Communications Systems Inc – ‘8-A12G’ on 11/8/99

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Registration of a Class of Securities   —   Form 8-A
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 8-A12G      Communications Systems Shareholder Rights Plan        69    249K 

Document Table of Contents

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SECURITIES AND EXCHANGE COMMISSION
 Washington, D. C. 20549

FORM 8-A

 FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
 PURSUANT TO SECTION 12(b) OR (g) OF THE
 SECURITIES EXCHANGE ACT OF 1934

COMMUNICATIONS SYSTEMS, INC.
(Exact name of registrant as specified in its charter)

Minnesota                                 41-0957999
(State of incorporation or organization)    (I.R.S. Employer/Identification No.)

213 South Main Street                                                 
Hector, Minnesota                                55342            
---------------------------------          ------------------------------------ 
(Address of principal                              (Zip Code)             
executive offices)                                                    

Securities to be registered pursuant to Section 12(b) of the Act: None          

If this form relates to the  registration  of a class of securities  pursuant to
section  12(b)  of  the  Exchange  Act  and is  effective  pursuant  to  General
Instruction A.(c), check the following box: |_|                                 

If this form relates to the  registration  of a class of securities  pursuant to
Section  12(g)  of  the  Exchange  Act  and is  effective  pursuant  to  General
Instruction A.(d), check then following box: |X|                                

Securities  to be  registered  pursuant to Section  12(g) of the Act:  Preferred
Stock Purchase Rights                                                           

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Item 1.  Description of Securities to be Registered.                            

         On October 26, 1999, the Board of Directors of Communications  Systems,
Inc. (the "Company") declared a dividend of one Right for each outstanding share
of the Company's Common Stock, $.05 par value per share (the "Common Stock"), to
the  stockholders  of record at the close of business on November  10, 1999 (the
"Record  Date").  Except as set forth below,  each Right entitles the registered
holder to  purchase  from the Company  one  one-hundredth  (1/100) of a share of
Series A Junior  Participating  Preferred  Stock,  no par value (the  "Preferred
Stock"),  at a price  of $65 per one  one-hundredth  of a share  (the  "Purchase
Price").  The  description  and  terms of the  Rights  are set forth in a Rights
Agreement  dated as of October 26,  1999 (the  "Rights  Agreement")  between the
Company and Norwest Bank Minnesota, N.A., as Rights Agent.                      

         Initially,  the Rights will be attached  implicitly to all Common Stock
certificates  representing  shares  then  outstanding,  and  no  separate  Right
certificates  will be  distributed.  The  Rights are not  exercisable  until the
Distribution  Date.  The Rights will  expire on October 26, 2009 unless  earlier
redeemed by the Company as described  below. A Distribution  Date for the Rights
will occur  upon the  earlier of ten days  following  (i) a public  announcement
that, without the prior consent of the Board of Directors,  a person or group of
affiliated  or  associated  persons (an  "Acquiring  Person") has  acquired,  or
obtained the right to acquire,  beneficial ownership of voting securities having
16.5% or more of the voting power of the Company (the "Stock Acquisition Date"),
or (ii) the commencement of (or a public announcement of an intention to make) a
tender  offer or exchange  offer  which would  result in any person or group and
related persons having beneficial ownership of voting securities having 16.5% or
more of the voting power of the Company.                                        

         Until the  Distribution  Date, the Rights will be transferred  with and
only with  Common  Stock  certificates.  From as soon as  practicable  after the
Record Date and until the Distribution Date (or earlier redemption or expiration
of the Rights),  new Common Stock certificates issued after the Record Date upon
transfer  or  new   issuance  of  the  Common  Stock  will  contain  a  notation
incorporating the Rights Agreement by reference. Until the Distribution Date (or
earlier  redemption or expiration of the Rights),  the surrender for transfer of
any  certificates  for Common Stock  outstanding as of the Record Date will also
constitute  the  transfer  of  the  Rights  associated  with  the  Common  Stock
represented  by  such  certificate.   As  soon  as  practicable   following  the
Distribution  Date,  separate   certificates   evidencing  the  Rights  ("Rights
Certificates") will be mailed to holders of record of the Common Stock as of the
close of business on the Distribution Date, and the separate Rights Certificates
alone will evidence the Rights.                                                 

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         In the event that any person becomes the  beneficial  owner of 16.5% or
more  of the  voting  power  of the  Company  in a  transaction  which  has  not
previously  been approved by a majority of the independent  directors,  ten (10)
days  thereafter  (the "Flip-In  Event") each holder of a Right will  thereafter
have the right to receive,  in lieu of shares of Preferred Stock,  upon exercise
thereof at the then current  Purchase  Price of the Right,  Common Stock (or, in
certain  circumstances,  a combination of cash, other property,  Common Stock or
other securities) which has a value of two times the Purchase Price of the Right
(such  right being  called the  "Flip-In  Right").  Upon the  occurrence  of the
Flip-In  Event,  any Rights  that are or were at any time owned by an  Acquiring
Person shall become null and void insofar as they relate to the Flip-In Right.  

         In  addition,  in the event that the Company is acquired in a merger or
other business  combination  transaction  where the Company is not the surviving
corporation  or in the event that 50% or more of its assets or earning  power is
sold,  proper  provision  shall  be made so that  each  holder  of a Right  will
thereafter  have the right to  receive,  upon the  exercise  thereof at the then
current Purchase Price of the Right,  common stock of the acquiring entity which
has a value of two  times  the  Purchase  Price  of the  Right  (the  "Flip-Over
Right").  The  Flip-Over  Right is in addition  to the  Flip-In  Rights and will
survive any exercise of a Flip-In Right.                                        

         The Purchase Price payable, and the number of shares of Preferred Stock
or other  securities  or  property  issuable,  upon  exercise  of the Rights are
subject to adjustment from time to time to prevent  dilution (i) in the event of
a stock dividend on, or a subdivision,  combination or  reclassification  of the
Preferred  Stock,  (ii)  upon the grant to  holders  of the  Preferred  Stock of
certain  rights or warrants to  subscribe  for  Preferred  Stock or  convertible
securities at less than the current market price of the Preferred Stock or (iii)
upon  the  distribution  to  holders  of the  Preferred  Stock of  evidences  of
indebtedness  or assets  (excluding  regular  quarterly  cash  dividends)  or of
subscription rights or warrants (other than those referred to above).           

         At any time after the acquisition by a person or group of affiliated or
associated persons of beneficial  ownership of 16.5% or more of the voting power
of the  Company and prior to the  acquisition  by such person or group of 50% or
more of the voting power of the  Company,  the Board of Directors of the Company
may exchange  the Rights  (other than Rights owned by such person or group which
have become  void),  in whole or in part,  at an exchange  ratio of one share of
Common Stock, or one  one-hundredth of a share of Preferred Stock (or of a share
of a class or series of the Company's  preferred stock having equivalent rights,
preferences and privileges), per Right (subject to adjustment).                 

         With certain  exceptions,  no adjustment in the Purchase  Price will be
required until  cumulative  adjustments  require an adjustment of at least 1% in
the Purchase  Price. No fractions of shares will be issued and, in lieu thereof,
an  adjustment  in cash will be made based on the market price of the  Preferred
Stock on the last trading date prior to the date of exercise.                   

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         At any time  prior to the  earlier  to occur of (i) the tenth day after
the Stock  Acquisition  Date, or (ii) the expiration of the Rights,  the Company
may redeem the Rights in whole,  but not in part,  at a price of $.001 per Right
(the  "Redemption  Price"),  which redemption shall be effective at such time as
the Board of Directors shall establish. Additionally, the Company may, following
the tenth day after the Stock  Acquisition  Date,  redeem  the then  outstanding
Rights in whole,  but not in part, at the Redemption  Price provided that either
(a) the Acquiring Person reduces his beneficial  ownership to less than 16.5% of
the voting power of the Company in a manner which is satisfactory to the Company
and there are no other Acquiring  Persons,  or (b) such redemption is incidental
to a merger or other business combination  transaction or series of transactions
involving  the Company but not  involving an Acquiring  Person or any person who
was an Acquiring  Person.  The  redemption of Rights  described in the preceding
sentence shall be effective only after ten (10) business days prior notice. Upon
the effective  date of the  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.                                                   

         The  Preferred  Stock  purchasable  upon exercise of the Rights will be
nonredeemable.  Each share of Preferred Stock will have a preferential quarterly
dividend in an amount equal to 100 times the dividend  declared on each share of
Common Stock. In the event of  liquidation,  the holders of Preferred Stock will
receive a preferred  liquidation  payment of $100 per whole  share of  Preferred
Stock. Each whole share of Preferred Stock will have 100 votes,  voting together
with the  Common  Stock.  In the  event of any  merger,  consolidation  or other
transaction  in which Common Stock are exchange,  each share of Preferred  Stock
will be  entitled  to receive  100 times the  amount  and type of  consideration
received  per share of Common  Stock.  The rights of the  Preferred  Stock as to
dividends and liquidations, and in the event of mergers and consolidations,  are
protected by customary anti-dilution provisions.  Fractional shares of Preferred
Stock in integral  multiples of one  one-hundredth of a share of Preferred Stock
will be issued unless the Company  elects to distribute  depositary  receipts in
lieu  of  such  fractional  shares.  In lieu of  fractional  shares  other  than
fractions that are multiples of one  one-hundredth  of a share, an adjustment in
cash will be made based on the market price of the  Preferred  Stock on the last
trading date prior to the date of exercise.                                     

         Until a Right is  exercised,  it will not  entitle  the  holder  to any
rights  as a  stockholder  of the  Company  (other  than  those  as an  existing
stockholder),  including,  without  limitation,  the right to vote or to receive
dividends.                                                                      

         The terms of the Rights may be amended by the Board of Directors of the
Company (i) prior to the Distribution  Date in any manner,  and (ii) on or after
the  Distribution  Date to cure any  ambiguity,  to  correct or  supplement  any
provision of the Rights  Agreement which may be defective or  inconsistent  with
any other provisions,  or in any manner not adversely affecting the interests of
the holders of the Rights.                                                      

         As of October 26, 1999,  there were  approximately  8,558,772 shares of
Common Stock issued and outstanding,  and 1,204,238 shares reserved for issuance
pursuant to the exercise of outstanding stock options. Each outstanding share of
Common Stock on November 10, 1999 will receive one Right.  As long as the Rights
are  attached to the Common  Stock,  the  Company  will issue one Right for each
share of Common Stock issued between the Record Date and the  Distribution  Date
so that all such shares will have attached  Rights.  There are 150,000 shares of
Preferred Stock reserved for issuance upon exercise of the Rights.              

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         The Rights  Agreement is designed to protect  shareholders in the event
of an unsolicited  attempt to acquire the Company for an inadequate price and to
protect against abusive  practices that do not treat all  shareholders  equally,
including  partial and two-tier  tender offers,  coercive  offers,  and creeping
stock  accumulation  programs.  Such  practices can pressure  shareholders  into
tendering their investments prior to realizing the full value or total potential
of such  investments.  The Rights Agreement is intended to make the cost of such
abusive practices  prohibitive and create an incentive for a potential  acquiror
to negotiate in good faith with the Board.  The Rights Agreement is not intended
to, and will not, prevent all unsolicited  offers to acquire the Company.  If an
unsolicited  offer is made, and the Board  determines that it is fair and in the
best interests of the Company and its shareholders,  then, pursuant to the terms
of the Rights  Agreement,  the Board has the  authority to redeem the Rights and
permit the offer to proceed.  Essentially, the Rights Agreement will provide the
Board with  sufficient  opportunity to evaluate the fairness of any  unsolicited
offer and the credibility of the bidder,  and will therefore enable the Board to
represent the interests of all  shareholders  more  effectively.  Of course,  in
deciding whether to redeem the Rights in connection with any unsolicited  offer,
the  Board  will  be  bound  by its  fiduciary  obligations  to act in the  best
interests of the Company and its shareholders.                                  

         The form of Rights  Agreement  between the Company and the Rights Agent
specifying  the terms of the  Rights,  which  includes  as Exhibit B the form of
Rights  Certificate,  is attached hereto as Exhibit 1 and is incorporated herein
by  reference.  The foregoing  description  of the Rights does not purport to be
complete and is qualified in its entirety by reference to such Exhibit.         

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Item 2.  Exhibits.                                                              

Exhibit 1:                                                    

         Form  of  Rights  Agreement  dated  as  of  October  26,  1999  between
         Communications  Systems,  Inc.  and Norwest  Bank  Minnesota,  National
         Association,  which  includes  as Exhibit B thereto  the form of Rights
         Certificate. Pursuant to the Rights Agreement, Rights Certificates will
         not be mailed  until  after the  earlier of (i) the tenth day after the
         Stock  Acquisition  Date,  or (ii) the  tenth day after the date of the
         commencement  of,  or  first  public  announcement  of  the  intent  to
         commence,  a  tender  or  exchange  offer  by any  person  or  group of
         affiliated or associated  persons if, upon consummation  thereof,  such
         person or group would be the  beneficial  owner of 16.5% or more of the
voting power of the Company.                                  

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 SIGNATURE

         Pursuant to the  requirements of Section 12 of the Securities  Exchange
Act of 1934, the Registrant  has duly caused this  Registration  Statement to be
signed on its behalf by the undersigned, thereto duly authorized.               

                    COMMUNICATIONS SYSTEMS, INC.

Dated:  November 5, 1999            By   /s/ Paul N. Hanson                     
                                   ---------------------------------------
                                    Paul N. Hanson, Chief Financial Officer,
                                   Vice President of Finance and Treasurer

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COMMUNICATIONS SYSTEMS, INC.

 and

NORWEST BANK MINNESOTA, N.A.
Rights Agent

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

RIGHTS AGREEMENT

Dated as of October 26, 1999

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 TABLE OF CONTENTS

Section           Page                                                          

1.  Certain Definitions.....................................................1   

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

3.  Issue of Rights Certificates............................................5   

4.  Form of Rights Certificates.............................................7   

5.  Countersignature and Registration.......................................8   

6.  Transfer, Split Up, Combination and Exchange of Rights Certificates;        
 Mutilated, Destroyed, Lost or Stolen Rights Certificates................9

7.  Exercise of Rights; Purchase Price; Expiration Date of Rights..........10   

8.  Cancellation and Destruction of Rights Certificates....................12   

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

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

11.  Adjustment of Purchase Price, Number and Kind of Stock or Number           
    of Rights...........................................................14

12.  Certificate of Adjusted Purchase Price or Number of Stock.............23   

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

14.  Fractional Rights and Fractional Stock................................26   

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

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

17.  Rights Certificate Holder Not Deemed a Shareholder....................29   

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

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

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

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

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

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

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

25.  Notice of Certain Events..............................................36   

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

27.  Supplements and Amendments............................................37   

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

29.  Benefits of this Agreement............................................38   

30.  Administration of Agreement...........................................38   

31.  Severability..........................................................38   

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

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

34.  Descriptive Headings..................................................39   

Exhibit A:        Certificate of Designation, Preferences                       
and Rights of Series A Junior Participating 
Preferred Stock                             

Exhibit B:        Form of Rights Certificate                                    

Exhibit C:        Summary of Shareholders' Rights Plan                          

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RIGHTS AGREEMENT

         RIGHTS  AGREEMENT,  dated as of  October  26,  1999 (the  "Agreement"),
between  Communications  Systems, Inc., a Minnesota corporation (the "Company"),
and Norwest Bank Minnesota, N.A., a Minnesota corporation (the "Rights Agent"). 

 W I T N E S S E T H

         WHEREAS,  on October 26,  1999,  the Board of  Directors of the Company
(the "Board")  authorized and declared a dividend  distribution of one Right (as
hereinafter  defined) for each outstanding  share of the Company's Common Stock,
$.05 par  value per  share  (the  "Common  Stock")  outstanding  at the close of
business on November 10, 1999 (the "Record Date"),  each Right  representing the
right to purchase one one-hundredth of a share of Series A Junior  Participating
Preferred  Stock of the Company having the rights,  powers and  preferences  set
forth in the form of  Certificate  of  Designation,  Preferences  and  Rights of
Series A Junior Participating Preferred Stock attached hereto as Exhibit A, upon
the terms and subject to the conditions hereinafter set forth (the "Rights") and
further  authorized  the  issuance  of one Right  with  respect to each share of
Common  Stock that would become  outstanding  after the close of business on the
Record  Date  in  accordance  with  the  terms  and  subject  to the  conditions
hereinafter set forth;                                                          

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

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

                  (a) "Acquiring  Person" shall mean any Person (as such term is
         hereinafter  defined) who or which,  together with all  Affiliates  (as
         such  term is  hereinafter  defined)  and  Associates  (as such term is
         hereinafter  defined) of such Person,  without the prior  approval of a
         majority of the Board of Directors,  shall be the Beneficial  Owner (as
         such term is hereinafter  defined) of voting  securities having sixteen
         and  one-half  percent  (16.5%) or more of the then voting power of the
         Company,  but shall not  include the  Company,  any  Subsidiary  of the
         Company,  any employee benefit plan of the Company or of any Subsidiary
         of the Company,  or any entity  organized,  appointed or established by
         the Company  for or  pursuant to the terms of any such plan;  provided,
         however,  that if a Person  is the  Beneficial  Owner  at the  close of
         business on the date of this Agreement of sixteen and one-half  percent
         (16.5%) or more of the voting power of the  Company,  such Person shall
         not be deemed an Acquiring Person unless and until such Person acquires
         any  additional  Common  Stock in any manner  other than  pursuant to a
         stock dividend,  stock split,  recapitalization  or similar transaction
         that  does not  affect  the  percentage  of  outstanding  Common  Stock
         beneficially owned by such Person.  Notwithstanding  the foregoing,  no
         Person  shall  become  an  "Acquiring  Person"  as  the  result  of  an
         acquisition  of Common  Stock by the Company  which,  by  reducing  the
         number of shares  outstanding,  increases the  proportionate  number of

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         shares  beneficially  owned by such  Person  to  sixteen  and  one-half
         percent  (16.5%) or more of the then voting  power of the Company  then
         outstanding;  provided,  however,  that if a Person  shall  become  the
         Beneficial Owner of sixteen and one-half percent (16.5%) or more of the
         then voting power of the Company then  outstanding  by reason of shares
         purchased by the Company and shall,  after such share  purchases by the
         Company,  become the Beneficial Owner of additional Common Stock of the
         Company  representing  1% or more of the  shares of Common  Stock  then
         outstanding,  then such  Person  shall be  deemed  to be an  "Acquiring
         Person." Notwithstanding the foregoing, if a majority of the members of
         the  Company's  Board of Directors  then in office  determines  in good
         faith that a Person who would  otherwise be an "Acquiring  Person",  as
         defined pursuant to the foregoing provisions of this paragraph (a), has
         become  such  inadvertently,  and such  Person  divests as  promptly as
         practicable a sufficient  number of shares of Common Stock so that such
         Person would no longer be an Acquiring  Person,  as defined pursuant to
         the foregoing  provisions of this paragraph (a), then such Person shall
         not be deemed to be an  "Acquiring  Person"  for any  purposes  of this
Agreement.                                                    

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

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

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

                           (ii)  which  such  Person  or  any of  such  Person's
                  Affiliates  or  Associates  has (A) the right or obligation to
                  acquire  (whether such right or obligation is  exercisable  or
                  effective  immediately  or only  after  the  passage  of time)
                  pursuant  to  any  agreement,   arrangement  or  understanding
                  (whether or not in writing) or upon the exercise of conversion
                  rights,  exchange rights, rights (other than the Rights at any
                  time  prior  to the  occurrence  of a  Triggering  Event,  but
                  thereafter  including  the Rights  acquired from and after the
                  Distribution  Date (as defined in Section  3(a)  below)  other
                  than pursuant to Section 3(a) below),  warrants or options, or
                  otherwise;  provided,  however,  that a  Person  shall  not be
                  deemed the "Beneficial  Owner" of, or to  "beneficially  own,"
                  securities  tendered  pursuant to a tender or  exchange  offer
                  made by such  Person  or any of such  Person's  Affiliates  or
                  Associates  until such  tendered  securities  are accepted for
                  purchase or exchange; or (B) the right to vote pursuant to any
                  agreement,  arrangement  or  understanding  (whether or not in
                  writing); provided, however, that a Person shall not be deemed
                  the  "Beneficial  Owner"  of,  or to  "beneficially  own," any

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                  security under this clause (B) if the  agreement,  arrangement
                  or understanding to vote such security: (1) arises solely from
                  a  revocable  proxy  given in  response  to a public  proxy or
                  consent solicitation made pursuant to, and in accordance with,
                  the applicable  rules and regulations of the Exchange Act, and
                  (2) is not also then reportable by such Person on Schedule 13D
                  under  the  Exchange  Act  (or  any  comparable  or  successor
report); or                                 

                           (iii)  which  are  beneficially  owned,  directly  or
                  indirectly, by any other Person (or any Affiliate or Associate
                  thereof)  with  which  such  Person  or any of  such  Person's
                  Affiliates or Associates  has any  agreement,  arrangement  or
                  understanding  (whether  or  not in  writing  and  other  than
                  customary agreements with and between underwriters and selling
                  group  members with respect to a bona fide public  offering of
                  securities),  for the purpose of  acquiring,  holding,  voting
                  (except  pursuant to a revocable  proxy as described in clause
                  (B) of  subparagraph  (ii) of this paragraph (c)) or disposing
of any voting securities of the Company.    

                           Notwithstanding the foregoing,  a Person shall not be
                  deemed to be the  "Beneficial  Owner"  of or to  "beneficially
                  own" any securities that are issued, or proposed to be issued,
                  to such  Person  pursuant  to any stock  option  plan or other
                  employee  compensation  plan or  arrangement of the Company or
                  any of its  Subsidiaries  or any  securities  for  which  such
                  Person  serves  as a trustee  pursuant  to an  employee  stock
                  ownership  or  similar  plan  of  the  Company.   Furthermore,
                  directors  and officers of the Company  shall not be deemed to
                  beneficially  own each others Common Stock solely due to their
   status as a director or officer of the Company.

                           Notwithstanding   anything  in  this   definition  of
                  Beneficial  Ownership  to  the  contrary,   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  which such Person  would be deemed to
own beneficially hereunder.                 

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

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

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                  (f) "Common Stock" shall mean the Common Stock, $.05 par value
         per share, of the Company (as such term is defined in the  introductory
         paragraphs  above) or any other shares of capital  stock of the Company
         into which the Common Stock shall be  reclassified  or changed,  except
         that "Common  Stock" when used with  reference to any Person other than
         the Company  shall mean the shares of capital  stock of such Person (if
         such  Person  is a  corporation)  of any class or  series,  or units of
         equity  interests in such Person (if such Person is not a  corporation)
         of any  class or  series,  the  terms of which do not limit (as a fixed
         amount and not merely in proportional terms) the amount of dividends or
         income payable or  distributable  on such class or series or the amount
         of assets  distributable  on such class or series upon any voluntary or
         involuntary  liquidation,  dissolution or winding up of such Person and
         do not provide  that such class or series is subject to  redemption  at
         the option of such Person,  or any shares of capital  stock or units of
         equity  interests  into which the foregoing  shall be  reclassified  or
         changed;  provided,  however,  that if at any time there  shall be more
         than one such class or series of capital  stock or equity  interests of
         such  Person,  "Common  Stock" of such  Person  shall  include all such
         classes and series  substantially in the proportion of the total number
         of shares or other  units of each class or series  outstanding  at such
time.                                                         

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

                  (h) "Expiration  Date" and "Final  Expiration Date" shall have
the meanings set forth in Section 7 hereof.                                     

                  (i)  "Flip-In  Event"  shall  have the  meaning  set  forth in
Section 11(a)(ii) hereof.                                                       

                  (j) "Person"  shall mean any  individual,  firm,  corporation,
         partnership,  limited  liability  company  or other  entity  and  shall
include any successor (by merger or otherwise) of such entity.

                  (k)  "Preferred  Stock"  shall mean  shares of Series A Junior
Participating Preferred Stock, no par value, of the Company.  

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

                  (m)  "Subsidiary"  shall  mean,  with  reference  to any other
         Person,  any  corporation  of which a  majority  of any class of equity
         security is beneficially owned,  directly or indirectly,  by such other
Person.                                                       

                  (n)  "Triggering  Event"  shall mean the Flip-In  Event or any
event described in Section 13(a) hereof.                                        

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                  (o) "Voting  power of the Company"  shall mean the  collective
voting power of the Common Stock of the Company.                                

          In addition, for purposes of this Agreement,  the following terms have
the meanings indicated in the specified sections of this Agreement:  "Act" shall
have the meaning set forth in Section 9(c)  hereof;  "Adjustment  Shares"  shall
have the meaning set forth in Section 11(a)(ii)  hereof;  "Board" shall have the
meaning set forth in the  preamble;  "Common Stock  Equivalents"  shall have the
meaning set forth in Section 11(a)(iii) hereof; "Company" shall have the meaning
set forth in the  preamble;  "current  market  price" shall have the meaning set
forth in Section 11(d) hereof;  "Current Value" shall have the meaning set forth
in  Section  11(a)(iii)  hereof;  "Equivalent  Preferred  Stock"  shall have the
meaning set forth in Section 11(b) hereof; "Exchange Act" shall have the meaning
set forth in section  1(b) hereof;  "Exchange  Ratio" shall have the meaning set
forth in Section 24(a) hereof; "Flip-In Trigger Date" shall have the meaning set
forth in Section 11(a)(iii) hereof; "Nasdaq" shall have the meaning set forth in
Section 11(d)(i) hereof;  "Principal  Party" shall have the meaning set forth in
Section  13(b)  hereof;  "Purchase  Price"  shall have the  meaning set forth in
Section  4(a)  hereof;  "Record  Date"  shall have the  meaning set forth in the
preamble;  "Redemption  Price"  shall  have the  meaning  set  forth in  Section
23(a)(i)  hereof;  "Rights"  shall have the meaning  set forth in the  preamble;
"Rights  Agent"  shall  have the  meaning  set  forth in the  preamble;  "Rights
Certificates" shall have the meaning set forth in Section 3(a) hereof;  "Spread"
shall have the meaning  set forth in Section  11(a)(iii)  hereof;  "Substitution
Period" shall have the meaning set forth in Section 11(a)(iii) hereof;  "Summary
of Rights" shall have the meaning set forth in Section 3(b) hereof; and "Trading
Day" shall have the meaning set forth in Section 11(d)(i) hereof.               

         Any determination required by the definitions contained in this Section
1 shall be made by the Board in their good faith judgment,  which  determination
shall be final and binding on the Rights Agent.                                 

         Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof,  shall prior to the Distribution  Date also
be the holders of the Common Stock) 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.  In the event the Company appoints one or more Co-Rights Agents,  the
respective  duties of the Rights Agent and any  Co-Rights  Agent shall be as the
Company shall determine.                                                        

Section 3.  Issue of Rights Certificates.                     

                  (a) Until the  earlier  of (i) the  close of  business  on the
         tenth (10th) day after the Stock Acquisition Date, or (ii) the close of
         business  on the  tenth  (10th)  day  (or  such  later  date  as may be
         determined  by action of the  majority of the members of the  Company's
         Board  of  Directors  prior  to such  time  as any  Person  becomes  an

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         Acquiring  Person)  after  the date of the  commencement  of,  or first
         public  announcement  of the  intent  of any  Person  (other  than  the
         Company,  any Subsidiary of the Company or any employee benefit plan of
         the  Company  or of  any  Subsidiary  of  the  Company  or  any  entity
         organized,  appointed or  established by the Company for or pursuant to
         the terms of any such plan),  to commence,  a tender or exchange  offer
         which  would  result  in  such  person  becoming  an  Acquiring  Person
         (including  any such date which is after the date of this Agreement and
         prior to the  issuance  of the  Rights)  (the  earliest of (i) and (ii)
         being herein referred to as the  "Distribution  Date"),  (x) the Rights
         will be evidenced  (subject to the  provisions of paragraph (b) of this
         Section 3) by the certificates for Common Stock registered in the names
         of the holders of the Common Stock (which certificates for Common Stock
         shall be deemed also to be certificates for Rights) and not by separate
         certificates, and (y) the Rights (and the right to receive certificates
         therefor) will be transferable  only in connection with the transfer of
         the  underlying  shares of Common  Stock  (including  a transfer to the
         Company).  As soon as  practicable  after the  Distribution  Date,  the
         Rights Agent will send by  first-class,  postage  prepaid mail, to each
         record  holder of the Common  Stock as of the close of  business on the
         Distribution  Date,  at the address of such holder shown on the records
         of the Company, one or more rights  certificates,  in substantially the
         form of Exhibit B hereto (the "Rights  Certificates"),  evidencing  one
         Right  for each  share of  Common  Stock so held.  As of and  after the
         Distribution  Date, the Rights will be evidenced  solely by such Rights
Certificates.                                                 

                  (b) As promptly as practicable  following the Record Date, the
         Company will send a copy of a Summary of the Shareholders' Rights Plan,
         in substantially the form attached hereto as Exhibit C (the "Summary of
         Rights"),  by first-class,  postage prepaid mail, to each record holder
         of the Common Stock as of the close of business on the Record Date,  at
         the address of such holder  shown on the records of the  Company.  With
         respect to  certificates  for the Common  Stock  outstanding  as of the
         Record Date, until the Distribution  Date, the Rights will be evidenced
         by such certificates for the Common Stock and the registered holders of
         the Common Stock shall also be the registered holders of the associated
         Rights.  Until the earlier of the  Distribution  Date or the Expiration
         Date (as such term is defined in Section 7 hereof),  the  surrender for
         transfer of any of the certificates for the Common Stock outstanding on
         the Record  Date  shall  also  constitute  the  transfer  of the Rights
   associated with the Common Stock represented by such certificate.

                  (c)  Certificates for the Common Stock issued after the Record
         Date  but  prior  to  the  earlier  of  the  Distribution  Date  or the
         Expiration  Date,  shall be deemed also to be certificates  for Rights,
and shall bear the following legend:                          

                  This certificate also evidences and entitles the holder hereof
                  to certain Rights as set forth in the Rights Agreement between
                  Communications Systems, Inc. and Norwest Bank Minnesota,  N.A.
                  dated as of October 26, 1999,  (the "Rights  Agreement"),  the
                  terms of which are hereby incorporated herein by reference and

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                  a copy  of  which  is on  file  at the  principal  offices  of
                  Communications  Systems, Inc. Under certain circumstances,  as
                  set  forth  in the  Rights  Agreement,  such  Rights  will  be
                  evidenced  by  separate  certificates  and will no  longer  be
                  evidenced by this certificate.  Communications  Systems,  Inc.
                  will  mail to the  holder  of this  certificate  a copy of the
                  Rights  Agreement  without charge  promptly after receipt of a
                  written request therefor. Under certain circumstances,  Rights
                  issued to, or held by, an Acquiring Person, or an Affiliate or
                  Associate  thereof  (as such  terms are  defined in the Rights
                  Agreement) and any subsequent holder of such Rights may become
null and void.                              

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

Section 4.  Form of Rights Certificates.                      

                  (a) The  Rights  Certificates  (and the forms of  election  to
         exercise and of assignment to be printed on the reverse  thereof) shall
         each be  substantially in the form attached hereto as Exhibit B and may
         have such marks of  identification  or  designation  and such  legends,
         summaries  or  endorsements  printed  thereon as the  Company  may deem
         appropriate  and as are not  inconsistent  with the  provisions of this
         Agreement,  or as may be required to comply with any  applicable law or
         with any rule or regulation  made pursuant  thereto or with any rule or
         regulation  of any stock  exchange on which the Rights may from time to
         time be listed,  or to conform to usage.  Subject to the  provisions of
         Section 11 and  Section 22 hereof,  the Rights  Certificates,  whenever
         distributed,  shall be dated as of the  Record  Date and on their  face
         shall entitle the holders  thereof to purchase such number of shares of
         Preferred  Stock (or Common Stock,  as the case may be) as shall be set
         forth therein at the price per share set forth  therein (the  "Purchase
         Price"),  but the number of such shares and the Purchase Price shall be
subject to adjustment as provided herein.                     

                  (b) Any Rights  Certificate issued pursuant to Section 3(a) or
         Section 22 hereof that represents Rights  beneficially owned by: (i) an
         Acquiring Person or any Associate or Affiliate of an Acquiring  Person,
         (ii) a  transferee  of an  Acquiring  Person (or any such  Associate or
         Affiliate) who becomes a transferee  after the Acquiring Person becomes

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         such,  except a  transferee  purchasing  from or  through a  nationally
         recognized  broker-dealer  where such transferee and such  transferee's
         Associates and  Affiliates do not  collectively  acquire,  and will not
         have  acquired  during the preceding 20 calendar  days, in  combination
         with the  proposed  transfer,  an amount of Common  Stock equal to more
         than one percent (1%) of the  outstanding  shares of Common Stock,  and
         (iii) a  transferee  of an Acquiring  Person (or any such  Associate or
         Affiliate) who becomes a transferee  prior to or concurrently  with the
         Acquiring  Person  becoming such and receives  such Rights  pursuant to
         either  (A) a  transfer  (whether  or not for  consideration)  from the
         Acquiring Person to or on behalf of holders of equity interests in such
         Acquiring  Person or to any Person with whom the  Acquiring  Person has
         any continuing  agreement,  arrangement or understanding  regarding the
         transferred  Rights or (B) a transfer which the majority of the members
         of the Company's Board of Directors otherwise conclude in good faith is
         part of a plan,  arrangement  or  understanding  which has as a primary
         purpose or effect  avoidance  of Section  7(e)  hereof,  and any Rights
         Certificate  issued  pursuant  to Section 6 or  Section 11 hereof  upon
         transfer,  exchange,  replacement  or  adjustment  of any other  Rights
         Certificate referred to in this sentence,  shall contain (to the extent
     feasible and reasonably identifiable as such) the following legend:

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

         The  provisions  of  Section  7(e) of the  Rights  Agreement  shall  be
operative  whether or not the  foregoing  legend is contained on any such Rights
Certificate.                                                                    

Section 5.  Countersignature and Registration.                

                  (a) The Rights Certificates shall be executed on behalf of the
         Company  by its  Chief  Executive  Officer,  its  President,  its Chief
         Financial Officer,  its Treasurer or any Vice President either manually
         or by facsimile signature,  which shall be attested by the Secretary or
         any Assistant Secretary of the Company, either manually or by facsimile
         signature.  The Rights Certificates shall be manually  countersigned by
         the  Rights  Agent and shall  not be valid  for any  purpose  unless so
         countersigned. In case any officer of the Company who shall have signed
         any of the Rights  Certificates  shall cease to be such  officer of the
         Company  before  countersignature  by the Rights Agent and issuance and
         delivery by the Company, such Rights Certificates, nevertheless, may be
         countersigned  by the Rights  Agent,  and issued and  delivered  by the
         Company  with the same force and effect as though the person who signed
         such  Rights  Certificates  had not  ceased to be such  officer  of the
         Company;  and any  Rights  Certificates  may be signed on behalf of the
         Company by any person who, at the actual date of the  execution of such

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         Rights  Certificate,  shall be a proper  officer of the Company to sign
         such Rights Certificate,  although at the date of the execution of this
Rights Agreement any such person was not such an officer.     

                  (b) Following  the  Distribution  Date,  the Rights Agent will
         keep or cause to be kept,  at its offices in South St. Paul,  Minnesota
         or New York,  New York,  books for  registration  and  transfer  of the
         Rights Certificates  issued hereunder.  Such books shall show the names
         and addresses of the respective holders of the Rights Certificates, the
         number  of  Rights  evidenced  on  its  face  by  each  of  the  Rights
Certificates and the date of each of the Rights Certificates. 

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

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

                  (b)  Upon  receipt  by the  Company  and the  Rights  Agent of
         evidence   reasonably   satisfactory  to  them  of  the  loss,   theft,
         destruction  or  mutilation  of a Rights  Certificate,  and, in case of
         loss,  theft  or  destruction,  of  indemnity  or  security  reasonably
         satisfactory to them, and  reimbursement  to the Company and the Rights

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         Agent of all reasonable expenses incidental thereto, and upon surrender
         to the  Rights  Agent and  cancellation  of the Rights  Certificate  if
         mutilated,   the  Company   will  execute  and  deliver  a  new  Rights
         Certificate of like tenor to the Rights Agent for  countersignature and
         delivery to the registered  owner in lieu of the Rights  Certificate so
lost, stolen, destroyed or mutilated.                         

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

                  (a)  The  registered  holder  of any  Rights  Certificate  may
         exercise the Rights  evidenced  thereby  (except as otherwise  provided
         herein including without limitation, the restrictions on exercisability
         set forth in Section 9(c), Section 11(a)(iii) and Section 23(a) hereof)
         in  whole or in part at any  time  after  the  Distribution  Date  upon
         surrender  of the  Rights  Certificate,  with the form of  election  to
         exercise on the reverse side thereof duly executed, to the Rights Agent
         at the  office or  offices  of the  Rights  Agent  designated  for such
         purpose,  together  with  payment  of the  Purchase  Price for each one
         one-hundredth  of a share of Preferred  Stock (or, if applicable,  such
         other number of shares or other  securities) as to which the Rights are
         exercised,  at or prior to the  earlier of (i) the close of business on
         October  26, 2009 (the "Final  Expiration  Date"),  or (ii) the time at
         which the Rights are  redeemed as  provided in Section 23 hereof  (such
         earlier time being herein  referred to as the "Expiration  Date").  Any
         Person who prior to the  Distribution  Date becomes a record  holder of
         shares of Common  Stock may  exercise all of the rights of a registered
         holder of a Rights  Certificate  with respect to the Rights  associated
         with such shares of Common Stock in accordance  with and subject to the
         provisions of this Agreement,  including the provisions of Section 7(e)
         hereof, as of the date such Person becomes a record holder of shares of
Common Stock.                                                 

                  (b) The Purchase Price for each one  one-hundredth  of a share
         of Preferred  Stock pursuant to the exercise of a Right shall initially
         be sixty-five  Dollars ($65),  and shall be subject to adjustment  from
         time to time as  provided  in Section 11 hereof and shall be payable in
         lawful  money of the  United  States  of  America  in  accordance  with
paragraph (c) below.                                          

                  (c)  Upon  receipt  of  a  Rights   Certificate   representing
         exercisable  Rights,  with  the  form  of  election  to  exercise  duly
         executed,  accompanied  by payment of the Purchase Price for the shares
         to be purchased and an amount equal to any applicable transfer tax, the
         Rights  Agent shall  thereupon  promptly (i) (A)  requisition  from any
         transfer agent of the shares of Preferred Stock (or make available,  if
         the Rights  Agent is the transfer  agent for such shares)  certificates
         for the number of shares of  Preferred  Stock to be  purchased  and the
         Company hereby irrevocably authorizes its transfer agent to comply with
         all such requests, or (B) if the Company, in its sole discretion, shall
         have elected to deposit the shares of  Preferred  Stock  issuable  upon
         exercise of the Rights  hereunder into a depositary,  requisition  from
         the depositary agent depositary  receipts  representing  such number of
         one  one-hundredth of a share of Preferred Stock as are to be purchased
         (in  which  case   certificates  for  the  shares  of  Preferred  Stock

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         represented  by such receipts  shall be deposited by the transfer agent
         with the  depositary  agent) and the Company will direct the depositary
         agent to comply with such request,  (ii) when appropriate,  requisition
         from the  Company  the  amount of cash,  if any,  to be paid in lieu of
         fractional  shares in  accordance  with Section 14 hereof,  (iii) after
         receipt of such certificates or depositary receipts,  cause the same to
         be  delivered  to or upon the  order of the  registered  holder of such
         Rights  Certificate,  registered  in  such  name  or  names  as  may be
         designated  by such holder,  and (iv) when  appropriate,  after receipt
         thereof,  deliver  such  cash,  if any,  to or upon  the  order  of the
         registered  holder  of such  Rights  Certificate.  The  payment  of the
         Purchase  Price (as such  amount  may be  reduced  pursuant  to Section
         11(a)(iii)  hereof)  shall  be  made in  cash  or by  certified  check,
         cashier's check,  bank draft or money order payable to the order of the
         Company,  except that if so  provided by the Board,  the payment of the
         Purchase  Price  following  the  Flip-In  Event  and  until  the  first
         occurrence of an event described in Section 13 may be made wholly or in
         part by delivery of a certificate  or  certificates  (with  appropriate
         stock powers executed in blank attached thereto) evidencing a number of
         shares of Common Stock of the Company equal to the then Purchase  Price
         divided by the closing price (as  determined  pursuant to Section 11(d)
         hereof)  per  share of  Common  Stock on the  Trading  Day  immediately
         preceding the date of such  exercise.  In the event that the Company is
         obligated to issue other  securities  of the  Company,  pay cash and/or
         distribute other property pursuant to Section  11(a)(iii)  hereof,  the
         Company  will  make  all  arrangements  necessary  so that  such  other
         securities, cash, and/or property are available for distribution by the
         Rights Agent, if and when appropriate.  In addition,  in the case of an
         exercise of the Rights by a holder pursuant to Section  11(a)(ii),  the
         Rights Agent shall  return such Rights  Certificate  to the  registered
         holder  thereof  after  imprinting,  stamping or  otherwise  indicating
         thereon  that the rights  represented  by such  Rights  Certificate  no
         longer include the rights  provided by Section  11(a)(ii) of the Rights
         Agreement  and if less than all the Rights  represented  by such Rights
         Certificate  were so exercised,  the Rights Agent shall indicate on the
         Rights  Certificate  the  number of Rights  represented  thereby  which
continue to include the rights provided by Section 11(a)(ii). 

                  (d) In case the  registered  holder of any Rights  Certificate
         shall exercise (except pursuant to Section 11(a)(ii)) less than all the
         Rights evidenced thereby,  a new Rights  Certificate  evidencing Rights
         equivalent to the Rights remaining  unexercised  shall be issued by the
         Rights  Agent and  delivered  to the  registered  holder of such Rights
         Certificate  or  to  his  duly  authorized  assigns,   subject  to  the
provisions of Section 14 hereof.                              

                  (e)   Notwithstanding   anything  in  this  Agreement  to  the
         contrary,  from and after the occurrence of a Flip-In Event, any Rights
         beneficially  owned  by (a) an  Acquiring  Person  or an  Associate  or
         Affiliate of an Acquiring  Person,  (b) except as provided  below or in
         Section  4(b),  a  transferee  of an  Acquiring  Person  (or  any  such

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         Associate or  Affiliate)  who becomes a transferee  after the Acquiring
         Person becomes such, and (c) except as provided  below, a transferee of
         an Acquiring  Person (or any such Associate or Affiliate) who becomes a
         transferee prior to or concurrently  with the Acquiring Person becoming
         such and  receives  such  Rights  pursuant  to  either  (i) a  transfer
         (whether or not for  consideration)  from the Acquiring Person to or on
         behalf of holders of equity  interests in such  Acquiring  Person or to
         any Person with whom the Acquiring Person has any continuing agreement,
         arrangement or understanding regarding the transferred Rights or (ii) a
         transfer  which the majority of the members of the  Company's  Board of
         Directors  otherwise  conclude  in  good  faith  is  part  of  a  plan,
         arrangement or  understanding  which has as a primary purpose or effect
         avoidance of this Section 7(e),  shall become null and void without any
         further  action,  and any holder of such Rights shall thereupon have no
         right to exercise such Rights under any provision of this Agreement.  A
         majority  of the members of the  Company's  Board of  Directors  may in
         appropriate  circumstances  waive  application of this Section 7(e) and
         the requirements of Section 4(b) to any transfer by an Acquiring Person
         in  connection  with a transfer or series of  transfers  which cause an
         Acquiring  Person to become the Beneficial  Owner of voting  securities
         having less than  sixteen and  one-half  percent  (16.5%) of the voting
         power of the Company.  The Company shall use all reasonable  efforts to
         insure that the  provisions  of this  Section  7(e) hereof are complied
         with,  but shall  have no  liability  to any  holder of Rights  for the
         inability  to make any  determinations  with  respect  to an  Acquiring
         Person or any of their respective Affiliates, Associates or transferees
hereunder.                                                    

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

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

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Section 9.  Reservation and Availability of Capital Stock.    

                  (a) The Company  covenants and agrees that it will cause to be
         reserved and kept available out of its  authorized and unissued  shares
         of  Preferred  Stock (and,  following  the  occurrence  of a Triggering
         Event,  Common Stock and/or other  securities)  or any  authorized  and
         issued shares of Preferred  Stock (and  following  the  occurrence of a
         Triggering  Event,  Common Stock and/or other  securities)  held in its
         treasury,  the number of shares of Preferred Stock (and,  following the
         occurrence of a Triggering Event, Common Stock and/or other securities)
         that,  except as provided in Section  11(a)(iii) and subject to Section
         7(e) hereof,  will be  sufficient to permit the exercise in full of all
outstanding Rights.                                           

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

                  (c) The  Company  shall use its best  efforts to (i) file,  as
         soon as  practicable  following the  Distribution  Date, a registration
         statement under the Securities Act of 1933 (the "Act"), with respect to
         the Rights and the securities  purchasable  upon exercise of the Rights
         on an  appropriate  form,  (ii) cause such  registration  statement  to
         become  effective as soon as practicable  after such filing,  and (iii)
         cause  such   registration   statement  to  remain  effective  (with  a
         prospectus at all times meeting the  requirements of the Act) until the
         date of the  expiration of the Rights.  The Company will also take such
         action as may be  appropriate  under  the Blue Sky laws of the  various
         states. The Company may temporarily  suspend,  for a period of time not
         to exceed ninety (90) days, the  exercisability  of the Rights in order
         to prepare and file any required registration statement.  Upon any such
         suspension,  the Company shall issue a public announcement stating that
         the  exercisability  of the  Rights  has  been  temporarily  suspended.
         Notwithstanding  any provision of this  Agreement to the contrary,  the
         Rights  shall  not  be  exercisable  in  any  jurisdiction  unless  the
         requisite  qualification in such jurisdiction shall have been obtained,
         the exercise thereof shall have been permitted under applicable law and
a registration statement shall have been declared effective.  

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

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

         Section 10.  Preferred Stock Record Date. Each person in whose name any
certificate  for shares of Preferred Stock (or Common Stock, as the case may be)
is issued upon the  exercise of Rights  shall for all purposes be deemed to have
become the holder of record of the shares of Preferred  Stock (or Common  Stock,
as the case may be) represented thereby on, and such certificate shall be dated,
the date upon  which the  Rights  Certificate  evidencing  such  Rights was duly
surrendered  and  payment of the  Purchase  Price (and all  applicable  transfer
taxes)  was made;  provided,  however,  that if the date of such  surrender  and
payment is a date upon which the Preferred  Stock (or Common Stock,  as the case
may be) transfer books of the Company are closed, such person shall be deemed to
have become the record holder of such shares on, and such  certificate  shall be
dated, the next succeeding  Business Day on which the Preferred Stock (or Common
Stock, as the case may be) transfer books of the Company are open.  Prior to the
exercise of the Rights  evidenced  thereby,  the holder of a Rights  Certificate
shall not be entitled to any rights of a shareholder of the Company with respect
to  shares  for  which  the  Rights  shall be  exercisable,  including,  without
limitation, the right to vote, to receive dividends or other distributions or to
exercise any preemptive  rights, and shall not be entitled to receive any notice
of any proceedings of the Company, except as provided herein.                   

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

                  (a) (i) In the event the  Company  shall at any time after the
                  date of this Agreement (A) declare a dividend on the Preferred
                  Stock payable in shares of Preferred  Stock, (B) subdivide the
                  outstanding  Preferred  Stock,  (C)  combine  the  outstanding
                  Preferred Stock into a smaller number of shares,  or (D) issue
                  any shares of its capital stock in a  reclassification  of the

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                  Preferred  Stock  (including  any  such   reclassification  in
                  connection with a consolidation or merger in which the Company
                  is  the  continuing  or  surviving  corporation),   except  as
                  otherwise  provided in this Section  11(a) and in Section 7(e)
                  hereof, the Purchase Price in effect at the time of the record
                  date  for  such  dividend  or of the  effective  date  of such
                  subdivision,  combination or reclassification,  and the number
                  and kind of shares of Preferred Stock or capital stock, as the
                  case may be, issuable on such date,  shall be  proportionately
                  adjusted so that the holder of any Right  exercised after such
                  time  shall  be  entitled  to  receive,  upon  payment  of the
                  Purchase Price then in effect,  the aggregate  number and kind
                  of shares of Preferred Stock or capital stock, as the case may
                  be, which, if such Right had been exercised  immediately prior
                  to such date and at a time when the Preferred  Stock  transfer
                  books of the Company  were open,  such holder would have owned
                  upon such  exercise and been  entitled to receive by virtue of
                  such dividend,  subdivision,  combination or reclassification;
                  provided, however, that in no event shall the consideration to
                  be paid  upon  the  exercise  of one  Right  be less  than the
                  aggregate  par  value of the  shares of  capital  stock of the
                  Company  issuable  upon  exercise  of one  Right.  If an event
                  occurs which would  require an  adjustment  under both Section
                  11(a)(i) and Section 11(a)(ii), the adjustment provided for in
                  this  Section  11(a)(i)  shall be in addition to, and shall be
                  made  prior to any  adjustment  required  pursuant  to Section
11(a)(ii).                                  

                           (ii) Subject to Section 24 of this Agreement,  in the
                  event any Person  (other than the Company,  any  Subsidiary of
                  the Company,  any employee  benefit plan of the Company or any
                  Subsidiary of the Company,  or any Person or entity organized,
                  appointed or established by the Company for or pursuant to the
                  terms of any such plan), alone or together with its Affiliates
                  and  Associates,  shall,  at any time  after  the date of this
                  Agreement,  become  an  Acquiring  Person,  unless  the  event
                  causing  such  Person  to  become  an  Acquiring  Person is an
                  acquisition  of shares of Common  Stock  pursuant  to a tender
                  offer or an  exchange  offer  for all  outstanding  shares  of
                  Common Stock at a price and on terms  determined by at least a
                  majority of the members of the Board of Directors  who are not
                  officers  of the  Company  and who  are  not  representatives,
                  nominees,  Affiliates or  Associates  of an Acquiring  Person,
                  after  receiving  advice from one or more  investment  banking
                  firms, to be (a) at a price which is fair to shareholders  and
                  not  inadequate  (taking into  account all factors  which such
                  members  of  the  Board  deem  relevant,   including,  without
                  limitation,  prices which could  reasonably be achieved if the
                  Company or its assets were sold on an orderly  basis  designed
                  to  realize  maximum  value)  and (b)  otherwise  in the  best
                  interests of the Company and its shareholders,  then, promptly
                  following  ten (10) days after the date of the  occurrence  of
                  such event (the "Flip-In  Event"),  proper  provision shall be
                  made so that each holder of a Right (except as provided  below
                  and in Section 7(e) hereof) shall thereafter have the right to
                  receive,  upon exercise  thereof at the then current  Purchase
                  Price in accordance with the terms of this Agreement,  in lieu

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                  of a number  of one  one-hundredths  of a share  of  Preferred
                  Stock, such number of shares of Common Stock of the Company as
                  shall equal the result  obtained by (x)  multiplying  the then
                  current Purchase Price by the number of one  one-hundredths of
                  a share of Preferred  Stock for which a Right was  exercisable
                  immediately  prior to the first occurrence of a Flip-In Event,
                  and (y) dividing  that product  (which,  following  such first
                  occurrence,  shall  thereafter be referred to as the "Purchase
                  Price" for each Right and for all purposes of this  Agreement)
                  by 50% of the current  market  price  (determined  pursuant to
                  Section 11(d) hereof) per share of Common Stock on the date of
                  such first occurrence (such number of shares,  the "Adjustment
Shares").                                   

                           (iii) In the event  that (x) the  number of shares of
                  Common Stock which are authorized by the Company's articles of
                  incorporation,  but which are not  outstanding or reserved for
                  issuance for purposes  other than upon exercise of the Rights,
                  are not  sufficient  to  permit  the  exercise  in full of the
                  Rights in accordance with the foregoing  subparagraph  (ii) of
                  this Section  11(a),  or (y) if the majority of the members of
                  the Company's Board of Directors determine that such action is
                  necessary or appropriate  and not contrary to the interests of
                  holders  of Rights  (excluding  those  owned by the  Acquiring
                  Person),  the Company  shall:  (A) determine the excess of (1)
                  the value of the Adjustment  Shares issuable upon the exercise
                  of a Right (the "Current  Value") over (2) the Purchase  Price
                  (such  excess,  the  "Spread"),  and (B) with  respect to each
                  Right,   make  adequate   provision  to  substitute   for  the
                  Adjustment  Shares,  upon payment of the  applicable  Purchase
                  Price,  (1) cash, (2) a reduction in the Purchase  Price,  (3)
                  Common  Stock  or  other  equity  securities  of  the  Company
                  (including, without limitation, shares, or units of shares, of
                  preferred  stock which the Board of  Directors  of the Company
                  has  deemed to have the same  value as shares of Common  Stock
                  (such shares of preferred stock "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 based
                  upon the advice of a nationally  recognized investment banking
                  firm  selected  by the  Board  of  Directors  of the  Company;
                  provided, however, if the Company shall not have made adequate
                  provision to deliver value pursuant to clause (B) above within
                  thirty  (30)  days  following  the  later  of  (x)  the  first
                  occurrence  of a  Flip-In  Event and (y) the date on which the
                  Company's  right  of  redemption  pursuant  to  Section  23(a)
                  expires (the later of (x) and (y) being  referred to herein as
                  the  "Flip-In  Trigger  Date"),  then  the  Company  shall  be
                  obligated  to deliver,  upon the  surrender  for exercise of a
                  Right and without  requiring  payment of the  Purchase  Price,
                  shares of Common Stock (to the extent  available) and then, if
                  necessary,  cash,  which shares  and/or cash have an aggregate
                  value equal to the Spread.  If the Board of  Directors  of the
                  Company  shall  determine in good faith that it is likely that
                  sufficient   additional   shares  of  Common  Stock  could  be

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                  authorized  for issuance  upon exercise in full of the Rights,
                  the thirty  (30) day period set forth above may be extended to
                  the extent necessary, but not more than ninety (90) days after
                  the Flip-In  Trigger  Date, in order that the Company may seek
                  shareholder  approval for the authorization of such additional
                  shares  (such  thirty (30) day period,  as it may be extended,
                  the  "Substitution  Period").  To the extent  that the Company
                  determines  that some  action  need be taken  pursuant  to the
                  first and/or second sentences of this Section 11(a)(iii),  the
                  Company (x) shall  provide,  subject to Section  7(e)  hereof,
                  that such action  shall  apply  uniformly  to all  outstanding
                  Rights,  and (y) may suspend the  exercisability of the Rights
                  until the  expiration of the  Substitution  Period in order to
                  seek  such  shareholder  approval  for such  authorization  of
                  additional  shares  and/or to decide the  appropriate  form of
                  distribution to be made pursuant to such first sentence and to
                  determine  the  value  thereof.  In  the  event  of  any  such
                  suspension,  the  Company  shall  issue a public  announcement
                  stating  that  the  exercisability  of  the  Rights  has  been
                  temporarily  suspended,  as well as a public  announcement  at
                  such  time as the  suspension  is no  longer  in  effect.  For
                  purposes of this Section  11(a)(iii),  the value of the Common
                  Stock  shall  be  the  current  market  price  (as  determined
                  pursuant  to  Section  11(d)  hereof)  per share of the Common
                  Stock on the Flip-In  Trigger Date and the value of any Common
                  Stock Equivalent shall be deemed to have the same value as the
Common Stock on such date.                  

                  (b) In case  the  Company  shall  fix a  record  date  for the
         issuance of rights,  options or  warrants  to all holders of  Preferred
         Stock  entitling  them  to  subscribe  for or  purchase  (for a  period
         expiring  within  forty-five (45) calendar days after such record date)
         Preferred  Stock (or shares  having  the same  rights,  privileges  and
         preferences  as the shares of Preferred  Stock  ("equivalent  preferred
         stock")) or securities  convertible  into Preferred Stock or equivalent
         preferred stock at a price per share of Preferred Stock or per share of
         equivalent  preferred stock (or having a conversion price per share, if
         a security  convertible  into Preferred  Stock or equivalent  preferred
         stock) less than the current  market price (as  determined  pursuant to
         Section 11(d) hereof) per share of Preferred Stock on such record date,
         the  Purchase  Price to be in effect  after such  record  date shall be
         determined  by  multiplying  the Purchase  Price in effect  immediately
         prior to such record date by a fraction,  the  numerator of which shall
         be the number of shares of Preferred  Stock  outstanding on such record
         date,  plus the number of shares of Preferred Stock which the aggregate
         offering price of the total number of shares of Preferred  Stock and/or
         equivalent  preferred  stock so to be  offered  (and/or  the  aggregate
         initial  conversion  price  of  the  convertible  securities  so  to be
         offered)   would   purchase  at  such  current  market  price  and  the
         denominator  of which shall be the number of shares of Preferred  Stock
         outstanding on such record date,  plus the number of additional  shares
         of Preferred Stock and/or equivalent  preferred stock to be offered for
         subscription or purchase (or into which the  convertible  securities so
         to be offered are initially convertible); provided, however, that in no
         event shall the consideration to be paid upon the exercise of one Right
         be less than the  aggregate par value of the shares of capital stock of

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         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, whose  determination
         shall be described in a statement filed with the Rights Agent and shall
         be binding on the Rights Agent and the holders of the Rights. Shares of
         Preferred  Stock owned by or held for the account of the Company  shall
         not be deemed outstanding for the purpose of any such computation. Such
         adjustment  shall be made  successively  whenever such a record date is
         fixed; and in the event that such rights or warrants are not so issued,
         the  Purchase  Price shall be adjusted to be the  Purchase  Price which
 would then be in effect if such record date had not been fixed.

                  (c)  In  case  the  Company  shall  fix a  record  date  for a
         distribution  to all holders of  Preferred  Stock  (including  any such
         distribution made in connection with a consolidation or merger in which
         the  Company  is  the   continuing   corporation)   of   evidences   of
         indebtedness, cash (other than a regular quarterly cash dividend out of
         the earnings or retained earnings of the Company), assets (other than a
         dividend payable in Preferred Stock, but including any dividend payable
         in stock other than Preferred Stock) or subscription rights or warrants
         (excluding  those referred to in Section 11(b)),  the Purchase Price to
         be in effect after such record date shall be determined by  multiplying
         the Purchase Price in effect immediately prior to such record date by a
         fraction,  the numerator of which shall be the current market price (as
         determined  pursuant to Section  11(d)  hereof) per share of  Preferred
         Stock on such record date, less the fair market value (as determined in
         good faith by the Board,  whose  determination  shall be described in a
         statement  filed  with the  Rights  Agent) of the  portion of the cash,
         assets or evidences of  indebtedness  so to be  distributed  or of such
         subscription  rights or  warrants  applicable  to a share of  Preferred
         Stock and the  denominator  of which shall be such current market price
         (as determined pursuant to Section 11(d) hereof) per share of Preferred
         Stock;  provided,  however, that in no event shall the consideration to
         be paid upon the exercise of one Right be less than the  aggregate  par
         value of the shares of capital  stock of the  Company 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 be adjusted to be
         the Purchase  Price which would have been in effect if such record date
had not been fixed.                                           

                  (d) (i) For the purpose of any  computation  hereunder,  other
                  than computations made pursuant to Section  11(a)(iii) hereof,
                  the current market price per share of Common Stock on any date
                  shall be deemed to be the average of the daily closing  prices
                  per share of such Common Stock for the thirty (30) consecutive
                  Trading Days (as such term is hereinafter defined) immediately
                  prior to such date,  and for  purposes  of  computations  made
                  pursuant to Section  11(a)(iii)  hereof,  the "current  market
                  price"  per share of Common  Stock on any date shall be deemed
                  to be the  average  of the daily  closing  prices per share of
                  such Common  Stock for the ten (10)  consecutive  Trading Days

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                  immediately  following such date; provided,  however,  that in
                  the  event  that the  current  market  price  per share of the
                  Common  Stock is  determined  during a  period  following  the
                  announcement  by the  issuer  of such  Common  Stock  of (A) a
                  dividend  or  distribution  on such  Common  Stock  payable in
                  shares of such Common  Stock or  securities  convertible  into
                  shares of such Common Stock  (other than the  Rights),  or (B)
                  any  subdivision,  combination  or  reclassification  of  such
                  Common  Stock,  and prior to the  expiration  of the requisite
                  thirty (30) Trading Day or ten (10) Trading Day period, as set
                  forth above,  after the ex-dividend  date for such dividend or
                  distribution,   or  the  record  date  for  such  subdivision,
                  combination or reclassification,  then, and in each such case,
                  the "current market price" shall be properly  adjusted to take
                  into account ex-dividend  trading.  The closing price for each
                  day shall be the last sale price,  regular way, or, in case no
                  such sale takes place on such day,  the average of the closing
                  bid and asked prices,  regular way, in either case as reported
                  in the principal  consolidated  transaction  reporting  system
                  with  respect to  securities  listed or admitted to trading on
                  the New York Stock  Exchange or, if the shares of Common Stock
                  are not  listed or  admitted  to trading on the New York Stock
                  Exchange,   as   reported   in  the   principal   consolidated
                  transaction reporting system with respect to securities listed
                  on the  principal  national  securities  exchange on which the
                  shares of Common  Stock are listed or  admitted to trading or,
                  if the shares of Common  Stock are not listed or  admitted  to
                  trading on any national securities  exchange,  the last quoted
                  sale price or, if not so quoted,  the  average of the high bid
                  and  low  asked  prices  in the  over-the-counter  market,  as
                  reported by the National  Association  of Securities  Dealers,
                  Inc.  Automated  Quotation  System  ("Nasdaq")  or such  other
                  system  then in use,  or,  if on any such  date the  shares of
                  Common  Stock  are not  quoted by any such  organization,  the
                  average of the closing bid and asked  prices as furnished by a
                  professional  market maker making a market in the Common Stock
                  selected by the Board.  If on any such date no market maker is
                  making a market in the  Common  Stock,  the fair value of such
                  shares on such date as  determined  in good faith by the Board
                  shall be used.  The term  "Trading  Day"  shall  mean a day on
                  which the principal national  securities exchange on which the
                  shares of Common  Stock are listed or  admitted  to trading is
                  open for the  transaction  of  business  or, if the  shares of
                  Common  Stock are not  listed or  admitted  to  trading on any
                  national  securities  exchange,  a Business Day. If the Common
                  Stock  is  not  publicly  held  or not so  listed  or  traded,
                  "current market price" per share shall mean the fair value per
                  share  as  determined  in good  faith by the  majority  of the
                  members   of  the   Company's   Board  of   Directors,   whose
                  determination shall be described in a statement filed with the
          Rights Agent and shall be conclusive for all purposes.

                           (ii) For the  purpose of any  computation  hereunder,
                  the "current  market price" per share of Preferred Stock shall
                  be  determined  in the same  manner as set forth above for the
                  Common Stock in clause (i) of this  Section  11(d) (other than
                  the last sentence  thereof).  If the current  market price per

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                  share of Preferred  Stock cannot be  determined  in the manner
                  provided  above,  the  "current  market  price"  per  share of
                  Preferred Stock shall be  conclusively  deemed to be an amount
                  equal to 100  times  the  current  market  price  per share of
                  Common  Stock,  as  appropriately  adjusted for stock  splits,
                  stock dividends or similar transactions after the date hereof.
                  If  neither  the  Common  Stock  nor the  Preferred  Stock  is
                  publicly held or so listed or traded,  "current  market price"
                  per share shall mean the fair value per share as determined in
                  good faith by the  majority  of the  members of the  Company's
                  Board of Directors,  whose determination shall be described in
                  a  statement   filed  with  the  Rights  Agent  and  shall  be
conclusive for all purposes.                

                  (e)  Anything  herein  to  the  contrary  notwithstanding,  no
         adjustment  in  the  Purchase  Price  shall  be  required  unless  such
         adjustment  would  require  an  increase  or  decrease  of at least one
         percent  (1%)  in the  Purchase  Price;  provided,  however,  that  any
         adjustments  which by reason of this Section  11(e) are not required to
         be made  shall  be  carried  forward  and  taken  into  account  in any
         subsequent adjustment.  All calculations under this Section 11 shall be
         made to the nearest cent or to the nearest ten-thousandth of a share of
         Common  Stock or other share or  one-millionth  of a share of Preferred
         Stock, as the case may be.  Notwithstanding  the first sentence of this
         Section 11(e), any adjustment required by this Section 11 shall be made
         no later  than the  earlier of (i) three (3) years from the date of the
         transaction  which  mandates such  adjustment,  or (ii) the  Expiration
Date.                                                         

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

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

                  (h) Unless the Company  shall have  exercised  its election as
         provided in Section 11(i),  upon each  adjustment of the Purchase Price
         as a result of the  calculations  made in Sections  11(b) and (c), each
         Right  outstanding  immediately  prior to the making of such adjustment
         shall  thereafter  evidence  the  right to  purchase,  at the  adjusted
         Purchase  Price,  that  number  of  one  one-hundredth  of a  share  of

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         Preferred Stock (calculated to the nearest  one-millionth)  obtained by
         (i) multiplying (x) the number of one  one-hundredth of a share covered
         by the 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 shares of Preferred
         Stock  purchasable  upon the  exercise  of a Right.  Each of the Rights
         outstanding  after the  adjustment  in the  number  of Rights  shall be
         exercisable for the number of one one-hundredth of a share of Preferred
         Stock  for  which a Right  was  exercisable  immediately  prior to such
         adjustment.  Each Right held of record prior to such  adjustment of the
         number of Rights shall become that number of Rights  (calculated to the
         nearest one ten-thousandth)  obtained by dividing the Purchase Price in
         effect  immediately  prior to adjustment  of the Purchase  Price by the
         Purchase Price in effect  immediately  after adjustment of the Purchase
         Price. The Company shall make a public  announcement of its election to
         adjust  the  number  of  Rights,  indicating  the  record  date for the
         adjustment,  and, if known at the time, the amount of the adjustment to
         be made.  This record date may be the date on which the Purchase  Price
         is adjusted or any day thereafter, but, if the Rights Certificates have
         been issued, shall be at least ten (10) days later than the date of the
         public announcement. If Rights Certificates have been issued, upon each
         adjustment of the number of Rights pursuant to this Section 11(i),  the
         Company shall, as promptly as  practicable,  cause to be distributed to
         holders of record of Rights  Certificates  on such  record  date Rights
         Certificates  evidencing,  subject to Section 14 hereof, the additional
         Rights to which  such  holders  shall be  entitled  as a result of such
         adjustment,  or,  at the  option  of the  Company,  shall  cause  to be
         distributed to such holders of record in  substitution  and replacement
         for the Rights  Certificates  held by such holders prior to the date of
         adjustment, and upon surrender thereof, if required by the Company, new
         Rights  Certificates  evidencing  all the Rights to which such  holders
         shall be entitled after such adjustment.  Rights  Certificates so to be
         distributed  shall be issued,  executed and countersigned in the manner
         provided for herein (and may bear,  at the option of the  Company,  the
         adjusted  Purchase  Price) and shall be  registered in the names of the
         holders of record of Rights  Certificates  on the record date specified
in the public announcement.                                   

                  (j)  Irrespective  of any adjustment or change in the Purchase
         Price or the number of one  one-hundredth of a share of Preferred Stock
         issuable  upon the  exercise  of the  Rights,  the Rights  Certificates
         theretofore and thereafter  issued may continue to express the Purchase
         Price per share and the number of shares  which were  expressed  in the
initial Rights Certificates issued hereunder.                 

                  (k) Before  taking any action that would  cause an  adjustment
         reducing the Purchase Price below the then stated or par value, if any,
         of the shares of Preferred  Stock issuable upon exercise of the Rights,
         the Company shall take any  corporate  action which may, in the opinion
         of its counsel,  be necessary in order that the Company may validly and

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         legally issue fully paid and non-assessable  shares of Preferred Stock,
   Common Stock or other securities 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  until  the
         occurrence  of such  event  the  issuance  to the  holder  of any Right
         exercised  after such  record  date the shares of  Preferred  Stock and
         other capital stock or securities of the Company, if any, issuable upon
         such  exercise  over and above the shares of Preferred  Stock and other
         capital stock or securities of the Company,  if any, issuable upon such
         exercise  on the basis of the  Purchase  Price in effect  prior to such
         adjustment;  provided,  however, that the Company shall deliver to such
         holder a due  bill or  other  appropriate  instrument  evidencing  such
         holder's right to receive such additional shares upon the occurrence of
the event requiring such adjustment.                          

                  (m)   Anything   in   this   Section   11  to   the   contrary
         notwithstanding,  the Company shall be entitled to make such reductions
         in the  Purchase  Price,  in  addition to those  adjustments  expressly
         required  by this  Section  11, as and to the extent that in their sole
         discretion  the  majority  of the  members  of the  Company's  Board of
         Directors  shall  determine  to be  advisable  in  order  that  any (i)
         consolidation  or  subdivision  of the Preferred  Stock,  (ii) issuance
         wholly  for cash of any  shares  of  Preferred  Stock at less  than the
         current  market  price,  (iii)  issuance  wholly  for cash of shares of
         Preferred Stock or securities which by their terms are convertible into
         or exchangeable for shares of Preferred Stock,  (iv) stock dividends or
         (v) issuance of rights, options or warrants referred to in this Section
         11,  hereafter  made by the Company to holders of its  Preferred  Stock
shall not be taxable to such shareholders.                    

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

                  (o) The Company  covenants  and agrees  that,  after the Stock
         Acquisition  Date,  it will not,  except as  permitted  by  Section  23
         hereof,  take (or permit any Subsidiary to take) any action the purpose
         or effect of which is to diminish  substantially or otherwise eliminate
the benefits intended to be afforded by the Rights.           

                  (p)    Anything   in   this    Agreement   to   the   contrary
         notwithstanding,  in the event that the Company shall at any time after

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         the  date of this  Agreement  and  prior to the  Distribution  Date (i)
         declare a dividend on the outstanding shares of Common Stock payable in
         shares of Common Stock,  (ii) subdivide the  outstanding  Common Stock,
         (iii)  combine the  outstanding  Common Stock into a smaller  number of
         shares,   or  (iv)  issue  any  shares  of  its  capital   stock  in  a
         reclassification  of the outstanding Common Stock, the number of Rights
         associated  with each share of Common  Stock  shall be  proportionately
         adjusted so that the number of Rights  thereafter  associated with each
         share of Common Stock  following  any such event shall equal the result
         obtained by multiplying the number of Rights associated with each share
         of Common  Stock  immediately  prior to such  event by a  fraction  the
         numerator  of which shall be the total number of shares of Common Stock
         outstanding  immediately  prior to the  occurrence of the event and the
         denominator  of which  shall be the  total  number  of shares of Common
       Stock outstanding immediately following the occurrence of such event.

                  (q) The exercise of Rights under Section  11(a)(ii) shall only
         result in the loss of rights under  Section  11(a)(ii) to the extent so
         exercised and shall not otherwise affect the rights  represented by the
         Rights under this Rights Agreement, including the rights represented by
Section 13.                                                   

         Section 12.  Certificate of Adjusted Purchase Price or Number of Stock.
Whenever an  adjustment  is made as  provided in Sections 11 and 13 hereof,  the
Company shall (a) promptly  prepare a certificate  setting forth such adjustment
and a brief statement of the facts accounting for such adjustment,  (b) promptly
file with the Rights Agent and with each transfer agent for the Preferred  Stock
and the Common Stock a copy of such  certificate,  and (c) mail a brief  summary
thereof to each holder of a Rights  Certificate  in  accordance  with Section 26
hereof.  The  Rights  Agent  shall be fully  protected  in  relying  on any such
certificate and on any adjustment therein contained.                            

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

                  (a) In the event that,  following the Stock  Acquisition Date,
         directly or  indirectly,  (x) the Company  shall  consolidate  with, or
         merge with and into, any other Person, and the Company shall not be the
         continuing or surviving  corporation of such  consolidation  or merger,
         (y) any Person  shall  consolidate  with,  or merge  with or into,  the
         Company,   and  the  Company  shall  be  the  continuing  or  surviving
         corporation  of such  consolidation  or merger and, in connection  with
         such  consolidation or merger, all or part of the outstanding shares of
         Common  Stock  shall be changed  into or  exchanged  for stock or other
         securities  of any other Person or cash or any other  property,  or (z)
         the Company  shall sell or  otherwise  transfer  (or one or more of its
         Subsidiaries  shall  sell  or  otherwise  transfer),  in  one  or  more
         transactions,  assets, cash flow or earning power aggregating more than
         50% of the  assets,  cash flow or earning  power of the Company and its
         Subsidiaries  (taken as a whole) to any Person or Persons  (other  than
         the Company or any  Subsidiary of the Company),  then, and in each such

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         case,  proper  provision  shall be made so that:  (i) each  holder of a
         Right,  shall  thereafter have the right to receive,  upon the exercise
         thereof at the then current Purchase Price in accordance with the terms
         of this Agreement,  such number of validly authorized and issued, fully
         paid, non-assessable and freely tradeable shares of Common Stock of the
         Principal  Party  (as  hereinafter  defined),  free and clear of liens,
         rights of call or first refusal,  encumbrances or other adverse claims,
         as shall be equal to the result  obtained by (1)  multiplying  the then
         current  Purchase Price by the then number of one  one-hundredths  of a
         share of Preferred  Stock for which a Right is exercisable  immediately
         prior to the first occurrence of an event described in clauses (x), (y)
         and (z) of this Section 13 (or, if a  transaction  described in Section
         11(a)(ii) hereof has occurred prior to the first occurrence of an event
         described  in  clauses  (x),  (y)  and  (z)  of  this  Section   13(a),
         multiplying the number of such one  one-hundredths of a share for which
         a Right  was  exercisable  prior to the  first  occurrence  of an event
         described  in  Section  11(a)(ii)  by  the  Purchase  Price  in  effect
         immediately  prior to such  first  occurrence)  and (2)  dividing  that
         product (which, following the first occurrence of an event described in
         clauses (x), (y) and (z) of this Section  13(a) shall be referred to as
         the  "Purchase  Price"  for each  Right  and for all  purposes  of this
         Agreement) by 50% of the current market price  (determined  pursuant to
         Section  11(d)(i)  hereof)  per  share  of the  Common  Stock  of  such
         Principal  Party on the  date of  consummation  of such  consolidation,
         merger, sale or transfer; (ii) such Principal Party shall thereafter 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 such  Principal  Party,  it being  specifically
         intended  that the  provisions of Section 11 hereof shall apply to such
         Principal  Party;  and (iv) such Principal  Party shall take such steps
         (including,  but not limited to, the reservation of a sufficient number
         of shares of its Common Stock) in connection  with the  consummation of
         any such  transaction as may be necessary to assure that the provisions
         hereof shall  thereafter be applicable,  as nearly as reasonably may be
         possible,  in  relation  to  its  shares  of  Common  Stock  thereafter
deliverable upon the exercise of the Rights.                  

(b) "Principal Party" shall mean:           

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

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

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         provided,  however,  that in any such case,  (1) if the Common Stock of
         such Person is not at such time and has not been  continuously over the
         preceding  twelve (12) month period  registered under Section 12 of the
         Exchange  Act,  and such Person is a direct or indirect  Subsidiary  of
         another Person the Common Stock of which is and has been so registered,
         "Principal  Party" shall refer to such other  Person;  (2) in case such
         Person  is a  Subsidiary,  directly  or  indirectly,  of more  than one
         Person,  the Common Stocks of two or more of which are and have been so
         registered,  "Principal Party" shall refer to whichever of such Persons
         is the issuer of the Common Stock having the greatest  aggregate market
         value; and (3) in case such Person is owned, directly or indirectly, by
         a joint  venture  formed  by two or more  Persons  that are not  owned,
         directly or indirectly,  by the same Person, the rules set forth in (1)
         and (2) above shall apply to each of the chains of ownership  having an
         interest in such joint venture as if such party were a "Subsidiary"  of
         both or all of such joint  venturers and the Principal  Parties in each
         such chain shall bear the  obligations  set forth in this Section 13 in
         the same ratio as their  direct or  indirect  interests  in such Person
bear to the total of such interests.                          

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

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

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

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

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         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,   instruments  or  securities  outstanding  or  any
         agreements or arrangements  which,  as a result of the  consummation of
         such  transaction,   would  eliminate  or  substantially  diminish  the
         benefits intended to be afforded by the Rights.  The provisions of this
         Section   13  shall   similarly   apply  to   successive   mergers   or
         consolidations  or sales or other  transfers.  The  rights  under  this
         Section 13 shall be in addition  to the rights to  exercise  Rights and
         adjustments  under  Section  11(a)(ii)  and shall  survive any exercise
thereof.                                                      

                  (d)   Notwithstanding   anything  in  this  Agreement  to  the
         contrary, Section 13 shall not be applicable to a transaction described
         in  subparagraphs  (x) and (y) of Section 13(a) if (i) such transaction
         is consummated  with a Person or Persons who acquired  shares of Common
         Stock pursuant to a tender offer or exchange offer for all  outstanding
         shares of  Common  Stock at a price  and on terms  determined  to be in
         accordance with the provisions of Section 11(a)(ii) hereof (or a wholly
         owned  subsidiary  of any such Person or  Persons),  (ii) the price per
         share of Common Stock offered in such  transaction is not less than the
         price per share of Common Stock paid to all holders of shares of Common
         Stock whose  shares  were  purchased  pursuant to such tender  offer or
         exchange offer and (iii) the form of consideration being offered to the
         remaining   holders  of  shares  of  Common  Stock   pursuant  to  such
         transaction is the same as the form of  consideration  paid pursuant to
         such tender  offer or exchange  offer.  Upon  consummation  of any such
         transaction  contemplated by this Section 13(d),  all Rights  hereunder
shall expire.                                                 

Section 14.  Fractional Rights and Fractional Stock.          

                  (a) The Company  shall not be required to issue  fractions  of
         Rights,  except prior to the  Distribution  Date as provided in Section
         11(p)  hereof,  or to distribute  Rights  Certificates  which  evidence
         fractional  Rights. In lieu of such fractional  Rights,  there shall be
         paid to the registered  holders of the Rights  Certificates with regard
         to which such fractional Rights would otherwise be issuable,  an amount
         in cash equal to the same  fraction  of the current  market  value of a
         whole Right.  For purposes of this Section  14(a),  the current  market
         value of a whole Right shall be the closing price of the Rights for the
         Trading  Day  immediately  prior to the date on which  such  fractional
         Rights would have been  otherwise  issuable.  The closing  price of the
         Rights for any day shall be the last sale price,  regular  way,  or, in
         case no such sale takes  place on such day,  the average of the closing
         bid and asked  prices,  regular  way, in either case as reported in the
         principal  consolidated  transaction  reporting  system with respect to
         securities listed or admitted to trading on the New York Stock Exchange
         or, if the Rights are not listed or admitted to trading on the New York
         Stock Exchange, as reported in the principal  consolidated  transaction
         reporting  system with respect to  securities  listed on the  principal
         national securities exchange on which the Rights are listed or admitted
         to  trading,  or if the Rights are not listed or admitted to trading on
         any national securities exchange, the last quoted sale price or, if not

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         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 shall
be used.                                                      

                  (b) The Company  shall not be required to issue  fractions  of
         shares of  Preferred  Stock  (other than  fractions  which are integral
         multiples  of one  one-hundredth  of a share of  Preferred  Stock) upon
         exercise of the Rights or to  distribute  certificates  which  evidence
         fractional  shares of Preferred  Stock (other than fractions  which are
         integral multiples of one one-hundredth of a share of Preferred Stock).
         Fractions  of shares of  Preferred  Stock in integral  multiples of one
         one-hundredth of a share of Preferred Stock 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
         shares of Preferred Stock represented by such depositary  receipts.  In
         lieu of  fractional  shares of  Preferred  Stock that are not  integral
         multiples  of one  one-hundredth  of a share of  Preferred  Stock,  the
         Company may pay to the registered holders of Rights Certificates at the
         time such  Rights are  exercised  as herein  provided an amount in cash
         equal  to  the  same  fraction  of  the  current  market  value  of one
         one-hundredth  of a share of  Preferred  Stock.  For  purposes  of this
         Section 14(b), the current market value of one one-hundredth of a share
         of Preferred Stock shall be one one-hundredth of the closing sale price
         of a share of  Preferred  Stock (as  determined  pursuant to of Section
         11(d)(ii)  hereof) for the Trading Day immediately prior to the date of
such exercise.                                                

                  (c)  Following  the  occurrence  of a  Triggering  Event,  the
         Company  shall not be required to issue  fractions  of shares of Common
         Stock upon exercise of the Rights or to distribute  certificates  which
         evidence  fractional  shares of  Common  Stock.  In lieu of  fractional
         shares of Common Stock,  the Company may pay to the registered  holders
         of Rights  Certificates at the time such Rights are exercised as herein
         provided  an amount in cash equal to the same  fraction  of the current
         market  value of one (1) share of Common  Stock.  For  purposes of this
         Section  14(c),  the  current  market  value of one (1) share of Common
         Stock  shall be the closing  sale price of a share of Common  Stock (as
         determined  pursuant  to Section  11(d)(i)  hereof) for the Trading Day
immediately prior to the date of such exercise.               

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

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

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

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

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

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

                  (d)   notwithstanding   anything  in  this  Agreement  to  the
         contrary,  neither  the  Company  nor the Rights  Agent  shall have any
         liability  to any holder of a Right or other  Person as a result of its
         inability  to perform any of its  obligations  under this  Agreement by
         reason of any  preliminary  or  permanent  injunction  or other  order,
         decree or ruling  issued by a court of competent  jurisdiction  or by a
         governmental, regulatory or administrative agency or commission, or any

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         statute,  rule, regulation or executive order promulgated or enacted by
         any  governmental  authority,   prohibiting  or  otherwise  restraining
         performance of such obligation; provided, however, the Company must use
         reasonable  efforts to have any such order,  decree or ruling lifted or
otherwise overturned as soon as possible.                     

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

Section 18.  Concerning the Rights Agent.                     

                  (a) The Company  agrees to pay to the Rights Agent  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 disbursements and other disbursements  incurred in the
         administration  and  execution of this  Agreement  and the exercise and
         performance  of its  duties  hereunder.  The  Company  also  agrees  to
         indemnify  the Rights Agent for, and to hold it harmless  against,  any
         loss, liability, or expense, incurred without negligence,  bad faith or
         willful  misconduct on the part of the Rights Agent,  for anything done
         or omitted by the Rights Agent in connection  with the  acceptance  and
         administration  of this Agreement,  including the costs and expenses of
         defending against any claim of liability arising therefrom, directly or
indirectly.                                                   

                  (b) The Rights  Agent  shall be  protected  and shall incur no
         liability for or in respect of any action taken, suffered or omitted by
         it in connection with its  administration of this Agreement in reliance
         upon any Rights  Certificate  or  certificate  for Common  Stock or for
         other securities of the Company,  instrument of assignment or transfer,
         power of attorney,  endorsement,  affidavit, letter, notice, 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 of counsel as set forth in Section 20 hereof. 

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

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

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

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

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

                  (b)  Whenever  in the  performance  of its  duties  under this
         Agreement  the Rights Agent shall deem it  necessary or desirable  that
         any fact or matter (including,  without limitation, the identity of any
         Acquiring  Person and the  determination  of "current market price") be
         proved or  established  by the Company prior to taking or suffering any
         action hereunder, such fact or matter (unless other evidence in respect

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         thereof  be  herein  specifically  prescribed)  may  be  deemed  to  be
         conclusively  proved and  established  by a  certificate  signed by the
         Chief Executive  Officer,  the President,  the Chief Financial Officer,
         the  Treasurer or any Vice  President,  the  Secretary or any Assistant
         Secretary of the Company and  delivered to the Rights  Agent;  and such
         certificate  shall be full  authorization  to the Rights  Agent for any
         action  taken or suffered in good faith by it under the  provisions  of
this Agreement in reliance upon such certificate.             

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

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

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

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

                  (g) The Rights  Agent is hereby  authorized  and  directed  to
         accept  instructions  with  respect  to the  performance  of its duties
         hereunder from the Chief Executive  Officer,  the President,  the Chief
         Financial Officer,  the Treasurer or any Vice President,  the Secretary
         or any  Assistant  Secretary  of the  Company,  and to  apply  to  such
         officers for advice or instructions in connection with its duties,  and

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         it shall not be liable for any action  taken or suffered to be taken by
       it in good faith in accordance with instructions of any such officer.

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

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

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

         Section 21. Change of Rights  Agent.  The Rights Agent or any successor
Rights Agent may resign and be discharged  from its duties under this  Agreement
upon  thirty (30) days'  notice in writing  mailed to the  Company,  and to each
transfer  agent of the  Common  Stock and  Preferred  Stock,  by  registered  or
certified  mail,  and to the holders of the Rights  Certificates  by first-class
mail. The Company may remove the Rights Agent or any successor Rights Agent upon
thirty (30) days'  notice in writing,  mailed to the Rights  Agent or  successor
Rights Agent, as the case may be, and to each transfer agent of the Common Stock
and Preferred  Stock, by registered or certified mail, and to the holders of the
Rights  Certificates by first-class mail. If the Rights Agent shall resign or be
removed or shall otherwise become incapable of acting, the Company shall appoint
a  successor  to the  Rights  Agent.  If the  Company  shall  fail to make  such
appointment  within a period of thirty  (30) days  after  giving  notice of such
removal  or  after  it has been  notified  in  writing  of such  resignation  or
incapacity by the resigning or incapacitated  Rights Agent or by the holder of a
Rights  Certificate (who shall, with such notice,  submit his Rights Certificate
for  inspection  by the  Company),  then the  registered  holder  of any  Rights
Certificate may apply to any court of competent jurisdiction for the appointment
of a new Rights Agent.  Any successor  Rights  Agent,  whether  appointed by the
Company  or by such a court,  shall be (a) a  corporation  organized  and  doing
business  under the laws of the United  States or of the States of  Minnesota or
New York (or of any other state of the United States so long as such corporation

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is authorized to do business as a banking institution in the States of Minnesota
or New  York),  in good  standing,  having a  principal  office in the States of
Minnesota or New York, which is authorized under such laws to exercise corporate
trust powers and is subject to  supervision  or  examination by federal or state
authority  and  which  has at the  time of its  appointment  as  Rights  Agent a
combined  capital  and  surplus  of at  least  $50,000,000  or (b) an  Affiliate
controlled  by a  corporation  described in clause (a) of this  sentence.  After
appointment,  the  successor  Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as Rights
Agent  without  further  act or deed;  but the  predecessor  Rights  Agent shall
deliver and transfer to the successor Rights Agent any property at the time held
by it hereunder, and execute and deliver any further assurance,  conveyance, act
or deed necessary for the purpose. Not later than the effective date of any such
appointment,  the  Company  shall  file  notice  thereof  in  writing  with  the
predecessor  Rights  Agent and each  transfer  agent of the Common Stock and the
Preferred Stock, and mail a notice thereof in writing to the registered  holders
of the Rights  Certificates.  Failure to give any  notice  provided  for in this
Section 21,  however,  or any defect  therein,  shall not affect the legality or
validity of the resignation or removal of the Rights Agent or the appointment of
the successor Rights Agent, as the case may be.                                 

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

Section 23.  Redemption and Termination.                      

                           (a) (i) By a decision by the  majority of the members
                  of the  Company's  Board of  Directors,  the Board may, at its
                  option,  at any time  prior to the  close of  business  on the
                  earlier of (i) the Flip-In Event, or (ii) the Final Expiration

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                  Date, redeem all but not less than all of the then outstanding
                  Rights at a redemption price of $.001 per Right, appropriately
                  adjusted to reflect any stock split, stock dividend or similar
                  transaction  occurring after the date hereof (such  redemption
                  price  being  hereinafter   referred  to  as  the  "Redemption
                  Price"). The redemption of the Rights by the Board may be made
                  effective at such time, on such basis and with such conditions
                  as  the   Board  in  its  sole   discretion   may   establish.
                  Notwithstanding  anything  contained in this  Agreement to the
                  contrary,  the Rights shall not be exercisable after the first
                  occurrence of an event  described in Section  11(a)(ii)  until
                  such time as the Company's  right of redemption  hereunder has
                  expired.  The Company may, at its option,  pay the  Redemption
                  Price in cash,  shares of Common  Stock (based on the "current
                  market price",  as defined in Section 11(d)(i) hereof,  of the
                  Common Stock at the time of  redemption)  or any other form of
               consideration deemed appropriate by the Board of Directors.

                           (ii) In addition,  the majority of the members of the
                  Company's  Board of Directors may redeem all but not less than
                  all of the then  outstanding  Rights at the  Redemption  Price
                  following  the  occurrence of a Flip-In Event but prior to any
                  event  described  in Section  13(a)  either (x) if each of the
                  following  shall have  occurred  and  remain in effect:  (1) a
                  Person who is an Acquiring  Person shall have  transferred  or
                  otherwise  disposed of a number of shares of Common Stock in a
                  manner  satisfactory  to the  majority  of the  members of the
                  Company's   Board  of  Directors  such  that  such  Person  is
                  thereafter a Beneficial Owner of voting securities having less
                  than sixteen and one-half  percent (16.5%) of the voting power
                  of the Company, and (2) there is no other Person,  immediately
                  following the occurrence of the event described in clause (1),
                  who is an  Acquiring  Person,  or (y) in  connection  with any
                  transaction not involving an Acquiring  Person or an Affiliate
or Associate of an Acquiring Person.        

                  (b)  In the  case  of a  redemption  permitted  under  Section
         23(a)(i),  immediately upon the action of the Board of Directors of the
         Company ordering the redemption of the Rights,  evidence of which shall
         have been filed with the Rights  Agent and without  any further  action
         and without any notice, the right to exercise the Rights will terminate
         and the only right  thereafter  of the  holders  of Rights  shall be to
         receive the  Redemption  Price.  In the case of a redemption  permitted
         only under Section  23(a)(ii),  evidence of which shall have been filed
         with the Rights Agent,  the right to exercise the Rights will terminate
         and represent only the right to receive the Redemption Price only after
         ten  (10)  business  days  following  the  giving  of  notice  of  such
         redemption  to the holders of such  Rights.  Within ten (10) days after
         the action of the Board of Directors,  ordering any such  redemption of
         the Rights,  the Company  shall give notice of such  redemption  to the
         Rights Agent and the holders of the then outstanding  Rights by mailing
         such notice to the Rights  Agent and to all such  holders at their last
         addresses  as they appear upon the  registry  books of the Rights Agent
         or,  prior  to the  Distribution  Date,  on the  registry  books of the
         Transfer Agent for the Common Stock.  Any notice which is mailed in the

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         manner herein provided shall be deemed given, whether or not the holder
         receives  the  notice.  Each such notice of  redemption  will state the
   method by which the payment of the Redemption Price will be made.

Section 24.  Exchange.                                        

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

                  (b)  Immediately  upon the  action of the Board  ordering  the
         exchange of any Rights pursuant to paragraph (a) of this Section 24 and
         without  any  further  action  and  without  any  notice,  the right to
         exercise such Rights shall terminate and the only right thereafter of a
         holder of such  Rights  shall be to  receive  that  number of shares of
         Common  Stock  equal to the number of such  Rights  held by such holder
         multiplied  by the Exchange  Ratio.  The Company  shall  promptly  give
         public notice of any such exchange; provided, however, that the failure
         to give, or any defect in, such notice shall not affect the validity of
         such  exchange.  The Company  promptly  shall mail a notice of any such
         exchange to all of the  holders of such Rights at their last  addresses
         as they appear upon the registry books of the Rights Agent.  Any notice
         which is mailed in the manner  herein  provided  shall be deemed given,
         whether or not the holder  receives  the  notice.  Each such  notice of
         exchange  shall  state the method by which the  exchange  of the Common
         Stock for Rights  will be  effected  and,  in the event of any  partial
         exchange,  the number of Rights  which will be  exchanged.  Any partial
         exchange  shall be  effected  pro rata  based on the  number  of Rights
         (other  than Rights  which have  become  null and void  pursuant to the
   provisions of Section 7(e) hereof) held by each holder of Rights.

                  (c) In any exchange  pursuant to this Section 24, the Company,
         at its option, may substitute  Preferred Stock (or equivalent preferred
         stock, as such term is defined in Section 11(b) hereof) for some or all
         of the Common Stock exchangeable for Rights, at the initial rate of one
         one-hundredth  of a share of Preferred  Stock (or equivalent  preferred
         stock) for each share of Common  Stock,  as  appropriately  adjusted to
         reflect  adjustments  in  the  voting  rights  of the  Preferred  Stock

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         pursuant  to the  terms  thereof,  so that the  fraction  of a share of
         Preferred  Stock  delivered in lieu of each share of Common Stock shall
have the same voting rights as one share of Common Stock.     

                  (d) In the event that there shall not be sufficient  shares of
         Common  Stock  or  Preferred   Stock  issued  but  not  outstanding  or
         authorized   but   unissued  to  permit  any   exchange  of  Rights  as
         contemplated in accordance with this Section 24, the Company shall take
         all such action as may be  necessary  to  authorize  additional  Common
    Stock or Preferred Stock for issuance upon exchange of the Rights.

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

         Section  25.  Notice  of  Certain  Events.  In case the  Company  shall
propose,  at any time  after  the  Distribution  Date,  (a) to pay any  dividend
payable in stock of any class to the holders of  Preferred  Stock or to make any
other  distribution  to the  holders of  Preferred  Stock  (other than a regular
quarterly cash dividend out of earnings or retained earnings of the Company), or
(b) to offer to the holders of  Preferred  Stock rights or warrants to subscribe
for or to purchase any additional  shares of Preferred  Stock or shares of stock
of any class or any other  securities,  rights or options,  or (c) to effect any
reclassification of its Preferred Stock (other than a reclassification involving
only the subdivision of outstanding shares of Preferred Stock), or (d) 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 more than 50% of the assets,
cash flow or  earning  power of the  Company  and its  Subsidiaries  (taken as a
whole) to, any other Person,  or (e) to effect the  liquidation,  dissolution or
winding up of the Company,  then,  in each such case,  the Company shall give to
each holder of a Rights  Certificate,  to the extent  feasible and in accordance
with Section 26 hereof,  a notice of such proposed  action,  which shall specify
the record date for the purposes of such stock dividend,  distribution of rights
or warrants, or the date on which such reclassification,  consolidation, merger,
sale, transfer, liquidation, dissolution, or winding up is to take place and the
date of  participation  therein by the holders of the shares of Preferred Stock,
if any such date is to be fixed,  and such notice  shall be so given in the case
of any action covered by clause (a) or (b) above at least twenty (20) days prior
to the record date for determining  holders of the shares of Preferred Stock for
purposes  of such  action,  and in the case of any such other  action,  at least
twenty (20) days prior to the date of the taking of such proposed  action or the
date of  participation  therein by the holders of the shares of Preferred  Stock
whichever shall be the earlier.                                                 

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

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

  Communications Systems, Inc.
213 South Main Street     
Hector, MN 55342          
         Attention:  Chief Financial Officer

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

  Norwest Bank Minnesota, N.A.
161 N. Concord Exchange   
     South St. Paul, Minnesota 55075
           Attention:  Stock Transfer Department

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

          Section 27. Supplements and Amendments. The Board and the Rights Agent
shall  from time to time,  if the Board so  directs,  supplement  or amend  this
Agreement  without the approval of any holders of Rights  Certificates  in order
(i) to cure any ambiguity, (ii) to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provisions  herein,
(iii)  prior to the  Distribution  Date,  to  change  or  supplement  any of the
provisions  hereunder  which the Board may deem  necessary  or desirable or (iv)
following the  Distribution  Date, to change or supplement any of the provisions
hereunder  in any manner which the Board may deem  necessary  or  desirable  and
which  shall  not  adversely  affect  the  interests  of the  holders  of Rights
Certificates  (other than an Acquiring Person or an Affiliate or Associate of an
Acquiring  Person).  Notwithstanding  the foregoing,  following the Distribution

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Date,  this Agreement  shall not be supplemented or amended to lengthen any time
period relating to the Rights,  including,  without limitation,  the time period
during  which the Rights may be  redeemed,  unless such  lengthening  is for the
purpose of protecting, enhancing or clarifying the rights of and benefits to the
holders of the Rights (excluding in each case Rights held by an Acquiring Person
or an Associate  or  Affiliate  of an Acquiring  Person whose Rights have or may
become null and void  pursuant to Section 7(e)  hereof).  Upon the delivery of a
certificate  from an  appropriate  officer of the Company  which states that the
proposed supplement or amendment is in compliance with the terms of this Section
27, the Rights Agent shall  execute  such  supplement  or  amendment  unless the
Rights  Agent  shall  have  determined  in good faith  that such  supplement  or
amendment  would adversely  affect its interests under this Agreement.  Prior to
the  Distribution  Date,  the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of Common Stock.                   

    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   Certificates  (and,  prior  to  the
Distribution  Date,  registered  holders  of the  Common  Stock)  any  legal  or
equitable right, remedy or claim under this Agreement;  but this Agreement shall
be for the sole and exclusive  benefit of the Company,  the Rights Agent and the
registered  holders of the Rights  Certificates  (and, prior to the Distribution
Date, registered holders of the Common Stock).                                  

         Section 30. Administration of Agreement. The majority of the members of
the Company's Board of Directors shall have the exclusive power and authority to
administer  this  Agreement  and to exercise all rights and powers  specifically
granted to the Board or the Company or as may be  necessary  or advisable in the
administration  of this Agreement,  including  without  limitation the right and
power to interpret the Agreement and to make all determinations deemed necessary
or  advisable  for  the  administration  of  this  Agreement.   All  such  acts,
interpretations and determinations done or made by the Board in good faith shall
be final,  conclusive  and  binding on the  Company,  the  Rights  Agent and the
holders of the Rights. Accordingly, the majority of the members of the Company's
Board of Directors shall not be liable to the holders of Rights  Certificates or
any other party for any  determination  made, action taken, or action omitted to
be taken pursuant to the terms of this Agreement, if such determination,  action
or omitted action was made or taken in good faith.                              

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         Section  31.  Severability.   If  any  term,  provision,   covenant  or
restriction  of this Agreement is held by a court of competent  jurisdiction  or
other  authority  to be invalid,  void or  unenforceable,  the  remainder of the
terms, provisions,  covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected,  impaired or invalidated;
provided,  however,  that  notwithstanding  anything  in this  Agreement  to the

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contrary, if any such term,  provision,  covenant or restriction is held by such
court  or  authority  to be  invalid,  void or  unenforceable  and the  Board of
Directors of the Company determines in its good faith judgment that severing the
invalid  language  from this  Agreement  would  adversely  affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23 hereof
shall be  reinstated  and shall not expire  until the close of  business  on the
tenth day following the date of such  determination by the Board of Directors of
the Company.  Without limiting the foregoing,  if any provision requiring that a
determination  be made by less  than  the  entire  Board  is held by a court  of
competent  jurisdiction or other authority to be invalid, void or unenforceable,
such determination shall then be made by the entire Board.                      

         Section 32.  Governing Law. This Agreement,  each Right and each Rights
Certificate  issued  hereunder  shall be deemed to be a contract  made under the
laws of the State of  Minnesota  and for all  purposes  shall be governed by and
construed in accordance with the laws of such State applicable to contracts made
and to be performed entirely within such State.                                 

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

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

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

COMMUNICATIONS SYSTEMS, INC.
Attest:                                                                         

By_____________________                     By_________________________________ 
Its Secretary                                    Its Chief Executive Officer

NORWEST BANK MINNESOTA, N.A.

Attest:                                                                         

By___________________                          By______________________________ 
Its________________                          Its_________________________   

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                                                                   Exhibit A

 FORM OF
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

of

Communications Systems, Inc.

 Pursuant to Section 302A.401 of the Minnesota
Business Corporation Law

         We, Paul N. Hanson, Chief Financial Officer and Treasurer,  and Richard
A. Primuth,  Secretary, of Communications Systems, Inc., a corporation organized
and existing under the Minnesota  Business  Corporation  Act, in accordance with
the provisions of Section 302A.401 thereof, DO HEREBY CERTIFY:                  

         That pursuant to the authority conferred upon the Board of Directors by
the  Articles  of  Incorporation  of the said  Corporation,  the  said  Board of
Directors on October 26, 1999 adopted the following resolution creating a series
of one hundred fifty thousand  (150,000) shares of preferred stock designated as
Series A Junior Participating Preferred Stock:                                  

         RESOLVED,  that  pursuant  to the  authority  vested  in the  Board  of
Directors of this  Corporation in accordance with the provisions of its Articles
of  Incorporation,  a series of preferred  stock of the  Corporation  be, and it
hereby is,  created,  and that the designation and amount thereof and the voting
powers,  preferences  and  relative,  participating,  optional and other special
rights of the shares of such  series,  and the  qualifications,  limitations  or
restrictions thereof, are as follows:                                           

     Section 1.  Designation  and  Amount.  The shares of such  series  shall be
designated as "Series A Junior Participating Preferred Stock," no par value, and
the number of shares  constituting such series shall be 150,000.  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 Junior
Participating  Preferred  Stock to a number  less than that of the  shares  then
outstanding  plus the number of shares  issuable  upon  exercise of  outstanding
rights,  options or warrants or upon conversion of outstanding securities issued
by the Corporation.                                                             

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Section 2.  Dividends and Distributions.                              

     (A) Subject to the prior and  superior  rights of the holders of any shares
of any series of preferred stock now or hereafter  ranking prior and superior to
the shares of Series A Junior  Participating  Preferred  Stock  with  respect to
dividends,  the  holders  of shares of Series A Junior  Participating  Preferred
Stock,  in preference  to the holders of shares of Common Stock,  $.05 par value
per share (the "Common  Stock"),  of the Corporation and any other junior 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 last day of March,  June,  September and December in each year (each
such date being  referred to herein as a  "Quarterly  Dividend  Payment  Date"),
commencing on the first Quarterly Dividend Payment Date after the first issuance
of a share or  fraction  of a share of Series A Junior  Participating  Preferred
Stock,  in an amount per whole 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 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 Junior  Participating  Preferred  Stock.  In the  event  the
Corporation  shall at any time  declare  or pay any  dividend  on  Common  Stock
payable in shares of Common Stock,  or effect a  subdivision  (by stock split or
otherwise) or combination (by reverse stock split or otherwise) or consolidation
of the  outstanding  shares of Common Stock (by  reclassification  or otherwise)
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 Junior  Participating
Preferred Stock were entitled  immediately prior to such event shall be adjusted
by multiplying  such amount by a fraction,  the numerator of which is the number
of shares of Common  Stock  outstanding  immediately  after  such  event and the
denominator  of  which is the  number  of  shares  of  Common  Stock  that  were
outstanding  immediately  prior to such  event (and  rounding  the result to the
nearest whole number);  and provided  further that if at any time after November
10,  1999 the  Corporation  shall  issue any  shares of its  capital  stock in a
reclassification  or change of the outstanding shares of Common Stock (including
any such  reclassification  or change in  connection  with a merger in which the
Corporation  is the  surviving  corporation),  then in such  event the amount to
which  holders of Series A Junior  Participating  Preferred  Stock are  entitled
shall be appropriately adjusted to reflect such reclassification or change.     

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

     (C) The holders of shares of Series A Junior Participating  Preferred Stock
shall not be entitled to receive any dividends or other distributions  except as
provided herein.                                                                

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

     (A) Each  share of  Series A Junior  Participating  Preferred  Stock  shall
entitle the holder thereof to one hundred (100) votes,  subject to adjustment in
the manner set forth in Section  2(A),  on all  matters on which  holders of the
Common Stock or stockholders generally are entitled to vote.                    

     (B) Except as otherwise  provided  herein or by applicable law, the holders
of shares of Series A Junior  Participating  Preferred  Stock and the holders of
shares of Common Stock shall vote together as one class on all matters submitted
to a vote of stockholders of the Corporation.                                   

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

Section 4.  Certain Restrictions.                                     

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

                  (i) declare or pay dividends, 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  Junior
Participating 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 Junior  Participating  Preferred Stock,  except dividends paid
         ratably on the Series A Junior  Participating  Preferred  Stock and all
         such  parity  stock on which  dividends  are  payable  or in arrears in
         proportion to the total amounts to which the holders of all such shares
are then entitled;                                            

                  (iii)   redeem  or   purchase   or   otherwise   acquire   for
         consideration  shares  of  any  stock  ranking  junior  (either  as  to
         dividends or upon liquidation, dissolution or winding up) to the Series
         A Junior Participating  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 (either as to dividends or upon dissolution,
         liquidation  or  winding  up)  to the  Series  A  Junior  Participating
Preferred Stock; or                                           

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

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

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

Section 6.  Liquidation, Dissolution or Winding Up.           

         (A) Upon any  liquidation  (voluntary  or  otherwise),  dissolution  or
winding up of the Corporation,  no distribution  shall be made to the holders of
shares of stock  ranking  junior  (either as to dividends  or upon  liquidation,
dissolution or winding up) to the Series A Junior Participating  Preferred Stock
unless,  prior thereto,  the holders of shares of Series A Junior  Participating
Preferred  Stock shall have  received  $100 per share,  plus an amount  equal to
accrued and unpaid dividends and distributions thereon, whether or not declared,
to the  date of such  payment  (the  "Liquidation  Preference").  Following  the
payment  of  the  full  amount  of the  Liquidation  Preference,  no  additional
distributions  shall  be made to the  holders  of  shares  of  Series  A  Junior
Participating  Preferred Stock unless,  prior thereto,  the holders of shares of
Common Stock shall have  received an amount per share (the "Common  Adjustment")
equal to the quotient  obtained by dividing (i) the  Liquidation  Preference  by
(ii) 100 (as  appropriately  adjusted  as set forth in  subparagraph  C below to
reflect such events as stock splits, stock dividends and  recapitalization  with
respect to the Common  Stock) (such number in clause (ii) being herein  referred
to as the "Adjustment Number").  Following the payment of the full amount of the
Liquidation  Preference and the Common  Adjustment in respect of all outstanding
shares  of  Series A Junior  Preferred  Stock and  Common  Stock,  respectively,
holders of Series A Junior  Participating  Preferred Stock and holders of shares
of Common Stock shall proportionately share in the remaining assets in the ratio
of the  Adjustment  Number  (per  share of  Preferred  Stock) to 1 (per share of
Common Stock).                                                                  

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

         (C) In the  event the  Corporation  shall at any time (i)  declare  any
dividend on Common Stock payable in shares of Common Stock,  (ii)  subdivide the
outstanding  Common Stock, or (iii) combine the outstanding  Common Stock into a
smaller number of shares, then in each such case the Adjustment Number in effect
immediately prior to such event shall be adjusted by multiplying such Adjustment
Number by a fraction,  the  numerator of which is the number of shares of Common
Stock  outstanding  immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding  immediately prior to
such event.                                                                     

         Section 7.  Consolidation,  Merger etc. In case the  Corporation  shall
enter into any  consolidation,  merger combination or other transaction in which
the shares of Common  Stock are  exchanged  for or changed  into other  stock or
securities,  cash and/or any other property, then in any such case the shares of
Series  A  Junior  Participating  Preferred  Stock  shall  at the  same  time be
similarly  exchanged or changed in an amount per share (subject to the provision
for adjustment hereinafter set forth) equal to 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  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 set forth in the preceding sentence with respect to
the  exchange  or change of  shares of Series A Junior  Participating  Preferred
Stock shall be adjusted by multiplying such amount by a fraction,  the numerator
of which is the number of shares of Common Stock  outstanding  immediately after
such event and the  denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.                          

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

         Section 9. Ranking. The Series A Junior  Participating  Preferred Stock
shall rank junior to all other series of the Corporation's preferred stock which
may hereafter be authorized as to the payment of dividends and the  distribution
of assets, unless the terms of any such series shall provide otherwise.         

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         Section 10. Amendment. The Articles of Incorporation of the Corporation
shall not be amended in any manner  which would  materially  alter or change the
powers,  preferences  or  special  rights of the  Series A Junior  Participating
Preferred Stock so as to affect them adversely  without the affirmative  vote of
the holders of two-thirds  (2/3) or more of the  outstanding  shares of Series A
Junior Participating Preferred Stock, voting separately as a class.             

         Section 11. Fractional Shares. Series A Junior Participating  Preferred
Stock may be issued in fractions of a share which shall  entitle the holder,  in
proportion  to such  holder's  fractional  shares,  to exercise  voting  rights,
receive  dividends,  participate  in liquidating  distributions  and to have the
benefit  of all  other  rights  of  holders  of  Series A  Junior  Participating
Preferred Stock.                                                                

IN WITNESS  WHEREOF,  we have executed and subscribed  this  Certificate  and do
affirm the  foregoing  as true under the  penalties  of perjury this ____ day of
[_____], 1999.                                                                  

Attest:                                                                         
-----------------------     ------------------------------                      
Richard A. Primuth          Paul N. Hanson                                      
Secretary                   Chief Financial Officer and Treasurer               

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                                                                     Exhibit B

Form of Rights Certificate

Certificate No. R-                                                              

Rights                                                        

         NOT  EXERCISABLE  AFTER OCTOBER 26, 2009, OR EARLIER IF REDEEMED BY THE
         COMPANY.  THE RIGHTS ARE  SUBJECT TO  REDEMPTION,  AT THE OPTION OF THE
         COMPANY,  AT $.001  PER  RIGHT ON THE  TERMS  SET  FORTH IN THE  RIGHTS
         AGREEMENT  REFERRED  TO HEREIN.  UNDER  CERTAIN  CIRCUMSTANCES,  RIGHTS
         BENEFICIALLY  OWNED BY AN ACQUIRING  PERSON (AS SUCH TERM IS DEFINED IN
         THE RIGHTS  AGREEMENT)  AND ANY  SUBSEQUENT  HOLDER OF SUCH  RIGHTS MAY
         BECOME NULL AND VOID. [THE RIGHTS  REPRESENTED BY THIS  CERTIFICATE ARE
         OR WERE  BENEFICIALLY  OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING
         PERSON OR AN AFFILIATE  OR  ASSOCIATE  OF AN ACQUIRING  PERSON (AS SUCH
         TERMS ARE  DEFINED IN THE RIGHTS  AGREEMENT).  ACCORDINGLY,  THIS RIGHT
         CERTIFICATE AND THE RIGHTS  REPRESENTED HEREBY MAY BECOME NULL AND VOID
     IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH AGREEMENT.]1

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Rights Certificate

Communications Systems, 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 October 26, 1999 (the "Rights Agreement"), between Communications Systems,
Inc., a Minnesota corporation (the "Company"),  and Norwest Bank Minnesota, N.A.
(the  "Rights  Agent"),  to  purchase  from the  Company  at any time  after the
Distribution Date (as such term is defined in the Rights Agreement) and prior to
5:00 P.M.  (Minneapolis,  Minnesota  time) on October  26, 2009 at the office or
offices of the Rights Agent  designated  for such purpose,  or its successors as
Rights Agent, one one-hundredth of a fully paid,  non-assessable share of Series
A Junior  Participating  Preferred Stock (the "Preferred Stock") of the Company,
at a purchase price of sixty-five Dollars ($65) per one one-hundredth of a share
(the  "Purchase  Price"),   upon  presentation  and  surrender  of  this  Rights
Certificate  with the Form of Election to Exercise duly executed.  The number of
Rights evidenced by this Rights  Certificate (and the number of shares which may
be purchased upon exercise  thereof) set forth above, and the Purchase Price per
share set forth  above,  are the number and  Purchase  Price as of November  10,
1999, based on the Preferred Stock as constituted at such date.                 

         If the Rights  evidenced by this Rights  Certificate  are  beneficially
owned by (i) an  Acquiring  Person  or an  Affiliate  or  Associate  of any such
Acquiring  Person (as such terms are  defined in the Rights  Agreement),  (ii) a
transferee  of any such  Acquiring  Person or  Associate  or  Affiliate  of such
Acquiring Person except as provided in Section 4(b) of the Rights Agreement,  or
(iii)  under  certain  circumstances,  a  transferee  of  persons  who became an
Acquiring  Person or Affiliate or Associate of such Acquiring  Person  following
such  transfer,  such Rights shall become null and void upon the occurrence of a
Flip-In Event described in Section 11(a)(ii) and as described in Section 7(e) of
the Rights  Agreement  and no holder hereof shall have any right with respect to
such Rights from and after the occurrence of such event.                        

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

         This Rights Certificate is subject to all of the terms,  provisions and
conditions of the Rights Agreement,  which terms,  provisions and conditions are
hereby  incorporated  herein by  reference  and made a part  hereof and to which
Rights Agreement  reference is hereby made for a full description of the rights,
limitations  of rights,  obligations,  duties and  immunities  hereunder  of the
Rights  Agent,  the Company and the  holders of the Rights  Certificates,  which
limitations of rights include the temporary  suspension of the exercisability of
such Rights under  certain  circumstances  specified  in such Rights  Agreement.

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Copies of the Rights Agreement are on file at the above-mentioned  office of the
Rights Agent and are also available upon written  request to the Rights Agent or
the Company.                                                                    

         This Rights  Certificate,  with or without  other Rights  Certificates,
upon surrender at the office or offices of the Rights Agent  designated for such
purpose,  may be exchanged for another Rights Certificate or Rights Certificates
of like tenor and date evidencing Rights entitling the holder to purchase a like
aggregate  number of shares of  Preferred  Stock as the Rights  evidenced by the
Rights Certificate or Rights  Certificates  surrendered shall have entitled such
holder to purchase.  If this Rights  Certificate  shall be exercised (other than
pursuant to Section 11(a)(ii) of the Rights Agreement) in part, the holder shall
be entitled to receive upon  surrender  hereof  another  Rights  Certificate  or
Rights Certificates for the number of whole Rights not exercised. If this Rights
Certificate shall be exercised in whole or in part pursuant to Section 11(a)(ii)
of the Rights  Agreement,  the holder  shall be entitled to receive  this Rights
Certificate duly marked to indicate that such exercise has occurred as set forth
in the Rights Agreement.                                                        

         Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate may be redeemed by the Company at its option at a redemption
price of $.001 per Right.                                                       

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

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

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

        WITNESS the facsimile signature of the proper officers of the Company.

Dated:   _________________                                                      

ATTEST:  Communications Systems, Inc.                                           

_______________________                By_____________________________ Secretary
Title:                                                                  

Countersigned:                                                                  

NORWEST BANK MINNESOTA, N.A.                                                    

By_____________________                                                         
Authorized Signature                                                        

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[Form of Reverse Side of Rights Certificate]

FORM OF ASSIGNMENT

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

       FOR VALUE RECEIVED ____________________________________ hereby sells,
assigns and transfers unto _____________________                              

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

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

         The undersigned  hereby certifies (after due inquiry and to the best of
its knowledge) by checking the appropriate boxes that:                          

(1)  this Rights Certificate                                  
[    ] is                                                                       

or

[    ] is not                                                                   

being sold,  assigned and  transferred by or on behalf of a Person who is or was
an Acquiring Person or an Affiliate or Associate of an Acquiring Person (as such
terms are defined in the Rights Agreement); and                                 

(2)  the undersigned                                          
[    ] did                                                                      

or

[    ] did not                                                                  

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acquire the Rights evidenced by this Rights  Certificate from any person who is,
was or subsequently  became an Acquiring  Person or an Affiliate or Associate of
an Acquiring Person.                                                            

Dated: _________________                                                        

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

Signature Medallion Guaranteed:                                                 

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

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FORM OF ELECTION TO EXERCISE

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

To:  Communications Systems, Inc.:                                              

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

 (Please print name and address)

(Please insert social security
or other identifying number)

         The Rights Certificate  indicating the balance,  if any, of such Rights
which may  still be  exercised  pursuant  to  Section  11(a)(ii)  of the  Rights
Agreement shall be returned to the undersigned  unless such person requests that
the Rights  Certificate be registered in the name of and delivered to: (complete
only  if  Rights  Certificate  is to be  registered  in a name  other  than  the
undersigned)                                                                    

 (Please print name and address)

(Please insert social security
or other identifying number)

         The undersigned  hereby certifies (after due inquiry and to the best of
its knowledge) by checking the appropriate boxes that:                          

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(1)  the Rights evidenced by this Rights Certificate          

[    ] are                                                                      
or

[    ] are not                                                                  

being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate  or Associate of an Acquiring  Person (as such terms are defined in
the Rights Agreement); and                                                      

(2)  the undersigned                                          
[    ] did                                                                      

or

[    ] did not                                                                  

acquire the Rights evidenced by this Rights  Certificate from any person who is,
was or subsequently  became an Acquiring  Person or an Affiliate or Associate of
an Acquiring Person.                                                            

Dated: _________________                                                        

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

Signature Medallion Guaranteed:                                                 

NOTICE

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

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                                                                     EXHIBIT C
SUMMARY OF SHAREHOLDER RIGHTS PLAN

         On October 26, 1999 the Board of Directors of  Communications  Systems,
Inc. (the "Company")  adopted a shareholder  rights plan (the "Rights Plan") The
purpose of the Rights  Plan is to deter  certain  coercive  or abusive  takeover
tactics and to encourage  third  parties  interested in acquiring the Company to
negotiate  with the Board and  otherwise  assist the Board in  representing  the
interests of all shareholders. The Rights Plan does not deter negotiated mergers
or business  combinations  that the Board determines to be in the best interests
of the Company and its stockholders.                                            

         To  implement  the Rights  Plan,  the Board  declared a dividend of one
preferred stock purchase right (the "Right") for each  outstanding  share of the
Company's Common Stock,  $.05 par value per share (the "Common Stock"),  payable
to its shareholders of record at the close of business on November 10, 1999 (the
"Record  Date").  Except as set forth below,  each Right entitles the registered
holder to  purchase  from the Company  one  one-hundredth  (1/100) of a share of
Series A Junior  Participating  Preferred  Stock,  no par value (the  "Preferred
Stock"),  at a price  of $65 per one  one-hundredth  of a share  (the  "Purchase
Price"). The terms of the Rights are set forth in a Rights Agreement dated as of
October 26, 1999 (the "Rights  Agreement")  between the Company and Norwest Bank
Minnesota, N.A., as Rights Agent.                                               

         Initially,  the Rights will be attached  implicitly to all Common Stock
certificates  representing  shares  then  outstanding,  and  no  separate  Right
certificates  will be  distributed.  Until  the  earlier  to  occur  of ten days
following (i) a public announcement that, without the prior consent of the Board
of  Directors,  a person  or group  of  affiliated  or  associated  persons  (an
"Acquiring Person") has acquired,  or obtained the right to acquire,  beneficial
ownership of voting  securities  having 16.5% or more of the voting power of the
Company (the "Stock Acquisition Date"), or (ii) the commencement of (or a public
announcement  of an intention  to make) a tender  offer or exchange  offer which
would  result in any  person  or group and  related  persons  having  beneficial
ownership of voting  securities  having 16.5% or more of the voting power of the
Company  (the  earlier of such  dates  referred  to in (i) and (ii) above  being
called the "Distribution  Date"), the Rights will be evidenced,  with respect to
any of the Common Stock certificates  outstanding as of the Record Date, by such
Common Stock certificates.                                                      

         The Rights Agreement  provides that,  until the Distribution  Date, the
Rights will be transferred with and only with Common Stock certificates. From as
soon as practicable  after the Record Date and until the  Distribution  Date (or
earlier  redemption or expiration of the Rights),  new Common Stock certificates
issued  after the Record Date upon  transfer or new issuance of the Common Stock
will contain a notation  incorporating the Rights Agreement by reference.  Until
the Distribution Date (or earlier  redemption or expiration of the Rights),  the
surrender for transfer of any  certificates  for Common Stock  outstanding as of
the Record Date will also constitute the transfer of the Rights  associated with
the  Common  Stock  represented  by such  certificate.  As  soon as  practicable
following the Distribution  Date,  separate  certificates  evidencing the Rights

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("Rights  Certificates") will be mailed to holders of record of the Common Stock
as of the close of business on the  Distribution  Date, and the separate  Rights
Certificates alone will evidence the Rights.                                    

         The Rights are not exercisable until the Distribution  Date. The Rights
will  expire on October  26,  2009,  unless  earlier  redeemed by the Company as
described below.                                                                

         In the event that any person becomes the  beneficial  owner of 16.5% or
more  of the  voting  power  of the  Company  in a  transaction  which  has  not
previously  been approved by a majority of the independent  directors,  ten (10)
days  thereafter  (the "Flip-In  Event") each holder of a Right will  thereafter
have the right to receive,  upon exercise  thereof at the then current  Purchase
Price of the Right, Common Stock (or, in certain circumstances, a combination of
cash, other property, Common Stock or other securities) which has a value of two
times the  Purchase  Price of the Right (such right  being  called the  "Flip-In
Right"). In the event that the Company is acquired in a merger or other business
combination transaction where the Company is not the surviving corporation or in
the event that 50% or more of its  assets,  cash flow or earning  power is sold,
proper  provision  shall be made so that each holder of a Right will  thereafter
have the  right  to  receive,  upon the  exercise  thereof  at the then  current
Purchase  Price of the Right,  common stock of the acquiring  entity which has a
value of two times the Purchase  Price of the Right (such right being called the
"Flip-Over  Right").  The holder of a Right will  continue to have the Flip-Over
Right  whether  or not  such  holder  exercises  the  Flip-In  Right.  Upon  the
occurrence of the Flip-In  Event,  any Rights that are or were at any time owned
by an Acquiring  Person shall become null and void insofar as they relate to the
Flip-In Right.                                                                  

         For  example,  at a  Purchase  Price of $65 per  Right,  if any  person
becomes  the  beneficial  owner  of  16.5%  or more of the  voting  power of the
Company,  ten (10) days  thereafter  each Right other than a Right owned by such
16.5%  beneficial  owner would  entitle its holder to purchase $130 worth of the
Company's  Common  Stock  (or  other  consideration,  as noted  above)  for $65.
Assuming  that the Common  Stock had a per share value of $13 at such time,  the
holder of each Right  would  effectively  be  entitled  to purchase 10 shares of
Common Stock for $65.                                                           

         Similarly,   assuming,   following  the  Stock  Acquisition  Date,  the
occurrence of a business  combination with another entity in which the Company's
Common  Stock  is  converted  or  exchanged,  or a sale  of 50% or  more  of the
Company's  assets,  cash flow or earning  power,  each Right  would  entitle its
holder to purchase $130 worth of the acquiring entity's stock for $65.          

         The Purchase Price payable, and the number of shares of Preferred Stock
or other  securities  or  property  issuable,  upon  exercise  of the Rights are
subject to adjustment from time to time to prevent  dilution (i) in the event of
a stock dividend on, or a subdivision,  combination or  reclassification  of the
Preferred  Stock,  (ii)  upon the grant to  holders  of the  Preferred  Stock of
certain  rights or warrants to  subscribe  for  Preferred  Stock or  convertible
securities at less than the current market price of the Preferred Stock or (iii)
upon  the  distribution  to  holders  of the  Preferred  Stock of  evidences  of

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

         At any time after the acquisition by a person or group of affiliated or
associated persons of beneficial  ownership of 16.5% or more of the voting power
of the  Company and prior to the  acquisition  by such person or group of 50% or
more of the voting power of the  Company,  the Board of Directors of the Company
may exchange  the Rights  (other than Rights owned by such person or group which
have become  null and void),  in whole or in part,  at an exchange  ratio of one
share of Common Stock, or one one-hundredth of a share of Preferred Stock (or of
a share of a class or series of the Company's  preferred stock having equivalent
rights, preferences and privileges), per Right (subject to adjustment).         

         With certain  exceptions,  no adjustment in the Purchase  Price will be
required until  cumulative  adjustments  require an adjustment of at least 1% in
the Purchase  Price. No fractions of shares will be issued and, in lieu thereof,
an  adjustment  in cash will be made based on the market price of the  Preferred
Stock on the last trading date prior to the date of exercise.                   

         At any time  prior to the  earlier  to occur of (i) the tenth day after
the Stock  Acquisition  Date, or (ii) the expiration of the Rights,  the Company
may redeem the Rights in whole,  but not in part,  at a price of $.001 per Right
(the  "Redemption  Price"),  which redemption shall be effective at such time as
the Board of  Directors  shall  establish.  Additionally,  the  majority  of the
members of the Company's  Board of Directors may,  following the tenth day after
the Stock Acquisition Date, redeem the then outstanding Rights in whole, but not
in part, at the Redemption  Price provided that either (a) the Acquiring  Person
reduces  his, her or its  beneficial  ownership to less than 16.5% of the voting
power of the Company in a manner  which is  satisfactory  to the majority of the
members of the  Company's  Board of Directors  and there are no other  Acquiring
Persons,  or (b) such  redemption is  incidental  to a merger or other  business
combination  transaction or series of transactions involving the Company but not
involving an Acquiring  Person or any person who was an  Acquiring  Person.  The
redemption of Rights described in the preceding sentence shall be effective only
after ten (10)  business  days  prior  notice.  Upon the  effective  date of the
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.

         The  Preferred  Stock  purchasable  upon exercise of the Rights will be
nonredeemable.  Each share of Preferred Stock will have a preferential quarterly
dividend in an amount equal to 100 times the dividend  declared on each share of
Common Stock. In the event of  liquidation,  the holders of Preferred Stock will
receive a preferred  liquidation  payment of $100 per whole  share of  Preferred
Stock. Each whole share of Preferred Stock will have 100 votes,  voting together
with the  Common  Stock.  In the  event of any  merger,  consolidation  or other
transaction in which Common Stock are exchanged,  each share of Preferred  Stock
will be  entitled  to receive  100 times the  amount  and type of  consideration
received  per share of Common  Stock.  The rights of the  Preferred  Stock as to
dividends and liquidations, and in the event of mergers and consolidations,  are
protected by customary anti-dilution provisions.  Fractional shares of Preferred

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Stock in integral  multiples of one  one-hundredth of a share of Preferred Stock
will be issued unless the Company  elects to distribute  depositary  receipts in
lieu  of  such  fractional  shares.  In lieu of  fractional  shares  other  than
fractions that are multiples of one  one-hundredth  of a share, an adjustment in
cash will be made based on the market price of the  Preferred  Stock on the last
trading date prior to the date of exercise.                                     

         Until a Right is  exercised,  it will not  entitle  the  holder  to any
rights  as a  shareholder  of the  Company  (other  than  those  as an  existing
shareholder),  including,  without  limitation,  the right to vote or to receive
dividends.                                                                      

         The terms of the Rights may be amended by the Board of Directors of the
Company (i) prior to the Distribution  Date in any manner,  and (ii) on or after
the  Distribution  Date to cure any  ambiguity,  to  correct or  supplement  any
provision of the Rights  Agreement which may be defective or  inconsistent  with
any other provisions,  or in any manner not adversely affecting the interests of
the holders of the Rights.                                                      

         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. 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.                 

4 

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘8-A12G’ Filing		Date		First		Last			Other Filings
		10/26/09		2		67
		11/10/99		2		66			8-K
Filed on:		11/8/99
		11/5/99		7
		10/26/99		2		66
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