Document:

<PAGE>   1

                                                                     EXHIBIT 4.3

                                  ORGANIC, INC.

                                       and

                          EquiServe Trust Company, N.A.

                                 as Rights Agent

                                RIGHTS AGREEMENT

                          Dated as of February 9, 2000

<PAGE>   2

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
SECTION                                                                                   PAGE
-------                                                                                   ----
<S>             <C>                                                                       <C>
Section 1.      Certain Definitions........................................................1
Section 2.      Appointment of Rights Agent................................................6
Section 3.      Issue of Rights Certificates...............................................6
Section 4.      Form of Rights Certificates................................................7
Section 5.      Countersignature and Registration..........................................8
Section 6.      Transfer, Split Up, Combination and Exchange of Rights Certificates;
                Mutilated, Destroyed, Lost or Stolen Rights Certificates...................8
Section 7.      Exercise of Rights; Purchase Price; Expiration Date of Rights..............9
Section 8.      Cancellation and Destruction of Rights Certificates.......................11
Section 9.      Reservation and Availability of Capital Stock.............................11
Section 10.     Preferred Stock Record Date...............................................13
Section 11.     Adjustment of Purchase Price, Number and Kind of Shares or
                Number of Rights..........................................................13
Section 12.     Certificate of Adjusted Purchase Price or Number of Shares................22
Section 13.     Consolidation, Merger or Sale or Transfer of Assets or Earning Power......22
Section 14.     Fractional Rights and Fractional Shares...................................25
Section 15.     Rights of Action..........................................................26
Section 16.     Agreement of Rights Holders...............................................26
Section 17.     Rights Certificate Holder Not Deemed a Stockholder........................27
Section 18.     Concerning the Rights Agent...............................................27
Section 19.     Merger or Consolidation or Change of Name of Rights Agent.................28
Section 20.     Duties of Rights Agent....................................................28
Section 21.     Change of Rights Agent....................................................31
</TABLE>

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<TABLE>
<S>             <C>                                                                       <C>
Section 22.     Issuance of New Rights Certificates.......................................31
Section 23.     Redemption and Termination................................................32
Section 24.     Notice of Certain Events..................................................33
Section 25.     Notices...................................................................33
Section 26.     Supplements and Amendments................................................34
Section 27.     Successors................................................................35
Section 28.     Determinations and Actions by the Board of Directors, etc.................35
Section 29.     Benefits of this Agreement................................................35
Section 30.     Severability..............................................................35
Section 31.     Governing Law.............................................................36
Section 32.     Counterparts..............................................................36
Section 33.     Descriptive Headings......................................................36
Section 34.     Exchange..................................................................36

Exhibit A       Form of Rights Certificate ...............................................A-1
Exhibit B       Form of Summary of Rights ................................................B-1
Exhibit C       Certificate of Designation ...............................................C-1
</TABLE>

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<PAGE>   4

                                RIGHTS AGREEMENT

        RIGHTS AGREEMENT, dated as of February 9, 2000 (the "Agreement"),
between Organic, Inc., a Delaware corporation (the "Company"), and EquiServe
Trust Company, a Delaware corporation (the "Rights Agent").

        WHEREAS, effective February 9, 2000 (the "Rights Dividend Declaration
Date"), the Board of Directors of the Company (the "Board of Directors") (i)
authorized and declared a dividend distribution of one Right for each share of
Common Stock, par value $.0001 per share, of the Company (the "Company Common
Stock") outstanding at the Close of Business on February 9, 2000 (the "Record
Date"), and (ii) authorized the issuance of one Right (as such number may
hereinafter be adjusted pursuant hereto) for each share of Company Common Stock
issued between the Record Date (whether originally issued or delivered from the
Company's treasury) and, except as otherwise provided in Section 22, the
Distribution Date, each Right initially representing the right to purchase upon
the terms and subject to the conditions hereinafter set forth one Unit of Series
C Preferred Stock (the "Rights"); and

        WHEREAS, the Board of Directors of the Company has determined that it is
in the best interest of the Company and the holders of the Company Common Stock
to amend the Agreement with respect to the provisions governing supplements and
amendments to the Agreement;

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

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

                (a) "Acquiring Person" shall mean any Person who or which,
        together with all Affiliates or Associates of such Person, shall be the
        Beneficial Owner of 15% or more of the shares of Company Common Stock
        then outstanding. Notwithstanding the foregoing: (i) an "Acquiring
        Person" shall not include: (A) the Company; (B) any Subsidiary of the
        Company; (C) any employee benefit plan maintained by the Company or any
        of its Subsidiaries; (D) any trustee or fiduciary with respect to such
        employee benefit plan acting in such capacity or a trustee or fiduciary
        holding shares of Company Common Stock for the purpose of funding any
        such plan or employee benefits; (E) Organic Holdings, Inc./Omnicom Group
        Inc. ("Holdings/Omnicom"), not including any of its transferees or
        assignees, but only so long as (x) Holdings/Omnicom is not required to
        report such ownership on Schedule 13(D) under the Exchange Act (or any
        comparable or successor report), and (y) Holdings/Omnicom's Beneficial
        Ownership of the shares of Company Common Stock does not exceed the sum
        of Holdings/Omnicom's Beneficial Ownership of Company Common Stock on
        the date of this Agreement plus 1% of the shares of Company Common Stock
        outstanding on such date; (F) any Person if the Board of Directors of
        the Company determines in good faith that such Person who would
        otherwise be an "Acquiring Person" became such inadvertently (including,
        without limitation, because (x) such Person was unaware that it
        beneficially owned a percentage

                                       1
<PAGE>   5

        of Company Common Stock that would otherwise cause such Person to be an
        "Acquiring Person" or (y) such Person was aware of the extent of its
        Beneficial Ownership of Company Common Stock but had no actual knowledge
        of the consequences of such Beneficial Ownership under this Agreement)
        and without any intention of changing or influencing control of the
        Company, and if such Person does not acquire any additional shares of
        Company Common Stock and as promptly as practicable divested or divests
        itself of Beneficial Ownership of a sufficient number of shares of
        Company Common Stock so that such Person would no longer be an
        "Acquiring Person;" or (G) any Person who becomes the Beneficial Owner
        of 15% or more of the then outstanding shares of Company Common Stock as
        a result of the acquisition of shares of Company Common Stock directly
        from the Company in one or more transactions approved by a majority of
        the Board of Directors, and (ii) no Person shall be deemed an "Acquiring
        Person" as a result of the acquisition of shares of Company Common Stock
        by the Company which, by reducing the number of shares of Company Common
        Stock outstanding, increases the proportional number of shares
        beneficially owned by such Person; provided, however, that if (A) a
        Person would become an Acquiring Person (but for the operation of this
        subclause (ii)) as a result of the acquisition of shares of Company
        Common Stock by the Company and (B) after such share acquisition by the
        Company, such Person becomes the Beneficial Owner of any additional
        shares of Company Common Stock, then such Person shall be deemed an
        Acquiring Person unless upon becoming the Beneficial Owner of such
        additional shares such Person is the Beneficial Owner of less than 15%
        of the then outstanding shares of Company Common Stock. Each Person
        identified in subclauses (A), (B), (C) and (D) of this Section (1)(a) is
        individually an "Exempt Person" and collectively "Exempt Persons."

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

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

                        (i) of which such Person or any of such Person's
                Affiliates or Associates is considered to be a "beneficial
                owner" under Rule 13d-3 of the General Rules and Regulations
                under the Exchange Act (the "Exchange Act Regulations") as in
                effect on the date hereof; provided, however, that a Person
                shall not be deemed the "Beneficial Owner" of, or to
                "beneficially own", any securities under this subparagraph (i)
                as a result of an agreement, arrangement or understanding to
                vote such securities if such agreement, arrangement or
                understanding (A) arises solely from a revocable proxy or
                consent given in response to a public proxy or consent
                solicitation made pursuant to, and in accordance with, the
                applicable provisions of the Exchange Act and the Exchange Act
                Regulations, and (B) is not reportable by such Person on
                Schedule 13D under the Exchange Act (or any comparable or
                successor report);

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<PAGE>   6

                        (ii) which are beneficially owned, directly or
                indirectly, by any other Person (or any Affiliate or Associate
                of such other Person) with which such Person (or any of such
                Person's Affiliates or Associates) has any agreement,
                arrangement or understanding (whether or not in writing), for
                the purpose of acquiring, holding, voting (except pursuant to a
                revocable proxy or consent as described in the proviso to
                subparagraph (i) of this paragraph (c)) or disposing of such
                securities; or

                        (iii) which such Person or any of such Person's
                Affiliates or Associates, directly or indirectly, has the right
                to acquire (whether such right is exercisable immediately or
                only after the passage of time or upon the satisfaction of
                conditions) pursuant to any agreement, arrangement or
                understanding (whether or not in writing) or upon the exercise
                of conversion rights, exchange rights, rights, warrants or
                options, or otherwise;

        provided, however, that under this paragraph (c) a Person shall not be
        deemed the "Beneficial Owner" of, to have "Beneficial Ownership" of, or
        to "beneficially own", (A) securities tendered pursuant to a tender or
        exchange offer made in accordance with Exchange Act Regulations by such
        Person or any of such Person's Affiliates or Associates until such
        tendered securities are accepted for purchase or exchange, (B)
        securities that may be issued upon exercise of Rights at any time prior
        to the occurrence of a Triggering Event, or (C) securities that may be
        issued upon exercise of Rights from and after the occurrence of a
        Triggering Event, which Rights were acquired by such Person or any of
        such Person's Affiliates or Associates prior to the Distribution Date or
        pursuant to Section 3(c) or Section 22 hereof (the "Original Rights") or
        pursuant to Section 11(i) hereof in connection with an adjustment made
        with respect to any Original Rights; and further provided, however, that
        (x) nothing in this paragraph (c) shall cause a Person engaged in
        business as an underwriter of securities to be the "Beneficial Owner"
        of, or to "beneficially own," any securities acquired through such
        Person's participation in good faith in a firm commitment underwriting
        until the expiration of forty days after the date of such acquisition,
        (y) no decision reached, or action taken, by the Board of Directors of
        the Company or any committee thereof shall cause any Person (or any
        Affiliate or Associate of such Person) who is a member of the Board of
        Directors of the Company or such committee to be deemed, for the
        purposes of this Agreement, to be a Beneficial Owner of any securities
        beneficially owned by any other Person (or any Affiliate or Associate of
        such Person) who is a member of the Board of Directors of the Company or
        any committee thereof solely by reason of such membership of the Board
        of Directors or any committee thereof or participation in the decisions
        or actions thereof on the part of either or both of such Persons and (z)
        no Person who is an officer, director or employee of an Exempt Person
        shall be deemed, solely by reason of such Person's status or authority
        as such, to be the "Beneficial Owner" of, to have "Beneficial Ownership"
        of or to "beneficially own" any securities that are "beneficially owned"
        (as defined in this paragraph (c)), including, without limitation, in a
        fiduciary capacity, by an Exempt Person or by any other such officer,
        director or employee of an Exempt Person.

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<PAGE>   7

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

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

                (f) "Common Stock" of any Person other than the Company shall
        mean the capital stock of such Person with the greatest voting power,
        or, if such Person shall have no capital stock, the equity securities or
        other equity interest having power to control or direct the management
        of such Person.

                (g) "Company" means Organic, Inc., a Delaware corporation, and
        also means a Principal Party to the extent provided in Section 13(a).

                (h) "Company Common Stock" has the meaning set forth in the
        Whereas Clause.

                (i) "Distribution Date" has the meaning set forth in Section
        3(a).

                (j) "Expiration Date" has the meaning set forth in Section 7(a).

                (k) "Person" shall mean any individual, partnership, firm,
        corporation, association, trust, unincorporated organization or other
        entity, as well as any syndicate or group deemed to be a person under
        Section 14(d)(2) of the Exchange Act as in effect on the date hereof.

                (l) "Preferred Stock" shall mean the Series C Preferred Stock,
        par value $.0001 per share, of the Company having the voting powers,
        designation, preferences and relative, participating, optional or other
        special rights and qualifications, limitations and restrictions
        described in the Certificate of Designation set forth as Exhibit C
        hereto and as amended from time to time.

                (m) "Purchase Price" has the meaning set forth in Section 7(b).

                (n) "Record Date" has the meaning set forth in the Whereas
        Clause.

                (o) "Right" has the meaning set forth in the Whereas Clause.

                (p) "Rights Certificate" has the meaning set forth in Section
        3(a).

                (q) "Rights Dividend Declaration Date" has the meaning set forth
        in the Whereas Clause.

                (r) "Section 11(a)(ii) Event" shall mean the event described in
        Section 11(a)(ii) hereof.

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<PAGE>   8

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

                (t) "Stock Acquisition Date" shall mean the first date of public
        announcement (including, without limitation, the filing of any report
        pursuant to Section 13(d) of the Exchange Act (or any comparable or
        successor report)) by the Company or an Acquiring Person that an
        Acquiring Person has become such.

                (u) "Subsidiary" shall mean, with reference to any Person, any
        other Person of which an amount of voting securities or equity interests
        sufficient to elect at least a majority of the directors or equivalent
        governing body of such other Person is beneficially owned, directly or
        indirectly, by such Person, or otherwise controlled by such
        first-mentioned Person.

                (v) "Summary of Rights" has the meaning set forth in Section
        3(b).

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

                (x) "Unit" has the meaning set forth in Section 7(b).

                In addition, the following terms are defined in the Sections
indicated below:

<TABLE>
<CAPTION>
                      Defined Term                          Section Number
                      ------------                          --------------
<S>                                                         <C>
                      Adjustment Shares                     11(a)(ii)
                      Adjustment Spread                     34(a)
                      common stock equivalents              11(a)(iii)
                      Current Value                         11(a)(iii)
                      Depositary Agent                      7(c)
                      Distribution Date                     3(a)
                      Equivalent Preferred Stock            11(b)
                      Exchange Act                          1(b)
                      Exchange Act Regulations              1(c)
                      Exchange Ratio                        34(a)
                      Exempt Person                         1(a)
                      Expiration Date                       7(a)
                      Final Expiration Date                 7(a)
                      Nasdaq                                11(d)(i)
                      Original Rights                       1(c)
                      Purchase Price                        7(b)
                      Redemption Price                      23(a)
                      Registered Common Stock               13(b)(ii)
                      Registration Date                     9(c)
                      Registration Statement                9(c)
                      Rights Certificates                   3(a)
                      Section 11(a)(ii) Event               11(a)(ii)(C)
                      Section 11(a)(iii) Trigger Date       11(a)(iii)
                      Section 13 Event                      13(a)
                      Securities Act                        9(c)
</TABLE>

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<TABLE>
<S>                                                         <C>
                      Spread                                11(a)(iii)
                      Summary of Rights                     3(b)
                      Trading Day                           11(d)(i)
                      Unit                                  7(b)
</TABLE>

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

        Section 3. Issue of Rights Certificates. (a) Until the earlier of (i)
the Close of Business on the tenth Business Day after the Stock Acquisition
Date, and (ii) the Close of Business on the tenth Business Day (or such later
date as may be determined by action of a majority of the Board of Directors of
the Company prior to the occurrence of a Section 11(a)(ii) Event) after the date
that a tender or exchange offer by any Person (other than an Exempt Person) is
first published or sent or given within the meaning of Rule 14d-4(a) of the
Exchange Act Regulations or any successor rule, if upon consummation thereof
such Person would be an Acquiring Person (including, in the case of both clause
(i) and (ii), any such date which is after the date of this Agreement and prior
to the issuance of the Rights)(the earlier of (i) and (ii) above being the
"Distribution Date"), (x) the Rights will be evidenced (subject to the
provisions of paragraph (b) of this Section 3) by the certificates for shares of
Company Common Stock registered in the names of the holders of shares of Company
Common Stock as of and subsequent to the Record Date (which certificates for
shares of Company Common Stock shall be deemed also to be certificates for
Rights) and not by separate certificates, and (y) the Rights will be
transferable only in connection with the transfer of the underlying shares of
Company Common Stock including a transfer to the Company; provided, however,
that if a tender or exchange offer is terminated prior to the occurrence of a
Distribution Date, then no Distribution Date shall occur as a result of such
tender or exchange offer. As soon as practicable after the Distribution Date,
the Rights Agent will send by first-class, insured, postage prepaid mail, to
each record holder of shares of Company Common Stock as of the Close of Business
on the Distribution Date, at the address of such holder shown on the records of
the Company, one or more rights certificates, in substantially the form of
Exhibit A hereto (the "Rights Certificates"), evidencing one Right for each
share of Company Common Stock so held, subject to adjustment as provided herein.

        In the event that an adjustment in the number of Rights per share of
Company Common Stock has been made pursuant to Section 11(p) hereof, at the time
of distribution of the Rights Certificates, the Company may make the necessary
and appropriate rounding adjustments (in accordance with Section 14(a) hereof)
so that Rights Certificates representing only whole numbers of Rights are
distributed and cash is paid in lieu of any fractional Rights. As of and after
the Distribution Date, the Rights will be evidenced solely by such Rights
Certificates.

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<PAGE>   10

                (b) As promptly as practicable following the Record Date, the
Company will send a copy of a Summary of Rights to Purchase Preferred Stock, in
substantially the form attached hereto as Exhibit B (the "Summary of Rights"),
by first-class, postage prepaid mail, to each record holder of shares of Company
Common Stock as of the Close of Business on the Record Date, at the address of
such holder shown on the records of the Company. With respect to certificates
for Company Common Stock 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. Until
the Distribution Date (or, if earlier, the Expiration Date), the surrender for
transfer of any such certificate for Company Common Stock outstanding as of the
Record Date, with or without a copy of the Summary of Rights, shall also
constitute the transfer of the Rights associated with the Company Common Stock
represented thereby.

                (c) Rights shall, without any further action, be issued in
respect of all shares of Company Common Stock which are issued (including any
shares of Company Common Stock held in treasury) after the Record Date but prior
to the earlier of the Distribution Date and the Expiration Date. Certificates,
representing such shares of Company Common Stock, issued after the Record Date
shall bear the following legend:

        This certificate also evidences and entitles the holder hereof to
        certain Rights as set forth in the Rights Agreement between Organic,
        Inc. (the "Company") and Equiserve Trust Company, N.A. (the "Rights
        Agent") dated as of February 9, 2000, as amended from time to time (the
        "Rights Agreement"), the terms of which are hereby incorporated herein
        by reference and a copy of which is on file at the principal office of
        the stock transfer administration office of the Rights Agent. Under
        certain circumstances, as set forth in the Rights Agreement, such Rights
        will be evidenced by separate certificates and will no longer be
        evidenced by this certificate. The Company will mail to the holder of
        this certificate a copy of the Rights Agreement, as in effect on the
        date of mailing, without charge promptly after receipt of a written
        request therefor. UNDER CERTAIN CIRCUMSTANCES SET FORTH IN THE RIGHTS
        AGREEMENT, RIGHTS ISSUED TO, OR HELD BY, ANY PERSON WHO IS, WAS OR
        BECOMES AN ACQUIRING PERSON OR ANY AFFILIATE OR ASSOCIATE THEREOF (AS
        SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT), WHETHER CURRENTLY HELD
        BY OR ON BEHALF OF SUCH PERSON OR BY ANY SUBSEQUENT HOLDER, MAY BECOME
        NULL AND VOID.

With respect to certificates representing shares of Company Common Stock that
bear the foregoing legend until the earlier of the Distribution Date and the
Expiration Date, the Rights associated with the shares of Company Common Stock
represented by such certificates shall be evidenced by such certificates alone
and registered holders of the shares of Company Common Stock shall also be the
registered holders of the associated Rights, and the transfer of any of such
certificates shall also constitute the transfer of the Rights associated with
the shares of Company Common Stock represented by such certificates.

        Section 4. Form of Rights Certificates. (a) The Rights Certificates (and
the forms of election to purchase, assignment and certificate to be printed on
the reverse thereof) shall each be

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<PAGE>   11

substantially in the form set forth in 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 any rule or regulation thereunder or with any rule or
regulation of any stock exchange or automated quotation system on which the
Rights may from time to time be listed or to conform to usage. Subject to the
provisions of Section 11 and Section 22 hereof, the Rights Certificates,
whenever distributed, shall be dated as of the Record Date and on their face
shall entitle the holders thereof to purchase such number of Units of Preferred
Stock as shall be set forth therein at the price set forth therein, but the
amount and type of securities, cash or other assets that may be acquired upon
the exercise of each Right and the Purchase Price thereof shall be subject to
adjustment as provided herein.

        Section 5. Countersignature and Registration . (a) Rights Certificates
shall be executed on behalf of the Company by its Chairman, the President or one
of its Vice Presidents under its corporate seal reproduced thereon attested by
its Secretary, Treasurer or one of its Assistant Secretaries. The signature of
any of these officers on the Rights Certificates may be manual or facsimile.
Rights Certificates bearing the manual or facsimile signatures of the
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the countersignature of such Rights Certificates or
did not hold such offices at the date of such Rights Certificates. No Rights
Certificate shall be entitled to any benefit under this Agreement or be valid
for any purpose unless there appears on such Rights Certificate a
countersignature duly executed by the Rights Agent by manual signature of an
authorized signatory, and such countersignature upon any Rights Certificate
shall be conclusive evidence, and the only evidence, that such Rights
Certificate has been duly countersigned as required hereunder.

                (b) Following the Distribution Date, the Rights Agent will keep
or cause to be kept, at its office designated for surrender of Rights
Certificates upon exercise or transfer, books for registration and transfer of
the Rights Certificates issued hereunder. Such books shall show the name and
address of each holder of the Rights Certificates, the number of Rights
evidenced on its face by each Rights Certificate and the date of each Rights
Certificate.

        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 4, 7(e) and 14 hereof, at any time after
the Close of Business on the Distribution Date, and at or prior to the Close of
Business on the Expiration Date, any Rights Certificate or Certificates may be
transferred, split up, combined or exchanged for another Rights Certificate or
Certificates, entitling the registered holder to purchase a like number of Units
of Preferred Stock (or, following a Triggering Event, other securities, cash or
other assets, as the case may be) as the Rights Certificate or Certificates
surrendered then entitled such holder to purchase. Any registered holder
desiring to transfer, split up, combine or exchange any Rights Certificate or
Certificates shall make such request in writing delivered to the Rights Agent,
and shall surrender the Rights Certificate or Certificates to be transferred,
split up, combined or exchanged at the 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 executed
the

                                       8
<PAGE>   12

certificate set forth in the form of assignment on the reverse side of such
Rights Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) of the Rights
represented by such Rights Certificate or Affiliates or Associates thereof as
the Company shall reasonably request; whereupon the Rights Agent shall, subject
to the provisions of Section 7(e) and Section 14 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 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) Subject to Section 7(e) hereof, if a Rights Certificate
shall be mutilated, lost, stolen or destroyed, upon request by the registered
holder of the Rights represented thereby and upon payment to the Company and the
Rights Agent of all reasonable expenses incident thereto, there shall be issued,
in exchange for and upon cancellation of the mutilated Rights Certificate, or in
substitution for the lost, stolen or destroyed Rights Certificate, a new Rights
Certificate, in substantially the form of the prior Rights Certificate, of like
tenor and representing the equivalent number of Rights, but, in the case of
loss, theft or destruction, only upon receipt of evidence satisfactory to the
Company and the Rights Agent of such loss, theft or destruction of such Rights
Certificate and, if requested by the Company or the Rights Agent, indemnity also
satisfactory to it.

        Section 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights. (a) Prior to the earlier of (i) the Close of Business on the tenth
anniversary hereof (the "Final Expiration Date"), (ii) the time at which the
Rights are redeemed as provided in Section 23 hereof and (iii) the time at which
the Rights are exchanged as provided in Section 34 hereof (the earlier of (i),
(ii) and (iii) being the "Expiration Date"), the registered holder of any Rights
Certificate may, subject to the provisions of Sections 7(e) and 9(c) hereof,
exercise the Rights evidenced thereby, in whole or in part, at any time after
the Distribution Date upon surrender of the Rights Certificate, with the form of
election to purchase and the certificate on the reverse side thereof duly
executed, to the Rights Agent at the office of the Rights Agent designated for
such purpose, together with payment of the aggregate Purchase Price (as
hereinafter defined) for the number of Units of Preferred Stock (or, following a
Triggering Event, other securities, cash or other assets, as the case may be)
for which such surrendered Rights are then exercisable.

                (b) The purchase price for each one one-hundredth of a share
(each such one one-hundredth of a share being a "Unit") of Preferred Stock upon
exercise of Rights shall be $300, subject to adjustment from time to time as
provided in Sections 11 and 13(a) hereof (such purchase price, as so adjusted,
being the "Purchase Price"), and shall be payable in accordance with paragraph
(c) below.

                (c) As promptly as practicable following the occurrence of the
Distribution Date, the Company shall deposit with the Rights Agent or other
corporation in good standing organized under the laws of the United States or
any State of the United States, which is authorized under such laws to exercise
corporate trust or stock transfer powers and is subject to supervision or
examination by federal or state authority (such institution being the
"Depositary Agent"), certificates representing the shares of Preferred Stock
that may be acquired upon exercise of the

                                       9
<PAGE>   13

Rights and shall cause such Depositary Agent to enter into an agreement pursuant
to which the Depositary Agent shall issue receipts representing interests in the
shares of Preferred Stock so deposited. Upon receipt of a Rights Certificate
representing exercisable Rights, with the form of election to purchase and the
certificate duly executed, accompanied by payment, with respect to each Right so
exercised, of the Purchase Price for the Units of Preferred Stock (or, following
a Triggering Event, other securities, cash or other assets, as the case may be)
to be purchased thereby as set forth below and an amount equal to any applicable
transfer tax or evidence satisfactory to the Company of payment of such tax, the
Rights Agent shall, subject to Section 20(k) hereof, thereupon promptly (i)
requisition from the Depositary Agent depositary receipts representing such
number of Units of Preferred Stock as are to be purchased and the Company will
direct the Depositary Agent to comply with such request, (ii) requisition from
the Company the amount of cash, if any, to be paid in lieu of fractional shares
in accordance with Section 14 hereof, (iii) after receipt of such depositary
receipts, cause the same to be delivered to or upon the order of the registered
holder of such Rights Certificate, registered in such name or names as may be
designated by such holder, and (iv) after receipt thereof, deliver such cash, if
any, to or upon the order of the registered holder of such Rights Certificate.
In the event that the Company is obligated to issue Company Common Stock, other
securities of the Company, pay cash and/or distribute other property pursuant to
Section 11(a) hereof, the Company will make all arrangements necessary so that
such Company Common Stock, other securities, cash and/or other property are
available for distribution by the Rights Agent, if and when appropriate. The
payment of the Purchase Price (as such amount may be reduced pursuant to Section
11(a)(iii) hereof) may be made in cash or by certified or bank check or money
order payable to the order of the Company.

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

                (e) Notwithstanding anything in this Agreement to the contrary,
from and after the first occurrence of any Section 11(a)(ii) Event, any Rights
beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of an
Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) which becomes a transferee after the Acquiring Person
becomes such, or (iii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) which becomes a transferee prior to or concurrently with
the Acquiring Person becoming such and which receives such Rights pursuant to
either (A) a transfer (whether or not for consideration) from the Acquiring
Person (or any such Associate or Affiliate) to holders of equity interests in
such Acquiring Person (or any such Associate or Affiliate) or to any Person with
whom the Acquiring Person (or such Associate or Affiliate) has any continuing
agreement, arrangement or understanding regarding the transferred Rights, shares
of Company Common Stock or the Company or (B) a transfer which the Board of
Directors has determined to be part of a plan, arrangement or understanding
which has as a primary purpose or effect the avoidance of this Section 7(e),
shall be 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

                                       10
<PAGE>   14

provisions of this Section 7(e) hereof are complied with, but shall have no
liability to any holder of Rights or any other Person as a result of its failure
to make any determination under this Section 7(e) with respect to an Acquiring
Person or its Affiliates, Associates or transferees.

                (f) Notwithstanding anything in this Agreement or any Rights
Certificate 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 by such registered holder unless such
registered holder shall have (i) completed and executed the certificate
following 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) of the Rights represented by such Rights Certificate 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 any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
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
Certificates acquired by the Company otherwise than upon the exercise thereof.
The Rights Agent shall deliver all cancelled Rights Certificates to the Company,
or shall, at the written request of the Company, destroy such cancelled Rights
Certificates, and in such case shall deliver a certificate of destruction
thereof to the Company.

        Section 9. Reservation and Availability of Capital Stock. (a) The
Company shall at all times prior to the Expiration Date cause to be reserved and
kept available, out of its authorized and unissued shares of preferred stock,
the number of shares of Preferred Stock that, as provided in this Agreement,
will be sufficient to permit the exercise in full of all outstanding Rights.
Upon the occurrence of any events resulting in an increase in the aggregate
number of shares of Preferred Stock (or other equity securities of the Company)
issuable upon exercise of all outstanding Rights above the number then reserved,
the Company shall make appropriate increases in the number of shares so reserved
to the extent practicable.

                (b) If the shares of Preferred Stock to be issued and delivered
upon the exercise of the Rights may be listed on any national securities
exchange or automated quotation system, the Company shall during the period from
the Distribution Date through the Expiration Date use its best efforts to cause
all securities 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 (i) as soon as
practicable following the occurrence of a Section 11(a)(ii) Event and a
determination by the Company in accordance with Section 11(a)(iii) hereof of the
consideration to be delivered by the Company upon exercise of the Rights or, if
so required by law, as soon as practicable following the Distribution Date (such
date being the "Registration Date"), to file a registration statement on an
appropriate form under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to the securities that

                                       11
<PAGE>   15

may be acquired upon exercise of the Rights (the "Registration Statement"), (ii)
to cause the Registration Statement to become effective as soon as practicable
after such filing, (iii) to cause the Registration Statement to continue to be
effective (and to include a prospectus complying with the requirements of the
Securities Act) until the earlier of (A) the date as of which the Rights are no
longer exercisable for the securities covered by the Registration Statement, and
(B) the Expiration Date and (iv) to take as soon as practicable following the
Registration Date such action as may be required to ensure that any acquisition
of securities upon exercise of the Rights complies with any applicable state
securities or "blue sky" laws. The Company may temporarily suspend, for a period
of time not to exceed one hundred twenty (120) days after the date set forth in
clause (i) of the first sentence of this Section 9(c), the exercisability of the
Rights in order to prepare and file such registration statement and permit it to
become effective. Upon any such suspension, the Company shall issue a public
announcement stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the suspension is no
longer in effect. In addition, if the Company shall determine that a
registration statement is required following the Distribution Date, the Company
may temporarily suspend the exercisability of the Rights until such time as a
registration statement has been declared effective. Notwithstanding any
provision of this Agreement to the contrary, the Rights shall not be exercisable
in any jurisdiction if the requisite qualification in such jurisdiction shall
not have been obtained, the exercise thereof shall not be permitted under
applicable law or a registration statement shall not have been declared
effective.

                (d) The Company shall take such action as may be necessary to
ensure that all shares of Preferred Stock (and, following the occurrence of a
Triggering Event, any other securities that may be delivered upon exercise of
Rights) shall be, at the time of delivery of the certificates or depositary
receipts for such securities (subject to payment of the Purchase Price), duly
and validly authorized and issued and fully paid and non-assessable.

                (e) The Company shall pay any documentary, stamp or transfer tax
imposed in connection with the issuance or delivery of the Rights Certificates
or upon the exercise of Rights; provided, however, the Company shall not be
required to pay any such tax imposed in connection with the issuance or delivery
of Units of Preferred Stock, or any certificates or depositary receipts for such
Units of Preferred Stock (or, following the occurrence of a Triggering Event,
any other securities, cash or assets, as the case may be) to any person other
than the registered holder of the Rights Certificates evidencing the Rights
surrendered for exercise. The Company shall not be required to issue or deliver
any certificates or depositary receipts for Units of Preferred Stock (or,
following the occurrence of a Triggering Event, any other securities, cash or
assets, as the case may be) to, or in a name other than that of, the registered
holder upon the exercise of any Rights until any such tax shall have been paid
(any such tax being payable by the holder of such 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. Preferred Stock Record Date. Each Person in whose name any
certificate or depositary receipt for Units of Preferred Stock (or, following
the occurrence of a Triggering Event, other securities) is issued upon the
exercise of Rights shall for all purposes be deemed to have become the holder of
record of the Units of Preferred Stock (or, following the occurrence of a
Triggering Event, other securities) represented thereby on, and such certificate
shall be dated,

                                       12
<PAGE>   16

the date upon which the Rights Certificate evidencing such Rights was duly
surrendered and payment of the Purchase Price (and any applicable transfer
taxes) was made; provided, however, that if the date of such surrender and
payment is a date upon which the Preferred Stock (or, following the occurrence
of a Triggering Event, other securities) transfer books of the Company are
closed, such Person shall be deemed to have become the record holder of such
securities on, and such certificate shall be dated, the next succeeding Business
Day on which the Preferred Stock (or, following the occurrence of a Triggering
Event, other securities) transfer books of the Company are open and, further
provided, however, that if delivery of Units of Preferred Stock is delayed
pursuant to Section 9(c) hereof, such Persons shall be deemed to have become the
record holders of such Units of Preferred Stock only when such Units first
become deliverable. Prior to the exercise of the Rights evidenced thereby, the
holder of a Rights Certificate shall not be entitled to any rights of a
stockholder of the Company with respect to securities for which the Rights shall
be exercisable, including, without limitation, the right to vote, to receive
dividends or other distributions or to exercise any preemptive rights, and shall
not be entitled to receive any notice of any proceedings of the Company, except
as provided herein.

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

                (a) (i) In the event the Company shall at any time after the
        date of this Agreement (A) declare a dividend on the Preferred Stock
        payable in shares of Preferred Stock, (B) subdivide the outstanding
        Preferred Stock, (C) combine the outstanding Preferred Stock into a
        smaller number of shares, or (D) issue any shares of its capital stock
        in a reclassification of the Preferred Stock (including any such
        reclassification in connection with a consolidation or merger in which
        the Company is the continuing or surviving corporation), except as
        otherwise provided in this Section 11(a), the Purchase Price in effect
        at the time of the record date for such dividend or of the effective
        date of such subdivision, combination or reclassification, and the
        number and kind of shares of Preferred Stock or capital stock, as the
        case may be, issuable on such date upon exercise of the Rights, shall be
        proportionately adjusted so that the holder of any Right exercised after
        such time shall be entitled to receive, upon payment of the Purchase
        Price then in effect, the aggregate number and kind of shares of
        Preferred Stock or capital stock, as the case may be, which, if such
        Right had been exercised immediately prior to such date, such holder
        would have owned upon such exercise and been entitled to receive by
        virtue of such dividend, subdivision, combination or reclassification;
        provided, however, that in no event shall the consideration to be paid
        upon the exercise of one Right be less than the aggregate par value of
        the shares of capital stock of the Company issuable upon the exercise of
        one Right. If an event occurs which would require an adjustment under
        both this Section 11(a)(i) and Section 11(a)(ii) hereof, the adjustment
        provided for in this Section 11(a)(i) shall be in addition to, and shall
        be made prior to, any adjustment required pursuant to Section 11(a)(ii)
        hereof.

                (ii) In the event any Person shall become an Acquiring Person,
        other than pursuant to any transaction set forth in Section 13(a)
        hereof, then, immediately upon the occurrence

                                       13
<PAGE>   17

        of such event (a "Section 11(a)(ii) Event"), proper provision shall be
        made so that each holder of a Right (except as provided below and in
        Section 7(e) hereof) shall, subject to Section 34 hereof, thereafter
        have the right to receive, upon exercise of such Right at the then
        current Purchase Price in accordance with the terms of this Agreement,
        in lieu of the number of Units of Preferred Stock for which a Right was
        exercisable immediately prior to the first occurrence of a Section
        11(a)(ii) Event (whether or not such Right was then exercisable), such
        number of Units of Preferred Stock as shall equal the result obtained by
        (x) multiplying the then current Purchase Price by the then number of
        Units of Preferred Stock for which a Right was exercisable immediately
        prior to the first occurrence of a Section 11(a)(ii) Event (whether or
        not such Right was then exercisable) (such product thereafter being, for
        all purposes of this Agreement, other than Section 13 hereof, the
        "Purchase Price"), and (y) dividing that product by 50% of the then
        current market price (determined pursuant to Section 11(d) hereof) per
        Unit of Preferred Stock on the date of such first occurrence (such Units
        of Preferred Stock being the "Adjustment Shares"); provided, however,
        that the Purchase Price and the number of Units of Preferred Stock so
        receivable upon exercise of a Right shall, following the Section
        11(a)(ii) Event, be subject to further adjustment as appropriate in
        accordance with Section 11 hereof. Notwithstanding the foregoing, the
        Rights shall not be exercisable pursuant to this Section 11(a)(ii) until
        the time period during which the Rights may be redeemed pursuant to
        Section 23 hereof shall have expired.

                (iii) The Company, by the vote of a majority of the Board of
        Directors, may at its option substitute for a Unit of Preferred Stock
        issuable upon the exercise of Rights in accordance with the foregoing
        subparagraph (ii), shares of Company Common Stock or fractions thereof
        having a current market price (as determined by Section 11(d) hereof)
        equal to the current market price of a Unit of Preferred Stock on the
        date of the Section 11(a)(ii) Event. In the event that the number of
        shares of Preferred Stock which are authorized by the Company's Restated
        Certificate of Incorporation but not outstanding or reserved for
        issuance for purposes other than upon exercise of the Rights is not
        sufficient to permit the exercise in full of the Rights in accordance
        with the foregoing subparagraph (ii) of this Section 11(a), the Company,
        by the vote of a majority of the Board of Directors, shall to the extent
        permitted by applicable law and any material agreements then in effect
        to which the Company is a party or by which it is bound: (A) determine
        the excess of (1) the value of the Adjustment Shares issuable upon the
        exercise of a Right (the "Current Value") over (2) the Purchase Price
        (such excess being the "Spread"), and (B) with respect to each Right
        (other than Rights which have become void pursuant to Section 7(e)),
        make adequate provision to substitute, in whole or in part, for such
        Adjustment Shares, upon exercise of a Right and payment of the
        applicable Purchase Price, (1) cash, (2) a reduction in the Purchase
        Price, (3) shares of Company Common Stock or other equity securities of
        the Company (including, without limitation, shares, or units of shares,
        of preferred stock (such other shares being "common stock
        equivalents")), (4) debt securities of the Company, (5) other assets, or
        (6) any combination of the foregoing, having an aggregate value which,
        when added to the value of the Units of Preferred Stock actually issued
        upon exercise of such Right, shall have an aggregate value equal to the
        Current Value (less the amount of any reduction in such Purchase Price),

                                       14
<PAGE>   18

        where such aggregate value has been determined by a majority of the
        Board of Directors, after receiving advice from a nationally recognized
        investment banking firm; provided, however, that if the Company shall
        not have made adequate provision to deliver value pursuant to clause (B)
        above within thirty days following the later of (x) the first occurrence
        of a Section 11(a)(ii) Event and (y) the date on which the Company's
        right of redemption pursuant to Section 23(a) expires (the later of (x)
        and (y) being referred to herein as the "Section 11(a)(iii) Trigger
        Date"), then, subject to Section 34 hereof, the Company shall be
        obligated (to the extent permitted by applicable law and any material
        agreements then in effect to which the Company is a party or by which it
        is bound) to deliver, upon the surrender for exercise of a Right and
        without requiring payment of the Purchase Price, Units of Preferred
        Stock (to the extent available) and then, if necessary, shares (or
        fractions of shares, at the discretion of the Board of Directors) of
        Company Common Stock, cash or a combination thereof, which Units of
        Preferred Stock, shares (or fractions of shares) of Company Common Stock
        and/or cash shall have an aggregate value equal to the Spread; further
        provided, however, that if the Company is unable to comply with the
        immediately foregoing provision within such thirty day period, then the
        Company shall (to the extent permitted by law) take all such action as
        may be necessary to comply with such provision, including the calling of
        a meeting of stockholders to authorize additional shares of Preferred
        Stock or Company Common Stock. To the extent that the Company determines
        that some action need be taken pursuant to the first sentence of this
        Section 11(a)(iii), the Company shall provide, subject to Section 7(e)
        hereof, that such action shall apply uniformly to all outstanding
        Rights. For purposes of this Section 11(a)(iii), the value of a Unit of
        Preferred Stock or share of Company Common Stock shall be the current
        market price (as determined pursuant to Section 11(d) hereof) per Unit
        of Preferred Stock or share of Company Common Stock, as the case may be,
        on the Section 11(a)(iii) Trigger Date and the value of any common stock
        equivalent shall be deemed to have the same value as the Preferred Stock
        on such date.

                (b) In case the Company shall fix a record date for the issuance
        of rights, options or warrants to all holders of Preferred Stock
        entitling them to subscribe for or purchase (for a period expiring
        within forty-five calendar days after such record date) shares of
        Preferred Stock (or shares having substantially the same rights,
        privileges and preferences as shares of Preferred Stock ("Equivalent
        Preferred Stock")) or securities convertible into Preferred Stock or
        Equivalent Preferred Stock at a price per share of Preferred Stock or
        per share of Equivalent Preferred Stock (or having a conversion price
        per share, if a security convertible into Preferred Stock or Equivalent
        Preferred Stock) less than the current market price (as determined
        pursuant to Section l1(d) hereof) per share of Preferred Stock on such
        record date, the Purchase Price to be in effect after such record date
        shall be determined by multiplying the Purchase Price in effect
        immediately prior to such record date by a fraction, the numerator of
        which shall be the sum of the number of shares of Preferred Stock
        outstanding on such record date plus the number of shares of Preferred
        Stock which the aggregate offering price of the total number of shares
        of Preferred Stock and/or Equivalent Preferred Stock so to be offered
        (and/or the aggregate initial conversion price of the convertible
        securities so to be offered) would purchase at such current market
        price, and the denominator of which shall be the number of shares of

                                       15
<PAGE>   19

        Preferred Stock outstanding on such record date plus the number of
        additional shares of Preferred Stock and/or Equivalent Preferred Stock
        to be offered for subscription or purchase (or into which the
        convertible securities so to be offered are initially convertible). In
        case such subscription price may be paid by delivery of consideration
        part or all of which may be in a form other than cash, the value of such
        consideration shall be as determined in good faith by a majority of the
        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. Shares of Preferred Stock owned by
        or held for the account of the Company or any Subsidiary 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 Purchase Price shall be adjusted to be the Purchase Price
        which would then be in effect if such record date had not been fixed.

                (c) In case the Company shall fix a record date for a
        distribution to all holders of shares of Preferred Stock (including any
        such distribution made in connection with a consolidation or merger in
        which the Company is the continuing or surviving corporation) of
        evidences of indebtedness, cash (other than a regular quarterly cash
        dividend paid out of funds legally available therefor), assets (other
        than a dividend payable in shares of Preferred Stock, but including any
        dividend payable in stock other than Preferred Stock) or subscription
        rights, options or warrants (excluding those referred to in Section
        11(b) hereof), the Purchase Price to be in effect after such record date
        shall be determined by multiplying the Purchase Price in effect
        immediately prior to such record date by a fraction, the numerator of
        which shall be the current market price (as determined pursuant to
        Section 11(d) hereof) per share of Preferred Stock on such record date
        less the fair market value (as determined in good faith by a majority of
        the 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 holder of the Rights) of the cash, assets or evidences of
        indebtedness so to be distributed or of such subscription rights,
        options or warrants distributable in respect of a share of Preferred
        Stock and the denominator of which shall be such current market price
        (as determined pursuant to Section 11(d) hereof) per share of Preferred
        Stock. Such adjustments shall be made successively whenever such a
        record date is fixed, and in the event that such distribution is not so
        made, the Purchase Price shall be adjusted to be the Purchase Price
        which would have been in effect if such record date had not been fixed.

                (d) (i) For the purpose of any computation hereunder, the
        "current market price" per share of Company Common Stock or Common Stock
        on any date shall be deemed to be the average of the daily closing
        prices per share of such shares for the ten consecutive Trading Days (as
        such term is hereinafter defined) immediately prior to such date;
        provided, however, if prior to the expiration of such requisite ten
        Trading Day period the issuer announces either (A) a dividend or
        distribution on such shares payable in such shares or securities
        convertible into such shares (other than the Rights), or (B) any
        subdivision, combination or reclassification of such shares, then,
        following the ex-dividend date for such dividend or the record date for
        such subdivision, combination or reclassification, as the case may be,
        the "current market price" shall be properly

                                       16
<PAGE>   20

        adjusted to take into account such event. The closing price for each day
        shall be, if the shares are listed and admitted to trading on a national
        securities exchange, as reported in the principal consolidated
        transaction reporting system with respect to securities listed on the
        principal national securities exchange on which such shares are listed
        or admitted to trading or, if such shares are not listed or admitted to
        trading on any national securities exchange, the last quoted price or,
        if not so quoted, the average of the high bid and low asked prices in
        the over-the-counter market, as reported by the Nasdaq National Market
        ("Nasdaq") or such other system then in use, or, if on any such date
        such shares are not quoted by any such organization, the average of the
        closing bid and asked prices as furnished by a professional market maker
        making a market in such shares selected by a majority of the Board of
        Directors. If on any such date no market maker is making a market in
        such shares, the fair value of such shares on such date as determined in
        good faith by a majority of the Board of Directors shall be used. If
        such shares are not publicly held or not so listed or traded, "current
        market price" per share shall mean the fair value per share as
        determined in good faith by a majority of the Board of Directors, whose
        determination shall be described in a statement filed with the Rights
        Agent and shall be conclusive for all purposes. The term "Trading Day"
        shall mean, if such shares are listed or admitted to trading on any
        national securities exchange, a day on which the principal national
        securities exchange on which such shares are listed or admitted to
        trading is open for the transaction of business or, if such shares are
        not so listed or admitted, a Business Day.

                (ii) For the purpose of any computation hereunder, the "current
        market price" per share of Preferred Stock shall be determined in the
        same manner as set forth above for Company Common Stock in clause (i) of
        this Section 11(d) (other than the fourth sentence thereof). If the
        current market price per share of Preferred Stock cannot be determined
        in the manner provided above or if the Preferred Stock is not publicly
        held or listed or traded in a manner described in clause (i) of this
        Section 11(d), the "current market price" per share of Preferred Stock
        shall be conclusively deemed to be an amount equal to 100 (as such
        amount may be appropriately adjusted for such events as stock splits,
        stock dividends and recapitalizations with respect to Company Common
        Stock occurring after the date of this Agreement) multiplied by the
        current market price per share of Company Common Stock. If neither
        Company Common Stock nor Preferred Stock is publicly held or so listed
        or traded, "current market price" per share of the Preferred Stock shall
        mean the fair value per share as determined in good faith by a majority
        of the 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. For all purposes of this Agreement,
        the "current market price" of a Unit of Preferred Stock shall be equal
        to the "current market price" of one share of Preferred Stock divided by
        100.

                (e) Anything herein to the contrary notwithstanding, no
        adjustment in the Purchase Price shall be required unless such
        adjustment would require an increase or decrease of at least 1% in the
        Purchase Price; provided, however, that any adjustments which by reason
        of this Section 11(e) are not required to be made shall be carried
        forward and taken into account in any subsequent adjustment. All
        calculations under this Section

                                       17
<PAGE>   21

        11 shall be made to the nearest cent or to the nearest one-hundredth of
        a share of Company Common Stock or Common Stock or other share or
        ten-thousandth of a share of Preferred Stock, as the case may be.
        Notwithstanding the first sentence of this Section 11(e), any adjustment
        required by this Section 11 shall be made no later than the earlier of
        (i) three years from the date of the transaction which mandates such
        adjustment and (ii) the Expiration Date.

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

                (g) All Rights originally issued by the Company subsequent to
        any adjustment made to the Purchase Price hereunder shall evidence the
        right to purchase, at the adjusted Purchase Price, the number of Units
        of Preferred Stock (or other securities or amount of cash or combination
        thereof) that may be acquired from time to time hereunder upon exercise
        of the Rights, all subject to further adjustment as provided herein.

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

                (i) The Company may elect on or after the date of any adjustment
        of the Purchase Price to adjust the number of Rights, in lieu of any
        adjustment in the number of Units of Preferred Stock that may be
        acquired upon the exercise of a Right. Each of the Rights outstanding
        after the adjustment in the number of Rights shall be exercisable for
        the number of Units of Preferred Stock for which a Right was exercisable
        immediately prior to such adjustment. Each Right held of record prior to
        such adjustment of the number of Rights shall become that number of
        Rights (calculated to the nearest one ten-thousandth) obtained by
        dividing the Purchase Price in effect immediately prior to adjustment of
        the Purchase Price by the Purchase Price in effect immediately after
        adjustment of the Purchase Price. The Company shall make a public
        announcement of its election to adjust the number of Rights, indicating
        the record date for the adjustment, and, if known at the time, the
        amount of the adjustment to be made. This record date may be the date on
        which the Purchase Price is adjusted or any day thereafter, but, if the
        Rights Certificates have

                                       18
<PAGE>   22

        been issued, shall be at least ten days later than the date of such
        public announcement. If Rights Certificates have been issued, upon each
        adjustment of the number of Rights pursuant to this Section 11(i), the
        Company shall, as promptly as practicable, cause to be distributed to
        holders of record of Rights Certificates on such record date Rights
        Certificates evidencing, subject to Section 14 hereof, the additional
        Rights to which such holders shall be entitled as a result of such
        adjustment, or, at the option of the Company, shall cause to be
        distributed to such holders of record in substitution and replacement
        for the Rights Certificates held by such holders prior to the date of
        adjustment, and upon surrender thereof, if required by the Company, new
        Rights Certificates evidencing all the Rights to which such holders
        shall be entitled after such adjustment. Rights Certificates to be so
        distributed shall be issued, executed and countersigned in the manner
        provided for herein (and may bear, at the option of the Company, the
        adjusted Purchase Price) and shall be registered in the names of the
        holders of record of Rights Certificates on the record date specified in
        the public announcement.

                (j) Irrespective of any adjustment or change in the Purchase
        Price or the number of Units of Preferred Stock issuable upon the
        exercise of the Rights, the Rights Certificates theretofore and
        thereafter issued may continue to express the Purchase Price per Unit
        and the number of Units of Preferred Stock which were expressed in the
        Initial Rights Certificates issued hereunder.

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

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

                (m) Anything in this Section 11 to the contrary notwithstanding,
        the Company shall be entitled to make such reductions in the Purchase
        Price, in addition to those adjustments expressly required by this
        Section 11, as and to the extent that in their good faith judgment a
        majority of the Board of Directors shall determine to be advisable in
        order that any (i) consolidation or subdivision of the Preferred Stock,
        (ii) issuance wholly for cash of any shares of Preferred Stock at less
        than the current market price, (iii)

                                       19
<PAGE>   23

        issuance wholly for cash of shares of Preferred Stock or securities
        which by their terms are convertible into or exchangeable for shares of
        Preferred Stock, (iv) stock dividends or (v) issuance of rights, options
        or warrants referred to in this Section 11, hereafter made by the
        Company to holders of its Preferred Stock, shall not be taxable to such
        holders or shall reduce the taxes payable by such holders.

                (n) The Company shall not, at any time after the Distribution
        Date, (i) consolidate with any other Person (other than a wholly owned
        Subsidiary of the Company in a transaction which complies with Section
        11(o) hereof), (ii) merge with or into any other Person (other than a
        wholly owned Subsidiary of the Company in a transaction which complies
        with Section 11(o) hereof), or (iii) sell or transfer (or permit any
        Subsidiary to sell or transfer), in one transaction, or a series of
        transactions, assets or earning power aggregating more than 50% of the
        assets or earning power of the Company and its Subsidiaries (taken as a
        whole) to any other Person or Persons (other than the Company and/or any
        of its Subsidiaries in one or more transactions each of which complies
        with Section 11(o) hereof), if (x) at the time of or immediately after
        such consolidation, merger or sale there are any rights, warrants or
        other instruments or securities outstanding or agreements in effect
        which would substantially diminish or otherwise eliminate the benefits
        intended to be afforded by the Rights or (y) prior to, simultaneously
        with or immediately after such consolidation, merger or sale, the Person
        which constitutes, or would constitute, the "Principal Party" for
        purposes of Section 13(a) hereof shall have distributed or otherwise
        transferred to its shareholders or other persons holding an equity
        interest in such Person Rights previously owned by such Person or any of
        its Affiliates and Associates; provided, however, this Section 11(n)
        shall not affect the ability of any wholly owned Subsidiary of the
        Company to consolidate with, merge with or into, or sell or transfer
        assets or earning power to, any other wholly owned Subsidiary of the
        Company.

                (o) After the Distribution Date, the Company shall not, except
        as permitted by Section 23, Section 26 or Section 34 hereof, take (or
        permit any Subsidiary to take) any action if at the time such action is
        taken it is reasonably foreseeable that such action will diminish
        substantially or otherwise eliminate the benefits intended to be
        afforded by the Rights.

                (p) Anything in this Agreement to the contrary notwithstanding,
        in the event that the Company shall at any time after the Rights
        Dividend Declaration Date and prior to the Distribution Date (i) declare
        a dividend on the outstanding shares of Company Common Stock payable in
        shares of Company Common Stock, (ii) subdivide the outstanding shares of
        Company Common Stock, (iii) combine the outstanding shares of Company
        Common Stock into a smaller number of shares, or (iv) issue any shares
        of its capital stock in a reclassification of Company Common Stock
        (including any such reclassification in connection with a consolidation
        or merger in which the Company is the continuing or surviving
        corporation), the number of Rights associated with each share of Company
        Common Stock then outstanding, or issued or delivered thereafter prior
        to the Distribution Date or in accordance with Section 22 hereof, shall
        be proportionately adjusted so that the number of Rights thereafter
        associated with each share of Company

                                       20
<PAGE>   24

        Common Stock following any such event shall equal the result obtained by
        multiplying the number of Rights associated with each share of Company
        Common Stock immediately prior to such event by a fraction the numerator
        of which shall be the total number of shares of Company Common Stock
        outstanding immediately prior to the occurrence of the event and the
        denominator of which shall be the total number of shares of Company
        Common Stock outstanding immediately following the occurrence of such
        event.

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

        Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power. (a) In the event that, following the first occurrence of a
Section 11(a)(ii) Event, directly or indirectly, either (x) 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 which complies with Section
11(o) hereof), and the Company shall not be the continuing or surviving
corporation of such consolidation or merger, (y) any Person (other than a wholly
owned Subsidiary of the Company in a transaction which compiles with Section
11(o) hereof) shall consolidate with, or merge with or into, the Company, and
the Company shall be the continuing or surviving corporation of such
consolidation or merger and, in connection with such consolidation or merger,
all or part of the outstanding shares of Company Common Stock shall be changed
into or exchanged for stock or other securities of the Company or any other
Person or cash or any other property, or (z) the Company shall sell or otherwise
transfer (or one or more of its Subsidiaries shall sell or otherwise transfer)
to any Person or Persons (other than the Company or any of its wholly owned
Subsidiaries in one or more transactions each of which complies with Section
11(o) hereof), in one or more transactions, assets or earning power aggregating
50% or more of the assets or earning power of the Company and its Subsidiaries
(taken as a whole) (any such event being a "Section 13 Event"), then, and in
each such case, proper provision shall be made so that: (i) each holder of a
Right, (other than Rights which have become void as provided in Section 7(e)
hereof), shall thereafter have the right to receive, upon the exercise thereof
at the then current Purchase Price, in accordance with this Agreement and in
lieu of Units of Preferred Stock or shares of Company Common Stock, such number
of validly authorized and issued, fully paid, non-assessable and freely
tradeable shares of Common Stock of the Principal Party (as such term is
hereinafter defined), which shares shall not be subject to any liens,
encumbrances, rights of call or first refusal, transfer restrictions or other
adverse claims, as shall be equal to the result obtained by (1) multiplying the
then current Purchase Price by the number of Units of Preferred Stock for which
a Right is exercisable immediately prior to the first occurrence of a Section 13
Event (or, if a Section 11(a)(ii) Event has occurred prior to the first
occurrence of a Section 13

                                       21
<PAGE>   25

Event, multiplying the number of such Units for which a Right would be
exercisable hereunder but for the occurrence of such Section 11(a)(ii) Event by
the Purchase Price which would be in effect hereunder but for such first
occurrence) and (2) dividing that product (which, following the first occurrence
of a Section 13 Event, shall be the "Purchase Price" for all purposes of this
Agreement) by 50% of the current market price (determined pursuant to Section
11(d) hereof) per share of the Common Stock of such Principal Party on the date
of consummation of such Section 13 Event, provided, however, that the Purchase
Price (as theretofore adjusted in accordance with Section 11(a)(ii) hereof) and
the number of shares of Common Stock of such Principal Party so receivable upon
exercise of a Right shall be subject to further adjustment as appropriate in
accordance with Section 11(f) hereof to reflect any events occurring in respect
of the Common Stock of such Principal Party after the occurrence of such Section
13 Event; (ii) such Principal Party shall thereafter be liable for, and shall
assume, by virtue of such Section 13 Event, all the obligations and duties of
the Company pursuant to this Agreement; (iii) the term "Company" shall
thereafter be deemed to refer to such Principal Party in all respects; (iv) such
Principal Party shall take such steps (including, but not limited to, the
reservation of a sufficient number of shares of its Common Stock in accordance
with Section 9 hereof) in connection with the consummation of any such
transaction as may be necessary to assure that the provisions of this Agreement
shall thereafter be applicable, as nearly as reasonably may be, in relation to
its shares of Common Stock thereafter deliverable upon the exercise of the
Rights, to its shares of Common Stock; provided, however, that, upon the
subsequent occurrence of any merger, consolidation, sale of all or substantially
all of the assets, recapitalization, reclassification of shares, reorganization
or other extraordinary transaction in respect of such Principal Party, each
holder of a Right shall thereupon be entitled to receive, upon exercise of a
Right and payment of the Purchase Price, such cash, shares, rights, warrants and
other property which such holder would have been entitled to receive had it, at
the time of such transaction, owned the shares of Common Stock of the Principal
Party purchasable upon the exercise of a Right, and such Principal Party shall
take such steps (including, but not limited to, reservation of shares of stock)
as may 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; and (v) the provisions of Section 11(a)(ii) hereof shall be of
no further effect following the first occurrence of any Section 13 Event.

                (b) "Principal Party" shall mean:

                        (i) in the case of any transaction described in clause
                (x) or (y) of the first sentence of Section 13(a), (A) the
                Person that is the issuer of any securities into which shares of
                Company Common Stock are converted in such merger or
                consolidation, or, if there is more than one such issuer, the
                issuer of Common Stock that has the highest aggregate current
                market price (determined pursuant to Section 11(d) hereof) and
                (B) if no securities are so issued, the Person that is the other
                party to such merger or consolidation, or, if there is more than
                one such Person, the Person the Common Stock of which has the
                highest aggregate current market price (determined pursuant to
                Section 11(d) hereof); and

                        (ii) in the case of any transaction described in clause
                (z) of the first sentence of Section 13(a) hereof, the Person
                that is the party receiving the largest

                                       22
<PAGE>   26

                portion of the assets or earning power transferred pursuant to
                such transaction or transactions, or, if each Person that is a
                party to such transaction or transactions receives the same
                portion of the assets or earning power transferred pursuant to
                such transaction or transactions or if the Person receiving the
                largest portion of the assets or earning power cannot be
                determined, whichever Person the Common Stock of which has the
                highest aggregate current market price (determined pursuant to
                Section 11(d) hereof); provided, however, that in any such case,
                (1) if the Common Stock of such Person is not at such time and
                has not been continuously over the preceding twelve-month period
                registered under Section 12 of the Exchange Act ("Registered
                Common Stock"), or such Person is not a corporation, and such
                Person is a direct or indirect Subsidiary of another Person that
                has Registered Common Stock outstanding, "Principal Party" shall
                refer to such other Person; (2) if the Common Stock of such
                Person is not Registered Common Stock or such Person is not a
                corporation, and such Person is a direct or indirect Subsidiary
                of another Person but is not a direct or indirect Subsidiary of
                another Person which has Registered Common Stock outstanding,
                "Principal Party" shall refer to the ultimate parent entity of
                such first-mentioned Person; (3) if the Common Stock of such
                Person is not Registered Common Stock or such Person is not a
                corporation, and such Person is directly or indirectly
                controlled by more than one Person, and one or more of such
                other Persons has Registered Common Stock outstanding,
                "Principal Party" shall refer to whichever of such other Persons
                is the issuer of the Registered Common Stock having the highest
                aggregate current market price (determined pursuant to Section
                11(d) hereof); and (4) if the Common Stock of such Person is not
                Registered Common Stock or such Person is not a corporation, and
                such Person is directly or indirectly controlled by more than
                one Person, and none of such other Persons have Registered
                Common Stock outstanding, "Principal Party" shall refer to
                whichever ultimate parent entity is the corporation having the
                greatest shareholders equity or, if no such ultimate parent
                entity is a corporation, shall refer to whichever ultimate
                parent entity is the entity having the greatest net assets

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

                        (i) (A) file on an appropriate form, as soon as
                practicable following the execution of such agreement, a
                registration statement under the Securities Act with respect to
                the Common Stock that may be acquired upon exercise of the
                Rights, (B) cause such registration statement to remain
                effective (and to include a prospectus complying with the
                requirements of the Securities Act) until the Expiration Date,
                and (C) as soon as practicable following the execution of such

                                       23
<PAGE>   27

                agreement, take such action as may be required to assure that
                any acquisition of such Common Stock upon the exercise of the
                Rights complies with any applicable state securities or "blue
                sky" laws; and

                        (ii) as soon as practicable following the execution of
                such agreement, deliver to holders of the Rights historical
                financial statements for the Principal Party and each of its
                Affiliates which comply in all respects with the requirements
                for registration on Form 10 under the Exchange Act.

                (d) In case the Principal Party which is to be a party to a
        transaction referred to in this Section 13 has a provision in any of its
        authorized securities or in its Certificate of Incorporation or By-laws
        or other instrument governing its corporate affairs, which provision
        would have the effect of (i) causing such Principal Party to issue, in
        connection with, or as a consequence of, the consummation of a
        transaction referred to in this Section 13, shares of Common Stock of
        such Principal Party at less than the then current market price per
        share (determined pursuant to Section 11(d) hereof) or securities
        exercisable for, or convertible into, Common Stock of such Principal
        Party at less than such then current market price (other than to holders
        of Rights pursuant to this Section 13) or (ii) providing for any special
        payment, tax or similar provisions in connection with the issuance of
        the Common Stock of such Principal Party pursuant to the provisions of
        this Section 13; then, in such event, the Company 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 cancelled, 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 provisions of this Section 13 shall similarly apply to
        successive mergers or consolidations or sales or other transfers. In the
        event that a Section 13 Event shall occur at any time after the
        occurrence of a Section 11(a)(ii) Event, the Rights which have not
        theretofore been exercised shall thereafter become exercisable, in the
        manner and for the securities described in Section 13(a).

                (f) Notwithstanding anything contained herein to the contrary,
        in the event of any merger or other acquisition transaction involving
        the Company pursuant to a merger or other acquisition agreement between
        the Company and any Person (or one or more of such Person's Affiliates
        or Associates) which agreement has been approved by the Board of
        Directors prior to any Person becoming an Acquiring Person, this
        Agreement and the rights of holders of Rights hereunder shall be
        terminated in accordance with Section 7(a) hereof.

        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 issuing such
fractional Rights, there shall be paid to the Persons to which such fractional
Rights would otherwise be issuable, an amount in cash equal to such fraction of
the market value of a whole Right. For purposes of this Section 14(a), the
market value of a whole

                                       24
<PAGE>   28

Right shall be the closing price of the Rights for the Trading Day immediately
prior to the date on which such fractional Rights would have been otherwise
issuable. The closing price of the Rights for any day shall be, if the Rights
are listed or admitted to trading on a national securities exchange, as reported
in the principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which the
Rights are listed or admitted to trading or, if the Rights are not listed or
admitted to trading on any national securities exchange, the last quoted price
or, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by Nasdaq or such other system then in use
or, if on any such date the Rights are not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Rights selected by a majority of the Board
of Directors. If on any such date no such market maker is making a market in the
Rights, the fair value of the Rights on such date as determined in good faith by
a majority of the Board of Directors shall be used and such determination shall
be described in a statement filed with the Rights Agent and the holders of the
Rights.

                (b) The Company shall not be required to issue fractions of
shares of Preferred Stock (other than fractions which are integral multiples of
one one-hundredth of a share of Preferred Stock) upon exercise of the Rights or
to distribute certificates which evidence such fractional shares of Preferred
Stock (other than fractions which are integral multiples of one one-hundredth of
a share of Preferred Stock); provided, however, that in lieu of fractions of
shares of Preferred Stock which are integral multiples of one one-hundredth of a
share of Preferred Stock, the Company may provide for the issuance of depositary
receipts pursuant to Section 7(c) hereof. In lieu of such fractional shares of
Preferred Stock that are not integral multiples of one one-hundredth of a share,
the Company may pay to the registered holders of Rights Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the then current market price of a share of Preferred Stock on the
day of exercise, determined in accordance with Section 11(d) hereof.

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

        Section 15. Rights of Action. All rights of action in respect of this
Agreement, other than rights of action vested in the Rights Agent pursuant to
Section 18 hereof, are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of
certificates representing shares of Company Common Stock); and any registered
holder of a Rights Certificate (or, prior to the Distribution Date, of a
certificate representing shares of Company Common Stock), without the consent of
the Rights Agent or of the holder of any other Rights Certificate (or, prior to
the Distribution Date, of a certificate representing shares of Company Common
Stock), may, in his own behalf and for his own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company or any
other Person to enforce, or otherwise act in respect of, his right to exercise
the Rights evidenced by such Rights Certificate in the manner provided in such
Rights Certificate and in this Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Agreement and shall be entitled to specific performance of

                                       25
<PAGE>   29

the obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement.

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

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

                (b) after the Distribution Date, the Rights Certificates are
        transferable only on the registry books of the Rights Agent if
        surrendered at the office 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 duly executed;

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

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

        Section 17. Rights Certificate Holder Not Deemed a Stockholder. No
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the number of shares of
Preferred Stock or any other securities of the Company which may at any time be
issuable on the exercise of the Rights represented thereby, nor shall anything
contained herein or in any 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, except as provided in Section 24 hereof, to
receive notice of meetings or other actions affecting stockholders, or to
receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such Rights Certificate

                                       26
<PAGE>   30

shall have been exercised in accordance with the provisions hereof. This Section
17 shall also apply to holders, as such, of Rights prior to the issuance of
Rights Certificates.

        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, including reasonable fees and disbursements of its counsel, incurred
in connection with the execution and administration of this Agreement and the
exercise and performance of its duties hereunder. The Company shall indemnify
the Rights Agent for any loss, liability, or expenses incurred in connection
with its performance under the Agreement, unless caused by the Rights Agent's
gross negligence, bad faith or willful misconduct.

                (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 Preferred Stock 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 believed by it to be genuine and to have been signed, executed
and, where necessary, verified or acknowledged by the proper Person or Persons.

                (c) The indemnity provided herein shall survive the expiration
of the Rights and the termination of this Agreement. In no case will the Rights
Agent be liable for special, indirect, incidental or consequential loss or
damage of any kind whatsoever (including but not limited to lost profits), even
if the Rights Agent has been advised of the possibility of such loss or damage.

        Section 19. Merger or Consolidation or Change of Name of Rights Agent.
(a) Any corporation into which the Rights Agent or any successor Rights Agent
may be merged or with which it may be consolidated, or any corporation resulting
from any merger or consolidation to which the Rights Agent or any successor
Rights Agent shall be a party, or any corporation succeeding to the corporate
trust or shareholder services businesses 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 document 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 a predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor or in
the name of the successor Rights Agent; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.

                (b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Rights Certificates so

                                       27
<PAGE>   31

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 protection to the Rights Agent as to
        any action taken or omitted by it in good faith and in accordance with
        such opinion.

                (b) Whenever in the performance of its duties under this
        Agreement the Rights Agent shall deem it necessary or desirable that any
        fact or matter (including, without limitation, the identity of any
        Acquiring Person and the determination of "current market price") be
        proved or established by the Company prior to taking or suffering any
        action hereunder, such fact or matter (unless other evidence in respect
        thereof be specified herein) may be deemed to be conclusively proved and
        established by a certificate signed by the Chairman of the Board, the
        Chief Executive Officer, the President, any Vice President, the
        Treasurer, any Assistant Treasurer, the Secretary or any Assistant
        Secretary of the Company and delivered to the Rights Agent; provided,
        however, that so long as any Person is an Acquiring Person hereunder,
        such certificate shall be signed and delivered by a majority of the
        Board of Directors; 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 only be liable to the Company in the
        event of loss, liability or damages caused by the Rights Agent's gross
        negligence, bad faith or willful misconduct.

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

                (e) The Rights Agent shall not have any responsibility for the
        validity of this Agreement or the execution and delivery hereof (except
        the due execution hereof by the Rights Agent) or for 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 failure by the Company to satisfy conditions contained
        in this Agreement or in any Rights Certificate; nor shall it be
        responsible for any adjustment required under the provisions of Section
        11 or Section 13 hereof or for the manner, method or amount of any such
        adjustment or the ascertaining of the existence of facts that would
        require any

                                       28
<PAGE>   32

        such adjustment (except with respect to the exercise of Rights evidenced
        by Rights Certificates after receipt by the Rights Agent of the
        certificate describing any such adjustment contemplated by Section 12);
        nor shall it by any act hereunder be deemed to make any representation
        or warranty as to the authorization or reservation of any shares of
        Preferred Stock or any other securities to be issued pursuant to this
        Agreement or any Rights Certificate or as to whether any shares of
        Preferred Stock or any other securities will, when so issued, be validly
        authorized and issued, fully paid and non-assessable.

                (f) The Company shall perform, execute, acknowledge and deliver
        or cause to be performed, executed, acknowledged and delivered all such
        further acts, instruments and assurances as may reasonably be required
        by the Rights Agent for the performance by the Rights Agent of its
        duties under this Agreement.

                (g) The Rights Agent is hereby authorized and directed to accept
        instructions with respect to the performance of its duties hereunder
        from the Chairman of the Board, the Chief Executive Officer, the
        President, any Vice President, the Secretary, any Assistant Secretary,
        the Treasurer or any Assistant Treasurer of the Company, and to apply to
        such officers for advice or instructions in connection with its duties,
        and it shall not be liable for any action taken or suffered to be taken
        by it in good faith in accordance with instructions of any such officer;
        provided, however, that so long as any Person is an Acquiring Person
        hereunder, the Rights Agent shall accept such instructions and advice
        only from a majority of the Board of Directors and shall not be liable
        for any action taken or suffered to be taken by it in good faith in
        accordance with such instructions of the majority of the Board of
        Directors. 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 Business Days after the date any such
        officer of the Company actually receives such application, unless any
        such officer shall have consented in writing to an earlier date) unless,
        prior to taking any such action (or the effective date in the case of an
        omission), the Rights Agent shall have received written instructions in
        response to such application specifying the action to be taken or
        omitted.

                (h) The Rights Agent and any shareholder, director, officer or
        employee of the Rights Agent may buy, sell or deal in any of the Rights
        or other securities of the Company or have a pecuniary interest 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.

                                       29
<PAGE>   33

                (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.

                (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 or in the exercise of
        its rights hereunder if the Rights Agent shall have reasonable grounds
        for believing that repayment of such funds or adequate indemnification
        against such risk or liability is not reasonably assured to it.

                (k) If, with respect to any Rights Certificate surrendered to
        the Rights Agent for exercise or transfer, the certificate attached to
        the form of assignment or form of election to purchase, as the case may
        be, has either not been completed, not signed 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. If such
        certificate has been completed and signed and shows a negative response
        to clauses 1 and 2 of such certificate, unless previously instructed
        otherwise in writing by the Company (which instructions may impose on
        the Rights Agent additional ministerial responsibilities, but no
        discretionary responsibilities), the Rights Agent may assume without
        further inquiry that the Rights Certificate is not owned by a Person
        described in Section 7(e) hereof and shall not be charged with any
        knowledge to the contrary.

        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 days' prior notice in writing mailed to the Company, and to each
transfer agent of the Preferred Stock and the Company Common Stock, 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 days' prior 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 Stock and the Company Common Stock, 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 days after
giving notice of such removal or after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated Rights Agent or by
the holder of a Rights Certificate (who shall, with such notice, submit his
Rights Certificate for inspection by the Company), then any 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 a court, shall be (a) a corporation organized and
doing business under the laws of the United States or any state of the United
States in good standing, shall be authorized under applicable laws to exercise
corporate trust or stock transfer powers and shall be subject to supervision or
examination by federal or state authorities or (b) an Affiliate of a corporation
described in clause (a). 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

                                       30
<PAGE>   34

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 Stock and the Company Common Stock, 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.

        Section 22. Issuance of New Rights Certificates. Notwithstanding any of
the provisions of this Agreement or 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 a majority of the Board of Directors to reflect any
adjustment or change made in accordance with the provisions of this Agreement in
the Purchase Price or the number or kind or class of shares or other securities
or property that may be acquired under the Rights Certificates. In addition, in
connection with the issuance or sale of shares of Company Common Stock following
the Distribution Date and prior to the Expiration Date, the Company (a) shall,
with respect to shares of Company Common Stock so issued or sold pursuant to the
exercise of stock options or under any employee plan or arrangement, or upon the
exercise, conversion or exchange of securities hereinafter issued by the
Company, and (b) may, in any other case, if deemed necessary or appropriate by a
majority of the Board of Directors, issue Rights Certificates representing the
appropriate number of Rights in connection with such issuance or sale; provided,
however, that (i) no such Rights Certificate shall be issued if, and to the
extent that, the Company shall be advised by counsel that such issuance would
create a significant risk of material adverse tax consequences to the Company or
the Person to whom such Rights Certificate would be issued, and (ii) no such
Rights Certificate shall be issued if, and to the extent that, appropriate
adjustment shall otherwise have been made in lieu of the issuance thereof.

        Section 23. Redemption and Termination. (a) Subject to Section 30
hereof, the Company may, at its option, by action of a majority of the Board of
Directors, at any time prior to the earlier of (i) the Close of Business on the
tenth Business Day following the Stock Acquisition Date or (ii) the Final
Expiration Date, redeem all but not less than all of the then outstanding Rights
at a redemption price of $.01 per Right, as such amount may be appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such redemption price being the "Redemption
Price"). The Company may, at its option, by action of a majority of the Board of
Directors, pay the Redemption Price either in shares of Company Common Stock
(based on the "current market price", as defined in Section 11(d) hereof, of the
shares of Company Common Stock at the time of redemption) or cash and the
redemption of the Rights shall be effective on the basis and with such
conditions as the Board of Directors may in its sole discretion establish.

                (b) Immediately upon the action of a majority of the Board of
Directors ordering the redemption of the Rights, evidence of which shall be
filed with the Rights Agent, and without any further action and without any
notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price for
each Right so held. The Company shall promptly give public notice of any such
redemption;

                                       31
<PAGE>   35

provided, however, that the failure to give, or any defect in, any such notice
shall not affect the validity of such redemption. Promptly after the action of a
majority of the Board of Directors ordering the redemption of the Rights, the
Company shall give notice of such redemption to the Rights Agent and the holders
of the then outstanding Rights by mailing such notice to all such holders at
each holder's last address as it appears upon the registry books of the Rights
Agent or, prior to the Distribution Date, on the registry books of the transfer
agent for the Company Common Stock. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of redemption will state the method by which the
payment of the Redemption Price will be made.

        Section 24. Notice of Certain Events. (a) In case the Company shall
propose, at any time after the Distribution Date, (i) to pay any dividend
payable in stock of any class to the holders of Preferred Stock or to make any
other distribution to the holders of Preferred Stock (other than a regular
quarterly cash dividend paid out of funds legally available therefor), (ii) to
offer to the holders of Preferred Stock rights or warrants to subscribe for or
to purchase any additional shares of Preferred Stock or shares of stock of any
class or any other securities, rights or options, (iii) to effect any
reclassification of its Preferred Stock (other than a reclassification involving
only the subdivision of outstanding shares of Preferred Stock), (iv) to effect
any consolidation or merger into or with any other Person, or to effect any sale
or other transfer (or to permit one or more of its Subsidiaries to effect any
sale or other transfer), in one or more transactions, of more than 50% of the
assets or earning power of the Company and its Subsidiaries (taken as a whole)
to any other Person or Persons (other than a transfer by the Company and/or any
of its wholly owned Subsidiaries in one or more transactions each of which
complies with Section 11(o) hereof), or (v) to effect the liquidation,
dissolution or winding up of the Company, then, in each such case, the Company
shall give to each holder of a Rights Certificate, to the extent feasible and in
accordance with Section 25 hereof, a notice of such proposed action, which shall
specify the record date for the purposes of such stock dividend, distribution of
rights or warrants, or the date on which such reclassification, consolidation,
merger, sale, transfer, liquidation, dissolution, or winding up is to take place
and the date of participation therein by the holders of the shares of Preferred
Stock, if any such date is to be fixed, and such notice shall be so given in the
case of any action covered by clause (i) or (ii) above at least twenty (20) days
prior to the record date for determining holders of the shares of Preferred
Stock for purposes of such action, and in the case of any such other action, at
least twenty (20) days prior to the date of the taking of such proposed action
or the date of participation therein by the holders of the shares of Preferred
Stock whichever shall be the earlier; provided, however, no such notice shall be
required pursuant to this Section 24, if any wholly owned Subsidiary of the
Company effects a consolidation or merger with or into, or effects a sale or
other transfer of assets or earnings power to, any other wholly owned Subsidiary
of the Company.

                (b) In case any Triggering Event shall occur, then, in any such
case, (i) the Company shall as soon as practicable thereafter give to each
holder of a Rights Certificate, to the extent feasible and in accordance with
Section 25 hereof, a notice of the occurrence of such event, which shall specify
the event and the consequences of the event to holders of Rights under Section
11(a)(ii) or Section 13 hereof, as the case may be.

                                       32
<PAGE>   36

        Section 25. Notices. All notices and other communications provided for
hereunder shall, unless otherwise stated herein, be in writing (including by
telex, telegram or cable) and mailed or sent or delivered, if to the Company, at
its address at:

        Organic, Inc.
        510 Third Street
        San Francisco, CA 94107
        Attention: Corporate Secretary

        and if to the Rights Agent, at its address at:

        Equiserve Trust Company, N.A.
        150 Royall Street
        Canton, Massachusetts 02021-1031
        Attention:  Andrea Grant

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

        Section 26. Supplements and Amendments. Prior to the Distribution Date
and subject to the penultimate sentence of this Section 26, the Company and the
Rights Agent shall, if the Company so directs, supplement or amend any provision
of this Agreement in any respect without the approval of any holders of
certificates representing shares of Company Common Stock. From and after the
Distribution Date and subject to the penultimate sentence of this Section 26,
the Company and the Rights Agent shall, if the Company so directs, supplement or
amend this Agreement without the approval of any holders of Rights Certificates
in order (i) to cure any ambiguity, (ii) to correct or supplement any provision
contained herein which may be defective or inconsistent with any other
provisions herein, (iii) to shorten or lengthen any time period hereunder, or
(iv) to change or supplement the provisions hereunder in any manner which the
Company may deem necessary or desirable and which shall not adversely affect the
interests of the holders of Rights Certificates (other than an Acquiring Person
or an Affiliate or Associate of an Acquiring Person); provided, however, that
this Agreement may not be supplemented or amended to lengthen, pursuant to
clause (iii) of this sentence, (A) subject to Section 30 hereof, 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. Upon the delivery of a certificate from an
appropriate officer of the Company or, so long as any Person is an Acquiring
Person hereunder, from the majority of the Board of Directors which states that
the proposed supplement or amendment is in compliance with the terms of this
Section 26, the Rights Agent shall execute such supplement or amendment.
Notwithstanding anything contained in this Agreement to the contrary, (i) no
supplement or amendment shall be made which changes the Redemption Price, the
Purchase Price, the Expiration Date or the number of Units of

                                       33
<PAGE>   37

Preferred Stock or other securities or assets for which a Right is exercisable
without the approval of a majority of the Board of Directors, and (ii) following
the occurrence of a Section 11(a)(ii) Event, no supplement or amendment
whatsoever shall be made without the approval of the Board of Directors. Prior
to the Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of Company Common Stock.

        Section 27. 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 28. Determinations and Actions by the Board of Directors, etc.
For all purposes of this Agreement, any calculation of the number of shares of
Company Common Stock outstanding at any particular time, including for purposes
of determining the particular percentage of such outstanding shares of Company
Common Stock of which any Person is the Beneficial Owner, shall be made in
accordance with the last sentence of Rule 13d-3(d)(1)(i) of the Exchange Act
Regulations as in effect on the date hereof. Except as otherwise specifically
provided herein, the Board of Directors shall have the exclusive power and
authority to administer this Agreement and to exercise all rights and powers
specifically granted to the Board of Directors or to 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. All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) which are done or made by the Board
of Directors in good faith shall (x) be final, conclusive and binding on the
Company, the Rights Agent, the holders of the Rights and all other parties, and
(y) not subject the Board of Directors or any member thereof to any liability to
the holders of the Rights.

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

        Section 30. 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 a majority of the
Board of Directors determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement and the Rights shall not then be redeemable, the right
of redemption set forth in Section 23 hereof shall be reinstated and shall not
expire until the Close

                                       34
<PAGE>   38

of Business on the tenth Business Day following the date of such determination
by a majority of the Board of Directors.

        Section 31. Governing Law. This Agreement, each Right and each Rights
Certificate issued hereunder shall be governed by, and construed in accordance
with, the laws of the State of Delaware applicable to contracts executed in and
to be performed entirely in such State.

        Section 32. Counterparts. This Agreement may be executed (including by
facsimile) in one or more counterparts, and by the different parties hereto in
separate counterparts, each of which when executed shall be deemed to be an
original, but all of which taken together shall constitute one and the same
instrument.

        Section 33. Descriptive Headings. The headings contained in this
Agreement are for descriptive purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.

        Section 34. Exchange. (a) The Company, upon resolution of a majority of
the Board of Directors may, at its option, at any time after the first
occurrence of a Section 11(a)(ii) Event, exchange all or part of the then
outstanding and exercisable Rights (which shall not include Rights that have
become void pursuant to Section 7(e) hereof) for Units of Preferred Stock or
shares of Company Common Stock (at the election of the Board of Directors) at an
exchange ratio of one Unit of Preferred Stock or one share of Company Common
Stock, as the case may be, per Right, as appropriately adjusted to reflect any
stock split, stock dividend or similar transaction occurring after the date
hereof (such exchange ratio being the "Exchange Ratio"). Notwithstanding the
foregoing, the Board of Directors shall not be empowered to effect such exchange
at any time after any Person (other than an Exempt Person), together with all
Affiliates and Associates of such Person, becomes the Beneficial Owner of shares
of Company Common Stock aggregating 50% or more of the shares of Company Common
Stock then outstanding. From and after the occurrence of a Section 13(a) Event,
any Rights that theretofore have not been exchanged pursuant to this Section
34(a) shall thereafter be exercisable only in accordance with Section 13 and may
not be exchanged pursuant to this Section 34(a). The exchange of the Rights by
the Board of Directors may be made effective at such time, on such basis and
with such conditions as the Board of Directors in its sole discretion may
establish.

                (b) Immediately upon the action of a majority of the Board of
Directors ordering the exchange of any Rights pursuant to Section 34(a) 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 Units of Preferred Stock or shares of Company
Common Stock, as the case may be, equal to the number of such Rights held by
such holder multiplied by the Exchange Ratio. The Company shall promptly give
public notice of any such exchange; provided, however, that the failure to give,
or any defect in, such notice shall not affect the validity of such exchange.
The Company promptly shall mail a notice of any such exchange to all of the
holders of such Rights at their last addresses as they appear upon the registry
books of the Rights Agent. Any notice which is mailed in the manner herein
provided shall be deemed given, whether or not the holder receives the notice.
Each such notice of exchange shall state the method by which the exchange of
Units of Preferred Stock or shares of Company Common

                                       35
<PAGE>   39

Stock, as the case may be, 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 the number of shares of Preferred Stock or
Company Common Stock, as the case may be, which are authorized by the Company's
Restated Certificate of Incorporation but not outstanding or reserved for
issuance for purposes other than upon exercise of the Rights are not sufficient
to permit any exchange of Rights as contemplated in accordance with this Section
34, the Company, upon a resolution of a majority of the Board of Directors,
shall take all such action as may be necessary to authorize additional shares of
Preferred Stock or Company Common Stock, as the case may be, for issuance upon
exchange of the Rights or make adequate provision to substitute, in whole or in
part, (1) cash, (2) other equity securities of the Company, (3) debt securities
of the Company, (4) other assets, or (5) any combination of the foregoing,
having an aggregate value for each Right to be exchanged equal to the per share
market price of one Unit of Preferred Stock or share of Company Common Stock, as
the case may be (determined pursuant to Section 11(d) hereof) as of the date of
a Section 11(a)(ii) Event, where such aggregate value has been determined by a
majority of the Board of Directors.

                (d) The Company shall not be required to issue fractions of
Units of Preferred Stock or fractions of shares of Company Common Stock or to
distribute certificates which evidence fractional Units or fractional shares. In
lieu of issuing fractional Units or fractional shares, the Company may pay to
the registered holders of Rights Certificates at the time such Rights are
exchanged as herein provided an amount in cash equal to the same fraction of the
current market price (determined pursuant to Section 11(d) hereof) of one Unit
of Preferred Stock or one share of Company Common Stock, as the case may be, on
the Trading Day immediately prior to the date of exchange pursuant to this
Section 34.

                                       36
<PAGE>   40

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

ORGANIC, INC.

     By:  /s/ Margaret Maxwell Zagel         By:  /s/ Marita Scarfi
        -------------------------------         --------------------------------
     Name:    Margaret Maxwell Zagel         Name:    Marita Scarfi
           ----------------------------            -----------------------------
     Title:   VP, Chief Legal Officer,       Title:   VP, Finance
           ----------------------------            -----------------------------
                   Secretary
        -------------------------------

EQUISERVE TRUST COMPANY, N.A.

     By:   /s/ Christopher P. Richard         By:   /s/ Andrea Grant
        -------------------------------         --------------------------------
     Name:     Christopher P. Richard         Name:     Andrea Grant
           ----------------------------            -----------------------------
     Title:    Director                       Title:    Account Manager
           ----------------------------            -----------------------------

                                       37
<PAGE>   41

                                                                       EXHIBIT A
                                                             TO RIGHTS AGREEMENT

                           FORM OF RIGHTS CERTIFICATE

Certificate No. ______                                             ______ Rights

NOT EXERCISABLE AFTER THE EXPIRATION DATE (AS DEFINED IN THE RIGHTS AGREEMENT
REFERRED TO BELOW). THE RIGHTS ARE SUBJECT TO REDEMPTION OR EXCHANGE, AT THE
OPTION OF THE COMPANY, ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER
CERTAIN CIRCUMSTANCES (SPECIFIED IN THE RIGHTS AGREEMENT), RIGHTS BENEFICIALLY
OWNED BY ACQUIRING PERSONS (AS DEFINED IN THE RIGHTS AGREEMENT) OR ANY
SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID.

                                            Rights Certificate

                                            ORGANIC, INC.

        This certifies that ______________________, or registered assigns, is
the registered holder of the number of Rights set forth above, each of which
entitles the registered holder thereof, subject to the terms and conditions of
the Rights Agreement dated as of February 9, 2000, as amended from time to time
(the "Rights Agreement"; terms defined therein are used herein with the same
meaning unless otherwise defined herein) between Organic, Inc., a Delaware
corporation (the "Company"), and EquiServe Trust Company, N.A., as Rights Agent
(which term shall include any successor Rights Agent under the Rights
Agreement), to purchase from the Company at any time after the Distribution Date
and prior to the Expiration Date at the office of the Rights Agent, one
one-hundredth of a fully paid and nonassessable share of Series C Preferred
Stock, par value $.0001 per share (the "Preferred Stock"), of the Company at the
Purchase Price initially of $300 per one one-hundredth share of Preferred Stock
(each such one one-hundredth of a share being a "Unit"), upon presentation and
surrender of this Rights Certificate with the Election to Purchase and related
certificate duly executed. The number of Rights evidenced by this Rights
Certificate (and the number of shares which may be purchased upon exercise
thereof) set forth above, and the Purchase Price per Unit set forth above, and
the Purchase Price per share set forth above, are the number and Purchase Price
as of February 9, 2000 based on the Preferred Stock as constituted at such date.
The Company reserves the right to require prior to the occurrence of a
Triggering Event (as such term is defined in the Rights Agreement) that a number
of Rights be exercised so that only whole shares of Preferred Stock will be
issued.

        UPON THE OCCURRENCE OF A SECTION 11(a)(ii) EVENT, IF THE RIGHTS
EVIDENCED BY THIS RIGHTS CERTIFICATE ARE BENEFICIALLY OWNED BY AN ACQUIRING
PERSON OR AN AFFILIATE OR ASSOCIATE OF ANY SUCH ACQUIRING PERSON OR, UNDER
CERTAIN CIRCUMSTANCES

                                      A-1
<PAGE>   42

DESCRIBED IN THE RIGHTS AGREEMENT, A TRANSFEREE OF ANY SUCH ACQUIRING PERSON,
ASSOCIATE OR AFFILIATE, SUCH RIGHTS SHALL BECOME NULL AND VOID AND NO HOLDER
HEREOF SHALL HAVE ANY RIGHT WITH RESPECT TO SUCH RIGHTS FROM AND AFTER THE
OCCURRENCE OF SUCH SECTION 11(a)(ii) EVENT.

        In certain circumstances described in the Rights Agreement, the Rights
evidenced hereby may entitle the registered holder thereof to purchase capital
stock of an entity other than the Company or receive common stock, cash or other
assets, all as provided in the Rights Agreement.

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

        This Rights Certificate is subject to all of the terms and conditions of
the Rights Agreement, which terms 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 office of the Rights Agent and are available from
the Rights Agent upon written request.

        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 an aggregate number of Rights equal to the aggregate number
of Rights evidenced by the Rights Certificate or Rights Certificates
surrendered. If this Rights Certificate shall be exercised in part, the
registered holder shall be entitled to receive, upon surrender hereof, another
Rights Certificate or Rights Certificates for the number of whole Rights not
exercised.

        Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate may be redeemed by the Company under certain circumstances
at its option at a redemption price of $.01 per Right, at any time prior to the
earlier of the close of business on (i) the tenth business day following the
Stock Acquisition Date (as such time period may be extended pursuant to the
Rights Agreement), other than a Stock Acquisition Date that occurs as a result
of a Qualifying Offer, and (ii) the Final Expiration Date. In addition, the
Rights may be exchanged, in whole or in part, for shares of the Common Stock of
the Company. Immediately upon the action of the Board of Directors of the
Company authorizing any such exchange, and without any further action or any
notice, the Rights (other than Rights which are not subject to such exchange)
will terminate and the Rights will only enable holders to receive the shares
issuable upon such exchange. Under certain circumstances set forth in the Rights
Agreement, the decision to

                                      A-2
<PAGE>   43

redeem the Rights shall require the concurrence of a majority of the Independent
Directors.

        No fractional shares of Preferred Stock will be issued upon the exercise
of any Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-hundredth of a share of Preferred Stock or depositary
receipts representing such fractions), 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 Preferred Stock
or of any other securities which may at any time be issuable on the exercise
hereof, nor shall anything contained in the Rights Agreement or herein be
construed to confer upon the holder hereof, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting stockholders (except as provided in the Rights
Agreement), or to receive dividends of subscription rights, or otherwise, until
the Rights evidenced by this Rights Certificate shall have been exercised as
provided in the Rights Agreement.

                                      A-3
<PAGE>   44

        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.
Dated as of _________________, __________

                                            ORGANIC, INC.

                                            By:
                                               ---------------------------------
                                               Name:  Michael Hudes
                                               Title:  President

                                            By:
                                               ---------------------------------
                                               Name:  Margaret Maxwell Zagel
                                               Title:  Secretary

Countersigned:

EquiServe Trust Company, N.A.
        as Rights Agent

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

                                      A-4
<PAGE>   45

                  [Form of Reverse Side of Rights Certificate]

                               FORM OF ASSIGNMENT

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

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

                                            Dated
                                                 -------------------------------

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

                                            Signature Guaranteed:

                                   Certificate

        The undersigned hereby certifies by checking the appropriate boxes in
(1) and (2) that:

        (1) this Rights Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (as such terms are defined
pursuant to the Rights Agreement); and

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

                                            Dated
                                                 -------------------------------

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

                                            Signature Guaranteed:

                                      A-5
<PAGE>   46

                                     NOTICE

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

        Signatures must be guaranteed by an approved eligible financial
institution acceptable to the Rights Agent in its sole discretion or by a
participant in the Securities Transfer Agents Medallion Program, the Stock
Exchange Medallion Program or the New York Stock Exchange Medallion Program.

        In the event the certification set forth above is not completed, the
Company will deem the beneficial owner of the Rights evidenced by this Rights
Certificate to be an Acquiring Person or an Affiliate or Associate thereof (as
defined in the Rights Agreement) and, in the case of an Assignment, will affix a
legend to that effect on any Rights Certificates issued in exchange for this
Rights Certificate.

                                      A-6
<PAGE>   47

                          FORM OF ELECTION TO PURCHASE

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

To:  ORGANIC, INC.

        The undersigned hereby irrevocably elects to exercise
____________________ Rights represented by this Rights Certificate to purchase
the Units of Preferred Stock issuable upon the exercise of the Rights (or such
other securities of the Company or of any other person or other property which
may be issuable upon the exercise of the Rights) and requests that certificates
for such Units be issued in the name of and delivered to: _____________________
________________________________________________________________________ (Please
print name and address) _______________________________ (Please insert social
security or other identifying number).

        If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
__________________________________________________________ (Please print name
and address) ______________________________________________ (Please insert
social security or other identifying number).

                                            Dated
                                                 -------------------------------

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

                                            Signature Guaranteed:

                                   Certificate

        The undersigned hereby certifies by checking the appropriate boxes in
(1) and (2) that:

        (1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not
beneficially owned by an Acquiring Person or an Affiliate or an Associate
thereof (as defined in the Rights Agreement); and

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

                                            Dated
                                                 -------------------------------

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

                                            Signature Guaranteed:

                                      A-7
<PAGE>   48

                                     NOTICE

        The signature in the foregoing Election to Purchase and Certificate 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.

        Signatures must be guaranteed by an approved eligible financial
institution acceptable to the Rights Agent in its sole discretion or by a
participant in the Securities Transfer Agents Medallion Program, the Stock
Exchange Medallion Program or the New York Stock Exchange Medallion Program.

        In the event the certification set forth above is not completed, the
Company will deem the beneficial owner of the Rights evidenced by this Rights
Certificate to be an Acquiring Person or an Affiliate or Associate thereof (as
defined in the Rights Agreement) and, in the case of an Assignment, will affix a
legend to that effect on any Rights Certificates issued in exchange for this
Rights Certificate.

                                      A-8
<PAGE>   49

                                                                       EXHIBIT B
                                                             TO RIGHTS AGREEMENT

                           UNDER CERTAIN CIRCUMSTANCES
                      (SPECIFIED IN THE RIGHTS AGREEMENT),
                 RIGHTS BENEFICIALLY OWNED BY ACQUIRING PERSONS
                      (AS DEFINED IN THE RIGHTS AGREEMENT)
                     OR ANY SUBSEQUENT HOLDER OF SUCH RIGHTS
                            MAY BECOME NULL AND VOID.

                  SUMMARY OF RIGHTS TO PURCHASE PREFERRED STOCK

        On January 7, 2000, the Board of Directors of Organic, Inc. (the
"Company") authorized and declared a dividend distribution of one Right for each
outstanding share of its Common Stock, par value $.0001 per share (the "Company
Common Stock"), to stockholders of record at the close of business on February
9, 2000 (the "Record Date"), and authorized the issuance of one Right with each
share of Company Common Stock issued (including shares distributed from
Treasury) by the Company thereafter between the Record Date and the Distribution
Date (as defined below). Each Right entitles the registered holder, subject to
the terms of the Rights Agreement (as defined below), to purchase from the
Company one one-hundredth of a share (a "Unit") of Series C Preferred Stock, par
value $.0001 per share (the "Preferred Stock"), at a purchase price of $300 per
Unit, subject to adjustment. The purchase price is payable in cash or by
certified or bank check or money order payable to the order of the Company. The
description and terms of the Rights are set forth in a Rights Agreement between
the Company and EquiServe Trust Company, N.A., as Rights Agent, dated as of
February 9, 2000, as amended from time to time (the "Rights Agreement").

        A copy of the Rights Agreement, with related exhibits including the
Certificate of Designation, has been filed with the Securities and Exchange
Commission as an exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1999. Copies of the Rights Agreement and the
Certificate of Designation are available free of charge from the Company. This
summary description of the Rights and the Preferred Stock does not purport to be
complete and is qualified in its entirety by reference to all of the provisions
of the Rights Agreement and the Certificate of Designation, including the
definitions therein of certain terms, which Rights Agreement and Certificate of
Designation are incorporated herein by reference.

        The Rights Agreement

        Initially, the Rights will attach to all certificates representing
shares of outstanding Company Common Stock, and no separate Rights Certificates
will be distributed. The Rights will separate from the Company Common Stock and
the "Distribution Date" will occur upon the earlier of (i) ten business days
following a public announcement (the date of such announcement being the "Stock
Acquisition Date") that a person or group of affiliated or associated persons
has acquired or otherwise obtained beneficial ownership

                                      B-1
<PAGE>   50

of 15% or more of the then outstanding shares of Company Common Stock (an
"Acquiring Person"), and (ii) ten business days (or such later date as may be
determined by action of the Board of Directors prior to such time as any person
becomes an Acquiring Person) following the commencement of a tender offer or
exchange offer that would result in a person or group beneficially owning 15% or
more of the then outstanding shares of Company Common Stock. Until the
Distribution Date, (i) the Rights will be evidenced by Company Common Stock
certificates and will be transferred with and only with such Company Common
Stock certificates, (ii) new Company Common Stock certificates issued after the
Record Date (also including shares distributed from Treasury) will contain a
notation incorporating the Rights Agreement by reference and (iii) the surrender
for transfer of any certificates representing outstanding Company Common Stock
will also constitute the transfer of the Rights associated with the Company
Common Stock represented by such certificates.

        An "Acquiring Person" does not include: (A) the Company; (B) any
Subsidiary of the Company; (C) any employee benefit plan maintained by the
Company or any of its Subsidiaries; (D) any trustee or fiduciary with respect to
such employee benefit plan acting in such capacity or a trustee or fiduciary
holding shares of Company Common Stock for the purpose of funding any such plan
or employee benefits; (E) Organic Holdings, Inc./Omnicom Group Inc.
("Holdings/Omnicom"), not including any of its transferees or assignees, but
only so long as (x) Holdings/Omnicom is not required to report such ownership on
Schedule 13(D) under the Exchange Act (or any comparable or successor report),
and (y) Holdings/Omnicom's Beneficial Ownership of the shares of Company Common
Stock does not exceed the sum of Holdings/Omnicom's Beneficial Ownership of
Company Common Stock on the date of this Agreement plus 1% of the shares of
Company Common Stock outstanding on such date; (F) any Person if the Board of
Directors of the Company determines in good faith that such Person who would
otherwise be an "Acquiring Person" became such inadvertently (including, without
limitation, because (x) such Person was unaware that it beneficially owned a
percentage of Company Common Stock that would otherwise cause such Person to be
an "Acquiring Person" or (y) such Person was aware of the extent of its
Beneficial Ownership of Company Common Stock but had no actual knowledge of the
consequences of such Beneficial Ownership under this Agreement) and without any
intention of changing or influencing control of the Company, and if such Person
does not acquire any additional shares of Company Common Stock and as promptly
as practicable divested or divests itself of Beneficial Ownership of a
sufficient number of shares of Company Common Stock so that such Person would no
longer be an "Acquiring Person;" or (G) any Person who becomes the Beneficial
Owner of 15% or more of the then outstanding shares of Company Common Stock as a
result of the acquisition of shares of Company Common Stock directly from the
Company in one or more transactions approved by a majority of the Board of
Directors, and (ii) no Person shall be deemed an "Acquiring Person" as a result
of the acquisition of shares of Company Common Stock by the Company which, by
reducing the number of shares of Company Common Stock outstanding, increases the
proportional number of shares beneficially owned by such Person; provided,
however, that if (A) a Person would become an Acquiring Person (but for the
operation of this

                                      B-2
<PAGE>   51

subclause (ii)) as a result of the acquisition of shares of Company Common Stock
by the Company and (B) after such share acquisition by the Company, such Person
becomes the Beneficial Owner of any additional shares of Company Common Stock,
then such Person shall be deemed an Acquiring Person unless upon becoming the
Beneficial Owner of such additional shares such Person is the Beneficial Owner
of less than 15% of the then outstanding shares of Company Common Stock.

        The Rights are not exercisable until the Distribution Date and will
expire at the close of business on the tenth anniversary of the Rights Agreement
unless earlier redeemed or exchanged by the Company as described below. Under
certain circumstances the exercisability of the Rights may be suspended. In no
event, however, will the Rights be exercisable prior to the expiration of the
period in which the Rights may be redeemed.

        As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of Company Common Stock as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights.

        In the event that a person becomes an Acquiring Person, then, in such
case, each holder of a Right will thereafter have the right to receive, upon
exercise, shares of Company Common Stock (or, in certain circumstances, cash,
property or other securities of the Company) having a value equal to two times
the exercise price of the Right. The exercise price is the purchase price
multiplied by the number of Units of Preferred Stock issuable upon exercise of a
Right prior to the event described in this paragraph. Notwithstanding any of the
foregoing, following the occurrence of the event set forth in this paragraph,
all Rights that are, or (under certain circumstances specified in the Rights
Agreement) were, beneficially owned by any Acquiring Person will be null and
void.

        In the event that, at any time following the date that any person
becomes an Acquiring Person, (i) the Company is acquired in a merger or other
business combination transaction and the Company is not the surviving
corporation, (ii) any person merges with the Company and all or part of the
Company Common Stock is converted or exchanged for securities, cash or property
of the Company or any other person or (iii) 50% or more of the Company's assets
or earning power is sold or transferred, each holder of a Right (except Rights
which previously have been voided as described above) shall thereafter have the
right to receive, upon exercise, common stock of the Acquiring Person having a
value equal to two times the exercise price of the Right.

        The purchase price payable, and the number of Units of Preferred Stock
issuable, upon exercise of the Rights are subject to adjustment from time to
time to prevent dilution (i) in the event of a stock dividend on, or a
subdivision, combination or reclassification of, the Preferred Stock, (ii) if
holders of the Preferred Stock are granted certain rights or warrants to
subscribe for Preferred Stock or convertible securities at less than the current
market price of the Preferred Stock, or (iii) upon the distribution to the
holders of the Preferred Stock of evidences of indebtedness, cash or assets
(excluding

                                      B-3
<PAGE>   52

regular quarterly cash dividends) or of subscription rights or warrants (other
than those referred to above).

        With certain exceptions, no adjustment in the purchase price will be
required until cumulative adjustments amount to at least 1% of the purchase
price. The Company is not required to issue fractional shares of Preferred Stock
(other than fractions which are integral multiples of one one-hundredth of a
share of Preferred Stock which may be evidenced by depositary receipts). In lieu
thereof, an adjustment in cash may be made based on the current market price of
a share of Preferred Stock on the day of exercise.

        At any time until the earlier of (i) the tenth business day following
the Stock Acquisition Date (as such time period may be extended pursuant to the
Rights Agreement), other than a Stock Acquisition Date that occurs as a result
of a Qualifying Offer and (ii) the Final Expiration Date, a majority of the
Board of Directors (including, following the date on which there is an Acquiring
Person, the majority of the Independent Directors) may redeem the Rights in
whole, but not in part, at a price of $.01 per Right (subject to adjustment in
certain events) (the "Redemption Price") payable, at the election of the
majority of the Board of Directors (including a majority of the Independent
Directors), in cash or shares of Company Common Stock. Immediately upon the
action of a majority of the Board of Directors (including, following the date on
which there is an Acquiring Person, a majority of the Independent Directors)
ordering the redemption of the Rights, the Rights will terminate and the only
right of the holders of Rights will be to receive the Redemption Price.

        The Company may at any time after there is an Acquiring Person, by
action of a majority of the Board of Directors (including a majority of the
Independent Directors), exchange all or part of the then outstanding and
exercisable Rights (other than Rights that shall have become null and void) for
shares of Company Common Stock pursuant to a one-for-one exchange ratio, as
adjusted.

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

        Any of the provisions of the Rights Agreement may be amended without the
approval of the holders of Company Common Stock at any time prior to the
Distribution Date. After the Distribution Date, the provisions of the Rights
Agreement may be amended in order to cure any ambiguity, defect or
inconsistency, to make changes which do not adversely affect the interests of
holders of Rights (excluding the interests of any Acquiring Person), or to
shorten or lengthen any time period under the Rights Agreement; provided,
however, that no amendment to adjust (i) the time period governing redemption
shall be made at such time as the Rights are not redeemable or (ii) any other
time period unless such lengthening is for the purpose of protecting, enhancing
or clarifying the

                                      B-4
<PAGE>   53

Rights of and/or benefiting, the holders of Rights. In addition, after a person
becomes an Acquiring Person, no amendment or supplement may be made without the
approval of a majority of the Board of Directors (including a majority of the
Independent Directors).

        Description of Preferred Stock

        The Units of Preferred Stock that may be acquired upon exercise of the
Rights will be nonredeemable and subordinate to any other shares of preferred
stock that may be issued by the Company.

        Each Unit of Preferred Stock will have a minimum preferential quarterly
dividend of $.01 per Unit or any higher per share dividend declared on the
Company Common Stock.

        In the event of liquidation, the holder of a Unit of Preferred Stock
will receive a preferred liquidation payment equal to the greater of $.01 per
Unit and the per share amount paid in respect of a share of the Company Common
Stock.

        Each Unit of Preferred Stock will have one vote, voting together with
the Company Common Stock.

        In the event of any merger, consolidation or other transaction in which
shares of Company Common Stock are exchanged, each Unit of Preferred Stock will
be entitled to receive the per share amount paid in respect of each share of
Company Common Stock.

        The rights of holders of the Preferred Stock with respect to dividends,
liquidation and voting, and in the event of mergers and consolidations, are
protected by customary antidilution provisions.

        Because of the nature of the Preferred Stock's dividend, liquidation and
voting rights, the economic value of one Unit of Preferred Stock that may be
acquired upon the exercise of each Right should approximate the economic value
of one share of Company Common Stock.

                                      B-5
<PAGE>   54

                                                                       EXHIBIT C
                                                             TO RIGHTS AGREEMENT

                                  ORGANIC, INC.
                           CERTIFICATE OF DESIGNATION
                                     OF THE
                            SERIES C PREFERRED STOCK

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

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

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

        The undersigned officers of Organic, Inc., a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"Corporation"), in accordance with the provisions of Section 103 thereof, DO
HEREBY CERTIFY:

        That, pursuant to the authority conferred upon the Board of Directors of
the Corporation by its Restated Certificate of Incorporation (the
"Certificate"), the said Board of Directors, at a duly called meeting held on
January 7, 2000, at which a quorum was present and acted throughout, adopted the
following resolution, which resolution remains in full force and effect on the
date hereof creating a series of 3,000,000 shares of Preferred Stock having a
par value of $.0001 per share, designated as Series C Preferred Stock (the
"Series C Preferred Stock") out of the class of 25,000,000 shares of preferred
stock of the par value of $.0001 per share (the "Preferred Stock"):

        RESOLVED, that pursuant to the authority vested in the Board of
Directors in accordance with the provisions of its Certificate, the Board of
Directors does hereby create, authorize and provide for 3,000,000 shares of its
authorized Preferred Stock to be designated and issued as the Series C Preferred
Stock, having the voting powers, designation, relative, participating, optional
and other special rights, preferences and qualifications, limitations and
restrictions that are set forth as follows:

        1. Dividends and Distributions. (A) Subject to the prior and superior
rights of the holders of any shares of any other series of Preferred Stock or
any other shares of stock of the Corporation ranking prior and superior to the
shares of Series C Preferred Stock with respect to dividends, each holder of one
one-hundredth (1/100) of a share (a "Unit") of Series C Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors out of
funds legally available for that purpose, (i) quarterly dividends payable in
cash on the last day of February, May, August and November in each year (each
such date being a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of such Unit of Series
C Preferred Stock, in an amount per Unit (rounded to the nearest cent) equal to
the greater of (a) $0.01 or (b) subject to the provision for adjustment
hereinafter set forth, the aggregate per share amount of all cash dividends
declared on shares of the Common Stock since the immediately preceding Quarterly
Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment
Date, since the first issuance of a Unit of Series C Preferred

                                      C-1
<PAGE>   55

Stock, and (ii) subject to the provision for adjustment hereinafter set forth,
quarterly distributions (payable in kind) on each Quarterly Dividend Payment
Date in an amount per Unit equal to the aggregate per share amount of all
non-cash dividends or other distributions (other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares of Common
Stock, by reclassification or otherwise) declared on shares of Common Stock
since the immediately preceding Quarterly Dividend Payment Date, or with respect
to the first Quarterly Dividend Payment Date, since the first issuance of a Unit
of Series C Preferred Stock. In the event that the Corporation shall at any time
after February 9, 2000 (the "Rights Declaration Date") (i) declare any dividend
on outstanding shares of Common Stock payable in shares of Common Stock, (ii)
subdivide outstanding shares of Common Stock or (iii) combine outstanding shares
of Common Stock into a smaller number of shares, then in each such case the
amount to which the holder of a Unit of Series C Preferred Stock was entitled
immediately prior to such event under clause (b) of the preceding sentence shall
be adjusted by multiplying such amount by a fraction the numerator of which
shall be the number of shares of Common Stock that are outstanding immediately
after such event and the denominator of which shall be the number of shares of
Common Stock that were outstanding immediately prior to such event.

        (B) The Corporation shall declare a dividend or distribution on Units of
Series C Preferred Stock as provided in paragraph (A) above immediately after it
declares a dividend or distribution on the shares of Common Stock (other than a
dividend payable in shares of Common Stock); provided, however, that, in the
event no dividend or distribution shall have been declared on the Common Stock
during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $0.01 per Unit on the
Series C Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.

        (C) Dividends shall begin to accrue and shall be cumulative on each
outstanding Unit of Series C Preferred Stock from the Quarterly Dividend Payment
Date next preceding the date of issuance of such Unit of Series C Preferred
Stock, unless the date of issuance of such Unit is prior to the record date for
the first Quarterly Dividend Payment Date, in which case, dividends on such Unit
shall begin to accrue from the date of issuance of such Unit, or unless the date
of issuance is a Quarterly Dividend Payment Date or is a date after the record
date for the determination of holders of Units of Series C Preferred Stock
entitled to receive a quarterly dividend and before such Quarterly Dividend
Payment Date, in either of which events such dividends shall begin to accrue and
be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on Units of Series C Preferred
Stock in an amount less than the aggregate amount of all such dividends at the
time accrued and payable on such Units shall be allocated pro rata on a
unit-by-unit basis among all Units of Series C Preferred Stock at the time
outstanding. The Board of Directors may fix a record date for the determination
of holders of Units of Series C Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date shall be no more
than thirty (30) days prior to the date fixed for the payment thereof.

        2. Voting Rights. The holders of Units of Series C Preferred Stock shall
have the following voting rights:

                                      C-2
<PAGE>   56

        (A) Subject to the provision for adjustment hereinafter set forth, each
Unit of Series C Preferred Stock shall entitle the holder thereof to one vote on
all matters submitted to a vote of the stockholders of the Corporation. In the
event the Corporation shall at any time after the Rights Declaration Date (i)
declare any dividend on outstanding shares of Common Stock payable in shares of
Common Stock, (ii) subdivide outstanding shares of Common Stock or (iii) combine
the outstanding shares of Common Stock into a smaller number of shares, then in
each such case the number of votes per Unit to which holders of Units of Series
C Preferred Stock were entitled immediately prior to such event shall be
adjusted by multiplying such number by a fraction the numerator of which shall
be the number of shares of Common Stock outstanding immediately after such event
and the denominator of which shall be the number of shares of Common Stock that
were outstanding immediately prior to such event; and

        (B) Except as otherwise provided herein, in the Certificate or the
Bylaws of the Corporation or as required by law, the holders of Units of Series
C Preferred Stock and the holders of shares of Common Stock shall vote together
as one class on all matters submitted to a vote of stockholders of the
Corporation, and such holders shall have no special voting rights and their
consents shall not be required for taking any corporate action.

        3. Certain Restrictions. (A) Whenever quarterly dividends or other
dividends or distributions payable on Units of Series C Preferred Stock as
provided herein are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on outstanding Units of
Series C Preferred Stock shall have been paid in full, the Corporation shall not
(i) declare or pay dividends on, make any other distributions on, or redeem or
purchase or otherwise acquire for consideration any shares of junior stock; (ii)
declare or pay dividends on or make any other distributions on any shares of
parity stock, except dividends paid ratably on Units of Series C Preferred Stock
and shares of all such parity stock on which dividends are payable or in arrears
in proportion to the total amounts to which the holders of such Units and all
such shares are then entitled; (iii) redeem or purchase or otherwise acquire for
consideration shares of any parity stock, provided, however, that the
Corporation may at any time redeem, purchase or otherwise acquire shares of any
such parity stock in exchange for shares of any junior stock; (iv) purchase or
otherwise acquire for consideration any Units of Series C Preferred Stock,
except in accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such Units.

        (B) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 3,
purchase or otherwise acquire such shares at such time and in such manner.

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

                                      C-3
<PAGE>   57

        5. Liquidation, Dissolution or Winding Up. (A) Upon any voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, no
distribution shall be made (i) to the holders of shares of junior stock unless
the holders of Units of Series C Preferred Stock shall have received, subject to
adjustment as hereinafter provided in paragraph (B), the greater of either (a)
$0.01 per Unit plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not earned or declared, to the date of such
payment, or (b) the amount equal to the aggregate per share amount to be
distributed to holders of shares of Common Stock, or (ii) to the holders of
shares of parity stock, unless simultaneously therewith distributions are made
ratably on Units of Series C Preferred Stock and all other shares of such parity
stock in proportion to the total amounts to which the holders of Units of Series
C Preferred Stock are entitled under clause (i)(a) of this sentence and to which
the holders of shares of such parity stock are entitled, in each case upon such
liquidation, dissolution or winding up.

        (B) In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on outstanding shares of Common Stock
payable in shares of Common Stock, (ii) subdivide outstanding shares of Common
Stock, or (iii) combine outstanding shares of Common Stock into a smaller number
of shares, then in each such case the aggregate amount to which holders of Units
of Series C Preferred Stock were entitled immediately prior to such event
pursuant to clause (i)(b) of paragraph (A) of this Section 5 shall be adjusted
by multiplying such amount by a fraction the numerator of which shall be the
number of shares of Common Stock that are outstanding immediately after such
event and the denominator of which shall be the number of shares of Common Stock
that were outstanding immediately prior to such event.

        6. Consolidation, Merger, etc. In case the Corporation shall enter into
any consolidation, merger, combination or other transaction in which the shares
of Common Stock are exchanged for or converted into other stock or securities,
cash and/or any other property, then in any such case Units of Series C
Preferred Stock shall at the same time be similarly exchanged for or converted
into an amount per Unit (subject to the provision for adjustment hereinafter set
forth) equal to the aggregate amount of stock, securities, cash and/or any other
property (payable in kind), as the case may be, into which or for which each
share of Common Stock is converted or exchanged. In the event the Corporation
shall at any time after the Rights Declaration Date (i) declare any dividend on
outstanding shares of Common Stock payable in shares of Common Stock, (ii)
subdivide outstanding shares of Common Stock, or (iii) combine outstanding
Common Stock into a smaller number of shares, then in each such case the amount
set forth in the immediately preceding sentence with respect to the exchange or
conversion of Units of Series C Preferred Stock shall be adjusted by multiplying
such amount by a fraction the numerator of which shall be the number of shares
of Common Stock that are outstanding immediately after such event and the
denominator of which shall be the number of shares of Common Stock that were
outstanding immediately prior to such event.

        7. Redemption. The Units of Series C Preferred Stock and shares of
Series C Preferred Stock shall not be redeemable.

        8. Ranking. The Units of Series C Preferred Stock and shares of Series C
Preferred Stock shall rank junior to all other series of the Preferred Stock and
to any other class of Preferred

                                      C-4
<PAGE>   58

Stock that hereafter may be issued by the Corporation as to the payment of
dividends and the distribution of assets, unless the terms of any such series or
class shall provide otherwise.

        9. Fractional Shares. The Series C Preferred Stock may be issued in
Units or other fractions of a share, which Units or fractions shall entitle the
holder, in proportion to such holder's units or fractional shares, to exercise
voting rights, receive dividends, participate in distributions and to have the
benefit of all other rights of holders of Series C Preferred Stock.

        10. Certain Definitions. As used in this resolution with respect to the
Series C Preferred Stock, the following terms shall have the following meanings:

        (A) The term "Common Stock" shall mean the class of stock designated as
the common stock, par value $.0001 per share, of the Corporation at the date
hereof or any other class of stock resulting from successive changes or
reclassification of the common stock.

        (B) The term "junior stock" (i) as used in Section 3 shall mean the
Common Stock and any other class or series of capital stock of the Corporation
hereafter authorized or issued over which the Series C Preferred Stock has
preference or priority as to the payment of dividends and (ii) as used in
Section 5, shall mean the Common Stock and any other class or series of capital
stock of the Corporation over which the Series C Preferred Stock has preference
or priority in the distribution of assets on any liquidation, dissolution or
winding up of the Corporation.

        (C) The term "parity stock" (i) as used in Section 3 shall mean any
class or series of stock of the Corporation hereafter authorized or issued
ranking pari passu with the Series C Preferred Stock as to dividends and (ii) as
used in Section 5, shall mean any class or series of capital stock ranking pari
passu with the Series C Preferred Stock in the distribution of assets on any
liquidation, dissolution or winding up.

                                      C-5
<PAGE>   59

        IN WITNESS WHEREOF, Organic, Inc. has caused this Certificate to be
signed by its Chairman and Chief Executive Officer and its Chief Legal and
Administrative Officer and Secretary this __ day of __________, 2000.

                                            ORGANIC, INC.

                                            By:
                                               ---------------------------------
                                               Name:  Jonathan Nelson
                                               Title: Chairman and Chief
                                                      Executive Officer

                                            By:
                                               ---------------------------------
                                               Name:  Margaret Maxwell Zagel
                                               Title: Chief Legal and
                                                      Administrative Officer and
                                                      Secretary

                                      C-6<PAGE>   1
                                                                  EXHIBIT 4(i).1

                                  SAFEWAY INC.
                       FIRST AMENDMENT TO CREDIT AGREEMENT
                           DATED AS OF MARCH 19, 1999

               This FIRST AMENDMENT TO CREDIT AGREEMENT dated as of March 19,
1999 (this "FIRST AMENDMENT") to the Credit Agreement dated as of April 8, 1997
(as amended, the "CREDIT AGREEMENT"), is by and among Safeway Inc., a Delaware
corporation ("COMPANY"), The Vons Companies, Inc. ("VONS" and together with
Company, the "DOMESTIC BORROWERS"), Canada Safeway Limited (together with the
Domestic Borrowers, the "BORROWERS"), the financial institutions named on the
signature pages hereof ("LENDERS"), Bankers Trust Company ("BTCO"), as
Administrative Agent for Lenders ("ADMINISTRATIVE AGENT"), The Chase Manhattan
Bank, as Syndication Agent, and The Bank of Nova Scotia and Bank of America
National Trust and Savings Association, as Documentation Agents. Capitalized
terms used herein without definition shall have the same meanings herein as set
forth in the Credit Agreement.

                                    RECITALS

               WHEREAS, Domestic Borrowers have requested that the Tranche B
Domestic Commitment be increased from $880,666,667 to $1,000,000,000;

               WHEREAS, Tranche B Domestic Lenders have agreed to make Tranche B
Domestic Loans to the Domestic Borrowers in an amount equal to their respective
Tranche B Domestic Commitments set forth on Schedule 1 annexed hereto;

               WHEREAS, Domestic Borrowers have agreed to pay to the Tranche B
Domestic Lenders, a utilization fee in connection with any utilized Tranche B
Domestic Commitments under the Credit Agreement; and

               WHEREAS, the Borrowers and Lenders have agreed, subject to the
terms and conditions of this First Amendment, to restate subsection 9.4(i) of
the Credit Agreement to clarify the intent of such provision to allow for the
merger of other Persons with and into the Company or its Wholly-Owned
Subsidiaries as provided therein and to make certain other modifications to the
Credit Agreement as set forth herein.

                                    AGREEMENT

               NOW, THEREFORE, in consideration of the terms and conditions
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

<PAGE>   2

                                    SECTION 1
               EXTENSION OF TRANCHE B REVOLVING TERMINATION DATE.

               Pursuant to subsection 2.8 of the Credit Agreement, each Tranche
B Domestic Lender by execution of a counterpart hereof agrees that the Tranche B
Revolving Termination Date (which date is currently April 5, 1999) is hereby
extended for an additional 364 days.

                                   SECTION 2.
                   INCREASE IN TRANCHE B DOMESTIC COMMITMENT.

               Subject to the terms and conditions of the Credit Agreement
(including subsection 2.1A(iii) thereof), each Domestic Lender listed on
Schedule 1 annexed hereto severally agrees to lend Domestic Borrowers from time
to time during the period from the First Amendment Effective Date to such
Lender's Tranche B Revolving Termination Date an aggregate amount, not exceeding
such Lender's Tranche B Domestic Pro Rata Share of the aggregate amount of the
Tranche B Domestic Commitments. The portion of Schedule 2.1 of the Credit
Agreement relating to the Tranche B Domestic Commitments of Domestic Lenders is
hereby amended and restated in the form attached hereto as Schedule 1.

                                   SECTION 3.
                       AMENDMENT TO THE CREDIT AGREEMENT.

               A. UTILIZATION FEE. Subsection 2.3 of the Credit Agreement is
hereby amended to add paragraph D, which shall read as follows:

                     "D. UTILIZATION FEE. The Domestic Borrowers shall pay to
       the Agent for distribution to each Tranche B Domestic Lender as provided
       herein, a utilization fee based on the actual daily aggregate principal
       amount of Tranche B Domestic Loans then outstanding hereunder with
       respect to each day on which the principal amount of all Tranche B
       Domestic Loans outstanding exceeds 35% of the Tranche B Domestic
       Commitments as of the First Amendment Effective Date. The amount of the
       utilization fee will equal 0.25% per annum of outstanding Tranche B
       Domestic Loans during each day on which outstanding Tranche B Domestic
       Loans exceeds 35% of the aggregate Tranche B Domestic Commitments as of
       the First Amendment Effective Date and shall be increased to 0.50% per
       annum of outstanding Tranche B Domestic Loans during each day on which
       outstanding Tranche B Domestic Loans exceed 70% of the aggregate Tranche
       B Domestic Commitments as of the First Amendment Effective Date. The
       utilization fee shall be payable to each Tranche B Domestic Lender in
       proportion to such Lender's Tranche B Domestic Pro Rata Share for the
       period from and including the First Amendment Effective Date to and
       excluding such Lender's Tranche B Revolving Termination Date. In the
       event that any Lender's Tranche B Domestic Loans remain outstanding
       beyond such Lender's Tranche B Revolving Termination Date, a utilization
       fee of 0.50% per annum shall be payable to such Lender based on the
       actual daily aggregate principal amount of such loans outstanding for the
       period from and including

                                       2
<PAGE>   3

       such Lender's Tranche B Revolving Termination Date, to and excluding such
       Lender's Tranche B Term Termination Date. In the event any Tranche B
       Domestic Loans remain outstanding beyond any Lender's Tranche B Term
       Termination Date, the utilization fees described in the previous sentence
       shall continue to accrue on such Loans and be due and payable as
       described in this subsection 2.3D. All such utilization fees described in
       this subsection 2.3D are to be payable quarterly in arrears on each
       Quarterly Payment Date, commencing on the first such date to occur after
       the First Amendment Effective Date, and on each Tranche B Domestic
       Lender's Tranche B Revolving Termination Date and Tranche B Term
       Termination Date, as the case may be."

               B. DEFINITIONS. Subsection 1.1 of the Credit Agreement is hereby
amended to include the following definitions:

               "FIRST AMENDMENT" means the First Amendment to the Agreement
        dated as of March 19, 1999 by and among Borrowers, the financial
        institutions party thereto, BTCo, as Administrative Agent for Lenders,
        Chase, as Syndication Agent, Scotiabank and BofA, as Documentation
        Agents.

               "FIRST AMENDMENT EFFECTIVE DATE" means the date on which the
        First Amendment became effective in accordance with its terms.

               "TRANCHE B DOMESTIC LENDER" means any Domestic Lender having a
        Tranche B Domestic Commitment.

               C. RESTRICTION ON FUNDAMENTAL CHANGES; MATERIAL ASSET SALES.
Subsection 9.4 of the Credit Agreement is hereby amended by deleting paragraph
(i) in its entirety and substituting the following in place thereof:

                      "(i) any Subsidiary of Company or any other Person may be
        merged or amalgamated with or into Company or any Wholly-Owned
        Subsidiary of Company, or be liquidated, wound up or dissolved into, or
        all or any part of its business, property or assets may be conveyed,
        sold, leased, transferred or otherwise disposed of, in one transaction
        or a series of transactions, to Company or any Wholly-Owned Subsidiary
        of Company; provided that, (a) in the case of any such merger involving
        Company, Company shall be the surviving corporation, (b) in the case of
        such a merger involving Vons or Canada Safeway but not covered by clause
        (a), Vons or Canada Safeway, as the case may be, shall be the surviving
        corporation and shall, after giving effect to such merger, be a
        Wholly-Owned Subsidiary of Company, and (c) in the case of such a merger
        involving a Wholly-Owned Subsidiary and not covered by either clause (a)
        or clause (b) above, the surviving corporation shall be a Wholly-Owned
        Subsidiary of Company; and"

                                       3
<PAGE>   4

                                   SECTION 4.
                         REPRESENTATIONS AND WARRANTIES.

               In order to induce Lenders to enter into this First Amendment and
to amend the Credit Agreement in the manner provided herein, Borrowers represent
and warrant to each Lender as of the date hereof, as of the First Amendment
Effective Date that the following statements are true, correct and complete:

               A. CORPORATE POWER AND AUTHORITY. Borrowers have all requisite
corporate power and authority to enter into this First Amendment and to carry
out the transactions contemplated by, and perform its obligations under, the
Credit Agreement.

               B. AUTHORIZATION OF AGREEMENTS. The execution and delivery of
this First Amendment and the performance of the Credit Agreement have been duly
authorized by all necessary corporate action on the part of the Borrowers.

               C. NO CONFLICT. The execution and delivery by Borrowers of this
First Amendment and the performance by Borrowers of the Credit Agreement do not
and will not (i) violate any provision of any law or any governmental rule or
regulation applicable to Borrowers or any Subsidiary, the Certificate or
Articles of Incorporation or Bylaws of Borrowers or any Subsidiary or any order,
judgment or decree of any court or other agency of government binding on
Borrowers or any Subsidiary, (ii) conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any
Contractual Obligation of Borrowers or any Subsidiary, (iii) result in or
require the creation or imposition of any Lien upon any of the properties or
assets of Borrowers or any Subsidiary (other than Liens created under any of the
Loan Documents in favor of Administrative Agent on behalf of Lenders), or (iv)
require any approval of stockholders or any approval or consent of any Person
under any Contractual Obligation of Borrowers or any Subsidiary, except for such
approvals which will be obtained on or before the First Amendment Effective Date
and disclosed in writing to Lenders.

               D. GOVERNMENTAL CONSENTS. The execution and delivery by Borrowers
of this First Amendment and the performance by Borrowers of the Credit Agreement
do not and will not require any registration with, consent or approval of, or
notice to, or other action to, with or by, any federal, state or other
governmental authority or regulatory body.

               E. BINDING OBLIGATION. This First Amendment has been duly
executed and delivered by Borrowers and, when executed and delivered, this First
Amendment and the Credit Agreement will be the legally valid and binding
obligations of Borrowers, enforceable against Borrowers in accordance with their
respective terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting creditors'
rights generally or by equitable principles relating to enforceability.

               F. INCORPORATION OF REPRESENTATIONS AND WARRANTIES FROM CREDIT
AGREEMENT. The representations and warranties contained in Section 7 of the
Credit Agreement are and will be true, correct and complete in all material
respects to the same extent as though

                                       4
<PAGE>   5

made on and as of that date, except to the extent such representations and
warranties specifically relate to an earlier date, in which case they were true,
correct and complete in all material respects on and as of such earlier date.

               G. ABSENCE OF DEFAULT. No event has occurred and is continuing or
will result from the consummation of the transactions contemplated by this First
Amendment that would constitute an Event of Default or a Potential Event of
Default.

                                   SECTION 5.
                          CONDITIONS TO EFFECTIVENESS.

               This First Amendment shall become effective only on or after
April 5, 1999 and only upon the satisfaction of all of the following conditions
precedent, in form and substance satisfactory to Administrative Agent (the
"FIRST AMENDMENT EFFECTIVE DATE"):

               (i) On or before the First Amendment Effective Date, the
               Borrowers shall have delivered to the Administrative Agent
               resolutions of the Board of Directors of each Borrower
               authorizing and approving the execution, delivery and performance
               of this First Amendment, in each case certified by the corporate
               secretary or an assistant secretary of such Borrower, as the case
               may be, as of the First Amendment Effective Date;

               (ii) On or before the First Amendment Effective Date, the
               Borrowers shall have delivered to the Administrative Agent a
               certificate of the corporate secretary or an assistant secretary
               of each Borrower which shall certify, as of the First Amendment
               Effective Date, the names and offices of the officers of each
               Borrower authorized to sign this First Amendment;

               (iii) On or before the First Amendment Effective Date, the
               Borrowers shall have delivered to the Administrative Agent a
               counterpart hereof executed by a duly authorized officer of each
               Borrower, Requisite Lenders and each Tranche B Domestic Lender;

               (iv) On or before the First Amendment Effective Date, the
               Domestic Borrowers shall have paid (a) to each Tranche B
               Domestic Lender that has offered a Tranche B Domestic
               Commitment of $75 million or more an upfront fee of (i) 0.10%
               of its allocated Tranche B Domestic Commitment to the extent
               that its allocated Tranche B Domestic Commitment is greater
               than $75 million and (ii) an upfront fee of 0.08% of its
               allocated Tranche B Domestic Commitment to the extent that
               such allocated Tranche B Domestic Commitment is less than or
               equal to $75 million, (b) to each Tranche B Domestic Lender
               that has offered a Tranche B Domestic Commitment of at least
               $45 million but less than $75 million an upfront fee of 0.06%
               of its allocated Tranche B Domestic Commitment and (c) to each
               Tranche B Domestic Lender that has offered a Tranche B
               Domestic

                                       5
<PAGE>   6

               Commitment of less than $45 million an upfront fee of 0.04% of
               its allocated Tranche B Domestic Commitment.

                                   SECTION 6.
                            LIMITATION OF AMENDMENTS.

               Without limiting the generality of the provisions of subsection
13.7 of the Credit Agreement, the consent and the amendments set forth above
shall be limited precisely by their terms, shall not have any force or effect
with respect to any other matter except as expressly provided above, and nothing
in this First Amendment shall be deemed to:

               (i) constitute a waiver or modification of any other term,
               provision or condition of the Credit Agreement or any other
               instrument or agreement referred to therein; or

               (ii) prejudice any right or remedy that Administrative Agent or
               any Lender may now have (except to the extent such right or
               remedy was based upon existing defaults that will not exist after
               giving effect to this First Amendment) or may have in the future
               under or in connection with the Credit Agreement or any other
               instrument or agreement referred to therein.

               Except as expressly set forth herein, the terms, provisions and
conditions of the Credit Agreement and the other Loan Documents shall remain in
full force and effect and in all other respects are hereby ratified and
confirmed.

                                   SECTION 7.
                                 MISCELLANEOUS.

               A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE LOAN
DOCUMENTS.

               (i) On and after the First Amendment Effective Date, each
               reference in the Credit Agreement to "this Agreement",
               "hereunder", "hereof", "herein" or words of like import referring
               to the Credit Agreement, and each reference in the other Loan
               Documents to the "Credit Agreement", "thereunder", "thereof" or
               words of like import referring to the Credit Agreement shall mean
               and be a reference to the Credit Agreement, as amended by this
               First Amendment.

               (ii) Except as specifically amended by this First Amendment, the
               Credit Agreement and the other Loan Documents shall remain in
               full force and effect and are hereby ratified and confirmed.

               (iii) The execution, delivery and performance of this First
               Amendment shall not, except as expressly provided herein,
               constitute a waiver of any provision of,

                                       6
<PAGE>   7

               or operate as a waiver of any right, power or remedy of Agent or
               any Lender under, the Credit Agreement or any of the other Loan
               Documents.

               B. FEES AND EXPENSES. Borrowers acknowledge that all costs, fees
and expenses as described in subsection 13.2 of the Credit Agreement incurred by
Administrative Agent and its counsel with respect to this First Amendment and
the documents and transactions contemplated hereby shall be for the account of
Borrowers.

               C. HEADINGS. Section and subsection headings in this First
Amendment are included herein for convenience of reference only and shall not
constitute a part of this First Amendment for any other purpose or be given any
substantive effect.

               D. APPLICABLE LAW. THIS FIRST AMENDMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW
OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.

               E. COUNTERPARTS; EFFECTIVENESS. This First Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed an original, but all such counterparts together shall constitute but one
and the same instrument; signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signature pages
are physically attached to the same document. This First Amendment shall become
effective upon the execution of a counterpart hereof by Borrowers, Tranche B
Domestic Lenders, Requisite Lenders and receipt by Company and Administrative
Agent of written or telephonic notification of such execution and authorization
of delivery thereof.

                  [Remainder of Page Intentionally Left Blank]

                                       7
<PAGE>   8

               IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to be executed as of the date first above written, by their respective
officers thereunto duly authorized.

BORROWERS:                        SAFEWAY INC.

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

                                  Title:
                                        ----------------------------------------

                                  THE VONS COMPANIES, INC.

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

                                  Title:
                                        ----------------------------------------

                                  CANADA SAFEWAY LIMITED

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

                                  Title:
                                        ----------------------------------------

LENDERS:                          ABN-AMRO BANK N.V., as a Domestic Lender

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

                                  Title:
                                        ----------------------------------------

                                  BANCA DI ROMA, as a Domestic Lender

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

                                  Title:
                                        ----------------------------------------

                                  BANCA MONTE DEI PASCHI DE SIENA, as a Domestic
                                  Lender

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

                                  Title:
                                        ----------------------------------------

                                  BANCA POPULARE DI MILANO, as a Domestic Lender

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

                                  Title:
                                        ----------------------------------------

                                      S-1

<PAGE>   9

                                  BANK OF AMERICA, NATIONAL TRUST & SAVINGS
                                  ASSOCIATION, as a Domestic Lender and as a
                                  Documentation Agent

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

                                  Title:
                                        ----------------------------------------

                                  BANK OF MONTREAL, as a Domestic Lender and a
                                  Canadian Lender and as an Agent

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

                                  Title:
                                        ----------------------------------------

                                  BANK OF NEW YORK, as a Domestic Lender and as
                                  an Agent

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

                                  Title:
                                        ----------------------------------------

                                  THE BANK OF NOVA SCOTIA, as a Domestic Lender
                                  and a Canadian Lender and as primary
                                  Documentation Agent

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

                                  Title:
                                        ----------------------------------------

                                  BANKERS TRUST COMPANY, as a Domestic Lender
                                  and as Administrative Agent

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

                                  Title:
                                        ----------------------------------------

                                  BANK OF SCOTLAND, as a Domestic Lender

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

                                  Title:
                                        ----------------------------------------

                                      S-2

<PAGE>   10

                                  BANQUE NATIONALE DE PARIS, as a Domestic
                                  Lender

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

                                  Title:
                                        ----------------------------------------

                                  CARIPLO-CASSA DI RISPARMIO DELLE PROVINCIE
                                  LOMBARDE SPA, as a Domestic Lender

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

                                  Title:
                                        ----------------------------------------

                                  THE CHASE MANHATTAN BANK, as Syndication Agent
                                  and as a Domestic Lender

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

                                  Title:
                                        ----------------------------------------

                                  CANADIAN IMPERIAL BANK OF COMMERCE, as a
                                  Domestic Lender and a Canadian Lender and as
                                  an Agent

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

                                  Title:
                                        ----------------------------------------

                                  CITICORP USA, INC., as a Domestic Lender

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

                                  Title:
                                        ----------------------------------------

                                  CREDIT AGRICOLE INDOSUEZ, as a Domestic Lender

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

                                  Title:
                                        ----------------------------------------

                                  CREDIT SUISSE FIRST BOSTON, as a Domestic
                                  Lender

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

                                  Title:
                                        ----------------------------------------

                                      S-3

<PAGE>   11

                                  FIRST HAWAIIAN BANK, as a Domestic Lender

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

                                  Title:
                                        ----------------------------------------

                                  FIRST NATIONAL BANK OF CHICAGO, as a Domestic
                                  Lender

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

                                  Title:
                                        ----------------------------------------

                                  THE FIRST NATIONAL BANK OF MARYLAND, as a
                                  Domestic Lender

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

                                  Title:
                                        ----------------------------------------

                                  THE FUJI BANK, LIMITED, as a Domestic Lender

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

                                  Title:
                                        ----------------------------------------

                                  INDUSTRIAL BANK OF JAPAN, LIMITED, SAN
                                  FRANCISCO AGENCY, as a Domestic Lender

V

                                  KEY BANK NATIONAL ASSOCIATION, as a Domestic
                                  Lender

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

                                  Title:
                                        ----------------------------------------

                                  THE LONG TERM CREDIT BANK OF JAPAN, LIMITED,
                                  LOS ANGELES AGENCY, as a Domestic Lender

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

                                  Title:
                                        ----------------------------------------

                                      S-4
<PAGE>   12

                                  MELLON BANK, N.A., as a Domestic Lender

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

                                  Title:
                                        ----------------------------------------

                                  MERCANTILE BANK OF ST. LOUIS, N.A., as a
                                  Domestic Lender

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

                                  Title:
                                        ----------------------------------------

                                  NATIONSBANK OF TEXAS, NATIONAL ASSOCIATION, as
                                  a Domestic Lender and as an Agent

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

                                  Title:
                                        ----------------------------------------

                                  NORTHERN TRUST COMPANY, as a Domestic Lender

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

                                  Title:
                                        ----------------------------------------

                                  ROYAL BANK OF CANADA, as a Domestic Lender and
                                  a Canadian Lender and as an Agent

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

                                  Title:
                                        ----------------------------------------

                                  THE SUMITOMO BANK, LIMITED, as a Domestic
                                  Lender and as an Agent

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

                                  Title:
                                        ----------------------------------------

                                  UNION BANK OF CALIFORNIA, N.A., as a Domestic
                                  Lender and as an Agent

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

                                  Title:
                                        ----------------------------------------

                                      S-5
<PAGE>   13

                                  US BANK NATIONAL ASSOCIATION, as a Domestic
                                  Lender

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

                                  Title:
                                        ----------------------------------------

                                  WELLS FARGO BANK, NATIONAL ASSOCIATION, as a
                                  Domestic Lender

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

                                  Title:
                                        ----------------------------------------

                                  WACHOVIA BANK, N.A., as a Domestic Lender

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

                                  Title:
                                        ----------------------------------------

                                      S-6

<PAGE>   14

<TABLE>
<CAPTION>

                                   SCHEDULE 1

DOMESTIC LENDER                                           TRANCHE B DOMESTIC COMMITMENT
---------------                                           -----------------------------
<S>                                                       <C>
ABN-Amro Bank N.V                                                 $ 8,000,000
Banca Di Roma                                                     $18,000,000
Banca Populare Di Milano                                          $10,000,000
Bank of America, National Trust & Savings                         $62,500,000
Association
Bank of Montreal                                                  $45,000,000
Bank of New York                                                  $45,000,000
The Bank of Nova Scotia                                           $62,500,000
Bankers Trust Company                                             $72,500,000
Banque Nationale de Paris                                         $16,000,000
Cariplo-Cassa di Risparmio Delle Provincie                        $ 3,500,000
Lombarde Spa

The Chase Manhattan Bank                                          $72,500,000
Canadian Imperial Bank of Commerce                                $45,000,000
Citicorp USA, Inc.                                                $50,000,000
Credit Agricole Indosuez                                          $25,000,000
Credit Suisse First Boston                                        $18,000,000
First Hawaiian Bank                                               $25,000,000
First National Bank of Chicago                                    $50,000,000
The First National Bank of Maryland                               $10,000,000
Industrial Bank of Japan, Limited, San                            $16,000,000
Francisco Agency

Key Bank National Association                                     $45,000,000
Mellon Bank, N.A                                                  $ 5,500,000
Northern Trust Company                                            $35,000,000
Royal Bank of Canada                                              $45,000,000
</TABLE>

                                       1
<PAGE>   15

                          TRANCHE B DOMESTIC COMMITMENT

<TABLE>
<CAPTION>

DOMESTIC LENDER                                           TRANCHE B DOMESTIC COMMITMENT
---------------                                           -----------------------------
<S>                                                       <C>
DOMESTIC LENDER
The Sumitomo Bank, Limited                                        $   45,000,000
Union Bank of California, N.A                                     $   50,000,000
US Bank National Association                                      $   50,000,000
Wells Fargo Bank, National Association                            $   25,000,000
Wachovia Bank, N.A                                                $   45,000,000
                                                                  --------------
TOTAL                                                             $1,000,000,000
                                                                  ==============
</TABLE>

                                       2
<PAGE>   16

                                  SAFEWAY INC.
                                SECOND AMENDMENT
                               TO CREDIT AGREEMENT
                            DATED AS OF MARCH 9, 2000

               This SECOND AMENDMENT TO CREDIT AGREEMENT dated as of March 9,
2000 (this "Amendment" or the "SECOND AMENDMENT") to the Credit Agreement dated
as of April 8, 1997, as amended by the First Amendment to Credit Agreement dated
as of March 19, 1999 (as amended, the "CREDIT AGREEMENT"), is by and among
Safeway Inc., a Delaware corporation ("COMPANY"), The Vons Companies, Inc.
("VONS" and together with the Company, the "DOMESTIC BORROWERS"),Canada Safeway
Limited (together with the Domestic Borrowers, the "BORROWERS"), the financial
institutions named on the signature pages hereof ("LENDERS"), Bankers Trust
Company ("BTCO"), as Administrative Agent for Lenders ("ADMINISTRATIVE AGENT"),
The Chase Manhattan Bank, as Syndication Agent, and The Bank of Nova Scotia and
Bank of America, N.A., as Documentation Agents. Capitalized terms used herein
without definition shall have the same meanings herein as set forth in the
Credit Agreement.

                                    RECITALS

               WHEREAS, Company and Requisite Lenders desire to amend the Credit
Agreement to increase the utilization fees for the Tranche B Domestic Loans
payable pursuant to Subsection 2.3D thereof and permit Company to request an
additional extension of the Tranche B Revolving Termination Date on any date
after May 1, 2000 and on or prior to June 30, 2000, as more specifically
provided for herein;

               WHEREAS, after giving effect to this Second Amendment, the
Tranche B Domestic Loan facility shall be deemed to be amended and restated as
specifically provided herein and in the Credit Agreement.

                                    AGREEMENT

               NOW, THEREFORE, in consideration of the terms and conditions
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

               SECTION 1. AMENDMENT TO THE CREDIT AGREEMENT.

               1.1 Amendment to Section 2.3D: Utilization Fee

                   Subsection 2.3D of the Credit Agreement is amended by
deleting the reference therein to "0.25%" and substituting "0.30%" therefor and
deleting the two references therein to "0.50%" and substituting "0.60%"
therefor.

               1.2 Amendment to Section 2.8:  Extension of Tranche B Revolving
Termination Date.

                                       1
<PAGE>   17

                      Section 2.8 is hereby amended by the addition of the
following paragraph after the first paragraph of such section:

               "At any time after May 1, 2000 and on or prior to June 30, 2000,
Company may, at its option, deliver to Administrative Agent, for distribution to
each Lender within five Business Days of Administrative Agent's receipt thereof,
a Tranche B Extension Request signed by each Domestic Borrower requesting an
extension of the Tranche B Revolving Termination Date for 364 days pursuant to
such Tranche B Extension Request as provided in this paragraph. Each Lender may,
in its sole discretion, consent or not consent to any such Tranche B Extension
Request and, if such Lender so consents, such Lender shall deliver its consent
to such Tranche B Extension Request to Administrative Agent (which shall
promptly notify Company of such consent) during the 30 day period following the
date of such Tranche B Extension Request. Any Lender that fails to consent to
such Tranche B Extension Request within such 30 day period shall be deemed to
have rejected such Tranche B Extension Request. If Administrative Agent shall
have received, within such 30 day period, consents to such Tranche B Extension
Request from one or more Lenders, the Tranche B Revolving Termination Date to be
extended pursuant to such request shall, with respect to those Lenders
consenting to such request, be extended for 364 days from the end of such 30 day
period, and, on or prior to the end of such 30 day period, the Domestic
Borrowers shall pay to each Lender that has consented to such Tranche B
Extension Request a fee of 0.02% of its Tranche B Domestic Commitments. If any
Lender rejects a Tranche B Extension Request pursuant to this paragraph, Company
may, at its option, at any time prior to the Tranche B Revolving Termination
Date (as in effect prior to giving effect to such Tranche B Extension Request),
replace such rejecting Lender by causing such Lender to assign, and each Lender
agrees that, following its rejection of any Tranche B Extension Request and upon
the written request of Company, it shall assign, its Tranche B Domestic Loans
and Tranche B Domestic Commitment, as the case may be, to another Lender or an
Eligible Assignee identified by Company (that, in either case, has agreed to the
Tranche B Extension Request) in accordance with the provisions of subsection
13.1; provided that no assignment fee shall be payable to Primary Documentation
Agent in connection with such assignment. Administrative Agent shall give
Company and each Lender prompt notice of any extension of the Tranche B
Revolving Termination Date pursuant to this paragraph."

               SECTION 2. REPRESENTATIONS AND WARRANTIES.

               In order to induce Requisite Lenders to enter into this Second
Amendment, Company represents and warrants to each Lender that:

               A. No event would result from the execution of this Second
               Amendment and, after giving effect to this Amendment, no event
               has occurred or is continuing which constitutes an Event of
               Default or Potential Event of Default;

               B. After giving effect to this Second Amendment, the
               representations and warranties of Company contained in the Credit
               Agreement, as amended by this Second Amendment (the "Amended
               Credit Agreement") are true, correct and complete in all material
               respects on and as of the date hereof to the same extent as
               though made on and as of the date hereof, except that the
               representations and warranties need not be true and correct to
               the extent that changes in the facts and

                                       2
<PAGE>   18

               conditions on which such representations and warranties are
               based are required or permitted under the Credit Agreement;

               C. This Second Amendment, the Amended Credit Agreement, and the
               consummation of the transactions contemplated hereby or thereby
               do not and will not (i) violate any provisions of law applicable
               to Company or any of its Subsidiaries, the Certificate of
               Incorporation or Bylaws of Company or any of its Subsidiaries, or
               any order, judgment or decree of any court or other agency of
               government binding on Company or any of its Subsidiaries, or (ii)
               conflict with, result in a breach of, or constitute (with due
               notice or lapse of time or both) a default under, the indentures
               pursuant to which any outstanding Subordinated Indebtedness or
               any term of any other material agreement or instrument to which
               Company or any of its Subsidiaries is a party or by which any of
               their properties or assets are bound;

               D. Each Loan Party has performed in all material respects all
               agreements and satisfied all conditions which the Credit
               Agreement and this Second Amendment provide shall be performed by
               it on or before the date hereof; and

               E. The execution, delivery and performance by Company of this
               Second Amendment are within the corporate power of Company and
               have been duly authorized by all necessary corporate action on
               the part of Company, and this Second Amendment and the Amended
               Credit Agreement constitute the valid and binding obligations of
               Company enforceable against Company in accordance with their
               respective terms, subject to the effect of any applicable
               bankruptcy, insolvency, reorganization or other laws relating to
               or affecting the enforcement of creditors' rights generally.

               SECTION 3. CONDITIONS TO EFFECTIVENESS.

               This Second Amendment shall become effective on the first date
Administrative Agent, on behalf of Lenders, shall have received all of the
following, in form and substance satisfactory to Administrative Agent (the
"Second Amendment Effective Date"):

                      A. A certificate of the corporate secretary or an
               assistant secretary of each Borrower which shall certify, as of
               the Second Amendment Effective Date, the names and offices of the
               officers of each Borrower authorized to sign this Amendment;

                      B. A counterpart hereof executed by a duly authorized
               officer of each Borrower and Requisite Lenders, or in the case of
               any Lender, telecopy or telephone confirmation from such Lender
               of its execution hereof.

               On the later of (i) April 3, 2000 and (ii) the first date on
which both the Second Amendment Effective Date has occurred and the Tranche B
Revolving Termination Date for all or a portion of the Tranche B Domestic Loans
has been extended to April 2, 2001, the Domestic Borrowers shall pay to each
Tranche B Domestic Lender that has elected to execute the Second

                                       3
<PAGE>   19

               Amendment and has extended its Tranche B Domestic Commitments to
April 2, 2001 a fee of 0.03% of its Tranche B Domestic Commitments.

               SECTION 4. MISCELLANEOUS.

               A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER
LOAN DOCUMENTS.

               (i) On and after the Second Amendment Effective Date, each
        reference in the Credit Agreement to "this Agreement", "hereunder",
        "hereof", "herein" or words of like import referring to the Credit
        Agreement, and each reference in the other Loan Documents to the "Credit
        Agreement", "thereunder", "thereof" or words of like import referring to
        the Credit Agreement shall mean and be a reference to the Amended Credit
        Agreement.

               (ii) Except as specifically amended by this Second Amendment, the
        Credit Agreement and the other Loan Documents shall remain in full force
        and effect and are hereby ratified and confirmed.

               (iii) The execution, delivery and performance of this Second
        Amendment shall not, except as expressly provided herein, constitute a
        waiver of any provision of, or operate as a waiver of any right, power
        or remedy of Agent or any Lender under, the Credit Agreement or any of
        the other Loan Documents.

               B. COUNTERPARTS. This Second Amendment may be executed in any
number of counterparts, and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument; signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signature pages
are physically attached to the same document.

               C. HEADINGS. Section and subsection headings in this Second
Amendment are included herein for convenience of reference only and shall not
constitute a part of this Second Amendment for any other purpose or be given any
substantive effect.

               D. APPLICABLE LAW. THIS SECOND AMENDMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW
OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.

                   Remainder of Page Intentionally Left Blank

                                       4
<PAGE>   20

               IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be executed as of the date first above written, by their respective
officers thereunto duly authorized.

BORROWERS:                        SAFEWAY INC.

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

                                  THE VONS COMPANIES, INC.

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

                                  CANADA SAFEWAY LIMITED

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

LENDERS:                          BANKERS TRUST COMPANY, as a Domestic Lender
                                  and as Administrative Agent

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

                                  THE CHASE MANHATTAN BANK, as Syndication Agent
                                  and a Domestic Lender

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

                                  THE CHASE MANHATTAN BANK OF CANADA, as a
                                  Canadian Lender

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

                                      S-1
<PAGE>   21

                                  THE BANK OF NOVA SCOTIA, as a Domestic Lender
                                  and a Canadian Lender and as primary
                                  Documentation Agent

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

                                  BANK OF AMERICA, N.A., as a Domestic Lender
                                  and as a Documentation Agent

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

                                  DEUTSCHE BANK CANADA, as a Canadian Lender

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

                                  CREDIT AGRICOLE INDOSUEZ, as a Domestic Lender

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

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

                                  ALLFIRST BANK, as a Domestic Lender

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

                                  WACHOVIA BANK, as a Domestic Lender

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

                                      S-2
<PAGE>   22

                                  BANK ONE, NA (main office Chicago), as a
                                  Domestic Lender

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

                                  BANK OF SCOTLAND, as a Domestic Lender

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

                                  BANCA MONTE DEI PASCHI DE SIENA, as a Domestic
                                  Lender

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

                                  BANCA NAZIONALE DEL LAVORO, as a Domestic
                                  Lender

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

                                  BANCA POPOLARE DI MILANO, as a Domestic Lender

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

                                  GE CAPITAL COM'L FINANCE, as a Domestic Lender

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

                                  KEYBANK, as a Domestic Lender

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

                                      S-3
<PAGE>   23

                                  BANK OF AMERICA CANADA, as a Canadian Lender

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

                                  CITICORP USA, INC., as a Domestic Lender

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

                                  CITIBANK CANADA, as a Canadian Lender

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

                                  MELLON BANK, as a Domestic Lender

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

                                  STB DELAWARE FUNDING TRUST I, as a Domestic
                                  Lender

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

                                  MERCANTILE BANK, as a Domestic Lender

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

                                  NORTHERN TRUST COMPANY, as a Domestic Lender

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

                                       S-4
<PAGE>   24

                                  BANK OF MONTREAL, as a Domestic Lender and a
                                  Canadian Lender and as an Agent

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

                                  CARIPLO-CASSA DI RISPARMIO DELLE PROVINCIE
                                  LOMBARDE S.P.A., as a Domestic Lender

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

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

                                  CANADIAN IMPERIAL BANK OF COMMERCE, as a
                                  Domestic Lender and a Canadian Lender and as
                                  an Agent

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

                                  ROYAL BANK OF CANADA, as a Domestic Lender and
                                  a Canadian Lender and as an Agent

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

                                  UNITED STATES NATIONAL BANK OF OREGON, as a
                                  Domestic Lender and as an Agent

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

                                  BANK HAPOALIM, as a Domestic Lender

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

                                       S-5
<PAGE>   25

                                  THE SUMITOMO BANK, LIMITED, SAN FRANCISCO
                                  BRANCH, as a Domestic Lender and as an Agent

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

                                  THE SUMITOMO BANK OF CANADA, as a Canadian
                                  Lender and as an Agent

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

                                  UNION BANK OF CALIFORNIA, N.A., as a Domestic
                                  Lender and as an Agent

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

                                  THE DAI-ICHI KANGYO BANK, LIMITED, SAN
                                  FRANCISCO AGENCY, as a Domestic Lender and as
                                  an Agent

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

                                  THE BANK OF NEW YORK, as a Domestic Lender and
                                  as an Agent

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

                                  THE FUJI BANK, LIMITED, as a Domestic Lender

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

                                      S-6

<PAGE>   26

                                  ABN AMRO BANK N.V., as a Domestic Lender

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

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

                                  THE TOKAI BANK, LTD., LOS ANGELES AGENCY, as a
                                  Domestic Lender

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

                                  TOKAI BANK CANADA, as a Canadian Lender

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

                                  FIRST HAWAIIAN BANK, as a Domestic Lender

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

                                  WELLS FARGO BANK, NATIONAL ASSOCIATION, as a
                                  Domestic Lender

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

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

                                      S-7
<PAGE>   27

                                  BANQUE NATIONALE DE PARIS, as a Domestic
                                  Lender

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

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

                                  BANQUE NATIONALE DE PARIS (CANADA), as a
                                  Canadian Lender

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

                                  THE INDUSTRIAL BANK OF JAPAN, LIMITED, as a
                                  Domestic Lender

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

                                  THE INDUSTRIAL BANK OF JAPAN (CANADA), as a
                                  Canadian Lender

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

                                  THE SANWA BANK LIMITED, LOS ANGELES BRANCH, as
                                  a Domestic Lender

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

                                  CREDIT SUISSE FIRST BOSTON, as a Domestic
                                  Lender

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

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

                                       S-8
<PAGE>   28

                                  THE SAKURA BANK, LIMITED, SAN FRANCISCO
                                  AGENCY, as a Domestic Lender

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

                                  SAKURA BANK (CANADA), as a Canadian Lender

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

                                  BANCA DI ROMA, as a Domestic Lender

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

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

                                      S-9

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