<PAGE>
Exhibit 1
ORATEC INTERVENTIONS, INC.
and
AMERICAN STOCK TRANSFER AND TRUST COMPANY
Rights Agent
PREFERRED SHARES RIGHTS AGREEMENT
---------------------------------
Dated as of November 28, 2000
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TABLE OF CONTENTS
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<TABLE>
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Page
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<S> <C>
1. Certain Definitions.............................................................. 3
2. Appointment of Rights Agent...................................................... 7
3. Issuance of Rights Certificates.................................................. 8
4. Form of Rights Certificates...................................................... 9
5. Countersignature and Registration................................................ 10
6. Transfer, Split Up, Combination and Exchange of Rights Certificates;
Mutilated, Destroyed, Lost or Stolen Rights Certificates......................... 11
7. Exercise of Rights; Purchase Price; Expiration Date of Rights.................... 11
8. Cancellation and Destruction of Rights Certificates.............................. 13
9. Reservation and Availability of Preferred Shares................................. 14
10. Preferred Shares Record Date..................................................... 15
11. Adjustment of Purchase Price, Number of Shares or Number of Rights............... 15
12. Certificate of Adjusted Purchase Price or Number of Shares....................... 23
13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power............. 23
14. Fractional Rights and Fractional Shares.......................................... 26
15. Rights of Action................................................................. 27
16. Agreement of Rights Holders...................................................... 27
17. Rights Certificate Holder Not Deemed a Shareholder............................... 27
18. Concerning the Rights Agent...................................................... 28
19. Merger or Consolidation or Change of Name of Rights Agent........................ 28
20. Duties of Rights Agent........................................................... 29
21. Change of Rights Agent........................................................... 31
22. Issuance of New Rights Certificates.............................................. 31
23. Redemption....................................................................... 32
24. Exchange......................................................................... 33
25. Notice of Certain Events......................................................... 34
26. Notices.......................................................................... 35
27. Supplements and Amendments....................................................... 35
28. Successors....................................................................... 36
29. Determinations and Actions by the Board of Directors, etc........................ 36
30. Benefits of this Agreement....................................................... 36
31. Severability..................................................................... 36
32. Governing Law.................................................................... 37
33. Counterparts..................................................................... 37
34. Descriptive Headings............................................................. 37
</TABLE>
EXHIBITS
Exhibit A Form of Certificate of Designations
Exhibit B Form of Rights Certificate
Exhibit C Summary of Rights
<PAGE>
ORATEC INTERVENTIONS, INC.
PREFERRED SHARES RIGHTS AGREEMENT
---------------------------------
This Preferred Shared Rights Agreement, dated as of November 28, 2000 is
made between ORATEC Interventions, Inc., a Delaware corporation (the "Company"),
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and American Stock Transfer and Trust Company (the "Rights Agent").
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RECITALS
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On November 28, 2000 (the "Rights Dividend Declaration Date"), the Board of
--------------------------------
Directors of the Company authorized and declared a dividend of one Preferred
Share purchase right (a "Right") for each Common Share (as hereinafter defined)
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of the Company outstanding as of the Close of Business (as hereinafter defined)
on December 13, 2000 (the "Record Date"), each Right representing the right to
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purchase one one-thousandth of a share of Series A Participating Preferred Stock
(as such number may be adjusted pursuant to the provisions of this Agreement),
having the rights, preferences and privileges set forth in the form of
Certificate of Designations attached to this Agreement as Exhibit A, upon the
---------
terms and subject to the conditions herein set forth, and further authorized and
directed the issuance of one Right (as such number may be adjusted pursuant to
the provisions of this Agreement) with respect to each Common Share that shall
become outstanding between the Record Date and the earlier of the Distribution
Date and the Expiration Date (as such terms are hereinafter defined), and in
certain circumstances after the Distribution Date.
AGREEMENT
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The parties agree as follows:
1. Certain Definitions. For purposes of this Agreement, the following
-------------------
terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which, together
----------------
with all Affiliates and Associates of such Person, shall be the Beneficial Owner
of 15% or more of the Common Shares then outstanding, but shall not include the
Company, any Subsidiary of the Company or any employee benefit plan of the
Company or of any Subsidiary of the Company, or any entity holding Common Shares
for or pursuant to the terms of any such plan. Notwithstanding the foregoing,
no Person shall be deemed to be an Acquiring Person either (i) as the result of
an acquisition of Common Shares by the Company which, by reducing the number of
shares outstanding, increases the proportionate number of shares beneficially
owned by such Person to 15% or more of the Common Shares of the Company then
outstanding; provided, however, that if a Person shall become the Beneficial
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Owner of 15% or more of the Common Shares of the Company then outstanding by
reason of share purchases by the Company and shall, after such share purchases
by the Company, become the Beneficial Owner of any additional Common Shares of
the Company, (other than pursuant to a dividend or distribution paid or made by
the Company on the outstanding Common Shares in Common Shares or pursuant to a
split or
<PAGE>
subdivision of the outstanding Common Shares), then such Person shall be deemed
to be an Acquiring Person unless upon becoming the Beneficial Owner of such
additional Common Shares of the Company such Person does not beneficially own
15% or more of the Common Shares of the Company then outstanding.
Notwithstanding the foregoing, (i) if the Board of Directors of the Company
determines in good faith that a Person who would otherwise be an "Acquiring
Person" as defined pursuant to the foregoing provisions of this Section 1(a) has
become such inadvertently (including, without limitation, because (A) such
Person was unaware that it beneficially owned a percentage of the Common Shares
that would otherwise cause such Person to be an "Acquiring Person," as defined
pursuant to the foregoing provisions of this Section 1(a) or (B) such Person was
aware of the extent of the Common Shares it beneficially owned but had no actual
knowledge of the consequences of such beneficial ownership under this Agreement)
and without any intention of changing or influencing control of the Company, and
if such Person divested or divests as promptly as practicable a sufficient
number of Common Shares to that such Person would no longer be an "Acquiring
Person," as defined pursuant to the foregoing provisions of this paragraph (a),
then such Person shall not be deemed to be or to have become an "Acquiring
Person" for any purposes of this Agreement; and (ii) if, as of the date hereof,
any Person is the Beneficial Owner of 15% or more of the Common Shares
outstanding, such Person shall not be or become an "Acquiring Person," as
defined pursuant to the foregoing provisions of this Section 1(a), unless and
until such time as such Person shall become the Beneficial Owner of additional
Common Shares (other than pursuant to a dividend or distribution paid or made by
the Company on the outstanding Common Shares in Common Shares or pursuant to a
split or subdivision of the outstanding Common Shares), unless, upon becoming
the Beneficial Owner of such additional Common Shares, such Person is not then
the Beneficial Owner of 15% or more of the Common Shares then outstanding.
(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
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effect on the date of this Agreement.
(c) A Person shall be deemed the "Beneficial Owner" of and shall be
----------------
deemed to "beneficially own" any securities:
----------------
(i) which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly, for purposes of Section
13(d) of the Exchange Act and Rule 13d-3 thereunder (or any comparable or
successor law or regulation);
(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, whether or not in writing (other than customary
agreements with and between underwriters and selling group members with respect
to a bona fide public offering of securities), or upon the exercise of
conversion rights, exchange rights, rights (other than the Rights), warrants or
options, or otherwise; provided, however, that a Person shall not be deemed
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pursuant to this Section l(c)(ii)(A) to be the Beneficial Owner of, or to
beneficially own, (1) securities tendered pursuant to a tender or exchange offer
made by or on behalf of such Person or any of such Person's
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<PAGE>
Affiliates or Associates until such tendered securities are accepted for
purchase or exchange or (2) securities which a Person or any of such Person's
Affiliates or Associates may be deemed to have the right to acquire pursuant to
any merger or other acquisition agreement between the Company and such Person
(or one or more of its Affiliates or Associates) if such agreement has been
approved by the Board of Directors prior to a Triggering Event; or (B) the right
to vote pursuant to any agreement, arrangement or understanding; provided,
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however, that a Person shall not be deemed the Beneficial Owner of, or to
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beneficially own, any security under this Section l(c)(ii)(B) if the agreement,
arrangement or understanding to vote such security (1) arises solely from a
revocable proxy or consent given to such Person in response to a public proxy or
consent solicitation made pursuant to, and in accordance with, the applicable
rules and regulations of the Exchange Act and (2) is not also then reportable on
Schedule 13D under the Exchange Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by any
other Person (or any Affiliate or Associate thereof) with which such Person or
any of such Person's Affiliates or Associates has any agreement, arrangement or
understanding (whether or not in writing) (other than customary agreements with
and between underwriters and selling group members with respect to a bona fide
public offering of securities) for the purpose of acquiring, holding, voting
(except to the extent contemplated by the proviso to Section l(c)(ii)(B)) or
disposing of any securities of the Company; provided, however, that in no case
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shall an officer or director of the Company be deemed (x) the Beneficial Owner
of any securities beneficially owned by another officer or director of the
Company solely by reason of actions undertaken by such persons in their capacity
as officers or directors of the Company or (y) the Beneficial Owner of
securities held of record by the trustee of any employee benefit plan of the
Company or any Subsidiary of the Company for the benefit of any employee of the
Company or any Subsidiary of the Company, other than the officer or director, by
reason of any influence that such officer or director may have over the voting
of the securities held in the plan.
(d) "Board of Directors" shall mean the Board of Directors of the
------------------
Company then in office.
(e) "Business Day" shall mean any day other than a Saturday, Sunday or
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a day on which banking institutions in New York are authorized or obligated by
law or executive order to close.
(f) "Close of Business" on any given date shall mean 5:00 P.M., New
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York time, on such date; provided, however, that if such date is not a Business
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Day it shall mean 5:00 P.M., New York time, on the next succeeding Business Day.
(g) "Common Shares" when used with reference to the Company shall mean
-------------
the shares of Common Stock of the Company, $0.001 par value. "Common Shares"
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when used with reference to any Person other than the Company shall mean the
capital stock (or equity interest) with the greatest voting power of such other
Person or, if such other Person is a Subsidiary of another Person, the Person or
Persons which ultimately control such first-mentioned Person.
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<PAGE>
(h) "Distribution Date" shall mean the earlier of (i) the Close of
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Business on the tenth day (or such later date as may be determined by action of
a majority of the Board of Directors) after the Shares Acquisition Date (or, if
the tenth day after the Shares Acquisition Date occurs before the Record Date,
the Close of Business on the Record Date) or (ii) the Close of Business on the
tenth day (or such later date as may be determined by action of a majority of
the Board of Directors) after the date that a tender or exchange offer by any
Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or of any Subsidiary of the Company, or any Person
or entity organized, appointed or established by the Company for or pursuant to
the terms of any such plan) is first published or sent or given within the
meaning of Rule 14d-2(a) of the General Rules and Regulations under the Exchange
Act, if, assuming the successful consummation thereof, such Person would be the
Beneficial Owner of 15% or more of the shares of Common Stock then outstanding.
(i) "Equivalent Shares" shall mean Preferred Shares and any other
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class or series of capital stock of the Company that is entitled to participate
in dividends and other distributions, including distributions upon the
liquidation, dissolution or winding up of the Company, on a proportional basis
with the Common Shares. In calculating the number of any class or series of
Equivalent Shares for purposes of Section 11 of this Agreement, the number of
shares, or fractions of a share, of such class or series of capital stock that
is entitled to the same dividend or distribution as a whole Common Share shall
be deemed to be one share.
(j) "Expiration Date" shall mean the earliest of (i) the Close of
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Business on the Final Expiration Date, (ii) the Redemption Date, (iii) the time
at which the Board of Directors orders the exchange of the Rights as provided in
Section 24 of this Agreement or (iv) the consummation of a transaction
contemplated by Section 13(d) of this Agreement.
(k) "Final Expiration Date" shall mean November 28, 2010.
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(1) "Permitted Offer" shall mean a tender offer for all outstanding
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Common Shares made in the manner prescribed by Section 14(d) of the Exchange Act
and the rules and regulations promulgated thereunder; provided, however, that a
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majority of the Board of Directors has determined that the offer is both
adequate and otherwise in the best interests of the Company and its stockholders
(taking into account all factors that the Board of Directors deems relevant,
including without limitation prices that could reasonably be achieved if the
Company or its assets were sold on an orderly basis designed to realize maximum
value).
(m) "Person" shall mean any individual, firm, corporation or other
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entity, and shall include any successor (by merger or otherwise) of such entity.
(n) "Preferred Shares" shall mean shares of Series A Participating
----------------
Preferred Stock of the Company.
(o) "Purchase Price" shall have the meaning set forth in Section 4(a)
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of this Agreement.
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<PAGE>
(p) "Record Date" shall have the meaning set forth in the recitals at
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the beginning of this Agreement.
(q) "Redemption Date" shall mean the time at which the Board of
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Directors of the Company orders redemption of the Rights as provided in Section
23 of this Agreement.
(r) "Redemption Price" shall have the meaning set forth in Section
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23(a) of this Agreement.
(s) "Right" shall have the meaning set forth in the recitals at the
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beginning of this Agreement.
(t) "Rights Dividend Declaration Date" shall have the meaning set
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forth in the recitals at the beginning of this Agreement.
(u) "Section 13 Event" shall mean any event described in clause (i),
----------------
(ii) or (iii) of Section 13(a) of this Agreement.
(v) "Shares Acquisition Date" shall mean the first date of public
-----------------------
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) of the Exchange Act) by the
Company or an Acquiring Person that an Acquiring Person has become such;
provided that, if such person is determined not to have become an Acquiring
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Person pursuant to Section l(a)(ii) of this Agreement, then no Shares
Acquisition Date shall be deemed to have occurred.
(w) "Subsidiary" of any Person shall mean any corporation or other
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entity of which an amount of voting securities sufficient to elect a majority of
the directors or Persons having similar authority of such corporation or other
entity is beneficially owned, directly or indirectly, by such Person, or any
corporation or other entity otherwise controlled by such Person.
(x) "Total Exercise Price" shall have the meaning set forth in Section
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4(a) of this Agreement.
(y) "Trading Day" shall have the meaning set forth in Section 11(d) of
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this Agreement.
(z) A "Triggering Event" shall be deemed to have occurred upon any
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Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or any Subsidiary of the Company, or any entity
holding Common Shares for or pursuant to the terms of any such plan), together
with all Affiliates and Associates of such Person, becoming an Acquiring Person.
2. Appointment of Rights Agent. The Company hereby appoints the Rights
---------------------------
Agent to act as agent for the Company in accordance with the terms and
conditions of this Agreement,
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<PAGE>
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.
3. Issuance of Rights Certificates.
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(a) Until the Distribution Date, (i) the Rights will be evidenced
(subject to the provisions of Sections 3(b) and 3(c) of this Agreement) by the
certificates for Common Shares registered in the names of the holders thereof
(which certificates shall also be deemed to be Rights Certificates) and not by
separate Rights Certificates and (ii) the right to receive Rights Certificates
will be transferable only in connection with the transfer of Common Shares.
Until the earlier of the Distribution Date or the Expiration Date, the surrender
for transfer of such certificates for Common Shares shall also constitute the
surrender for transfer of the Rights associated with the Common Shares
represented thereby. As soon as practicable after the Distribution Date, the
Company will prepare and execute, the Rights Agent will countersign, and the
Company will send or cause to be sent (and the Rights Agent will, if requested,
send) by first-class, postage-prepaid mail, to each record holder of Common
Shares as of the close of business on the Distribution Date, at the address of
such holder shown on the records of the Company, a Rights Certificate in
substantially the form of Exhibit B to this Agreement (a "Rights Certificate"),
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evidencing one Right for each Common Share so held, subject to adjustment as
provided herein. In the event that an adjustment in the number of Rights per
Common Share has been made pursuant to Section 11(a)(i), Section 11(i) or
Section 11(p) of this Agreement, then at the time of distribution of the Rights
Certificates, the Company shall make the necessary and appropriate rounding
adjustments (in accordance with Section 14(a) of this Agreement) so that Rights
Certificates representing only whole numbers of Rights are distributed and cash
is paid in lieu of any fractional Rights. As of the Distribution Date, the
Rights will be evidenced solely by such Rights Certificates and may be
transferred by the transfer of the Rights Certificates as permitted hereby,
separately and apart from any transfer of one or more Common Shares, and the
holders of such Rights Certificates as listed in the records of the Company or
any transfer agent or registrar for the Rights shall be the record holders
thereof.
(b) On the Record Date or as soon as practicable thereafter, the
Company will send (or cause to be sent) a copy of a Summary of Rights in
substantially the form of Exhibit C to this Agreement (the "Summary of Rights"),
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by first-class, postage-prepaid mail, to each record holder of Common Shares as
of the close of business on the Record Date, at the address of such holder shown
on the records of the Company.
(c) Unless the Board of Directors, by resolution adopted at or before
the time of the issuance (including pursuant to the exercise of rights under the
Company's benefit plans) of any Common Shares, specifies to the contrary, Rights
shall be issued in respect of all Common Shares that are issued after the Record
Date but prior to the earlier of the Distribution Date or the Expiration Date
or, in certain circumstances provided in Section 22 of this Agreement, after the
Distribution Date. Certificates representing such Common Shares shall also be
deemed to be certificates for Rights, and shall bear the following legend:
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<PAGE>
This certificate also evidences and entitles the holder hereof to certain
rights as set forth in a Preferred Shares Rights Agreement between Oratec
Interventions, Inc. and American Stock Transfer and Trust Company as the
Rights Agent, dated as of November 28, 2000 (the "Rights Agreement"), the
----------------
terms of which are hereby incorporated herein by reference and a copy of
which is on file at the principal executive offices of Oratec
Interventions, Inc. Under certain circumstances, as set forth in the
Rights Agreement, such Rights will be evidenced by separate certificates
and will no longer be evidenced by this certificate. Oratec Interventions,
Inc. will mail to the holder of this certificate a copy of the Rights
Agreement without charge after receipt of a written request therefor.
Under certain circumstances set forth in the Rights Agreement, Rights
issued to, or held by, any Person who is, was or becomes an Acquiring
Person or any Affiliate or Associate thereof (as such terms are defined in
the Rights Agreement), whether currently held by or on behalf of such
Person or by any subsequent holder, may become null and void.
With respect to such certificates containing the foregoing legend, until the
earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights
associated with the Common Shares represented by such certificates shall be
evidenced by such certificates alone, and the surrender for transfer of any such
certificate shall also constitute the transfer of the Rights associated with the
Common Shares represented thereby. In the event that the Company purchases or
acquires any Common Shares after the Record Date but prior to the Distribution
Date, any Rights associated with such Common Shares shall be deemed canceled and
retired so that the Company shall not be entitled to exercise any Rights
associated with the Common Shares which are no longer outstanding.
4. Form of Rights Certificates.
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(a) The Rights Certificates (and the forms of election to purchase
Common Shares and of assignment to be printed on the reverse thereof) shall be
substantially in the form of Exhibit B to this Agreement and may have such marks
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of identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange on which the Rights may from time to
time be listed, or to conform to usage. Subject to the provisions of Section 11
and Section 22 of this Agreement, the Rights Certificates, whenever distributed,
shall be dated as of the Record Date (or in the case of Rights issued with
respect to Common Shares issued by the Company after the Record Date, as of the
date of issuance of such Common Shares), shall show the date of countersignature
by the Rights Agent, and on their face shall entitle the holders thereof to
purchase such number of one-thousandths of a Preferred Share as shall be set
forth therein at the price set forth therein (such exercise price per one one-
thousandth of a Preferred Share being hereinafter referred to as the "Purchase
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Price" and the aggregate exercise price of all Preferred Shares issuable upon
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exercise of one Right being hereinafter referred to as the "Total Exercise
--------------
Price"), but the number
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<PAGE>
and type of securities purchasable upon the exercise of each Right and the
Purchase Price shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or Section
22 of this Agreement that represents Rights beneficially owned by: (i) an
Acquiring Person or any Associate or Affiliate of an Acquiring Person, (ii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee after the Acquiring Person becomes such or (iii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee prior to or concurrently with the Acquiring Person becoming
such and receives such Rights pursuant to either (A) a transfer (whether or not
for consideration) from the Acquiring Person to holders of equity interests in
such Acquiring Person or to any Person with whom such Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer that the Board of Directors of the Company has
determined is part of a plan, arrangement or understanding that has as a primary
purpose or effect avoidance of Section 7(e) of this Agreement, and any Rights
Certificate issued pursuant to Section 6 or Section 11 of this Agreement upon
transfer, exchange, replacement or adjustment of any other Rights Certificate
referred to in this sentence, shall contain (to the extent feasible) the
following legend:
The Rights represented by this Rights Certificate are or were beneficially
owned by a Person who was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person (as such terms are defined in the Rights
Agreement). Accordingly, this Rights Certificate and the Rights
represented hereby may become null and void in the circumstances specified
in Section 7(e) of the Rights Agreement.
In the event that the Rights become exercisable, the Rights Agent and the
Company will agree upon a procedure for determining which Rights will be so
legended.
5. Countersignature and Registration.
---------------------------------
(a) The Rights Certificates shall be executed on behalf of the Company
by its Chairman of the Board, its Chief Executive Officer, its President or any
Vice President, either manually or by facsimile signature, and by the Secretary
or an Assistant Secretary of the Company, either manually or by facsimile
signature, and shall have affixed thereto the Company's seal (if any) or a
facsimile thereof. The Rights Certificates shall be manually countersigned by
an authorized signatory of the Rights Agent and shall not be valid for any
purpose unless countersigned. In case any officer of the Company who shall have
signed any of the Rights Certificates shall cease to be such officer of the
Company before countersignature by the Rights Agent and issuance and delivery by
the Company, such Rights Certificates nevertheless, may be countersigned by the
Rights Agent and issued and delivered by the Company with the same force and
effect as though the person who signed such Rights Certificates had not ceased
to be such officer of the Company; and any Rights Certificate may be signed on
behalf of the Company by any person who, at the actual date of the execution of
such Rights Certificate, shall be a proper officer of the Company to sign such
Rights Certificate,
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<PAGE>
although at the date of the execution of this Rights Agreement any such person
was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its office designated for such purposes, books for
registration and transfer of the Rights Certificates issued hereunder. Such
books shall show the names and addresses of the respective holders of the Rights
Certificates, the number of Rights evidenced on its face by each of the Rights
Certificates and the date of each of the Rights Certificates.
6. Transfer, Split Up, Combination and Exchange of Rights Certificates;
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Mutilated, Destroyed, Lost or Stolen Rights Certificates.
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(a) Subject to the provisions of Sections 7(e), 14 and 24 of this
Agreement, at any time after the Close of Business on the Distribution Date, and
at or prior to the Close of Business on the Expiration Date, any Rights
Certificate or Rights Certificates may be transferred, split up, combined or
exchanged for another Rights Certificate or Rights Certificates, entitling the
registered holder to purchase a like number of one-thousandths of a Preferred
Share (or, following a Triggering Event, other securities, cash or other assets,
as the case may be) as the Rights Certificate or Rights Certificates surrendered
then entitled such holder to purchase. Any registered holder desiring to
transfer, split up, combine or exchange any Rights Certificate or Rights
Certificates shall make such request in writing delivered to the Rights Agent,
and shall surrender the Rights Certificate or Rights Certificates to be
transferred, split up, combined or exchanged at the office of the Rights Agent
designated for such purpose. Neither the Rights Agent nor the Company shall be
obligated to take any action whatsoever with respect to the transfer of any such
surrendered Rights Certificate until the registered holder shall have completed
and signed the certificate contained in the form of assignment on the reverse
side of such Rights Certificate and shall have provided such additional evidence
of the identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Company shall reasonably request.
Thereupon the Rights Agent shall, subject to Sections 7(e), 14 and 24 of this
Agreement, countersign and deliver to the person entitled thereto a Rights
Certificate or Rights Certificates, as the case may be, as so requested. The
Company may require payment of a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any transfer, split up,
combination or exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and, at the Company's request,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Rights Certificate if mutilated, the Company will make and deliver a new
Rights Certificate of like tenor to the Rights Agent for delivery to the
registered holder in lieu of the Rights Certificate so lost, stolen, destroyed
or mutilated.
7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
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<PAGE>
(a) Subject to Sections 7(e), 23(b) or 24 of this Agreement, the
registered holder of any Rights Certificate may exercise the Rights evidenced
thereby (except as otherwise provided herein) in whole or in part at any time
after the Distribution Date upon surrender of the Rights Certificate, with the
form of election to purchase on the reverse side thereof duly executed, to the
Rights Agent at the office of the Rights Agent designated for such purpose,
together with payment of the Purchase Price for each one-thousandth of a
Preferred Share as to which the Rights are exercised, at or prior to the
Expiration Date.
(b) The Purchase Price for each one-thousandth of a Preferred Share
issuable pursuant to the exercise of a Right shall initially be $55.00, shall be
subject to adjustment from time to time as provided in Sections 11 and 13 of
this Agreement and shall be payable in lawful money of the United States of
America in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase duly executed, accompanied by
payment of the Purchase Price for the number of one-thousandths of a Preferred
Share (or other securities or property, as the case may be) to be purchased and
an amount equal to any applicable transfer tax required to be paid by the holder
of such Rights Certificate in accordance with Section 9 of this Agreement in
cash, or by certified check or cashier's check payable to the order of the
Company, the Rights Agent shall, subject to Section 20(k) of this Agreement,
thereupon promptly (i) (A) requisition from any transfer agent of the Preferred
Shares (or make available, if the Rights Agent is the transfer agent for the
Preferred Shares) a certificate or certificates for the number of one-
thousandths of a Preferred Share to be purchased and the Company hereby
irrevocably authorizes its transfer agent to comply with all such requests or
(B) if the Company shall have elected to deposit the total number of one-
thousandths of a Preferred Share issuable upon exercise of the Rights hereunder
with a depository agent, requisition from the depository agent of depository
receipts representing such number of one-thousandths of a Preferred Share as are
to be purchased (in which case certificates for the Preferred Shares represented
by such receipts shall be deposited by the transfer agent with the depository
agent) and the Company hereby directs the depository agent to comply with such
request, (ii) when appropriate, requisition from the Company the amount of cash
to be paid in lieu of issuance of fractional shares in accordance with Section
14 of this Agreement, (iii) after receipt of such certificates or depository
receipts, cause the same to be delivered to or upon the order of the registered
holder of such Rights Certificate, registered in such name or names as may be
designated by such holder and (iv) when appropriate, after receipt thereof,
deliver such cash to or upon the order of the registered holder of such Rights
Certificate. The payment of the Purchase Price (as such amount may be reduced
(including to zero) pursuant to Section 11(a)(iv) of this Agreement) may be made
in cash or by certified check or cashier's check payable to the order of the
Company. In the event that the Company is obligated to issue other securities
of the Company, pay cash and/or distribute other property pursuant to Section
11(a) of this Agreement, the Company will make all arrangements necessary so
that such other securities, cash and/or other property are available for
distribution by the Rights Agent, if and when appropriate.
(d) In case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights Certificate
evidencing Rights equivalent to
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<PAGE>
the Rights remaining unexercised shall be issued by the Rights Agent to the
registered holder of such Rights Certificate or to his or her duly authorized
assigns, subject to the provisions of Section 14 of this Agreement.
(e) Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of a Triggering Event or a Section 13 Event, any
Rights beneficially owned by (i) an Acquiring Person or an Associate or
Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or
of any such Associate or Affiliate) who becomes a transferee after the Acquiring
Person becomes such (a "Post Transferee"), (iii) a transferee of an Acquiring
---------------
Person (or of any such Associate or Affiliate) who becomes a transferee prior to
or concurrently with the Acquiring Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from the
Acquiring Person to holders of equity interests in such Acquiring Person or to
any Person with whom the Acquiring Person has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a transfer
which the Board of Directors has determined is part of a plan, arrangement or
understanding which has as a primary purpose or effect the avoidance of this
Section 7(e) (a "Prior Transferee") or (iv) any subsequent transferee receiving
----------------
transferred Rights from a Post Transferee or a Prior Transferee, either directly
or through one or more intermediate transferees, shall become null and void
without any further action and no holder of such Rights shall have any rights
whatsoever with respect to such Rights, whether under any provision of this
Agreement or otherwise. The Company shall use all reasonable efforts to ensure
that the provisions of this Section 7(e) and Section 4(b) of this Agreement are
complied with, but shall have no liability to any holder of Rights Certificates
or to any other Person as a result of its failure to make any determinations
with respect to an Acquiring Person or any of such Acquiring Person's
Affiliates, Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall have
(i) completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the Rights Certificate surrendered for
such exercise and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
8. Cancellation and Destruction of Rights Certificates. All Rights
---------------------------------------------------
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Rights Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall
deliver all canceled Rights Certificates to the Company, or shall, at the
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<PAGE>
written request of the Company, destroy such canceled Rights Certificates, and
in such case shall deliver a certificate of destruction thereof to the Company.
9. Reservation and Availability of Preferred Shares.
------------------------------------------------
(a) The Company covenants and agrees that it will use its best efforts
to cause to be reserved and kept available out of and to the extent of its
authorized and unissued shares of preferred stock not reserved for another
purpose (and, following the occurrence of a Triggering Event, out of its
authorized and unissued shares of Common Shares and/or other securities), the
number of Preferred Shares (and, following the occurrence of the Triggering
Event, Common Shares and/or other securities) that will be sufficient to permit
the exercise in full of all outstanding Rights.
(b) If the Company shall hereafter list any of its Preferred Shares on
a national securities exchange, then so long as the Preferred Shares (and,
following the occurrence of a Triggering Event, Common Shares and/or other
securities) issuable and deliverable upon exercise of the Rights may be listed
on a national securities exchange, the Company shall use its best efforts to
cause, from and after such time as the Rights become exercisable (but only to
the extent that it is reasonably likely that the Rights will be exercised), all
shares reserved for such issuance to be listed on such exchange upon official
notice of issuance upon such exercise.
(c) The Company shall use its best efforts to (i) file, as soon as
practicable following the earliest date after the first occurrence of a
Triggering Event in which the consideration to be delivered by the Company upon
exercise of the Rights has been determined in accordance with Sections 11(a)(ii)
or 11(a)(iv) of this Agreement, or as soon as is required by law following the
Distribution Date, as the case may be, a registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
--------------
securities purchasable upon exercise of the Rights on an appropriate form, (ii)
cause such registration statement to become effective as soon as practicable
after such filing and (iii) cause such registration statement to remain
effective (with a prospectus at all times meeting the requirements of the
Securities Act) until the earlier of (A) the date as of which the Rights are no
longer exercisable for such securities and (B) the date of expiration of the
Rights. The Company may temporarily suspend, for a period not to exceed ninety
(90) days after the date set forth in clause (i) of the first sentence of this
Section 9(c), the exercisability of the Rights in order to prepare and file such
registration statement and permit it to become effective. Upon any such
suspension, the Company shall issue a public announcement stating, and notify
the Rights Agent, that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement and notification to the Rights Agent
at such time as the suspension is no longer in effect. The Company will also
take such action as may be appropriate under, or to ensure compliance with, the
securities or "blue sky" laws of the various states in connection with the
exercisability of the Rights. Notwithstanding any provision of this Agreement
to the contrary, the Rights shall not be exercisable in any jurisdiction, unless
the requisite qualification in such jurisdiction shall have been obtained, or an
exemption therefrom shall be available, and until a registration statement has
been declared effective.
-14-
<PAGE>
(d) The Company covenants and agrees that it will take all such action
as may be necessary to ensure that all Preferred Shares delivered upon exercise
of Rights shall, at the time of delivery of the certificates for such Preferred
Shares (subject to payment of the Purchase Price), be duly and validly
authorized and issued and fully paid and nonassessable shares.
(e) The Company further covenants and agrees that it will pay when due
and payable any and all federal and state transfer taxes and charges which may
be payable in respect of the original issuance or delivery of the Rights
Certificates or of any Preferred Shares upon the exercise of Rights. The
Company shall not, however, be required to pay any transfer tax which may be
payable in respect of any transfer or delivery of Rights Certificates to a
person other than, or the issuance or delivery of certificates or depository
receipts for the Preferred Shares in a name other than that of, the registered
holder of the Rights Certificate evidencing Rights surrendered for exercise or
to issue or to deliver any certificates or depository receipts for Preferred
Shares upon the exercise of any Rights until any such tax shall have been paid
(any such tax being payable by the holder of such Rights Certificate at the time
of surrender) or until it has been established to the Company's satisfaction
that no such tax is due.
10. Preferred Shares Record Date. Each person in whose name any
----------------------------
certificate for a number of one-thousandths of a Preferred Share is issued upon
the exercise of Rights shall for all purposes be deemed to have become the
holder of record of Preferred Shares represented thereby on, and such
certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
multiplied by the number of one-thousandths of a Preferred Share with respect to
which the Rights have been exercised (and any applicable transfer taxes) was
made; provided, however, that if the date of such surrender and payment is a
-------- -------
date upon which the Preferred Shares transfer books of the Company are closed,
such person shall be deemed to have become the record holder of such shares on,
and such certificate shall be dated, the next succeeding Business Day on which
the Preferred Shares transfer books of the Company are open. Prior to the
exercise of the Rights evidenced thereby, the holder of a Rights Certificate
shall not be entitled to any rights of a holder of Preferred Shares 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.
11. Adjustment of Purchase Price, Number of Shares or Number of Rights.
------------------------------------------------------------------
The Purchase Price, the number and kind of shares or other property covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the date
of this Agreement (A) declare a dividend on the Common Shares payable in Common
Shares, (B) subdivide the outstanding Common Shares, (C) combine the outstanding
Common Shares (by reverse stock split or otherwise) into a smaller number of
Common Shares, or (D) issue any shares of its capital stock in a
reclassification of the Common Shares (including any such reclassification in
connection with a consolidation or merger in which the Company is the continuing
or surviving corporation), then, in each such event, except as otherwise
provided in
-15-
<PAGE>
this Section 11(a) and Section 7(e) of this Agreement: (1) each of the Rights
outstanding at the time of the record date for such dividend or the effective
date of such subdivision, combination or reclassification shall be
proportionately adjusted to that number of Rights (calculated to the nearest one
ten-thousandth (1/10,000) of a Right) equal to a fraction (the "Exchange
--------
Ratio"), the numerator of which shall be the total number of Common Shares or
-----
shares of capital stock issued in such dividend, subdivision, combination or
reclassification of the Common Shares outstanding immediately following such
dividend, subdivision, combination or reclassification and the denominator of
which shall be the total number of Common Shares outstanding immediately prior
to such time, and the number of Rights that shall thereafter be issued with
respect to each Common Share or share of such other capital stock that shall
become outstanding thereafter prior to the Distribution Date shall be equal to
the total number of outstanding Rights immediately after such event (as adjusted
pursuant to this clause (1)) divided by the total number of outstanding Common
Shares or shares of such other capital stock immediately after such event
(subject to further adjustment pursuant to the provisions of this Agreement);
(2) the Purchase Price in effect at the time of the record date for such
dividend or of the effective date of such subdivision, combination or
reclassification shall be adjusted so that the Purchase Price thereafter shall
equal the result obtained by dividing the Purchase Price in effect immediately
prior to such time by the Exchange Ratio; provided, however, that in no event
-------- -------
shall the consideration to be paid upon the exercise of one Right be less than
the aggregate par value of the shares of capital stock of the Company issuable
upon exercise of such Right; and (3) the number of Preferred Shares or shares of
such other capital stock issuable upon the exercise of each Right shall remain
unchanged immediately after such event, but, in the event of a reclassification,
the kind of shares issuable upon the exercise of each Right immediately after
such reclassification shall be adjusted to be the kind of shares of such other
capital stock issued in such reclassification, rather than Preferred Shares. If
an event occurs which would require an adjustment under both this Section
11(a)(i) and Section 11(a)(ii) of this Agreement, the adjustment provided for in
this Section 11(a)(i) shall be in addition to, and shall be made prior to, any
adjustment required pursuant to Section 11(a)(ii) of this Agreement.
(ii) Subject to Section 24 of this Agreement, in the event a
Triggering Event shall have occurred, then promptly following such Triggering
Event, proper provision shall be made so that each holder of a Right, except as
provided in Section 7(e) of this Agreement, shall thereafter have the right to
receive for each Right, upon exercise thereof in accordance with the terms of
this Agreement and payment of the then-current Total Exercise Price, in lieu of
a number of one-thousandths of a Preferred Share, such number of Common Shares
of the Company as shall equal the result obtained by multiplying the then-
current Purchase Price by the then number of one-thousandths of a Preferred
Share for which a Right was exercisable (or would have been exercisable if the
Distribution Date had occurred) immediately prior to the first occurrence of a
Triggering Event, and dividing that product by 50% of the current per share
market price (determined pursuant to Section 11(d) of this Agreement) for
Common Shares on the date of occurrence of the Triggering Event (such number of
shares being hereinafter referred to as the "Adjustment Shares").
-----------------
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<PAGE>
(iii) The right to buy Common Shares of the Company pursuant to
Section 11(a)(ii) of this Agreement shall not arise as a result of any Person
becoming an Acquiring Person through an acquisition of Common Shares pursuant to
a Permitted Offer.
(iv) In lieu of issuing Common Shares in accordance with Section
11(a)(ii) of this Agreement, the Company may, if the Board of Directors
determines that such action is necessary or appropriate and not contrary to the
interest of holders of Rights (and, in the event that the number of Common
Shares which are authorized by the Company's Certificate of Incorporation but
not outstanding or reserved for issuance for purposes other than upon exercise
of the Rights are not sufficient to permit the exercise in full of the Rights,
or if any necessary regulatory approval for such issuance has not been obtained
by the Company, the Company shall): (A) determine the excess of (1) the value
of the Common Shares issuable upon the exercise of a Right (the "Current Value")
-------------
over (2) the Purchase Price (such excess, the "Spread") and (B) with respect to
------
each Right, make adequate provision to substitute for such Common Shares, upon
exercise of the Rights, (1) cash, (2) a reduction in the Purchase Price, (3)
other equity securities of the Company (including, without limitation, shares or
units of shares of any series of Preferred Stock which the Board of Directors
has deemed to have the same value as Common Shares (such shares or units of
shares of Preferred Stock are herein called "common stock equivalents")), except
------------------------
to the extent that the Company has not obtained any necessary stockholder or
regulatory approval for such issuance, (4) debt securities of the Company,
except to the extent that the Company has not obtained any necessary stockholder
or regulatory approval for such issuance, (5) other assets or (6) any
combination of the foregoing, having an aggregate value equal to the Current
Value, where such aggregate value has been determined by the Board of Directors
based upon the advice of a nationally recognized investment banking firm
selected by the Board of Directors; provided, however, if the Company shall not
-------- -------
have made adequate provision to deliver value pursuant to clause (B) above
within thirty (30) days following the later of (x) the first occurrence of a
Triggering Event and (y) the date on which the Company's right of redemption
pursuant to Section 23(a) expires (the later of (x) and (y) being referred to
herein as the "Section 11(a)(ii) Trigger Date"), then the Company shall be
------------------------------
obligated to deliver, upon the surrender for exercise of a Right and without
requiring payment of the Purchase Price, Common Shares (to the extent
available), except to the extent that the Company has not obtained any necessary
stockholder or regulatory approval for such issuance, and then, if necessary,
cash, which shares and/or cash have an aggregate value equal to the Spread. If
the Board of Directors shall determine in good faith that it is likely that
sufficient additional Common Shares could be authorized for issuance upon
exercise in full of the Rights or that any necessary regulatory approval for
such issuance will be obtained, the thirty (30) day period set forth above may
be extended to the extent necessary, but not more than ninety (90) days after
the Section 11(a)(ii) Trigger Date, in order that the Company may seek
stockholder approval for the authorization of such additional shares or take
action to obtain such regulatory approval (such period, as it may be extended,
the "Substitution Period"). To the extent that the Company determines that some
-------------------
action need be taken pursuant to the first and/or second sentences of this
Section 11(a)(iv), the Company (x) shall provide, subject to Section 7(e) of
this Agreement, that such action shall apply uniformly to all outstanding Rights
and (y) may suspend the exercisability of the Rights until the expiration of the
Substitution Period in order to seek any authorization of additional shares, to
take any action to obtain any required regulatory approval and/or to decide the
-17-
<PAGE>
appropriate form of distribution to be made pursuant to such first sentence and
to determine the value thereof. In the event of any such suspension, the
Company shall issue a public announcement stating that the exercisability of the
Rights has been temporarily suspended, as well as a public announcement at such
time as the suspension is no longer in effect. For purposes of this Section
11(a)(iv), the value of the Common Shares shall be the current per share market
price (as determined pursuant to Section 11(d) of this Agreement) of the Common
Shares on the Section 11(a)(ii) Trigger Date and the value of any "common stock
------------
equivalent" shall be deemed to have the same value as the Common Shares on such
----------
date.
(b) In case the Company shall, at any time after the date of this
Agreement, fix a record date for the issuance of rights, options or warrants to
all holders of Common Shares or of any class or series of Equivalent Shares
entitling such holders (for a period expiring within forty-five (45) calendar
days after such record date) to subscribe for or purchase Common Shares or
Equivalent Shares or securities convertible into Common Shares or Equivalent
Shares at a price per share (or having a conversion price per share, if a
security convertible into Common Shares or Equivalent Shares) less than the then
current per share market price of the Common Shares or Equivalent Shares (as
defined in Section 11(d)) on such record date, then, in each such case, the
Purchase Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the number of Common Shares and
Equivalent Shares (if any) outstanding on such record date, plus the number of
Common Shares or Equivalent Shares, as the case may be, which the aggregate
offering price of the total number of Common Shares or Equivalent Shares, as the
case may be, so to be offered (and/or the aggregate initial conversion price of
the convertible securities so to be offered) would purchase at such current
market price, and the denominator of which shall be the number of Common Shares
and Equivalent Shares (if any) outstanding on such record date, plus the number
of additional Common Shares or Equivalent Shares, as the case may be, to be
offered for subscription or purchase (or into which the convertible securities
so to be offered are initially convertible). In case such subscription price
may be paid in a consideration part or all of which shall be in a form other
than cash, the value of such consideration shall be as determined in good faith
by the Board of Directors, whose determination shall be described in a statement
filed with the Rights Agent and shall be binding on the Rights Agent and the
holders of the Rights. Common Shares and Equivalent Shares owned by or held for
the account of the Company shall not be deemed outstanding for the purpose of
any such computation. Such adjustment shall be made successively whenever such
a record date is fixed, and in the event that such rights, options or warrants
are not so issued, the Purchase Price shall be adjusted to be the Purchase Price
which would then be in effect if such record date had not been fixed.
(c) In case the Company shall, at any time after the date of this
Agreement, fix a record date for the making of a distribution to all holders of
the Common Shares or of any class or series of Equivalent Shares (including any
such distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of indebtedness
or assets (other than a regular quarterly cash dividend, if any, or a dividend
payable in Common Shares) or subscription rights, options or warrants
(excluding those referred to in Section 11(b)), then, in each such case, the
Purchase Price to be in effect after
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<PAGE>
such record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the current market price (as determined pursuant to Section 11(d) of
this Agreement) of a Common Share or an Equivalent Share on such record date,
less the fair market value (as determined in good faith by the Board of
Directors, whose determination shall be described in a statement filed with the
Rights Agent) of the portion of the cash, assets or evidences of indebtedness so
to be distributed or of such subscription rights or warrants applicable to a
Common Share or Equivalent Share, as the case may be, and the denominator of
which shall be such current market price (as determined pursuant to Section
11(d) of this Agreement) of a Common Share or Equivalent Share on such record
date. Such adjustments shall be made successively whenever such a record date is
fixed, and in the event that such distribution is not so made, the Purchase
Price shall be adjusted to be the Purchase Price which would have been in effect
if such record date had not been fixed.
(d) For the purpose of any computation hereunder, other than
computations made pursuant to Section 11(a)(iv) of this Agreement, the "current
-------
per share market price" of any security (a "Security" for the purpose of this
---------------------- --------
Section 11(d)) on any date shall be deemed to be the average of the daily
closing prices per share of such Security for the thirty (30) consecutive
Trading Days (as such term is hereinafter defined) immediately prior to such
date, and for purposes of computations made pursuant to Section 11(a)(iv) of
this Agreement, the "current per share market price" of any Security on any date
------------------------------
shall be deemed to be the average of the daily closing prices per share of such
Security for the ten (10) consecutive Trading Days immediately prior to such
date; provided, however, that in the event that the current per share market
-------- -------
price of the Security is determined during a period following the announcement
by the issuer of such Security of (i) a dividend or distribution on such
Security payable in shares of such Security or securities convertible into such
shares or (ii) any subdivision, combination or reclassification of such
Security, and prior to the expiration of the requisite thirty (30) Trading Day
or ten (10) Trading Day period, after the ex-dividend date for such dividend or
distribution, or the record date for such subdivision, combination or
reclassification, then, and in each such case, the current per share market
price shall be appropriately adjusted to reflect the current market price per
share equivalent of such Security. The closing price for each day shall be the
last sale price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Security is not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Security is listed or admitted to trading or, if the Security is
not listed or admitted to trading on any national securities exchange, the last
sale price or, if such last sale price is not reported, the average of the high
bid and low asked prices in the over-the-counter market, as reported by the
National Association of Securities Dealers, Inc. Automated Quotations System
("Nasdaq") or such other system then in use, or, if on any such date the
--------
Security is not quoted by any such organization, the average of the closing bid
and asked prices as furnished by a professional market maker making a market in
the Security selected by the Board of Directors. If on any such date no market
maker is making a market in the Common Shares, the fair value of such shares on
such date as determined in good faith by the Board of Directors shall be used.
The term "Trading Day" shall mean a day on
-----------
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<PAGE>
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 Common Shares are not publicly held or so
listed or traded, "current per share market price" shall mean the fair value per
------------------------------
share as determined in good faith by the Board of Directors, whose determination
shall be described in a statement filed with the Rights Agent and shall be
conclusive for all purposes.
(e) Anything herein to the contrary notwithstanding, no adjustment in
the Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least 1% in the Purchase Price; provided, however,
-------- -------
that any adjustments which by reason of this Section 11(e) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be made to the nearest
cent or to the nearest ten-thousandth of a Common Share or other share or one
hundred-thousandth of a Preferred Share, as the case may be. Notwithstanding
the first sentence of this Section 11(e), any adjustment required by this
Section 11 shall be made no later than the earlier of (i) three (3) years from
the date of the transaction which requires such adjustment or (ii) the
Expiration Date.
(f) If as a result of an adjustment made pursuant to Sections 11(a)
or 13(a) of this Agreement, the holder of any Right thereafter exercised shall
become entitled to receive any shares of capital stock other than Preferred
Shares, thereafter the number of such other shares so receivable upon exercise
of any Right and if required, the Purchase Price thereof, shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Common Shares contained in
Sections 11(a), (b), (c), (e), (h), (i), (j), (k), (1) and (m), and the
provisions of Sections 7, 9, 10, 13 and 14 with respect to the Preferred Shares
shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one-thousandths of a
Preferred Share purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided
in Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Section 11(b), 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 Preferred Shares (calculated to
the nearest one hundred-thousandth of a share) obtained by (i) multiplying (x)
the number of Preferred Shares covered by a Right immediately prior to this
adjustment, by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price, and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.
(i) The Company may elect on or after the date of any adjustment of
the Purchase Price as a result of the calculations made in Section 11(b) to
adjust the number of Rights, in substitution for any adjustment in the number of
Preferred Shares purchasable upon
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<PAGE>
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-thousandths of a
Preferred Share for which a Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to such adjustment of the number of
Rights shall become that number of Rights (calculated to the nearest ten-
thousandth) obtained by dividing the Purchase Price in effect immediately prior
to adjustment of the Purchase Price by the Purchase Price in effect immediately
after adjustment of the Purchase Price. The Company shall make a public
announcement of its election to adjust the number of Rights, indicating the
record date for the adjustment, and, if known at the time, the amount of the
adjustment to be made. This record date may be the date on which the Purchase
Price is adjusted or any day thereafter, but, if the Rights Certificates have
been issued, shall be at least ten (10) days later than the date of the public
announcement. If Rights Certificates have been issued, upon each adjustment of
the number of Rights pursuant to this Section 11(i), the Company shall, as
promptly as practicable, cause to be distributed to holders of record of Rights
Certificates on such record date Rights Certificates evidencing, subject to
Section 14 of this Agreement, the additional Rights to which such holders shall
be entitled as a result of such adjustment, or, at the option of the Company,
shall cause to be distributed to such holders of record in substitution and
replacement for the Rights Certificates held by such holders prior to the date
of adjustment, and upon surrender thereof, if required by the Company, new
Rights Certificates evidencing all the Rights to which such holders shall be
entitled after such adjustment. Rights Certificates so to be distributed shall
be issued, executed and countersigned in the manner provided for herein (and may
bear, at the option of the Company, the adjusted Purchase Price) and shall be
registered in the names of the holders of record of Rights Certificates on the
record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or
the number of Preferred Shares issuable upon the exercise of the Rights, the
Rights Certificates theretofore and thereafter issued may continue to express
the Purchase Price per one one-thousandth of a Preferred Share and the number of
one-thousandths of a Preferred Share which were expressed in the initial Rights
Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the par or stated value, if any, of the number of one-
thousandths of a Preferred Share issuable upon exercise of the Rights, the
Company shall take any corporate action which may, in the opinion of its
counsel, be necessary in order that the Company may validly and legally issue as
fully paid and nonassessable shares such number of one-thousandths of a
Preferred Share at such adjusted Purchase Price.
(1) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Right exercised after such record date of
the number of one-thousandths of a Preferred Share and other capital stock or
securities of the Company, if any, issuable upon such exercise over and above
the number of one-thousandths of a Preferred Share 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
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other appropriate instrument evidencing such holder's right to receive such
additional shares (fractional or otherwise) upon the occurrence of the event
requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, prior
to the Distribution Date, the Company shall be entitled to make such reductions
in the Purchase Price, in addition to those adjustments expressly required by
this Section 11, as and to the extent that it in its sole discretion shall
determine to be advisable in order that any (i) consolidation or subdivision of
the Preferred or Common Shares, (ii) issuance wholly for cash of any Preferred
or Common Shares at less than the current market price, (iii) issuance wholly
for cash of Preferred or Common Shares or securities which by their terms are
convertible into or exchangeable for Preferred or Common Shares, (iv) stock
dividends or (v) issuance of rights, options or warrants referred to in this
Section 11, hereafter made by the Company to holders of its Preferred or Common
Shares shall not be taxable to such stockholders.
(n) The Company covenants and agrees that it shall not, at any time
after the Distribution Date, effect or permit to occur any Triggering Event or
Section 13 Event, if (i) at the time or immediately after such Triggering Event
or Section 13 Event there are any rights, warrants or other instruments or
securities outstanding or agreements in effect which would substantially
diminish or otherwise eliminate the benefits intended to be afforded by the
Rights or (ii) prior to, simultaneously with or immediately after such Section
13 Event, the stockholders of the Person who constitutes, or would constitute,
the "Principal Party" for purposes of Section 13(b) of this Agreement shall have
---------------
received a distribution of Rights previously owned by such Person or any of its
Affiliates and Associates.
(o) The Company covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Sections 23, 24 or 27 of this
Agreement, take (or permit to be taken) any action if at the time such action is
taken it is reasonably foreseeable that such action will diminish substantially
or otherwise eliminate the benefits intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary notwithstanding, in the
event the Company shall at any time after the date of this Agreement (A) declare
a dividend on the Preferred Shares payable in Preferred Shares, (B) subdivide
the outstanding Preferred Shares, (C) combine the outstanding Preferred Shares
(by reverse stock split or otherwise) into a smaller number of Preferred Shares,
or (D) issue any shares of its capital stock in a reclassification of the
Preferred Shares (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or surviving
corporation), then, in each such event, except as otherwise provided in this
Section 11 and Section 7(e) of this Agreement: (1) each of the Rights
outstanding at the time of the record date for such dividend or the effective
date of such subdivision, combination or reclassification shall be
proportionately adjusted to that number of Rights (calculated to the nearest one
ten-thousandth (1/10,000) of a Right) equal to a fraction (the "Exchange
--------
Fraction"), the numerator of which shall be the total number of Preferred Shares
--------
or shares of capital stock issued in such reclassification of the Preferred
Shares outstanding immediately following such time and the denominator of which
shall be the total number of Preferred Shares outstanding immediately prior to
such time, and the number of
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Rights that shall thereafter be issued with respect to each Common Share or
share of other capital stock that shall be issued in a reclassification of the
Common Shares prior to the Distribution Date shall be equal to the total number
of outstanding Rights immediately after such event (as adjusted pursuant to this
clause (1)) divided by the total number of outstanding Common Shares or shares
of such other capital stock immediately after such event (subject to further
adjustment pursuant to the provisions of this Agreement); (2) the Purchase Price
in effect at the time of the record date for such dividend or of the effective
date of such subdivision, combination or reclassification shall be adjusted so
that the Purchase Price thereafter shall equal the result obtained by dividing
the Purchase Price in effect immediately prior to such time by the Exchange
Fraction; provided, however, that in no event shall the consideration to be paid
-------- -------
upon the exercise of one Right be less than the aggregate par value of the
shares of capital stock of the Company issuable upon exercise of such Right; and
(3) the number of one-thousandths of a Preferred Share or share of such other
capital stock issuable upon the exercise of each Right shall remain unchanged
immediately after such event, but, in the event of a reclassification, the kind
of shares issuable upon the exercise of each Right immediately after such
reclassification shall be adjusted to be the kind of shares of such other
capital stock issued in such reclassification, rather than Preferred Shares.
12. Certificate of Adjusted Purchase Price or Number of Shares.
----------------------------------------------------------
Whenever an adjustment is made as provided in Sections 11 and 13 of this
Agreement, the Company shall promptly (a) prepare a certificate setting forth
such adjustment and a brief statement of the facts accounting for such
adjustment, (b) file with the Rights Agent and with each transfer agent for the
Preferred Shares a copy of such certificate and (c) mail a brief summary thereof
to each holder of a Rights Certificate in accordance with Section 26 of this
Agreement. Notwithstanding the foregoing sentence, the failure of the Company
to make such certification or give such notice shall not affect the validity of
such adjustment or the force or effect of the requirement for such adjustment.
The Rights Agent shall be fully protected in relying on any such certificate and
on any adjustment contained therein and shall not be deemed to have knowledge of
such adjustment unless and until it shall have received such certificate.
13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power.
--------------------------------------------------------------------
(a) In the event that, following the Shares Acquisition Date,
directly or indirectly:
(i) the Company shall consolidate with, or merge with and into,
any other Person (other than a Subsidiary of the Company in a transaction the
principal purpose of which is to change the state of incorporation of the
Company or that complies with Section 11(o) of this Agreement);
(ii) any Person (other than a Subsidiary of the Company in a
transaction that complies with Section 11(o) of this Agreement) shall
consolidate with the Company, or merge with and into the Company and the Company
shall be the continuing or surviving corporation of such consolidation or
merger; or
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<PAGE>
(iii) the Company shall sell or otherwise transfer (or one or
more of its Subsidiaries shall sell or otherwise transfer), in one or more
transactions, assets or earning power aggregating 50% or more of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person or Persons (other than the Company or one or more of its wholly
owned Subsidiaries in one or more transactions, each of which complies with
Section 11(o) of this Agreement),
then, and in each such case, proper provision shall be made so
that
(A) each holder of a Right (except as otherwise provided
herein) shall thereafter have the right to receive, upon the exercise thereof in
accordance with the terms of this Agreement, such number of validly authorized
and issued, fully paid and nonassessable Common Shares of the Principal Party
(as hereinafter defined), free of any liens, encumbrances, rights of first
refusal or other adverse claims, as shall be equal to the result obtained by (1)
multiplying the then current Purchase Price by the number of one-thousandths of
a Preferred Share for which a Right was exercisable immediately prior to the
first occurrence of a Section 13 Event (or, if a Triggering Event has occurred
prior to the first occurrence of a Section 13 Event, multiplying the number of
such one-thousandths of a Preferred Share for which a Right was exercisable
immediately prior to the first occurrence of a Triggering Event by the Purchase
Price in effect immediately prior to such first occurrence) and (2) dividing
that product (which, following the first occurrence of a Section 13 Event, shall
be referred to as the "Total Exercise Price" for each Right and for all purposes
--------------------
of this Agreement) by 50% of the current per share market price (determined
pursuant to Section 11(d) of this Agreement) of the Common Shares of such
Principal Party on the date of consummation of such Section 13 Event;
(B) such Principal Party shall thereafter be liable for, and
shall assume, by virtue of such Section 13 Event, all the obligations and duties
of the Company pursuant to this Agreement;
(C) the term "Company" shall thereafter be deemed to refer to
-------
such Principal Party, it being specifically intended that the provisions of
Section 11 of this Agreement shall apply only to such Principal Party following
the first occurrence of a Section 13 Event;
(D) such Principal Party shall take such steps (including, but
not limited to, the reservation of a sufficient number of its Common Shares) in
connection with the consummation of any such transaction as may be necessary to
assure that the provisions of this Agreement shall thereafter be applicable, as
nearly as reasonably may be, in relation to its Common Shares thereafter
deliverable upon the exercise of the Rights.
(b) "Principal Party" shall mean, in the case of any transaction
---------------
described in clause (i), (ii) or (iii) of Section 13(a), the Person referred to
therein or such Person's successor, including, if applicable, the Company, if it
is the surviving corporation), provided, however, that in any such case, (i) if
-------- -------
such Person is a direct or indirect Subsidiary of another Person, "Principal
---------
Party" shall refer to such other Person and (ii) in case such Person is a
-----
Subsidiary, directly or indirectly, of more than one Person, "Principal Party"
---------------
shall refer to whichever of such Persons is the issuer of the Common Shares
having the greatest aggregate value, and provided, further, that
-------- -------
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<PAGE>
for purposes of transactions described in clause (iii) of this Section 13(b),
"Principal Party" shall refer to that Person receiving the greatest portion of
---------------
the assets or earning power transferred pursuant to such transaction or
transactions.
(c) If, for any reason, the Rights cannot be exercised for Common
Shares of such Principal Party as provided in Section 13(a), then each holder of
Rights shall have the right to exchange its Rights for cash from such Principal
Party in an amount equal to the number of Common Shares that it would otherwise
be entitled to purchase times 50% of the current per share market price, as
determined pursuant to Section 11(d) of this Agreement, of such Common Shares of
such Principal Party. If, for any reason, the foregoing formulation cannot be
applied to determine the cash amount into which the Rights are exchangeable,
then the Board of Directors, based upon the advice of one or more nationally
recognized investment banking firms, and based upon the total value of the
Company, shall determine such amount reasonably and with good faith to the
holders of Rights. Any such determination shall be final and binding on the
Rights Agent.
(d) Notwithstanding anything in this Agreement to the contrary,
Section 13 shall not be applicable to a transaction described in clauses (i) and
(ii) of Section 13(a) if: (i) such transaction is consummated with a Person or
Persons who acquired Common Shares pursuant to a Permitted Offer (or a wholly-
owned Subsidiary of any such Person or Persons); (ii) the price per share of
Common Shares offered in such transaction is not less than the price per share
of Common Shares paid to all holders of Common Shares whose shares were
purchased pursuant to such Permitted Offer; and (iii) the form of consideration
being offered to the remaining holders of Common Shares pursuant to such
transaction is the same form as the form of consideration paid pursuant to such
Permitted Offer. Upon consummation of any such transaction contemplated by this
Section 13(d), all Rights hereunder shall expire.
(e) The Company shall not consummate any Section 13 Event unless the
Principal Party shall have a sufficient number of authorized Common Shares that
have not been issued or reserved for issuance to permit the exercise in full of
the Rights in accordance with this Section 13 and unless prior thereto the
Company and such issuer shall have executed and delivered to the Rights Agent a
supplemental agreement confirming that such Principal Party shall, upon
consummation of such Section 13 Event, assume this Agreement in accordance with
Sections 13(a) and (b) of this Agreement, that all rights of first refusal or
preemptive rights in respect of the issuance of Common Shares of such Principal
Party upon exercise of outstanding Rights have been waived, that there are no
rights, warrants, instruments or securities outstanding or any agreements or
arrangements which, as a result of the consummation of such transaction, would
eliminate or substantially diminish the benefits intended to be afforded by the
Rights and that such transaction shall not result in a default by such Principal
Party under this Agreement, and further providing that, as soon as practicable
after the date of such Section 13 Event, such Principal Party will:
(i) prepare and file a registration statement under the Securities Act
with respect to the Rights and the securities purchasable upon exercise of the
Rights on an appropriate form, use its best efforts to cause such registration
statement to become effective as
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<PAGE>
soon as practicable after such filing and use its best efforts to cause such
registration statement to remain effective (with a prospectus at all times
meeting the requirements of the Securities Act) until the Expiration Date, and
similarly comply with applicable state securities laws;
(ii) use its best efforts to list (or continue the listing of)
the Rights and the securities purchasable upon exercise of the Rights on a
national securities exchange or to meet the eligibility requirements for
quotation on Nasdaq; and
(iii) deliver to holders of the Rights historical financial
statements for such Principal Party which comply in all respects with the
requirements for registration on Form 10 (or any successor form) under the
Exchange Act.
In the event that at any time after the occurrence of a
Triggering Event some or all of the Rights shall not have been exercised at the
time of a transaction described in this Section 13, the Rights which have not
theretofore been exercised shall thereafter be exercisable in the manner
described in Section 13(a) (without taking into account any prior adjustment
required by Section 11(a)(ii)).
(f) The provisions of this Section 13 shall similarly apply to
successive mergers or consolidations or sales or other transfers.
14. Fractional Rights and Fractional Shares.
---------------------------------------
(a) The Company shall not be required to issue fractions of Rights or
to distribute Rights Certificates that evidence fractional Rights. In lieu of
such fractional Rights, there shall be paid to the registered holders of the
Rights Certificates with regard to which such fractional Rights would otherwise
be issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For the purposes of this Section 14(a), the current
market value of a whole Right shall be the closing price of the Rights for the
Trading Day immediately prior to the date on which such fractional Rights would
have been otherwise issuable, as determined pursuant to the second sentence of
Section 11(d) of this Agreement.
(b) The Company shall not be required to issue fractions of Preferred
Shares (other than fractions that are integral multiples of one one-thousandth
of a Preferred Share) upon exercise of the Rights or to distribute certificates
which evidence fractional Preferred Shares (other than fractions that are
integral multiples of one one-thousandth of a Preferred Share). In lieu of
fractional Preferred Shares that are not integral multiples of one one-
thousandth of a Preferred Share, the Company shall pay to the registered holders
of Rights Certificates at the time such Rights are exercised as herein provided
an amount in cash equal to the same fraction of the current market value of a
Common Share. For purposes of this Section 14(b), the current market value of a
Common Share shall be the closing price of a Common Share (as determined
pursuant to the second sentence of Section 11(d) of this Agreement) for the
Trading Day immediately prior to the date of such exercise.
(c) The holder of a Right by the acceptance of the Right expressly
waives his or her right to receive any fractional Rights or any fractional
shares upon exercise of a Right.
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<PAGE>
15. Rights of Action. All rights of action in respect of this Agreement,
----------------
excepting the rights of action given to the Rights Agent under Section 18 of
this Agreement, are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Rights Certificate (or, prior
to the Distribution Date, of the Common Shares), without the consent of the
Rights Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Shares), may, in his or her own behalf and for
his or her own benefit, enforce, and may institute and maintain any suit, action
or proceeding against the Company to enforce, or otherwise act in respect of,
his or her right to exercise the Rights evidenced by such Rights Certificate in
the manner provided in such Rights Certificate and in this Agreement. Without
limiting the foregoing or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not have an adequate
remedy at law for any breach of this Agreement and will be entitled to specific
performance of the obligations under, and injunctive relief against actual or
threatened violations of, the obligations of any Person subject to this
Agreement.
16. Agreement of Rights Holders. Every holder of a Right, by accepting
---------------------------
the same, consents and agrees with the Company and the Rights Agent and with
every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the office or offices of the Rights Agent designated for such purposes, duly
endorsed or accompanied by a proper instrument of transfer and with the
appropriate forms and certificates fully executed; and
(c) subject to Sections 6(a) and 7(f) of this Agreement, the Company
and the Rights Agent may deem and treat the person in whose name the Rights
Certificate (or, prior to the Distribution Date, the associated Common Shares
certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Rights Certificates or the associated Common Shares certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent shall be affected by any notice to the
contrary.
17. Rights Certificate Holder Not Deemed a Stockholder. No holder, as
--------------------------------------------------
such, of any Rights Certificate shall be entitled to vote, receive dividends or
be deemed for any purpose the holder of the Preferred Shares or any other
securities of the Company which may at any time be issuable on the exercise of
the Rights represented thereby, nor shall anything contained herein or in any
Rights Certificate be construed to confer upon the holder of any Rights
Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 25 of this Agreement), or to receive
-27-
<PAGE>
dividends or subscription rights, or otherwise, until the Right or Rights
evidenced by such Rights Certificate shall have been exercised in accordance
with the provisions of this Agreement.
18. Concerning the Rights Agent.
---------------------------
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
other disbursements incurred in the administration and execution of this
Agreement and the exercise and performance of its duties hereunder. The Company
also agrees to indemnify the Rights Agent for, and to hold it harmless against,
any loss, liability or expense, incurred without negligence, bad faith or
willful misconduct on the part of the Rights Agent, for anything done or omitted
by the Rights Agent in connection with the acceptance and administration of this
Agreement, including the costs and expenses of defending against any claim of
liability in the premises.
(b) The Rights Agent shall be protected and shall incur no liability
for, or in respect of any action taken, suffered or omitted by it in connection
with, its administration of this Agreement in reliance upon any Rights
Certificate or certificate for the Common Shares or for other securities of the
Company, instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate, statement or other
paper or document believed by it to be genuine and to be signed, executed and,
where necessary, verified or acknowledged, by the proper Person or Persons, or
otherwise upon the advice of counsel as set forth in Section 20 of this
Agreement.
19. Merger or Consolidation or Change of Name of Rights Agent.
---------------------------------------------------------
(a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights Agent
or any successor Rights Agent shall be a party, or any corporation succeeding to
the shareholder services business of the Rights Agent or any successor Rights
Agent, shall be the successor to the Rights Agent under this Agreement without
the execution or filing of any paper or any further act on the part of any of
the parties to this Agreement; provided, however, that such corporation would be
-------- -------
eligible for appointment as a successor Rights Agent under the provisions of
Section 21 of this Agreement. In case at the time such successor Rights Agent
shall succeed to the agency created by this Agreement, any of the Rights
Certificates shall have been countersigned but not delivered, any such successor
Rights Agent may adopt the countersignature of the predecessor Rights Agent and
deliver such Rights Certificates so countersigned; and in case at that time any
of the Rights Certificates shall not have been countersigned, any successor
Rights Agent may countersign such Rights Certificates either in the name of the
predecessor Rights Agent or in the name of the successor Rights Agent; and in
all such cases such Rights Certificates shall have the full force provided in
the Rights Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed
and at such time any of the Rights Certificates shall have been countersigned
but not delivered, the Rights Agent may adopt the countersignature under its
prior name and deliver Rights Certificates
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<PAGE>
so countersigned; and in case at that time any of the Rights Certificates shall
not have been countersigned, the Rights Agent may countersign such Rights
Certificates either in its prior name or in its changed name; and in all such
cases such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
20. Duties of Rights Agent. The Rights Agent undertakes the duties and
----------------------
obligations imposed by this Agreement upon the following terms and conditions,
by all of which the Company and the holders of Rights Certificates, by their
acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion or advice of such counsel shall be
full and complete authorization and protection to the Rights Agent as to any
action taken or omitted by it in good faith and in accordance with such opinion
or advice.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the
determination of "current per share market price") be proved or established by
------------------------------
the Company prior to taking or suffering any action hereunder, such fact or
matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by any one of the Chairman of the Board, the Chief Executive
Officer, the President, any Vice President, the Chief Financial Officer, the
Secretary or any Assistant Secretary of the Company and delivered to the Rights
Agent; and such certificate shall be full authorization to the Rights Agent for
any action taken or suffered in good faith by it under the provisions of this
Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company and any
other Person only for its own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the Rights
Certificates (except its countersignature thereof) or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery of this
Agreement (except the due execution of this Agreement by the Rights Agent) or in
respect of the validity or execution of any Rights Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by the
Company of any covenant or condition contained in this Agreement or in any
Rights Certificate; nor shall it be responsible for any change in the
exercisability of the Rights or any adjustment in the terms of the Rights
(including the manner, method or amount thereof) provided for in Sections 3, 11,
13, 23 or 24, or the ascertaining of the existence of facts that would require
any such change or adjustment (except with respect to the exercise of Rights
evidenced by Rights Certificates after receipt by the Rights Agent of a
certificate furnished pursuant to Section 12 describing such change or
adjustment); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any
Preferred Shares to be
-29-
<PAGE>
issued pursuant to this Agreement or any Rights Certificate or as to whether any
Preferred Shares will, when issued, be validly authorized and issued, fully paid
and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the Chief Executive Officer, the President,
any Vice President, the Chief Financial Officer, the Secretary or any Assistant
Secretary of the Company, and to apply to such officers for advice or
instructions in connection with its duties, and it shall not be liable for any
action taken or suffered by it in good faith in accordance with instructions of
any such officer or for any delay in acting while waiting for those
instructions. Any application by the Rights Agent for written instructions from
the Company may, at the option of the Rights Agent, set forth in writing any
action proposed to be taken or omitted by the Rights Agent under this Rights
Agreement and the date on and/or after which such action shall be taken or such
omission shall be effective. The Rights Agent shall not be liable for any
action taken by, or omission of, the Rights Agent in accordance with a proposal
included in any such application on or after the date specified in such
application (which date shall not be less than five (5) Business Days after the
date any officer of the Company actually receives such application, unless any
such officer shall have consented in writing to an earlier date) unless, prior
to taking any such action (or the effective date in the case of an omission),
the Rights Agent shall have received written instructions in response to such
application specifying the action to be taken or omitted.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from
acting in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct, provided reasonable care was exercised in the selection
and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
-30-
<PAGE>
(k) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.
21. Change of Rights Agent. The Rights Agent or any successor Rights
----------------------
Agent may resign and be discharged from its duties under this Agreement upon
thirty (30) days' notice in writing mailed to the Company and to each transfer
agent of the Preferred Shares and the Common Shares by registered or certified
mail, and to the holders of the Rights Certificates by first-class mail. The
Company may remove the Rights Agent or any successor Rights Agent upon thirty
(30) days' notice in writing, mailed to the Rights Agent or successor Rights
Agent, as the case may be, and to each transfer agent of the Preferred Shares
and the Common Shares by registered or certified mail, and to the holders of the
Rights Certificates by first-class mail. If the Rights Agent shall resign or
be removed or shall otherwise become incapable of acting, the Company shall
appoint a successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of thirty (30) days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Rights Certificate (who shall, with such notice, submit his or her Rights
Certificate for inspection by the Company), then the registered holder of any
Rights Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether
appointed by the Company or by such a court, shall either (a) be a corporation
organized and doing business under the laws of the United States or of any state
of the United States, in good standing, which is authorized under such laws to
exercise corporate trust or shareholder services powers and is subject to
supervision or examination by federal or state authority and which has at the
time of its appointment as Rights Agent a combined capital and surplus of at
least $50 million or (b) an affiliate of such a corporation. After appointment,
the successor Rights Agent shall be vested with the same powers, rights, duties
and responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Not later than the effective date of any such appointment, the
Company shall file notice thereof in writing with the predecessor Rights Agent
and each transfer agent of the Preferred Shares and the Common Shares, and mail
a notice thereof in writing to the registered holders of the Rights
Certificates. Failure to give any notice provided for in this Section 21,
however, or any defect therein, shall not affect the legality or validity of the
resignation or removal of the Rights Agent or the appointment of the successor
Rights Agent, as the case may be.
22. Issuance of New Rights Certificates. Notwithstanding any of the
-----------------------------------
provisions of this Agreement or of the Rights to the contrary, the Company may,
at its option, issue new Rights Certificates evidencing Rights in such form as
may be approved by its Board of Directors to reflect any adjustment or change in
the Purchase Price and the number or kind or class of shares or other securities
or property purchasable under the Rights Certificates made in accordance with
the provisions of this Agreement. In addition, in connection with the issuance
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<PAGE>
or sale of Common Shares following the Distribution Date and prior to the
redemption or expiration of the Rights, the Company (a) shall, with respect to
Common Shares so issued or sold pursuant to the exercise of stock options or
under any employee plan or arrangement or upon the exercise, conversion or
exchange of securities hereinafter issued by the Company and (b) may, in any
other case, if deemed necessary or appropriate by the Board of Directors, issue
Rights Certificates representing the appropriate number of Rights in connection
with such issuance or sale; provided, however, that (i) no such Rights
-------- -------
Certificate shall be issued and this sentence shall be null and void ab initio
---------
if, and to the extent that, such issuance or this sentence would create a
significant risk of or result in material adverse tax consequences to the
Company or the Person to whom such Rights Certificate would be issued or would
create a significant risk of or result in such options' or employee plans' or
arrangements' failing to qualify for otherwise available special tax treatment
and (ii) no such Rights Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of the issuance
thereof.
23. Redemption.
----------
(a) The Company may, at its option and with the approval of the Board
of Directors, at any time prior to the Close of Business on the earlier of (i)
the tenth day following the Shares Acquisition Date or such later date as may be
determined by action of a majority of the Board of Directors and publicly
announced by the Company or (ii) the Final Expiration Date, redeem all but not
less than all the then outstanding Rights at a redemption price of $0.01 per
Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date of this Agreement (such redemption
price being herein referred to as the "Redemption Price") and the Company may,
----------------
at its option, pay the Redemption Price either in Common Shares (based on the
current per share market price thereof (as determined pursuant to Section 11(d)
of this Agreement) at the time of redemption) or cash. Such redemption by the
Company may be made effective at such time, on such basis and with such
conditions as the Board of Directors in its sole discretion may establish.
(b) Immediately upon the action of the Board of Directors ordering the
redemption of the Rights, evidence of which shall have been filed with the
Rights Agent, and without any further action and without any notice, the right
to exercise the Rights will terminate and the only right thereafter of the
holders of Rights shall be to receive the Redemption Price. The Company shall
promptly give public notice of any such redemption, provided, however, that the
-------- -------
failure to give, or any defect in, such notice shall not affect the validity of
such redemption. Within ten (10) days after the action of the Board of
Directors ordering the redemption of the Rights, the Company shall give notice
of such redemption to the Rights Agent and the holders of the then outstanding
Rights by mailing such notice to all such holders at their last addresses as
they appear upon the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the transfer agent for the Common
Shares. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice
of redemption will state the method by which the payment of the Redemption Price
will be made. Neither the Company nor any of its Affiliates or Associates may
redeem, acquire or purchase for value any Rights at any time in any manner other
than that specifically
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<PAGE>
set forth in this Section 23 or in Section 24 of this Agreement, and other than
in connection with the purchase of Common Shares prior to the Distribution Date.
24. Exchange.
--------
(a) Subject to applicable laws, rules and regulations, and subject to
subsection (c) below, the Company may, at its option, by majority vote of the
Board of Directors, at any time after the occurrence of a Triggering Event,
exchange all or part of the then outstanding and exercisable Rights (which shall
not include Rights that have become void pursuant to the provisions of Section
7(e) of this Agreement) for Common Shares at an exchange ratio of one Common
Share per Right, appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date of this Agreement (such
exchange ratio being hereinafter referred to as the "Ratio of Exchange").
-----------------
Notwithstanding the foregoing, the Board of Directors shall not be empowered to
effect such exchange at any time after any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or any such
Subsidiary, or any entity holding Common Shares for or pursuant to the terms of
any such plan), together with all Affiliates and Associates of such Person,
becomes the Beneficial Owner of 50% or more of the Common Shares then
outstanding.
(b) Immediately upon the action of the Board of Directors ordering the
exchange of any Rights pursuant to subsection (a) of this Section 24 and without
any further action and without any notice, the right to exercise such Rights
shall terminate and the only right thereafter of a holder of such Rights shall
be to receive that number of Common Shares equal to the number of such Rights
held by such holder multiplied by the Ratio of Exchange. The Company shall give
public notice of any such exchange; provided, however, that the failure to give,
-------- -------
or any defect in, such notice shall not affect the validity of such exchange.
The Company shall mail a notice of any such exchange to all of the holders of
such Rights at their last addresses as they appear upon the registry books of
the Rights Agent. Any notice which is mailed in the manner herein provided
shall be deemed given, whether or not the holder receives the notice. Each such
notice of exchange will state the method by which the exchange of the Common
Shares for Rights will be effected and, in the event of any partial exchange,
the number of Rights which will be exchanged. Any partial exchange shall be
effected pro rata based on the number of Rights (other than Rights which have
become void pursuant to the provisions of Section 7(e) of this Agreement) held
by each holder of Rights.
(c) In the event that there shall not be sufficient Common Shares
issued but not outstanding or authorized but unissued to permit any exchange of
Rights as contemplated in accordance with Section 24(a), the Company shall
either take such action as may be necessary to authorize additional Common
Shares for issuance upon exchange of the Rights or alternatively, at the option
of a majority of the Board of Directors, with respect to each Right (i) pay cash
in an amount equal to the Current Value (as hereinafter defined), in lieu of
issuing Common Shares in exchange therefor, or (ii) issue debt or equity
securities or a combination thereof, having a value equal to the Current Value,
in lieu of issuing Common Shares in exchange for each such Right, where the
value of such securities shall be determined by a nationally recognized
investment banking firm selected by the Board of Directors by majority vote of
the Board of Directors, or
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<PAGE>
(iii) deliver any combination of cash, property, Common Shares and/or other
securities having a value equal to the Current Value in exchange for each Right.
For purposes of this Section 24(c) only, the Current Value shall mean the
product of the current per share market price of Common Shares (determined
pursuant to Section 11(d) on the date of the occurrence of the event described
above in subparagraph (a)) multiplied by the number of Common Shares for which
the Right otherwise would be exchangeable if there were sufficient shares
available. To the extent that the Company determines that some action need be
taken pursuant to clauses (i), (ii) or (iii) of this Section 24(c), the Board of
Directors may temporarily suspend the exercisability of the Rights for a period
of up to sixty (60) days following the date on which the event described in
Section 24(a) shall have occurred, in order to seek any authorization of
additional Common Shares and/or to decide the appropriate form of distribution
to be made pursuant to the above provision and to determine the value thereof.
In the event of any such suspension, the Company shall issue a public
announcement stating that the exercisability of the Rights has been temporarily
suspended.
(d) The Company shall not be required to issue fractions of Common
Shares or to distribute certificates that evidence fractional Common Shares. In
lieu of such fractional Common Shares, there shall be paid to the registered
holders of the Rights Certificates with regard to which such fractional Common
Shares would otherwise be issuable, an amount in cash equal to the same fraction
of the current per share market value of a whole Common Share (as determined
pursuant to the second sentence of Section 11(d) of this Agreement).
(e) The Company may, at its option, by majority vote of the Board of
Directors, at any time before any Person has become an Acquiring Person,
exchange all or part of the then outstanding Rights for rights of substantially
equivalent value, as determined reasonably and with good faith by the Board of
Directors, based upon the advice of one or more nationally recognized investment
banking firms.
(f) Immediately upon the action of the Board of Directors ordering the
exchange of any Rights pursuant to subsection (e) of this Section 24 and without
any further action and without any notice, the right to exercise such Rights
shall terminate and the only right thereafter of a holder of such Rights shall
be to receive that number of rights in exchange therefor as has been determined
by the Board of Directors in accordance with subsection (e) above. The Company
shall give public notice of any such exchange; provided, however, that the
-------- -------
failure to give, or any defect in, such notice shall not affect the validity of
such exchange. The Company shall mail a notice of any such exchange to all of
the holders of such Rights at their last addresses as they appear upon the
registry books of the transfer agent for the Common Shares of the Company. Any
notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of exchange
will state the method by which the exchange of the Rights will be effected.
25. Notice of Certain Events.
------------------------
(a) In case the Company shall propose to effect or permit to occur any
Section 13 Event, the Company shall give notice thereof to each holder of Rights
in accordance
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<PAGE>
with Section 26 of this Agreement at least twenty (20) days prior to occurrence
of such Section 13 Event.
(b) In case any Triggering Event or Section 13 Event shall occur,
then, in any such case, the Company shall as soon as practicable thereafter give
to each holder of a Rights Certificate, in accordance with Section 26 of this
Agreement, a notice of the occurrence of such event, which shall specify the
event and the consequences of the event to holders of Rights under Sections
11(a)(ii) and 13 of this Agreement.
26. Notices. Notices or demands authorized by this Agreement to be
-------
given or made by the Rights Agent or by the holder of any Rights Certificate to
or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
ORATEC Interventions, Inc.
3706 Haven Court
Menlo Park, CA 94025
Attention: Kenneth Anstey
Subject to the provisions of Section 21 of this Agreement, any notice or demand
authorized by this Agreement to be given or made by the Company or by the holder
of any Rights Certificate to or on the Rights Agent shall be sufficiently given
or made if sent by first-class mail, postage prepaid, addressed (until another
address is filed in writing with the Company) as follows:
American Stock Transfer and Trust Company
6201 15/th/ Avenue, 3/rd/ Floor
Brooklyn, NY 11219
Attention: Corporate Trust Department
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
27. Supplements and Amendments. Prior to the Distribution Date, the
--------------------------
Company may supplement or amend this Agreement in any respect without the
approval of any holders of Rights and the Rights Agent shall, if the Company so
directs, execute such supplement or amendment. From and after the Distribution
Date, the Company and the Rights Agent may from time to time supplement or amend
this Agreement without the approval of any holders of Rights in order to (i)
cure any ambiguity, (ii) correct or supplement any provision contained herein
which may be defective or inconsistent with any other provisions herein, (iii)
shorten or lengthen any time period hereunder or (iv) change or supplement the
provisions hereunder in any manner that the Company may deem necessary or
desirable and that shall not adversely affect the interests of the holders of
Rights (other than an Acquiring Person or an Affiliate or Associate of an
Acquiring Person); provided, this Agreement may not be supplemented or amended
--------
to
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<PAGE>
lengthen, pursuant to clause (iii) of this sentence, (A) a time period relating
to when the Rights may be redeemed at such time as the Rights are not then
redeemable or (B) any other time period unless such lengthening is for the
purpose of protecting, enhancing or clarifying the rights of, and/or the
benefits to, the holders of Rights. Upon the delivery of a certificate from an
appropriate officer of the Company that states that the proposed supplement or
amendment is in compliance with the terms of this Section 27, the Rights Agent
shall execute such supplement or amendment. Prior to the Distribution Date, the
interests of the holders of Rights shall be deemed coincident with the interests
of the holders of Common Shares.
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.
29. Determinations and Actions by the Board of Directors, etc. For all
---------------------------------------------------------
purposes of this Agreement, any calculation of the number of Common Shares
outstanding at any particular time, including for purposes of determining the
particular percentage of such outstanding Common Shares of which any Person is
the Beneficial Owner, shall be made in accordance with the last sentence of Rule
13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act. The
Board of Directors shall have the exclusive power and authority to administer
this Agreement and to exercise all rights and powers specifically granted to the
Board of Directors, or the Company, or as may be necessary or advisable in the
administration of this Agreement, including, without limitation, the right and
power to (i) interpret the provisions of this Agreement and (ii) make all
determinations deemed necessary or advisable for the administration of this
Agreement (including a determination to redeem or not redeem the Rights or to
amend the Agreement). All such actions, calculations, interpretations and
determinations (including, for purposes of clause (y) below, all omissions with
respect to the foregoing) which are done or made by the Board of Directors in
good faith, shall (x) be final, conclusive and binding on the Company, the
Rights Agent, the holders of the Rights Certificates and all other parties and
(y) not subject the Board of Directors to any liability to the holders of the
Rights.
30. Benefits of this Agreement. Nothing in this Agreement shall be
--------------------------
construed to give to any Person other than the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, the Common Shares) any legal or equitable right, remedy or claim under
this Agreement; but this Agreement shall be for the sole and exclusive benefit
of the Company, the Rights Agent and the registered holders of the Rights
Certificates (and, prior to the Distribution Date, the Common Shares).
31. Severability. If any term, provision, covenant or restriction of
------------
this Agreement is held by a court of competent jurisdiction or other authority
to be invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated; provided,
--------
however, that notwithstanding anything in this Agreement to the contrary, if any
-------
such term, provision, covenant or restriction is held by such court or authority
to be invalid, void or unenforceable and the Board of Directors determines in
its good faith judgment that severing the invalid language from this Agreement
would adversely affect the purpose or effect of this
-36-
<PAGE>
Agreement, the right of redemption set forth in Section 23 of this Agreement
shall be reinstated and shall not expire until the close of business on the
tenth day following the date of such determination by the Board of Directors.
32. Governing Law. This Agreement and each Right and each Rights
-------------
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and performed entirely within such State.
33. Counterparts. This Agreement may be executed in any number of
------------
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
34. Descriptive Headings. Descriptive headings of the several Sections
--------------------
of this Agreement are inserted for convenience only and shall not control or
affect the meaning or construction of any of the provisions of this Agreement.
-37-
<PAGE>
The parties have caused this Agreement to be duly executed as of the date
first written above.
ORATEC INTERVENTIONS, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
AMERICAN STOCK TRANSFER AND
TRUST COMPANY
By:__________________________________
Name:________________________________
Title:_______________________________
-38-
<PAGE>
EXHIBIT A
FORM OF CERTIFICATE OF DESIGNATION
----------------------------------
<PAGE>
CERTIFICATE OF DESIGNATION
OF RIGHTS, PREFERENCES AND PRIVILEGES OF
SERIES A PARTICIPATING PREFERRED STOCK
OF
ORATEC INTERVENTIONS, INC.
Pursuant to Section 151(g) and Section 103 of the General Corporation Law
of the State of Delaware, I, Kenneth Anstey, the President and Chief Executive
Officer, of ORATEC Interventions, Inc. (the "Corporation"), a corporation
-----------
organized and existing under the General Corporation Law of the State of
Delaware hereby certify:
That pursuant to the authority conferred upon the Board of Directors by the
Amended and Restated Certificate of Incorporation of the Corporation, the Board
of Directors, on November 28, 2000 adopted the following resolution creating a
series of shares of Preferred Stock designated as Series A Participating
Preferred Stock:
"RESOLVED: that pursuant to the authority vested in the Board of Directors
--------
of the Corporation by the Amended and Restated Certificate of Incorporation, the
Board of Directors does hereby provide for the issue of a series of Preferred
Shares, $0.001 par value, of the Corporation, to be designated "Series A
--------
Participating Preferred Stock", initially consisting of One Hundred Thousand
-----------------------------
(100,000) shares and to the extent that the designations, powers, preferences
and relative and other special rights and the qualifications, limitations and
restrictions of the Series A Participating Preferred Stock are not stated and
expressed in the Amended and Restated Certificate of Incorporation, does hereby
fix and herein state and express such designations, powers, preferences and
relative and other special rights and the qualifications, limitations and
restrictions thereof, as follows (all terms used herein which are defined in the
Amended and Restated Certificate of Incorporation shall be deemed to have the
meanings provided therein):
1. Designation and Amount. The shares of such series shall be designated
----------------------
as "Series A Participating Preferred Stock", par value $0.001 per share, and the
number of shares constituting such series shall be One Hundred Thousand
(100,000).
2. Dividends and Distributions.
---------------------------
(A) Subject to the prior and superior right of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the shares
of Series A Participating Preferred Stock with respect to dividends, the holders
of shares of Series A Participating Preferred Stock shall be entitled to receive
when, as and if declared by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable in cash on the last day
of March, June, September and December in each year (each such date being
referred to herein as a
<PAGE>
"Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
-------------------------------
Payment Date after the first issuance of a share or fraction of a share of
Series A Participating Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to, subject to the provision for adjustment hereinafter set
forth, 1,000 times the aggregate per share amount of all cash dividends, and
1,000 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 of the Corporation
(the "Common Stock") since the immediately preceding Quarterly Dividend Payment
------------
Date, or, with respect to the first Quarterly Dividend Payment Date, since the
first issuance of any share or fraction of a share of Series A Participating
Preferred Stock. In the event the Corporation shall at any time after November
28, 2000 (the "Rights Declaration Date") (i) declare any dividend on Common
-----------------------
Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common
Stock, or (iii) combine the outstanding Common Stock into a smaller number of
shares, then in each such case the amount to which holders of shares of Series A
Participating Preferred Stock were entitled immediately prior to such event
under 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 Corporation shall declare a dividend or distribution on the
Series A Participating Preferred Stock as provided in paragraph (A) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock).
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Participating Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares of Series A
Participating Preferred Stock, unless the date of issue of such shares is prior
to the record date for the first Quarterly Dividend Payment Date, in which case
dividends on such shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a
date after the record date for the determination of holders of shares of Series
A Participating Preferred Stock entitled to receive a quarterly dividend and
before such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends
paid on the shares of Series A 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 Series A Participating Preferred
Stock entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be no more than 30 days prior to the date fixed
for the payment thereof.
3. Voting Rights. The holders of shares of Series A Participating
-------------
Preferred Stock shall have the following voting rights:
-2-
<PAGE>
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Series A Participating Preferred Stock shall entitle the holder
thereof to 1,000 votes on all matters submitted to a vote of the stockholders of
the Corporation. In the event the Corporation shall at any time after the
Rights Declaration Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the number of votes per share to which holders of shares of
Series A Participating Preferred Stock were entitled immediately prior to such
event shall be adjusted by multiplying such number by a fraction, the numerator
of which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of
shares of Series A Participating Preferred Stock and the holders of shares of
Common Stock shall vote together as one class on all matters submitted to a vote
of stockholders of the Corporation.
(C) Except as required by law, holders of Series A 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.
4. Certain Restrictions.
--------------------
(A) The Corporation shall not declare any dividend on, make any
distribution on, or redeem or purchase or otherwise acquire for consideration
any shares of Common Stock after the first issuance of a share or fraction of a
share of Series A Participating Preferred Stock unless concurrently therewith it
shall declare a dividend on the Series A Participating Preferred Stock as
required by Section 2 hereof.
(B) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Participating Preferred Stock as provided in Section 2
are in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A Participating
Preferred Stock outstanding shall have been paid in full, the Corporation shall
not:
(i) declare or pay dividends on, make any other distributions
on, or redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Participating Preferred Stock;
(ii) declare or pay dividends on, 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 Series A Participating Preferred
Stock, except dividends paid ratably on the Series A 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-
<PAGE>
(iii) 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 Series A Participating
Preferred Stock, provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such parity stock in exchange for shares of
any stock of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Participating Preferred
Stock;
(iv) purchase or otherwise acquire for consideration any shares
of Series A Participating Preferred Stock, or any shares of stock ranking on a
parity with the Series A 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.
(C) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (A) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
5. Reacquired Shares. Any shares of Series A Participating Preferred
-----------------
Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock and may be reissued as part of a new series of
Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein.
6. Liquidation, Dissolution or Winding Up.
--------------------------------------
(A) Upon any liquidation (voluntary or otherwise), dissolution or
winding up of the Corporation, no distribution shall be made to the holders of
shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Participating Preferred Stock unless,
prior thereto, the holders of shares of Series A Participating Preferred Stock
shall have received an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment,
plus an amount equal to the greater of (1) $1,000 per share, provided that in
the event the Corporation does not have sufficient assets, after payment of its
liabilities and distribution to holders of Preferred Stock ranking prior to the
Series A Participating Preferred Stock, available to permit payment in full of
the $1,000 per share amount, the amount required to be paid under this Section
6(A)(1) shall, subject to Section 6(B) hereof, equal the value of the amount of
available assets divided by the number of outstanding shares of Series A
Participating Preferred Stock or (2) subject to the provisions for adjustment
hereinafter set forth, 1,000 times the aggregate per share amount to be
distributed to the holders of Common Stock (the greater of (1) or (2), the
"Series A Liquidation Preference"). In the event the Corporation shall at any
time after the Rights Declaration Date (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide
-4-
<PAGE>
the outstanding Common Stock, or (iii) combine the outstanding Common Stock into
a smaller number of shares, then in each such case the amount to which holders
of shares of Series A Participating Preferred Stock were entitled immediately
prior to such event under clause (2) 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 that were 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) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation Preference and
the liquidation preferences of all other series of Preferred Stock, if any,
which rank on a parity with the Series A 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.
7. Consolidation, Merger, etc. In case the Corporation shall enter into
--------------------------
any consolidation, merger, combination or other transaction in which the shares
of Common Stock are exchanged for or changed into other stock or securities,
cash and/or any other property, then in any such case the shares of Series A
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 1,000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time after the Rights Declaration Date
(i) declare any dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, or (iii) combine the outstanding Common
Stock into a smaller number of shares, then in each such case the amount set
forth in the preceding sentence with respect to the exchange or change of shares
of Series A Participating Preferred Stock shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of common Stock that were outstanding immediately prior to
such event.
8. No Redemption. The shares of Series A Participating Preferred Stock
-------------
shall not be redeemable.
9. Ranking. The Series A Participating Preferred Stock shall rank junior
-------
to all other series of the Corporation's Preferred Stock as to the payment of
dividends and the distribution of assets, unless the terms of any such series
shall provide otherwise.
10. Amendment. The Certificate of Incorporation of the Corporation shall
---------
not be further amended in any manner which would materially alter or change the
powers, preference or special rights of the Series A 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 Series A Participating
Preferred Stock, voting separately as a class.
11. Fractional Shares. Series A Participating Preferred Stock may be
-----------------
issued in fractions of a share which shall entitle the holder, in proportion to
such holder's fractional shares,
-5-
<PAGE>
to exercise voting rights, receive dividends, participate in distributions and
to have the benefit of all other rights of holders of Series A Participating
Preferred Stock."
Executed this 28th day of November, 2000.
____________________________________
Kenneth Anstey
President and Chief Executive Officer
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<PAGE>
EXHIBIT B
---------
FORM OF RIGHTS CERTIFICATE
--------------------------
<PAGE>
EXHIBIT B
---------
FORM OF RIGHTS CERTIFICATE
--------------------------
Certificate No. R- ______ Rights
NOT EXERCISABLE AFTER NOVEMBER 28, 2010, OR EARLIER IF TERMINATED BY THE
COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE
COMPANY, AT $0.01 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING
PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS
ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH
RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS
CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN
ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS
SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS
CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN
THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH RIGHTS AGREEMENT.]/*/
RIGHTS CERTIFICATE
------------------
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
Preferred Shares Rights Agreement, dated as of November 28, 2000 (the "Rights
------
Agreement"), between Oratec Interventions, Inc., a Delaware corporation (the
---------
"Company"), and the American Stock Transfer and Trust Company (the "Rights
------- ------
Agent"), to purchase from the Company at any time after the Distribution Date
-----
(as such term is defined in the Rights Agreement) and prior to 5:00 P.M., New
York time, on November 28, 2010, at the office of the Rights Agent designated
for such purpose, or at the office of its successor as Rights Agent, one one-
thousandth (1/1,000) of a fully paid non-assessable share of Series A
Participating Preferred Stock (the "Preferred Shares"), of the Company, at a
----------------
purchase price of $55.00 per one-thousandth of a Preferred Share (the "Purchase
--------
Price"), upon presentation and surrender of this Rights Certificate with the
-----
Form of Election to Purchase and related Certificate duly executed. The number
of Rights evidenced by this Rights Certificate (and the number of one-
thousandths of a Preferred Share which may be purchased upon exercise hereof)
set forth above, are the number and Purchase Price as of ________, ____, based
on the Preferred Shares as constituted at such date. As provided in the Rights
Agreement, the Purchase Price and the number and kind of Preferred Shares or
other securities which may be purchased
_____________
/*/ The portion of the legend in bracket shall be inserted only if applicable
and shall replace the preceding sentence.
<PAGE>
upon the exercise of the Rights evidenced by this Rights Certificate are subject
to modification and adjustment upon the happening of certain events.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the principal executive offices of
the Company and the above-mentioned office of the Rights Agent.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Rights Certificate (i) may be redeemed by the Company, at its option, at a
redemption price of $0.01 per Right or (ii) may be exchanged by the Company in
whole or in part for Common Shares, substantially equivalent rights or other
consideration as determined by the Company.
This Rights Certificate, with or without other Rights Certificates, upon
surrender at the office of the Rights Agent designated for such purpose, may be
exchanged for another Rights Certificate or Rights Certificates of like tenor
and date evidencing Rights entitling the holder to purchase a like aggregate
amount of securities as the Rights evidenced by the Rights Certificate or Rights
Certificates surrendered shall have entitled such holder to purchase. If this
Rights Certificate shall be exercised in part, the holder shall be entitled to
receive upon surrender hereof another Rights Certificate or Rights Certificates
for the number of whole Rights not exercised.
No fractional portion less than integral multiples of one one-thousandth of
a Preferred Share will be issued upon the exercise of any Right or Rights
evidenced hereby but in lieu thereof a cash payment will be made, as provided in
the Rights Agreement.
No holder of this Rights Certificate, as such, shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of the Preferred
Shares or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a shareholder of the Company or any right to vote for the
election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting shareholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by an authorized signatory of the Rights
Agent.
<PAGE>
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal. Dated as of __________, ___.
ATTEST: ORATEC INTERVENTIONS, INC.
______________________________ By:_____________________________________
Secretary President and Chief Executive Officer
Countersigned:
American Stock Transfer and Trust Company
______________________________________
as Rights Agent
By:______________________________________
Authorized Signatory
Date of countersignature:________________
<PAGE>
FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
Rights Certificate)
FOR VALUE RECEIVED _______________________________________________ hereby sells,
assigns and transfers unto _____________________________________________________
(Please print name and address of transferee)
________________________________________________________________________________
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint __________________________
Attorney, to transfer the Rights Certificate on the books of the within-named
Company, with full power of substitution.
Dated: _______________, _____
_____________________________________
Signature
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., a commercial bank or trust company having an office or correspondent in
the United States or any other member of a medallion signature guarantee program
approved by the Securities Transfer Association.
<PAGE>
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate [_] is [_] is not being sold, assigned
and transferred by or on behalf of a Person who is or was an Acquiring Person,
or an Affiliate or Associate of any such Person (as such terms are defined in
the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned,
it [_] did [_] did not acquire the Rights evidenced by this Rights Certificate
from any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of any such Person.
Dated: _______________, _____
_________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., a commercial bank or trust company having an office or correspondent in
the United States or any other member of a medallion signature guarantee program
approved by the Securities Transfer Association.
<PAGE>
Form of Reverse Side of Rights Certificate -- continued
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise the Rights Certificate)
To: ______________________________________
The undersigned hereby irrevocably elects to exercise ____________________
Rights represented by this Rights Certificate to purchase the number of one-
thousandths of a Preferred Share issuable upon the exercise of such Rights and
requests that certificates for such number of one-thousandths of a Preferred
Share be issued in the name of:
Please insert social security or other identifying number
_____________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this Rights
Certificate, a new Rights Certificate for the balance shall be registered in the
name of and delivered to:
Please insert social security or other identifying number
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
Dated: _______________, ____
___________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., a commercial bank or trust company having an office or correspondent in
the United States or any other member of a medallion signature guarantee program
approved by the Securities Transfer Association.
<PAGE>
CERTIFICATE
-----------
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate [_] are [_] are
not being exercised by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of any such Person (as such terms are
defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned,
it [_] did [_] did not acquire the Rights evidenced by this Rights Certificate
from any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of any such Person.
Dated: _______________, _____
___________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., a commercial bank or trust company having an office or correspondent in
the United States or any other member of a medallion signature guarantee program
approved by the Securities Transfer Association.
<PAGE>
Form of Reverse Side of Rights Certificate -- continued
NOTICE
------
The signature in the foregoing Forms of Assignment and Election must
conform to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
<PAGE>
EXHIBIT C
SUMMARY OF RIGHTS
-----------------
<PAGE>
EXHIBIT C
---------
ORATEC INTERVENTIONS, INC. CORPORATION
STOCKHOLDER RIGHTS PLAN
Summary of Rights
Distribution and The Board of Directors has declared a dividend of one
Transfer of Rights; Right for each share of Common Stock of ORATEC
Rights Certificate: Interventions, Inc. (the "Company") outstanding.
------------------- -------
Prior to the Distribution Date referred to below, the
Rights will be evidenced by and trade with the
certificates for the Common Stock. After the
Distribution Date, the Company will mail Rights
certificates to the Company's stockholders and the
Rights will become transferable apart from the Common
Stock.
Distribution Date: Rights will separate from the Common Stock and become
------------------
exercisable following the tenth day (or such later
date as may be determined by a majority of the
Company's Board of Directors) after a person or group
(a) acquires beneficial ownership of 15% or more of
the Company's Common Stock or (b) announces a tender
or exchange offer, the consummation of which would
result in ownership by a person or group of 15% or
more of the Company's Common Stock (the "Distribution
------------
Date").
----
Preferred Stock After the Distribution Date, each Right will entitle
Purchasable Upon the holder to purchase, for $55.00, a fraction of a
Exercise of Rights: share of the Company's Preferred Stock with economic
-------------------
terms similar to that of one share of the Company's
Common Stock.
Flip-In: If an acquiror (an "Acquiring Person") obtains 15% or
-------- ----------------
more of the Company's Common Stock (other than
pursuant to a tender offer deemed fair by the Board
of Directors (a "Permitted Offer")), then each Right
---------------
(other than Rights owned by an Acquiring Person or
its affiliates) will entitle the holder thereof to
purchase, for the exercise price, a number of shares
of the Company's Common Stock having a then current
market value of twice the exercise price.
Flip-Over: If, after the Shares Acquisition Date (defined
----------
below), (a) the Company merges into another entity,
(b) an acquiring entity merges into the Company or
(c) the Company sells more than 50% of the Company's
assets or earning power, then each Right (other than
Rights owned by an Acquiring Person or its
affiliates) will entitle the holder thereof to
purchase, for the exercise price, a number of shares
of Common Stock of the person engaging in the
transaction having a then current market value of
twice the exercise price (unless the transaction
satisfies certain conditions and is consummated with
a person who acquired shares pursuant to a Permitted
Offer, in which case the Rights will expire).
<PAGE>
Exchange Provision: At any time after an Acquiring Person obtains 15% or
-------------------
more of the Company's Common Stock (other than
pursuant to a Permitted Offer) and prior to the
acquisition by the Acquiring Person of 50% or more of
the outstanding Common Stock, the Board of Directors
of the Company may exchange the Rights (other than
Rights owned by the Acquiring Person or its
affiliates), in whole or in part, at an exchange
ratio of one Common Share per Right (subject to
adjustment).
Redemption of Rights will be redeemable at the Company's option for
the Rights: $0.01 per Right at any time on or prior to the tenth
-----------
day (or such later date as may be determined by a
majority of the Board of Directors) after public
announcement that a person has acquired beneficial
ownership of 15% or more of the Company's Common
Stock (the "Shares Acquisition Date").
-----------------------
Expiration of The Rights expire on the earliest of (a) November 28,
the Rights: 2010, (b) exchange or redemption of the Rights as
-----------
described above, or (c) consummation of a merger or
consolidation or sale of assets resulting in
expiration of the Rights as described above.
Amendment of Terms The terms of the Rights and the Rights Agreement may
of Rights: be amended in any respect without the consent of the
----------
Rights holders on or prior to the Distribution Date;
thereafter, the terms of the Rights and the Rights
Agreement may be amended without the consent of the
Rights holders in order to cure any ambiguities or to
make changes which do not adversely affect the
interests of Rights holders (other than the Acquiring
Person).
Voting Rights: Rights will not have any voting rights.
--------------
Anti-Dilution Rights will have the benefit of certain customary
Provisions: anti-dilution provisions.
-----------
Taxes: The Rights distribution should not be taxable for
------
federal income tax purposes. However, following an
event which renders the Rights exercisable or upon
redemption of the Rights, stockholders may recognize
taxable income.
The foregoing is a summary of certain principal terms of the Stockholder Rights
Plan only and is qualified in its entirety by reference to the detailed terms of
the Rights Agreement dated as of November 28, 2000, between the Company and the
Rights Agent.
-2-
