Document:

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                                                                   EXHIBIT 10.23

                                RIGHTS AGREEMENT

                                     BETWEEN

                              DIAMOND FOODS, INC.

                                       AND

                          EQUISERVE TRUST COMPANY, N.A.

                                AS RIGHTS AGENT

                           DATED AS OF APRIL 29, 2005

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                                TABLE OF CONTENTS

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

Section 2.         Appointment of Rights Agent                                            4

Section 3.         Evidence of Rights Before Distribution Date: Transfer: Legends         4

Section 4.         Evidence of  Rights After Distribution Date: Form of Right             6
                   Certificates; Countersignatures

Section 5.         Distribution of Certificates: Registration                             6

Section 6.         Transfer, Split Up, Combination and Exchange of Right                  7
                   Certificates: Mutilated Destroyed Lost or Stolen Right
                   Certificates

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

Section 8.         Cancellation and Destruction of Right Certificates                     9

Section 9.         Status and Availability of Preferred Shares                            9

Section 10.        Preferred Shares Record Date                                           9

Section 11.        Adjustment of Purchase Price. Number of Shares or Number of Rights    10

Section 12.        Certificate of Adjusted  Purchase Price of Number of Shares           16

Section 13.        Consolidation, Merger or Sale or Transfer of Assets of Earning        16
                   Power

Section 14.        Fractional Rights and Fractional Shares                               17

Section 15.        Rights of Action                                                      18

Section 16.        Agreement of Right Holders                                            18

Section 17.        Right Certificate Holder Not Deemed a Stockholder                     18

Section 18.        Compensation and Indemnity of the Rights Agent                        19

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

Section 20.        Rights and Duties of Rights Agent                                     20

Section 21.        Change of Rights Agent                                                22
</TABLE>

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<TABLE>
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                                                                                        ----
<S>                                                                                     <C>
Section 22.        Issuance of New Right Certificates                                    23

Section 23.        Redemption                                                            23

Section 24.        Exchange                                                              24

Section 25.        Notice of Certain Events                                              25

Section 26.        Notices                                                               26

Section 27.        Supplements and Amendments                                            26

Section 28.        Successors                                                            27

Section 29.        Benefits of this Agreement                                            27

Section 30.        Severability                                                          27

Section 31.        Governing Law                                                         27

Section 32.        Counterparts                                                          27

Section 33.        Descriptive Headings                                                  27

Section 34.        Entire Agreement                                                      27

Section 35.        Force Majeure                                                         27

                   Signatures

EXHIBIT A-         Form of Certificate of Designations of Series A Junior
                   Participating Preferred Stock

EXHIBIT B-         Summary of Rights to Purchase Preferred Shares

EXHIBIT C-         Form of Right Certificate
</TABLE>

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<PAGE>

                                RIGHTS AGREEMENT

      This Agreement, dated as of April 29, 2005, between Diamond Foods, Inc., a
Delaware corporation ("COMPANY"), and Equiserve Trust Company, N.A., a New York
company, as Rights Agent ("RIGHTS AGENT").

      The Board of Directors of the Company has authorized and declared a
dividend of one preferred share purchase right ("RIGHT") for each Common Share
(as hereinafter defined) of the Company outstanding at the Close of Business (as
hereinafter defined) on the date of the closing of the Company's proposed
initial public offering ("RECORD DATE"), each Right representing the right to
purchase one one-hundredth of a Preferred Share (as hereinafter defined), upon
the terms and subject to the conditions herein set forth, and has further
authorized and directed the issuance of one Right with respect to each Common
Share that shall become outstanding (i) between the Record Date and the earliest
of the Distribution Date, the Redemption Date and the Final Expiration Date (as
such terms are hereinafter defined) or (ii) following the Distribution Date and
prior to the Redemption Date or Final Expiration Date, pursuant to the exercise
of stock options or under any employee plan or arrangement or upon the exercise,
conversion or exchange of other securities of the Company, which options or
securities were outstanding prior to the Distribution Date.

      Accordingly, in consideration of the premises and the mutual agreements
herein set forth, the parties hereto 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 and Associates of such Person, shall be the Beneficial Owner
of 15% ("DESIGNATED PERCENTAGE") or more of the Common Shares of the Company
then outstanding, but shall not include (i) the Company, (ii) any Subsidiary of
the Company, (iii) any employee benefit plan of the Company or of any Subsidiary
of the Company or (iv) any entity holding Common Shares for or pursuant to the
terms of any such plan. Notwithstanding the foregoing,

                  (i) No Person shall become an Acquiring Person if the Board of
Directors of the Company determines in good faith that a Person who would
otherwise be an Acquiring Person has become such inadvertently, and such Person
as promptly as practicable takes such actions as may be necessary so that such
Person would no longer be considered an Acquiring Person.

                  (ii) No Person shall become an Acquiring Person as the result
of an acquisition of Common Shares by the Company that, by reducing the number
of shares outstanding, increases the proportionate number of shares beneficially
owned by such Person and such Person's Affiliates and Associates to the
Designated Percentage or more of the Common Shares of the Company then
outstanding; provided, however, that if a Person, together with such Person's
Affiliates and Associates, shall become the Beneficial Owner of the Designated
Percentage or more of the Common Shares of the Company then outstanding by
reason of share purchases by the Company and such Person, together with its
Affiliates and Associates, shall, after public announcement of such share
purchases by the Company, become the Beneficial

                                        1

<PAGE>

Owner of any additional Common Shares of the Company, then such Person shall be
deemed to be an "Acquiring Person."

            (b) "AFFILIATE" and "ASSOCIATE" shall have the following meanings:

                  (i) An "AFFILIATE" of, or a Person "AFFILIATED" with, a
specified Person, is a Person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
the Person specified. For this purpose, "CONTROL" (including the terms
"CONTROLLING," "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") means the
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise;

                  (ii) The term "ASSOCIATE" used to indicate a relationship with
any Person shall mean (A) any corporation or organization (other than the
Company or a majority-owned subsidiary of the Company) of which such Person is
an officer or partner or is, directly or indirectly, the Beneficial Owner of 10%
or more of any class of equity securities, (B) any trust or other estate in
which such Person has a substantial beneficial interest or as to which such
Person serves as trustee or in a similar fiduciary capacity, and (C) any
relative or spouse of such Person, or any relative of such spouse, who has the
same home as such Person or who is a director or officer of the Company or of
any of its parents or Subsidiaries.

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

                  (i) that such Person owns, directly or indirectly;

                  (ii) that such Person has (A) the right to acquire (whether
such right is exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding (other than customary
agreements with and between underwriters and selling group members with respect
to a bona fide public offering of securities), written or otherwise, or upon the
exercise of conversion rights, exchange rights, rights (other than the Rights),
warrants or options, or otherwise; provided, however, that a Person shall not be
deemed to be the Beneficial Owner of, or to beneficially own, securities
tendered pursuant to a tender or exchange offer made by or on behalf of such
Person until such tendered securities are accepted for purchase or exchange; or
(B) the right to vote pursuant to any agreement, arrangement or understanding;
provided, however, that a Person shall not be deemed the Beneficial Owner of, or
to beneficially own, any security if the agreement, arrangement or understanding
to vote such security (1) arises solely from a revocable proxy or consent given
to such Person in response to a public proxy or consent solicitation made
pursuant to, and in accordance with, the applicable rules and regulations
promulgated under the Exchange Act and (2) is not also then reportable on
Schedule 13D under the Exchange Act (or any comparable or successor report); or

                  (iii) that are beneficially owned, directly or indirectly, by
any other Person with which such Person has any agreement, arrangement or
understanding (other than customary agreements with and between underwriters and
selling group members with respect to a bona fide public offering of
securities), written or otherwise, for the purpose of acquiring, holding, voting
(except to the extent contemplated by the proviso to Section 1(c)(ii)(B)) or
disposing of any securities of the Company.

                                        2

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            Notwithstanding anything in this definition of Beneficial Ownership
to the contrary, (A) the phrase "THEN OUTSTANDING," when used with reference to
a Person's Beneficial Ownership of securities of the Company, shall mean the
number of such securities then issued and outstanding together with the number
of such securities not then actually issued and outstanding that such Person
would be deemed to own beneficially hereunder, and (B) a Person who is a
director or officer of the Company or who is an Affiliate or Associate of a
director or officer of the Company (each, an "EXEMPTED PERSON") shall not be
deemed to "beneficially own" Common Shares held by another Exempted Person
solely by reason of any agreement, arrangement or understanding, written or
otherwise, entered into in opposition to a transaction that, at the time such
agreement, arrangement or understanding was entered into, has not been approved
or recommended by the Board of Directors to the stockholders of the Company.

            (d) "BUSINESS DAY" shall mean any day other than a Saturday, a
Sunday, or a day on which banking institutions in the Commonwealth of
Massachusetts are not open for business.

            (e) "CLOSE OF BUSINESS" on any given date shall mean 5:00 p.m.,
Eastern Time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 p.m., Eastern Time, on the next succeeding
Business Day.

            (f) "COMMON SHARES" when used with reference to the Company shall
mean the shares of common stock, par value $0.001 per share, of the Company.
"Common Shares" when used with reference to any Person other than the Company
shall mean the capital stock (or equity interest) with the greatest voting power
of such other Person or, if such other Person is a Subsidiary of another Person,
of the Person or Persons that ultimately control such first-mentioned Person.

            (g) "DESIGNATED PERCENTAGE" shall have the meaning set forth in
Section 1(a) hereof.

            (h) "DISTRIBUTION DATE" shall mean the earlier of (i) the tenth day
after the Shares Acquisition Date or (ii) the tenth Business Day (or such later
date as may be determined by action of the Board of Directors of the Company
prior to such time as any Person becomes an Acquiring Person) after the first
public announcement of the intention of any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or of any
Subsidiary of the Company or any entity holding Common Shares for or pursuant to
the terms of any such plan) to commence a tender or exchange offer the
consummation of which would result in any such Person becoming an Acquiring
Person (including any such date that is after the date of this Agreement and
prior to the issuance of the Rights).

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

            (j) "FINAL EXPIRATION DATE" shall have the meaning set forth in
Section 7(a) hereof.

            (k) "PERSON" shall mean any individual, firm, corporation,
partnership, limited partnership, business trust, limited liability company,
unincorporated association or any other entity, and shall include any successor
(by merger or otherwise) of such entity.

            (l) "PURCHASE PRICE" shall have the meaning set forth in Section
7(b) hereof.

                                        3

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            (m) "PREFERRED SHARES" shall mean shares of Series A Junior
Participating Preferred Stock, par value $0.001 per share, of the Company having
the rights and preferences set forth in the Certificate of Designations attached
to this Agreement as Exhibit A.

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

            (o) "RIGHTS" shall have the meaning set forth in the second
paragraph of this Agreement, provided, however, that none of the following shall
be deemed "Rights" or "outstanding Rights" for any purpose under this Agreement
from and after the effective time of the event indicated: (i) Rights that have
become Void Rights pursuant to Section 7(f) hereof, and upon such occurrence,
all Right Certificates therefor shall be null and void and shall not be deemed
"outstanding Right Certificates"; (ii) all rights that have been redeemed
pursuant to Section 23 hereof, and upon such occurrence, all Right Certificates
therefor shall represent only the right to receive the consideration provided in
Section 23 hereof and shall not be deemed "outstanding Right Certificates", and
(iii) any Rights that have been exchanged pursuant to Section 24 hereof, and
upon such occurrence, all Right Certificates therefor shall represent only the
right to receive the consideration provided in Section 24 and shall not be
deemed "outstanding Right Certificates".

            (p) "SHARES ACQUISITION DATE" shall mean the earlier of the date of
(i) the public announcement by the Company or an Acquiring Person that an
Acquiring Person has become such or (ii) the public disclosure of facts by the
Company or an Acquiring Person indicating that an Acquiring Person has become
such.

            (q) "SUBSIDIARY" of any Person shall mean any Person of which a
majority of the voting power of the voting equity securities or equity interest
is owned, directly or indirectly, by such Person.

            (r) A "SUCCESSOR" shall mean the estate or legal representative of a
deceased individual, the beneficiary of a deceased individual's estate, a trust
created by a deceased individual as grantor, or the beneficiary of a trust
created by a deceased individual as grantor.

            (s) "VOID RIGHTS" shall have the meaning set forth in Section 7(f).

      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 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. EVIDENCE OF RIGHTS BEFORE DISTRIBUTION DATE; TRANSFER; LEGENDS.

            (a) From the Record Date until the earliest of the Distribution
Date, the Redemption Date or the Final Expiration Date, (x) Rights will be
evidenced by the certificates for Common Shares registered in the names of the
holders thereof (which certificates shall also be deemed to be Right
Certificates) and not by separate Right Certificates (as defined below), and (y)
Rights will be transferable only in connection with the transfer of Common
Shares. On the Record Date, or as soon as practicable thereafter, the Company
will send a copy of a

                                        4

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Summary of Stock Purchase Rights, in substantially the form of Exhibit B hereto
("SUMMARY OF RIGHTS"), by first-class, postage-prepaid mail, to each record
holder of Common Shares as of the Close of Business on the Record Date, at the
address of such holder shown on the records of the Company. Until the earliest
of the Distribution Date, the Redemption Date or the Final Expiration Date, the
surrender for transfer of any certificate for Common Shares outstanding on the
Record Date, with or without a copy of the Summary of Rights attached thereto,
shall also constitute the surrender for transfer of the Rights associated with
the Common Shares represented thereby.

            (b) Certificates for Common Shares that become outstanding
(including, without limitation, reacquired Common Shares referred to in the last
sentence of this Section 3(b)) after the Record Date but prior to the earliest
of the Distribution Date, the Redemption Date or the Final Expiration Date shall
have impressed on, printed on, written on or otherwise affixed to them the
following legend:

            THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO
            CERTAIN RIGHTS (THE "RIGHTS") AS SET FORTH IN A RIGHTS AGREEMENT
            BETWEEN DIAMOND FOODS, INC. (THE "COMPANY") AND EQUISERVE TRUST
            COMPANY, N.A., AS RIGHTS AGENT, DATED AS OF APRIL 29, 2005, AS
            SUCH MAY SUBSEQUENTLY BE AMENDED (THE "RIGHTS AGREEMENT"), THE TERMS
            OF WHICH ARE HEREBY INCORPORATED HEREIN BY REFERENCE AND A COPY OF
            WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY.
            UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT,
            SUCH RIGHTS WILL BE EVIDENCED BY SEPARATE CERTIFICATES AND WILL NO
            LONGER BE EVIDENCED BY THIS CERTIFICATE. THE COMPANY WILL MAIL TO
            THE HOLDER OF THIS CERTIFICATE A COPY OF THE RIGHTS AGREEMENT
            WITHOUT CHARGE AFTER RECEIPT OF A WRITTEN REQUEST THEREFOR. AS
            DESCRIBED IN SECTION 7(F) OF THE RIGHTS AGREEMENT, RIGHTS
            BENEFICIALLY OWNED BY ANY PERSON WHO BECOMES AN ACQUIRING PERSON (AS
            DEFINED IN THE RIGHTS AGREEMENT) AND CERTAIN OTHER PERSONS SHALL
            BECOME NULL AND VOID.

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

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      SECTION 4. EVIDENCE OF RIGHTS AFTER DISTRIBUTION DATE; FORM OF RIGHT
CERTIFICATES; COUNTERSIGNATURES.

            (a) From and after the Distribution Date until the earlier of the
Redemption Date or the Final Expiration Date, Rights will be evidenced solely by
Right Certificates that, together with the forms of election to purchase
Preferred Shares and of assignment to be printed on the reverse thereof, shall
be substantially in the form set forth as Exhibit C hereto (each, a "RIGHT
CERTIFICATE"), which may have such marks of identification or designation and
such legends, summaries or endorsements printed thereon as the Company may deem
appropriate and which do not affect the rights, duties or responsibilities of
the Rights Agent and as are not inconsistent with the provisions of this
Agreement, or as may be required to comply with any applicable law or with any
rule or regulation made pursuant thereto or with any rule or regulation of any
stock exchange on which the Rights may from time to time be listed, or to
conform to usage. Subject to the other provisions of this Agreement, the Right
Certificates shall entitle the holders thereof to purchase such number of one
one-hundredths of a Preferred Share as shall be set forth therein at the
Purchase Price, but the number of such one one-hundredths of a Preferred Share
and the Purchase Price shall be subject to adjustment as provided herein.

            (b) The Right Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its Chief Executive Officer, its
President, any of its Vice Presidents, or its Treasurer, either manually or by
facsimile signature, shall have affixed thereto the Company's seal or a
facsimile thereof, and shall be attested by the Secretary or any Assistant
Secretary of the Company, either manually or by facsimile signature. The Right
Certificates shall be manually countersigned by the Rights Agent (unless
applicable exchange rules and law permit facsimile signature, in which case the
Rights Agent signature may be by facsimile) and shall not be valid for any
purpose unless countersigned. In case any officer of the Company who shall have
signed any of the Right Certificates shall cease to be such officer of the
Company before countersignature by the Rights Agent and issuance and delivery by
the Company, such Right Certificates, nevertheless, may be countersigned by the
Rights Agent and issued and delivered by the Company with the same force and
effect as though the individual who signed such Right Certificates had not
ceased to be such officer of the Company; and any Right Certificate may be
signed on behalf of the Company by any individual who, at the actual date of the
execution of such Right Certificate, shall be a proper officer of the Company to
sign such Right Certificate, although at the date of the execution of this
Rights Agreement any such individual was not such an officer.

      SECTION 5. DISTRIBUTION OF CERTIFICATES; REGISTRATION.

            (a) As soon as practicable after the Distribution Date (and so long
as the Redemption Date and the Final Expiration Date shall not have occurred),
the Company will prepare and execute, the Rights Agent will countersign and the
Company will send or cause to be sent (and the Rights Agent will, if requested
and provided with all necessary information, send) by first-class, insured,
postage-prepaid mail to each record holder of Common Shares as of the Close of
Business on the Distribution Date (other than the holder of Void Rights (as
defined in Section 7(f) hereof), at the address of such holder shown on the
records of the Company, Rights Certificates evidencing one Right for each Common
Share so held.

            (b) Following the Distribution Date and receipt by the Rights agent
of all relevant information, the Rights Agent will keep or cause to be kept, at
its office, books for

                                        6

<PAGE>

registration and transfer of the Right Certificates issued hereunder. Such books
shall show the names and addresses of the respective holders of the Right
Certificates, the number of Rights evidenced on its face by each of the Right
Certificates and the date of each of the Right Certificates.

      SECTION 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHT
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES.

            (a) Subject to the provisions of Section 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 earlier of the Redemption Date or the Final Expiration
Date, any Right Certificate or Right Certificates (other than Right Certificates
representing Void Rights or Rights that have been exchanged pursuant to Section
24 hereof) may be transferred, split up, combined or exchanged for another Right
Certificate or Right Certificates, entitling the registered holder to purchase a
like number of one one-hundredths of a Preferred Share as the Right Certificate
or Right Certificates surrendered then entitled such holder to purchase. Any
registered holder desiring to transfer, split up, combine or exchange any Right
Certificate or Right Certificates shall make such request in writing delivered
to the Rights Agent, and shall surrender the Right Certificate or Right
Certificates to be transferred, split up, combined or exchanged at the office of
the Rights Agent. Thereupon the Company shall execute and the Rights Agent shall
countersign and deliver to the Person entitled thereto a Right Certificate or
Right Certificates, as the case may be, as so requested. The Company may require
payment of a sum sufficient for all taxes and governmental charges that may be
imposed in connection with any transfer, split up, combination or exchange of
Right Certificates. The Rights Agent shall have no duty or obligation under this
Section 6 unless and until it is satisfied that all such taxes and/or charges
have been paid.

            (b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Right Certificate, and, at the Company's request, reimbursement to the Company
and the Rights Agent of all reasonable expenses incidental thereto, and, (i) in
case of loss, theft or destruction, of indemnity or security satisfactory to
them, or (ii) in the case of mutilation, upon surrender to the Rights Agent and
cancellation of the Right Certificate, then, in either such case, the Company
will make and deliver a new Right Certificate of like tenor to the Rights Agent
for delivery to the registered holder in lieu of the Right Certificate so lost,
stolen, destroyed or mutilated.

      SECTION 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE; VOID
RIGHTS.

            (a) The registered holder of any Right Certificate may exercise the
Rights evidenced thereby (except as otherwise provided herein) in whole or in
part at any time after the Distribution Date upon surrender of the Right
Certificate, with the form of election to purchase on the reverse side thereof
duly executed, to the Rights Agent at the office of the Rights Agent, together
with payment of the Purchase Price for each one one-hundredth of a Preferred
Share as to which the Rights are exercised and payment of all transfer taxes and
governmental charges required to be paid by the holder of such Right Certificate
as provided in Section 9 hereof, at or prior to the earliest of (i) the Close of
Business on March 22, 2015 ("FINAL EXPIRATION DATE"), (ii) the time at which the
Rights are redeemed as provided in Section 23 hereof ("REDEMPTION DATE"), or
(iii) the time at which such Rights are exchanged as provided in Section 24
hereof.

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<PAGE>

            (b) The purchase price for each one one-hundredth of a Preferred
Share pursuant to the exercise of a Right ("PURCHASE PRICE") shall initially be
$60.00, shall be subject to adjustment from time to time as provided in
Sections 11 and 13 hereof and shall be payable in lawful money of the United
States of America in accordance with Section 7(c) hereof.

            (c) Upon receipt of a Right Certificate representing exercisable
Rights within the time permitted in Section 7(a), with the form of election to
purchase and certificate duly executed, accompanied by payment of the Purchase
Price for the shares to be purchased and an amount equal to all applicable taxes
and governmental charges required to be paid by the holder of such Right
Certificate in accordance with Section 9 hereof by certified check, cashier's
check or money order payable to the order of the Company, the Rights Agent shall
promptly (i)(A) requisition from any transfer agent of the Preferred Shares
certificates for the number of one-one hundredths of a Preferred Share to be
purchased, and the Company hereby irrevocably authorizes its transfer agent to
comply with all such requests, or (B) requisition from any depositary agent for
the Preferred Shares depositary receipts representing such number of one
one-hundredths of a Preferred Share as are to be purchased (in which case
certificates for the Preferred Shares represented by such receipts shall be
deposited by the transfer agent with the depositary agent), and the Company
hereby directs the depositary agent to comply with all such requests, (ii) when
appropriate, requisition from the Company the amount of cash to be paid in lieu
of issuance of fractional Preferred Shares in accordance with Section 14 hereof,
(iii) after receipt of such certificates or depositary receipts, cause the same
to be delivered to or upon the order of the registered holder of such Right
Certificate, registered in such name or names as may be designated by such
holder and (iv) when appropriate, after receipt, deliver such cash to or upon
the order of the registered holder of such Right Certificate.

            (d) In case the registered holder of any Right Certificate shall
exercise less than all the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent to the registered holder of such Right Certificate or to
such holder's duly authorized assigns, subject to the provisions of Section 6
and Section 14 hereof.

            (e) The Company covenants and agrees that it will cause to be
reserved and kept available, out of its authorized and unissued Preferred Shares
or any Preferred Shares held in its treasury, the number of Preferred Shares
that will be sufficient to permit the exercise in full of all Rights in
accordance with this Section 7.

            (f) From and after the time that any Person becomes an Acquiring
Person, (i) all Rights that are or were acquired or beneficially owned by such
Acquiring Person (and all Rights that are or were acquired or beneficially owned
by each Associate and by each Affiliate of such Acquiring Person) shall be null
and void without any further action on the part of the Company, the Rights Agent
or any other Person (all such Rights, "VOID RIGHTS") and (ii) any holder thereof
shall thereafter have no right to exercise such Void Rights under any provision
of this Agreement. No Right Certificate shall be issued pursuant to Sections 5
or 6 that represents Rights beneficially owned by an Acquiring Person whose
Rights have become Void Rights pursuant to the preceding sentence or by any
Associate or Affiliate thereof; no Right Certificate shall be issued at any time
upon the transfer of any Rights to an Acquiring Person whose Rights have become
Void Rights pursuant to the preceding sentence or to any Associate or Affiliate
thereof or to any nominee of such Acquiring Person, Associate or Affiliate; and
any Right Certificate delivered to the Rights Agent for transfer to an Acquiring
Person whose Rights have

                                        8

<PAGE>

become Void Rights pursuant to the preceding sentence or for transfer to any
Associate or Affiliate thereof shall be cancelled. This Section 7(f) shall apply
not only to an initial Acquiring Person, and each of its Affiliates and
Associates, but also to all subsequent Acquiring Persons, and each of their
Affiliates and Associates.

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

      SECTION 8. CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES. All Right
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Rights Agreement. The Company shall deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent shall cancel
and retire, any other Right Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
cancelled Right Certificates to the Company, or shall, at the written request of
the Company, destroy such cancelled Right Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.

      SECTION 9. STATUS AND AVAILABILITY OF PREFERRED SHARES. The Company
covenants and agrees that it will take all such action as may be necessary to
ensure that all Preferred Shares delivered upon valid exercise of Rights in
compliance with Section 7 shall, at the time of delivery of the certificates for
such Preferred Shares (subject to payment of the Purchase Price), be duly and
validly authorized and issued and fully paid and non-assessable shares.

      The Company further covenants and agrees that it will pay when due and
payable any and all taxes and governmental charges that may be payable in
respect of the issuance or delivery of the Right Certificates or of any
Preferred Shares upon the exercise of Rights. The Company shall not, however, be
required (i) to pay any tax or governmental charge that may be payable in
respect of any transfer or delivery of Right Certificates to a Person other
than, or the issuance or delivery of certificates or depositary receipts for the
Preferred Shares in a name other than that of, the registered holder of the
Right Certificate evidencing Rights surrendered for exercise or to issue or (ii)
to deliver any certificates or depositary receipts for Preferred Shares upon the
exercise of any Rights until all such taxes and governmental charges shall have
been paid (all such taxes and governmental charges being payable by the holder
of such Right Certificate at the time of surrender for exercise) or until it has
been established to the Company's reasonable satisfaction that no such tax or
governmental charge is due.

      SECTION 10. PREFERRED SHARES RECORD DATE. Each Person in whose name any
certificate for Preferred Shares is issued upon the valid exercise of Rights
shall for all purposes be deemed to have become the holder of record of the
Preferred Shares represented thereby on, and such certificate shall be dated,
the date upon which the Right Certificate evidencing such Rights was

                                        9

<PAGE>

duly surrendered and payment of the Purchase Price (and any applicable taxes and
governmental charges) was made. Prior to the exercise of the Rights evidenced
thereby, the holder of a Right Certificate shall not be entitled to any rights
of a holder of Preferred Shares for which the Rights shall be exercisable,
including, without limitation, the right to vote, to receive dividends or other
distributions or to exercise any preemptive rights, and shall not be entitled to
receive any notice of any proceedings of the Company, except as provided herein.

      SECTION 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER OF SHARES OR NUMBER OF
RIGHTS. The Purchase Price, the number of Preferred Shares covered by each Right
and the number of Rights outstanding are subject to adjustment from time to time
as provided in this Section 11, provided, however, that no adjustment, payment
or distribution of securities or other change in the Rights or securities
issuable upon exercise of any Rights as provided in this Section 11 shall apply
to any Void Rights.

            (a)   (i) In the event the Company shall at any time after the date
of this Agreement (A) declare a dividend on the Preferred Shares payable in
Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C) combine
the outstanding Preferred Shares into a smaller number of Preferred Shares or
(D) issue any shares of its capital stock in a reclassification of the Preferred
Shares (including any such reclassification in connection with a consolidation
or merger in which the Company is the continuing or surviving corporation),
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 dividend, subdivision, combination or reclassification, and the number and
kind of shares of capital stock that would be issuable upon exercise of a Right
on such date (if such Rights were then exercisable), shall be proportionately
adjusted so that the holder of any Right exercised after such time shall be
entitled to receive the aggregate number and kind of shares of capital stock
that, 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 the class or
series of capital stock of the Company issuable upon exercise of one Right.

                  (ii) Subject to Section 7(f) and Section 24 of this Agreement,
in the event that any Person shall become an Acquiring Person, unless the event
causing the Designated Percentage threshold to be crossed and the Person to
thereby become an Acquiring Person is a transaction set forth in Section 13
hereof, each holder of a Right shall thereafter have a right to receive, upon
exercise of such Right at a price equal to the then current Purchase Price
multiplied by the number of one one-hundredths of a Preferred Share for which a
Right is then exercisable, in accordance with the terms of this Agreement and in
lieu of Preferred Shares, such number of Common Shares of the Company as shall
equal the result obtained by (x) multiplying the then current Purchase Price by
the number of one one-hundredths of a Preferred Share for which a Right is then
exercisable and dividing that product by (y) 50% of the then current per share
market price of the Company's Common Shares (determined pursuant to Section
11(d) hereof) on the date such Person became an Acquiring Person.

                  (iii) In the event that the number of Common Shares that are
authorized by the Company's certificate of incorporation and not outstanding or
subscribed for, or reserved or otherwise committed for issuance for purposes
other than upon exercise of the Rights, is not sufficient to permit the holder
of each Right to purchase the number of Common Shares to which

                                       10

<PAGE>

such holder would be entitled upon the exercise in full of the Rights in
accordance with Section 11(a)(ii), the Company shall: (A) determine the excess
of (1) the value of the Common Shares issuable upon the exercise of a Right
(calculated as provided in the last sentence of this Section 11(a)(iii))
pursuant to Section 11(a)(ii) hereof ("CURRENT VALUE") over (2) the Purchase
Price (such excess, the "SPREAD"), and (B) with respect to each Right, make
adequate provision to substitute for such Common Shares, upon payment of the
applicable Purchase Price, (1) cash, (2) a reduction in the Purchase Price, (3)
Common Shares or other equity securities of the Company (including, without
limitation, shares of the Company's Preferred Stock, or units of shares of the
Company's capital stock) that the Board of Directors of the Company has
determined to have the same value as Common Shares (such equity securities,
"COMMON STOCK EQUIVALENTS")), (4) debt securities of the Company, (5) other
assets or (6) any combination of the foregoing, having an aggregate value equal
to the Current Value, where such aggregate value has been determined by the
Board of Directors of the Company in good faith; provided, however, if the
Company shall not have made adequate provision to deliver value pursuant to
clause (B) of this paragraph within thirty (30) days following the first
occurrence of an event triggering the rights to purchase Common Shares described
in Section 11(a)(ii) ("SECTION 11(a)(II) TRIGGER DATE"), then the Company shall
be obligated to deliver, upon the surrender for exercise of a Right without
requiring payment of the Purchase Price, Common Shares (to the extent available)
and then, if necessary, cash, which shares and cash have an aggregate value
equal to the Spread. If the Board of Directors of the Company shall determine in
good faith that it is likely that sufficient additional Common Shares could be
authorized for issuance upon exercise in full of the Rights, the thirty (30) day
period set forth above may be extended to the extent necessary, but not more
than ninety (90) days after the Section 11(a)(ii) Trigger Date, in order that
the Company may seek stockholder approval for the authorization of such
additional shares (such period, as it may be extended, the "SUBSTITUTION
PERIOD"). To the extent that the Company determines that some action needs to be
taken pursuant to the first and/or second sentences of this Section 11(a)(iii),
the Company (x) shall provide, subject to Section 7(g) hereof, that such action
shall apply uniformly to all Rights, and (y) may suspend the exercisability of
the Rights until the expiration of the Substitution Period in order to seek any
authorization of additional shares and/or to decide the appropriate form of
distribution to be made pursuant to such first sentence and to determine the
value thereof. In the event of any such suspension, the Company shall make a
public announcement, and shall deliver to the Rights Agent a statement, stating
that the exercisability of the Rights has been temporarily suspended. At such
time as the suspension is no longer in effect, the Company shall make another
public announcement, and deliver to the Rights Agent a statement, so stating.
For purposes of this Section 11(a)(iii), the value of the Common Shares shall be
the current per share market price (as determined pursuant to Section 11(d)(i)
hereof) of the Common Shares on the Section 11(a)(ii) Trigger Date and the value
of any "common stock equivalent" shall be deemed to have the same value as the
Common Shares on such date.

                  (b) In case the Company shall fix a record date for the
issuance of rights, options or warrants to all holders of Preferred Shares
entitling them to subscribe for or purchase Preferred Shares (or shares having
the same rights, privileges and preferences as the Preferred Shares ("EQUIVALENT
PREFERRED SHARES")) or securities convertible into Preferred Shares or
equivalent preferred shares at a price per Preferred Share or equivalent
preferred share (or having a conversion price per share, if a security
convertible into Preferred Shares or equivalent preferred shares) less than the
then current per share market price of the Preferred Shares (as defined in
Section 11(d)) on such record date, the Purchase Price to be in effect after
such record date shall be determined by multiplying (x) the Purchase Price in
effect immediately prior to

                                       11

<PAGE>

such record date by (y) a fraction, (1) the numerator of which shall be the sum
of (A) number of Preferred Shares outstanding on such record date plus (B) the
number of Preferred Shares that the aggregate offering price of the total number
of Preferred Shares and/or equivalent preferred shares 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 (2) the denominator of
which shall be the sum of (A) number of Preferred Shares outstanding on such
record date plus (B) the number of additional Preferred Shares and/or equivalent
preferred shares to be offered for subscription or purchase (or into which the
convertible securities so to be offered are initially convertible); provided,
however, that in no event shall the consideration to be paid upon the exercise
of one Right be less than the aggregate par value of the class or series of
shares of capital stock of the Company issuable upon exercise of one Right. In
case such subscription price may be paid in a consideration part or all of which
shall be in a form other than cash, the value of such consideration shall be as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent and
shall be conclusive for all purposes. Preferred Shares owned by or held for the
account of the Company shall not be deemed outstanding for the purpose of any
such computation. Such adjustment shall be made successively whenever such a
record date is fixed; and in the event that such rights, options or warrants are
not so issued, the Purchase Price shall be adjusted to be the Purchase Price
that would then be in effect if such record date had not been fixed.

            (c) In case the Company shall fix a record date for the making of a
distribution to all holders of the Preferred Shares (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of indebtedness
or assets (other than a regular quarterly cash dividend or a dividend payable in
Preferred Shares) or subscription rights or warrants (excluding those referred
to in Section 11(b) hereof), the Purchase Price to be in effect after such
record date shall be determined by multiplying (x) the Purchase Price in effect
immediately prior to such record date by (y) a fraction, (1) the numerator of
which shall be the difference of (A) then current per share market price of the
Preferred Shares on such record date, less (B) the fair market value (as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent and
shall be conclusive for all purposes) of the portion of the assets or evidences
of indebtedness so to be distributed or of such subscription rights or warrants
applicable to one Preferred Share and (2) the denominator of which shall be such
current per share market price of the Preferred Shares; 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 class or series of shares of capital
stock of the Company to be issued upon exercise of one Right. Such adjustments
shall be made successively whenever such a record date is fixed; and in the
event that such distribution is not so made, the Purchase Price shall again be
adjusted to be the Purchase Price that would then be in effect if such record
date had not been fixed.

            (d) (i) For the purpose of any computation hereunder, the "CURRENT
PER SHARE MARKET PRICE" of any security ("SECURITY" for the purpose of this
Section 11(d)(i)) on any date shall be deemed to be the average of the daily
closing prices per share of such Security for the 30 consecutive Trading Days
(as such term is hereinafter defined) immediately prior to such date; provided,
however, that in the event that the current per share market price of the
Security is determined during a period following the announcement by the issuer
of such Security of (A) a dividend or distribution on such Security payable in
shares of such Security or securities convertible into such shares, or (B) any
subdivision, combination or reclassification of such

                                       12

<PAGE>

Security and prior to the expiration of 30 Trading Days after the ex-dividend
date for such dividend or distribution, or the record date for such subdivision,
combination or reclassification, then, and in each such case, the current per
share market price shall be appropriately adjusted to reflect the current market
price per share equivalent of such Security. The closing price for each day
shall be the last sale price, regular way, or, in case no such sale takes place
on such day, the average of the closing bid and asked prices, regular way, in
either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if the Security is not listed or admitted to trading on the
New York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the Security is listed or admitted to trading or,
if the Security is not listed or admitted to trading on any national securities
exchange, the last 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 Stock Market ("NASDAQ") or such other system then in use, or, if on any
such date the Security is not quoted by any such organization, the average of
the closing bid and asked prices as furnished by a professional market maker
making a market in the Security selected by the Board of Directors of the
Company. The term "TRADING DAY" shall mean a day on which the principal national
securities exchange on which the Security is listed or admitted to trading is
open for the transaction of business or, if the Security is not listed or
admitted to trading on any national securities exchange, a Business Day.

                  (ii) For the purpose of any computation hereunder, the
"current per share market price" of the Preferred Shares shall be determined in
accordance with the method set forth in Section 11(d)(i). If the Preferred
Shares are not publicly traded, the "current per share market price" of the
Preferred Shares shall be conclusively deemed to be the current per share market
price of the Common Shares as determined pursuant to Section 11(d)(i)
(appropriately adjusted to reflect each stock split, stock combination, stock
dividend or similar transaction occurring after the date hereof), multiplied by
one hundred. If neither the Common Shares nor the Preferred Shares are publicly
held or so listed or traded, "current per share market price" shall mean the
fair value per share thereof as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent and shall be conclusive for all purposes.

            (e) 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 that by reason of this
Section 11(e) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Section
11 shall be made to the nearest cent or to the nearest one one-millionth of a
Preferred Share or one one-thousandth of any other share or security 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 three years from the
date of the transaction that, but for such sentence of this Section 11(e), would
have required such adjustment.

            (f) If as a result of an adjustment made pursuant to Section 11(a)
hereof, the holder of any Right thereafter exercised shall become entitled to
receive any shares of capital stock of the Company other than Preferred Shares,
the number of such other shares so receivable upon exercise of any Right shall
thereafter be subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with respect to the
Preferred Shares contained in Section 11(a) through (c), inclusive, and the
provisions of Sections

                                       13

<PAGE>

7, 9, 10 and 13 with respect to the Preferred Shares shall apply on like terms
to any such other shares.

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

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

            (i) The Company may elect on or after the date of any adjustment of
the Purchase Price to adjust the number of Rights in substitution for any
adjustment in the number of one one-hundredths of a Preferred Share purchasable
upon the exercise of a Right. Each of the Rights outstanding after such
adjustment of the number of Rights shall be exercisable for the number of one
one-hundredths of a Preferred Share for which a Right was exercisable
immediately prior to such adjustment. Each Right held of record prior to such
adjustment of the number of Rights and outstanding thereafter shall become that
number of Rights (calculated to the nearest one one-thousandth) obtained by
dividing (x) the Purchase Price in effect immediately prior to adjustment of the
Purchase Price by (y) the Purchase Price in effect immediately after adjustment
of the Purchase Price. The Company shall make a public announcement (with prompt
notice thereof to the Rights Agent) of its election to adjust the number of
Rights, indicating the record date for the adjustment, and, if known at the
time, the amount of the adjustment to be made. This record date may be the date
on which the Purchase Price is adjusted or any day thereafter, but, if the Right
Certificates have been distributed, shall be at least ten days later than the
date of the public announcement. If Right Certificates have been distributed,
upon each adjustment of the number of Rights pursuant to this Section 11(i), the
Company shall, as promptly as practicable, cause to be distributed to holders of
record of Right Certificates on such record date, Right Certificates evidencing,
subject to Section 14 hereof, the additional Rights to which such holders shall
be entitled as a result of such adjustment, or, at the option of the Company,
shall cause to be distributed to such holders of record in substitution and
replacement for the Right Certificates held by such holders prior to the date of
adjustment, and upon surrender thereof, if required by the Company, new Right
Certificates evidencing all the Rights to which such holders shall be entitled
after such adjustment. Right Certificates to be so distributed shall be issued,
executed and countersigned in the manner provided for herein and shall be
registered in the names of the holders of record of Right Certificates on the
record date specified in the public announcement.

            (j) Irrespective of any adjustment or change in the Purchase Price
or the number of one one-hundredths of a Preferred Share issuable upon the
exercise of the Rights, the Right Certificates theretofore and thereafter issued
may continue to express the Purchase Price

                                       14

<PAGE>

and the number of one one-hundredths of a Preferred Share that were expressed in
the initial Right Certificates issued hereunder.

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

            (l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer (and shall promptly notify the
Rights Agent of any such elections), until the occurrence of such event, the
issuing to the holder of any Right exercised after such record date, the
additional Preferred Shares and other capital stock or securities of the
Company, if any, issuable upon such exercise over and above the Preferred Shares
and other capital stock or securities of the Company, if any, issuable upon such
exercise on the basis of the Purchase Price in effect prior to such adjustment;
provided, however, that the Company shall deliver to such holder a due bill or
other appropriate instrument evidencing such holder's right to receive such
additional shares 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 it in its sole discretion shall determine to be advisable in
order that any (i) subdivision, combination or consolidation of the Preferred
Shares, (ii) issuance wholly for cash of Preferred Shares or securities that by
their terms are convertible into or exchangeable for Preferred Shares, (iii)
dividends on Preferred Shares payable in Preferred Shares or (iv) issuance of
any rights, options or warrants referred to hereinabove in Section 11(b),
hereafter made by the Company to holders of its Preferred Shares shall not be
taxable to such stockholders.

            (n) In the event that at any time after the date of this Agreement,
the Company shall (i) declare or pay any dividend on the Common Shares payable
in Common Shares or (ii) effect a subdivision, combination or consolidation of
the Common Shares (by reclassification or otherwise other than by payment of
dividends in Common Shares) into a greater or lesser number of Common Shares,
then in any such case (i) the number of one one-hundredths of a Preferred Share
purchasable after such event upon proper exercise of each Right shall be
determined by multiplying (x) the number of one one-hundredths of a Preferred
Share so purchasable immediately prior to such event by (y) a fraction, (1) the
numerator of which is the number of Common Shares outstanding immediately before
such event and (2) the denominator of which is the number of Common Shares
outstanding immediately after such event, and (ii) each Common Share outstanding
immediately after such event shall have issued with respect to it that number of
Rights that each Common Share outstanding immediately prior to such event had
issued with respect to it. The adjustments provided for in this Section 11(n)
shall be made successively whenever such a dividend is declared or paid or such
a subdivision, combination or consolidation is effected.

            (o) The Company covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Sections 23, 24 and 27, take (or
permit any Subsidiary to take) any action if the purpose of such action is to,
or if at the time such action is taken it is reasonably

                                       15

<PAGE>

foreseeable that such action will, diminish substantially or eliminate the
benefits intended to be afforded by the Rights.

      SECTION 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES.
Whenever an adjustment is made as provided in Sections 11 or 13 hereof, the
Company shall promptly (a) prepare a certificate setting forth such adjustment,
and a brief statement of the facts and computations accounting for such
adjustment, (b) file with the Rights Agent and with each transfer agent for the
Common Shares or the Preferred Shares a copy of such certificate and (c) mail a
brief summary thereof to each holder of a Right Certificate 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 have no duty
with respect to and shall not be deemed to have knowledge of any adjustment
unless and until it shall have received such certificate.

      SECTION 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR EARNING
POWER. In the event that any Person shall become an Acquiring Person, and,
directly or indirectly, (a) the Company shall consolidate with, or merge with
and into, an Acquiring Person, or an Affiliate or Associate of an Acquiring
Person, (b) an Acquiring Person, or an Affiliate or Associate of an Acquiring
Person, shall consolidate with the Company, or merge with and into the Company
and the Company shall be the continuing or surviving corporation of such merger
and, in connection with such merger, all or part of the Common Shares shall be
changed into or exchanged for stock or other securities of any other Person (or
the Company) or cash or any other property, or (c) the Company shall sell or
otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise
transfer), in one or more transactions, assets or earning power aggregating 50%
or more of the assets or earning power of the Company and its Subsidiaries
(taken as a whole) to an Acquiring Person, or an Affiliate or Associate of an
Acquiring Person, then, and in each such case, proper provision shall be made so
that (i) each holder of a Right (other than Rights that have become Void Rights)
shall thereafter have the right to receive, upon the exercise thereof at a price
equal to the then current Purchase Price multiplied by the number of one
one-hundredths of a Preferred Share for which a Right is then exercisable, in
accordance with the terms of this Agreement and in lieu of Preferred Shares,
such number of Common Shares of the Person in the transaction (including the
Company as successor thereto or as the surviving corporation) who is issuing the
consideration with the greatest fair market value to the Company and its
stockholders in connection with such transaction ("PRINCIPAL ISSUER") as shall
equal the result obtained by (A) multiplying the then current Purchase Price by
the number of one one-hundredths of a Preferred Share for which a Right is then
exercisable and dividing that product by (B) 50% of the then current per share
market price of the Common Shares of the Principal Issuer (determined pursuant
to Section 11(d) hereof) on the date of consummation of such consolidation,
merger, sale or transfer; (ii) the Principal Issuer shall be liable for, and
shall assume, by virtue of such consolidation, merger, sale or transfer, all the
obligations and duties of the Company pursuant to this Agreement; (iii) the term
"Company" shall thereafter be deemed to refer to the Principal Issuer; and (iv)
the Principal Issuer shall take such steps (including, but not limited to, the
reservation of a sufficient number of its Common Shares in accordance with
Section 9 hereof) in connection with such consummation as may be necessary to
assure that the provisions hereof shall thereafter be applicable, as nearly as
reasonably may be, in relation to the Common Shares thereafter deliverable upon
the exercise of the Rights. The Company covenants and agrees that it shall not
consummate any such consolidation, merger, sale or transfer unless prior thereto
the Company and the Principal Issuer shall have executed and delivered to the
Rights Agent a supplemental agreement so providing. The Company shall not enter
into any transaction of the kind referred to in this Section 13 if at the time
of such transaction there are any rights, warrants,

                                       16

<PAGE>

instruments or securities outstanding or any agreements or arrangements that, as
a result of the consummation of such transaction, would eliminate or
substantially diminish the benefits intended to be afforded by the Rights. The
provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers.

      SECTION 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.

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

            (b) The Company shall not be required to issue fractions of
Preferred Shares (other than fractions that are integral multiples of one
one-hundredth of a Preferred Share) upon exercise of the Rights or to distribute
certificates that evidence fractional Preferred Shares (other than fractions
that are integral multiples of one one-hundredth of a Preferred Share).
Fractions of Preferred Shares in integral multiples of one one-hundredth of a
Preferred Share may, at the election of the Company, be evidenced by depositary
receipts, pursuant to an appropriate agreement between the Company and a
depositary selected by it; provided, that such agreement shall provide that the
holders of such depositary receipts shall have all the rights, privileges and
preferences to which they are entitled as beneficial owners of the Preferred
Shares represented by such depositary receipts. In lieu of fractional Preferred
Shares that are not integral multiples of one one-hundredth of a Preferred
Share, the Company shall pay to the registered holders of Right Certificates at
the time such Rights are exercised as herein provided an amount in cash equal to
the same fractions of the current market value of one Preferred Share. For the
purposes of this Section 14(b), the current market value of a Preferred Share
shall be the closing price of a Preferred Share (as determined pursuant to the
second sentence of Section 11(d)(i) hereof) for the Trading Day immediately
prior to the date of such exercise.

                                       17

<PAGE>

            (c) The holder of a Right by the acceptance of the Right expressly
waives any right to receive fractional Rights or fractional shares upon exercise
of a Right (except as provided above).

      SECTION 15. RIGHTS OF ACTION. All rights of action in respect of this
Agreement, excepting the rights of action of the Rights Agent and the Company,
are vested in the respective registered holders of the Rights; and any
registered holder of any Right may, without the consent of the Rights Agent or
of the holder of any other Right, in such holder's own behalf and for such
holder's own benefit, enforce, and may institute and maintain any suit, action
or proceeding against the Company to enforce, or otherwise act in respect of,
such holder's right to exercise the Rights in the manner provided in this
Agreement and in any issued and outstanding Right Certificate representing such
Right. Without limiting the foregoing or any remedies available to the holders
of Rights, it is specifically acknowledged that the holders of Rights would not
have an adequate remedy at law for any breach of this Agreement and will be
entitled to specific performance of the obligations under, and injunctive relief
against actual or threatened violations of the obligations of any Person subject
to, this Agreement.

      SECTION 16. AGREEMENT OF RIGHT HOLDERS. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:

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

            (b) after the Distribution Date, the Right Certificates are
transferable only on the registry books maintained by the Rights Agent if
surrendered at the office of the Rights Agent, duly endorsed or accompanied by a
proper instrument of transfer and payment of taxes and governmental changes, all
as otherwise provided in Section 6; and

            (c) the Company and the Rights Agent shall deem and treat the Person
in whose name the Right Certificate (or, prior to the Distribution Date, the
associated Common Shares certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any notations of
ownership or writing on the Right Certificates or the associated Common Shares
certificate made by anyone other than the Company or the Rights Agent) for all
purposes whatsoever, and neither the Company nor the Rights Agent shall be
affected by any notice (other than notice provided by transfer documentation
properly completed and tendered in accordance with this Agreement) to the
contrary.

            (d) notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any holder
of a Right or other Person as a result of its failure to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree, judgment or ruling (whether interlocutory
final) 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.

      SECTION 17. RIGHT CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No holder,
as such, of any Right shall be entitled to vote, receive dividends or be deemed
for any purpose the holder

                                       18

<PAGE>

of the Preferred Shares or any other securities of the Company that may at any
time be issuable on the exercise of such Rights nor shall anything contained
herein or in any Right Certificate be construed to confer upon the holder of any
Rights, as such, any of the rights of a stockholder of the Company or any right
to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 25 hereof), or to receive dividends
or subscription rights, or otherwise, until such Right shall have been properly
exercised in accordance with the provisions hereof.

      SECTION 18. COMPENSATION AND INDEMNITY OF THE RIGHTS AGENT. (a) The
Company agrees to pay to the Rights Agent reasonable compensation for all
services rendered by it hereunder and, from time to time, on demand of the
Rights Agent, its reasonable expenses and counsel fees and other disbursements
incurred in the preparation, delivery, amendment, administration and execution
of this Agreement and the exercise and performance of its duties hereunder. The
Company also agrees to indemnify the Rights Agent (including employees,
directors, officers and agents of the Rights Agent (the Rights Agent together
with such Persons, the "AGENT INDEMNITEES")) for, and to hold each Agent
Indemnitee harmless against, any loss, liability, damage, judgment, fine,
penalty, claim, demand, settlement, cost or expense (each an "AGENT LOSS"),
incurred on the part of such Agent Indemnitee for any action taken, suffered or
omitted by any of the Agent Indemnitees in connection with the acceptance and
administration of this Agreement, including the costs and expenses of defending
against any claim of liability in the premises, provided, however, that the
Company shall not be required to indemnify any Agent Indemnitee hereunder for
any Agent Loss that resulted from any action taken, suffered or omitted by the
Agent Indemnitee in bad faith or through gross negligence or willful misconduct
of the Rights Agent or any other Agent Indemnity, as each is finally determined
by a court of competent jurisdiction, and the respective Agent Indemnitee shall
promptly refund to the Company all sums advanced to such Agent Indemnitee as or
against indemnification for Agent Losses upon such judicial determination. If an
Agent Indemnitee brings an action to enforce its right to indemnification under
this Section 18, the Company shall pay the costs of such action to the extent
that such Agent Indemnitee is a prevailing party in such litigation. Anything to
the contrary notwithstanding, in no event shall any Agent Indemnitee be liable
for special, punitive, indirect, consequential or incidental loss or damage of
any kind whatsoever (including but not limited to lost profits), even if such
Agent Indemnitee has been advised of the likelihood of such loss or damage. Any
liability of an Agent Indemnitee under this Rights Agreement will be limited to
the amount of fees paid by the Company to the Rights Agent. The provisions of
this Section 18 and Section 20 below shall survive the termination of this
Agreement, the exercise or expiration of the Rights and the resignation or
removal of the Rights Agent.

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

      SECTION 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT. Any
Person into which the Rights Agent or any successor Rights Agent may be merged
or with which

                                       19

<PAGE>

it may be consolidated, or any Person resulting from any merger or consolidation
to which the Rights Agent or any successor Rights Agent shall be a party, or any
Person succeeding to the shareholder service business of the Rights Agent or any
successor Rights Agent, shall be the successor to the Rights Agent under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties hereto, provided that such Person would be eligible
for appointment as a successor Rights Agent under the provisions of Section 21
hereof. In case at the time such successor Rights Agent shall succeed to the
agency created by this Agreement any of the Right Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Right
Certificates so countersigned; and in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Right Certificates either in the name of the predecessor Rights
Agent or in the name of the successor Rights Agent; and in all such cases such
Right Certificates shall have the full force provided in the Right Certificates
and in this Agreement.

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

      SECTION 20. RIGHTS AND DUTIES OF RIGHTS AGENT. The Rights Agent undertakes
only the duties and obligations expressly imposed by this Agreement upon the
following terms and conditions, by all of which the Company and, by their
acceptance of Rights, the holders of Rights shall be bound:

            (a) The Rights Agent may consult with legal counsel (who may be
legal counsel for the Company), and the advice or opinion of such counsel shall
be full and complete authorization and protection to the Rights Agent and the
Rights Agent shall incur no liability for or in respect of any action taken,
suffered or omitted by it in good faith and in accordance with such advice or
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 be
proved or established by the Company prior to taking, suffering or omitting any
action hereunder, such fact or matter (unless other evidence in respect thereof
be herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of the Board, the
Chief Executive Officer, the President, any Vice President, the General Counsel,
the Treasurer or the Secretary of the Company and delivered to the Rights Agent;
and such certificate shall be full authorization and protection to the Rights
Agent and the Rights Agent shall incur no liability for or in respect of any
action taken, suffered or omitting in good faith by it under the provisions of
this Agreement in reliance upon such certificate.

            (c) The Rights Agent shall be liable hereunder only for its own bad
faith, gross negligence or willful misconduct as finally determined by a court
of competent jurisdiction. The Rights Agent makes no representation or warranty
with respect to and is not

                                       20

<PAGE>

responsible or liable for the validity, value or availability of the Rights, the
Right Certificates or the Preferred Shares.

            (d) The Rights Agent shall be protected and shall incur no liability
for any action taken, suffered or omitted by it in connection with, its
administration of this Agreement in reliance upon any Right Certificate or
certificate for the Common Shares or for other securities of the Company,
instrument of assignment or transfer, power of attorney, endorsement, affidavit,
letter, notice, direction, consent, certificate, statement or other paper or
document believed by it to be genuine and to be signed, executed and, where
necessary, verified or acknowledged, by the proper Person or Persons, or
otherwise upon the advice or opinion of counsel as set forth in this Section 20.

            (e) The Rights Agent shall not be assumed to have knowledge of and
shall not be required to take note of or act upon any fact or circumstance
including, without limitation, the occurrence of facts or circumstances leading
to the Shares Acquisition Date or the Distribution Date, facts or circumstances
relating to whether any Person may be an Affiliate or an Associate of any other
Person, facts or circumstances relevant to an adjustment to the Purchase Price,
facts or circumstances relevant to events described in Section 13 (mergers,
etc.), Section 23 (redemption) and Section 24 (exchange) that may be relevant to
performance by the Rights Agent under this Agreement unless the Company has
provided written notice thereof to the Rights Agent; and the Company agrees that
it will (i) promptly notify the Rights Agent in writing of the occurrence of the
Shares Acquisition Date (including the identity of the Acquiring Person and the
date on which the Shares Acquisition Date occurred), the Distribution Date, the
Redemption Date, and of any events described in Section 13 (merger), and (ii)
promptly provide the Rights Agent with such other information as the Rights
Agent may reasonably request in connection with the performance of its duties
under this Agreement.

            (f) The Rights Agent shall not have any liability for or be under
any responsibility in respect of the validity of this Agreement or the execution
and delivery hereof (except the due authorization and execution hereof by the
Rights Agent) or in respect of the validity or execution of any Right
Certificate (except its countersignature thereof); nor shall it be responsible
for any breach by the Company of any covenant or condition contained in this
Agreement or in any Right Certificate; nor shall it be responsible for any
change in the exercisability of the Rights (including the Rights becoming null
and void pursuant to Section 7(f) hereof) or any change or adjustment in the
terms of the Rights (including the manner, method or amount thereof) provided
for in Section 3, 11, 13, 23 or 24, or the ascertaining of the existence of
facts that would require any such change or adjustment (except with respect to
the exercise of Rights evidenced by Right Certificates after receipt of the
certificate described in Section 12 hereof, upon which the Rights Agent may
rely); nor shall it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any Preferred Shares will,
when issued, be validly authorized and issued, fully paid and nonassessable.

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

            (h) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the

                                       21

<PAGE>

Board, the Chief Executive Officer, the President, any Vice President, the
General Counsel, the Secretary or the 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 by it in good faith in
accordance with instructions of any such officer or for any delay in acting
while waiting for those instructions. Any application by the Rights Agent for
written instructions from the Company may, at the option of the Rights Agent,
set forth in writing any action proposed to be taken or omitted by the Rights
Agent with respect to its duties or obligations under this Rights Agreement and
the date on and/or after which such action shall be taken or omitted and the
Rights Agent shall not be liable for any action taken, suffered or omitted in
accordance with a proposal included in any such application on or after the date
specified therein (which date shall not be less than three Business Days after
the date any such officer actually receives such application, unless any such
officer shall have consented in writing to an earlier date) unless, prior to
taking or omitting any such action, the Rights Agent has received written
instructions in response to such application specifying the action to be taken
or omitted.

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

            (j) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and, with regard to acts performed through its
attorneys, the Rights Agent shall not be answerable or accountable for any act,
default, neglect or misconduct of any such attorneys or for any loss to the
Company resulting from any such act, default, neglect or misconduct, absent bad
faith, gross negligence or willful misconduct of the Rights Agent (as finally
determined by a court of competent jurisdiction) in the selection and continued
employment of such attorneys.

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

      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 30 days' notice in writing mailed to the Company and to each transfer agent
of the Common Shares or Preferred Shares by registered or certified mail, and to
the holders of the Right Certificates by first-class mail. In the event the
transfer agency relationship in effect between the Company and the Rights Agent
terminates, the Rights Agent will be deemed to resign automatically on the
effective date of such termination; and any required notice will be sent by the
Company. The Company may remove the Rights Agent or any successor Rights Agent
upon 30 days' notice in writing, mailed to the Rights Agent or successor Rights
Agent, as the case may be, and to each transfer agent of the Common Shares or
Preferred Shares by registered or certified mail, and to the holders of the
Right Certificates by first-class mail. If the Rights Agent shall resign or be
removed or shall otherwise become incapable of acting, the Company shall appoint
a successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of 30 days after giving notice of such removal or
after it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Rights Agent or by the holder of a Right (who shall,
with such notice, submit such holder's Right Certificate or, before the
Distribution Date, certificate representing Common Shares, for inspection by the
Company), then

                                       22

<PAGE>

the registered holder of any Right may apply to any court of the United States
or of any state thereof having competent jurisdiction over such matter for the
appointment of a new Rights Agent. Any successor Rights Agent, whether appointed
by the Company or by such a court, shall be (i) a Person organized and doing
business under the laws of the United States or of the State of California (or
of any other state of the United States), so long as such Person in good
standing, which is authorized under such laws to exercise shareholder service
powers and is subject to supervision or examination by federal or state
authority and which has at the time of its appointment as Rights Agent a
combined capital and surplus of at least $50 million dollars or (ii) an
Affiliate of a Person described in clause (i) of this sentence. After
appointment, the successor Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as Rights
Agent without further act or deed; but the predecessor Rights Agent shall
deliver and transfer to the successor Rights Agent any property at the time held
by it hereunder, and execute and deliver any further assurance, conveyance, act
or deed necessary for the purpose. Not later than the effective date of any such
appointment, the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Shares or
Preferred Shares, and mail a notice thereof in writing to the registered holders
of Rights. Failure to give any notice provided for in this Section 21, however,
or any defect therein, shall not affect the legality or validity of the
resignation or removal of the Rights Agent or the appointment of the successor
Rights Agent, as the case may be.

      SECTION 22. ISSUANCE OF NEW RIGHT CERTIFICATES. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Company may,
at its option, issue new Right Certificates evidencing Rights in such form as
may be approved by its Board of Directors to reflect any adjustment or change in
the Purchase Price and the number or kind or class of shares or other securities
or property purchasable under the Rights made in accordance with the provisions
of this Agreement. In addition, following the Distribution Date and prior to the
Redemption Date or Final Expiration Date, in connection with the issuance or
sale of Common Shares pursuant to the exercise of stock options or under any
employee plan or arrangement or upon the exercise, conversion or exchange of
other securities of the Company, in each case, which options or securities are
outstanding prior to the Distribution Date, the Board of Directors shall issue
Right Certificates representing the appropriate number of Rights in connection
with such issuance or sale; provided, however, that (i) no such Right
Certificate shall be issued and this sentence shall be null and void ab initio
if, and to the extent that, such issuance or this sentence would create a
significant risk of or result in material adverse tax consequences to the
Company or the Person to whom such Right Certificate would be issued or would
create a significant risk of or result in such options' or employee plans' or
arrangements' failing to qualify for otherwise available special tax treatment
and (ii) no such Right Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of the issuance
thereof.

      SECTION 23. REDEMPTION.

            (a) The Board of Directors of the Company may, at its option, at any
time from and after the Record Date and prior to such time as any Person becomes
an Acquiring Person ("REDEMPTION PERIOD"), redeem all but not less than all the
then outstanding Rights at a redemption price of $0.0001 per Right,
appropriately adjusted to reflect each stock split, stock combination, stock
dividend or similar transaction occurring after the date hereof (such redemption
price, as so adjusted, being hereinafter referred to as the "REDEMPTION PRICE").
After the Redemption Period has expired, the Board of Directors may not extend
the period for

                                       23
<PAGE>

redemption of the Rights or otherwise provide for their redemption. The
redemption of the Rights by the Board of Directors may be made effective at such
time during the Redemption Period, on such basis and subject to such conditions
as the Board of Directors in its sole discretion may establish.

            (b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights pursuant to Section 23(a), and
without any further action and without any notice, the right to exercise all
then outstanding Rights will terminate and the only right thereafter of the
holders of Rights shall be to receive the Redemption Price. The Company shall
promptly give notice to the Rights Agent and public notice of any such
redemption; provided, however, that the failure to give, or any defect in, any
such notice shall not affect the validity of such redemption. Within ten days
after such action of the Board of Directors ordering the redemption of the
Rights pursuant to Section 23(a), the Company shall mail a notice of redemption
to all the holders of the then outstanding Rights at their last addresses as
they appear upon the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the transfer agent for the Common
Shares. Any notice that is mailed in the manner herein provided shall be deemed
given upon mailing, whether or not the holder receives the notice. If the
payment of the Redemption Price is not included in such notice, each such notice
shall state the method by which the payment of the Redemption Price will be
made. Neither the Company nor any of its Affiliates or Associates may redeem,
acquire or purchase for value any Rights at any time in any manner other than
(i) as specifically set forth in this Section 23 or in Section 24 hereof, or
(ii) in connection with the purchase of Common Shares prior to the Distribution
Date.

      SECTION 24. EXCHANGE.

            (a) The Board of Directors of the Company may, at its option, at any
time after any Person becomes an Acquiring Person, authorize and direct the
exchange of all or part of the then outstanding and exercisable Rights (which
shall not include Rights that have become Void Rights) for Common Shares at an
exchange ratio ("EXCHANGE RATIO") of one Common Share per Right, appropriately
adjusted to reflect each stock split, stock combination, stock dividend or
similar transaction occurring after the date hereof. Notwithstanding the
foregoing, the Board of Directors shall not be empowered to effect such exchange
at any time after any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or any such Subsidiary or any
entity holding Common Shares for or pursuant to the terms of any such plan),
together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of a majority of the Common Shares then outstanding.

            (b) Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant Section 24(a) hereof and
without any further action and without any notice, the right to exercise such
Rights shall terminate and the only right thereafter of a holder of such Rights
shall be to receive that number of Common Shares equal to the number of such
Rights held by such holder multiplied by the Exchange Ratio. The Company shall
promptly give notice to the Rights Agent and 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
that is mailed in the manner herein provided shall be deemed given when mailed,
whether or not the holder receives the notice. Each such notice of exchange will
state the

                                       24

<PAGE>

method by which the exchange of the Common Shares for Rights will be effected
and, in the event of any partial exchange, the number of Rights that will be
exchanged. Any partial exchange shall be effected pro rata based on the number
of Rights (other than Rights that have become Void Rights) held by each holder
of Rights.

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

            (d) In the event that there shall not be sufficient Common Shares,
Preferred Shares or common stock equivalents authorized by the Company's
certificate of incorporation and not outstanding or subscribed for, or reserved
or otherwise committed for issuance for purposes other than upon exercise of
Rights, to permit any exchange of Rights as contemplated in accordance with this
Section 24, the Company shall take all such action as may be necessary to
authorize additional Common Shares, Preferred Shares or common stock equivalents
for issuance upon exchange of the Rights.

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

      SECTION 25. NOTICE OF CERTAIN EVENTS.

            (a) In case the Company shall propose (i) to pay any dividend
payable in stock of any class to the holders of its Preferred Shares or to make
any other distribution to the holders of its Preferred Shares (other than a
regular quarterly cash dividend), (ii) to offer to the holders of its Preferred
Shares rights or warrants to subscribe for or to purchase any additional
Preferred Shares or shares of stock of any class or any other securities, rights
or options, (iii) to effect any reclassification of its Preferred Shares (other
than a reclassification involving only the subdivision of outstanding Preferred
Shares), (iv) to effect any consolidation or merger into or with, 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 50% or more
of the assets or earning power of the Company and its Subsidiaries (taken as a
whole) to, any other Person, (v) to effect the liquidation, dissolution or
winding up of the Company or (vi) to declare or pay any dividend on the Common
Shares payable in Common Shares or to effect a subdivision, combination or
consolidation of the Common Shares (by reclassification or otherwise than by
payment of dividends in Common Shares), then, in each such case, the Company
shall give to the Rights Agent and each holder of a Right Certificate, in
accordance with Section 26 hereof, a notice of such proposed action, which shall
specify the record date for the purposes of such stock

                                       25

<PAGE>

dividend, or 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 Common Shares and/or Preferred Shares, 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 ten days prior to the record date for
determining holders of the Preferred Shares for purposes of such action, and in
the case of any such other action, at least ten days prior to the date of the
taking of such proposed action or the date of participation therein by the
holders of the Common Shares and/or Preferred Shares, whichever shall be the
earlier.

            (b) If any event set forth in Section 11(a)(ii) hereof shall occur,
then the Company shall as soon as practicable thereafter give to each holder of
a Right Certificate, in accordance with Section 26 hereof, a notice of the
occurrence of such event, which notice shall describe such event and the
consequences of such event to holders of Rights under Section 11(a)(ii) hereof.

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

             EquiServe Foods, Inc.
             1050 South Diamond Street
             Stockton, California 95205-7087
             Attention: Client Administration

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

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

Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.

      SECTION 27. SUPPLEMENTS AND AMENDMENTS. The Company may, by resolution of
its Board of Directors, from time to time, and the Rights Agent shall, if the
Company directs, supplement or amend this Agreement without the approval of any
holders of Rights in order to cure any ambiguity, to correct or supplement any
provision contained herein that may be defective or inconsistent with any other
provisions herein, or to make any other provisions or changes with respect to
the Rights that the Company may deem necessary or desirable, including, without
limitation, to modify or amend the definition of Acquiring Person set forth in
Section 1(a) hereof, to change the Purchase Price set forth in Section 7(b), or
to extend or shorten the period for redemption of the Rights; provided, however,
that from and after such time as any

                                       26

<PAGE>

Person becomes an Acquiring Person, this Agreement shall not be amended in any
manner that would adversely affect the interests of the holders of Rights (other
than Void Rights of an Acquiring Person and its Affiliates and Associates),
including, without limitation, to extend the period for redemption of the
Rights, or otherwise provide for their redemption, or to provide for an earlier
Final Expiration Date. Any such supplement or amendment will be evidenced by a
writing signed by the Company and the Rights Agent. Upon the delivery of a
certificate from an appropriate officer of the Company and, if requested by the
Rights Agent, an opinion of counsel, that states that the proposed supplement or
amendment complies with this Section 27, the Rights Agent shall execute such
supplement or amendment, provided, however, the Rights Agent shall not be
obligated to enter into any amendment or supplement to this Agreement that in
the opinion of the Rights Agent, may adversely affect the rights, duties,
liabilities of the Rights Agent.

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

      SECTION 29. 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 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.

      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, then such term, provision,
covenant or restriction shall be enforced to the maximum extent permissible, and
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.

      SECTION 31. GOVERNING LAW. This Agreement and each Right Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of Delaware and for all purposes shall be governed by and construed in
accordance with the laws of such State applicable to contracts to be made and
performed entirely within such State.

      SECTION 32. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.

      SECTION 33. DESCRIPTIVE HEADINGS. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.

      SECTION 34. ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties with respect to the subject matter hereof.

      SECTION 35. FORCE MAJEURE. Notwithstanding anything to the contrary
contained herein, Rights Agent shall not be liable for any delays or failures in
performance resulting from acts beyond its reasonable control including, without
limitation, acts of God, terrorist acts, shortage of supply, breakdowns or
malfunctions, interruptions or malfunction of computer facilities, or loss of
data due to power failures or mechanical difficulties with information storage
or retrieval systems, labor difficulties, war, or civil unrest.

                         [Signatures on Following Page]

                                       27

<PAGE>

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

Company:

DIAMOND FOODS, INC.

By: /s/ Michael J. Mendes
    ___________________________________

Name:  Michael J. Mendes

Title:  President and Chief Executive Officer

Rights Agent:

EQUISERVE TRUST COMPANY, N.A.

By: /s/ Katherine Anderson
    ___________________________________

Name: Katherine Anderson
      __________________________________

Title: Managing Director
       _________________________________

                      [SIGNATURE PAGE TO RIGHTS AGREEMENT]

                                       28

<PAGE>

                                                                       EXHIBIT A

                                      FORM

                                       OF

                           CERTIFICATE OF DESIGNATIONS

                                       OF

                  SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

                                       OF

                               DIAMOND FOODS, INC.

                         (Pursuant to Section 151 of the
                        Delaware General Corporation Law)

      Diamond Foods, Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware (hereinafter called the
"CORPORATION"), hereby certifies that the following resolution was adopted by
the Board of Directors of the Corporation as required by Section 151 of the
General Corporation Law at a meeting duly called and held on [________________],
2005:

      RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of this Corporation (hereinafter called the "BOARD OF
DIRECTORS" or the "BOARD") in accordance with the provisions of the Certificate
of Incorporation of the Corporation, the Board of Directors hereby creates a
series of Preferred Stock, par value $0.001 per share ("PREFERRED STOCK"), of
the Corporation and hereby states the designation and number of shares, and
fixes the relative rights, preferences, and limitations thereof as follows:

      Series A Junior Participating Preferred Stock:

      SECTION 1. DESIGNATION AND AMOUNT. The shares of such series shall be
designated as "SERIES A JUNIOR PARTICIPATING PREFERRED STOCK" ("SERIES A
PREFERRED STOCK") and the number of shares constituting the Series A Preferred
Stock shall be 500,000. Such number of shares may be increased or decreased by
resolution of the Board of Directors; provided, that no decrease shall reduce
the number of shares of Series A Preferred Stock to a number less than the
number of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights or warrants or upon
the conversion of any outstanding securities issued by the Corporation
convertible into Series A Preferred Stock.

      SECTION 2. DIVIDENDS AND DISTRIBUTIONS.

            (A) Subject to the rights of the holders of any shares of any series
of Preferred Stock (or any other stock) ranking prior and superior to the Series
A Preferred Stock with respect to dividends, the holders of shares of Series A
Preferred Stock shall be entitled to receive, when, as and if declared by the
Board of Directors out of funds legally available for the purpose, quarterly
dividends payable in cash on the first day of March, June, September and
December in

                                        1

<PAGE>

each year (each such date being referred to herein as a "QUARTERLY DIVIDEND
PAYMENT DATE"), commencing on the first Quarterly Dividend Payment Date after
the first issuance of a share or fraction of a share of Series A Preferred
Stock, in an amount (if any) per share (rounded to the nearest cent), subject to
the provision for adjustment hereinafter set forth, equal to 100 times the
aggregate per share amount of all cash dividends, and 100 times the aggregate
per share amount (payable in kind) of all non-cash dividends or other
distributions, other than a dividend payable in shares of Common Stock, par
value $0.001 per share ("COMMON STOCK"), of the Company or a subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise), declared
on the Common Stock since the immediately preceding Quarterly Dividend Payment
Date or, with respect to the first Quarterly Dividend Payment Date, since the
first issuance of any share or fraction of a share of Series A Preferred Stock.
In the event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount to which holders of shares of Series A Preferred Stock were
entitled immediately prior to such event under the preceding sentence shall be
adjusted by multiplying (x) such amount by (y) a fraction, (1) the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and (2) the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.

            (B) The Corporation shall declare a dividend or distribution on the
Series A Preferred Stock as provided in paragraph (A) of this Section
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock).

            (C) Dividends due pursuant to paragraph (A) of this Section shall
begin to accrue and be cumulative on outstanding shares of Series A Preferred
Stock from the Quarterly Dividend Payment Date next preceding the date of issue
of such shares, unless the date of issue of such shares is prior to the record
date for the first Quarterly Dividend Payment Date, in which case dividends on
such shares shall begin to accrue from the date of issue of such shares, or
unless the date of issue is a Quarterly Dividend Payment Date or is a date after
the record date for the determination of holders of shares of Series A Preferred
Stock entitled to receive a quarterly dividend and before such Quarterly
Dividend Payment Date, in either of which events such dividends shall begin to
accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but
unpaid dividends shall not bear interest. Dividends paid on the shares of Series
A Preferred Stock in an amount less than the total amount of such dividends at
the time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of shares of
Series A Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be not more than 60 days
prior to the date fixed for the payment thereof.

      SECTION 3. VOTING RIGHTS. The holders of shares of Series A Preferred
Stock shall have the following voting rights:

            (A) Subject to the provision for adjustment hereinafter set forth,
each share of Series A Preferred Stock shall entitle the holder thereof to 100
votes on all matters submitted to a vote of the stockholders of the Corporation.
In the event the Corporation shall at any time

                                        2

<PAGE>

declare or pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the number of votes per share
to which holders of shares of Series A Preferred Stock were entitled immediately
prior to such event shall be adjusted by multiplying (x) such number by (y) a
fraction, (1) the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and (2) the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.

            (B) Except as otherwise provided herein, in any other Certificate of
Designations creating a series of Preferred Stock or any similar stock, or by
law, the holders of shares of Series A Preferred Stock and the holders of shares
of Common Stock and any other capital stock of the Corporation having general
voting rights shall vote together as one class on all matters submitted to a
vote of stockholders of the Corporation.

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

      SECTION 4. CERTAIN RESTRICTIONS.

            (A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series A Preferred Stock outstanding shall have
been paid in full, the Corporation shall not:

                  (i) declare or pay dividends, or make any other distributions,
on any shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Stock;

                  (ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except dividends paid ratably on the Series A Preferred Stock
and all such parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all such shares are then
entitled; or

                  (iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Stock,
provided that the Corporation may at any time redeem, purchase or otherwise
acquire shares of any such junior stock in exchange for shares of any stock of
the Corporation ranking junior (as to dividends and upon dissolution,
liquidation or winding up) to the Series A Preferred Stock.

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

                                        3

<PAGE>

      SECTION 5. REACQUIRED SHARES. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein, in the
Certificate of Incorporation, or in any other Certificate of Designations
creating a series of Preferred Stock or any similar stock or as otherwise
required by law.

      SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP.

            (A) Upon any liquidation, dissolution or winding up of the
Corporation, the holders of shares of Series A Preferred Stock shall be entitled
to receive, prior and in preference to any distribution of any assets of the
Corporation to the holders of Common Stock, the amount of $1.00 per share for
each share of Series A Preferred Stock then held by them. Thereafter, the
holders of shares of Series A Preferred Stock shall be entitled to receive an
aggregate amount per share, subject to the provision for adjustment hereinafter
set forth, equal to 100 times the aggregate amount to be distributed per share
to holders of shares of Common Stock plus an amount equal to any accrued and
unpaid dividends. In the event the Corporation shall at any time declare or pay
any dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the aggregate amount to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event under the
preceding sentence shall be adjusted by multiplying (x) such amount by (y) a
fraction (1) the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and (2) the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.

            (B) If the assets of the Corporation legally available for
distribution to the holders of shares of Series A Preferred Stock upon
liquidation, dissolution or winding up of the Corporation are insufficient to
pay the full preferential amount set forth in the first sentence of paragraph
(A) above, then the entire assets of the Corporation legally available for
distribution to the holders of Series A Preferred Stock shall be distributed
among such holders in proportion to the shares of Series A Preferred Stock then
held by them.

            (C) The foregoing rights upon liquidation, dissolution or winding up
provided to the holders of Series A Preferred Stock shall be subject to the
rights of the holders of any other series of Preferred Stock (or any other
stock) ranking prior and superior to the Series A Preferred Stock upon
liquidation, dissolution or winding up.

      SECTION 7. CONSOLIDATION, MERGER, ETC. In case the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or other property, then in any such case each share of
Series A Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a

                                        4

<PAGE>

subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the amount set forth in the preceding sentence with respect to
the exchange or change of shares of Series A Preferred Stock shall be adjusted
by multiplying (x) such amount by (y) a fraction, (1) the numerator of which is
the number of shares of Common Stock outstanding immediately after such event
and (2) the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.

      SECTION 8. NO REDEMPTION. The shares of Series A Preferred Stock shall not
be redeemable.

                                        5

<PAGE>

      IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf
of the Corporation this __ day of __________, 2005.

DIAMOND FOODS, INC.

By: _________________________________________
    Michael J. Mendes
    President and Chief Executive Officer

                 [SIGNATURE PAGE TO CERTIFICATE OF DESIGNATIONS]

                                       6

<PAGE>

                                                                       EXHIBIT B

                        SUMMARY OF STOCK PURCHASE RIGHTS

      On March 22, 2005, the Board of Directors of Diamond Foods, Inc.
("COMPANY") declared a dividend of one stock purchase right ("RIGHT") for each
outstanding share of common stock, par value $0.001 per share ("COMMON SHARES"),
of the Company. The dividend is payable to stockholders of record on the date of
the closing of the Company's proposed initial public offering ("RECORD DATE").
In addition, one Right will be issued with each share of Company common stock
that becomes outstanding (i) between the Record Date and the earliest of the
Distribution Date (as defined below), the date the Rights are redeemed and the
date the Rights expire or (ii) following the Distribution Date and prior to the
date the Rights are redeemed and the date the Rights expire, pursuant to the
exercise of employee stock options or upon the exercise, conversion or exchange
of other securities of the Company, outstanding prior to the Distribution Date.
Each Right entitles the registered holder to purchase from the Company one
one-hundredth of a share of the Company's Series A Junior Participating
Preferred Stock ("PREFERRED SHARES") at a price of $60.00 per one one-hundredth
of a Preferred Share ("PURCHASE PRICE"), subject to adjustment. A complete
description of the terms of the Rights is set forth in a Rights Agreement
between the Company and Equiserve Trust Company, N.A., as Rights Agent.

      Until the earlier to occur of (i) ten days following a public announcement
or disclosure that a person or group of affiliated or associated persons
("ACQUIRING PERSON"), has acquired beneficial ownership of 15% or more of the
Company's outstanding common stock or (ii) ten business days (or a later date
determined by the Company's Board of Directors before a person or group becomes
an Acquiring Person) following the announcement of an intention to make a tender
offer or exchange offer the consummation of which would result in a person or
group becoming an Acquiring Person (the earlier of such dates being called the
"DISTRIBUTION DATE"), the Rights will be represented by common stock
certificates with a copy of this Summary of Rights attached. No person or group
will become an Acquiring Person if the Company's Board of Directors determines
that such person crossed the ownership threshold inadvertently, and such person
or group promptly sells shares of Company common stock until they own less than
15% of the outstanding common stock.

      The Rights Agreement provides that, until the Distribution Date, the
Rights will be transferred only with Company common stock. Until the
Distribution Date (or earlier redemption or expiration of the Rights), new
common stock certificates issued after the Record Date will contain a notation
incorporating the Rights Agreement by reference. Until the Distribution Date (or
earlier redemption or expiration of the Rights), the transfer of any common
stock certificates, even without such notation or a copy of this Summary of
Rights being attached, will also constitute the transfer of the Rights
associated with the Company common stock represented by such certificate. After
the Distribution Date, separate certificates representing the Rights will be
mailed to record holders of Company common stock on the Distribution Date and
such separate certificates alone will evidence the Rights. If shares of Company
common stock are issued or sold after the Distribution Date (but prior to the
redemption or expiration of the Rights) in connection with the exercise of stock
options or upon the exercise, conversion or exchange of other securities of the
Company outstanding prior to the Distribution Date, the Company shall issue the
appropriate number of Rights in connection with such issuance or sale.

                                       1

<PAGE>
      The Rights are not exercisable until the Distribution Date. The Rights
will expire on March 22, 2015, unless the expiration date is extended or unless
the Rights are earlier redeemed or exchanged by the Company, as described below.
Until a Right is exercised, the holder of a Right, as such, will have no rights
as a stockholder of the Company.

      The purchase price payable, and the number of Preferred Shares or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution. The number of Rights and the
number of one one-hundredths of a Preferred Share issuable upon exercise of each
Right are also subject to adjustment upon certain events occurring before the
Distribution Date.

      The Preferred Shares have been structured so that each Preferred Share has
dividend, liquidation and voting rights equal to those of 100 shares of Company
common stock. Because of this, the value of the one one-hundredth interest in a
Preferred Share purchasable upon exercise of each Right should approximate the
value of one Common Share. The Preferred Shares are not redeemable.

      In the event that any person or group becomes an Acquiring Person, unless
the event causing the person to become an Acquiring Person is a merger,
acquisition or other business combination described in the next paragraph, each
holder of a Right, other than Rights beneficially owned by the Acquiring Person
(which will thereafter be void), will thereafter have the right to receive upon
exercise and payment of the exercise price that number of shares of common stock
having a market value of two times the exercise price of the Right. If the
Company does not have enough authorized but unissued shares of common stock to
satisfy this obligation to issue common shares, the Company will deliver upon
payment of the exercise price of a Right an amount of cash or other securities
equivalent in value to the common stock issuable upon exercise of a Right.

      In the event that any person or group becomes an Acquiring Person and the
Company merges into or engages in certain other business combinations with an
Acquiring Person, or 50% or more of its consolidated assets or earning power are
sold to an Acquiring Person, each holder of a Right, other than Rights owned by
an Acquiring Person, will thereafter have the right to receive, upon exercise
and payment of the exercise price, that number of shares of common stock of the
acquiring company that at the time of such transaction will have a market value
of two times the exercise price of the Right.

      At any time after a person or group becomes an Acquiring Person and prior
to such person acquiring a majority of the outstanding Company common stock, the
Company Board of Directors may exchange all or some of the Rights (other than
Rights owned by the Acquiring Person), at an exchange ratio of one Common Share,
or one one-hundredth of a Preferred Share (or other equivalent securities), per
Right.

         At any time before a person or group becomes an Acquiring Person, the
Company Board of Directors may redeem all (but not some) of the Rights at a
price of $0.0001 per Right and on such terms and conditions as the Board of
Directors may establish. After the period for redemption of the Rights has
expired, the Board may not amend the Rights Agreement to extend the period for
redemption of the Rights. Immediately upon any redemption of the Rights, the
right to exercise the Rights will terminate and the only right of the holders of
Rights will be to receive the redemption price.

                                        2

<PAGE>

      The terms of the Rights may be amended by a resolution of the Board of
Directors without the consent of the holders of the Rights, except that after a
person or group becomes an Acquiring Person, no such amendment may adversely
affect the interests of the holders of the Rights (other than an Acquiring
Person).

      A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A filed
[____________], 2005. A copy of the Rights Agreement is available free of charge
from the Company. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement,
which is deemed to be incorporated into this summary.

                                        3

<PAGE>

                                                                       EXHIBIT C

                            FORM OF RIGHT CERTIFICATE

Certificate No. R-                                                 _____ Rights

         NOT EXERCISABLE AFTER __________, 2015, OR EARLIER IF REDEMPTION OR
         EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $0.0001 PER
         RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.

                               RIGHT CERTIFICATE

                               DIAMOND FOODS, INC.

      This certifies that ____________________ or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of [___________], 2005 ("RIGHTS AGREEMENT"), between Diamond
Foods, Inc., a Delaware corporation ("COMPANY"), and Equiserve Trust Company,
N.A. ("RIGHTS AGENT"), to purchase from the Company at any time after the
Distribution Date (as such term is defined in the Rights Agreement) and prior to
5:00 p.m., Pacific Time, on [___________], 2015 at the office of the Rights
Agent, or at the office of its successor as Rights Agent, one one-hundredth of a
fully paid non-assessable share of Series A Junior Participating Preferred
Stock, par value $0.001 per share ("PREFERRED SHARES"), of the Company, at a
purchase price of __________ Dollars ($_____) per one one-hundredth of a
Preferred Share ("PURCHASE PRICE"), upon presentation and surrender of this
Right Certificate with the Certification and the Form of Election to Purchase
duly executed. The number of Rights evidenced by this Right Certificate (and the
number of one one-hundredths of a Preferred Share that may be purchased upon
exercise hereof) set forth above, and the Purchase Price set forth above, are
the number and Purchase Price as of __________, based on the Preferred Shares as
constituted at such date. As provided in the Rights Agreement, the Purchase
Price and the number of one one-hundredths of a Preferred Share that may be
purchased upon the exercise of the Rights evidenced by this Right Certificate
are subject to modification and adjustment upon the happening of certain events.

      This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right Certificates. Copies of
the Rights Agreement are on file at the principal executive offices of the
Company and the above-mentioned offices of the Rights Agent.

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

                                       1

<PAGE>

      Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate (i) may be redeemed by the Company at a redemption price of
$0.0001 per Right or (ii) may be exchanged in whole or in part for Preferred
Shares or shares of the Company's Common Stock, par value $0.001 per share.

      No fractional Preferred Shares will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions that are integral
multiples of one one-hundredth of a Preferred Share, which may, at the election
of the Company, be evidenced by depository receipts), but in lieu thereof a cash
payment will be made, as provided in the Rights Agreement.

      No holder of this Right Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of the Preferred Shares or of
any other securities of the Company that may at any time be issuable on the
exercise hereof, nor shall anything contained in the Rights Agreement or herein
be construed to confer upon the holder hereof, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting stockholders (except as provided in the Rights
Agreement), or to receive dividends or subscription rights, or otherwise, until
the Right or Rights evidenced by this Right Certificate shall have been
exercised as provided in the Rights Agreement.

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

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

Dated as of _________________________

ATTEST:

                                                 DIAMOND FOODS, INC.

By: __________________________________           By: ___________________________

Countersigned:

EQUISERVE TRUST COMPANY, N.A.

By: ___________________________________
    Authorized Signature

                                        2

<PAGE>

                    Form of Reverse Side of Right Certificate

                               FORM OF ASSIGNMENT

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

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

Dated:  ________________________

                                                _______________________________
                                                Signature

Signature(s) Guaranteed:

      SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15

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

      The undersigned hereby certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Rights Agreement).

                                                _______________________________
                                                Signature

<PAGE>

              Form of Reverse Side of Right Certificate--continued

                          FORM OF ELECTION TO PURCHASE

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

To _______________________:

      The undersigned hereby irrevocably elects to exercise _____________ Rights
represented by this Right Certificate to purchase the Preferred Shares issuable
upon the exercise of such Rights and requests that certificates for such
Preferred Shares be issued in the name of:

Please insert social security
or other identifying number_______________________

____________________________________
(Please print name and address)

____________________________________

____________________________________

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

Please insert social security
or other identifying number_______________________

_____________________________________
(Please print name and address)

____________________________________

____________________________________

Dated: ______________________________

                                                     __________________________
                                                     Signature

Signature(s) Guaranteed:

      SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15

<PAGE>

              Form of Reverse Side of Right Certificate--continued

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

      The undersigned hereby certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by an Acquiring Person or an Affiliate or
Associate thereof (as such terms are defined in the Rights Agreement).

                                                  ______________________________
                                                  Signature

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

                                     NOTICE

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

      In the event the certification set forth above in the Form of Assignment
or the Form of Election to Purchase, as the case may be, is not completed, the
Company and the Rights Agent will deem the beneficial owner of the Rights
evidenced by this Right Certificate to be an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Rights Agreement) and such Assignment or
Election to Purchase will not be honored.<PAGE>

                                                                   EXHIBIT 10.24

                          DIAMOND WALNUT GROWERS, INC.
                            1050 SOUTH DIAMOND STREET
                           STOCKTON, CALIFORNIA 95201

               7.35% Senior Notes, Series A, due December 1, 2013

                   Second Amendment to Note Purchase Agreement
                            dated as of July 17, 2001

                                                                     Dated as of
                                                                   April 8, 2005

TO EACH OF THE HOLDERS OF THE ABOVE NOTES
AS LISTED IN THE ATTACHED SCHEDULE A

Ladies and Gentlemen:

      DIAMOND GROWERS, WALNUT INC., a California corporation (the "Company"),
intends to convert from an incorporated non-stock agricultural cooperative
marketing association organized under the Food and Agricultural Code of the
State of California to a Delaware corporation (the "Conversion"). The Conversion
will be accomplished by merging the Company with and into Diamond Foods, Inc., a
newly-formed Delaware corporation and wholly owned subsidiary of the Company
(the "New Company"). The New Company intends to issue new equity in a public
offering (the "Public Offering"). The Conversion will not occur unless the
Public Offering is completed. The Conversion and the Public Offering may not
take place under the Agreement described below without your consent and several
amendments to the Agreement. In addition, the Company is requesting modification
to certain of the Company's financial covenants in the Agreement.

      In consideration of the foregoing, the Company hereby agrees with you as
follows:

      1. Note Purchase Agreement. Reference is hereby made to the Note Purchase
Agreement dated as of July 17, 2001, as amended by the Amendment to Note
Purchase Agreement dated as of December 1, 2004 (the "Agreement"), between the
Company and you (or your predecessor in interest listed in Schedule A to the
Agreement) pursuant to which the Company issued its 7.35% Senior Notes, Series
A, due December 1, 2013, held by you. Certain capitalized terms used in this
Amendment are defined in Schedule B to the Agreement.

      2. Consent and Amendments. Subject to the satisfaction of the conditions
set forth in Section 5,

      (a) You consent to the Conversion.

      (b) As the context may require, all references in the Agreement and the
Notes to "Diamond Walnut Growers, Inc., a California corporation" and similar
phrases are hereby amended to be references instead to "Diamond Foods, Inc., a
Delaware corporation" and correlative phrases.

<PAGE>

      (c) Section 5.1 of the Agreement is hereby amended in its entirety to read
as follows:

      Section 5.1. Organization; Power and Authority. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and is duly qualified as a foreign corporation and is
in good standing in each jurisdiction in which such qualification is required by
law, other than those jurisdictions as to which the failure to be so qualified
or in good standing would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. The Company has the corporate power
and authority to own or hold under lease the properties it purports to own or
hold under lease, to transact the business it transacts and proposes to
transact, to execute and deliver this Agreement and the Other Agreements and the
Notes and to perform the provisions hereof and thereof.

      (d) Section 5.9 of the Agreement is hereby amended by (i) deleting the
phrase "Company is taxed as a cooperative under Subtitle A., Chapter 1,
Subchapter T, Section 1381 et seq. of the Code and the," (ii) deleting the last
sentence thereof and (iii) adding the following sentence:

      The Company and its Subsidiaries have not been previously audited by the
      Internal Revenue Service except for the fiscal year ended July 31, 1998,
      which audit has been completed.

      (e) Section 5.15(a) of the Agreement is hereby amended by (i) deleting the
date "May 1, 2001" and inserting in lieu thereof the date "April 8, 2005, and
(ii) adding the following sentence:

      The Company has delivered to you and each Other Purchaser all of the
      agreements to which the Company is a party pertaining to such Debt.

      (f) Exhibit 5.15 of the Agreement is hereby amended in its entirety to
read as follows:

                               Description of Debt
                       of the Company and its Subsidiaries
                               as of April 8, 2005

      1. Master Loan Agreement entered into as of February 23, 2004 and amended
and restated on March 21, 2005, between CoBANK, ACB ("CoBank"), and the Company,
as supplemented by the Revolving Credit Supplement dated November 23, 2004 and
the Revolving Term Loan Supplement dated February 23, 2004 (the "CoBank
Agreement").

      2. Credit Agreement entered into as of December 2, 2004, between Bank of
the West and the Company.

      (g) Section 9.5 of the Agreement is hereby amended to delete the second
sentence thereof.

      (h) Section 10.2(a) of the Agreement is hereby amended by (i) deleting the
phrase "incorporated non-stock marketing cooperative" and inserting the word
"corporation" in lieu thereof and (ii) deleting clause (iii).

      (i) Section 10.3(b) of the Agreement is hereby amended in its entirety to
read as

                                        2
<PAGE>

follows:

      (b) Subject to compliance at all times with Section 10.7, liens on
inventory in favor of producers of farm products arising under Section 55631 of
the California Food and Agricultural Code;

      (j) Section 10.3(j) is hereby amended to read in its entirety as follows,
and the current Sections 10.3(j) and (k) are hereby renumbered Sections 10.3(k)
and (l), respectively:

      (j) any Lien on equity in CoBank required pursuant to the CoBank
Agreement;

      (k) Section 10.4(a) of the Agreement is hereby amended in its entirety to
read as follows:

      (a) Limitation on Total Debt. The Company will not permit (i) the
following ratio to exceed 3.75 to 1.00: (A) Total Debt, determined as of the end
of each of the fiscal quarters ended on October 31, 2005, January 31, 2006 and
April 30, 2006, to (B) EBITDA, calculated (I) as of October 31, 2005, as 4 times
EBITDA for the fiscal quarter ending on such date, (II) as of January 31, 2006,
as 2 times EBITDA for the two consecutive fiscal quarters ending on such date,
and (III) as of April 30, 2006, as 1.3333 times EBITDA for the three consecutive
fiscal quarters ending on such date; and (ii) the following ratio to exceed 3.00
to 1.00: (A) Total Debt at any time on or after July 31, 2006, to (B) EBITDA,
calculated as any determination date for the most recent four consecutive fiscal
quarters ending on or before such determination date.

      (l) Section 10.4 of the Agreement is hereby amended to add the following:

      (c) Interest Coverage. The Company will not permit the Interest Charges
Coverage Ratio to be less than 3.00 to 1.00 (i) for the first fiscal quarter
ending after the Effective Date, (ii) for the first two consecutive fiscal
quarters ending after the Effective Date, (iii) for the first three consecutive
fiscal quarters ending after the Effective Date, and (iv) for each four
consecutive fiscal quarters thereafter.

      (m) Section 10.5 of the Agreement is hereby amended in its entirety to
read as follows:

      Section 10.5. Consolidated Net Worth. The Company will not permit
Consolidated Net Worth at any time to be less than the sum of (a) 80% of
Consolidated Net Worth as of the Effective Date plus (b) 50% of Consolidated Net
Income, if positive, for each fiscal quarter ending after the Effective Date
plus (c) 100% of the Net Proceeds Amount received by the Company from any
Investment in the equity of the Company made after the Effective Date.

      (n) Section 10.7 of the Agreement is hereby amended in its entirety to
read as follows:

      Section 10.7. Waiver of Producer's Lien; Inventory. The Company shall not
at any time allow more than 2% of its accounts payable to walnut producers to be
to walnut producers that have not given the Company written waivers
substantially in the form of Exhibit 10.7 hereof of any liens such producers may
have on the Company's inventory arising under Section 55631 of the California
Food and Agricultural Code. Furthermore, the Company shall not at

                                       3
<PAGE>

any time allow less than 50% of the its accounts payable to nut suppliers be to
walnut suppliers.

      (o) Exhibit 10.7 of the Agreement is hereby amended in its entirety to
read as follows:

      Waiver of Producer's Lien. Producer expressly waives the provisions of
California Food and Agricultural Code Section 55631, which provides in part:

            "Every producer of any farm product that sells any product which is
            grown by him to any processor . . . has a lien upon such product and
            upon all processed or manufactured forms of such fm product for his
            labor, care, and expense in growing and harvesting such product."

The producer's lien under Section 55631 is a first priority lien on the farm
product sold. A person waiving the benefits of Section 55631 would be in the
position of a general creditor of the processor, instead of a secured creditor.

      (p) Section 10 of the Agreement is hereby amended by adding Section 10.9
thereto reading as follows:

      Section 10.9. Restricted Payments. The Company will not, and will not
permit any of its Subsidiaries to, declare or make, or incur any liability to
declare or make, any Restricted Payment unless immediately after giving effect
to such action, no Default or Event of Default would exist.

      (q) Clause (ii) of Section 1l(f) is hereby amended in its entirety to read
as follows:

      (ii) (A) the Company or any Subsidiary is in default in the performance of
      or compliance with any term of any evidence of any Debt in an aggregate
      outstanding principal amount of at least $5,000,000 or of any mortgage,
      indenture or other agreement relating thereto or (B) any other condition
      exists and as a consequence of such condition such Debt may be or has been
      declared due and payable before its stated maturity or before its
      regularly scheduled dates of payment, or

      (r) The definition of "Consolidated Adjusted Net Worth" in Schedule B to
the Agreement is hereby deleted in its entirety.

      (s) Schedule B to the Agreement is hereby amended to add the following
definitions:

      "Capital Lease" means a lease with respect to which the lessee is required
concurrently to recognize the acquisition of an asset and the incurrence of a
liability in accordance with GAAP.

      "Consolidated Net Income" means, with reference to any period, the net
income (or loss) of the Company and its Subsidiaries for such period (taken as a
cumulative whole), as determined in accordance with GAAP, after eliminating all
offsetting debits and credits between the Company and its Subsidiaries and all
other items required to be eliminated in the course of the preparation of
consolidated financial statements of the Company and its Subsidiaries in
accordance with GAAP, provided that there shall be excluded any net income

                                       4
<PAGE>

or gain (but not any net loss) during such period from any extraordinary items.

      "Consolidated Net Worth" means, at any time,

            (a) the sum of (i) the par value (or value stated on the books of
      the corporation) of the capital stock (but excluding treasury stock and
      capital stock subscribed and unissued) of the Company and its Subsidiaries
      plus (ii) the amount of the paid-in capital and retained earnings of the
      Company and its Subsidiaries, in each case as such amounts would be shown
      on a consolidated balance sheet of the Company and its Subsidiaries as of
      such time prepared in accordance with GAAP, minus

            (b) to the extent included in clause (a), all amounts properly
      attributable to minority interests, if any, in the stock and surplus of
      Subsidiaries.

      "Distribution" means, in respect of any corporation, association or other
business entity:

            (a) dividends or other distributions or payments on capital stock or
      other equity interest of such corporation, association or other business
      entity (except distributions in such stock or other equity interest); and

            (b) the redemption or acquisition of such stock or other equity
      interests or of warrants, rights or other options to purchase such stock
      or other equity interests (except when solely in exchange for such stock
      or other equity interests) unless made, contemporaneously, from the net
      proceeds of a sale of such stock or other equity interests.

      "EBIT" means, with respect to any period, Consolidated Net Income for such
period plus all amounts deducted in the computation thereof on account of (a)
Interest Charges, (b) taxes imposed on or measured by income or excess profits,
(c) any Make-Whole Loan Amount paid by the Company pursuant to Section 4.2 of
the Trust Agreement in connection with an Unscheduled Redemption of Preferred
Securities and (d) non-cash share based expenses governed by FASB 123(R).

      "EBITDA" means, with respect to any period, Consolidated Net Income for
such period plus all amounts deducted in the computation thereof on account of
(a) Interest Charges, (b) taxes imposed on or measured by income or excess
profits, (c) any Make-Whole Loan Amount paid by the Company pursuant to Section
4.2 of the Trust Agreement in connection with an Unscheduled Redemption of
Preferred Securities, (d) non-cash share based expenses governed by FASB 123(R)
(e) depreciation and (f) amortization.

      "Fair Market Value" means, at any time and with respect to any property,
the sale value of such property that would be realized in an arm's-length sale
at such time between an informed and willing buyer and an informed and willing
seller (neither being under a compulsion to buy or sell).

      "Interest Charges" means, with respect to any period, the sum (without
duplication) of the following (in each case, eliminating all offsetting debits
and credits between the Company and its Subsidiaries and all other items
required to be eliminated in the course of the preparation of consolidated
financial statements of the Company and its Subsidiaries in accordance with
GAAP):

                                       5
<PAGE>

      (a) all interest in respect of Debt of the Company and its Subsidiaries
      (including imputed interest on Capital Lease Obligations) deducted in
      determining Consolidated Net Income for such period, and (b) all debt
      discount and expense amortized or required to be amortized in the
      determination of Consolidated Net Income for such period.

            "Interest Charges Coverage Ratio" means, with respect to any period,
      the ratio of (a) EBIT for such period to (b) Interest Charges for such
      period.

            "Investment" means any investment, made in cash or by delivery of
      property, in any Person, whether by acquisition of stock, capital
      contribution or otherwise.

            "Net Proceeds Amount" means, with respect to any Investment in any
      Person, an amount equal to the difference of

                        (a) the aggregate amount of the consideration (valued at
            the Fair Market Value of such consideration at the time of the
            consummation of such Investment) received by such Person in respect
            of such Investment, minus

                        (b) all ordinary and reasonable out-of-pocket costs and
            expenses actually incurred by such Person in connection with such
            Investment.

            "Restricted Payment" means any Distribution in respect of the
      Company or any Subsidiary of the Company (other than on account of capital
      stock or other equity interests of a Subsidiary owned legally and
      beneficially by the Company or another Subsidiary), including, without
      limitation, any Distribution resulting in the acquisition by the Company
      of Securities which would constitute treasury stock. For purposes of this
      Agreement, the amount of any Restricted Payment made in property shall be
      the greater of (x) the Fair Market Value of such property (as determined
      in good faith by the board of directors (or equivalent governing body) of
      the Person making such Restricted Payment) and (y) the net hook value
      thereof on the books of such Person, in each case determined as of the
      date on which such Restricted Payment is made.

            (t) On and after the date hereof, each reference in the Agreement or
the Notes to "this Agreement" or to "the Other Agreements" or the like shall
mean "this Agreement" or "the Other Agreements" as amended hereby.

            3. Scope of Amendment. Except as specifically amended above, (a) the
Agreement and the Other Agreements shall each remain in full force and effect
and each is hereby ratified and confirmed and (b) the execution, delivery and
effectiveness of this Amendment shall not, except as expressly provided herein,
operate as a waiver of any right, power, or remedy of the holders of the Notes,
nor constitute a waiver of any provision of the Agreement, the Notes or any
other document, instrument or agreement constituting executed in connection
therewith.

            4. Representations and Warranties. The Company hereby represents and
warrants that the following are true and correct on the date of this Amendment
and that, after giving effect to the amendments set forth in Section 2 above,
the following will be true and correct on the Effective Date:

                                       6
<PAGE>

            (a) No Default or Event of Default has occurred and is continuing,
      or would result from the change in the Company's name or status.

            (b) The Company has delivered to you and each Other Purchaser a copy
      of its Registration Statements on Forms S-1 and S-4, filed with the SEC on
      March 25, 2005 (the "Registration Statements"), relating to the Conversion
      and the Public Offering. The Agreement as amended by this Amendment, the
      Registration Statements and pro forma financials provided to you to date,
      taken as a whole, do not contain any untrue statement of a material fact
      or omit to state any material fact necessary to make the statements
      therein not misleading in light of the circumstances under which they were
      made. There is no fact known to the Company that could reasonably be
      expected to have a Material Adverse Effect.

            5. Effective Date. The Company shall give you at least 5 Business
Days' prior written notice of the date on or before July 29, 2005, on which the
Company would like the amendments in Section 2 to become effective (the
"Effective Date"). Such amendments shall become effective on the Effective Date
only upon the fulfillment to your satisfaction, prior to or on the Effective
Date, of the following conditions.

               (a) The Conversion and the Public Offering have occurred.

               (b) The New Company received in the Public Offering net proceeds
            of at least $50,000,000.

               (c) The New Company has on the Effective Date a Consolidated
            Adjusted Net Worth of not less than $62,500,000.

               (d) The representations and warranties of the New Company in the
            Agreement as amended by this Amendment shall be true and correct as
            of the Effective Date.

               (e) The Company and the New Company shall have performed and
            complied with all agreements and conditions contained in this
            Agreement required to be performed or complied with by it on or
            prior to the Effective Date, and after giving effect to the
            Conversion, no Default or Event of Default shall have occurred and
            be continuing.

               (f) The New Company shall have delivered to you an Officer's
            Certificate, dated the Effective Date, certifying that the
            conditions specified in Sections 5(a), (b), (c), (d) and (e) have
            been fulfilled.

               (g) You have received from the New Company, in form and substance
            reasonably satisfactory to you, its written assumption dated the
            Effective Date of the due and punctual performance and observance of
            each covenant and condition of this Agreement, the Other Agreements
            and the Notes (the "Assumption").

               (h) The New Company shall have delivered to you a certificate of
            its secretary certifying as to (i) the resolutions attached thereto
            of the Company and the New Company relating to the authorization,
            execution and delivery of this Amendment and the Assumption and
            approving the transactions contemplated by this Amendment and (ii)
            the organizational documents of the New Company.

                                       7
<PAGE>

            (i) You shall have received certificates of good standing from the
      Secretaries of State of the States of Delaware and California indicating
      that the New Company is qualified to do business and in good standing in
      such jurisdictions.

            (j) You shall have received from nationally recognized independent
      counsel, or other independent counsel reasonably satisfactory to you, and
      in form and substance reasonably satisfactory to you, a legal opinion to
      the effect that (i) the Conversion has occurred, (ii) the Company and its
      Subsidiaries are corporations, duly organized, validly existing and in
      good standing, and (iii) this Amendment, the Agreement as amended by this
      ,4mendment and all agreements or instruments effecting the Assumption are
      enforceable against the New Company in accordance with their terms, comply
      with the terms of the Agreement as amended by this Amendment, and are in
      compliance with law and other agreements to which the Company and the New
      Company is a party.

            (k) If necessary or appropriate, a new Private Placement Number
      issued by Standard & Poor's CUSIP Service Bureau (in cooperation with the
      Securities Valuation Office of the National Association of Insurance
      Commissioners) shall have been obtained for the Notes.

            (l) All corporate and other proceedings in connection with the
      transactions contemplated by this Amendment and all documents and
      instruments incident to such transactions shall be satisfactory to you and
      your special counsel, and you and your special counsel shall have received
      all such counterpart originals or certified or other copies of such
      documents as you or they may reasonably request.

      6. Covenants

      (a) Cumulative Recourse Offered Preferred Shares. The Company agrees
within 5 Business Days after the closing date of the Public Offering to (a)
prepay the Loan under the Subordinated Loan Agreement in full pursuant to
Section 2.03 of the Subordinated Loan Agreement and (b) in connection with such
repayment, effect under the Trust Agreement an Unscheduled Redemption of all
issued and outstanding Preferred Securities.

      (b) Payment of Fees. Without limiting the provisions of Section 15.1 of
the Agreement, the Company or the New Company shall pay the fees, charges and
disbursements of your special counsel to the extent reflected in a statement or
statements of such counsel rendered to the Company, within 30 days of receipt of
such statements.

      (c) Modification Fee. The Company or the New Company shall pay you
promptly after your execution of this Amendment a modification fee in the amount
of 0.1% of the aggregate principal amount of the Notes held by you.

      7. Miscellaneous.

      (a) Counterparts. This Amendment may be executed in any number of
identical counterparts, any set of which signed by all the parties hereto shall
be deemed to constitute a complete, executed original for all purposes.

                                       8
<PAGE>

      (b) Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of California without reference to
conflicts of law rules.

      (c) Headings. Heading in this Amendment are for convenience of reference
only and are not part of the substance hereof.

      (d) Equity in CoBank. Pursuant to the CoBank Agreement and the Bylaws of
CoBank, the Company has equity in CoBank, and has granted CoBank a statutory
first lien on all such equity. You hereby waive all defaults arising as a result
of the grant of such first lien and the ownership of such equity in CoBank.

                                       9
<PAGE>

      If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.

      Very truly yours,

      DIAMOND WALNUT GROWERS, INC.

      By: /s/ Matt Connors
          ------------------------------------
          Name: Matt Connors
          Title: VP Finance - Controller

      The foregoing is hereby agreed to as of the date hereof.

      TEACHERS INSURANCE AND ANNUITY
          ASSOCIATION OF AMERICA

      By: /s/ Jeffrey A. Burian
          ------------------------------------
          Name: Jeffrey A. Burian
          Title: Director

      PRU & CO.
      By Prudential Investment Management, Inc.,
           a general partner

      By: /s/ Mitchell W. Reed
          ------------------------------------
          Name: Mitchell W. Reed
          Title: Vice President

                                       10
<PAGE>

                                   SCHEDULE A

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA

PRU & CO.

                                       11

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