Document:

<PAGE>
                                                                     EXHIBIT 4.1

                             SUN MICROSYSTEMS, INC.

                                       AND

                          EQUISERVE TRUST COMPANY, N.A.

               THIRD AMENDED AND RESTATED SHARES RIGHTS AGREEMENT

                            DATED AS OF JULY 25, 2002

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                                TABLE OF CONTENTS

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<S>            <C>                                                                            <C>
Section 1.     Certain Definitions...............................................................2

Section 2.     Appointment of Rights Agent.......................................................8

Section 3.     Issuance of Rights Certificates...................................................8

Section 4.     Form of Rights Certificates......................................................10

Section 5.     Countersignature and Registration................................................11

Section 6.     Transfer, Split Up, Combination and Exchange of Rights Certificates;
               Mutilated, Destroyed, Lost or Stolen Rights Certificates.........................11

Section 7.     Exercise of Rights; Exercise Price; Expiration Date of Rights....................12

Section 8.     Cancellation and Destruction of Rights Certificates..............................14

Section 9.     Reservation and Availability of Preferred Shares.................................14

Section 10.    Record Date......................................................................16

Section 11.    Adjustment of Exercise Price, Number of Shares or Number of Rights...............16

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

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

Section 14.    Fractional Rights and Fractional Shares..........................................27

Section 15.    Rights of Action.................................................................28

Section 16.    Agreement of Rights Holders......................................................28

Section 17.    Rights Certificate Holder Not Deemed a Stockholder...............................29

Section 18.    Concerning the Rights Agent......................................................29

Section 19.    Merger or Consolidation or Change of Name of Rights Agent........................30

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

Section 21.    Change of Rights Agent...........................................................33
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                                TABLE OF CONTENTS
                                  (CONTINUED)

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<S>            <C>                                                                            <C>
Section 22.    Issuance of New Rights Certificates..............................................33

Section 23.    Redemption.......................................................................34

Section 24.    Exchange.........................................................................35

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

Section 26.    Notices..........................................................................37

Section 27.    Supplements and Amendments.......................................................38

Section 28.    Successors.......................................................................38

Section 29.    Determinations and Actions by the Board of Directors, etc........................38

Section 30.    Benefits of this Agreement.......................................................39

Section 31.    Severability.....................................................................39

Section 32.    Governing Law....................................................................39

Section 33.    Counterparts.....................................................................39

Section 34.    Descriptive Headings.............................................................39
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EXHIBITS

Exhibit A      Form of Rights Certificate

Exhibit B      Summary of Rights

                                     -iii-

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               THIRD AMENDED AND RESTATED SHARES RIGHTS AGREEMENT

        This Third Amended and Restated Shares Rights Agreement (the
"Agreement") is dated as of July 25, 2002, between Sun Microsystems, Inc., a
Delaware corporation, (the "Company"), and EquiServe Trust Company, N.A.
(formerly BankBoston, N.A. and The First National Bank of Boston), a national
banking association, as Rights Agent (the "Rights Agent").

        WHEREAS, the Company and the Rights Agent are parties to that certain
Shares Rights Agreement, dated as of May 15, 1989, as amended and restated as of
February 11, 1998, and as subsequently amended as of April 14, 1999, April 26,
2000, and December 13, 2000 (the "Prior Agreement");

        WHEREAS, the Board of Directors has determined that it is in the best
interests of the Company and its stockholders to amend and restate the Prior
Agreement as set forth herein, and the Rights Agent has agreed to the amendment
and restatement of the Prior Agreement as set forth herein;

        WHEREAS, the Company has determined that, pursuant to Section 27 of the
Prior Agreement, the Prior Agreement may be amended and restated as set forth
herein without the approval of the holders of the Rights (as hereinafter
defined); and

        WHEREAS, on April 26, 1989 (the "RIGHTS DIVIDEND DECLARATION DATE"), the
Board of Directors of the Company authorized and declared a dividend of one
share purchase right (a "RIGHT") for each Common Share (as hereinafter defined)
of the Company outstanding as of the Close of Business (as hereinafter defined)
on May 26, 1989 (the "RECORD DATE"), each Right originally representing the
right to purchase one Common Share and now representing the right to purchase
one ten-thousandth (0.0001) of a share of Series A Participating Preferred Stock
(as such number may be adjusted pursuant to the provisions of this Agreement),
having the rights, preferences and privileges set forth in the form of
Certificate of Designations of Rights, Preferences and Privileges of Series A
Participating Preferred Stock filed with the Secretary of the State of Delaware,
as amended, upon the terms and subject to the conditions herein set forth, and
further authorized and directed the issuance of one Right (as such number may be
adjusted pursuant to the provisions of this Agreement) with respect to each
Common Share that shall become outstanding between the Record Date and the
earlier of the Distribution Date and the Expiration Date (as such terms are
hereinafter defined), and in certain circumstances after the Distribution Date.

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

<PAGE>

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

               (a) "ACQUIRING PERSON" shall mean any Person, who or which,
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 10% or more of the Common Shares then outstanding, but shall
not include the Company, any Subsidiary of the Company or any employee benefit
plan of the Company or of any Subsidiary of the Company, or any entity holding
Common Shares for or pursuant to the terms of any such plan. Notwithstanding the
foregoing, no Person shall be deemed to be an Acquiring Person as the result of
an acquisition of Common Shares by the Company which, by reducing the number of
shares outstanding, increases the proportionate number of shares beneficially
owned by such Person to 10% or more of the Common Shares of the Company then
outstanding; provided, however, that if a Person shall become the Beneficial
Owner of 10% or more of the Common Shares of the Company then outstanding by
reason of share purchases by the Company and shall, after such share purchases
by the Company, become the Beneficial Owner of any additional Common Shares of
the Company (other than pursuant to a dividend or distribution paid or made by
the Company on the outstanding Common Shares in Common Shares or pursuant to a
split or subdivision of the outstanding Common Shares), then such Person shall
be deemed to be an Acquiring Person unless upon becoming the Beneficial Owner of
such additional Common Shares of the Company such Person does not beneficially
own 10% or more of the Common Shares of the Company then outstanding.
Notwithstanding the foregoing, (i) if the Company's Board of Directors
determines in good faith that a Person who would otherwise be an "Acquiring
Person," as defined pursuant to the foregoing provisions of this paragraph (a),
has become such inadvertently (including, without limitation, because (A) such
Person was unaware that it beneficially owned a percentage of the Common Shares
that would otherwise cause such Person to be an "Acquiring Person," as defined
pursuant to the foregoing provisions of this paragraph (a), or (B) such Person
was aware of the extent of the Common Shares it beneficially owned but had no
actual knowledge of the consequences of such beneficial ownership under this
Agreement) and without any intention of changing or influencing control of the
Company, and if such Person divested or divests as promptly as practicable a
sufficient number of Common Shares so that such Person would no longer be an
"Acquiring Person," as defined pursuant to the foregoing provisions of this
paragraph (a), then such Person shall not be deemed to be or to have become an
"Acquiring Person" for any purposes of this Agreement including, without
limitation Section 1(gg) hereof; and (ii) if, as of the date hereof, any Person
is the Beneficial Owner of 10% or more of the Common Shares outstanding, such
Person shall not be or become an "Acquiring Person," as defined pursuant to the
foregoing provisions of this paragraph (a), unless and until such time as such
Person shall become the Beneficial Owner of additional Common Shares (other than
pursuant to a dividend or distribution paid or made by the Company on the
outstanding Common Shares in Common Shares or pursuant to a split or subdivision
of the outstanding Common Shares), unless, upon becoming the Beneficial Owner of
such additional Common Shares, such Person is not then the Beneficial Owner of
10% or more of the Common Shares then outstanding.

                                                                             -2-
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               (b) "ADJUSTMENT FRACTION" shall have the meaning set forth in
Section 11(a)(i) hereof.

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

               (d) A Person shall be deemed the "BENEFICIAL OWNER" of and shall
be deemed to "BENEFICIALLY OWN" any securities:

                      (i) which such Person or any of such Person's Affiliates
or Associates beneficially owns, directly or indirectly, for purposes of Section
13(d) of the Exchange Act and Rule 13d-3 thereunder (or any comparable or
successor law or regulation); provided, however, if such Person files pursuant
to Rule 13d-1 of the Exchange Act a Schedule 13G and, therefore, is not required
to file a Schedule 13D, reporting beneficial ownership of not greater than
twenty percent (20%) of the Company's outstanding Common Shares, then such
Person, or any of such Person's Affiliates or Associates, as the case may be,
shall not be deemed the "Beneficial Owner" and shall not be considered to
"beneficially own" any securities so held nor deemed an "Acquiring Person" for
purposes of this Agreement, but only for so long as such Person, or any of such
Person's Affiliates or Associates, as the case may be, (1) does not file, nor in
the determination of the Board of Directors of the Company is it required to
file, a report on Schedule 13D pursuant to Section 13(d) or Rule 13d-1 of the
Exchange Act (or any comparable or successor law or regulation) and (ii)
notwithstanding the foregoing proviso, beneficially owns less than twenty
percent (20%) of the Company's outstanding Common Shares;

                      (ii) which such Person or any of such Person's Affiliates
or Associates has (A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide public
offering of securities), or upon the exercise of conversion rights, exchange
rights, rights (other than the Rights), warrants or options, or otherwise;
provided, however, that a Person shall not be deemed pursuant to this Section
1(d)(ii)(A) to be the Beneficial Owner of, or to beneficially own, (1)
securities tendered pursuant to a tender or exchange offer made by or on behalf
of such Person or any of such Person's Affiliates or Associates until such
tendered securities are accepted for purchase or exchange, or (2) securities
which a Person or any of such Person's Affiliates or Associates may be deemed to
have the right to acquire pursuant to any merger or other acquisition agreement
between the Company and such Person (or one or more of its Affiliates or
Associates) if such agreement has been approved by the Board of Directors of the
Company prior to there being an Acquiring Person; or (B) the right to vote
pursuant to any agreement, arrangement or understanding; provided, however, that
a Person shall not be deemed the Beneficial Owner of, or to beneficially own,
any security under this Section 1(d)(ii)(B) if the agreement, arrangement or
understanding to vote such security (1) arises solely from a revocable proxy or
consent given to such Person in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable rules and

                                                                             -3-
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regulations of the Exchange Act and (2) is not also then reportable on Schedule
13D under the Exchange Act (or any comparable or successor report); or

                      (iii) which are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate or Associate thereof) with
which such Person or any of such Person's Affiliates or Associates has any
agreement, arrangement or understanding, whether or not in writing (other than
customary agreements with and between underwriters and selling group members
with respect to a bona fide public offering of securities) for the purpose of
acquiring, holding, voting (except to the extent contemplated by the proviso to
Section 1(d)(ii)(B)) or disposing of any securities of the Company; provided,
however, that in no case shall an officer or director of the Company be deemed
(x) the Beneficial Owner of any securities beneficially owned by another officer
or director of the Company solely by reason of actions undertaken by such
persons in their capacity as officers or directors of the Company or (y) the
Beneficial Owner of securities held of record by the trustee of any employee
benefit plan of the Company or any Subsidiary of the Company for the benefit of
any employee of the Company or any Subsidiary of the Company, other than the
officer or director, by reason of any influence that such officer or director
may have over the voting of the securities held in the plan.

               (e) "BUSINESS DAY" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in New York are authorized or
obligated by law or executive order to close.

               (f) "CLOSE OF BUSINESS" on any given date shall mean 5:00 P. M.,
New York time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 P.M., New York time, on the next succeeding
Business Day.

               (g) "COMMON STOCK EQUIVALENTS" shall have the meaning set forth
in Section 11(a)(iii) hereof. "COMMON SHARES" when used with reference to the
Company shall mean the shares of Common Stock of the Company, par value at
$0.00067 per share. Common Shares when used with reference to any Person other
than the Company shall mean the capital stock (or equity interest) with the
greatest voting power of such other Person or, if such other Person is a
Subsidiary of another Person, the Person or Persons which ultimately control
such first-mentioned Person.

               (h) "COMPANY" shall mean Sun Microsystems, Inc., a Delaware
corporation, subject to the terms of Section 13(a)(iii)(C) hereof.

               (i) "CURRENT PER SHARE MARKET PRICE" of any security (a
"Security" for purposes of this definition), for all computations other than
those made pursuant to Section 11(a)(iii) hereof, shall mean the average of the
daily closing prices per share of such Security 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 Per Share Market Price
of any Security on any date

                                                                             -4-
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shall be deemed to be the average of the daily closing prices per share of such
Security for the ten (10) consecutive Trading Days immediately prior to such
date; provided, however, that in the event that the Current Per Share Market
Price of the Security is determined during a period following the announcement
by the issuer of such Security of (i) a dividend or distribution on such
Security payable in shares of such Security or securities convertible into such
shares or (ii) any subdivision, combination or reclassification of such
Security, and prior to the expiration of the applicable thirty (30) Trading Day
or ten (10) Trading Day period, after the ex-dividend date for such dividend or
distribution, or the record date for such subdivision, combination or
reclassification, then, and in each such case, the Current Per Share Market
Price shall be appropriately adjusted to reflect the current market price per
share equivalent of such Security. The closing price for each day shall be the
last sale price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Security is not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Security is listed or admitted to trading or, if the Security is
not listed or admitted to trading on any national securities exchange, the last
sale price or, if such last sale price is not reported, 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 Security is not
quoted by any such organization, the average of the closing bid and asked prices
as furnished by a professional market maker making a market in the Security
selected by the Board of Directors of the Company. If on any such date no market
maker is making a market in the Security, the fair value of such shares on such
date as determined in good faith by the Board of Directors of the Company shall
be used. If the Preferred Shares are not publicly traded, the Current Per Share
Market Price of the Preferred Shares shall be conclusively deemed to be (x) the
Current Per Share Market Price of the Common Shares as determined pursuant to
this Section 1(i), as appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof, multiplied by
(y) 10,000. If the Security is not publicly held or so listed or traded, Current
Per Share Market Price shall mean the fair value per share as determined in good
faith by the Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent and shall be conclusive for
all purposes.

               (j) "CURRENT VALUE" shall have the meaning set forth in Section
11(a)(iii) hereof.

               (k) "DISTRIBUTION DATE" shall mean the earlier of (i) the Close
of Business on the tenth (10th) day (or such later date as may be determined by
action of the Company's Board of Directors) after the Shares Acquisition Date
(or, if the tenth (10th) day after the Shares Acquisition Date occurs before the
Record Date, the Close of Business on the Record Date) or (ii) the Close of
Business on the tenth (10th) Business Day (or such later date as may be
determined by action of the Company's Board of Directors) 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

                                                                             -5-
<PAGE>

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, assuming the successful consummation
thereof, such Person would be an Acquiring Person.

               (l) "EQUIVALENT SHARES" shall mean Preferred Shares and any other
class or series of capital stock of the Company which is entitled to the same
rights, privileges and preferences as the Preferred Shares.

               (m) "EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as amended.

               (n) "EXCHANGE RATIO" shall have the meaning set forth in Section
24(a) hereof.

               (o) "EXERCISE PRICE" shall have the meaning set forth in Section
4(a) hereof.

               (p) "EXPIRATION DATE" shall mean the earliest to occur of: (i)
the Close of Business on the Final Expiration Date, (ii) the Redemption Date, or
(iii) the time at which the Board of Directors orders the exchange of the Rights
as provided in Section 24 hereof.

               (q) "FINAL EXPIRATION DATE" shall mean July 25, 2012.

               (r) "NASDAQ" shall mean The Nasdaq Stock Market, Inc.

               (s) "PERSON" shall mean any individual, firm, corporation or
other entity, and shall include any successor (by merger or otherwise) of such
entity.

               (t) "POST-EVENT TRANSFEREE" shall have the meaning set forth in
Section 7(e) hereof.

               (u) "PREFERRED SHARES" shall mean shares of Series A
Participating Preferred Stock, par value $0.001 per share, of the Company.

               (v) "PRE-EVENT TRANSFEREE" shall have the meaning set forth in
Section 7(e) hereof.

               (w) "PRINCIPAL PARTY" shall have the meaning set forth in Section
13(b) hereof.

               (x) "RECORD DATE" shall have the meaning set forth in the
recitals at the beginning of this Agreement.

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

               (z) "REDEMPTION PRICE" shall have the meaning set forth in
Section 23(a) hereof.

                                                                             -6-
<PAGE>

               (aa) "RIGHTS AGENT" shall mean (i) EquiServe Trust Company, N.A.,
(ii) its successor or replacement as provided in Sections 19 and 21 hereof or
(iii) any additional Person appointed pursuant to Section 2 hereof.

               (bb) "RIGHTS CERTIFICATE" shall mean a certificate substantially
in the form attached hereto as Exhibit A.

               (cc) "RIGHTS DIVIDEND DECLARATION DATE" shall have the meaning
set forth in the recitals at the beginning of this Agreement.

               (dd) "SECTION 11(a)(ii) TRIGGER DATE" shall have the meaning set
forth in Section 11(a)(iii) hereof.

               (ee) "SECTION 13 EVENT" shall mean any event described in clause
(i), (ii) or (iii) of Section 13(a) hereof.

               (ff) "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.

               (gg) "SHARES ACQUISITION DATE" shall mean the first date of
public announcement (which, for purposes of this definition, shall include,
without limitation, a report filed pursuant to Section 13(d) of the Exchange
Act) by the Company or an Acquiring Person that an Acquiring Person has become
such; provided that, if such Person is determined not to have become an
Acquiring Person pursuant to Section 1(a) hereof, then no Shares Acquisition
Date shall be deemed to have occurred by virtue of such event.

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

               (ii) "SUBSIDIARY" of any Person shall mean any corporation or
other entity of which an amount of voting securities sufficient to elect a
majority of the directors or Persons having similar authority of such
corporation or other entity is beneficially owned, directly or indirectly, by
such Person, or any corporation or other entity otherwise controlled by such
Person.

               (jj) "SUBSTITUTION PERIOD" shall have the meaning set forth in
Section 11(a)(iii) hereof.

               (kk) "SUMMARY OF RIGHTS" shall mean a summary of this Agreement
substantially in the form attached hereto as Exhibit B.

                                                                             -7-
<PAGE>

               (ll) "TOTAL EXERCISE PRICE" shall have the meaning set forth in
Section 4(a) hereof.

               (mm) "TRADING DAY" shall mean a day on which the principal
national securities exchange on which a referenced security is listed or
admitted to trading is open for the transaction of business or, if a referenced
security is not listed or admitted to trading on any national securities
exchange, a Business Day.

               (nn) A "TRIGGERING EVENT" shall be deemed to have occurred upon
any Person becoming an Acquiring Person.

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

        Section 3. Issuance of Rights Certificates.

               (a) Until the Distribution Date, (i) the Rights will be evidenced
(subject to the provisions of Sections 3(b) and 3(c) hereof) by the certificates
for Common Shares registered in the names of the holders thereof (which
certificates shall also be deemed to be Rights Certificates) and not by separate
Rights Certificates and (ii) the right to receive Rights Certificates will be
transferable only in connection with the transfer of Common Shares. Until the
earlier of the Distribution Date or the Expiration Date, the surrender for
transfer of certificates for Common Shares shall also constitute the surrender
for transfer of the Rights associated with the Common Shares represented
thereby. As soon as practicable after the Distribution Date, the Company will
prepare and execute, the Rights Agent will countersign, and the Company will
send or cause to be sent (and the Rights Agent will, if requested, send) by
first-class, postage-prepaid mail, to each record holder of Common Shares as of
the Close of Business on the Distribution Date, at the address of such holder
shown on the records of the Company, a Rights Certificate evidencing one Right
for each Common Share so held, subject to adjustment as provided herein. In the
event that an adjustment in the number of Rights per Common Share has been made
pursuant to Section 11 hereof, then 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 (in accordance with Section 14(a)
hereof). As of the Distribution Date, the Rights will be evidenced solely by
such Rights Certificates and may be transferred by the transfer of the Rights
Certificates as permitted hereby, separately and apart from any transfer of
Common Shares, and the holders of such Rights

                                                                             -8-
<PAGE>

Certificates as listed in the records of the Company or any transfer agent or
registrar for the Rights shall be the record holders thereof.

               (b) On the Record Date or as soon as practicable thereafter, the
Company will send a copy of the Summary of Rights by first-class,
postage-prepaid mail, to each record holder of Common Shares as of the Close of
Business on the Record Date, at the address of such holder shown on the records
of the Company's transfer agent and registrar. With respect to certificates for
Common Shares outstanding as of the Record Date, until the Distribution Date,
the Rights will be evidenced by such certificates registered in the names of the
holders thereof together with the Summary of Rights.

               (c) Unless the Board of Directors by resolution adopted at or
before the time of the issuance of any Common Shares after the Record Date but
prior to the earlier of the Distribution Date or the Expiration Date (or, in
certain circumstances provided in Section 22 hereof, after the Distribution
Date) specifies to the contrary, Rights shall be issued in respect of all Common
Shares that are so issued, and Certificates representing such Common Shares
shall also be deemed to be certificates for Rights, and shall bear the following
legend:

        THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO
        CERTAIN RIGHTS AS SET FORTH IN A RIGHTS AGREEMENT BETWEEN SUN
        MICROSYSTEMS AND THE RIGHTS AGENT (THE "RIGHTS AGREEMENT"), THE TERMS OF
        WHICH ARE HEREBY INCORPORATED HEREIN BY REFERENCE AND A COPY OF WHICH IS
        ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF SUN MICROSYSTEMS, INC.
        UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, SUCH
        RIGHTS WILL BE EVIDENCED BY SEPARATE CERTIFICATES AND WILL NO LONGER BE
        EVIDENCED BY THIS CERTIFICATE. THE COMPANY WILL MAIL TO THE HOLDER OF
        THIS CERTIFICATE A COPY OF THE RIGHTS AGREEMENT WITHOUT CHARGE AFTER
        RECEIPT OF A WRITTEN REQUEST THEREFOR. UNDER CERTAIN CIRCUMSTANCES SET
        FORTH IN THE RIGHTS AGREEMENT, RIGHTS ISSUED TO, OR HELD BY, ANY PERSON
        WHO IS, WAS OR BECOMES AN ACQUIRING PERSON OR ANY AFFILIATE OR ASSOCIATE
        THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT), 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 the Distribution Date or the Expiration Date, the Rights associated
with the Common Shares represented by such certificates shall be evidenced by
such certificates alone, and the surrender for transfer of any such certificate
shall also constitute the transfer of the Rights associated with the Common
Shares represented thereby.

                                                                             -9-
<PAGE>

               (d) In the event that the Company purchases or acquires any
Common Shares after the Record Date but prior to the Distribution Date, any
Rights associated with such Common Shares shall be deemed canceled and retired
so that the Company shall not be entitled to exercise any Rights associated with
the Common Shares which are no longer outstanding.

        Section 4. Form of Rights Certificates.

               (a) The Rights Certificates (and the forms of election to
purchase Common Shares and of assignment to be printed on the reverse thereof)
shall be substantially in the form of Exhibit A 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 or a national market system, on which
the Rights may from time to time be listed or included, 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 (or in
the case of Rights issued with respect to Common Shares issued by the Company
after the Record Date, as of the date of issuance of such Common Shares) and on
their face shall entitle the holders thereof to purchase such number of one
ten-thousandths (0.0001) of a Preferred Share as shall be set forth therein at
the price set forth therein (such exercise price per one ten-thousandth (0.0001)
of a Preferred Share being hereinafter referred to as the "EXERCISE PRICE" and
the aggregate Exercise Price of all Preferred Shares issuable upon exercise of
one Right being hereinafter referred to as the "TOTAL EXERCISE PRICE"), but the
number and type of securities purchasable upon the exercise of each Right and
the Exercise Price shall be subject to adjustment as provided herein.

               (b) Any Rights Certificate issued pursuant to Section 3(a) or
Section 22 hereof that represents Rights beneficially owned by: (i) an Acquiring
Person or any Associate or Affiliate of an Acquiring Person, (ii) a Post-Event
Transferee, (iii) a Pre-Event Transferee or (iv) any subsequent transferee
receiving transferred Rights from a Post-Event Transferee or a Pre-Event
Transferee, either directly or through one or more intermediate transferees, 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.

                                                                            -10-
<PAGE>

        Section 5. Countersignature and Registration.

               (a) The Rights Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its Chief Executive Officer, its Chief
Financial Officer, its President or any Vice President, either manually or by
facsimile signature, and by the Secretary or an Assistant Secretary of the
Company, either manually or by facsimile signature, and shall have affixed
thereto the Company's seal (if any) or a facsimile thereof. The Rights
Certificates shall be manually countersigned by the Rights Agent and shall not
be valid for any purpose unless 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 on behalf of the Company had not ceased to be such officer of the
Company; and any Rights Certificate 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.

               (b) Following the Distribution Date, the Rights Agent will keep
or cause to be kept, at its office designated for such purposes, 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 Sections 7(e), 14 and 24 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
Rights Certificates may be transferred, split up, combined or exchanged for
another Rights Certificate or Rights Certificates, entitling the registered
holder to purchase a like number of one ten-thousandths (0.0001) of a Preferred
Share (or, following a Triggering Event, other securities, cash or other assets,
as the case may be) as the Rights Certificate or Rights Certificates surrendered
then entitled such holder to purchase. Any registered holder desiring to
transfer, split up, combine or exchange any Rights Certificate or Rights
Certificates shall make such request in writing delivered to the Rights Agent,
and shall surrender the Rights Certificate or Rights Certificates to be
transferred, split up, combined or exchanged at the office of the Rights Agent
designated for such purpose. Neither the Rights Agent nor the Company shall be
obligated to take any action whatsoever with respect to the transfer of any such
surrendered Rights Certificate until the registered holder shall have completed
and signed the certificate contained in the form of

                                                                            -11-
<PAGE>

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 Sections
7(e), 14 and 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 from the registered holder 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, at the Company's request,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Rights Certificate if mutilated, the Company will make and deliver a new
Rights Certificate of like tenor to the Rights Agent for delivery to the
registered holder in lieu of the Rights Certificate so lost, stolen, destroyed
or mutilated.

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

               (a) Subject to Sections 7(e), 23(b) and 24(b) hereof, the
registered holder of any Rights Certificate may exercise the Rights evidenced
thereby (except as otherwise provided herein) in whole or in part at any time
after the Distribution Date and prior to the Close of Business on the Expiration
Date by surrender of the Rights Certificate, with the form of election to
purchase on the reverse side thereof duly executed, to the Rights Agent at the
office of the Rights Agent designated for such purpose, together with payment of
the Exercise Price for each one ten-thousandth (0.0001) of a Preferred Share
(or, following a Triggering Event, other securities, cash or other assets as the
case may be) as to which the Rights are exercised.

               (b) The Exercise Price for each one ten-thousandth (0.0001) of a
Preferred Share issuable pursuant to the exercise of a Right shall initially be
$250.00, shall be subject to adjustment from time to time as provided in
Sections 11 and 13 hereof and shall be payable in lawful money of the United
States of America in accordance with paragraph (c) below.

               (c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase duly executed, accompanied by
payment of the Exercise Price for the number of one ten-thousandths (0.0001) of
a Preferred Share (or, following a Triggering Event, other securities, cash or
other assets as the case may be) to be purchased and an amount equal to any
applicable transfer tax required to be paid by the holder of such Rights
Certificate in accordance with Section 9(e) hereof, the Rights Agent shall,
subject to Section 20(k) hereof, thereupon promptly (i) (A) requisition from any
transfer agent of the Preferred Shares (or make available, if the Rights Agent
is the transfer agent for the Preferred Shares) a certificate or certificates
for the number of one ten-thousandths (0.0001) of a Preferred Share (or,
following a Triggering Event, other securities,

                                                                            -12-
<PAGE>

cash or other assets as the case may be) 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 one
ten-thousandths (0.0001) of a Preferred Share (or, following a Triggering Event,
other securities, cash or other assets as the case may be) issuable upon
exercise of the Rights hereunder with a depository agent, requisition from the
depository agent depository receipts representing such number of one
ten-thousandths (0.0001) of a Preferred Share (or, following a Triggering Event,
other securities, cash or other assets as the case may be) as are to be
purchased (in which case certificates for the Preferred Shares (or, following a
Triggering Event, other securities, cash or other assets as the case may be)
represented by such receipts shall be deposited by the transfer agent with the
depository agent) and the Company hereby directs the depository agent to comply
with such request, (ii) when appropriate, requisition from the Company the
amount of cash to be paid in lieu of issuance of fractional shares in accordance
with Section 14 hereof, (iii) after receipt of such certificates or depository
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) when appropriate, after receipt thereof,
deliver such cash to or upon the order of the registered holder of such Rights
Certificate. The payment of the Exercise Price (as such amount may be reduced
(including to zero) pursuant to Section 11(a)(iii) hereof) and an amount equal
to any applicable transfer tax required to be paid by the holder of such Rights
Certificate in accordance with Section 9(e) hereof, may be made in cash or by
certified bank check, cashier's check or bank draft payable to the order of the
Company. In the event that the Company is obligated to issue securities of the
Company other than Preferred Shares, pay cash and/or distribute other property
pursuant to Section 11(a) hereof, the Company will make all arrangements
necessary so that such other securities, cash and/or other property are
available for distribution by the Rights Agent, if and when appropriate.

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

               (e) Notwithstanding anything in this Agreement to the contrary,
from and after the first occurrence of a Triggering 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 (a "POST-EVENT TRANSFEREE"), (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 Company's Board of Directors has determined is part of a plan,
arrangement or understanding which has as a primary purpose or effect

                                                                            -13-
<PAGE>

the avoidance of this Section 7(e) (a "PRE-EVENT TRANSFEREE") or (iv) any
subsequent transferee receiving transferred Rights from a Post-Event Transferee
or a Pre-Event Transferee, either directly or through one or more intermediate
transferees, 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 ensure that the provisions of this Section 7(e)
and Section 4(b) hereof are complied with, but shall have no liability to any
holder of Rights Certificates or to any other Person as a result of its failure
to make any determinations with respect to an Acquiring Person or any of such
Acquiring Person's 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 Section 7 unless such registered holder shall, in
addition to having complied with the requirements of subsection 7(a), 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.

        Section 8. Cancellation and Destruction 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 to any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no 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 Rights Certificate purchased or acquired by the Company otherwise
than upon the exercise thereof. The Rights Agent shall deliver all canceled
Rights Certificates to the Company, or shall, at the written request of the
Company, destroy such canceled Rights Certificates, and in such case shall
deliver a certificate evidencing the destruction thereof to the Company.

        Section 9. Reservation and Availability of Preferred Shares.

               (a) The Company covenants and agrees that it will use its best
efforts to cause to be reserved and kept available out of its authorized and
unissued Preferred Shares not reserved for another purpose (and, following the
occurrence of a Triggering Event, out of its authorized and unissued Common
Shares and/or other securities), the number of Preferred Shares (and, following
the occurrence of the Triggering Event, Common Shares and/or other securities)
that will be sufficient to permit the exercise in full of all outstanding
Rights.

                                                                            -14-
<PAGE>

               (b) If the Company shall hereafter list any of its Preferred
Shares on a national securities exchange, then so long as the Preferred Shares
(and, following the occurrence of a Triggering Event, Common Shares and/or other
securities) issuable and deliverable upon exercise of the Rights may be listed
on such exchange, the Company shall use its best efforts to cause, from and
after such time as the Rights become exercisable (but only to the extent that it
is reasonably likely that the Rights will be exercised), 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
Triggering Event in which the consideration to be delivered by the Company upon
exercise of the Rights is described in Section 11(a)(ii) or Section 11(a)(iii)
hereof, or as soon as is required by law following the Distribution Date, as the
case may be, a registration statement under the Securities Act with respect to
the securities purchasable upon exercise of the Rights on an appropriate form,
(ii) cause such registration statement to become effective as soon as
practicable after such filing and (iii) cause such registration statement to
remain effective (with a prospectus at all times meeting the requirements of the
Securities Act) until the earlier of (A) the date as of which the Rights are no
longer exercisable for such securities and (B) the date of expiration of the
Rights. The Company may temporarily suspend, for a period 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, and notify
the Rights Agent, that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement and notification to the Rights Agent
at such time as the suspension is no longer in effect. 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. Notwithstanding any provision of this Agreement to
the contrary, the Rights shall not be exercisable in any jurisdiction, unless
the requisite qualification in such jurisdiction shall have been obtained, or an
exemption therefrom shall be available, and until a registration statement has
been declared and remains effective.

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

               (e) The Company further covenants and agrees that it will pay
when due and payable any and all federal and state transfer taxes and charges
which may be payable in respect of the original issuance or delivery of the
Rights Certificates or of any Preferred Shares (or other securities of the
Company) 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

                                                                            -15-
<PAGE>

a person other than, or the issuance or delivery of certificates or depository
receipts for the Preferred Shares (or other securities of the Company) in a name
other than that of, the registered holder of the Rights Certificate evidencing
Rights surrendered for exercise or to issue or to deliver any certificates or
depository receipts for Preferred Shares (or other securities of the Company)
upon the exercise of any Rights until any such tax shall have been paid (any
such tax being payable by the holder of such Rights Certificate at the time of
surrender) or until it has been established to the Company's satisfaction that
no such tax is due.

        Section 10. Record Date. Each Person in whose name any certificate for a
number of one ten-thousandths (0.0001) of a Preferred Share (or other securities
of the Company) is issued upon the exercise of Rights shall for all purposes be
deemed to have become the holder of record of Preferred Shares (or other
securities of the Company) 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 Total Exercise Price with respect to which
the Rights have been exercised (and any applicable transfer taxes) was made;
provided, however, that if the date of such surrender and payment is a date upon
which the transfer books of the Company are closed, such Person shall be deemed
to have become the record holder of such shares on, and such certificate shall
be dated, the next succeeding Business Day on which the transfer books of the
Company 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 holder
of Preferred Shares (or other securities of the Company) for which the Rights
shall be exercisable, including, without limitation, the right to vote, to
receive dividends or other distributions or to exercise any preemptive rights,
and shall not be entitled to receive any notice of any proceedings of the
Company, except as provided herein.

        Section 11. Adjustment of Exercise Price, Number of Shares or Number of
Rights. The Exercise Price, the number and kind of shares or other property
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) Anything in this Agreement to the contrary
notwithstanding, in the event that the Company shall at any time after the date
of this Agreement (A) declare a dividend on the Preferred Shares payable in
Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C) combine
the outstanding Preferred Shares (by reverse stock split or otherwise) into a
smaller number of Preferred Shares, or (D) issue any shares of its capital stock
in a reclassification of the Preferred Shares (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), then, in each such event,
except as otherwise provided in this Section 11 and Section 7(e) hereof: (1) the
Exercise Price in effect at the time of the record date for such dividend or of
the effective date of such subdivision, combination or reclassification shall be
adjusted so that the Exercise Price thereafter shall equal the result obtained
by dividing the Exercise Price in effect immediately prior to such time by a
fraction (the "ADJUSTMENT FRACTION"), the numerator of which shall be the total
number of Preferred Shares (or shares of capital stock issued in such
reclassification of the Preferred Shares) outstanding immediately following such
time and the denominator of which shall be the total number of

                                                                            -16-
<PAGE>

Preferred Shares outstanding immediately prior to such time; provided, however,
that in no event shall the consideration to be paid upon the exercise of one
Right be less than the aggregate par value of the shares of capital stock of the
Company issuable upon exercise of such Right; and (2) the number of one
ten-thousandths (0.0001) of a Preferred Share (or share of such other capital
stock) issuable upon the exercise of each Right shall equal the number of one
ten-thousandths (0.0001) of a Preferred Share (or share of such other capital
stock) as was issuable upon exercise of a Right immediately prior to the
occurrence of the event described in clauses (A)-(D) of this Section 11(a)(i),
multiplied by the Adjustment Fraction; provided, however, that, no such
adjustment shall be made pursuant to this Section 11(a)(i) to the extent that
there shall have simultaneously occurred an event described in clause (A), (B),
(C) or (D) of Section 11(n) with a proportionate adjustment being made
thereunder. Each Common Share that shall become outstanding after an adjustment
has been made pursuant to this Section 11(a)(i) shall have associated with it
the number of Rights, exercisable at the Exercise Price and for the number of
one ten-thousandths (0.0001) of a Preferred Share (or shares of such other
capital stock) as one Common Share has associated with it immediately following
the adjustment made pursuant to this Section 11(a)(i).

                      (ii) Subject to Section 24 of this Agreement, in the event
that a Triggering Event shall have occurred, then promptly following such
Triggering Event each holder of a Right, except as provided in Section 7(e)
hereof, shall thereafter have the right to receive for each Right, upon exercise
thereof in accordance with the terms of this Agreement and payment of the
Exercise Price in effect immediately prior to the occurrence of the Triggering
Event, in lieu of a number of one ten-thousandths (0.0001) of a Preferred Share,
such number of Common Shares of the Company as shall equal the quotient obtained
by dividing (A) the product obtained by multiplying (1) the Exercise Price in
effect immediately prior to the occurrence of the Triggering Event by (2) the
number of one ten-thousandths (0.0001) of a Preferred Share for which a Right
was exercisable (or would have been exercisable if the Distribution Date had
occurred) immediately prior to the first occurrence of a Triggering Event, by
(B) fifty percent (50%) of the Current Per Share Market Price for Common Shares
on the date of occurrence of the Triggering Event; provided, however, that the
Exercise Price and the number of Common Shares of the Company so receivable upon
exercise of a Right shall be subject to further adjustment as appropriate in
accordance with Section 11(e) hereof to reflect any events occurring in respect
of the Common Shares of the Company after the occurrence of the Triggering
Event.

                      (iii) In lieu of issuing Common Shares in accordance with
Section 11(a)(ii) hereof, the Company may, if the Company's Board of Directors
determines that such action is necessary or appropriate and not contrary to the
interest of holders of Rights and, in the event that the number of Common Shares
which are authorized by the Company's Certificate of Incorporation but not
outstanding or reserved for issuance for purposes other than upon exercise of
the Rights are not sufficient to permit the exercise in full of the Rights, or
if any necessary regulatory approval for such issuance has not been obtained by
the Company, the Company shall: (A) determine the excess of (1) the value of the
Common Shares issuable upon the exercise of a Right (the "CURRENT VALUE") over
(2) the Exercise Price (such excess, the "SPREAD") and (B) with

                                                                            -17-
<PAGE>

respect to each Right, make adequate provision to substitute for such Common
Shares, upon exercise of the Rights, (1) cash, (2) a reduction in the Exercise
Price, (3) other equity securities of the Company (including, without
limitation, shares or units of shares of any series of preferred stock which the
Company's Board of Directors has deemed to have the same value as Common Shares
(such shares or units of shares of preferred stock are herein called "COMMON
STOCK EQUIVALENTS")), except to the extent that the Company has not obtained any
necessary stockholder or regulatory approval for such issuance, (4) debt
securities of the Company, except to the extent that the Company has not
obtained any necessary stockholder or regulatory approval for such issuance, (5)
other assets or (6) any combination of the foregoing, having an aggregate value
equal to the Current Value, where such aggregate value has been determined by
the Company's Board of Directors based upon the advice of a nationally
recognized investment banking firm selected by the Company's Board of Directors;
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 Triggering 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
DATE"), then the Company shall be obligated to deliver, upon the surrender for
exercise of a Right and without requiring payment of the Exercise Price, Common
Shares (to the extent available), except to the extent that the Company has not
obtained any necessary stockholder or regulatory approval for such issuance, and
then, if necessary, cash, which shares and/or cash have an aggregate value equal
to the Spread. If the Company's Board of Directors shall determine in good faith
that it is likely that sufficient additional Common Shares could be authorized
for issuance upon exercise in full of the Rights or that any necessary
regulatory approval for such issuance will be obtained, 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 stockholder approval for the authorization of such
additional shares or take action to obtain such regulatory approval (such
period, as it may be extended, the "SUBSTITUTION PERIOD"). To the extent that
the Company determines that some action need be taken pursuant to the first
and/or second sentences of this Section 11(a)(iii), the Company (x) shall
provide, subject to Section 7(e) hereof, that such action shall apply uniformly
to all outstanding Rights and (y) may suspend the exercisability of the Rights
until the expiration of the Substitution Period in order to seek any
authorization of additional shares, to take any action to obtain any required
regulatory approval 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 the Common Shares
shall be the Current Per Share Market Price of the Common Shares on the Section
11(a)(ii) Trigger Date and the value of any Common Stock Equivalent shall be
deemed to have the same value as the Common Shares on such date.

               (b) In case the Company shall, at any time after the date of this
Agreement, fix a record date for the issuance of rights, options or warrants to
all holders of Preferred Shares entitling such holders (for a period expiring
within forty-five (45) calendar days after such record date) to

                                                                            -18-
<PAGE>

subscribe for or purchase Preferred Shares or Equivalent Shares or securities
convertible into Preferred Shares or Equivalent Shares at a price per share (or
having a conversion price per share, if a security convertible into Preferred
Shares or Equivalent Shares) less than the then Current Per Share Market Price
of the Preferred Shares or Equivalent Shares on such record date, then, in each
such case, the Exercise Price to be in effect after such record date shall be
determined by multiplying the Exercise Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the number of
Preferred Shares and Equivalent Shares (if any) outstanding on such record date,
plus the number of Preferred Shares or Equivalent Shares, as the case may be,
which the aggregate offering price of the total number of Preferred Shares or
Equivalent Shares, as the case may be, to be offered or issued (and/or the
aggregate initial conversion price of the convertible securities to be offered
or issued) would purchase at such current market price, and the denominator of
which shall be the number of Preferred Shares and Equivalent Shares (if any)
outstanding on such record date, plus the number of additional Preferred Shares
or Equivalent Shares, as the case may be, to be offered for subscription or
purchase (or into which the convertible securities so to be offered are
initially convertible); provided, however, that in no event shall the
consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company issuable upon
exercise of one Right. In case such subscription price may be paid in a
consideration part or all of which shall be in a form other than cash, the value
of such consideration shall be as determined in good faith by the Company's
Board of Directors, whose determination shall be described in a statement filed
with the Rights Agent and shall be binding on the Rights Agent and the holders
of the Rights. Preferred Shares and Equivalent Shares owned by or held for the
account of the Company shall not be deemed outstanding for the purpose of any
such computation. Such adjustment shall be made successively whenever such a
record date is fixed, and in the event that such rights, options or warrants are
not so issued, the Exercise Price shall be adjusted to be the Exercise Price
which would then be in effect if such record date had not been fixed.

               (c) In case the Company shall, at any time after the date of this
Agreement, fix a record date for the making of a distribution to all holders of
the Preferred Shares (including any such distribution made in connection with a
consolidation or merger in which the Company is the continuing or surviving
corporation) of evidences of indebtedness or assets (other than a regular
quarterly cash dividend, if any, or a dividend payable in Preferred Shares) or
subscription rights, options or warrants (excluding those referred to in Section
11(b)), then, in each such case, the Exercise Price to be in effect after such
record date shall be determined by multiplying the Exercise Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the Current Per Share Market Price of a Preferred Share on such record
date, less the fair market value per Preferred Share (as determined in good
faith by the Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent) 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 Preferred Share, and the
denominator of which shall be such Current Per Share Market Price of a Preferred
Share on such record date; provided, however, that in no event shall the
consideration to be paid upon the exercise of one Right be less than the
aggregate par value

                                                                            -19-
<PAGE>

of the shares of capital stock of the Company issuable upon exercise of one
Right. Such adjustments shall be made successively whenever such a record date
is fixed, and in the event that such distribution is not so made, the Exercise
Price shall be adjusted to be the Exercise Price which would have been in effect
if such record date had not been fixed.

               (d) Anything herein to the contrary notwithstanding, no
adjustment in the Exercise Price shall be required unless such adjustment would
require an increase or decrease of at least one percent (1%) of the Exercise
Price; provided, however, that any adjustments which by reason of this Section
11(d) 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 (0.0001) of a
Common Share or other share or one hundred-thousandth (0.00001) of a Preferred
Share, as the case may be. Notwithstanding the first sentence of this Section
11(d), 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
requires such adjustment or (ii) the Expiration Date.

               (e) If as a result of an adjustment made pursuant to Section
11(a) 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 Shares, thereafter the number of such other shares so receivable upon
exercise of any Right and, if required, the Exercise 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 Shares
contained in Sections 11(a), 11(b), 11(c), 11(d), 11(g), 11(h), 11(i), 11(j),
11(k) and 11(l), and the provisions of Sections 7, 9, 10, 13 and 14 with respect
to the Preferred Shares shall apply on like terms to any such other shares.

               (f) All Rights originally issued by the Company subsequent to any
adjustment made to the Exercise Price hereunder shall evidence the right to
purchase, at the adjusted Exercise Price, the number of one ten-thousandths
(0.0001) of a Preferred Share purchasable from time to time hereunder upon
exercise of the Rights, all subject to further adjustment as provided herein.

               (g) Unless the Company shall have exercised its election as
provided in Section 11(h), upon each adjustment of the Exercise Price as a
result of the calculations made in Section 11(b) and (c), each Right outstanding
immediately prior to the making of such adjustment shall thereafter evidence the
right to purchase, at the adjusted Exercise Price, that number of Preferred
Shares (calculated to the nearest one hundred-thousandth (0.00001) of a share)
obtained by (i) multiplying (x) the number of Preferred Shares covered by a
Right immediately prior to this adjustment, by (y) the Exercise Price in effect
immediately prior to such adjustment of the Exercise Price, and (ii) dividing
the product so obtained by the Exercise Price in effect immediately after such
adjustment of the Exercise Price.

                                                                            -20-
<PAGE>

               (h) The Company may elect on or after the date of any adjustment
of the Exercise Price as a result of the calculations made in Section 11(b) or
(c) to adjust the number of Rights, in substitution for any adjustment in the
number of Preferred Shares purchasable upon the exercise of a Right. Each of the
Rights outstanding after such adjustment of the number of Rights shall be
exercisable for the number of one ten-thousandths (0.0001) of a Preferred Share
for which a Right was exercisable immediately prior to such adjustment. Each
Right held of record prior to such adjustment of the number of Rights shall
become that number of Rights (calculated to the nearest one hundred-thousandth
(0.00001)) obtained by dividing the Exercise Price in effect immediately prior
to adjustment of the Exercise Price by the Exercise Price in effect immediately
after adjustment of the Exercise Price. The Company shall make a public
announcement of its election to adjust the number of Rights, indicating the
record date for the adjustment, and, if known at the time, the amount of the
adjustment to be made. This record date may be the date on which the Exercise
Price is adjusted or any day thereafter, but, if any 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(h), 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 Exercise 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.

               (i) Irrespective of any adjustment or change in the Exercise
Price or the number of Preferred Shares issuable upon the exercise of the
Rights, the Rights Certificates theretofore and thereafter issued may continue
to express the Exercise Price per one ten-thousandth (0.0001) of a Preferred
Share and the number of one ten-thousandths (0.0001) of a Preferred Share which
were expressed in the initial Rights Certificates issued hereunder.

               (j) Before taking any action that would cause an adjustment
reducing the Exercise Price below the par or stated value, if any, of the number
of one ten-thousandths (0.0001) of a Preferred Share 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 as fully paid and nonassessable shares such number of one
ten-thousandths (0.0001) of a Preferred Share at such adjusted Exercise Price.

               (k) In any case in which this Section 11 shall require that an
adjustment in the Exercise Price be made effective as of a record date for a
specified event, the Company may elect to

                                                                            -21-
<PAGE>

defer until the occurrence of such event the issuing to the holder of any Right
exercised after such record date of the number of one ten-thousandths (0.0001)
of a Preferred Share and other capital stock or securities of the Company, if
any, issuable upon such exercise over and above the number of one
ten-thousandths (0.0001) of a Preferred Share and other capital stock or
securities of the Company, if any, issuable upon such exercise on the basis of
the Exercise Price in effect prior to such adjustment; provided, however, that
the Company shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such additional shares
(fractional or otherwise) upon the occurrence of the event requiring such
adjustment.

               (l) Anything in this Section 11 to the contrary notwithstanding,
prior to the Distribution Date, the Company shall be entitled to make such
reductions in the Exercise Price, in addition to those adjustments expressly
required by this Section 11, as and to the extent that it in its sole discretion
shall determine to be advisable in order that any (i) consolidation or
subdivision of the Preferred or Common Shares, (ii) issuance wholly for cash of
any Preferred or Common Shares at less than the current market price, (iii)
issuance wholly for cash of Preferred or Common Shares or securities which by
their terms are convertible into or exchangeable for Preferred or Common Shares,
(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 or
Common Shares shall not be taxable to such stockholders.

               (m) The Company covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Sections 23, 24 or 27 hereof, take (or
permit to be taken) 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.

               (n) In the event that the Company shall at any time after the
date of this Agreement (A) declare a dividend on the Common Shares payable in
Common Shares, (B) subdivide the outstanding Common Shares, (C) combine the
outstanding Common Shares (by reverse stock split or otherwise) into a smaller
number of Common Shares, or (D) issue any shares of its capital stock in a
reclassification of the Common Shares (including any such reclassification in
connection with a consolidation or merger in which the Company is the continuing
or surviving corporation), then, in each such event, except as otherwise
provided in this Section 11(a) and Section 7(e) hereof: (1) each Common Share
(or shares of capital stock issued in such reclassification of the Common
Shares) outstanding immediately following such time shall have associated with
it the number of Rights as were associated with one Common Share immediately
prior to the occurrence of the event described in clauses (A)-(D) above; (2) the
Exercise Price in effect at the time of the record date for such dividend or of
the effective date of such subdivision, combination or reclassification shall be
adjusted so that the Exercise Price thereafter shall equal the result obtained
by multiplying the Exercise Price in effect immediately prior to such time by a
fraction, the numerator of which shall be the total number of Common Shares
outstanding immediately prior to the event described in clauses (A)-(D) above,
and the denominator of which shall be the total number of Common Shares

                                                                            -22-
<PAGE>

outstanding immediately after such event; provided, however, that in no event
shall the consideration to be paid upon the exercise of one Right be less than
the aggregate par value of the shares of capital stock of the Company issuable
upon exercise of such Right; and (3) the number of one ten-thousandths (0.0001)
of a Preferred Share (or shares of such other capital stock) issuable upon the
exercise of each Right outstanding after such event shall equal the number of
one ten-thousandths (0.0001) of a Preferred Share (or shares of such other
capital stock) as were issuable with respect to one Right immediately prior to
such event. Each Common Share that shall become outstanding after an adjustment
has been made pursuant to this Section 11(n) shall have associated with it the
number of Rights, exercisable at the Exercise Price and for the number of one
ten-thousandths (0.0001) of a Preferred Share (or shares of such other capital
stock) as one Common Share has associated with it immediately following the
adjustment made pursuant to this Section 11(n). If an event occurs which would
require an adjustment under both this Section 11(n) and Section 11(a)(ii)
hereof, the adjustment provided for in this Section 11(n) shall be in addition
to, and shall be made prior to, any adjustment required pursuant to Section
11(a)(ii) hereof.

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

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

               (a) In the event that, following a Triggering Event, directly or
indirectly:

                      (i) the Company shall consolidate with, or merge with and
into, any other Person (other than a wholly-owned Subsidiary of the Company in a
transaction the principal purpose of which is to change the state of
incorporation of the Company and which complies with Section 11(m) hereof);

                      (ii) any Person shall consolidate with the Company, or
merge with and into the Company and the Company shall be the continuing or
surviving corporation of such consolidation or merger and, in connection with
such merger, all or part of the Common Shares shall be changed into or exchanged
for stock or other securities of any other person (or the Company); or

                      (iii) the Company shall sell or otherwise transfer (or one
or more of its Subsidiaries shall sell or otherwise transfer), in one or more
transactions, assets or earning power

                                                                            -23-
<PAGE>

aggregating fifty percent (50%) or more of the assets or earning power of the
Company and its Subsidiaries (taken as a whole) to any other Person or Persons
(other than the Company or one or more of its wholly owned Subsidiaries in one
or more transactions, each of which individually (and together) complies with
Section 11(m) hereof),

                             then, concurrent with and in each such case,

                             (A) 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 a price equal to the Total Exercise Price applicable
immediately prior to the occurrence of the Section 13 Event in accordance with
the terms of this Agreement, such number of validly authorized and issued, fully
paid, nonassessable and freely tradeable Common Shares of the Principal Party
(as hereinafter defined), free of any liens, encumbrances, rights of first
refusal or other adverse claims, as shall be equal to the result obtained by
dividing such Total Exercise Price by an amount equal to fifty percent (50%) of
the Current Per Share Market Price of the Common Shares of such Principal Party
on the date of consummation of such Section 13 Event, provided, however, that
the Exercise Price and the number of Common Shares of such Principal Party so
receivable upon exercise of a Right shall be subject to further adjustment as
appropriate in accordance with Section 11(e) hereof;

                             (B) 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;

                             (C) 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;

                             (D) such Principal Party shall take such steps
(including, but not limited to, the reservation of a sufficient number of its
Common Shares) in connection with the consummation of any such transaction as
may be necessary to ensure that the provisions hereof shall thereafter be
applicable, as nearly as reasonably may be, in relation to its Common Shares
thereafter deliverable upon the exercise of the Rights; and

                             (E) upon the subsequent occurrence of any
consolidation, merger, sale or transfer of assets or other extraordinary
transaction in respect of such Principal Party, each holder of a Right shall
thereupon be entitled to receive, upon exercise of a Right and payment of the
Total Exercise Price as provided in this Section 13(a), such cash, shares,
rights, warrants and other property which such holder would have been entitled
to receive had such holder, at the time of such transaction, owned the Common
Shares of the Principal Party receivable upon the exercise of such Right
pursuant to this Section 13(a), and such Principal Party shall take such steps
(including, but not limited to, reservation of shares of stock) as may be
necessary to permit the subsequent exercise of the Rights in accordance with the
terms hereof for such cash, shares, rights, warrants and other property.

                                                                            -24-
<PAGE>

                             (F) For purposes hereof, the "earning power" of the
Company and its Subsidiaries shall be determined in good faith by the Company's
Board of Directors on the basis of the operating income of each business
operated by the Company and its Subsidiaries during the three fiscal years
preceding the date of such determination (or, in the case of any business not
operated by the Company or any Subsidiary during three full fiscal years
preceding such date, during the period such business was operated by the Company
or any Subsidiary).

               (b) For purposes of this Agreement, the term  "PRINCIPAL PARTY"
shall mean:

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

                      (ii) in the case of any transaction described in clause
(iii) of Section 13(a) hereof, the Person that is the party receiving the
greatest portion of the assets or earning power transferred pursuant to such
transaction or transactions, or, if more than one Person that is a party to such
transaction or transactions receives the same portion of the assets or earning
power so transferred and each such portion would, were it not for the other
equal portions, constitute the greatest portion of the assets or earning power
so transferred, or if the Person receiving the greatest portion of the assets or
earning power cannot be determined, whichever of such Persons is the issuer of
Common Shares having the greatest aggregate market value of shares outstanding;
provided that in any such case described in the foregoing clause (b)(i) or
(b)(ii), if the Common Shares of such Person are not at such time or have not
been continuously over the preceding 12-month period registered under Section 12
of the Exchange Act, then (1) if such Person is a direct or indirect Subsidiary
of another Person the Common Shares of which are and have been so registered,
the term "Principal Party" shall refer to such other Person, or (2) if such
Person is a Subsidiary, directly or indirectly, of more than one Person, the
Common Shares of which are and have been so registered, the term "Principal
Party" shall refer to whichever of such Persons is the issuer of Common Shares
having the greatest aggregate market value of shares outstanding, or (3) if such
Person is owned, directly or indirectly, by a joint venture formed by two or
more Persons that are not owned, directly or indirectly by the same Person, the
rules set forth in clauses (1) and (2) above shall apply to each of the owners
having an interest in the venture as if the Person owned by the joint venture
was a Subsidiary of both or all of such joint venturers, and the Principal Party
in each such case shall bear the obligations set forth in this Section 13 in the
same ration as its interest in such Person bears to the total of such interests.

                                                                            -25-
<PAGE>

               (c) The Company shall not consummate any Section 13 Event unless
the Principal Party shall have a sufficient number of authorized Common Shares
that have not been issued or reserved for issuance to permit the exercise in
full of the Rights in accordance with this Section 13 and unless prior thereto
the Company and such issuer shall have executed and delivered to the Rights
Agent a supplemental agreement confirming that such Principal Party shall, upon
consummation of such Section 13 Event, assume this Agreement in accordance with
Sections 13(a) and 13(b) hereof, that all rights of first refusal or preemptive
rights in respect of the issuance of Common Shares of such Principal Party upon
exercise of outstanding Rights have been waived, that there are no rights,
warrants, instruments or securities outstanding or any agreements or
arrangements which, as a result of the consummation of such transaction, would
eliminate or substantially diminish the benefits intended to be afforded by the
Rights and that such transaction shall not result in a default by such Principal
Party under this Agreement, and further providing that, as soon as practicable
after the date of such Section 13 Event, such Principal Party will:

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

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

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

        In the event that at any time after the occurrence of a Triggering Event
some or all of the Rights shall not have been exercised at the time of a
transaction described in this Section 13, the Rights which have not theretofore
been exercised shall thereafter be exercisable in the manner described in
Section 13(a) (without taking into account any prior adjustment required by
Section 11(a)(ii)).

               (d) In case the "Principal Party" for purposes of Section 13(b)
hereof has provision in any of its authorized securities or in its certificate
of incorporation or by-laws or other instrument governing its corporate affairs,
which provision would have the effect of (i) causing such Principal Party to
issue (other than to holders of Rights pursuant to Section 13 hereof), in
connection with, or as a consequence of, the consummation of a Section 13 Event,
Common Shares of such Principal Party at less than the then Current Per Share
Market Price thereof or securities exercisable for, or convertible into, Common
Shares or Equivalent Shares of such Principal Party at less than such then
Current Per Share Market Price, or (ii) providing for any special payment, tax
or similar provision in

                                                                            -26-
<PAGE>

connection with the issuance of the Common Shares of such Principal Party
pursuant to the provisions of Section 13 hereof, then, in such event, the
Company hereby agrees with each holder of Rights that it shall not consummate
any such transaction unless prior thereto the Company and such Principal Party
shall have executed and delivered to the Rights Agent a supplemental agreement
providing that the provision in question of such Principal Party shall have been
canceled, waived or amended, or that the authorized securities shall be
redeemed, so that the applicable provision will have no effect in connection
with or as a consequence of, the consummation of the proposed transaction.

               (e) The Company covenants and agrees that it shall not, at any
time after the Distribution Date, effect or permit to occur any Section 13
Event, if (i) at the time or immediately after such Section 13 Event there are
any rights, warrants or other instruments or securities outstanding or
agreements in effect which would substantially diminish or otherwise eliminate
the benefits intended to be afforded by the Rights, (ii) prior to,
simultaneously with or immediately after such Section 13 Event, the stockholders
of the Person who constitutes, or would constitute, the "Principal Party" for
purposes of Section 13(b) hereof shall have received a distribution of Rights
previously owned by such Person or any of its Affiliates or Associates or (iii)
the form or nature of organization of the Principal Party would preclude or
limit the exercisability of the Rights.

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

        Section 14. Fractional Rights and Fractional Shares.

               (a) The Company shall not be required to issue fractions of
Rights or to distribute Rights Certificates which evidence fractional Rights. In
lieu of such fractional Rights, there shall be paid 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 the purposes of this Section 14(a),
the current market value of a whole Right shall be the closing price of the
Rights for the Trading Day immediately prior to the date on which such
fractional Rights would have been otherwise issuable, as determined pursuant to
the second sentence of Section 1(j) hereof.

               (b) The Company shall not be required to issue fractions of
Preferred Shares (other than fractions that are integral multiples of one
ten-thousandth (0.0001) of a Preferred Share) upon exercise of the Rights or to
distribute certificates which evidence fractional Preferred Shares (other than
fractions that are integral multiples of one ten-thousandth (0.0001) of a
Preferred Share). Interests in fractions of Preferred Shares in integral
multiples of one ten-thousandth (0.0001) of a Preferred Share may, at the
election of the Company, be evidenced by depository receipts, pursuant to an
appropriate agreement between the Company and a depository selected by it;
provided, that

                                                                            -27-
<PAGE>

such agreement shall provide that the holders of such depository receipts shall
have all the rights, privileges and preferences to which they are entitled as
beneficial owners of the Preferred Shares represented by such depository
receipts. In lieu of fractional Preferred Shares that are not integral multiples
of one ten-thousandth (0.0001) of a Preferred Share, the Company shall 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 a Preferred Share. For purposes of this Section 14(b),
the current market value of a Preferred Share shall be (x) ten thousand
multiplied by (y) the closing price of a Common Share (as determined pursuant to
the second sentence of Section 1(j) hereof) for the Trading Day immediately
prior to the date of such exercise.

               (c) The Company shall not be required to issue fractions of
Common Shares or to distribute certificates which evidence fractional Common
Shares upon the exercise or exchange of Rights. In lieu of such fractional
Common Shares, the Company shall pay to the registered holders of 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 a Common
Share. For purposes of this Section 14(c), the current market value of a Common
Share shall be the closing price of a Common Share (as determined pursuant to
the second sentence of Section 1(j) hereof) for the Trading Day immediately
prior to the date of such exercise.

               (d) The holder of a Right by the acceptance of the Right
expressly waives his or her right to receive any fractional Rights or any
fractional shares (other than fractions that are integral multiples of one
ten-thousandth (0.0001) of a Preferred Share) upon exercise of a Right.

        Section 15. Rights of Action. All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent pursuant to
Section 18 hereof, are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Rights Certificate (or, prior
to the Distribution Date, of the Common Shares), without the consent of the
Rights Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Shares), may, in his or her own behalf and for
his or her 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 or her 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 will be entitled to specific
performance of the obligations under, and injunctive relief against actual or
threatened violations of, the obligations of any Person subject to this
Agreement.

        Section 16. Agreement of 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:

                                                                            -28-
<PAGE>

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

               (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; and

               (c) subject to Sections 6(a) and 7(f) hereof, the Company and the
Rights Agent may deem and treat the person in whose name the Rights Certificate
(or, prior to the Distribution Date, the associated Common Shares certificate)
is registered as the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on the Rights
Certificates or the associated Common Shares certificate made by anyone other
than the Company or the Rights Agent) for all purposes whatsoever, and neither
the Company nor the Rights Agent shall be affected by any notice to the
contrary.

        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 to be the holder of the Preferred Shares
or any other securities of the Company which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any 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 specifically 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 reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
other disbursements incurred in the administration and execution of this
Agreement and the exercise and performance of its duties hereunder. The Company
also agrees to indemnify the Rights Agent for, and to hold it harmless against,
any loss, liability or expense, incurred without gross negligence, bad faith or
willful misconduct on the part of the Rights Agent, for anything done or omitted
by the Rights Agent in connection with the acceptance and administration of this
Agreement, including the costs and expenses of defending against any claim of
liability in the premises. In no event will the Rights Agent be liable for
special, indirect, incidental or consequential loss or damage of any kind
whatsoever, even if the Rights Agent has been advised of the possibility of such
loss or damage.

                                                                            -29-
<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 the Preferred Shares or Common Shares or for
other securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement or other paper or document reasonably believed by it to
be genuine and to be signed, executed and, where necessary, verified or
acknowledged, by the proper Person or Persons, or otherwise upon the advice of
counsel as set forth in Section 20 hereof.

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

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

               (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

                                                                            -30-
<PAGE>

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 Per Share 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 any one of the Chairman of the Board, the Chief Executive
Officer, the President, any Vice President, the Chief Financial Officer, 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 to the Company and
any other Person 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 (except its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and shall be deemed to
have been made by the Company only.

               (e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any 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 change in the exercisability of the Rights
or any adjustment in the terms of the Rights (including the manner, method or
amount thereof) provided for in Sections 3, 11, 13, 23 or 24, or the
ascertaining of the existence of facts that would require any such change or
adjustment (except with respect to the exercise of Rights evidenced by Rights
Certificates after receipt by the Rights Agent of a certificate furnished
pursuant to Section 12 describing such change or adjustment); nor shall it by
any act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any Preferred Shares to be issued pursuant to
this Agreement or any Rights Certificate or as to whether any Preferred Shares
will, when issued, be validly authorized and issued, fully paid and
nonassessable.

               (f) The Company agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts,

                                                                            -31-
<PAGE>

instruments and assurances as may reasonably be required by the Rights Agent for
the carrying out or performing by the Rights Agent of the provisions of this
Agreement.

               (g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the Chief Executive Officer, the President,
any Vice President, the Chief Financial Officer, the Secretary or any Assistant
Secretary of the Company, and to apply to such officers for advice or
instructions in connection with its duties, and it shall not be liable for any
action taken or suffered 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 Rights
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 any such application on or after the date specified in such
application (which date shall not be less than five (5) Business Days after the
date on which any officer of the Company actually receives such application,
unless any such officer shall have consented in writing to an earlier date)
unless, prior to taking any such action (or the effective date in the case of an
omission), the Rights Agent shall have received written instructions in response
to such application specifying the action to be taken or omitted.

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

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

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

                                                                            -32-
<PAGE>

               (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.

        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 Preferred Shares and the Common Shares by registered or
certified mail, and to the 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 Preferred
Shares and the Common Shares by registered or certified mail, and 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 or her Rights
Certificate for inspection by the Company), then the registered holder of any
Rights Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether appointed
by the Company or by such court, shall be a corporation organized and doing
business under the laws of the United States or of any state of the United
States, in good standing, which is authorized under such laws to exercise
corporate trust or stockholder services powers and is subject to supervision or
examination by federal or state authority. After appointment, the successor
Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Not later than the effective date of any such appointment, the
Company shall file notice thereof in writing with the predecessor Rights Agent
and each transfer agent of the Preferred Shares and the Common Shares, and 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 its Board of Directors to reflect any adjustment or change
in the Exercise 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 Common

                                                                            -33-
<PAGE>

Shares following the Distribution Date and prior to the redemption or expiration
of the Rights, the Company (a) shall, with respect to Common Shares so issued or
sold pursuant to the exercise of stock options or under any employee plan or
arrangement or upon the exercise, conversion or exchange of other securities of
the Company outstanding at the date hereof 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 and this sentence shall be null and void ab
initio if, and to the extent that, such issuance or this sentence would create a
significant risk of or result in material adverse tax consequences to the
Company or the Person to whom such Rights Certificate would be issued or would
create a significant risk of or result in such options' or employee plans' or
arrangements' failing to qualify for otherwise available special tax treatment
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.

               (a) The Company may, at its option and with the approval of the
Board of Directors, at any time prior to the Close of Business on the earlier of
(i) the fifth day following the Shares Acquisition Date (or such later date as
may be determined by action of the Company's Board of Directors and publicly
announced by the Company) and (ii) the Final Expiration Date, redeem all but not
less than all the then outstanding Rights at a redemption price of $0.00125 per
Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such redemption price being
herein referred to as the "REDEMPTION PRICE") and the Company may, at its
option, pay the Redemption Price either in Common Shares (based on the Current
Per Share Market Price thereof at the time of redemption) or cash. Such
redemption of the Rights by the Company may be made effective at such time, on
such basis and with such conditions as the Board of Directors in its sole
discretion may establish. The date on which the Board of Directors elects to
make the redemption effective shall be referred to as the "REDEMPTION DATE."

               (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.
The Company shall promptly give public notice of any such redemption; provided,
however, that the failure to give, or any defect in, any such notice shall not
affect the validity of such redemption. Within ten (10) days after 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 their last
addresses as they appear upon the registry books of the Rights Agent or, prior
to the Distribution Date, on the registry books of the transfer agent for the
Common Shares. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice of

                                                                            -34-
<PAGE>

redemption will state the method by which the payment of the Redemption Price
will be made. Neither the Company nor any of its Affiliates or Associates may
redeem, acquire or purchase for value any Rights at any time in any manner other
than that specifically set forth in this Section 23 or in Section 24 hereof, and
other than in connection with the purchase of Common Shares prior to the
Distribution Date.

        Section 24. Exchange.

               (a) Subject to applicable laws, rules and regulations, and
subject to subsection 24(c) below, the Company may, at its option, by action of
the Board of Directors, at any time after the occurrence of a Triggering Event,
exchange all or part of the then outstanding and exercisable Rights (which shall
not include Rights that have become void pursuant to the provisions of Section
7(e) hereof) for Common Shares at an exchange ratio of one Common Share per
Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the "EXCHANGE RATIO"). Notwithstanding the foregoing,
the Board of Directors shall not be empowered to effect such exchange at any
time after any Person (other than the Company, any Subsidiary of the Company,
any employee benefit plan of the Company or any such Subsidiary, or any entity
holding Common Shares 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 Shares then outstanding.

               (b) Immediately upon the action of the Board of Directors
ordering the exchange of any Rights pursuant to subsection 24(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 Common Shares equal to the number of
such Rights held by such holder multiplied by the Exchange Ratio. The Company
shall 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 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 Shares for Rights will be effected and, in the event of any
partial exchange, the number of Rights which will be exchanged. Any partial
exchange shall be effected pro rata based on the number of Rights (other than
Rights which have become void pursuant to the provisions of Section 7(e) hereof)
held by each holder of Rights.

               (c) In the event that there shall not be sufficient Common Shares
issued but not outstanding or authorized but unissued to permit any exchange of
Rights as contemplated in accordance with Section 24(a), the Company shall
either take such action as may be necessary to authorize additional Common
Shares for issuance upon exchange of the Rights or alternatively, at the option
of a majority of the Board of Directors, with respect to each Right (i) pay cash
in an amount equal to the Current Value (as hereinafter defined), in lieu of
issuing Common Shares in exchange therefor, or (ii) issue debt or equity
securities or a combination thereof, having a value

                                                                            -35-
<PAGE>

equal to the Current Value, in lieu of issuing Common Shares in exchange for
each such Right, where the value of such securities shall be determined by a
nationally recognized investment banking firm selected by majority vote of the
Board of Directors, or (iii) deliver any combination of cash, property, Common
Shares and/or other securities having a value equal to the Current Value in
exchange for each Right. For purposes of this Section 24(c) only, the Current
Value shall mean the product of the Current Per Share Market Price of Common
Shares on the date of the occurrence of the event described above in subsection
(a), multiplied by the number of Common Shares for which the Right otherwise
would be exchangeable if there were sufficient shares available. To the extent
that the Company determines that some action need be taken pursuant to clauses
(i), (ii) or (iii) of this Section 24(c), the Board of Directors may temporarily
suspend the exercisability of the Rights for a period of up to sixty (60) days
following the date on which the event described in Section 24(a) shall have
occurred, in order to seek any authorization of additional Common Shares and/or
to decide the appropriate form of distribution to be made pursuant to the above
provision 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.

               (d) The Company shall not be required to issue fractions of
Common Shares or to distribute certificates which evidence fractional Common
Shares. In lieu of such fractional Common Shares, there shall be paid to the
registered holders of the Rights Certificates with regard to which such
fractional Common Shares would otherwise be issuable, an amount in cash equal to
the same fraction of the current market value of a whole Common Share (as
determined pursuant to the second sentence of Section 1(j) hereof).

               (e) The Company may, at its option, by majority vote of the Board
of Directors, at any time before any Person has become an Acquiring Person,
exchange all or part of the then outstanding Rights for rights of substantially
equivalent value, as determined reasonably and with good faith by the Board of
Directors based upon the advice of one or more nationally recognized investment
banking firms.

               (f) Immediately upon the action of the Board of Directors
ordering the exchange of any Rights pursuant to subsection 24(e) 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 rights in exchange therefor as has
been determined by the Board of Directors in accordance with subsection 24(e)
above. The Company shall 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 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 transfer agent for the Common Shares
of the Company. Any notice which is mailed in the manner herein provided shall
be deemed given, whether or not the holder receives the notice.

                                                                            -36-
<PAGE>

Each such notice of exchange will state the method by which the exchange of the
Rights will be effected.

        Section 25. Notice of Certain Events.

               (a) In case the Company shall propose to effect or permit to
occur any Triggering Event or Section 13 Event, the Company shall give notice
thereof to each holder of Rights in accordance with Section 26 hereof at least
twenty (20) days prior to occurrence of such Triggering Event or such Section 13
Event.

               (b) In case any Triggering Event or Section 13 Event shall occur,
then, in any such case, the Company shall as soon as practicable thereafter give
to each holder of a Rights Certificate, 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 Sections 11(a)(ii) and 13
hereof.

        Section 26. Notices. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any 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 with
the Rights Agent) as follows:

                             Sun Microsystems, Inc.
                             4150 Network Circle
                             Santa Clara, California 95054
                             Attention: General Counsel

                             with a copy to:
                             Wilson Sonsini Goodrich & Rosati
                             Professional Corporation
                             650 Page Mill Road
                             Palo Alto, California 94304-1050
                             Attention:  David J. Berger

        Subject to the provisions of Section 21 hereof, 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 with the Company) as follows:

                             EquiServe Trust Company, N.A.
                             150 Royall Street
                             Canton, MA 02021
                             Attention: Client Administration

                                                                            -37-
<PAGE>

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

        Section 27. Supplements and Amendments; Super Session of Prior
Agreements. Prior to the occurrence of a Distribution Date, the Company may
supplement or amend this Agreement in any respect without the approval of any
holders of Rights and the Rights Agent shall, if the Company so directs, execute
such supplement or amendment. From and after the occurrence of a Distribution
Date, the Company and the Rights Agent may from time to time supplement or amend
this Agreement without the approval of any holders of Rights in order to (i)
cure any ambiguity, (ii) correct or supplement any provision contained herein
which may be defective or inconsistent with any other provisions herein, (iii)
shorten or lengthen any time period hereunder or (iv) to change or supplement
the provisions hereunder in any manner that the Company may deem necessary or
desirable and that shall not adversely affect the interests of the holders of
Rights (other than an Acquiring Person or an Affiliate or Associate of an
Acquiring Person); provided, this Agreement may not be supplemented or amended
to lengthen, pursuant to clause (iii) of this sentence, (A) a time period
relating to when the Rights may be redeemed at such time as the Rights are not
then redeemable or (B) any other time period unless such lengthening is for the
purpose of protecting, enhancing or clarifying the rights of, and/or the
benefits to, the holders of Rights (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 that 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 Shares. This Third
Amended and Restated Share Rights Agreement shall supersede in full the Prior
Agreement, and such Prior Agreement shall cease to be of further force or effect
as of the date first set forth above.

        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 Common
Shares outstanding at any particular time, including for purposes of determining
the particular percentage of such outstanding Common Shares of which any Person
is the Beneficial Owner, shall be made in accordance with the last sentence of
Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the 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 the Company, or as may be necessary or
advisable in the administration of this Agreement, including, without
limitation, the right and power (i) to interpret the provisions of this
Agreement and (ii) to 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,

                                                                            -38-
<PAGE>

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 Certificates and all other parties and
(y) with respect to claims specifically arising from the Agreement, not subject
the Board to any liability to the holders of the Rights.

        Section 30. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give to any Person other than the Company, the Rights Agent and
the registered holders of the Rights Certificates (and, prior to the
Distribution Date, the Common Shares) any legal or equitable right, remedy or
claim pursuant to 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, the Common
Shares).

        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 day following the date of such determination by the Board of Directors.

        Section 32. Governing Law. This Agreement and 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 to
be made and performed entirely within such State.

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

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

                                                                            -39-
<PAGE>

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

"COMPANY"                               SUN MICROSYSTEMS, INC.

                                        By:   /s/ Stephen T. McGowan
                                              ----------------------------------

                                        Name: Stephen T. McGowan
                                              ----------------------------------

                                        Title: Chief Financial Officer and
                                               Executive Vice President,
                                               Corporate Resources
                                              ----------------------------------

"RIGHTS AGENT"                          EQUISERVE TRUST COMPANY, N.A.

                                        By:   /s/ Joshua P. McGinn
                                              ----------------------------------

                                        Name: Joshua P. McGinn
                                              ----------------------------------

                                        Title: Senior Account Manager
                                              ----------------------------------

                                                                            -40-
<PAGE>

                                    EXHIBIT A

                           FORM OF RIGHTS CERTIFICATE

Certificate No. R-                                              _________ Rights

        NOT EXERCISABLE AFTER THE EARLIER OF (i) JULY 25, 2012, (ii) THE DATE
        TERMINATED BY THE COMPANY OR (iii) THE DATE THE COMPANY EXCHANGES THE
        RIGHTS PURSUANT TO THE RIGHTS AGREEMENT. THE RIGHTS ARE SUBJECT TO
        REDEMPTION, AT THE OPTION OF THE COMPANY, AT $0.00125 PER RIGHT ON THE
        TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES,
        RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE OR
        ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE
        RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME
        NULL AND VOID. [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 RIGHTS
        AGREEMENT.]*

                               RIGHTS CERTIFICATE

                             SUN MICROSYSTEMS, INC.

        This certifies that ______________________________, or registered
assigns, is the registered owner of the number of Rights set forth above, each
of which entitles the owner thereof, subject to the terms, provisions and
conditions of the Third Amended and Restated Shares Rights Agreement dated as of
July 25, 2002, (the "RIGHTS AGREEMENT"), between Sun Microsystems, Inc., a
Delaware corporation (the "COMPANY"), and EquiServe Trust Company, N.A. (the
"RIGHTS AGENT"), to purchase from the Company at any time after the Distribution
Date (as such term is defined in the Rights Agreement) and prior to 5:00 P.M.,
New York time, on July 25, 2012 at the office of the Rights Agent designated for
such purpose, or at the office of its successor as Rights

----------

*    The portion of the legend in bracket shall be inserted only if applicable
     and shall replace the preceding sentence.

<PAGE>

Agent, one ten-thousandth (0.0001) of a fully paid and non-assessable share of
Series A Participating Preferred Stock, par value $0.001 per share (the
"PREFERRED SHARES"), of the Company, at an Exercise Price of $250.00 per one
ten-thousandth (0.0001) of a Preferred Share (the "EXERCISE 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 one ten-thousandths
(0.0001) of a Preferred Share which may be purchased upon exercise hereof) set
forth above are the number and Exercise Price as of July 25, 2002 based on the
Preferred Shares as constituted at such date. As provided in the Rights
Agreement, the Exercise Price and the number and kind of Preferred Shares 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.

        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 principal executive offices of
the Company and the above-mentioned office of the Rights Agent.

        Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Rights Certificate (i) may be redeemed by the Company, at its option, at
a redemption price of $0.00125 per Right or (ii) may be exchanged by the Company
in whole or in part for Common Shares, substantially equivalent rights or other
consideration as determined by the Company.

        This Rights Certificate, with or without other Rights Certificates, upon
surrender at the office 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
amount of securities 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.

        No fractional portion of less than one ten-thousandth (0.0001) of a
Preferred Share will be issued upon the exercise of any Right or Rights
evidenced hereby but in lieu thereof a cash payment will be made, as provided in
the Rights Agreement.

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

                                                                             -2-
<PAGE>

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.

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

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

ATTEST:                                      SUN MICROSYSTEMS, INC.

                                             By:
-----------------------------------              -------------------------------
Secretary

                                             Its:
                                                 -------------------------------

Countersigned:

EQUISERVE TRUST COMPANY, N.A.
as Rights Agent

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

Its:
    -------------------------------

                                                                             -3-
<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:

        Signatures must be guaranteed by an "Eligible Guarantor Institution"
(with membership in an approved signature guarantee medallion program) pursuant
to Rule 17Ad-15 of the Securities Exchange Act of 1934, as amended.

<PAGE>

                                   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 Person (as such terms are
defined in the Rights Agreement);

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

Dated:                ,
       ---------------  ----

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

Signature Guaranteed:

        Signatures must be guaranteed by an "Eligible Guarantor Institution"
(with membership in an approved signature guarantee medallion program) pursuant
to Rule 17Ad-15 of the Securities Exchange Act of 1934, as amended.

<PAGE>

             FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE -- CONTINUED

                          FORM OF ELECTION TO PURCHASE

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

To:___________________________

               The undersigned hereby irrevocably elects to exercise
_________________________ Rights represented by this Rights Certificate to
purchase the number of one ten-thousandths (0.0001) of a Preferred Share
issuable upon the exercise of such Rights and requests that certificates for
such number of one ten-thousandths (0.0001) of a Preferred Share issued in the
name of:

Please insert social security
or other identifying number

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

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

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

Please insert social security
or other identifying number

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

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

Dated:                ,
       ---------------  ----

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

Signature Guaranteed:

        Signatures must be guaranteed by an "Eligible Guarantor Institution"
(with membership in an approved signature guarantee medallion program) pursuant
to Rule 17Ad-15 of the Securities Exchange Act of 1934, as amended.

<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 Person (as such terms are defined in the
Rights Agreement);

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

Dated:                ,
       ---------------  ----

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

Signature Guaranteed:

        Signatures must be guaranteed by an "Eligible Guarantor Institution"
(with membership in an approved signature guarantee medallion program) pursuant
to Rule 17Ad-15 of the Securities Exchange Act of 1934, as amended.

<PAGE>

             FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE -- CONTINUED

                                     NOTICE

               The signature in the foregoing Forms of Assignment and Election
must conform 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 B

                             STOCKHOLDER RIGHTS PLAN
                             SUN MICROSYSTEMS, INC.

                                SUMMARY OF RIGHTS

DISTRIBUTION AND                        The Board of Directors has declared a
TRANSFER OF RIGHTS;                     dividend of one Right for each share of
RIGHTS CERTIFICATE:                     Common Stock of Sun Microsystems, Inc.
                                        (the "COMPANY") outstanding. Prior to
                                        the Distribution Date referred to below,
                                        the Rights will be evidenced by and
                                        trade with the certificates for the
                                        Common Stock. After the Distribution
                                        Date, the Company will mail Rights
                                        certificates to the Company's
                                        stockholders and the Rights will become
                                        transferable apart from the Common
                                        Stock.

DISTRIBUTION DATE:                      Rights will separate from the Common
                                        Stock and become exercisable following
                                        (a) the tenth day (or such later date as
                                        may be determined by the Company's Board
                                        of Directors) after a person or group
                                        acquires beneficial ownership of 10% or
                                        more of the Company's Common Stock or
                                        (b) the tenth business day (or such
                                        later date as may be determined by the
                                        Company's Board of Directors) after a
                                        person or group announces a tender or
                                        exchange offer, the consummation of
                                        which would result in ownership by a
                                        person or group of 10% or more of the
                                        Company's Common Stock.

PREFERRED STOCK                         After the Distribution Date, each Right
PURCHASABLE UPON                        will entitle the holder to purchase for
EXERCISE OF RIGHTS:                     $250.00 (the "EXERCISE PRICE"), a
                                        fraction of a share of the Company's
                                        Preferred Stock with economic terms
                                        similar to that of one share of the
                                        Company's Common Stock.

FLIP-IN:                                If an acquirer (an "ACQUIRING PERSON")
                                        obtains 10% or more of the Company's
                                        Common Stock, then each Right (other
                                        than Rights owned by an Acquiring Person
                                        or its affiliates) will entitle the
                                        holder thereof to purchase, for the
                                        Exercise Price, a number of shares of
                                        the Company's Common Stock having a
                                        then-current market value of twice the
                                        Exercise Price.

FLIP-OVER:                              If, after an Acquiring Person obtains
                                        10% or more of the Company's Common
                                        Stock, (a) the Company merges into
                                        another entity, (b) an acquiring entity
                                        merges into the Company or (c) the
                                        Company sells more than 50% of the
                                        Company's assets or earning power, then
                                        each Right (other than Rights owned by
                                        an Acquiring Person or its affiliates)
                                        will entitle the holder thereof to
                                        purchase, for the Exercise Price, a
                                        number of shares of Common Stock of the
                                        person engaging in the transaction
                                        having a then current market value of
                                        twice the Exercise Price.

EXCHANGE PROVISION:                     At any time after the date on which an
                                        Acquiring Person obtains 10% or more of
                                        the Company's Common Stock and prior to
                                        the acquisition by the Acquiring Person
                                        of 50% of the outstanding Common Stock,
                                        the Board of Directors of the Company
                                        may exchange the Rights (other than
                                        Rights owned by the Acquiring Person or
                                        its affiliates), in whole or in part,
                                        for shares of Common Stock of the
                                        Company at an exchange ratio of one
                                        share of Common Stock per Right (subject
                                        to adjustment).

<PAGE>

REDEMPTION OF THE                       Rights will be redeemable at the
RIGHTS:                                 Company's option for $0.00125 per Right
                                        at any time on or prior to the fifth day
                                        (or such later date as may be determined
                                        by the Company's Board of Directors)
                                        after public announcement that a Person
                                        has acquired beneficial ownership of 10%
                                        or more of the Company's Common Stock
                                        (the "SHARES ACQUISITION DATE").

EXPIRATION OF THE                       The Rights expire on the earliest of (a)
RIGHTS:                                 July 25, 2012 or (b) exchange or
                                        redemption of the Rights as described
                                        above.

AMENDMENT OF TERMS                      The terms of the Rights and the Rights
OF RIGHTS:                              Agreement may be amended in any respect
                                        without the consent of the Rights
                                        holders on or prior to the Distribution
                                        Date; thereafter, the terms of the
                                        Rights and the Rights Agreement may be
                                        amended without the consent of the
                                        Rights holders in order to cure any
                                        ambiguities or to make changes which do
                                        not adversely affect the interests of
                                        Rights holders (other than the Acquiring
                                        Person).

VOTING RIGHTS:                          Rights will not have any voting rights.

ANTI-DILUTION                           Rights will have the benefit of certain
PROVISIONS:                             customary anti-dilution provisions.

TAXES:                                  The Rights distribution should not be
                                        taxable for federal income tax purposes.
                                        However, following an event which
                                        renders the Rights exercisable or upon
                                        redemption of the Rights, stockholders
                                        may recognize taxable income.

The foregoing is a summary of certain principal terms of the Stockholder Rights
Plan only and is qualified in its entirety by reference to the Preferred Stock
Rights Agreement dated as of July 25, 2002, between the Company and EquiServe
Trust Company, N.A., as Rights Agent (the "RIGHTS AGREEMENT"). The Rights
Agreement may be amended from time to time. A copy of the Rights Agreement was
filed with the Securities and Exchange Commission as an Exhibit to a
Registration Statement on Form 8-A/A dated September 26, 2002. A copy of the
Rights Agreement is available free of charge from the Company.<PAGE>
                                                                  EXHIBIT 10.1.4

                              FRENCH EMPLOYEES ONLY

                            CRYSTAL DECISIONS, INC.

                             1999 STOCK OPTION PLAN

                           AS AMENDED AUGUST 13, 2001

      1. Purposes of the Plan. The purposes of this Stock Option Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries to perform future services and to promote the
success of the Company's business. Options granted under the Plan may be
incentive stock options (as defined under Section 422 of the Code) or
nonstatutory stock options, as determined by the Administrator at the time of
grant of an option and subject to the applicable provisions of Section 422 of
the Code, as amended, and the regulations promulgated thereunder.

      2. Definitions. As used herein, the following definitions shall apply:

        (a) "Administrator" means the Board or any of its Committees appointed
pursuant to Section 4 of the Plan.

        (b) "Affiliate" means (i) any corporation in which the Company owns,
directly or indirectly, ten percent or more of the voting stock, or any
partnership, limited liability company or other entity in which the Company
ownership interest represents, directly or indirectly, ten percent or more of
the total ownership interests in such partnership, limited liability company, or
entity; (ii) any corporation which owns, directly or indirectly, ten percent or
more of the voting stock of the Company, or any partnership, limited liability
company or other entity which owns, directly or indirectly, ten percent or more
of the voting stock of the Company; or (iii) any corporation or any other entity
(including, but not limited to, partnerships, joint ventures and limited
liability companies) that the Administrator, in its sole discretion, determines
to be controlling, controlled by, or under common control with the Corporation.

        (c)    "Board" means the Board of Directors of the Company.

        (d) "California Optionee" means an Optionee residing in California or
working primarily in the Company's California offices.

        (e) "Code" means the Internal Revenue Code of 1986, as amended.

        (f) "Committee" means a Committee appointed by the Board of Directors in
accordance with Section 4 of the Plan.

        (g) "Common Stock" means the Common Stock of the Company.

        (h) "Company" means Crystal Decisions, Inc., a Delaware corporation.

        (i) "Consultant" means (i) any person who is engaged by the Company or
any Parent, Subsidiary or Affiliate to render consulting or advisory services to
such entity and is compensated for such services, (ii) any director of the
Company whether compensated for such services or not, or (iii) any employee or
director of an Affiliate.

                                       1
<PAGE>

        (j) "Continuous Status as an Employee or Consultant" means that the
employment or consulting relationship with the Company, any Parent, Subsidiary,
or Affiliate is not interrupted or terminated. Continuous Status as an Employee
or Consultant shall not be considered interrupted in the case of (i) any leave
of absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, Affiliate or any
successor. A leave of absence approved by the Company shall include sick leave,
military leave, or any other personal leave approved by an authorized
representative of the Company. For purposes of Incentive Stock Options, no such
leave may exceed ninety (90) days, unless reemployment upon expiration of such
leave is guaranteed by statute or contract, including Company policies. If
reemployment upon expiration of a leave of absence approved by the Company is
not so guaranteed, on the 181st day of such leave any Incentive Stock Option
held by the Optionee shall cease to be treated as an Incentive Stock Option and
shall be treated for tax purposes as a Nonstatutory Stock Option.

        (k) "Employee" means any person, including Officers and directors,
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.

        (l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

        (m) "Fair Market Value" means, as of any date, the value of Common Stock
determined as follows:

            (i) If the Common Stock is listed on any established stock exchange
or a national market system, including without limitation the Nasdaq National
Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market
Value shall be the closing sales price for such stock (or the closing bid, if no
sales were reported) as quoted on such exchange or system for the last market
trading day prior to the time of determination, as reported in The Wall Street
Journal or such other source as the Administrator deems reliable;

            (ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common Stock
on the last market trading day prior to the day of determination, or;

            (iii) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the
Administrator.

        (n) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.

        (o) "Nonstatutory Stock Option" means an Option not intended to qualify
as an Incentive Stock Option.

        (p) "Non-California Optionee" means an Optionee who is not a California
resident and who works primarily outside of the Company's California offices.

        (q) "Officer" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.

        (r) "Option" means a stock option granted pursuant to the Plan.

        (s) "Optioned Stock" means the Common Stock subject to an Option.

                                       2
<PAGE>

        (t) "Optionee" means an Employee or Consultant who receives an Option.

        (u) "Parent" means a "parent corporation", whether now or hereafter
existing, as defined in Section 424(e) of the Code.

        (v) "Plan" means this 1999 Stock Option Plan.

        (w) "Section 16(b)" means Section 16(b) of the Exchange Act.

        (x) "Share" means a share of the Common Stock, as adjusted in accordance
with Section 11 below.

        (y) "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.

        3. Stock Subject to the Plan. Subject to the provisions of Section 11 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 22,500,000 Shares. The Shares may be authorized, but unissued,
or reacquired Common Stock.

        If an Option expires or becomes unexercisable without having been
exercised in full, or is surrendered pursuant to an option exchange program, the
unpurchased Shares which were subject thereto shall become available for future
grant or sale under the Plan (unless the Plan has terminated); provided,
however, that Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan, except that if unvested Shares are repurchased by the Company at
their original purchase price, and the original purchaser of such Shares did not
receive any benefits of ownership of such Shares, such Shares shall become
available for future grant under the Plan. For purposes of the preceding
sentence, voting rights shall not be considered a benefit of Share ownership.

      4. Administration of the Plan.

        (a) Initial Plan Procedure. Prior to the date, if any, upon which the
Company becomes subject to the Exchange Act, the Plan shall be administered by
the Board or a Committee appointed by the Board.

        (b) Plan Procedure after the Date, if any, upon which the Company
becomes Subject to the Exchange Act.

            (i) Administration with Respect to Directors and Officers. With
respect to grants of Options to Employees who are also Officers or Directors of
the Company, the Plan shall be administered by (A) the Board if the Board may
administer the Plan in compliance with the rules under Rule 16b-3 promulgated
under the Exchange Act or any successor thereto ("Rule 16b-3") under which
Section 16(b) exempt discretionary grants and awards of equity securities are to
be made, or (B) a Committee designated by the Board to administer the Plan,
which Committee shall be constituted to comply with the rules under Rule 16b-3
under which Section 16(b) exempt discretionary grants and awards of equity
securities are to be made. Once appointed, such Committee shall continue to
serve in its designated capacity until otherwise directed by the Board. From
time to time the Board may increase the size of the Committee and appoint
additional members thereof, remove members (with or without cause) and appoint
new members in substitution therefor, fill vacancies, however caused, and remove
all members of the Committee and thereafter directly administer the Plan, all to
the extent permitted by the rules under Rule 16b-3 under which Section 16(b)
exempt discretionary grants and awards of equity securities are to be made.

                                       3
<PAGE>

            (ii) Multiple Administrative Bodies. If permitted by Rule 16b-3, the
Plan may be administered by different bodies with respect to directors,
non-director Officers and Employees who are neither directors nor Officers.

            (iii) Administration With Respect to Consultants and Other
Employees. With respect to grants of Options to Employees or Consultants who are
neither directors nor Officers of the Company, the Plan shall be administered by
(A) the Board or (B) a committee designated by the Board, which committee shall
be constituted in such a manner as to satisfy the legal requirements relating to
the administration of incentive stock option plans, if any, of state corporate
and securities laws, of the Code, and of any applicable stock exchange (the
"Applicable Laws"). Once appointed, such Committee shall continue to serve in
its designated capacity until otherwise directed by the Board. From time to time
the Board may increase the size of the Committee and appoint additional members
thereof, remove members (with or without cause) and appoint new members in
substitution therefor, fill vacancies, however caused, and remove all members of
the Committee and thereafter directly administer the Plan, all to the extent
permitted by the Applicable Laws.

        (c) Powers of the Administrator. Subject to the provisions of the Plan
and, in the case of a Committee, the specific duties delegated by the Board to
such Committee, and subject to the approval of any relevant authorities,
including the approval, if required, of any stock exchange upon which the Common
Stock is listed, the Administrator shall have the authority, in its discretion:

            (i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(m) of the Plan;

            (ii) to select the Consultants and Employees to whom Options may
from time to time be granted hereunder;

            (iii) to determine whether and to what extent Options are granted
hereunder;

            (iv) to determine the number of shares of Common Stock to be covered
by each such award granted hereunder;

            (v) to approve forms of agreement for use under the Plan;

            (vi) to determine the terms and conditions of any award granted
hereunder;

            (vii) to allow Optionees to satisfy withholding tax obligations by
electing to have the Company withhold from the Shares to be issued upon exercise
of an Option that number of Shares having a Fair Market Value equal to the
amount required to be withheld. The Fair Market Value of the Shares to be
withheld shall be determined on the date that the amount of tax to be withheld
is to be determined. All elections by Optionees to have Shares withheld for this
purpose shall be made in such form and under such conditions as the
Administrator may deem necessary or advisable;

            (viii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option has declined since the date the Option was granted; and

            (ix) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan.

                                       4
<PAGE>

        (d) Effect of Administrator's Decision. All decisions, determinations
and interpretations of the Administrator shall be final and binding on all
Optionees and any other holders of any Options.

      5. Eligibility.

        (a) Nonstatutory Stock Options may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if otherwise
eligible, be granted additional Options.

        (b) Each Option shall be designated in the written NOTICE OF STOCK
OPTION GRANT as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designation, to the extent that the aggregate Fair
Market Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 5(b), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.

        (c) The Plan shall not confer upon any Optionee any right with respect
to continuation of employment or consulting relationship with the Company, nor
shall it interfere in any way with his or her right or the Company's right to
terminate his or her employment or consulting relationship at any time, with or
without cause.

        (d) Upon the Company or a successor corporation issuing any class of
common equity securities required to be registered under Section 12 of the
Exchange Act or upon the Plan being assumed by a corporation having a class of
common equity securities required to be registered under Section 12 of the
Exchange Act, the following limitations shall apply to grants of Options to
Employees:

            (i) No Employee shall be granted, in any fiscal year of the Company,
Options to purchase more than 5,000,000 Shares.

            (ii) In connection with his or her initial employment, an Employee
may be granted Options to purchase up to an additional 3,000,000 Shares which
shall not count against the limit set forth in subsection (i) above.

            (iii) The foregoing limitations shall be adjusted proportionately in
connection with any change in the Company's capitalization as described in
Section 11.

            (iv) If an Option is cancelled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 11), the cancelled Option will be counted against the limit
set forth in subsection (i) above. For this purpose, if the exercise price of an
Option is reduced, the transaction will be treated as a cancellation of the
Option and the grant of a new Option.

      6. Term of Plan. The Plan shall become effective upon the earlier to occur
of its adoption by the Board of Directors or its approval by the stockholders of
the Company, as described in Section 17 of the Plan. It shall continue in effect
for a term of ten (10) years unless sooner terminated under Section 13 of the
Plan.

                                       5
<PAGE>

      7. Term of Option. The term of each Option shall be the term stated in the
NOTICE OF STOCK OPTION GRANT; provided, however, that the term shall be no more
than ten (10) years from the date of grant thereof. However, in the case of an
Incentive Stock Option granted to an Optionee who, at the time the Option is
granted, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the term of
the Option shall be five (5) years from the date of grant thereof or such
shorter term as may be provided in the NOTICE OF STOCK OPTION GRANT.

      8. Option Exercise Price and Consideration.

        (a) The per share exercise price for the Shares to be issued pursuant to
exercise of an Option shall be such price as is determined by the Administrator,
but shall be subject to the following:

            (i) In the case of an Incentive Stock Option

                 (A) granted to an Employee who, at the time of the grant of
such Incentive Stock Option, owns stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than one hundred ten
percent (110%) of the Fair Market Value per Share on the date of grant.

                 (B) granted to any Employee other than an Employee described in
the preceding paragraph, the per Share exercise price shall be no less than one
hundred percent (100%) of the Fair Market Value per Share on the date of grant.

            (ii) In the case of a Nonstatutory Stock Option

                 (A) granted to a person who, at the time of the grant of such
Option, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the per
Share exercise price shall be no less than one hundred ten percent (110%) of the
Fair Market Value per Share on the date of the grant.

                 (B) granted to any person, the per Share exercise price shall
be no less than eighty-five (85%) of the Fair Market Value per Share on the date
of grant.

        (b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option have been owned by the Optionee for more
than six months on the date of surrender and (y) have a Fair Market Value on the
date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised, (5) delivery of a properly executed
exercise notice together with such other documentation as the Administrator and
the broker, if applicable, shall require to effect an exercise of the Option and
delivery to the Company of the sale or loan proceeds required to pay the
exercise price, (6) the cancellation of a portion of the Shares subject to the
Option with a Fair Market Value equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised, or (7) any combination of the
foregoing methods of payment. In making its determination as to the type of
consideration to accept, the Administrator shall consider if acceptance of such
consideration may be reasonably expected to benefit the Company.

                                       6
<PAGE>

      9. Exercise of Option.

        (a) Procedure for Exercise; Rights as a Stockholder. Any Option granted
hereunder shall be exercisable at such times and under such conditions as
determined by the Administrator, including performance criteria with respect to
the Company and/or the Optionee, and as shall be permissible under the terms of
the Plan. Except in the case of Options granted to Officers, Directors,
Consultants and Non-California Optionees, Options shall become exercisable at a
rate of no less than 20% per year over five (5) years from the date the Options
are granted. With respect to Officers, Directors, Consultants and Non-California
Optionees, vesting shall cease on the 31st day of any leave of absence, unless
required otherwise by law or unless the Administrator provides otherwise in
writing to the Optionee, and shall recommence upon returning from the leave of
absence.

        An Option may not be exercised for a fraction of a Share.

        An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Administrator, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a stockholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 11 of the Plan.

        Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.

        (b) Termination of Employment or Consulting Relationship -- California
Optionees. In the event of termination of a California Optionee's Continuous
Status as an Employee or Consultant with the Company (for any reason and
regardless of any appropriate court finding such termination unfair or irregular
on any basis whatsoever), but not in the event of a California Optionee's change
of status from Employee to Consultant (in which case such Employee's Incentive
Stock Option shall automatically convert to a Nonstatutory Stock Option on the
date three (3) months and one (1) day from the date of such change of status) or
from Consultant to Employee, such Optionee may, but only within such period of
time as is determined by the Administrator, of at least thirty (30) days, with
such determination in the case of an Incentive Stock Option not exceeding three
(3) months after the date of such termination (but in no event later than the
expiration date of the term of such Option as set forth in the NOTICE OF STOCK
OPTION GRANT), exercise his or her Option to the extent that Optionee was
entitled to exercise it at the date of such termination. To the extent that the
California Optionee was not entitled to exercise the Option at the date of such
termination, or if the Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate, without
the Optionee being entitled to any compensation for the loss of such Option or
portion of Option.

                                       7
<PAGE>

        (c) Termination of Employment or Consulting Relationship --
Non-California Optionees. In the event of (i) termination of an Non-California
Optionee's Continuous Status as an Employee or Consultant with the Company (for
any reason and regardless of any appropriate court finding such termination
unfair or irregular on any basis whatsoever), but not in the event of an
Non-California Optionee's change of status from Employee to Consultant (in which
case an Employee's Incentive Stock Option shall automatically convert to a
Nonstatutory Stock Option on the date three (3) months and one (1) day from the
date of such change of status) or from Consultant to Employee, or (ii) a
Non-California Employee being provided with notice of termination of employment
(for any reason and regardless of any appropriate court finding the related
termination unfair or irregular on any basis whatsoever), such non-California
Optionee may, but only within thirty (30) days, (or such longer period as the
Administrator may allow, with such determination in the case of an Incentive
Stock Option not exceeding three (3) months after the date of a termination or
employment, and in no event later than the expiration date of the term of such
Option as set forth in the NOTICE OF STOCK OPTION GRANT) following the date of
such termination of Continuous Status as an Employee or Consultant or provision
of notice of termination of employment, exercise his or her Option to the extent
that Optionee was entitled to exercise it upon the earlier of (i) the date of
termination of Continuous Status as an Employee or Consultant, or (ii) the date
upon which Optionee was provided with notice of termination of employment (the
earlier of these dates is referred to herein as the "Vesting Cessation Date").
To the extent that such Optionee was not entitled to exercise the Option upon
the Vesting Cessation Date, or if Optionee does not exercise such Option to the
extent so entitled within the time specified herein, the Option shall terminate,
without the Optionee being entitled to any compensation for the loss of such
Option or portion of Option. A transfer of employment from any of the Company,
its Parent or a Subsidiary shall not be considered to involve a notice of
termination of employment.

        (d) Disability of Optionee. In the event of termination of an Optionee's
consulting relationship or Continuous Status as an Employee as a result of his
or her disability, Optionee may, but only within twelve (12) months from the
date of such termination (and in no event later than the expiration date of the
term of such Option as set forth in the NOTICE OF STOCK OPTION GRANT), exercise
the Option to the extent otherwise entitled to exercise it at the date of such
termination; provided, however, that if such disability is not a "disability" as
such term is defined in Section 22(e)(3) of the Code, in the case of an
Incentive Stock Option such Incentive Stock Option shall automatically convert
to a Nonstatutory Stock Option on the day three (3) months and one (1) day
following such termination. To the extent that Optionee is not entitled to
exercise the Option at the date of termination, or if Optionee does not exercise
such Option to the extent so entitled within the time specified herein, the
Option shall terminate, and the Shares covered by such Option shall revert to
the Plan.

        (e) Death of Optionee. In the event of the death of an Optionee, the
Option may be exercised at any time within twelve (12) months following the date
of death (but in no event later than the expiration of the term of such Option
as set forth in the Notice of Grant), by the Optionee's estate or by a person
who acquired the right to exercise the Option by bequest or inheritance, but
only to the extent that the Optionee was entitled to exercise the Option at the
date of death. If, at the time of death, the Optionee was not entitled to
exercise his or her entire Option, the Shares covered by the unexercisable
portion of the Option shall immediately revert to the Plan. If, after death, the
Optionee's estate or a person who acquired the right to exercise the Option by
bequest or inheritance does not exercise the Option within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.

         (f) Rule 16b-3. Options granted to persons subject to Section 16(b) of
the Exchange Act must comply with Rule 16b-3 and shall contain such additional
conditions or restrictions as may be required thereunder to qualify for the
maximum exemption from Section 16 of the Exchange Act with respect to Plan
transactions.

                                       8
<PAGE>

      10. Non-Transferability of Options. Options may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.

      11. Adjustments Upon Changes in Capitalization or Merger.

        (a) Changes in Capitalization. Subject to any required action by the
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the
Administrator, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an Option.

        (b) Dissolution or Liquidation. In the event of the proposed dissolution
or liquidation of the Company, the Administrator shall notify the Optionee at
least fifteen (15) days prior to such proposed action. To the extent it has not
been previously exercised, the Option will terminate immediately prior to the
consummation of such proposed action.

        (c) Merger or Asset Sale. In the event of a merger of the Company with
or into another corporation, or the sale of substantially all of the assets of
the Company, each outstanding Option shall be assumed or an equivalent option
substituted by the successor corporation or a Parent or Subsidiary of the
successor corporation. In the event that the successor corporation refuses to
assume or substitute for the Option, the Optionee shall fully vest in and have
the right to exercise the Option as to all of the Optioned Stock, including
Shares as to which it would not otherwise be vested or exercisable. If an Option
becomes fully vested and exercisable in lieu of assumption or substitution in
the event of a merger or sale of assets, the Administrator shall notify the
Optionee in writing or electronically that the Option shall be fully vested and
exercisable for a period of fifteen (15) days from the date of such notice, and
the Option shall terminate upon the expiration of such period. For the purposes
of this paragraph, the Option shall be considered assumed if, following the
merger or sale of assets, the option confers the right to purchase or receive,
for each Share of Optioned Stock subject to the Option immediately prior to the
merger or sale of assets, the consideration (whether stock, cash, or other
securities or property) received in the merger or sale of assets by holders of
Common Stock for each Share held on the effective date of the transaction (and
if holders were offered a choice of consideration, the type of consideration
chosen by the holders of a majority of the outstanding Shares); provided,
however, that if such consideration received in the merger or sale of assets is
not solely common stock of the successor corporation or its Parent, the
Administrator may, with the consent of the successor corporation, provide for
the consideration to be received upon the exercise of the Option, for each Share
of Optioned Stock subject to the Option, to be solely common stock of the
successor corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger or sale of
assets.

                                       9
<PAGE>

      12. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board. Notice
of the determination shall be given to each Employee or Consultant to whom an
Option is so granted within a reasonable time after the date of such grant.

      13. Amendment and Termination of the Plan. To the extent permitted by law,
the Board may, in its sole discretion, at any time amend, alter, suspend or
discontinue the Plan or amend or alter Options granted thereunder in accordance
with the Company's economic requirements or with statutory specifications
without giving rise to any obligation to compensate the Optionee. In addition,
to the extent necessary and desirable to comply with Rule 16b-3 under the
Exchange Act or with Sections 162(m) or 422 of the Code (or any other applicable
law or regulation, including the requirements of the NASD or an established
stock exchange), the Company shall obtain stockholder approval of any Plan
amendment in such a manner and to such a degree as required.

      14. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.

        As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned relevant provisions of law.

      15. Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. The inability of the Company
to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.

      16. Agreements. Options shall be evidenced by written agreements in such
form as the Administrator shall approve from time to time.

      17. Stockholder Approval. Continuance of the Plan shall be subject to
approval by the stockholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such stockholder approval shall be obtained
in the degree and manner required under applicable state and federal law and the
rules of any stock exchange upon which the Common Stock is listed.

      18. Information to Optionees and Purchasers. The Company shall provide to
each Optionee, not less frequently than annually, copies of annual financial
statements. The Company shall also provide such statements to each individual
who acquires Shares pursuant to the Plan while such individual owns such Shares.
The Company shall not be required to provide such statements to key employees
whose duties in connection with the Company assure their access to equivalent
information.

                                       10
<PAGE>

                                    EXHIBIT A

                             CRYSTAL DECISIONS, INC.

                             1999 STOCK OPTION PLAN

                                 EXERCISE NOTICE

                                     FRANCE

Crystal Decisions, Inc.
Attn:  Stock Plan Administration
840 Cambie Street
Vancouver, BC
Canada V6B 4J2

      1. Exercise of Option. Effective as of today, _______________, 20 _____,
the undersigned ("Optionee") hereby elects to exercise Optionee's option to
purchase _____________ (number to exercise) shares of the Common Stock (the
"Shares") of Crystal Decisions, Inc. (the "Company") under and pursuant to the
1999 Stock Option Plan, including all amendments thereto (the "Plan") and the
[ ] Incentive (ISO) [ ] Nonstatutory (NQ) Stock Option Notice of Grant dated
(enter grant date) ______________, ______ (the "Notice of Grant").

      2. Representations of Optionee. Optionee acknowledges that Optionee has
received, read and understood the Plan and the Notice of Grant and agrees to
abide by their terms and conditions.

      3. Rights as Stockholder. Until the stock certificate evidencing such
Shares is issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to vote
or receive dividends or any other rights as a stockholder shall exist with
respect to the Optioned Stock, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such stock certificate promptly
after the Option is exercised. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock certificate
is issued, except as provided in Section 11 of the Plan.

      Optionee shall enjoy rights as a stockholder until such time as Optionee
disposes of the Shares or the Company and/or its assignee(s) exercises the Right
of First Refusal hereunder. Upon such exercise, Optionee shall have no further
rights as a holder of the Shares so purchased except the right to receive
payment for the Shares so purchased in accordance with the provisions of this
Notice, and Optionee shall forthwith cause the certificate(s) evidencing the
Shares so purchased to be surrendered to the Company for transfer or
cancellation.

      4. Company's Right of First Refusal. Before any Shares held by Optionee or
any transferee (either being sometimes referred to herein as the "Holder") may
be sold or otherwise transferred (including transfer by gift or operation of
law), the Company or its assignee(s) shall have a right of first refusal to
purchase the Shares on the terms and conditions set forth in this Section (the
"Right of First Refusal").

            (a) Notice of Proposed Transfer. The Holder of the Shares shall
      deliver to the Company a written notice (the "Notice") stating: (i) the
      Holder's bona fide intention to sell or otherwise transfer such Shares;
      (ii) the name of each proposed Optionee or other transferee ("Proposed
      Transferee"); (iii) the number of Shares to be transferred to each
      Proposed Transferee; and (iv) the bona fide cash price or other
      consideration for which

                                       11
<PAGE>

      the Holder proposes to transfer the Shares (the "Offered Price"), and the
      Holder shall offer the Shares at the Offered Price to the Company or its
      assignee(s).

            (b) Exercise of Right of First Refusal. At any time within thirty
      (30) days after receipt of the Notice, the Company and/or its assignee(s)
      may, by giving written notice to the Holder, elect to purchase all, but
      not less than all, of the Shares proposed to be transferred to any one or
      more of the Proposed Transferees, at the purchase price determined in
      accordance with subsection (c) below.

            (c) Purchase Price. The purchase price ("Purchase Price") for the
      Shares purchased by the Company or its assignee(s) under this Section
      shall be the Offered Price. If the Offered Price includes consideration
      other than cash, the cash equivalent value of the non-cash consideration
      shall be determined by the Board of Directors of the Company in good
      faith.

            (d) Payment. Payment of the Purchase Price shall be made, at the
      option of the Company or its assignee(s), in cash (by check), by
      cancellation of all or a portion of any outstanding indebtedness of the
      Holder to the Company (or, in the case of repurchase by an assignee, to
      the assignee), or by any combination thereof within 30 days after receipt
      of the Notice or in the manner and at the times set forth in the Notice.

            (e) Holder's Right to Transfer. If all of the Shares proposed in the
      Notice to be transferred to a given Proposed Transferee are not purchased
      by the Company and/or its assignee(s) as provided in this Section, then
      the Holder may sell or otherwise transfer such Shares to that Proposed
      Transferee at the Offered Price or at a higher price, provided that such
      sale or other transfer is consummated within 120 days after the date of
      the Notice and provided further that any such sale or other transfer is
      effected in accordance with any applicable securities laws and the
      Proposed Transferee agrees in writing that the provisions of this Section
      shall continue to apply to the Shares in the hands of such Proposed
      Transferee. If the Shares described in the Notice are not transferred to
      the Proposed Transferee within such period, a new Notice shall be given to
      the Company, and the Company and/or its assignees shall again be offered
      the Right of First Refusal before any Shares held by the Holder may be
      sold or otherwise transferred.

            (f) Exception for Certain Family Transfers. Anything to the contrary
      contained in this Section notwithstanding, the transfer of any or all of
      the Shares during the Optionee's lifetime or on the Optionee's death by
      will or intestacy to the Optionee's immediate family or a trust for the
      benefit of the Optionee's immediate family shall be exempt from the
      provisions of this Section. "Immediate Family" as used herein shall mean
      spouse, lineal descendant or antecedent, father, mother, brother or
      sister. In such case, the transferee or other recipient shall receive and
      hold the Shares so transferred subject to the provisions of this Section,
      and there shall be no further transfer of such Shares except in accordance
      with the terms of this Section.

            (g) Termination of Right of First Refusal. The Right of First
      Refusal shall terminate as to any Shares 90 days after the first sale of
      Common Stock of the Company to the general public pursuant to a
      registration statement filed with and declared effective by the Securities
      and Exchange Commission under the Securities Act of 1933, as amended.

      5. Transferability of the Shares.

            (a) Transfer or sale of the Shares is subject to restrictions on
      transfer imposed by any applicable state and federal securities laws. Any
      transferee shall hold such Shares subject to all the provisions hereof
      with respect to any Shares purchased by Optionee and shall acknowledge the
      same by signing a copy of this Exercise Notice.

      6. Ownership, Voting Rights, Duties. This Exercise Notice shall not affect
in any way the ownership, voting rights or other rights or duties of Optionee,
except as specifically provided herein.

      7. Legends. The share certificate evidencing the Shares issued hereunder
shall be endorsed with the following legend (in addition to any legend required
under applicable federal and state securities laws):

                                       12
<PAGE>

      8. Tax Consultation. Optionee understands that Optionee may suffer adverse
tax consequences as a result of Optionee's purchase or disposition of the
Shares. Optionee represents that Optionee has consulted with any tax consultants
Optionee deems advisable in connection with the purchase or disposition of the
Shares and that Optionee is not relying on the Company for any tax advice.

      9. Restrictive Legends and Stop-Transfer Orders.

            (a) Legends. Optionee understands and agrees that the Company shall
      cause the legends set forth below or legends substantially equivalent
      thereto, to be placed upon any certificate(s) evidencing ownership of the
      Shares together with any other legends that may be required by the Company
      or by state or federal securities laws:

      THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT
OR, IN THE OPINION OF COMPANY COUNSEL SATISFACTORY TO THE ISSUER OF THESE
SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN
COMPLIANCE THEREWITH.

      THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AND A RIGHT OF FIRST REFUSAL HELD BY THE ISSUER OR ITS
ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE BETWEEN THE ISSUER AND THE
ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE
PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS AND RIGHT OF FIRST
REFUSAL ARE BINDING ON TRANSFEREES OF THESE SHARES.

        IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR
WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.

      Optionee understands that transfer of the Shares may be restricted by
Section 260.141.11 of the Rules of the California Corporations Commissioner, a
copy of which is attached to Exhibit B, the Investment Representation Statement.

            (b) Stop-Transfer Notices. Optionee agrees that, in order to ensure
      compliance with the restrictions referred to herein, the Company may issue
      appropriate "stop transfer" instructions to its transfer agent, if any,
      and that, if the Company transfers its own securities, it may make
      appropriate notations to the same effect in its own records.

            (c) Refusal to Transfer. The Company shall not be required (i) to
      transfer on its books any Shares that have been sold or otherwise
      transferred in violation of any of the provisions of this Exercise Notice
      or (ii) to treat as owner of such Shares or to accord the right to vote or
      pay dividends to any Optionee or other transferee to whom such Shares
      shall have been so transferred.

      10. Successors and Assigns. The Company may assign any of its rights under
this Exercise Notice to single or multiple assignees, and this Exercise Notice
shall inure to the benefit of the successors and assigns of the Company. Subject
to the restrictions on transfer herein set forth, this Exercise Notice shall be
binding upon Optionee and his or her heirs, executors, administrators,
successors and assigns.

      11. Interpretation. Any dispute regarding the interpretation of this
Exercise Notice shall be submitted by Optionee or by the Company forthwith to
the Company's Board of Directors or the committee thereof that administers the
Plan, which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Board or committee shall be final and
binding on the Company and on Optionee.

                                       13
<PAGE>

      12. Governing Law; Severability. This Exercise Notice shall be governed by
and construed in accordance with the laws of California excluding that body of
law pertaining to conflicts of law. Should any provision of this Exercise Notice
be determined by a court of law to be illegal or unenforceable, the other
provisions shall nevertheless remain effective and shall remain enforceable.

      13. Notices. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States mail by certified mail, with postage and fees
prepaid, addressed to the other party at its address as shown below beneath its
signature, or to such other address as such party may designate in writing from
time to time to the other party.

      14. Further Instruments. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Exercise Notice.

      15. Delivery of Payment. Optionee herewith delivers to the Company the
full Exercise Price for the Shares.

                                       14
<PAGE>

      16. Entire Notice. The Plan and Notice of Grant are incorporated herein by
reference. This Exercise Notice, the Plan, the Notice of Grant and the
Investment Representation Statement constitute the entire information exchanged
between the parties with respect to the subject matter hereof and supersede in
their entirety all prior notices, undertakings and agreements of the Company and
Optionee with respect to the subject matter hereof, and may be modified
unilaterally adversely by the Company.

Submitted By:   OPTIONEE

-------------------------------------------
(Print Name)

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

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

----------------------------------------------------
(Address)

Work Phone:
           --------------------------------
Home Phone:
           --------------------------------
Email Address:
              -----------------------------

                                           (to be completed by the company)
                                           Accepted by:  Crystal Decisions, Inc.

                                           By:

                                           Its:
                                               ---------------------------------
                                           Crystal Decisions, Inc.
                                           Attn: Stock Plan Administration
                                           840 Cambie Street
                                           Vancouver, BC
                                           Canada V6B 4J2

                                       15
<PAGE>

                                    EXHIBIT B

                       INVESTMENT REPRESENTATION STATEMENT

OPTIONEE:
         -------------------------------------------------
COMPANY : CRYSTAL DECISIONS, INC.

SECURITY : COMMON STOCK

AMOUNT:
       ---------------------------------------------------
                       (number of shares)

DATE:
     ---------------------------------------------------------------------------

In connection with the purchase of the above-listed Securities, the undersigned
Optionee represents to the Company the following:

               Optionee is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Securities. Optionee is
acquiring these Securities for investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").

               Optionee understands that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities unless they are registered or such registration is not required in
the opinion of counsel satisfactory to the Company, a legend prohibiting their
transfer without the consent of the Commissioner of Corporations of this state
and any other legend required under applicable state securities laws.

               Optionee understands that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities without the consent of the Commissioner of Corporations of
California. Optionee has read the applicable Commissioner's Rules with respect
to such restriction, a copy of which is attached.

Signature of Optionee:

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

Date:                          , 20
     --------------------------    ----

                                       16
<PAGE>

                                  ATTACHMENT 1

              STATE OF CALIFORNIA - CALIFORNIA ADMINISTRATIVE CODE

         Title 10. Investment - Chapter 3. Commissioner of Corporations

        260.141.11: Restriction on Transfer.

        (a) The issuer of any security upon which a restriction on transfer has
been imposed pursuant to Sections 260.102.6, 260.141.10 or 260.534 shall cause a
copy of this section to be delivered to each issuee or transferee of such
security at the time the certificate evidencing the security is delivered to the
issuee or transferee.

        (b) It is unlawful for the holder of any such security to consummate a
sale or transfer of such security, or any interest therein, without the prior
written consent of the Commissioner (until this condition is removed pursuant to
Section 260.141.12 of these rules), except:

            (1) to the issuer;

            (2) pursuant to the order or process of any court;

            (3) to any person described in Subdivision (i) of Section 25102 of
      the Code or Section 260.105.14 of these rules;

            (4) to the transferor's ancestors, descendants or spouse, or any
      custodian or trustee for the account of the transferor or the transferor's
      ancestors, descendants, or spouse; or to a transferee by a trustee or
      custodian for the account of the transferee or the transferee's ancestors,
      descendants or spouse;

            (5) to holders of securities of the same class of the same issuer;

            (6) by way of gift or donation inter vivos or on death;

            (7) by or through a broker-dealer licensed under the Code (either
      acting as such or as a finder) to a resident of a foreign state, territory
      or country who is neither domiciled in this state to the knowledge of the
      broker-dealer, nor actually present in this state if the sale of such
      securities is not in violation of any securities law of the foreign state,
      territory or country concerned;

            (8) to a broker-dealer licensed under the Code in a principal
      transaction, or as an underwriter or member of an underwriting syndicate
      or selling group;

            (9) if the interest sold or transferred is a pledge or other lien
      given by the Optionee to the seller upon a sale of the security for which
      the Commissioner's written consent is obtained or under this rule not
      required;

            (10) by way of a sale qualified under Sections 25111, 25112, 25113
      or 25121 of the Code, of the securities to be transferred, provided that
      no order under Section 25140 or subdivision (a) of Section 25143 is in
      effect with respect to such qualification;

            (11) by a corporation to a wholly owned subsidiary of such
      corporation, or by a wholly owned subsidiary of a corporation to such
      corporation;

            (12) by way of an exchange qualified under Section 25111, 25112 or
      25113 of the Code, provided that no order under Section 25140 or
      subdivision (a) of Section 25143 is in effect with respect to such quali

                                       17
<PAGE>

      fication;

            (13) between residents of foreign states, territories or countries
      who are neither domiciled nor actually present in this state;

            (14) to the State Controller pursuant to the Unclaimed Property Law
      or to the administrator of the unclaimed property law of another state; or

            (15) by the State Controller pursuant to the Unclaimed Property Law
      or by the administrator of the unclaimed property law of another state if,
      in either such case, such person (i) discloses to potential Optionees at
      the sale that transfer of the securities is restricted under this rule,
      (ii) delivers to each Optionee a copy of this rule, and (iii) advises the
      Commissioner of the name of each Optionee;

            (16) by a trustee to a successor trustee when such transfer does not
      involve a change in the beneficial ownership of the securities;

            (17) by way of an offer and sale of outstanding securities in an
      issuer transaction that is subject to the qualification requirement of
      Section 25110 of the Code but exempt from that qualification requirement
      by subdivision (f) of Section 25102; provided that any such transfer is on
      the condition that any certificate evidencing the security issued to such
      transferee shall contain the legend required by this section.

      (c) The certificates representing all such securities subject to such a
restriction on transfer, whether upon initial issuance or upon any transfer
thereof, shall bear on their face a legend, prominently stamped or printed
thereon in capital letters of not less than 10-point size, reading as follows:

"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR
WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."

                                       18
<PAGE>

                              OPTION -NOTIFICATION
                                 FRANCE EMPLOYEE

DATE:

RE: Notice of Stock Option Grant -- Approved on

Dear Crystal Decisions Team Member:

Congratulations!

Please find below the stock option grant awarded to you by the Crystal Decisions
Inc. Board of Directors under the French Subplan of the 1999 Stock Option Plan,
as amended on August 13, 2001.

        You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Notification, as
follows:

            Grant Number

            Date of Grant

            Vesting Commencement

            Exercise Price per Share

            Total Number of Shares Granted

            Total Exercise Price

            Type of Option: ___Incentive Stock Option ___Nonstatutory
                            Stock Option

            Term/Expiration Date

Vesting Schedule :

You may exercise this Option, in whole or in part, according to the following
vesting schedule:

25% of the Shares subject to the Option shall vest in the first year on the
anniversary of the Vesting Commencement Date. Thereafter 1/48th of the Shares
subject to the Option shall vest each month on the same day of the month as the
Vesting Commencement Date so that all Options will be vested at the end of the
48th month after the Vesting Commencement Date.

Sale of Shares Obtained by Exercise of this Option :

Shares obtained by exercise of this Option cannot be sold until four years after
[GRANT DATE].

We have also enclosed the 1999 Stock Option Plan document and Exhibits A and B
which you may keep for your file and which are all provided to you in both
English and French languages. Please note that the plan has been amended more
clearly to express the Company's intent that options will cease vesting on the
date

                                       19
<PAGE>

of notification of the employee's employment termination, whether such
termination is at the employee's or employer's initiative or whether such
termination by the employer is for cause or not. It has also been amended to
clarify that options will cease vesting on the 31st day of certain types of
Leave of Absence and recommence upon the employee's return.

You acknowledge that the changes enclosed in the 1999 Stock Option Plan document
apply retroactively to your previous grants as well as to the present grant.

The Exhibits are the forms required to exercise the option when your option
vests and you elect to exercise in the future. These forms will be posted on
MILO in soft copy so that you will also be able to access them there.

--------------------------------------------------------------------------------
Please complete the information below and return it with your original signature
to:
        Crystal Decisions
        Attn: Leah Lambert
        840 Cambie Street
        Vancouver, BC Canada
        V6B 4J2
--------------------------------------------------------------------------------

        THE DEADLINE TO RETURN THIS NOTE DULY EXECUTED ALONG WITH THE REQUESTED
INFORMATION IS __________. Please help us collect this signed document by the
deadline. It is recommended that you keep a copy of this signed document for
your records -- it contains important information about your vesting and share
price.

                                                   *

                                                  * *

        OPTIONEE ACKNOWLEDGES THAT THE VESTING OF SHARES PURSUANT TO THE OPTION
HEREOF IS EARNED ONLY BY CONTINUING EMPLOYMENT OF THE COMPANY (NOT THROUGH THE
ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER).
OPTIONEE FURTHER ACKNOWLEDGES THAT NOTHING IN THIS NOTIFICATION, NOR IN THE
COMPANY'S STOCK OPTION PLAN WHICH IS INCORPORATED HEREIN BY REFERENCE, SHALL
CONFER UPON OPTIONEE ANY RIGHT WITH RESPECT TO CONTINUATION OF EMPLOYMENT OR
CONSULTANCY BY THE COMPANY, NOR SHALL IT INTERFERE IN ANY WAY WITH OPTIONEE'S
RIGHT OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTANCY
AT ANY TIME, WITH OR WITHOUT CAUSE.

        Optionee's acknowledges receipt of a copy of this note, of the Plan (in
both English and French languages), along with Exhibits A & B (in both English
and French languages ) and of the French subplan (in French annexed in page 4 of
this note) and represents that Optionee is familiar with the terms and
provisions thereof. Optionee has reviewed the Plan and this Option in their
entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Option and fully understands all provisions of the Option.
Optionee hereby acknowledges that all decisions or interpretations of the
Administrator upon any question arising under the Plan or this Option are
binding, conclusive and final. Optionee further agrees to notify the Company
upon any change in the residence address indicated below.

                                       20
<PAGE>

        For any query, please contact:

--------------------------------------------------------------------------------
        Stock Plan Administration
        Leah Lambert
        840 Cambie Street
        Vancouver, BC Canada
        V6B 4J2
--------------------------------------------------------------------------------

Dated :
        --------------------------------------------------------
                                           Optionee (Print Name)

        --------------------------------           -----------------------------
        Social Security (U.S. Only)                 Optionee Signature

        Email address:
                        ---------------------------------
        Employee ID:
                      -------------------           ----------------------------
        Work Home:
                    --------------------            ----------------------------
        Home Phone:
                     --------------------           ----------------------------

                                                    ----------------------------
                                                    Mailing Address (Residence)
                                                    Please print clearly

                                          CRYSTAL DECISIONS, INC.,
                                          a Delaware corporation

                                          /s/ GREGORY KERFOOT

        By:                               President and Chief Executive Officer,

                                       21
<PAGE>

               EXHIBIT TO THE CRYSTAL DECISIONS STOCK OPTIONS PLAN

                  SUBPLAN FOR BENEFICIARIES RESIDING IN FRANCE

The purpose of this exhibit to the Plan is to set out the terms and conditions
defining the rights and obligations of both the Company and the employees of
Crystal Decisions who are deemed to French tax residents and who may benefit
from time to time from the stock options granted by the Company in compliance
with the applicable French legal and tax provisions and the general terms and
conditions of the Plan.

ARTICLE 1 -         RIGHTS ATTACHED TO THE EXERCISE OF STOCK OPTIONS

The shares resulting from exercise of stock options shall be recorded in a
register of nominative shares in the name of the beneficiary.

ARTICLE 2 -                      UNAVAILABILITY PERIOD

Each beneficiary of the offer, once the stock options have been granted and
subject to the terms of article 9 (a) of the [August 2001 Amended SOP], may only
sell the underlying shares following the expiration of a prohibition period for
the such sale, called the unavailability period.

This unavailability period is set at 4 years as from the date of grant of the
stock options.

ARTICLE 3 -                          HOLDING PERIOD

Upon expiration of the unavailability period referred to in article 2 hereof,
the beneficiary of stock options may, in order to benefit from lower taxation on
capital gains from acquisitions over 152,449.01 euros, keep his or her shares
for a further period of 2 years, called the holding period, before disposing of
them.

                                       22

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