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

H&R Block, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)

MISSOURI
- --------------------------------------------------------------------------------
(State of incorporation or organization)

44-0607856
- --------------------------------------------------------------------------------
(I.R.S. Employer Identification No.)

4400 Main Street, Kansas City, MO 64111
- --------------------------------------------------------------------------------
(Address of principal executive offices) (zip code)

If this Form relates to the  registration of a class of debt securities and
is effective upon filing pursuant to General Instruction A.(c)(1),  please check
the following box. [  ]

If this Form relates to the  registration of a class of debt securities
and is to become effective simultaneously with the effectiveness of a concurrent
registration  statement  under the  Securities  Act of 1933  pursuant to General
Instruction A.(c)(2), please check the following box. [  ]

Securities to be registered pursuant to Section 12(b) of the Act:

Name of each exchange on which each
Title of each class to be so registered           class is to be registered
- ---------------------------------------      -----------------------------------
Preferred Stock Purchase Rights                 New York Stock Exchange

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

Item 1.   Description of Registrant's Securities to be Registered.

The Board of  Directors  of H&R  Block,  Inc.  (the  "Company")  declared a
dividend distribution of one right (a "Right") for each outstanding share of the
Company's Common Stock,  without par value (the "Common Stock"),  payable to the
shareholders  of record at the close of business on the Effective  Date (defined
below)  (the  "Record  Date").  Except  as set forth  below,  each  Right,  when
exercisable,  entitles the  registered  holder to purchase  from the Company one
one-hundredth  of a share of a newly issued  series of the  Company's  preferred
stock,  designated   Participating  Preferred  Stock,  without  par  value  (the
"Preferred Stock"), at a purchase price of $215.00 per one one-hundredth (1/100)

of a share,  subject to adjustment.  The description and terms of the Rights are
set forth in a Rights Agreement (the "Rights Agreement") between the Company and
ChaseMellon Shareholder Services, L.L.C., as Rights Agent (the "Rights Agent").

Capitalized  terms  herein  have the same  meaning  set forth in the Rights
Agreement.  The  following  description  of the  Rights  does not  purport to be
complete  and is  qualified  in its  entirety by reference to the form of Rights
Agreement (and the exhibits attached thereto) attached hereto.

Effective Date of Plan

The Plan will become  effective  upon the  earliest of the  termination  or
expiration of the existing  Shareholder Rights Plan (first effective on July 14,
1988  (the  "Existing  Plan"))  or the date  upon  which  the  Existing  Plan is
determined to have become  ineffective,  regardless of the reasons therefor (the
"Effective Date"). The anticipated Effective Date for the Plan is July 25, 1998.

Rights Evidenced by Common Stock Certificates

The Rights will not be  exercisable  until the  Distribution  Date (defined
below).  Certificates  for the Rights will not be sent to  shareholders  and the
Rights will attach to and trade only  together  with Common Stock  certificates.
Accordingly,  Common  Stock  certificates  outstanding  on the Record  Date will
evidence the rights related thereto (even if such Certificates make reference to
a prior plan), and Common Stock  certificates  issued after the Record Date will
contain a notation  incorporating  the Rights Agreement by reference.  Until the
Distribution  Date  (or  earlier  redemption,  exchange,  or  expiration  of the
Rights),  the  surrender  or  transfer  of any  certificates  for  Common  Stock
outstanding  as of the Record  Date,  even  without  notation  or a copy of this
Summary being attached thereto,  will also constitute the transfer of the Rights
associated with the Common Stock represented by such certificates.

Distribution Date

The  Rights  will  separate  from  the  Common  Stock  certificates,  Right
Certificates  (as  defined  below)  will be issued,  and the Rights  will become
exercisable upon the "Distribution  Date", which is the earlier of the following
dates:

(i) the first to occur of (a) a public announcement that, without the prior
written  consent of the Company,  a person or group of  affiliated or associated
persons (an "Acquiring Person") has acquired,  or obtained the right to acquire,
15% or more of the outstanding  shares of Common Stock, or (b) the date on which
the Company first has notice or otherwise determines that a person has become an
Acquiring Person (the "Stock Acquisition Date"); or

2

(ii) ten days (or such  later  date as may be  determined  by action of the
Board of Directors,  but in no event later than the date set forth in (i) above)
following the commencement of, or announcement of an intention to make, a tender
offer or  exchange  offer  for 15% or more of the  outstanding  shares of Common
Stock without the Prior Written Approval of the Company.

Issuance of Right Certificates

As  soon  as  practicable   following  the  Distribution   Date,   separate
certificates  evidencing  the Rights  ("Right  Certificates")  will be mailed to
holders  of  record  of the  Common  Stock as of the  close of  business  on the
Distribution Date, and such separate Right Certificates alone will then evidence
the Rights.

Final Expiration Date

The Rights  will  expire on the  earliest of (i) March 25, 2008 (the "Final
Expiration  Date") unless the Final Expiration Date is extended by the Board, or
(ii) the  redemption  or exchange  of the Rights by the  Company,  as  described
below.

Initial Exercise of the Rights

Following  the  Distribution  Date,  and  until one of the  further  events
described  below,  holders of the  Rights  will be  entitled  to  receive,  upon
exercise  and the  payment of $215 per Right,  one  one-hundredth  of a share of
Preferred Stock.

Adjustments to Prevent Dilution

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, certain convertible  securities or
securities having the same or more favorable rights,  privileges and preferences
as the  Preferred  Stock 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 periodic cash dividends
out of earnings  or retained  earnings)  or of  subscription  rights or warrants
(other than those referred to above).

The number of outstanding  Rights and the number of one one-hundredths of a
share of Preferred  Stock  issuable  upon  exercise of each Right are subject to
adjustment in the event of a stock split of the Common Stock or a stock dividend
on the  Common  Stock  payable  in  shares  of  Common  Stock  or  subdivisions,
consolidations or combinations of the Common Stock.

Cash Paid Instead of Issuing Fractional Shares

With certain  exceptions,  no  adjustments  in the  Purchase  Price will be
required until  cumulative  adjustments  require an adjustment of at least 1% in
such Purchase Price. No fractions of shares will be issued and, in lieu thereof,

3

an adjustment in cash will be made based on the market price of the Common Stock
on the last trading date prior to the date of exercise.

Right to Buy Common Stock at Half Price

In the event that an Acquiring Person becomes such, proper provisions shall
be made so that each holder of a Right will have the right to receive,  upon the
exercise thereof at the then current exercise price of the Right, that number of
shares of Common Stock having a market value of two times the exercise  price of
the  Right,  to the  extent  available,  and  then  (after  all  authorized  and
unreserved  shares of Common Stock have been  issued) a common stock  equivalent
(such as  Preferred  Stock or  another  equity  security  with at least the same
economic  value as the  Common  Stock)  having a market  value of two  times the
exercise  price of the Right,  with Common Stock to the extent  available  being
issued first (such right being called the "Subscription Right").

Right to Buy Acquiring Company Stock at Half Price

In the event that following the Distribution  Date, the Company is involved
in a merger or other business combination  transaction in which the Common Stock
is exchanged or changed, or 50% or more of the Company's assets or earning power
are sold (in one  transaction  or a series of  transactions),  proper  provision
shall be made so that each holder of a Right shall  thereafter have the right to
receive,  upon the exercise  thereof at the then current  exercise  price of the
Right,  that number of shares of common stock of the  acquiring  company (or, in
the event  there is more  than one  acquiring  company,  the  acquiring  company
receiving the greatest portion of the assets or earning power transferred) which
at the time of such  transaction  would  have a market  value of two  times  the
exercise  price of the Right (such right being called the "Merger  Right").  The
holder of a Right will  continue  to have the Merger  Right  whether or not such
holder exercises the Subscription Right, in whole or in part.

Acquiring Person Rights Void

Upon the occurrence of any of the events giving rise to the  exercisability
of the Merger Right or the  Subscription  Right,  any Rights that are or were at
any time owned by an  Acquiring  Person shall become void insofar as they relate
to the Merger Right or the Subscription Right.

Redemption

At any time  prior to the  earlier  to  occur of (i) a person  becoming  an
Acquiring  Person or (ii) the  expiration of the Rights,  the Company may redeem
the  Rights in whole,  but not in part,  at a price of  $.00125  per Right  (the
"Redemption Price"),  which redemption shall be effective upon the action of the
Board of Directors.  The  redemption of the Rights by the Board of Directors may
be made  effective  at such  time,  in such form and on such basis and with such
conditions  as the Board of  Directors  in its sole  discretion  may  establish.
Immediately  upon the action of the  majority of the Board of  Directors  of the
Company electing to redeem the Rights, evidence of which shall be promptly filed
with the Rights  Agent,  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.

4

Exchange

After a person or group has become an  Acquiring  Person,  the  Company may
exchange all or part of the then outstanding and exercisable  Rights (other than
Rights owned by an Acquiring  Person that became void with respect to the Merger
Right or the Subscription Right) for Common Stock or common stock equivalents at
an Exchange  Ratio of one share of Common Stock (or  equivalent  value of common
stock  equivalent)  per Right or such other  Exchange Ratio as determined by the
Board of Directors. The Company may not effect such an exchange, however, at any
time after any person  (other than the Company and related  entities),  together
with certain related parties, beneficially owns 50% or more of the Common Stock.
Upon action by the Company  ordering  such  exchange,  the right to exercise the
Rights  subject to the exchange will terminate and the only right of the holders
of such  Rights  will be to receive  shares of Common  Stock  based on the above
Exchange Ratio.

Terms of Preferred Stock

The  Preferred  Stock  purchasable  upon  exercise  of the  Rights  will be
nonredeemable  and junior to any other series of preferred stock the Company may
issue  (unless  otherwise  provided in the terms of such  stock).  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,  but in no
event less than $1.00.  In the event of  liquidation,  the holders of  Preferred
Stock will  receive a  preferred  liquidation  payment  equal to the  greater of
$100.00 or 100 times the payment made per each share of Common Stock. Each share
of  Preferred  Stock will have 100  votes,  voting  together  with the shares of
Common Stock. In the event of any merger,  consolidation or other transaction in
which shares of 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,
liquidation  and  voting,  and in the event of mergers and  consolidations,  are
protected by customary anti-dilution provisions.  Fractional shares of Preferred
Stock will be issuable;  however, the Company may elect to distribute depositary
receipts in lieu of such fractional  shares.  In lieu of fractional shares other
than  fractions  that  are  multiples  of  one  one-hundredths  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.

Amendments to the Rights Agreement

The Rights  Agreement may be amended or  supplemented  from time to time in
order (a) to cure any  ambiguity,  (b) to correct or  supplement  any  provision
which may be defective or inconsistent with any other provision,  (c) to shorten
or lengthen any time period  hereunder  (including  the Final  Expiration  Date,
subject to certain limitations), (d) to increase or decrease the Purchase Price,
(e) increase or decrease the Exchange  Ratio, or (f) to change or supplement the
provisions which the Company may deem necessary or desirable and which shall not

5

adversely affect the interests of the holders of Right Certificates  (other than
an Acquiring  Person or an  Affiliate  or  Associate  of an  Acquiring  Person).
However,  if a person becomes an Acquiring Person,  the Rights Agreement may not
be amended in any manner  which  would  adversely  affect the  interests  of the
holders of the Rights.

Adverse Person

The Company may, prior to any person  becoming an Acquiring  Person,  amend
the Rights  Agreement to lower the 15% threshold to not less than the greater of
(i) any  percentage  greater than the largest  percentage of the Voting Power of
the Company then known by the Company to be beneficially  owned by any person or
group (other than the Company, or any of its affiliates), and (ii) 10%.

Shareholder Rights

Until a Right is  exercised,  the  holder  thereof,  as such,  will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends.

Item 2.           Exhibits.

Exhibit No.     Description of Exhibit
- -----------     ----------------------
1        Rights  Agreement,  dated as of March  25,  1998,
between   H&R   Block,   Inc.   and   ChaseMellon
Shareholder  Services,  L.L.C.,  as Rights Agent,
which   includes   as   Exhibit  1  the  form  of
Certificate   of  Amendment  of   Certificate  of
Designation,    Preferences    and    Rights   of
Participating  Preferred Stock; the form of Right
Certificate  as  Exhibit  2; and the  Summary  of
Shareholder Rights Plan as Exhibit 3.

Pursuant to the  requirements of Section 12 of the Securities  Exchange Act
of 1934,  the  registrant  has duly  caused this  amendment  to be signed on its
behalf by the undersigned, thereunto duly authorized.

H&R BLOCK, INC.

By: /s/ Ozzie Wenich
------------------------------------------
Ozzie Wenich, Senior Vice President and
Chief Financial Officer

Date:    July 22, 1998

6

EXHIBIT INDEX

Exhibit No.       Description of Exhibit
- -----------       ----------------------
1             Rights  Agreement,  dated as of March  25,  1998,
between   H&R   Block,   Inc.   and   ChaseMellon
Shareholder  Services,  L.L.C.,  as Rights Agent,
which   includes   as   Exhibit  1  the  form  of
Certificate   of  Amendment  of   Certificate  of
Designation,    Preferences    and    Rights   of
Participating  Preferred Stock; the form of Right
Certificate  as  Exhibit  2; and the  Summary  of
Shareholder Rights Plan as Exhibit 3.

7

RIGHTS AGREEMENT

H&R BLOCK, INC.

and

CHASEMELLON SHAREHOLDER SERVICES, L.L.C.

Rights Agent

Dated March 25, 1998

INDEX

Page

Section 1.        Certain Definitions..........................................1
Section 2.        Appointment of Rights Agent..................................4
Section 3.        Issue of Right Certificates..................................4
Section 4.        Form of Right Certificates...................................6
Section 5.        Countersignature and Registration............................7
Section 6.        Transfer, Split Up, Combination and
Exchange of Right Certificates;
Mutilated, Destroyed, Lost or Stolen
Right Certificates...........................................8
Section 7.        Exercise  of  Rights;   Purchase  Price;
Expiration Date of Rights....................................8
Section 8.        Cancellation  and  Destruction  of Right Certificates.......10
Section 9.        Reservation  and  Availability of Shares
of Preferred Stock..........................................10
Section 10.       Preferred Stock Record Date.................................11
Section 11.       Adjustment  of  Purchase  Price,  Number
of Shares or Number of Rights...............................11
Section 12.       Certificate  of Adjusted  Purchase Price
or Number of Shares.........................................18
Section 13.       Consolidation,   Merger   or   Sale   or
Transfer of Assets or Earning Power.........................18
Section 14.       Fractional Rights and Fractional Shares.....................20
Section 15.       Rights of Action............................................22
Section 16.       Agreement of Right Holders..................................22
Section 17.       Right Certificate Holder Not Deemed a Shareholder...........22
Section 18.       Concerning the Rights Agent.................................23
Section 19.       Merger  or  Consolidation  or  Change of
Name of Rights Agent........................................23
Section 20.       Duties of Rights Agent......................................24
Section 21.       Change of Rights Agent......................................25
Section 22.       Issuance of New Right Certificates..........................26
Section 23.       Redemption and Termination..................................27
Section 24.       Exchange....................................................27
Section 25.       Notice of Proposed Actions..................................28
Section 26.       Notices.....................................................29
Section 27.       Supplements and Amendments..................................30
Section 28.       Successors..................................................30
Section 29.       Benefits of this Agreement..................................30
Section 30.       Severability................................................31
Section 31.       Governing Law...............................................31
Section 32.       Counterparts................................................31
Section 33.       Descriptive Headings........................................31

Signatures

Exhibit 1        Form of Certificate of Amendment of Certificate of Designation,
Preferences and Rights of Participating Preferred Stock
Exhibit 2        Form of Right Certificate
Exhibit 3        Summary of Shareholder Rights Plan

i

RIGHTS AGREEMENT

This  Agreement,  dated March 25, 1998,  is entered into between H&R Block,
Inc.,  a Missouri  corporation  (the  "Company"),  and  ChaseMellon  Shareholder
Services, L.L.C. (the "Rights Agent").

Recitals

On March 25, 1998, the Board of Directors of the Company (i) authorized the
issuance and declared a dividend distribution of one right (hereinafter referred
to as a  "Right")  for each share of Common  Stock,  without  par value,  of the
Company  outstanding at the close of business on the Effective Date (the "Record
Date") (other than shares of such Common Stock held in the Company's treasury on
such  date),  and (ii)  authorized  and  directed  the  issuance of one Right in
respect of each share of Common Stock of the Company  issued  between the Record
Date (whether  originally issued or issued from the Company's  treasury) and the
Distribution Date (as such term is defined in Section 3 hereof), with each Right
representing the right to purchase one one-hundredth of a share of participating
preferred  stock of the Company having the rights,  powers and  preferences  set
forth in the form of  Certificate of  Designation  attached  hereto as Exhibit 1
(the  "Preferred  Stock"),   upon  the  terms  and  subject  to  the  conditions
hereinafter set forth (the "Rights").

The Company desires to appoint the Rights Agent to act as provided  herein,
and the Rights Agent is willing to so act.

Agreements

In  consideration  of the  recitals  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, except as otherwise provided herein, any
Person (as hereinafter  defined) who or which,  together with all Affiliates and
Associates  (as each term is  hereinafter  defined) of such Person,  without the
Prior  Written  Approval  of the  Company,  shall be the  Beneficial  Owner  (as
hereinafter  defined) of securities of the Company  constituting  15% or more of
the  Voting  Power  (as  hereinafter  defined)  of the  Company  or  was  such a
Beneficial  Owner at any time after the date hereof,  whether or not such Person
continues to be the Beneficial  Owner of securities  representing 15% or more of
the Voting Power of the Company;  but  "Acquiring  Person" shall not include the
Company,  any Subsidiary (as hereinafter  defined) of the Company,  any employee
benefit  plan of the Company or any  Subsidiary  of the  Company,  or any entity
holding  securities  of  the  Company  to the  extent  organized,  appointed  or
established  by the Company or any  Subsidiary of the Company for or pursuant to
the terms of any such employee benefit plan.  Notwithstanding the foregoing,  no
Person shall become an "Acquiring  Person" as the result of any  acquisition  of
voting securities of the Company by the Company which, by reducing the amount of
such securities outstanding, increases the proportionate Voting Power of such

securities beneficially owned by such Person to 15% or more of the Voting Power;
provided,  however,  that if a Person becomes the Beneficial Owner of securities
constituting  15% or more of the  Voting  Power by  reason of  purchases  by the
Company and shall,  after such  purchases by the Company,  become the Beneficial
Owner of any  additional  voting  securities  of the  Company  without the Prior
Written  Approval  of the  Company,  then such  Person  shall be deemed to be an
Acquiring  Person.  Any Person who or which,  together with all  Affiliates  and
Associates  of such  Person,  inadvertently  becomes  the  Beneficial  Owner  of
securities  of the  Company  representing  15% or more of  Voting  Power  of the
Company or otherwise  becomes a Beneficial  Owner without a plan or intention to
acquire control of the Company,  shall not become an "Acquiring  Person" so long
as such Person,  individually  or together with the Affiliates and Associates of
such Person,  promptly enters into, and delivers to the Company,  an irrevocable
commitment  to  promptly  divest,  and  thereafter   promptly  divests  (without
exercising  or  retaining  any power,  including  voting,  with  respect to such
securities),  sufficient securities of the Company so that such Person, together
with all Affiliates  and Associates of such Person,  ceases to be the Beneficial
Owner of 15% or more of the Voting Power of the Company.

Notwithstanding  the foregoing,  no Person who is, as of the Effective Date
of  this  Agreement,   the  Beneficial   Owner  of  securities  of  the  Company
constituting  15% or more of the  Voting  Power  of the  Company,  or who is the
Beneficial Owner of securities and/or rights convertible into or exercisable for
securities  of the Company  constituting  15% or more of the Voting Power of the
Company (each such Person, together with its Affiliates and Associates, being an
"Exempt  Person"),  shall be deemed  an  "Acquiring  Person"  as a result of the
ownership of such  securities  or rights,  or as a result of the  conversion  or
exercise  of such  securities  or rights  and the  ownership  of the  securities
obtained thereby,  unless such Person is deemed to be an Acquiring Person by the
Board of Directors;  provided, however, that if after the date hereof any Exempt
Person shall become the Beneficial Owner of additional securities of the Company
so that  such  Person's  Beneficial  Ownership  is in  excess  of the  amount of
securities of the Company  Beneficially Owned by such Person as of the Effective
Date of this  Agreement,  then  such  Exempt  Person  shall be  deemed  to be an
Acquiring Person.

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

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

(i)  which  such  Person  or  any  of  such  Person's   Affiliates  or
Associates,  directly  or  indirectly,   beneficially  owns  as  determined
pursuant  to Rule  13d-3 of the  General  Rules and  Regulations  under the
Exchange Act as in effect on the date hereof;

(ii)  which  such  Person  or  any  of  such  Person's  Affiliates  or
Associates has (A) the right to acquire  (whether such right is exercisable
immediately  or only after the passage of time)  pursuant to any agreement,
arrangement  or  understanding  (other than customary  agreements  with and
between  underwriters and selling group members with respect to a bona fide
public offering of securities),  or upon the exercise of conversion rights,

2

exchange  rights,  rights (other than the Rights)  warrants or options,  or
otherwise,  provided,  however,  that a  Person  shall  not be  deemed  the
"Beneficial Owner" of securities  tendered pursuant to a tender or exchange
offer  made  by or on  behalf  of  such  Person  or  any of  such  Person's
Affiliates or Associates  until such tendered  securities  are accepted for
payment or exchange;  or (B) the right to vote  pursuant to any  agreement,
arrangement or understanding, provided, however, that a Person shall not be
deemed the "Beneficial  Owner" of any security under this clause (B) if the
agreement,  arrangement or understanding to vote such securities (1) arises
solely  from a  revocable  proxy or consent  given in  response to a public
proxy or consent solicitation made pursuant to, and in accordance with, the
applicable  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);

(iii) which are  beneficially  owned,  directly or indirectly,  by any
other Person with which such Person or any of such  Person's  Affiliates or
Associates has any  agreement,  arrangement  or  understanding  (other than
customary  agreements  with and  between  underwriters  and  selling  group
members with respect to a bona fide public  offering of securities) for the
purpose of acquiring, holding, voting (except pursuant to a revocable proxy
or  consent  as  described  in  clause  (B) of  subparagraph  (ii)  of this
paragraph (c)) or disposing of any securities of the Company; or

(iv)  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 State of Missouri 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., Kansas City
time, on such date; provided,  however,  that if such date is not a Business Day
it shall mean 5:00 P.M., Kansas City time, on the next succeeding Business Day.

(f) "Common Stock" shall mean the Common Stock,  without par value,  of the
Company, except that "Common Stock" when used with reference to any Person other
than the Company shall mean the capital stock with the greatest  Voting Power of
such Person or the equity  securities or other equity  interest  having power to
control  or direct  the  management  of such  Person,  or,  if such  Person is a
Subsidiary  of another  Person,  of the Person which  ultimately  controls  such
first-mentioned  Person and which has issued and outstanding such capital stock,
equity securities or equity interests.

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

3

(h)  "Effective  Date"  of this  Agreement  shall  be the  earliest  of the
termination or expiration of the Shareholder Rights Plan adopted by the Board on
July 14,  1988,  as  amended,  (the  "Existing  Plan") or the date for which the
Existing Plan becomes or became ineffective, regardless of the reason therefor.

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

(j) "Prior  Written  Approval  of the  Company"  shall  mean prior  express
written consent of the Company to the actions in question, executed on behalf of
the Company by a duly  authorized  officer of the Company  following the express
approval  by  action  of at least a  majority  of the  members  of the  Board of
Directors then in office.

(k) "Purchase Price" shall have the meaning defined in Section 4 hereof.

(l) "Stock  Acquisition  Date" shall mean the earlier of (i) the first date
of public  announcement by the Company or an Acquiring  Person that an Acquiring
Person has become such,  or (ii) the date on which the Company first has notice,
direct  or  indirect,  or  otherwise  determines,  that a Person  has  become an
Acquiring Person.

(m) "Subsidiary" shall mean with respect to any Person, any other Person of
which  securities or other ownership  interests having ordinary Voting Power, in
the absence of  contingencies,  to elect a majority of the board of directors or
other  persons  performing  similar  functions  are  at  the  time  directly  or
indirectly  owned by such Person or one or more of such  Person's  Subsidiaries,
except that  "Subsidiary" when used with reference to the Company shall mean any
corporation  or other  entity of which  either a majority of the Voting Power of
the voting  equity  securities  or a majority of the equity  interests is owned,
directly or indirectly by the Company.

(n)  "Voting  Power"  shall mean the voting  power of all  securities  of a
Person then outstanding generally entitled to vote for the election of directors
of the Person (or, where  appropriate,  for the election of a person  performing
similar functions).

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 Right Certificates.

(a) Until the earlier of (i) the Close of Business on the Stock Acquisition
Date or (ii) the  Close of  Business  on the tenth  Business  Day after (or such
later date as may be determined  by action of the Board of Directors,  but in no

4

event  later  than the  date set  forth in  clause  (i)  above)  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,  any employee  benefit plan of
the  Company  or of  any  Subsidiary  of the  Company,  or  any  entity  holding
securities of the Company to the extent  organized,  appointed or established by
the Company or any Subsidiary of the Company for or pursuant to the terms of any
such employee  benefit plan) to commence (which intention to commence remains in
effect  for five  Business  Days  after such  announcement),  without  the Prior
Written  Approval of the Company,  a tender or exchange offer which would result
in any 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
earlier of such dates 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 the Common Stock registered in the names of
the holders of the Common  Stock (which  certificates  for Common Stock shall be
deemed  also  to be  Right  Certificates,  as  hereinafter  defined)  and not by
separate Right  Certificates,  as more fully set forth below, 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, as more
fully set forth below. As soon as practicable after the Company has notified the
Rights Agent of the  occurrence  of the  Distribution  Date,  the Company  shall
prepare  and  execute,  and the Rights  Agent  shall  countersign  and send,  by
first-class,  insured, postage prepaid mail, to each record holder of the Common
Stock as of the Close of Business on the  Distribution  Date,  at the address of
such  holder  shown on the  records  of the  Company,  a Right  Certificate,  in
substantially the form of Exhibit 2 hereto (the "Right Certificate"), 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  Right
Certificates.

(b) On the Record Date or as soon as  practicable  thereafter,  the Company
will send a copy of a Summary of Shareholder  Rights Plan, in substantially  the
form of Exhibit 3 hereto  (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 (or the earlier  redemption,
exchange, expiration or termination of the Rights), the Rights will be evidenced
by such certificates for the Common Stock registered in the names of the holders
of the Common Stock and the registered holders of the Common Stock shall also be
registered holders of the associated Rights. Until the Distribution Date (or the
earlier redemption,  expiration or termination of the Rights), the surrender for
transfer of any of the certificates for the Common Stock  outstanding in respect
of which  Rights  have been  issued  (with or  without a copy of the  Summary of
Rights  attached  thereto)  shall also  constitute  the  transfer  of the Rights
associated with the Common Stock represented by such certificate.

(c)  Certificates  for the Common Stock (including the Common Stock held in
the Company's  treasury on the Record Date) that becomes  outstanding  after the
Record Date but prior to the earlier of the Distribution Date or the redemption,
expiration or termination of the Rights shall be deemed also to be  certificates
for Rights and shall have impressed, printed or written on, or otherwise affixed
to them the following legend:

5

This  certificate  also evidences and entitles the holder hereof to
certain Rights as set forth in a Rights Agreement  between H&R Block,  Inc.
(the "Company") and ChaseMellon  Shareholder Services,  L.L.C. (the "Rights
Agent") dated as of March 25, 1998 (the "Rights  Agreement") as it may from
time  to  time  be  supplemented  or  amended,   the  terms  of  which  are
incorporated  herein  by  reference  and a copy of  which is on file at the
principal executive offices of the Company. Under certain circumstances, as
set forth in the Rights  Agreement,  such  Rights may be  redeemed,  may be
exchanged,  may expire, or may be evidenced by separate certificates and no
longer be  evidenced  by this  certificate.  The  Company  will mail to the
holder of this  certificate a copy of the Rights  Agreement  without charge
within five days after receipt of a written request therefor. Under certain
circumstances,  Rights  issued  to or held by  Acquiring  Persons  or their
Affiliates  or  Associates  (as  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
Distribution  Date  (or  the  earlier   redemption,   exchange,   expiration  or
termination  of the  Rights),  the  Rights  associated  with  the  Common  Stock
represented by such certificates shall be evidenced by such certificates  alone,
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 that 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
are no longer  outstanding.  Upon reissuance of such Common Stock by the Company
prior to the Distribution Date (or earlier redemption,  exchange,  expiration or
termination of the Rights) the Rights shall again attach to such Common Stock as
set forth in this Section 3(c).

Section 4. Form of Right Certificates.

(a) The Right  Certificates  (and the forms of election to purchase  shares
and  of  assignment  to  be  printed  on  the  reverse   thereof)  shall  be  in
substantially  the same  form as  Exhibit 2 hereto  and may have  such  marks of
identification  or  designation  and such  legends,  summaries  or  endorsements
printed thereon as the Company may deem  appropriate and as are not inconsistent
with the provisions of this Agreement,  or as may be required to comply with any
applicable  law,  rule or regulation 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
customary usage.  Subject to the provisions of Section 11 and Section 22 hereof,
the Right Certificates,  whenever issued,  shall be dated as of the Record Date,
and on their face shall  entitle the holders  thereof to purchase such number of
one  one-hundredths  of a share of Preferred Stock as shall be set forth therein
at the  price  per one  one-hundredths  of a share  as set  forth  therein  (the
"Purchase Price"), but the number of such shares and the Purchase Price shall be
and remain subject to adjustment as provided in Sections 11, 13 and 22 hereof.

6

(b) Any Right  Certificate  issued  pursuant  to Section  3(a)  hereof that
represents  Rights as to which an Acquiring Person or any Associate or Affiliate
thereof is the  Beneficial  Owner and any Right  Certificate  issued at any time
upon the  transfer  of any Rights to an  Acquiring  Person or any  Associate  or
Affiliate  thereof or to any  nominee of such  Acquiring  Person,  Associate  or
Affiliate,  and any  Right  Certificate  issued  pursuant  to  Section 6 hereof,
Section  11  hereof,  Section  13 hereof or  Section  22 hereof  upon  transfer,
exchange,  replacement or adjustment of any other Right Certificate  referred to
in this sentence, shall contain (to the extent feasible) the following legend:

The Rights  represented by this Right  Certificate were issued
to a Person who was an Acquiring  Person or an Affiliate or an
Associate of an Acquiring  Person.  This Right Certificate and
the  Rights   represented   hereby  may  become  void  in  the
circumstances   specified   in  Section  7(e)  of  the  Rights
Agreement.

The failure to print the foregoing  legend on any such Right  Certificate  or
any defect therein shall not affect in any manner  whatsoever the application of
interpretation of the provisions of Section 7(e) hereof.

Section 5. Countersignature and Registration.

(a) The Right  Certificates  shall be  executed on behalf of the Company by
its  President,  its  Chief  Financial  Officer  or any Vice  President,  either
manually or by facsimile signature, and shall have affixed thereto the Company's
seal or a facsimile  thereof  which shall be  attested  by the  Secretary  or an
Assistant Secretary of the Company,  either manually or by facsimile  signature.
The Right Certificates shall be countersigned manually or by facsimile signature
by the Rights Agent or any registrar for the Common Stock (the  "Registrar") and
shall not be valid for any purpose unless so countersigned.  In case any officer
of the  Company  whose  manual or  facsimile  signature  is affixed to the Right
Certificates   shall   cease  to  be  such   officer  of  the   Company   before
countersignature  by the Rights Agent or the Registrar and issuance and delivery
by the Company, such Right Certificates,  nevertheless,  may be countersigned by
the Rights Agent or the Registrar,  issued and delivered with the same force and
effect as though the person who signed such Right Certificates had not ceased to
be such officer of the Company. Any Right Certificate may be signed on behalf of
the Company by any person who, at the actual date of the execution of such Right
Certificate,  shall  be a proper  officer  of the  Company  to sign  such  Right
Certificate,  although at the date of the execution of this Rights Agreement any
such person was not such an officer.

(b) Following the Distribution Date, the Rights Agent will keep or cause to
be kept, at the office of the Registrar or such other office designated for such
purpose,  books for registration and transfer of the Right  Certificates  issued
hereunder.  Such books  shall  show the names and  addresses  of the  respective
holders of the Right Certificates, the number of Rights evidenced on its face by

7

each of the  Right  Certificates,  the  certificate  number of each of the Right
Certificates and the date of each of the Right Certificates.

Section  6.  Transfer,   Split  Up,   Combination  and  Exchange  of  Right
Certificates;  Mutilated, Destroyed, Lost or Stolen Right Certificates.  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 (as such term is  defined in Section  7(a)  hereof),  any Right
Certificate or Certificates  (other than Right Certificates  representing Rights
that have become void pursuant to Section 7(e) hereof) may be transferred, split
up, combined or exchanged for another Right  Certificate or Right  Certificates,
entitling the registered holder to purchase a like number of shares of Preferred
Stock as the Right Certificate or Right  Certificates  surrendered then entitled
such holder to purchase.  Any registered holder desiring to transfer,  split up,
combine or exchange  any Right  Certificate  shall make such  request in writing
delivered to the Rights  Agent,  and shall  surrender the Right  Certificate  or
Right  Certificates  to be  transferred,  split up, combined or exchanged at the
office of the  Registrar  or such  other  office  designated  for such  purpose.
Thereupon,  the Rights Agent or the Registrar  shall  countersign and deliver to
the person entitled thereto a Right 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 Right
Certificates.

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

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

(a) The registered  holder of any Right Certificate may exercise the Rights
evidenced  thereby (except as otherwise  provided herein) in whole or in part at
any time after the  Distribution  Date upon surrender of the Right  Certificate,
with the form of election to purchase on the reverse side thereof duly executed,
to the  Rights  Agent  at the  office  of the  Registrar  or such  other  office
designated for such purpose together with payment of the Purchase Price for each
one  one-hundredth  of a share of  Preferred  Stock as to which the  Rights  are
exercised,  at or prior to the Close of Business on the earlier of (i) March 25,
2008  (the  "Final  Expiration  Date"),  (ii) the time at which the  Rights  are
redeemed  as  provided  in  Section 23 or (iii) the time at which the Rights are
exchanged  as  provided in Section 24 hereof  (such  earlier  date being  herein
referred to as the "Expiration Date").

(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 $215.00,  shall be

8

subject to adjustment from time to time as provided in Sections 11 and 13 hereof
and shall be  payable  in  lawful  money of the  United  States  of  America  in
accordance with paragraph (c) below.

(c) Upon receipt of a Right Certificate  representing  exercisable  Rights,
with the form of election to purchase duly  executed,  accompanied by payment of
the Purchase Price for each one  one-hundredth  of a share of Preferred Stock to
be purchased and an amount equal to any  applicable  transfer tax required to be
paid by the holder of the Rights  pursuant  hereto in accordance  with Section 9
hereof in cash, or by certified check or money order payable to the order of the
Company or the Rights  Agent,  the Rights Agent shall,  subject to Section 20(k)
hereof, thereupon promptly (i) either (A) requisition from any transfer agent of
the shares of  Preferred  Stock (or make  available,  if the Rights Agent is the
transfer agent),  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-hundredths  of a share of Preferred  Stock as are to be purchased  (in which
case certificates for the shares of Preferred Stock represented by such receipts
shall be  deposited  by the transfer  agent with the  depositary  agent) and the
Company hereby  irrevocably  authorizes the depositary  agent to comply with all
such requests, (ii) when appropriate, requisition from the Company the amount of
cash to be paid in lieu of  issuance of  fractional  shares in  accordance  with
Section  14  hereof,  (iii)  promptly  after  receipt  of such  certificates  or
depositary  receipts  cause the same to be delivered to or upon the order of the
registered holder of such Right Certificate, registered in such name or names as
may be  designated by such holder,  and (iv) when  appropriate,  after  receipt,
promptly deliver such cash to or upon the order of the registered holder of such
Right  Certificate.  In the  event  the  Company  is  obligated  to issue  other
securities of the Company, or distribute property pursuant to Section 11(a), the
Company shall make all  arrangements  necessary so that such other securities or
property  are  available  for  distribution  by the  Rights  Agent,  if and when
appropriate.

(d) In case the registered  holder of any Right  Certificate shall exercise
(except  pursuant to Section 11(b) hereof) less than all of the Rights evidenced
thereby,  a new Right  Certificate  evidencing  Rights  equivalent to the Rights
remaining  unexercised  shall be issued by the  Rights  Agent to the  registered
holder of such Right Certificate or to his duly authorized  assigns,  subject to
the provisions of Section 14 hereof. In addition,  in the case of an exercise of
the Rights by a holder pursuant to Section 11(b),  the Rights Agent shall return
such Right  Certificate  to the  registered  holder  thereof  after  imprinting,
stamping or otherwise  indicating  thereon that the rights  represented  by such
Right  Certificate no longer include the rights provided by Section 11(b) of the
Rights  Agreement  and if less than all the  Rights  represented  by such  Right
Certificate  were so  exercised,  the Rights  Agent shall  indicate on the Right
Certificate the number of Rights  represented  thereby which continue to include
the rights provided by Section 11(b).

(e)  Notwithstanding  anything in this Agreement to the contrary,  upon the
occurrence  of any of the  events  listed in Section  11(b) or in Section  13(a)
hereof, any Rights of which an Acquiring Person or any Associate or Affiliate of
the Acquiring  Person is the Beneficial  Owner shall become void with respect to
Rights provided under Section 11(b), Section 13(a) and Section 24 hereof and any
holder of such Rights  shall  thereafter  have no right to exercise  such Rights
under the  provisions  of Section  11(b) and  Section  13(a),  or to receive any
Common  Stock in  exchange  therefor  pursuant to the  provisions  of Section 24
hereof.

9

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

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

Section 9. Reservation and Availability of Shares of Preferred 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 or
its authorized and issued shares of Preferred Stock held in treasury, the number
of shares of Preferred  Stock that will be  sufficient to permit the exercise in
full of all  outstanding  Rights and, after the occurrence of an event specified
in Section 11 hereof, shall so reserve and keep available a sufficient number of
shares of Preferred  Stock,  Common Stock and/or other  securities  which may be
required  to  permit  the  exercise  in  full  of the  Rights  pursuant  to this
Agreement.

(b) 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/or  other
securities  delivered upon exercise of Rights shall,  at the time of delivery of
the certificates for such shares or other securities  (subject to payment of the
"Purchase Price),  be duly and validly  authorized and issued and fully paid and
nonassessable shares or securities.

(c) The  Company  shall  use  its  best  efforts  to (i)  file,  as soon as
practicable  following the first  occurrence of any event which would  establish
the Distribution Date, a registration statement on an appropriate form under the
Securities Act of 1933, as amended (the "Securities  Act"),  with respect to the
securities purchasable upon exercise of the Rights, (ii) cause such registration
statement to become  effective  as soon as  practicable  after such filing,  and

10

(iii) cause such  registration  statement to remain effective (with a prospectus
at all times meeting the  requirements  of the Securities 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.

(d) 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 Right  Certificates  or of
any share of Preferred  Stock and/or other  securities  upon the exercise of the
Rights.  The Company  shall not,  however,  be required to pay any  transfer tax
which may be payable in respect of any  transfer  involved  in the  transfer  or
delivery of Right  Certificates  or the issuance or delivery of  certificates or
depositary  receipts for Preferred Stock and/or other securities in a name other
than that of the registered holder of the Right  Certificates  evidencing Rights
surrendered for exercise,  nor shall the Company be required to issue or deliver
any  certificates  or depositary  receipts for shares of Preferred  Stock and/or
other  securities  upon the exercise of any Rights until any such tax shall have
been paid (any such tax being payable by the holder of such Right 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  (other than the
Company) in whose name any  certificate  for shares of Preferred Stock (or other
securities)  is issued  upon the  exercise of Rights  shall for all  purposes be
deemed to have  become  the  holder of record of the  Preferred  Stock (or other
securities)  represented  thereby on, and such  certificate  shall be dated, the
date  upon  which  the  Right  Certificate   evidencing  such  Rights  was  duly
surrendered  and  payment of the  Purchase  Price (and any  applicable  transfer
taxes)  was made;  provided,  however,  that if the date of such  surrender  and
payment is a date upon which the Preferred Stock (or other securities)  transfer
books of the Company are closed,  such Person shall be deemed to have become the
record holder of such shares on, and such certificates  shall be dated, the next
succeeding  Business  Day on which the  Preferred  Stock  (or other  securities)
transfer  books of the  Company  are open.  Prior to the  exercise of the Rights
evidenced  thereby,  the holder of a Right  Certificate shall not be entitled to
any rights of a stockholder  of the Company with respect to shares for which the
Rights shall be exercisable,  including,  without limitation, the right to vote,
to receive  dividends  or other  distributions  or to  exercise  any  preemptive
rights,  and shall not be entitled to receive any notice of any  proceedings  of
the Company, except as provided herein.

Section 11.  Adjustment  of Purchase  Price,  Number of Shares or Number of
Rights.  The Purchase Price,  the number 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) In the  event  the  Company  shall at any time  after  the date of this
Agreement  (i) declare a dividend on the  Preferred  Stock  payable in shares of
Preferred Stock, (ii) subdivide the outstanding  Preferred Stock,  (iii) combine
the outstanding  Preferred Stock into a smaller number of shares,  or (iv) issue
any shares of its capital stock in a  reclassification  of the  Preferred  Stock
(including  any such  reclassification  in connection  with a  consolidation  or
merger in which the Company is the continuing or surviving corporation),  except
as otherwise  provided in this  Section 11, the Purchase  Price in effect at the
time of the record date for such dividend or the time of the  effective  date of
such subdivision,  combination or  reclassification,  and the number and kind of

11

shares of capital stock,  including Preferred Stock, issuable upon exercise of a
Right,  shall be  proportionately  adjusted  so that  the  holder  of any  Right
exercised  after such time,  upon payment of the aggregate  Purchase  Price such
holder  would have to pay to exercise  such Right  prior to such time,  shall be
entitled to receive the  aggregate  number and kind of shares of capital  stock,
including Preferred Stock,  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,  he would have owned upon such  exercise and been entitled to
receive   by   virtue   of   such   dividend,   subdivision,    combination   or
reclassification.  If an event occurs which would  require an  adjustment  under
both  Section  11(a) and Section  11(b),  the  adjustment  provided  for in this
Section  11(a)  shall be in  addition  to,  and  shall  be made  prior  to,  any
adjustment required pursuant to Section 11(b).

(b) In the event any Person shall become an Acquiring  Person,  then proper
provision shall be made so that each holder of a Right,  subject to Section 7(e)
and  Section  24 and  except as  provided  below,  shall  after the later of the
occurrence of such event and the effective date of an  appropriate  registration
statement pursuant to Section 9 hereof,  have a right to receive,  upon exercise
thereof at the then current  Purchase Price in accordance with the terms of this
Agreement, in lieu of shares of Preferred Stock, such number of shares of Common
Stock of the Company as shall equal the result  obtained by (x)  multiplying the
then current Purchase Price by the then number of one  one-hundredths of a share
of  Preferred  Stock for which a Right is then  exercisable  and  dividing  that
product by (y) 50% of the  current  market  price per one share of Common  Stock
(determined  pursuant to Section  11(f) hereof on the date of the  occurrence of
any one of the events  listed  above in this  subparagraph  (b)) (such number of
shares being referred to as the "Number of Adjustment Shares").

(c) In the event that there shall not be  sufficient  shares in treasury or
authorized but unissued shares of Common Stock to permit the exercise in full of
the Rights in accordance with the foregoing  Section 11(b) and the Rights become
so exercisable,  notwithstanding  any other provision of this Agreement,  to the
extent necessary and permitted by applicable law and any agreements in effect on
the date  hereof to which the Company is a party,  each Right  shall  thereafter
represent  the right to  receive,  upon  exercise  thereof  at the then  current
Purchase  Price in  accordance  with the  terms of this  Agreement,  a number of
shares,  or unit of shares,  of (x) Common Stock, and (y) any class or series of
preferred stock (or other equity securities) of the Company,  including, but not
limited to Preferred  Stock,  equal in the aggregate to the Number of Adjustment
Shares where the Board of Directors  shall have in good faith deemed such shares
or units, other than the shares of Common Stock, to have at least the same value
and voting rights as the Common Stock (a "common stock  equivalent");  provided,
however, if there are unavailable  sufficient shares (or fractions of shares) of
Common Stock and/or  common stock  equivalents,  then the Company shall take all
such action as may be necessary to authorize  additional  shares of Common Stock
or common stock equivalents for issuance upon exercise of the Rights,  including
the calling of a meeting of  shareholders;  and provided,  further,  that if the
Company is unable to cause sufficient shares of Common Stock and/or common stock
equivalents  to be available  for issuance  upon exercise in full of the Rights,
then the Company,  to the extent  necessary and permitted by applicable law, and
any  agreements  or  instruments  in effect on the date thereof to which it is a
party, shall make provision to pay an amount in cash equal to twice the Purchase
Price (as adjusted  pursuant to this  Section 11), in lieu of issuing  shares of

12

Common Stock and/or  common  stock  equivalents.  To the extent that the Company
determines  that some action needs to be taken pursuant to this Section 11(c), a
majority of the Board of Directors may suspend the  exercisability of the Rights
for a period of up to sixty days following the date on which the event described
in Section 11(b) hereof shall have occurred,  in order to decide the appropriate
form of  distribution to be made pursuant to this Section 11(c) 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. The Board of Directors may, but shall not be required to,
establish  procedures  to allocate the right to receive  Common Stock and common
stock  equivalents  upon exercise of the Rights among  holders of Rights,  which
such allocation may be, but is not required to be, pro rata.

(d) If the Company  shall fix a record  date for the  issuance of rights or
warrants to all holders of Preferred Stock entitling them (for a period expiring
within ninety calendar days after such record date) to subscribe for or purchase
Preferred  Stock  (or  securities  having  the  same or more  favorable  rights,
privileges  and  preferences  as  the  Preferred  Stock  ("equivalent  preferred
stock")) or securities  convertible into Preferred Stock or equivalent preferred
stock,  at a subscription  or purchase price per share of Preferred Stock or per
share of equivalent  preferred stock or having a conversion  price per share, as
the case may be, less than the current market price per share of Preferred Stock
(as defined in Section 11(f) hereof) 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 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  subscription  or  purchase  price of the  total  number  of shares of
Preferred Stock or equivalent  preferred stock to be offered for subscription or
purchase  (and/or the  aggregate  initial  conversion  price of the  convertible
securities so to be offered for subscription or purchase) would purchase at such
current market price, and the denominator of which shall be the number of shares
of Preferred Stock outstanding on such record date plus the number of additional
shares of Preferred  Stock and/or  equivalent  preferred stock to be offered for
subscription  or purchase  (or into which the  convertible  securities  so to be
offered are initially convertible).  In case such subscription or purchase price
(and/or  the  conversion  price  of  convertible  securities)  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 a majority
of the Board of Directors, whose determination shall be described in a statement
filed with the Rights Agent.  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
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.

(e) If the Company shall fix a record date for the making of 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
or  surviving  corporation)  of evidences  of  indebtedness,  cash (other than a
regular  periodic  cash  dividend  out of 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
convertible  securities,   subscription  rights  or  warrants  (excluding  those
referred to in Section 11(d)  hereof),  the Purchase Price to be in effect after

13

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 for one share of Preferred  stock (as defined
in Section  11(f)  hereof) on such record  date less the fair  market  value (as
determined  in good  faith  by a  majority  of the  Board  of  Directors,  whose
determination  shall be described in a statement filed with the Rights Agent) of
the portion of the assets or evidences of  indebtedness  so to be distributed or
of such convertible  securities,  subscription  rights or warrants applicable to
one share of Preferred Stock, and the denominator of which shall be such current
market price for one share of Preferred Stock.  Such  adjustments  shall be made
successively  whenever  such a record date is fixed;  and in the event that such
distribution  is not so made,  the Purchase  Price shall again be adjusted to be
the  Purchase  Price  which  would then be in effect if such record date had not
been fixed.

(f) (i) For the purpose of any computation  hereunder,  the "current market
price" of any security (a "Security"  for purposes of this Section  11(f)(i)) on
any date shall be deemed to be the average of the daily closing prices per share
of such  Security  for the  thirty  consecutive  Trading  Days  (as  hereinafter
defined)  immediately prior to such date; provided,  however,  that in the event
that the current market price per share of such Security is determined  during a
period  following  the  announcement  by the  issuer of such  Security  of (A) a
dividend or distribution on such Security  payable in shares of such Security or
securities  convertible  into shares of such  Security or (B) any,  subdivision,
combination or reclassification of such Security, and prior to the expiration of
thirty Trading Days after the ex-dividend date for such dividend or distribution
or the record date for such subdivision, combination or reclassification,  then,
and in each  such  case,  the  "current  market  price"  shall be  appropriately
adjusted  to reflect  the  current  market  price per share  equivalent  of such
Security.  The  closing  price  for each day  shall be in the last  sale  price,
regular  way,  or, in case no such sale takes place on such day,  the average of
the closing bid and asked prices, regular way, in either case as reported in the
principal  consolidated  transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange or, if the Security
is not listed or admitted to trading on the New York Stock Exchange, as reported
in the  principal  consolidated  transaction  reporting  system with  respect to
securities  listed on the principal  national  securities  exchange on which the
Security is listed or  admitted to trading or, if the  Security is not listed or
admitted to trading on any national securities exchange, the average of the last
transaction  price as reported in the  National  Market  System of the  National
Association of Securities Dealers, Inc. Automated Quotations System (NASDAQ), or
if not so  reported,  the  average  of the high bid and low asked  prices in the
over-the-counter market, as reported by NASDAQ or such other system then in use,
or, if on any such date the Security is not  reported by any such  organization,
the average of the closing bid and asked prices as  furnished by a  professional
market maker in the Security  selected by a majority of the Board of  Directors.
If on any such date no market maker is making a market in the Security, the fair
value of such Security on such date as determined in good faith by a majority of
the Board of Directors shall be used. The term "Trading Day" shall mean a day on
which the principal national securities exchange on which the Security is listed
or  admitted  to  trading is open for the  transaction  of  business  or, if the
Security  is not  listed or  admitted  to  trading  on any  national  securities
exchange,  a Business Day. If the Security is not publicly held or not so listed
or traded,  "current  market  price" shall mean the fair value as  determined in
good faith by a majority of the Board of Directors, whose determination shall be
described in a statement filed with the Rights Agent.

14

(ii) For the purposes of any  computation  hereunder,  the "Current  market
price" per share (or one  one-hundredth  of a 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(f) (other than the last sentence thereof).  If the current
market  price per share (or one  one-hundredth  of a share) of  Preferred  Stock
cannot be determined in the manner  provided above or if the Preferred  Stock is
not  publicly  held or listed or traded in a manner  described  in clause (i) of
this Section  11(f),  the "current  market  price" per share of Preferred  Stock
shall be conclusively deemed to be an amount equal to 100 (as such number may be
appropriately  adjusted for such events as stock  splits,  stock  dividends  and
recapitalizations  with respect to the Common Stock  occurring after the date of
this  Agreement)  multiplied by the current market price per share of the Common
Stock  and the  "current  market  price"  per one  one-hundredth  of a share  of
Preferred  Stock  shall be equal to the  current  market  price per share of the
Common  Stock (as  appropriately  adjusted).  If neither the Common Stock or 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
Board of Directors,  whose determination shall be described in a statement filed
with the Rights Agent and shall be conclusive for all purposes.

(g) Anything herein to the contrary  notwithstanding,  no adjustment in the
Purchase  Price  shall be  required  unless  such  adjustment  would  require an
increase or decrease of at least 1% in the Purchase  Price;  provided,  however,
that any  adjustments  which by reason of this Section 11(g) 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,  as  the  case  may  be.
Notwithstanding  the  first  sentence  of this  Section  11(g),  any  adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
years from the date of the  transaction  which mandates such  adjustment or (ii)
the Expiration Date.

(h) In the  event  that at any  time,  as a result  of an  adjustment  made
pursuant  to  Section  11(a) or (b)  hereof,  the  holder of any Right  shall be
entitled to receive upon  exercise of such Right any shares of capital  stock of
the Company other than shares of Preferred Stock,  thereafter the number of such
other  shares so  received  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  with respect to the shares  contained in Section
11(a) through (e) hereof,  inclusive, and the provisions of Section 7, 9, 10, 13
and 14 hereof with respect to the shares of Preferred  Stock shall apply on like
terms to any such other shares.

(i)  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 or  other  capital  stock of the  Company  purchasable  from  time to time
hereunder upon exercise of the Rights,  all subject to further adjustment of the
Purchase Price.

15

(j) Unless the Company  shall have  exercised  its  election as provided in
Section 11(k) hereof,  upon each adjustment of the Purchase Price as a result of
the calculations  made in Section 11(d) and (e) hereof,  each Right  outstanding
immediately prior to the making of such adjustment shall thereafter evidence the
right  to  purchase,  at  the  adjusted  Purchase  Price,  that  number  of  one
one-hundredths  of a  share  of  Preferred  Stock  (calculated  to  the  nearest
ten-thousandth) obtained by (i) multiplying (A) the number of one one-hundredths
of a share  of  Preferred  Stock  covered  by a Right  immediately  prior to the
adjustment  by (B) 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.

(k) 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 such adjustment of the
number of Rights shall be exercisable for the number of one  one-hundredths of a
share of Preferred Stock for which such 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
ten-thousandth)  obtained by dividing the Purchase  Price in effect  immediately
prior to  adjustment  of the  Purchase  Price by the  Purchase  Price in  affect
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 Right  Certificates  have
been  issued,  shall be at  least  ten days  later  than the date of the  public
announcement.  If Right  Certificates have been issued,  upon each adjustment of
the number of Rights  pursuant to this  Section  11(k),  the Company  shall,  as
promptly as  practicable,  cause to be distributed to holders of record of Right
Certificates  on such  record  date Right  Certificates  evidencing,  subject to
Section 14 hereof, the additional Rights to which such holders shall be entitled
as a result of such adjustment, or, at the option of the Company, shall cause to
be distributed to such holders of record in substitution and replacement for the
Right  Certificates  held by such holders prior to the date of  adjustment,  and
upon  surrender  thereof if  required  by the  Company,  new Right  Certificates
evidencing  all the Rights to which such  holders  shall be entitled  after such
adjustment.  Right  Certificates 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 Right  Certificates  on the  record  date
specified in the public announcement.

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

(m) Before  taking any action that would cause an  adjustment  reducing the
Purchase  Price below the then par value,  if any, of the shares of Common Stock
or other  securities and below one  one-hundredth of the then par value, if any,
of the Preferred Stock,  issuable upon exercise of the Rights, the Company shall

16

take any corporate action which may, in the opinion of its counsel, be necessary
in  order  that the  Company  may  validly  and  legally  issue  fully  paid and
nonassessable  shares of such Preferred Stock,  Common Stock or other securities
at such adjusted Purchase Price. If upon any exercise of the Rights, a holder is
to receive a combination of Common Stock and common stock equivalents, a portion
of the  consideration  paid upon such  exercise,  equal to at least the then par
value of a share of  Common  Stock of the  Company,  shall be  allocated  as the
payment for each share of Common Stock of the Company so received.

(n) 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
issuing 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.

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

(p) In the  event  that at any time  after the date of this  Agreement  and
prior to the  Distribution  Date,  the  Company  shall  (i)  declare  or pay any
dividend  on the  Common  Stock  payable  in  Common  Stock  or  (ii)  effect  a
subdivision,   combination   or   consolidation   of  the   Common   Stock   (by
reclassification or otherwise than by payment of dividends in Common Stock) into
a greater or lesser number of Common Stock, then in any such case (x) the number
of one  one-hundredth  shares of a Preferred Stock  purchasable after such event
upon proper exercise of each Right shall be determined by multiplying the number
of one one-hundredth shares of Preferred Stock so purchasable  immediately prior
to such event by a fraction,  the  numerator of which is the number of shares of
Common Stock  outstanding  immediately  before such event and the denominator of
which is the number of shares of Common Stock outstanding immediately after such
event, (y) each share of Common Stock  outstanding  immediately after such event
shall have issued with  respect to it that number of Rights  which each share of
Common Stock outstanding immediately prior to such event had issued with respect
to it and (z) 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
consolidation  shall be  proportionately  adjusted by multiplying  such Purchase

17

Price by the fraction described in clause (x)above. The adjustments provided for
in this Section  11(p) shall be made  successively  whenever  such a dividend is
declared  or  paid  or  such a  subdivision,  combination  or  consolidation  is
effected.

(q) The Company  covenants  and agrees that it shall not, at any time after
the Distribution  Date and so long as the Rights have not been redeemed pursuant
to Section 23 hereof or exchanged pursuant to Section 24 hereof, (i) consolidate
with,  (ii)  merge  with or into,  or  (iii)  sell or  transfer,  in one or more
transactions, assets or earning power aggregating more than 50% of the assets or
earning  power of the  Company  and its  Subsidiaries  (taken as a whole) to any
other Person, 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  agreements  in effect which,  would  substantially  diminish or
otherwise eliminate the benefits intended to be afforded by the Rights.

(r) The Company  covenants  and agrees  that,  after the Stock  Acquisition
Date,  it will not,  except as permitted by Sections 23 and 24 hereof,  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.

(s) The  exercise of Rights  under  Section  11(b) shall only result in the
loss of rights  under  Section  11(b) 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 Shares.
Whenever an  adjustment  is made as  provided  in Sections 11 or 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 Right  Certificate  in  accordance  with  Section 26
hereof.  The  Rights  Agent  shall be fully  protected  in  relying  on any such
certificate and on any adjustments therein contained.

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

(a) In the event that,  directly or indirectly,  following the Distribution
Date, (x) the Company shall  consolidate with, or merge with and into, any other
Person, (y) any Person shall consolidate with the Company or merge with and into
the Company and the Company shall be the continuing or surviving  corporation of
such merger and, in connection with such merger, all or part of the 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 or earning power aggregating 50%
or more of the  assets or  earning  power of the  Company  and its  Subsidiaries
(taken as a whole) to any other  Person other than to the Company or one or more
of its wholly-owned Subsidiaries,  then, and in each such case, proper provision
shall be made so that (i) each holder of a Right, subject to Section 7(e), shall

18

thereafter  have the right to  receive,  upon the  exercise  thereof at the then
current  Purchase Price in accordance with the terms of this Agreement,  in lieu
of Preferred Stock, such number of shares of freely tradable 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 (A) multiplying the then current Purchase Price by the
number of one  one-hundredths of a share of Preferred Stock for which a Right is
then  exercisable  (without  taking into account any adjustment  previously made
pursuant to Section  11(b)  hereof) and dividing  that product by (B) 50% of the
current  market  price per share of the  Common  Stock of such  Principal  Party
(determined  in the manner  described  in Section  11(f)  hereof) on the date of
consummation of such consolidation, merger, sale or transfer; (ii) the 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, except for the provisions of 11(b), shall apply
to such Principal  Party;  and (iv) such  Principal  Party shall take such steps
(including,  but  not  limited  to,  the  authorization  and  reservation  of  a
sufficient  number of  shares of its  Common  Stock to  permit  exercise  of all
outstanding  Rights in accordance  with this Section  13(a)) in connection  with
such consummation as may be necessary to assure that the provisions hereof shall
thereafter be  applicable,  as nearly as  reasonably  may be, in relation to the
shares of its Common  Stock  thereafter  deliverable  upon the  exercise  of the
Rights.

(b) "Principal Party" shall mean:

(i) in the case of any  transaction  described in clause (x) or (y) of
the first  sentence of Section 13(a) hereof,  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,  including the Company,  that is the other party to the
merger or consolidation; and

(ii) in the case of any  transaction  described  in clause  (z) of the
first  sentence  of Section  13(a)  hereof,  the  Person  that is the party
receiving the greatest  portion of the assets or earning power  transferred
pursuant to such transaction or transactions;  provided,  however,  that in
any case described in clause (i) or (ii) in this Section 13(b),  (x) if the
Common  Stock  of  such  person  is not at  such  time  and  has  not  been
continuously over the preceding 12-month period registered under Section 12
of the Exchange Act, and such Person is a direct or indirect  Subsidiary or
Affiliate of another  Person,  "Principal  Party" shall refer to such other
Person; (y) in case such Person is a Subsidiary, directly or indirectly, or
an  Affiliate  of more than one Person,  the Common Stock of two or more of
which are and have been so  registered,  "Principal  Party"  shall refer to
whichever  of such  Persons is the issuer of the  Common  Stock  having the
greatest  market value,  and (z) 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
(x) and (y) 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

19

shall bear the obligation 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
interest.

(c) The Company shall not consummate any such  consolidation,  merger, sale
or transfer unless the Principal Party shall have a sufficient  number of shares
of its  authorized  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 each  Principal  Party and
each  other  Person  who may  become  a  Principal  Party  as a  result  of such
consolidation, merger, sale or transfer 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 on an appropriate  form
under the  Securities  Act with  respect to the  Rights and the  securities
purchasable upon exercise of the Rights, will use its best efforts to cause
such  registration  statement to become  effective  as soon as  practicable
after such filing and will use its best efforts to cause such  registration
statement to remain  effective  (with a prospectus at all times meeting the
requirement of the Securities Act) until the Expiration Date;

(ii) use its best  efforts to qualify or  register  the Rights and the
securities  purchasable upon exercise of the Rights under the Blue Sky laws
of such jurisdictions as may be necessary or appropriate; and

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

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

Section 14. Fractional Rights and Fractional Shares.

(a) The Company  shall not be required to issue  fractions  of Rights or to
distribute Right Certificates which evidence  fractional Rights. In lieu or such
fractional  Rights,  there shall be paid to the registered  holders of the Right
Certificates  with regard to which such  fractional  Rights  would  otherwise be
issuable,  an amount in cash equal to the same  fractions 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 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  transactions  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

20

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 transaction price as reported in the National Market System of NASDAQ,  or,
if not so  reported,  the  average  of the high bid and low asked  prices in the
over-the-counter  market, as reported by NASDAQ or such other system then in use
or, if on any such date the Rights are not  reported  by any such  organization,
the average of the closing bid and asked prices as  furnished by a  professional
market maker in the Rights selected by a majority of the Board of Directors.  If
on any such date no such market maker is making a market in the Rights, the fair
value of the Rights on such date as  determined  in good faith by a majority  of
the Board of Directors shall be used.

(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 Right Certificates at the time
such Right  Certificates  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 price of a share of Preferred Stock (as determined
pursuant to Section  11(f)(ii)  hereof) for the Trading Day immediately prior to
the date of such exercise.

(c) Following the occurrence of one of the transactions or events specified
in Section 11 hereof giving rise to the right to receive  Common  Stock,  common
stock  equivalents or other  securities  (other than  Preferred  Stock) upon the
exercise of a Right,  the Company  shall not be required to issue  fractions  of
shares  or  units  of such  Common  Stock,  common  stock  equivalents  or other
securities  upon  exercise  of the Rights or to  distribute  certificates  which
evidence  fractional  shares of such Common Stock,  common stock  equivalents or
other  securities.  In lieu of fractional  shares or units of such Common Stock,
common  stock  equivalents  or  other  securities,  the  Company  may pay to the
registered  holders of Right  Certificates at the time such Rights are exercised
as herein  provided an amount in cash equal to the same  fraction of the current
market value of a share or unit of such Common Stock, common stock equivalent or
other  securities.  For purposes of this Section 14(c), the current market value
shall be determined in the manner set forth in Section  11(f)(i)  hereof for the
Trading Day  immediately  prior to the date of such exercise and, if such Common
Stock,  common stock  equivalent or other  securities are not traded,  each such
share or other unit of Common Stock, common stock equivalent or other securities
shall have the value of one one-hundredth of a share of Preferred Stock.

21

(d) Except as otherwise  expressly  provided in this Section 14, the holder
of a Right by the acceptance of the Rights expressly waives his right to receive
any fractional Rights or any fractional share upon exercise of Rights.

Section  15.  Rights of  Action.  All  rights of action in  respect of this
Agreement,  except for rights of action given to the Rights Agent under  Section
18  hereof,  are  vested  in the  respective  registered  holders  of the  Right
Certificates  (and,  prior to the Distribution  Date, the registered  holders of
Common Stock);  and any registered holder of any Right 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  Right  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 Right  Certificate in the manner provided
in such Right Certificate and in this Agreement.  Without limiting the foregoing
or  any  remedies  available  to  the  holders  of  Rights,  it is  specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and will be entitled to specific performance of
the  obligations  under,  and  injunctive  relief  against  actual or threatened
violations of, the obligations of any Person subject to this Agreement.  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  Right  Holders.  Every  holder  of a Right  by
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:

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

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

(c) the Company and the Rights Agent may deem and treat the person in whose
name the Right  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 Right  Certificates or the associated  Common Stock  certificate  made by
anyone other than the Company or the Rights Agent) for all purposes  whatsoever,
and neither the Company nor the Rights  Agent shall be affected by any notice to
the contrary.

Section 17. Right Certificate  Holder Not Deemed a Shareholder.  No holder,
as such, of any Right Certificate  shall be entitled to vote,  receive dividends
or be deemed for any purpose the holder of Preferred Stock,  Common 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 Right  Certificate be construed to confer upon the holder of any Right
Certificate,  as such,  any of the rights of a shareholder of the Company or any

22

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  Right  Certificate  shall  have  been  exercised  in  accordance  with the
provisions hereof.

Section 18.  Concerning the Rights Agent.  The Company agrees to pay to the
Rights Agent reasonable  compensation for all services  rendered by it hereunder
and, from time to time, on demand of the Rights Agent,  its reasonable  expenses
and counsel  fees and other  disbursements  incurred in the  administration  and
execution of this  Agreement  and the exercise  and  performance  of its duties,
hereunder.  The Company  also agrees to  indemnify  the Rights Agent for, and to
hold it harmless  against,  any loss,  liability or expenses,  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.

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 Right  Certificate  or
certificate  for Preferred  Stock,  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.

Section 19. Merger or  Consolidation or Change of Name of Rights Agent. 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 or stock transfer  business of the Rights Agent or any successor  Right
Agent,  shall be the successor to the Rights Agent under this Agreement  without
the  execution  or filing of any paper or any  further act on the part of any of
the  parties  hereto,  provided  that such  corporation  would be  eligible  for
appointment  as a  successor  Rights  Agent  under the  provision  of Section 21
hereof.  In case at the time such  successor  Rights Agent shall  succeed to the
agency created by this Agreement,  any of the Right Certificates shall have been
countersigned  but not delivered,  any such successor Rights Agent may adopt the
countersignature  of  the  predecessor  Rights  Agent  and  deliver  such  Right
Certificates  so  countersigned;  and in  case  at that  time  any of the  Right
Certificates shall not have been  countersigned,  any successor Rights Agent may
countersign such Right Certificates  either in the name of the predecessor or in
the name of the  successor  Rights  Agent;  and in all  such  cases  such  Right
Certificates shall have the full force provided in the Right Certificates and in
this Agreement.

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

23

and deliver Right Certificates so countersigned; and in case at that time any of
the Right Certificates shall not have been  countersigned,  the Rights Agent may
countersign such Right  Certificates  either in its prior name or in its changed
name;  and in all such cases such Right  Certificates  shall have the full force
provided in the Right Certificates 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 Right  Certificates,
by their acceptance thereof, shall be bound:

(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the  Company),  and the opinion of such counsel  shall give 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 be
proved or  established  by the Company  prior to taking or suffering  any action
hereunder,  such fact or matter  (unless  other  evidence in respect  thereof be
herein  specifically  prescribed)  may be deemed to be  conclusively  proved and
established  by a certificate  signed by the President or any Vice President and
by the  Treasurer or any  Assistant  Treasurer or the Secretary or any Assistant
Secretary of the Company and delivered to the Rights Agent; and such certificate
shall be full  authorization to the Right 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 Right
Certificates (except its countersignature  thereof) or be required to verify the
same, and all such  statements and recitals are and shall be deemed to have been
made by the Company only. Anything to the contrary notwithstanding,  in no event
shall the  Rights  Agent be  liable  for  special,  indirect,  consequential  or
incidental loss or damage of any kind whatsoever (including, but not limited to,
lost  profits),  even if the Rights Agent has been advised of the  likelihood of
such loss or damage.

(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 Right Certificate (except its  countersignature  thereof);  nor
shall it be  responsible  for any  breach  by the  Company  of any  covenant  or
condition contained in this Agreement or in any Right Certificate;  nor shall it
be responsible  for any  adjustment  required under the provisions of Section 11
and 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  to the  Rights  Agent  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 Preferred  Stock or other  securities to be issued pursuant to this Agreement
or any Right Certificate or as to whether any shares of Preferred Stock or other
securities will, when issued, be validly  authorized and issued,  fully paid and
nonassessable.

24

(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
President,  any Vice  President,  the Secretary,  any Assistant  Secretary,  the
Treasurer  or any  Assistant  Treasurer  of the  Company,  and to  apply to such
officers for advice or instructions in connection with its duties,  and it shall
not be liable for any action  taken or  suffered to be taken by it in good faith
in accordance with instructions of any such officer.

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

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

(k) If, with  respect to any Right  Certificate  surrendered  to the Rights
Agent  for  exercise  or  transfer,  the  certificate  attached  to the  form of
assignment  or form of election to purchase,  as the case may be, has either not
been  completed  or indicates  an  affirmative  response to clause l, 2 and/or 3
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise of transfer without first consulting with the Company.

Section  21.  Change of Rights  Agent.  The Rights  Agent or any  successor
Rights Agent may resign and be discharged  from its duties under this  Agreement
upon thirty 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 Right  Certificates  by first-class  mail. The Company
may remove the Rights Agent or any successor Rights Agent upon thirty day notice

25

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 Right  Certificates  by
first-class  mail.  If the  Rights  Agent  shall  resign or be  removed or shall
otherwise become  incapable of acting,  the Company shall appoint a successor to
the Rights Agent.  If the Company shall fail to make such  appointment  within a
period of thirty  days  after  such  removal  or after it has been  notified  in
writing of such  resignation  or incapacity  by the  resigning or  incapacitated
Rights  Agent or by the  holder of a Right  Certificate  (who  shall,  with such
notice,  submit his Right  Certificate for inspection by the Company),  then the
registered  holder of any Right  Certificate may apply to any court of competent
jurisdiction  for the  appointment  of a successor  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 any  state,  in good  standing,  which is  authorized  under  such laws to
exercise  corporate trust or stock transfer powers and is subject to supervision
or  examination  by federal or state  authority and which has at the time of its
appointment  as  Rights  Agent  a  combined  capital  and  surplus  of at  least
$25,000,000 or (b) an affiliate of 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. 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 mail a written notice thereof in
writing with the  predecessor  Rights Agent by certified or registered  mail and
each transfer agent of the Common Stock and Preferred  Stock, and mail a written
notice  thereof to the  registered  holders of the Right  Certificates  by first
class mail.  Failure to give any notice  provided for in this Section 21, or any
defect therein,  shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent, as
the case may be.

Section 22. Issuance of New Right Certificates.  Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary,  the Company may,
at its option,  issue new Right  Certificates  evidencing Rights in such form as
may be  approved  by a  majority  of the  Board  of  Directors  to  reflect  any
adjustment  or change in the  Purchase  Price and the number or kind or class of
shares of stock or other  securities  or  property  purchasable  under the Right
Certificates made in accordance with the provisions of this Agreement.

In  addition,  in  connection  with the  issuance  or sale of Common  Stock
following  the  Distribution  Date and  prior  to the  redemption,  exchange  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  benefit  plan or  arrangement,  or upon the  exercise,  conversion  or
exchange of securities  hereinafter  issued by the Company,  and (b) may, in any
other case, if deemed  necessary or appropriate by 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  Certificates  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  Certificates  would be issued and (ii) no Rights  Certificates  shall be
issued if, and to the extent that,  appropriate  adjustment shall otherwise have
been made in lieu of the issuance thereof.

26

Section 23. Redemption and Termination.

(a) The Board of Directors  of the Company may, at its option,  at any time
prior to the  earlier  of (x) the time  that any  person  becomes  an  Acquiring
Person,  or (y) the Final Expiration Date, elect to redeem all but not less than
all of the then  outstanding  Rights at a redemption price of $.00125 per Right,
as 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 of Directors  may be made  effective at such time, in such form, on
such  basis,  and with such  conditions  as the Board of  Directors  in its sole
discretion may establish.

(b)  Immediately  upon the action of a majority  of the Board of  Directors
electing  to redeem the Rights,  evidence of which shall be promptly  filed with
the  Rights  Agent,  or,  when   appropriate,   immediately  upon  the  time  or
satisfaction of such conditions as the Board of Directors may have  established,
and without any further action and without any notice, the right to exercise the
Rights will  terminate  and the only right  thereafter  of the holders of Rights
shall be to receive the Redemption Price. The Company shall promptly give public
disclosure of any such redemption;  provided, however, that the failure to give,
or any defect  in, any such  disclosure  shall not affect the  validity  of such
redemption.  Within ten days after the action of the Board of Directors ordering
the redemption of the Rights,  the Company shall give notice of such  redemption
to the  holders of the then  outstanding  Rights by mailing by first  class mail
such notice to all such holders at their last  addresses as they appear upon the
registry  books of the Rights Agent or, prior to the  Distribution  Date, on the
registry books of the Transfer  Agent for the Common Stock.  Any notice which is
mailed in the manner herein  provided shall be deemed given,  whether or not the
holder receives the notice. Each such notice of redemption will state the method
by which the payment of the Redemption Price will be made.

(c) Neither the Company nor any of its Affiliates or Associates may redeem,
acquire or purchase for value any Rights at any time or in any manner other than
that specifically set forth in this Section 23 and Section 24 hereof,  and other
than in  connection  with the  purchase  of shares of Common  Stock prior to the
Distribution Date.

Section 24. Exchange.

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

27

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

(c) In any  exchange  pursuant  to this  Section  24, the  Company,  at its
option,  may  substitute  common stock  equivalents  (as such term is defined in
Section  11(c)  hereof)  for some of all of the Common  Stock  exchangeable  for
Rights.

(d) In the event that there shall not be sufficient  Common Stock or common
stock equivalents  available 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 common stock  equivalents
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(f)(i)  hereof) for the Trading Day immediately  prior to the date of exchange
pursuant to this Section 24.

Section 25. Notice of Proposed  Actions.  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 its  Preferred  Stock  or to make  any  other
distribution  to the  holders  of its  Preferred  Stock  (other  than a  regular
periodic cash dividend out of earnings or retained earnings of the Company),  or
(b) to offer to the  holders  of its  Preferred  Stock  rights  or  warrants  to
subscribe for or to purchase any additional  shares of Preferred Stock or shares
of stock of any other 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  sales  or  other   transfer),   in  one  or  more

28

transactions,  of 50% or more of the assets or earning  power of the Company and
its Subsidiaries  (taken as a whole) to, any other Person,  or (e) to effect the
liquidation,  dissolution or winding up of the Company, or (f) to declare or pay
any  dividend  on the  Common  Stock  payable  in  Common  Stock or to  effect a
subdivision,   combination   or   consolidation   of  the   Common   Stock   (by
reclassification  or otherwise  than by payment of  dividends in Common  Stock),
then,  in each such case,  the  Company  shall mail by first  class mail to each
holder of a Right,  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 Common Stock and/or  Preferred  Stock, if any such
date in to be fixed.  Such  notice  shall be so given in the case of any  action
covered by clauses  (a) or (b) above at least ten days prior to the record  date
for determining  holders of the Preferred Stock for purposes of such action, and
in the case of any such other action, at least ten days prior to the date of the
taking of such  proposed  action  or the date of  participation  therein  by the
holders of Preferred Stock,  whichever shall be the earlier. The failure to give
notice required by this Section 25, or any defect therein,  shall not affect the
legality  or  validity  of the action  taken by the Company or the vote upon any
such action.

In case any of the  events  set forth in  Section  11(b) of this  Agreement
shall occur,  then, in any such case,  the Company shall as soon as  practicable
thereafter  mail by first class mail to each holder of a Right  Certificate,  in
accordance  with Section 26 hereof,  a notice of the  occurrence  of such event,
which shall  specify the event and the  consequences  of the event to holders of
Rights under Section 11(b) hereof.

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

H&R Block, Inc.
4400 Main Street
Kansas City, Missouri 64111
Attention: Secretary

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

ChaseMellon Shareholder Services, L.L.C.
85 Challenger Road
Ridgefield Park, NJ  07660
Attention: Secretary

Notices or demands  authorized  by this  Agreement to be given or made by the
Company or the  Rights  Agent to the  holder of any Right  Certificate  shall be

29

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 or the Rights Agent.

Section 27.  Supplements and Amendments.  The Company may from time to time
supplement or amend this Agreement  without the approval of any holders of Right
Certificates  in order (a) to cure any  ambiguity,  (b) to correct or supplement
any provision  contained herein which may be defective or inconsistent  with any
other  provisions  herein,  (c) to shorten or lengthen any time period hereunder
(including,  without  limitation,  to extend the Final Expiration  Date), (d) to
increase or  decrease  the  Purchase  Price,  (e) to  increase  or decrease  the
Exchange Ratio or (f) to change or supplement  the  provisions  hereunder in any
manner which the Company may deem  necessary  or  desirable  and which shall not
adversely affect the interests of the holders of Right Certificates  (other than
an Acquiring  Person or an  Affiliate  or  Associate  of an  Acquiring  Person);
provided,  however,  that from and  after  such time as any  Person  becomes  an
Acquiring Person,  this Agreement shall not be amended in any manner which would
adversely  affect the interests of the holders of Rights;  provided further that
this Agreement may not be supplemented or amended to lengthen pursuant to clause
(c) of this  sentence,  (A) the time  period  relating to when the Rights may be
redeemed if at the time of such amendment the Rights are not then redeemable, or
(B) any  other  time  period  unless  such  lengthening  is for the  purpose  of
protecting,  enhancing or clarifying  the rights of, and/or the benefits to, the
holders of the Rights; provided further that the Company shall have the right to
make any changes  unilaterally  necessary to  facilitate  the  appointment  of a
successor  Rights  Agent,  which such changes shall be set forth in a writing by
the Company or by the Company and such successor Rights Agent.  Without limiting
the  foregoing,  the  Company  may at any time  prior to such time as any Person
becomes an Acquiring  Person amend this  Agreement  to lower the  threshold  set
forth in Section  1(a)  hereof  from 15% to not less than the greater of (i) any
percentage  greater  than the  largest  percentage  of the  Voting  Power of the
Company then known by the Company to be beneficially  owned by any Person (other
than the Company, any Subsidiary of the Company, or any employee benefit plan or
compensation  arrangement of the Company or any  Subsidiary of the Company,  and
any entity holding securities of the Company to the extent organized,  appointed
or  established  by the  Company or any such  Subsidiary  for or pursuant to the
terms of any such employee  benefit plan or compensation  arrangement)  together
with all  Affiliates  or  Associates  of such  Person,  and (ii)  10%.  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.

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

30

Section 30. Severability.  If any term, provision,  covenant or restriction
of this  Agreement  is  held  by a court  of  competent  jurisdiction  or  other
authority  to be invalid,  void or  unenforceable,  the  remainder of the terms,
provisions,  covenants and  restrictions  of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated. It is
the  intent of the  parties  hereto  to  enforce  the  remainder  of the  terms,
provisions,  covenants and  restrictions to the maximum extent permitted by law.
Without limiting the foregoing,  if any provision requiring that a determination
be made by less than the  entire  Board of  Directors  (or at a time or with the
concurrence of a group of directors  consisting of less than the entire Board of
Directors) 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
Board of Directors in accordance with applicable law and the Company's  Articles
of Incorporation and Bylaws.

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

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

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

31

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

Attest:                              H&R BLOCK, INC.

By:/s/James H. Ingraham              By:/s/ Frank L. Salizzoni
--------------------                 -----------------------------
James H. Ingraham,                   Frank L. Salizzoni, President
Vice President, Legal
and Secretary

Attest:                             CHASEMELLON SHAREHOLDER SERVICES, L.L.C.

By:/s/L. Welch                      By: /s/ H. E. Bradford
-------------------------            -----------------------------     
L. Welch, Assistant                  H.E. Bradford, Vice President
Vice President

32

Exhibit 1

CERTIFICATE OF AMENDMENT OF CERTIFICATE OF DESIGNATION,

PREFERENCES AND RIGHTS OF PARTICIPATING PREFERRED STOCK

OF

H&R BLOCK, INC.

I, Ozzie Wenich,  Senior Vice President and Chief Financial  Officer of H&R
Block,  Inc. (the  "Company"),  a corporation  organized and existing  under The
General and Business  Corporation  Law of the State of Missouri,  in  accordance
with the provisions of Section 351.180.7 thereof, DO HEREBY CERTIFY:

That pursuant to the authority conferred upon the Board of Directors by the
Company's Articles of Incorporation,  as amended, the Board of Directors on July
14, 1988  adopted a resolution  creating a series of shares of voting  Preferred
Stock designated as Participating  Preferred Stock, pursuant to a Certificate of
Designation,  Preferences and Rights of Participating Preferred Stock filed with
the Missouri Secretary of State, with such Participating  Preferred Stock having
the powers, preferences and relative, participating,  optional and other special
rights with the qualifications, limitations or restrictions set forth below.

That pursuant to the authority conferred upon the Board of Directors by the
Company's Articles of Incorporation,  as amended, the Board of Directors on July
20, 1998, adopted the following resolution amending the Company's Certificate of
Designation, Preferences and Rights of Participating Preferred Stock to increase
the number of shares designated Participating Preferred Stock:

RESOLVED,  that it is  desirable  and in the best  interests of the Company
that the number of shares designated  Participating Preferred Stock be increased
from 600,000 to 1,200,000.

The 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 set forth below:

Section 1.  Designation  and Amount.  There shall be a series of the voting
preferred  stock of the Company  which  shall be  designated  as  "Participating
Preferred Stock",  without par value, and the number of shares constituting such
series shall be  1,200,000.  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 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 Company.

Section 2. Dividends and Distributions.

(a)  Subject  to the  rights of the  holders of any shares of any series of
preferred stock of the Company  ranking prior and superior to the  Participating
Preferred   Stock  with  respect  to   dividends,   the  holders  of  shares  of
Participating  Preferred Stock, in preference to the holders of shares of Common
Stock,  without par value (the "Common Stock"),  of the Company and of 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 first day of January,  April, July and October
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 Participating  Preferred
Stock, in an amount per share (rounded to the nearest cent) equal to the greater
of (a) $1.00 or (b) subject to the  provision  for  adjustment  hereinafter  set
forth,  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
Participating  Preferred Stock. In the event the Company shall at any time after
July 25, 1998 (the "Rights Declaration Date") declare or pay any dividend on the
Common  Stock  payable in shares of Common  Stock,  or effect a  subdivision  or
combination  or  consolidation  of the  outstanding  shares of Common  Stock (by
reclassification  or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common  Stock,  then in each
such case the amount to which holders of shares of Participating Preferred Stock
were entitled  immediately prior to such event under clause (b) of the preceding
sentence  shall be  adjusted  by  multiplying  such  amount by a  fraction,  the
numerator  of  which  is the  number  of  shares  of  Common  Stock  outstanding
immediately  after  such  event and the  denominator  of which is the  number of
shares of Common Stock that were outstanding immediately prior to such event.

(b)  The  Company  shall  declare  a  dividend  or   distribution   on  the
Participating  Preferred  Stock as provided  in  paragraph  (a) of this  Section
immediately  after it declares a dividend or  distribution  on the Common  Stock
(other than a dividend payable in shares of Common Stock); provided that, in the
event no dividend or  distribution  shall have been declared on the Common Stock
during the period  between  any  Quarterly  Dividend  Payment  Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on the
Participating  Preferred Stock shall  nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.

(c) Dividends shall begin to accrue and be cumulative on outstanding shares
of Participating  Preferred Stock from the Quarterly  Dividend Payment Date next
preceding  the date of issue of such  shares,  unless  the date of issue of such
shares is prior to the  record  date for the first  Quarterly  Dividend  Payment
Date, in which case dividends on such shares shall begin to accrue from the date
of issue of such  shares,  or unless the date of issue is a  Quarterly  Dividend
Payment Date or is a date after the record date for the determination of holders
of shares of  Participating  Preferred  Stock  entitled  to receive a  quarterly
dividend and before such  Quarterly  Dividend  Payment  Date, in either of which

2

events  such  dividends  shall  begin to  accrue  and be  cumulative  from  such
Quarterly  Dividend  Payment Date.  Accrued but unpaid  dividends shall not bear
interest.  Dividends paid on the shares of  Participating  Preferred Stock in an
amount  less than the total  amount of such  dividends  at the time  accrued and
payable on such shares shall be  allocated  pro rata on a  share-by-share  basis
among all such shares at the time outstanding.  The Board of Directors may fix a
record  date  for the  determination  of  holders  of  shares  of  Participating
Preferred  Stock  entitled  to receive  payment of a  dividend  or  distribution
declared  thereon,  which record date shall be not more than sixty days prior to
the date fixed for the payment thereof.

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

(a) Each share of  Participating  Preferred  Stock shall entitle the holder
thereof to 100 votes on all matters  submitted to a vote of the  stockholders of
the Company.

(b) Except as  otherwise  provided  herein,  in the  Company's  Articles of
Incorporation or by law, the holders of shares of Participating Preferred Stock,
the  holders of shares of Common  Stock,  and the holders of shares of any other
capital stock of the Company having  general voting rights,  shall vote together
as one class on all matters submitted to a vote of stockholders of the Company.

(c) Except as otherwise  set forth herein or in the  Company's  Articles of
Incorporation, and except as otherwise provided by law, holders of 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  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  Participating  Preferred
Stock outstanding shall have been paid in full, the Company shall not:

(i) declare or pay dividends on, make any other  distributions  on, or
redeem or purchase or  otherwise  acquire for  consideration  any shares of
stock  ranking  junior  (either  as  to  dividends  or  upon   liquidation,
dissolution or winding up) to the Participating Preferred Stock;

(ii) declare or pay  dividends on or make any other  distributions  on
any shares of stock  ranking on a parity  (either as to  dividends  or upon
liquidation,  dissolution or winding up) with the  Participating  Preferred
Stock,  except dividends paid ratably on the 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;

3

(iii)  except  as  permitted  in  Section  4(a)(iv)  below,  redeem or
purchase or otherwise acquire for consideration shares of any stock ranking
on a parity  (either as to dividends or upon  liquidation,  dissolution  or
winding  up) with the  Participating  Preferred  Stock,  provided  that the
Company may at any time redeem, purchase or otherwise acquire shares of any
such parity stock in exchange for share of any stock of the Company ranking
junior (either as to dividends or upon dissolution,  liquidation or winding
up) to the Participating Preferred stock; or

(iv)  purchase or otherwise  acquire for  consideration  any shares of
Participating  Preferred  Stock, or any shares of stock ranking on a parity
with  the  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 Company shall not permit any  subsidiary of the Company to purchase
or otherwise acquire for consideration any shares of stock of the Company unless
the Company 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 Participating  Preferred Stock
purchased or otherwise acquired by the Company in any manner whatsoever shall be
retired and canceled promptly after the acquisition  thereof.  The Company shall
cause all such shares upon their  cancellation  to be  authorized  but  unissued
shares of  Preferred  Stock  which may be  reissued  as part of a new  series of
Preferred  Stock to be  created by  resolution  or  resolutions  of the Board of
Directors,  subject to the  conditions  and  restrictions  on issuance set forth
herein.

Section 6. Liquidation, Dissolution or Winding Up.

(a) Upon any liquidation  (voluntary or otherwise),  dissolution or winding
up of the  Company,  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  Participating  Preferred  Stock unless,  prior thereto,  the
holders of shares of  Participating  Preferred  Stock  shall have  received  per
share,  the greater of $100.00 or 100 times the payment made per share of Common
Stock,  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 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 a set forth in  subparagraph
(c)  below  to  reflect  such  events  as  stock  dividends,  and  subdivisions,
combinations and  consolidations  with respect to the Common Stock) (such number
in clause (ii) being  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 Participating Preferred Stock

4

and Common Stock,  respectively,  holders of  Participating  Preferred Stock and
holders of shares of Common Stock shall receive their ratable and  proportionate
share of the remaining  assets to be  distributed in the ratio of the Adjustment
Number to 1 with respect to such Participating Preferred Stock and Common Stock,
on a per share basis, respectively.

(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
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 Company shall at any time after the Rights Declaration
Date  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  then 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  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 are  outstanding  immediately
prior to such event.

Section 7. Consolidation, Merger, Etc. In case the Company 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
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 exchanged or changed.
In the event the  Company  shall at any time after the Rights  Declaration  Date
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  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 are outstanding immediately prior to such event.

Section 8. Redemption.  The shares of  Participating  Preferred Stock shall
not be redeemable.

5

Section 9. Ranking. The Participating  Preferred Stock shall rank junior to
all other series of the Company's Preferred Stock as to the payment of dividends
and the  distribution  of  assets,  unless  the terms of any such  series  shall
provide otherwise.

Section 10.  Amendment.  The Articles of Incorporation of the Company shall
not be further amended in any manner which would  materially alter or change the
powers, preferences or special rights of the Participating Preferred Stock so as
to affect  them  adversely  without  the  affirmative  vote of the  holders of a
majority or more of the  outstanding  shares of  Participating  Preferred  Stock
voting separately as a class.

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

IN WITNESS  WHEREOF,  this  Certificate of Amendment of the  Certificate of
Designation  has been  executed by the Company by its  President and attested by
its Secretary on this 17th day of July, 1998.

H&R BLOCK, INC.

By: /s/ Ozzie Wenich
------------------------------------
Ozzie Wenich, Senior Vice President
and Chief Financial Officer

ATTEST:

/s/ James H. Ingraham
- ---------------------------------
James H. Ingraham, Vice President, Legal
and Secretary

6

STATE OF MISSOURI )
)  SS.
COUNTY OF JACKSON )

BE IT  REMEMBERED,  that on this 17th day of July,  1998,  before me, the
undersigned,  a Notary  Public  in and for said  County  and  State,  personally
appeared  Ozzie Wenich and James H.  Ingraham,  who  declared  that they are the
President and Secretary, respectively, of the corporation named in the foregoing
certificate,  and acknowledged  that they executed the foregoing  certificate on
behalf of the corporation.

/s/ Barbara Phillips
-----------------------------------------
Notary Public

My Commission Expires:
BARBARA PHILLIPS
Feb. 7, 2002                               NOTARY PUBLIC-NOTARY SEAL
- -------------------------------            STATE OF MISSOURI
JACKSON COUNTY
MY COMMISION EXP. FEB. 7, 2002

Exhibit 2

Form of Right Certificate

Certificate No. R-                                                        Rights
-----                                      ------------

NOT EXERCISABLE AFTER MARCH 25, 2008, UNLESS
EXTENDED BY THE BOARD OF DIRECTORS OR
EARLIER IF NOTICE OF REDEMPTION IS GIVEN,
THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE
OPTION OF THE COMPANY, AT $.00125 PER RIGHT
ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
[THE RIGHTS REPRESENTED BY THIS RIGHT CERTIFICATE
WERE ISSUED TO A PERSON WHO WAS AN ACQUIRING
PERSON OR AN AFFILIATE OR AN ASSOCIATE OF AN
ACQUIRING PERSON. THIS RIGHT CERTIFICATE AND
THE RIGHTS REPRESENTED HEREBY MAY BECOME VOID
IN THE CIRCUMSTANCES SPECIFIED IN SECTION
7(e) OF THE RIGHTS AGREEMENT.](1)

Right Certificate

H&R BLOCK, 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 March 25,  1998  between H&R Block,  Inc.,  a
Missouri  corporation (the  "Company"),  and ChaseMellon  Shareholder  Services,
L.L.C. (the "Rights Agent"),  as amended (the "Rights  Agreement"),  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.  (Kansas City time) on
March 25, 2008 at the office of the Registrar,  or such other office  designated
for such purpose, one one-hundredth of a fully paid,  nonassessable share of the
Participating  Preferred Stock,  without par value ("Preferred  Stock"),  of the
Company,  at a purchase price of $215.00 per one  one-hundredth  of a share (the
"Purchase  Price"),  upon  presentation and surrender of this Right  Certificate
with the Form of  Election  to  Purchase  duly  executed.  The  number of Rights
evidenced by this Right  Certificate (and the number of one  one-hundredths of a
share of Preferred Stock which may be purchased upon exercise of each Right) set
forth above, and the Purchase Price set forth above, are the number and Purchase
Price as of March  25,  1998,  based on the  shares  of  Preferred  Stock of the
Company as constituted at such date.

As provided in the Rights  Agreement,  the Purchase Price and the number of
one one-hundredths of a share of Preferred Stock which may be purchased upon the
exercise of each of the Rights  evidenced by this Right  Certificate are subject
to modification and adjustment upon the happening of certain events.

- --------------
(1) The portion of the legend in brackts shall be inserted only as applicable.

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

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

Subject to the provisions of the Rights Agreement,  the Rights evidenced by
this  Certificate  (i)  may be  redeemed  by the  Company  at  its  option  at a
redemption price of $.00125 per Right, or (ii) may be exchanged in whole or part
for shares of Common Stock.

No fractional shares of Preferred Stock will be issued upon the exercise of
any 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).  In lieu of such fractions
of a share, a cash payment will be made, as provided in the Rights Agreement.

No holder of this Right  Certificate  shall be  entitled to vote or receive
dividends or be deemed for any purpose the holder of 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 Rights evidenced by this Right  Certificate  shall have been exercised
as provided in the Rights Agreement.

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

-2-

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

Attest:                                H&R BLOCK, INC.

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

Countersigned:

CHASEMELLON SHAREHOLDER SERVICES, L.L.C.

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

-3-

[Form of Reverse Side of Right Certificate]

FORM OF ASSIGNMENT

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

FOR VALUE RECEIVED                                      hereby
------------------------------------
sells, assigns and transfers unto
----------------------------------------------

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

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

Dated: 
------------------------

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

(Signature  must  conform in all respects
to name of holder as specified on the
face of this Right Certificate)

Signature Guaranteed:
----------------------------------------------------------

Signatures  must be  guaranteed  by a member firm of a registered  national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.

[Form of Reverse Side of Right Certificate - Continued]

CERTIFICATE

The undersigned hereby certifies by checking the appropriate boxes that:

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

(2) after due inquiry and to the best knowledge of the undersigned, it [  ]
did [  ] did not acquire the Rights evidenced by this Right 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 must conform in all respects
to name of holder as specified on the
face of this Right Certificate)

-5-

[Form of Reverse Side of Right Certificate - Continued]

FORM OF ELECTION TO PURCHASE

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

To H&R Block, Inc.:

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

Name:
-----------------------------------
Address:
-------------------------------

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

Social Security or taxpayer identification number:

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

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

Name:
----------------------------------
Address:
-------------------------------

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

Social Security or taxpayer identification number:

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

Dated:
-----------------------

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

(Signature  must  conform in all respects
to name of holder as  specified on the
face of this Right Certificate)

-6-

Signature Guaranteed:

Signatures  must be  guaranteed  by a member firm of a registered  national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.

-7-

[Form of Reverse Side of Right Certificate - Continued]

CERTIFICATE

The undersigned hereby certifies by checking the appropriate boxes that:

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

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

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

Dated:
---------------------------        ---------------------------------------
Signature

(Signature must conform in all respects
to name of holder as specified on the
face of this Right Certificate)

NOTICE

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

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

-8-

Exhibit 3

H & R BLOCK, INC.

SUMMARY OF SHAREHOLDER RIGHTS PLAN

The Board of  Directors  of H&R  Block,  Inc.  (the  "Company")  declared a
dividend distribution of one right (a "Right") for each outstanding share of the
Company's  Common Stock,  without par value (the "Common  Stock") payable to the
shareholders  of record  at the close of  business  on the  Effective  Date (the
"Record  Date").  Except as set  forth  below,  each  Right,  when  exercisable,
entitles the registered holder to purchase from the Company one one-hundredth of
a share of a newly issued series of the Company's  preferred  stock,  designated
Participating  Preferred Stock,  without par value (the "Preferred Stock"), at a
purchase price of $215.00 per one one-hundredth  (1/100) of a share,  subject to
adjustment.  The  description  and terms of the Rights are set forth in a Rights
Agreement  (the  "Rights   Agreement")   between  the  Company  and  ChaseMellon
Shareholder Services, L.L.C., as Rights Agent (the "Rights Agent").

The following is a general  description only and is subject to the detailed
terms and conditions of the Rights Agreement.  Capitalized terms herein have the
same meaning set forth in the Rights Agreement.

Effective Date of Plan

The Plan will become  effective  upon the  earliest of the  termination  or
expiration of the existing  Shareholder Rights Plan (first effective on July 14,
1988  (the  "Existing  Plan"))  or the date  upon  which  the  Existing  Plan is
determined to have become ineffective, regardless of the reasons therefor.

Rights Evidenced by Common Stock Certificates

The Rights will not be  exercisable  until the  Distribution  Date (defined
below).  Certificates  for the Rights will not be sent to  shareholders  and the
Rights will attach to and trade only  together  with Common Stock  certificates.
Accordingly,  Common  Stock  certificates  outstanding  on the Record  Date will
evidence the rights related thereto (even if such Certificates make reference to
a prior plan), and Common Stock  certificates  issued after the Record Date will
contain a notation  incorporating  the Rights Agreement by reference.  Until the
Distribution  Date  (or  earlier  redemption,  exchange,  or  expiration  of the
Rights),  the  surrender  or  transfer  of any  certificates  for  Common  Stock
outstanding  as of the Record  Date,  even  without  notation  or a copy of this
Summary being attached thereto,  will also constitute the transfer of the Rights
associated with the Common Stock represented by such certificates.

Distribution Date

The  Rights  will  separate  from  the  Common  Stock  certificates,  Right
Certificates  (as  defined  below)  will be issued,  and the Rights  will become
exercisable upon the "Distribution  Date," which is the earlier of the following
dates:

(i) the first to occur of (a) a public  announcement that, without the
prior  written  consent of the Company,  a person or group of affiliated or
associated  persons (an "Acquiring  Person") has acquired,  or obtained the
right to acquire, 15% or more of the outstanding shares of Common Stock, or
(b) the date on which the Company first has notice or otherwise  determines
that a person  has  become an  Acquiring  Person  (the  "Stock  Acquisition
Date"); or

(ii) ten days (or such  later date as may be  determined  by action of
the Board of  Directors,  but in no event  later than the date set forth in
(i) above)  following the  commencement of, or announcement of an intention
to  make,  a  tender  offer  or  exchange  offer  for  15% or  more  of the
outstanding  shares of Common Stock without the Prior  Written  Approval of
the Company.

Issuance of Right Certificates

As  soon  as  practicable   following  the  Distribution   Date,   separate
certificates  evidencing  the Rights  ("Right  Certificates")  will be mailed to
holders  of  record  of the  Common  Stock as of the  close of  business  on the
Distribution Date, and such separate Right Certificates alone will then evidence
the Rights.

Final Expiration Date

The Rights  will  expire on the  earliest of (i) March 25, 2008 (the "Final
Expiration  Date") unless the Final Expiration Date is extended by the Board, or
(ii) the  redemption  or exchange  of the Rights by the  Company,  as  described
below.

Initial Exercise of the Rights

Following  the  Distribution  Date,  and  until one of the  further  events
described  below,  holders of the  Rights  will be  entitled  to  receive,  upon
exercise and the payment of $215.00 per Right,  one  one-hundredth of a share of
Preferred Stock.

Adjustments to Prevent Dilution

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, certain convertible  securities or

2

securities having the same or more favorable rights,  privileges and preferences
as the  Preferred  Stock 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 periodic cash dividends
out of earnings  or retained  earnings)  or of  subscription  rights or warrants
(other than those referred to above).

The number of outstanding  Rights and the number of one one-hundredths of a
share of Preferred  Stock  issuable  upon  exercise of each Right are subject to
adjustment in the event of a stock split of the Common Stock or a stock dividend
on the  Common  Stock  payable  in  shares  of  Common  Stock  or  subdivisions,
consolidations or combinations of the Common Stock.

Cash Paid Instead of Issuing Fractional Shares

With certain  exceptions,  no  adjustments  in the  Purchase  Price will be
required until  cumulative  adjustments  require an adjustment of at least 1% in
such 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 Common Stock
on the last trading date prior to the date of exercise.

Right to Buy Common Stock at Half Price

In the event that an Acquiring Person becomes such, proper provisions shall
be made so that each holder of a Right will have the right to receive,  upon the
exercise thereof at the then current exercise price of the Right, that number of
shares of Common Stock having a market value of two times the exercise  price of
the  Right,  to the  extent  available,  and  then  (after  all  authorized  and
unreserved  shares of Common Stock have been  issued) a common stock  equivalent
(such as  Preferred  Stock or  another  equity  security  with at least the same
economic  value as the  Common  Stock)  having a market  value of two  times the
exercise  price of the Right,  with Common Stock to the extent  available  being
issued first (such right being called the "Subscription Right").

Right to Buy Acquiring Company Stock at Half Price

In the event that following the Distribution  Date, the Company is involved
in a merger or other business combination  transaction in which the Common Stock
is exchanged or changed, or 50% or more of the Company's assets or earning power
are sold (in one  transaction  or a series of  transactions),  proper  provision
shall be made so that each holder of a Right shall  thereafter have the right to
receive,  upon the exercise  thereof at the then current  exercise  price of the
Right,  that number of shares of common stock of the  acquiring  company (or, in
the event  there is more  than one  acquiring  company,  the  acquiring  company
receiving the greatest portion of the assets or earning power transferred) which
at the time of such  transaction  would  have a market  value of two  times  the
exercise  price of the Right (such right being called the "Merger  Right").  The
holder of a Right will  continue  to have the Merger  Right  whether or not such
holder exercises the Subscription Right, in whole or in part.

3

Acquiring Person Rights Void

Upon the occurrence of any of the events giving rise to the  exercisability
of the Merger Right or the  Subscription  Right,  any Rights that are or were at
any time owned by an  Acquiring  Person shall become void insofar as they relate
to the Merger Right or the Subscription Right.

Redemption

At any time  prior to the  earlier  to  occur of (i) a person  becoming  an
Acquiring  Person or (ii) the  expiration of the Rights,  the Company may redeem
the  Rights in whole,  but not in part,  at a price of  $.00125  per Right  (the
"Redemption Price"),  which redemption shall be effective upon the action of the
Board of Directors.  The  redemption of the Rights by the Board of Directors may
be made  effective  at such  time,  in such form and on such basis and with such
conditions  as the Board of  Directors  in its sole  discretion  may  establish.
Immediately  upon the  action of a  majority  of the Board of  Directors  of the
Company  electing  to redeem the Rights,  evidence  of which  should be promptly
filed with the Rights  Agent,  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 the Redemption Price.

Exchange

After a person or group has become an  Acquiring  Person,  the  Company may
exchange all or part of the then outstanding and exercisable  Rights (other than
Rights owned by an Acquiring  Person that became void with respect to the Merger
Right or the Subscription Right) for Common Stock or common stock equivalents at
an Exchange  Ratio of one share of Common Stock (or  equivalent  value of common
stock  equivalent)  per Right or such other  Exchange Ratio as determined by the
Board of Directors. The Company may not effect such an exchange, however, at any
time after any person  (other than the Company and related  entities),  together
with certain related parties, beneficially owns 50% or more of the Common Stock.
Upon action by the Company  ordering  such  exchange,  the right to exercise the
Rights  subject to the exchange will terminate and the only right of the holders
of such  Rights  will be to receive  shares of Common  Stock  based on the above
Exchange Ratio.

Terms of Preferred Stock

The  Preferred  Stock  purchasable  upon  exercise  of the  Rights  will be
nonredeemable  and junior to any other series of preferred stock the Company may
issue  (unless  otherwise  provided in the terms of such  stock).  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,  but in no
event less than $1.00.  In the event of  liquidation,  the holders of  Preferred
Stock will  receive a  preferred  liquidation  payment  equal to the  greater of
$100.00 or 100 times the payment made per each share of Common Stock. Each share
of  Preferred  Stock will have 100  votes,  voting  together  with the shares of
Common Stock. In the event of any merger,  consolidation or other transaction in
which shares of Common Stock are exchanged,  each share of Preferred  Stock will

4

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,
liquidation  and  voting,  and in the event of mergers and  consolidations,  are
protected by customary anti-dilution provisions.  Fractional shares of Preferred
Stock will be issuable;  however, the Company may elect to distribute depositary
receipts in lieu of such fractional  shares.  In lieu of fractional shares other
than  fractions  that  are  multiples  of  one  one-hundredths  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.

Amendments to the Rights Agreement

The Rights  Agreement may be amended or  supplemented  from time to time in
order (a) to cure any  ambiguity,  (b) to correct or  supplement  any  provision
which may be defective or inconsistent with any other provision,  (c) to shorten
or lengthen any time period  hereunder  (including  the Final  Expiration  Date,
subject to certain limitations), (d) to increase or decrease the Purchase Price,
(e) increase or decrease the Exchange  Ratio, or (f) to change or supplement the
provisions which the Company may deem necessary or desirable and which shall not
adversely affect the interests of the holders of Right Certificates  (other than
an Acquiring  Person or an  Affiliate  or  Associate  of an  Acquiring  Person).
However,  if a person becomes an Acquiring Person,  the Rights Agreement may not
be amended in any manner  which  would  adversely  affect the  interests  of the
holders of the Rights.

Adverse Person

The Company may, prior to any person  becoming an Acquiring  Person,  amend
the Rights  Agreement to lower the 15% threshold to not less than the greater of
(i) any  percentage  greater than the largest  percentage of the Voting Power of
the Company then known by the Company to be beneficially  owned by any person or
group (other than the Company, or any of its affiliates), and (ii) 10%.

Shareholder Rights

Until a Right is  exercised,  the  holder  thereof,  as such,  will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends.

Availability of Rights Agreement

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 upon
written request.
5