<PAGE>
____________________________________
OSI SYSTEMS, INC.
and
U.S. STOCK TRANSFER CORPORATION
Rights Agreement
Dated as of July 31, 2000
____________________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Section 1. Certain Definitions......................................................... 1
Section 2. Appointment of Rights Agent................................................. 7
Section 3. Issue of Right Certificates................................................. 7
Section 4. Form of Right Certificates.................................................. 9
Section 5. Countersignature and Registration........................................... 10
Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates;
Mutilated, Destroyed, Lost or Stolen Right Certificates................... 11
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights............... 12
Section 8. Cancellation and Destruction of Right Certificates.......................... 14
Section 9. Availability of Preferred Shares............................................ 14
Section 10. Preferred Shares Record Date................................................ 16
Section 11. Adjustment of Purchase Price, Number of Shares
or Number of Rights....................................................... 16
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.................. 27
Section 13. Consolidation, Merger or Sale or Transfer of Assets
or Earning Power.......................................................... 27
Section 14. Fractional Rights and Fractional Shares..................................... 29
Section 15. Rights of Action............................................................ 31
Section 16. Agreement of Right Holders.................................................. 31
Section 17. Right Certificate Holder Not Deemed a Shareholder........................... 32
</TABLE>
<PAGE>
TABLE OF CONTENTS (cont.)
<TABLE>
<S> <C>
Section 18. Concerning the Rights Agent................................................. 32
Section 19. Merger or Consolidation or Change of Name of Rights Agent................... 33
Section 20. Duties of Rights Agent...................................................... 34
Section 21. Change of Rights Agent...................................................... 37
Section 22. Issuance of New Right Certificates.......................................... 38
Section 23. Redemption.................................................................. 39
Section 24. Exchange.................................................................... 40
Section 25. Notice of Certain Events.................................................... 42
Section 26. Notices..................................................................... 43
Section 27. Supplements and Amendments.................................................. 44
Section 28. Successors.................................................................. 45
Section 29. Benefits of this Agreement.................................................. 45
Section 30. Severability................................................................ 45
Section 31. Governing Law............................................................... 45
Section 32. Counterparts................................................................ 45
Section 33. Descriptive Headings........................................................ 46
SIGNATURES............................................................................... 46
</TABLE>
Exhibit A Form Certificate of Determination of Rights, Preferences and
Privileges of Series A Participating Preferred Stock of OSI
Systems, Inc.
Exhibit B Form of Right Certificate
-i-
<PAGE>
Exhibit C Summary of Rights to Purchase Preferred Shares
-ii-
<PAGE>
Rights Agreement, dated as of July 31, 2000 (the "Agreement"), between OSI
---------
Systems, Inc., a California corporation (the "Company"), and U.S. Stock Transfer
-------
Corporation, as rights agent (the "Rights Agent").
------------
The Board of Directors of the Company has authorized and declared a
dividend of one preferred share purchase right (a "Right") for each Common Share
-----
(as hereinafter defined) of the Company outstanding on August 17, 2000 (the
"Record Date") each Right representing the right to purchase one one-thousandth
-----------
of a Preferred Share (as hereinafter defined), upon the terms and subject to the
conditions herein set forth, and has further authorized and directed the
issuance of one Right with respect to each Common Share that shall become
outstanding between the Record Date and the earliest of the Distribution Date,
the Redemption Date and the Final Expiration Date (as such terms are hereinafter
defined).
Accordingly, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
-------------------
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person (as such term is
----------------
hereinafter defined) who or which, together with all Affiliates and Associates
of such Person, shall be the Beneficial Owner (as such term is hereinafter
defined) of 20% or more of the Common Shares of the Company then outstanding,
but shall not include the Company, any Subsidiary (as such term is hereinafter
defined) of the Company, any employee benefit plan of the Company or any
Subsidiary of the Company, any entity holding Common Shares for or pursuant to
the terms of any such plan or any Person who or which is
<PAGE>
the Beneficial Owner of 20% or more of the Common Shares of the Company then
outstanding on the date of this Agreement, until such time hereafter as any of
such Persons shall become the Beneficial Owner of any additional Common Shares
of the Company (other than by means of a stock dividend, stock split or other
pro rata distribution of securities of the Company and other than pursuant to
any employee benefit plan of the Company or the exercise of options or other
rights granted thereunder). Notwithstanding the foregoing, no Person shall
become an "Acquiring Person" as the result of an acquisition of Common Shares by
the Company which, by reducing the number of Common Shares of the Company
outstanding, increases the proportionate number of Common Shares of the Company
beneficially owned by such Person to 20% or more of the Common Shares of the
Company then outstanding; provided, however, that, if a Person shall become the
-------- -------
Beneficial Owner of 20% 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 by means of a stock dividend, stock
split or other pro rata distribution of securities of the Company and other than
pursuant to any employee benefit plan of the Company or the exercise of any
options or other rights granted thereunder), then such Person shall be deemed to
be an "Acquiring Person." Notwithstanding the foregoing, 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 paragraph (a), has become such inadvertently, and such Person
divests as promptly as practicable a sufficient number of Common Shares so that
such Person would no longer be an "Acquiring Person," as defined pursuant to the
foregoing provisions of this paragraph (a), then such Person shall not be deemed
to be an "Acquiring Person" for any purposes of this Agreement. For purposes of
the computations contemplated by this Section 1(a), the
2
<PAGE>
outstanding Common Shares as of any given date shall be deemed to include the
number of Common Shares actually outstanding on such date, plus the number of
Common Shares not actually outstanding on such date of which the Person in
question is or is deemed to be the Beneficial Owner on such date.
(b) "Affiliate" shall have the meaning ascribed to such term in Rule
---------
12b-2 of the General Rules and Regulations under the Exchange Act (as such term
is hereinafter defined) as in effect on the date of this Agreement.
(c) "Associate" shall have the meaning ascribed to such term in Rule
---------
12b-2 of the General Rules and Regulations under the Exchange Act as in effect
on the date of this Agreement.
(d) "Beneficial Owner." A Person shall be deemed the "Beneficial
-----------------
Owner" of and shall be deemed to "beneficially own" any securities:
(i) which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly;
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide public
---------
offering of securities), or upon the exercise of conversion rights, exchange
rights, rights (other than these Rights), warrants or options, or otherwise;
provided, however, that a Person shall not be deemed the Beneficial Owner of, or
-------- -------
to beneficially own, securities tendered pursuant to a tender or exchange offer
made by or on behalf of such Person or any of such Person's Affiliates or
Associates until such tendered securities are accepted for purchase or exchange;
or (B) the right to vote pursuant to any agreement, arrangement or
understanding; provided, however, that a Person shall not be deemed the
-------- -------
Beneficial Owner of, or to
3
<PAGE>
beneficially own, any security if the agreement, arrangement or understanding to
vote such security (1) arises solely from a revocable proxy or consent given to
such Person in response to a public proxy or consent solicitation made pursuant
to, and in accordance with, the applicable rules and regulations promulgated
under the Exchange Act and (2) is not also then reportable on Schedule 13D or
Schedule 13G under the Exchange Act (or any comparable or successor report)
other than such securities or such beneficial ownership reportable on Schedule
13G pursuant to Rule 13d-1(b) under the Exchange Act; or
(iii) which are beneficially owned, directly or indirectly, by
any other Person with which such Person or any of such Person's Affiliates or
Associates has any agreement, arrangement or understanding (other than customary
agreements with and between underwriters and selling group members with respect
to a bona fide public offering of securities) for the purpose of acquiring,
holding, voting (except to the extent contemplated by the proviso to Section
1(d)(ii)(B) hereof) or disposing of any securities of the Company.
Notwithstanding anything in this definition of Beneficial Ownership to the
contrary, the phrase "then outstanding," when used with reference to a Person's
Beneficial Ownership of securities of the Company, shall mean the number of such
securities then issued and outstanding together with the number of such
securities not then actually issued and outstanding which such Person would be
deemed to own beneficially hereunder.
(e) "Business Day" shall mean any day other than a Saturday, a Sunday,
------------
or a day on which banking institutions in California are authorized or obligated
by law or executive order to close.
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<PAGE>
(f) "Close of Business" on any given date shall mean 5:00 P.M., Los
-----------------
Angeles, California time, on such date; provided, however, that, if such date is
-------- -------
not a Business Day, it shall mean 5:00 P.M., Los Angeles, California time, on
the next succeeding date that is a Business Day.
(g) "Common Shares" when used with reference to the Company shall mean
-------------
the shares of common stock, without par value, of the Company. "Common Shares"
when used with reference to any Person other than the Company shall mean the
capital stock (or equity interest) with the greatest voting power of such other
Person or, if such other Person is a Subsidiary of another Person, the Person or
Persons which ultimately control such subsidiary.
(h) "Distribution Date" shall have the meaning set forth in Section
-----------------
3(a) hereof.
(i) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended.
(j) "Exchange Ratio" shall have the meaning set forth in Section 24(a)
--------------
hereof.
(k) "Final Expiration Date" shall have the meaning set forth in
---------------------
Section 7(a) hereof.
(l) "NASDAQ" shall mean the National Association of Securities
------
Dealers, Inc., Automated Quotation System.
(m) "Person" shall mean any individual, firm, corporation,
------
partnership, limited liability company, joint venture, association, trust or
other 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, without par value, of the Company having the rights,
preferences and privileges set forth in the Form of Certificate of Determination
of Rights, Preferences and Privileges attached to this Agreement as Exhibit A.
---------
(o) "Purchase Price" shall have the meaning set forth in Section 4
--------------
hereof.
5
<PAGE>
(p) "Record Date" shall have the meaning set forth in the second
-----------
paragraph hereof.
(q) "Redemption Date" shall have the meaning set forth in Section 7(a)
---------------
hereof.
(r) "Redemption Price" shall have the meaning set forth in Section 23
----------------
(a) hereof.
(s) "Right" shall have the meaning set forth in the second paragraph
-----
hereof.
(t) "Right Certificate" shall have the meaning set forth in Section
-----------------
3(a) hereof.
(u) "Shares Acquisition Date" shall mean the first date of public
-----------------------
announcement by the Company or an Acquiring Person that an Acquiring Person has
become such.
(v) "Subsidiary" of any Person shall mean any corporation or other
----------
entity of which a majority of the voting power of the voting equity securities
or equity interest is owned, directly or indirectly, by such Person.
(w) "Summary of Rights" shall have the meaning set forth in Section
-----------------
3(b) hereof.
(x) "Tender Offer Commencement Date" shall mean the date of the
------------------------------
commencement 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 entity holding Common Shares for or pursuant to the terms of any
such plan) of, or of the first public announcement of the intention of any
Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or of any Subsidiary of the Company or any entity
holding Common Shares for or pursuant to the terms of any such plan) to
commence, a tender or exchange offer the consummation of which would result in
any Person becoming the Beneficial Owner of Common Shares aggregating 20% or
more of the then outstanding Common Shares (including any such date which is
after the date of this Agreement and prior to the issuance of the Rights). For
purposes of the computations contemplated by this Section 1(x), the outstanding
Common Shares as of any given date shall be deemed to include the
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<PAGE>
number of Common Shares actually outstanding on such date, plus the number of
Common Shares not actually outstanding on such date of which the Person in
question is or is deemed to be the Beneficial Owner on such date.
(y) "Trading Day" shall have the meaning set forth in Section 11(d)
-----------
hereof.
Section 2. Appointment of Rights Agent. The Company hereby appoints the
---------------------------
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof, shall, prior to the Distribution Date, also
be the holders of the Common Shares of the Company) in accordance with the terms
and conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such co-Rights Agents as it may deem
necessary or desirable.
Section 3. Issue of Right Certificates.
---------------------------
(a) Until the earlier of (i) the tenth day after the Shares
Acquisition Date or (ii) the tenth Business Day (or such later date as may be
determined by action of the Board of Directors of the Company prior to such time
as any Person becomes an Acquiring Person) after the Tender Offer Commencement
Date (the earlier of such dates being herein referred to as the "Distribution
------------
Date"), (x) the Rights will be evidenced (subject to the provisions of Section
----
3(b) hereof) by the certificates for Common Shares of the Company registered in
the names of the holders thereof (which certificates shall also be deemed to be
Right Certificates) and not by separate Right Certificates, and (y) the Rights
and the right to receive Right Certificates will be transferable only in
connection with the transfer of Common Shares of the Company. 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 by and at the expense of the Company,
send) by first-class,
7
<PAGE>
insured, postage-prepaid mail, to each record holder of Common Shares of the
Company as of the Close of Business on the Distribution Date, at the address of
such holder shown on the records of the Company, a Right Certificate, in
substantially the form of Exhibit B hereto (a "Right Certificate"), evidencing
--------- -----------------
one Right for each Common Share of the Company so held. As of the Distribution
Date, the Rights will be evidenced solely by such Right Certificates.
(b) On the Record Date, or as soon as practicable thereafter, the
Company will send a copy of a Summary of Rights to Purchase Preferred Shares, in
substantially the form of Exhibit C hereto (the "Summary of Rights"), by first-
--------- -----------------
class, postage-prepaid mail, to each record holder of Common Shares of the
Company as of the Close of Business on the Record Date, at the address of such
holder shown on the records of the Company. With respect to certificates for
Common Shares of the Company outstanding on the Record Date, until the
Distribution Date, the Rights will be evidenced by such certificates registered
in the names of the holders thereof. Until the Distribution Date (or the
earlier of the Redemption Date or the Final Expiration Date), the surrender for
transfer of any certificate for Common Shares of the Company outstanding on the
Record Date shall also constitute the transfer of the Rights associated with the
Common Shares of the Company represented thereby.
(c) Certificates for Common Shares of the Company which become
outstanding (including, without limitation, reacquired Common Shares of the
Company referred to in the last sentence of this paragraph (c)) after the Record
Date but prior to the earliest of the Distribution Date, the Redemption Date or
the Final Expiration Date shall have impressed on, printed on, written or
otherwise affixed to them the following legend:
8
<PAGE>
This certificate also evidences and entitles the holder hereof to certain
rights ("Rights") as set forth in a Rights Agreement between OSI Systems,
Inc. and U.S. Stock Transfer Corporation, dated as of July 31, 2000, as it
may be amended from time to time (the "Rights Agreement"), the terms of
which are hereby incorporated herein by reference and a copy of which is on
file at the principal executive offices of OSI Systems, Inc. Under certain
circumstances, as set forth in the Rights Agreement, such Rights will be
evidenced by separate certificates and will no longer be evidenced by this
certificate. OSI Systems, Inc. will mail to the holder of this certificate
a copy of the Rights Agreement without charge after receipt of a written
request therefor. As set forth in the Rights Agreement, Rights issued to or
beneficially owned by any Person (as defined in the Rights Agreement) who
becomes an Acquiring Person (as defined in the Rights Agreement) become
null and void.
With respect to such certificates containing the foregoing legend, until the
Distribution Date, the Rights associated with the Common Shares of the Company
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 of the Company
requested thereby. In the event that the Company purchases or acquires any
Common Shares of the Company after the Record Date but prior to the Distribution
Date, any Rights associated with such Common Shares of the Company shall be
deemed cancelled and retired so that the Company shall not be entitled to
exercise any Rights associated with the Common Shares of the Company which are
no longer outstanding (provided that if any Common Shares of the Company so
purchased or acquired by the Company are subsequently sold or otherwise
transferred by the Company and shall thereafter become outstanding, new Rights
shall be issued with respect thereto in accordance herewith).
Section 4. Form of Right Certificates. The Right Certificates (and the
--------------------------
forms of election to purchase Preferred Shares and of assignment to be printed
on the reverse thereof) shall be substantially the same as Exhibit B hereto, and
---------
may have such marks of identification or designation and such legends, summaries
or endorsements printed thereon as the Company may deem appropriate and as
9
<PAGE>
are not inconsistent with the provisions of this Agreement, or as may be
required to comply with any applicable law or with any applicable rule or
regulation made pursuant thereto or with any applicable rule or regulation of
any stock exchange or the National Association of Securities Dealers, Inc., or
to conform to usage. Subject to the provisions of Section 22 hereof, the Right
Certificates shall entitle the holders thereof to purchase such number of one
one-thousandths of a Preferred Share as shall be set forth therein at the price
per one one-thousandth of a Preferred Share set forth therein (the "Purchase
--------
Price"), but the number of such one one-thousandths of a Preferred Share and the
-----
Purchase Price shall be subject to adjustment as provided herein, and the Right
Certificates shall, upon such adjustment, entitle the holders thereof to
purchase the number of one one-thousandths of a Preferred Share at the Purchase
Price, in each case as so adjusted.
Section 5. Countersignature and Registration. The Right Certificates
---------------------------------
shall be executed on behalf of the Company by its Chief Executive Officer, or
its Chief Financial Officer, either manually or by facsimile signature, and
shall be attested by the Secretary or any Assistant Secretary of the Company,
either manually or by facsimile signature. The Right Certificates shall be
manually countersigned by the Rights Agent and shall not be valid for any
purpose unless countersigned. In case any officer of the Company who shall have
signed any of the Right Certificates shall cease to be such officer of the
Company before countersignature by the Rights Agent and issuance and delivery by
the Company, such Right Certificates, nevertheless, may be countersigned by the
Rights Agent and issued and delivered by the Company, with the same force and
effect as though the individual who signed such Right Certificates had not
ceased to be such officer of the Company; and any Right Certificate may be
signed on behalf of the Company by an individual who, at the actual date of the
execution of such Right
10
<PAGE>
Certificate, shall be a proper officer of the Company to sign such Right
Certificate, although at the date of the execution of this Agreement any such
individual was not such an officer.
Following the Distribution Date, the Rights Agent will keep or cause to be
kept, at its principal office, books for registration and transfer of the Right
Certificates issued hereunder. Such books shall show the names and addresses of
the respective holders of the Right Certificates, the number of Rights evidenced
on its face by each of the Right Certificates and the date of each of the Right
Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Right
-----------------------------------------------------
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates. Subject
---------------------------------------------------------------------
to the provisions of Section 14 hereof, at any time after the Close of Business
on the Distribution Date, and at or prior to the Close of Business on the
earlier of the Redemption Date or the Final Expiration Date, any Right
Certificate or Right Certificates (other than Right Certificates representing
Rights that have become void pursuant to Section 11(a)(ii) hereof or that have
been exchanged pursuant to Section 24 hereof) may be transferred, split up,
combined or exchanged for another Right Certificate or Right Certificates
entitling the registered holder to purchase in the aggregate a like number of
one one-thousandths of a Preferred Share as the Right Certificate or Right
Certificates surrendered then entitled such holder to purchase, taking into
account any adjustments to such number theretofore in effect pursuant hereto.
Any registered holder desiring to transfer, split up, combine or exchange any
Right Certificate or Right Certificates shall make such request in writing
delivered to the Rights Agent, and shall surrender the Right Certificate or
Right Certificates to be transferred, split up, combined or exchanged at the
principal office of the Rights Agent. Thereupon the Rights Agent shall
countersign and deliver to the Person entitled thereto a Right Certificate or
Right Certificates, as the case may be, as so requested. The Company may require
11
<PAGE>
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer, split up, combination or exchange of
Right Certificates.
Upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Right
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, 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 Right Certificate if mutilated, the Company will make and deliver a new
Right Certificate of like tenor to the Rights Agent for countersignature and
delivery to the registered holder in lieu of the Right Certificate so lost,
stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
-------------------------------------------------------------
(a) The registered holder of any Right Certificate may exercise the
Rights evidenced thereby (except as otherwise provided herein), in whole or in
part (subject, in the case of exercise for fractional Preferred Shares, to the
provisions of Section 14 hereof), at any time after the Distribution Date, upon
surrender of the Right Certificate, with the form of election to purchase on the
reverse side thereof duly executed, to the Rights Agent at the principal office
of the Rights Agent, together with payment of the Purchase Price for each one
one-thousandth of a Preferred Share as to which the Rights are exercised, at or
prior to the earliest of (i) the Close of Business on July 31, 2010 (the "Final
------
Expiration Date"), (ii) the time at which the Rights are redeemed as provided in
---------------
Section 23 hereof (the "Redemption Date"), or (iii) the time at which such
---------------
Rights are exchanged as provided in Section 24 hereof.
(b) The Purchase Price for each one one-thousandth of a Preferred
Share purchasable pursuant to the exercise of a Right shall initially be
$100.00, and shall be subject to
12
<PAGE>
adjustment from time to time as provided in Section 11 or 13 hereof, and shall
be payable in lawful money of the United States of America in accordance with
paragraph (c) below.
(c) Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase duly elected, accompanied by
payment of the aggregate Purchase Price for the shares to be purchased and an
amount equal to any applicable transfer tax required to be paid by the holder of
such Right Certificate in accordance with Section 9 hereof by certified check,
cashier's check or money order payable to the order of the Company, the Rights
Agent shall thereupon promptly (i) (A) requisition from any transfer agent of
the Preferred Shares certificates for the number of Preferred Shares to be
purchased and the Company hereby irrevocably authorizes any such transfer agent
to comply with all such requests, or (B) if the Company has made an election
pursuant to Section 14 hereof, requisition from the depositary agent depositary
receipts representing such number of one 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 of the
Preferred Shares with such depositary agent) and the Company hereby directs such
depositary 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 hereof; (iii) after receipt of such
certificates or depositary receipts, cause the same to be delivered to or upon
the order of the registered holder of such Right Certificate, registered in such
name or names as may be designated by such holder; and (iv) when appropriate,
after receipt, promptly deliver such cash to or upon the order of the registered
holder of such Right Certificate.
(d) In case the registered holder of any Right Certificate shall
exercise less than all the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights
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<PAGE>
remaining unexercised shall be issued by the Rights Agent to the registered
holder of such Right Certificate or to such holder's duly authorized assigns,
subject to the provisions of Section 14 hereof.
Section 8. Cancellation and Destruction of Right Certificates. All Right
--------------------------------------------------
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Right Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
cancelled Right Certificates to the Company, or shall, at the written request of
the Company, destroy such cancelled Right Certificates, and, in such case, shall
deliver a certificate of destruction thereof to the Company.
Section 9. Availability of Preferred Shares. The Company covenants and
--------------------------------
agrees that it will cause to be reserved and kept available out of its
authorized and unissued shares of preferred stock or any Preferred Shares held
in its treasury the number of Preferred Shares that will be sufficient to permit
the exercise in full of all outstanding Rights in accordance with Section 7
hereof. 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.
The Company further covenants and agrees that it will pay when due and
payable any and all federal and state transfer taxes and charges which may be
payable in respect of the issuance or delivery
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<PAGE>
of the Right Certificates or of any certificates or depositary receipts for the
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 Right Certificates to a Person other than, or the issuance of
delivery of certificates or depositary receipts for the Preferred Shares in a
name other than that of, the registered holder of the Right Certificate
evidencing Rights surrendered for exercise or to issue or to deliver any Rights
Certificates or certificates or depositary 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 Right Certificate at the time of surrender)
or until it has been established to the Company's reasonable satisfaction that
no such tax is due.
The Company shall use its best efforts to (a) file, if required by law, as
soon as practicable following the Distribution Date, a registration statement
under the Securities Act of 1933, as amended (the "Act") with respect to the
---
securities purchasable upon exercise of the Rights on an appropriate form, (b)
cause such registration statement to become effective as soon as practicable
after such filing, and (c) cause such registration statement to remain effective
(with a prospectus at all times meeting the requirements of the Act and the
rules and regulations thereunder) until the Expiration Date (unless and until
the Company shall have received an opinion of counsel to the effect that the
maintenance of such registration statement in effect is no longer necessary).
The Company may temporarily suspend, for a period not to exceed 90 days after
the Distribution Date, 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.
Notwithstanding
15
<PAGE>
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 under the Act has been declared
effective.
Section 10. Preferred Shares Record Date. Each Person in whose name any
----------------------------
certificate for Preferred Shares is issued upon the exercise of Rights shall for
all purposes be deemed to have become the holder of record of the Preferred
Shares represented thereby on, and such certificate shall be dated, the date
upon which the Right Certificate evidencing such Rights was duly surrendered and
payment of the Purchase Price (and any applicable transfer taxes in accordance
with Section 9 hereof) 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 Right Certificate shall not be entitled to any rights of a holder of
Preferred Shares for which the Right shall be exercisable, including, without
limitation, the right to vote, to receive dividends or other distributions or to
exercise any preemptive rights, and shall not be entitled to receive any notice
of any proceedings of the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number of Shares or Number of
-----------------------------------------------------------
Rights. The Purchase Price, the number of Preferred Shares covered by each
------
Right and the number of Rights outstanding are subject to adjustment from time
to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Preferred Shares payable in
Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C) combine
the outstanding Preferred Shares into a smaller number
16
<PAGE>
of Preferred Shares or (D) issue any shares of its capital stock in a
reclassification of the Preferred Shares (including any such reclassification in
connection with a consolidation or merger in which the Company is the continuing
or surviving corporation), except as otherwise provided in this Section 11(a),
the Purchase Price in effect at the time of the record date for such dividend or
of the effective date of such subdivision, combination or reclassification, and
the number and kind of shares of capital stock issuable on such date, shall be
proportionately adjusted so that the holder of any Right exercised after such
time shall be entitled to receive the aggregate number and kind of shares of
capital stock which, if such Right had been exercised immediately prior to such
date and at a time when the Preferred Shares transfer books of the Company were
open, such holder would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, combination or
reclassification; provided, however, that in no event shall the consideration to
-------- -------
be paid upon the exercise of one Right be less than the aggregate par value of
the shares of capital stock of the Company issuable upon exercise of one Right.
(ii) Subject to Section 24 hereof, in the event any Person becomes an
Acquiring Person, each holder of a Right shall thereafter have a right to
receive, upon exercise thereof at a price equal to the then current Purchase
Price multiplied by the number of one one-thousandths of a Preferred Share for
which a Right is then exercisable, in accordance with the terms of this
Agreement and in lieu of Preferred Shares, such number of Common Shares of the
Company as shall equal the result obtained by (A) multiplying the then current
Purchase Price by the number of one one-thousandths of a Preferred Share for
which a Right is then exercisable and dividing that product by (B) 50% of the
then current per share market price of the Common Shares of the Company
(determined pursuant to Section 11(d) hereof) on the date of the occurrence of
such event. In the event that any
17
<PAGE>
Person shall become an Acquiring Person and the Rights shall then be
outstanding, the Company shall not take any action which would eliminate or
diminish the benefits intended to be afforded by the Rights.
From and after the occurrence of such event, any Rights that are or
were acquired or beneficially owned by any Acquiring Person (or any Associate or
Affiliate of such Acquiring Person) shall be null and void, and any holder of
such Rights shall thereafter have no right to exercise such Rights under any
provision of this Agreement. No Right Certificate shall be issued pursuant to
Section 3 hereof that represents Rights beneficially owned by an Acquiring
Person whose Rights would be null and void pursuant to the preceding sentence or
any Associate or Affiliate thereof or to any nominee of such Acquiring Person,
Associate or Affiliate; no Right Certificate shall be issued at any time upon
the transfer of any Rights to an Acquiring Person whose Rights would be null and
void pursuant to the preceding sentence or any Associate or Affiliate thereof or
to any nominee of such Acquiring Person, Associate or Affiliate; and any Right
Certificate delivered to the Rights Agent for transfer to an Acquiring Person
whose Rights would be null and void pursuant to the preceding sentence shall be
cancelled; provided, however, that any Right Certificate issued (whether by
-------- -------
error or otherwise) in contravention of this sentence shall, pursuant to the
preceding sentence, nonetheless be null and void.
(iii) In the event that there shall not be sufficient Common
Shares issued but not outstanding or authorized but unissued to permit the
exercise in full of the Rights in accordance with subparagraph (ii) above, the
Company shall take all such action as may be necessary to authorize additional
Common Shares for issuance upon exercise of the Rights, in the event the Company
shall, after good faith effort, be unable to take all such action as may be
necessary to authorize such additional Common Shares, the Company shall
substitute, for each Common Share that would
18
<PAGE>
otherwise be issuable upon exercise of a Right, a number of Preferred Shares or
fraction thereof such that the current per share market price of one Preferred
Share multiplied by such number or fraction is equal to the current per share
market price of one Common Share as of the date of issuance of such Preferred
Shares or fraction thereof.
(b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Preferred Shares entitling them
(for a period expiring within 45 calendar days after such record date) to
subscribe for or purchase Preferred Shares (or shares having the same rights,
preferences and privileges as the Preferred Shares ("equivalent preferred
--------------------
shares")) or securities convertible into Preferred Shares or equivalent
------
preferred shares at a price per Preferred Share or equivalent preferred share
(or having a conversion price per share, if a security convertible into
Preferred Shares or equivalent preferred shares) less than the then current per
share market price of the Preferred Shares (as defined in Section 11(d) hereof)
on such record date, the Purchase Price to be in effect after such record date
shall be determined by multiplying the Purchase Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be the
number of Preferred Shares outstanding on such record date plus the number of
Preferred Shares which the aggregate exercise price of the total number of
Preferred Shares and/or equivalent preferred shares available for subscription
or purchase (and/or the aggregate initial conversion price of the convertible
securities available for subscription or purchase) would purchase at such
current per share market price and the denominator of which shall be the number
of Preferred Shares outstanding on such record date plus the number of
additional Preferred Shares and/or equivalent preferred shares to be available
for subscription or purchase (or into which the convertible securities to be
available for subscription or purchase are initially convertible); provided,
--------
however, that in no event shall the consideration to be paid
-------
19
<PAGE>
upon the exercise of one Right be less than the aggregate par value of the
shares of capital stock of the Company issuable upon exercise of one Right. In
case such subscription or purchase price may be paid in a consideration part or
all of which shall be in a form other than cash, the value of such consideration
shall be as determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed with the Rights
Agent and shall be binding on the Rights Agent and holders of the Rights.
Preferred Shares owned by or held for the account of the Company shall not be
deemed outstanding for the purpose of any such computation. Such adjustment
shall be made successively whenever such a record date is fixed; and, in the
event that such rights, option or warrants are not so issued, the Purchase Price
shall be adjusted to be the Purchase Price which would then be in effect if such
record date had not been fixed.
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of the Preferred Shares (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of indebtedness
or assets (other than a regular quarterly cash dividend or a dividend payable in
Preferred Shares) or subscription rights or warrants (excluding those referred
to in Section 11(b) hereof), the Purchase Price to be in effect after such
record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the then current per share market price of the Preferred Shares on such
record date, less the fair market value (as determined in good faith by the
Board of Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent and shall be binding on the Rights Agent
and holders of the Rights) of the portion of the assets or evidences of
indebtedness so to be distributed or of such subscription rights or warrants
applicable to one Preferred Share and the
20
<PAGE>
denominator of which shall be such then-current per share market price of the
Preferred Shares on such record date; provided, however, that in no event shall
-------- -------
the consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company to be issued
upon exercise of one Right. Such adjustments shall be made successively whenever
a record date is fixed; and, in the event that such distribution is not so made,
the Purchase Price shall again be adjusted to be the Purchase Price which would
then be in effect if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, the "current
per share market price" of any security (a "Security" for the purpose of this
--------
Section 11(d)(i)) on any date shall be deemed to be the average of the daily
closing prices per share of such Security for the 30 consecutive Trading Days
immediately prior to such date; provided, however, that, in the event that the
-------- -------
current per share market price of the Security is determined during a period
following the announcement by the issuer of such Security of (A) a dividend or
distribution on such Security payable in shares of such Security or Securities
convertible into such shares, or (B) any subdivision, combination or
reclassification of such Security and prior to the expiration of 30 Trading Days
after the ex-dividend date for such dividend or distribution, or the record date
for such subdivision, combination or reclassification, then, and in each such
case, the current per share market price shall be appropriately adjusted to
reflect the current market price per share equivalent of such Security. The
closing price for each day shall be the last sale price, regular way, or, in
case no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case, as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if the Security is not
listed or admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to
21
<PAGE>
securities listed on the principal national securities exchange on which the
Security is listed or admitted to trading or, if the Security is not listed or
admitted to trading on any national securities exchange, the last quoted price
or, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by NASDAQ or such other system then in use,
or, if on any such date the Security is not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Security selected by the Board of Directors
of the Company. The term "Trading Day" shall mean a day on which the principal
-----------
national securities exchange on which the Security is listed or admitted to
trading is open for the transaction of business, or, if the Security is not
listed or admitted to trading on any national securities exchange, a Business
Day.
(ii) For the purpose of any computation hereunder, the "current per
share market price" of the Preferred Shares shall be determined in accordance
with the method set forth in Section 11(d)(i) hereof. If the Preferred Shares
are not publicly traded, the "current per share market price" of the Preferred
Shares shall be conclusively deemed to be the current per share market price of
the Common Shares as determined pursuant to Section 11(d)(i) hereof
(appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof), multiplied by one thousand. If
neither the Common Shares nor the Preferred Shares are publicly held or so
listed or traded, "current per share market price" shall mean the fair value per
share as determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed with the Rights
Agent.
(e) No adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in the Purchase
Price; provided, however, that
-------- -------
22
<PAGE>
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 one one-millionth of a Preferred Share or one ten-
thousandth of any other share or security as the case may be. Notwithstanding
the first sentence of this Section 11(e), any adjustment required by this
Section 11 shall be made no later than the earlier of (i) three years from the
date of the transaction which requires such adjustment or (ii) the date of the
expiration of the right to exercise any Rights.
(f) If, as a result of an adjustment made pursuant to Section 11(a)
hereof, the holder of any Right thereafter exercised shall become entitled to
receive any shares of capital stock of the Company other than Preferred Shares,
thereafter the number of such other shares so receivable upon exercise of any
Right shall be subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with respect to the
Preferred Shares contained in Section 11(a) through (c) hereof, inclusive, and
the provisions of Sections 7, 9, 10, 12, 13, 14 and 25 hereof with respect to
the Preferred Shares shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-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) hereof, upon each adjustment of the Purchase Price as a result
of the calculations made in Sections 11(b) and (c) hereof, each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number
23
<PAGE>
of one one-thousandths of a Preferred Share (calculated to the nearest one one-
millionth of a Preferred Share) obtained by (A) multiplying (x) the number of
one one-thousandths of a share covered by a Right immediately prior to this
adjustment by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price and (B) dividing the product so obtained by the
Purchase Price in effect immediately after such adjustment of the Purchase
Price.
(i) The Company may elect, on or after the date of any adjustment of
the Purchase Price, to adjust the number of Rights in substitution for any
adjustment in the number of one one-thousandths of a Preferred Share purchasable
upon the exercise of a Right. Each of the Rights outstanding after such
adjustment of the number of Rights shall be exercisable for the number of one
one-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 one ten-thousandth) obtained by dividing the Purchase
Price in effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the Purchase Price. The
Company shall make a public announcement of its election to adjust the number of
Rights, indicating the record date for the adjustment, and, if known at the
time, the amount of the adjustment to be made. This record date may be the date
on which the Purchase Price is adjusted or any day thereafter, but, if the Right
Certificates have been issued, shall be at least 10 days later than the date of
the public announcement. If Right Certificates have been issued, upon each
adjustment of the number of Rights pursuant to this Section 11(i), the Company
shall, as promptly as practicable, cause to be distributed to holders of record
of Right Certificates on such record date Right Certificates evidencing, subject
to Section 14 hereof, the additional Rights to which such holders shall be
entitled as a result of such adjustment, or, at the option of the Company, shall
24
<PAGE>
cause to be distributed to such holders of record in substitution and
replacement for the Right Certificates held by such holders prior to the date of
adjustment, and upon surrender thereof, if required by the Company, new Right
Certificates evidencing all the Rights to which such holders shall be entitled
after such adjustment. Right Certificates so to be distributed shall be issued,
executed and countersigned in the manner provided for herein, and shall be
registered in the names of the holders of record of Right Certificates on the
record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or
in the number of one one-thousandths of a Preferred Share issuable upon the
exercise of the Rights, the Right Certificates theretofore and thereafter issued
may continue to express the Purchase Price and the number of one-thousandths of
a Preferred Share which were expressed in the initial Right Certificates issued
hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below one-thousandth of the then par value, if any, of the
Preferred Shares 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 fully paid and
nonassessable Preferred Shares at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Right exercised after such record date of
the Preferred Shares and other capital stock or securities of the Company, if
any, issuable upon such exercise over and above the Preferred Shares and other
capital stock or securities of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to
25
<PAGE>
such adjustment; provided, however, that the Company shall deliver to such
-------- -------
holder a due bill or other appropriate instrument evidencing such holder's right
to receive such additional shares upon the occurrence of the event requiring
such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it, in its sole discretion, shall determine to be advisable in
order that any consolidation or subdivision of the Preferred Shares, issuance
wholly for cash of any Preferred Shares at less than the current market price,
issuance wholly for cash of Preferred Shares or securities which by their terms
are convertible into or exchangeable for Preferred Shares, dividends on
Preferred Shares payable in Preferred Shares or issuance of rights, options or
warrants referred to in Section 11 (b) hereof, hereafter made by the Company to
holders of the Preferred Shares shall not be taxable to such stockholders.
(n) In the event that, at any time after the date of this Agreement
and prior to the Distribution Date, the Company shall (i) declare or pay any
dividend on the Common Shares payable in Common Shares, or (ii) effect a
subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise than by payment of dividends in Common Shares)
into a greater or lesser number of Common Shares, then, in any such case, (A)
the number of one one-thousandths of a Preferred Share purchasable after such
event upon proper exercise of each Right shall be determined by multiplying the
number of one one-thousandths of a Preferred Share so purchasable immediately
prior to such event by a fraction, the numerator of which is the number of
Common Shares outstanding immediately before such event and the denominator of
which is the number of Common Shares outstanding immediately after such event,
and (B) each Common Share outstanding immediately after
26
<PAGE>
such event shall have issued with respect to it that number of Rights which each
Common Share outstanding immediately prior to such event had issued with respect
to it. The adjustments provided for in this Section 11 (n) shall be made
successively whenever such a dividend is declared or paid or such a subdivision,
combination or consolidation is effected.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
----------------------------------------------------------
Whenever an adjustment is made as provided in Section 11 or 13 hereof, 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 Common Shares or the
Preferred Shares a copy of such certificate and (c) if such adjustment occurs at
any time after the Distribution Date, mail a brief summary thereof to each
holder of a Right Certificate in accordance with Section 25 hereof. The Rights
Agent shall be fully protected in relying on any such certificate and on any
adjustment therein contained and shall not be obligated or responsible for
calculating any adjustment nor shall it be deemed to have knowledge of any such
adjustment unless and until it shall have received such certificate.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
------------------------------------------------------
Earning Power. In the event, directly or indirectly, at any time after a Person
-------------
has become an Acquiring Person, (a) the Company shall consolidate with, or merge
with and into, any other Person, (b) any Person shall consolidate with the
Company, or merge with and into the Company and the Company shall be the
continuing or surviving corporation of such merger and, in connection with such
merger, all or part of the Common Shares shall be changed into or exchanged for
stock or other securities of any other Person (or the Company) or cash or any
other property, or (c) the Company shall sell or otherwise transfer (or one or
more of its Subsidiaries shall sell or otherwise transfer), in one or more
transactions,
27
<PAGE>
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 Person other than
the Company or one or more of its wholly-owned Subsidiaries, then, and in each
such case, proper provision shall be made so that (i) each holder of a Right
(except as otherwise provided herein) shall thereafter have the right to
receive, upon the exercise thereof at a price equal to the then current Purchase
Price multiplied by the number of one one-thousandths of a Preferred Share for
which a Right is then exercisable, in accordance with the terms of this
Agreement and in lieu of Preferred Shares, such number of Common Shares of such
other Person (including the Company as successor thereto or as the surviving
corporation) as shall equal the result obtained by (A) multiplying the then
current Purchase Price by the number of one one-thousandths of a Preferred Share
for which a Right is then exercisable and dividing that product by (B) 50% of
the then current per share market price of the Common Shares of such other
Person (determined pursuant to Section 11(d) hereof) on the date of consummation
of such consolidation, merger, sale or transfer; (ii) the issuer of such Common
Shares shall thereafter be liable for, and shall assume, by virtue of such
consolidation, merger, sale or transfer, all the obligations and duties of the
Company pursuant to this Agreement; (iii) the term "Company" shall thereafter be
deemed to refer to such issuer, and (iv) such issuer shall take such steps
(including, but not limited to, the reservation of a sufficient number of its
Common Shares in accordance with Section 9 hereof) in connection with such
consummation as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to the
Common Shares of the Company thereafter deliverable upon the exercise of the
Rights. The Company shall not consummate any such consolidation, merger, sale or
transfer unless, prior thereto, the Company and such issuer shall have executed
and delivered to the Rights Agent a supplemental agreement so providing. The
Company
28
<PAGE>
shall not enter into any transaction of the kind referred to in this Section 13
if at the time of such transaction there are any rights, warrants, instruments
or securities outstanding or any agreements or arrangements which, as a result
of the consummation of such transaction, would eliminate or substantially
diminish the benefits intended to be afforded by the Rights. The provisions of
this Section 13 shall similarly apply to successive mergers or consolidations or
sales or other transfers.
Section 14. Fractional Rights and Fractional Shares.
---------------------------------------
(a) The Company shall not be required to issue fractions of Rights or
to distribute Right Certificates which evidence fractional Rights. In lieu of
such fractional Rights, there shall be paid to the registered holders of the
Right Certificates with regard to which such fractional Rights would otherwise
be issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For the purposes of this Section 14(a), the "current
market" value of a whole Right shall be the closing price of the Rights for the
Trading Day immediately prior to the date on which such fractional Rights would
have been otherwise issuable. The "closing price" for any day shall be the last
sale price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case, as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Rights are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Rights are listed or admitted to trading or, if the Rights are not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by NASDAQ or such other
system then in use or, if on any such date the Rights are not
29
<PAGE>
quoted by any such organization, the average of the closing bid and asked prices
as furnished by a professional market maker making a market in the Rights
selected by the Board of Directors of the Company. If on any such date no such
market maker is making a market in the Rights, the fair value of the Rights on
such date as determined in good faith by the Board of Directors of the Company
shall be used.
(b) The Company shall not be required to issue fractions of Preferred
Shares (other than fractions which 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 which are
integral multiples of one one-thousandth of a Preferred Share). Fractions of
Preferred Shares in integral multiples of one one-thousandths of a Preferred
Share may, at the election of the Company, be evidenced by depositary receipts,
pursuant to an appropriate agreement between the Company and a depositary
selected by it; provided that such agreement shall provide that the holders of
--------
such depositary receipts shall have all the rights, privileges and preferences
to which they are entitled as beneficial owners of the Preferred Shares
represented by such depositary receipts. In lieu of fractional Preferred Shares
that are not integral multiples of one one-thousandth of a Preferred Share, the
Company shall pay to the registered holders of Right Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one Preferred Share. For the purposes
of this Section 14(b), the current market value of a Preferred Share shall be
the closing price of a Preferred Share (as determined pursuant to the second
sentence of Section 11(d)(i) hereof) for the Trading Day immediately prior to
the date of such exercise.
30
<PAGE>
(c) The holder of a Right, by the acceptance of the Right, expressly
waives such holder's right to receive any fractional Rights or any fractional
shares upon exercise of a Right (except as provided above).
Section 15. Rights of Action. All rights of action in respect of this
----------------
Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Right 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 Right Certificate (or, prior to the
Distribution Date, of the Common Shares), may, in such holder's own behalf and
for such holder's own benefit, enforce, and may institute and maintain any suit,
action or proceeding against the Company to enforce, or otherwise act in respect
of, such holder's right to exercise the Rights evidenced by such Right
Certificate in the manner provided in such Right Certificate and in this
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement, and
will be entitled to specific performance of the obligations under, and
injunctive relief against actual or threatened violations of the obligations of
any Person subject to, this Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right, by
--------------------------
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of the Common Shares;
31
<PAGE>
(b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office of the Rights Agent, duly endorsed or accompanied by a
proper instrument of transfer; and
(c) the Company and the Rights Agent may deem and treat the person
in whose name the Right Certificate (or, prior to the Distribution Date, the
associated Common Shares certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any notations of
ownership or writing on the Right Certificate 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.
Section 17. Right Certificate Holder Not Deemed a Shareholder. No
-------------------------------------------------
holder, as such, of any Right Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of 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 Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a shareholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
shareholders (except as provided in Section 25 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Right Certificate shall have been exercised in accordance with the
provisions hereof.
Section 18. Concerning the Rights Agent. The Company agrees to pay to
---------------------------
the Rights Agent reasonable compensation for all services rendered by it
hereunder (as from time to time agreed by
32
<PAGE>
the Company and the Rights Agent), and, from time to time, on demand of the
Rights Agent, its reasonable expenses and counsel fees and other disbursements
reasonably 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.
The Rights Agent shall be protected and shall incur no liability for, or in
respect of any action taken, suffered or omitted by it in connection with, its
administration of this Agreement in reliance upon any Right Certificate or
certificate for the Preferred Shares or 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 hereof.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
---------------------------------------------------------
Any corporation into which the Rights Agent or any successor Rights Agent may be
merged or with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which the Rights Agent or any successor Rights
Agent shall be a party, or any corporation succeeding to the stock transfer of
corporate trust powers of the Rights Agent or any successor Rights Agent, shall
be the successor to the Rights Agent under this Agreement without the execution
or filing of any paper or any further act on the part of any of the parties
hereto; provided that such corporation would be eligible for appointment as a
--------
33
<PAGE>
successor Rights Agent under the provisions of Section 21 hereof. In case at
the time such successor Rights Agent shall succeed to the agency created by this
Agreement, any of the Right Certificates shall have been countersigned but not
delivered, any such successor Rights Agent may adopt the countersignature of the
predecessor Rights Agent and deliver such Right Certificates so countersigned;
and, in case at that time any of the Right Certificates shall not have been
countersigned, any successor Rights Agent may countersign such Right
Certificates either in the name of the predecessor Rights Agent or in the name
of the successor Rights Agent; and, in all such cases, such Right Certificates
shall have the full force provided in the Right Certificates and in this
Agreement.
In case at any time the name of the Rights Agent shall be changed and at
such time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and, in case at that time any
of the Right Certificates shall not have been countersigned, the Rights Agent
may countersign such Right Certificates either in its prior name or in its
changed name; and, in all such cases, such Right Certificates shall have the
full force provided in the Right Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
----------------------
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Right Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall 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.
34
<PAGE>
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chief Executive Officer or
the Chief Financial Officer 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 Right
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 hereof (except
the due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Right Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Right Certificate; nor shall it
be responsible for any change in the exercisability of the Rights (including the
Rights becoming void pursuant to Section 11 (a)(ii) hereof) or any adjustment in
the terms of the Rights (including the manner, method or amount thereof)
provided for in Section 3, 11, 13, 23 or 24 hereof, or the ascertaining of the
existence of facts that would require any
35
<PAGE>
such change or adjustment (except with respect to the exercise of Rights
evidenced by Right Certificates after actual notice that such change or
adjustment is required); 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 issued pursuant to this Agreement or any Right
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 Chief Executive Officer or the Chief Financial Officer 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.
(h) The Rights Agent and any shareholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from
acting in any other capacity for the Company or for any other legal entity.
36
<PAGE>
(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 that reasonable care was exercised in the
selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
Section 21. Change of Rights Agent. The Rights Agent or any successor
----------------------
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company and to each transfer agent
of the Common Shares or Preferred Shares by registered or certified mail, and to
the holders of the Right Certificates by first-class mail. The Company may
remove the Rights Agent or any successor Rights Agent upon 30 days notice in
writing, mailed to the Rights Agent or successor Rights Agent, as the case may
be, and to each transfer agent of the Common Shares or Preferred Shares by
registered or certified mail, and to the holders of the Right Certificates by
first-class mail. If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Rights Agent. If the Company shall fail to make such appointment within a
period of 30 days after giving notice of such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Right Certificate (which holder
shall, with such notice, submit such holder's Right
37
<PAGE>
Certificate for inspection by the Company), then the registered holder of any
Right Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether appointed
by the Company or by such a court, shall be a corporation organized and doing
business under the laws of the United States or of the State of California (or
of any other state of the United States so long as such corporation is
authorized to do business as a banking, trust or stock transfer institution in
the State of California), in good standing, having an office in the State of
California, which is authorized under such laws to exercise corporate trust or
stock transfer powers and is subject to supervision or examination by federal or
state authority and which has at the time of its appointment as Rights Agent a
combined capital and surplus of at least $10 million. After appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Not later than the effective date of any such appointment, the
Company shall file notice thereof in writing with the predecessor Rights Agent
and each transfer agent of the Common Shares or Preferred Shares, and mail a
notice thereof in writing to the registered holders of the Right Certificates.
Failure to give any notice provided for in this Section 21, however, or any
defect therein, shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent, as
the case may be.
Section 22. Issuance of New Right Certificates. Notwithstanding any of
----------------------------------
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Right Certificates evidencing Rights in such form
as may be approved by the Board of Directors of the
38
<PAGE>
Company 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
Right Certificates made in accordance with the provisions of this Agreement.
Section 23. Redemption.
----------
(a) The Board of Directors of the Company may, at its option, at any
time prior to such time as any Person becomes an Acquiring Person, redeem all
but not less than all the then outstanding Rights at a redemption price of $.001
per Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such redemption price being
hereinafter referred to as the "Redemption Price"). The redemption of the
----------------
Rights by the Board of Directors of the Company may be made effective at such
time, on such basis and with such conditions as the Board of Directors of the
Company, in its sole discretion, may establish.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights pursuant to paragraph (a) of this
Section 23, 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, any such notice shall not affect the validity of such
redemption. Within 10 days after such action of the Board of Directors of the
Company ordering the redemption of the Rights, the Company shall mail a notice
of redemption to all the holders of the then outstanding Rights at their last
addresses as they appear upon the registry books of the Rights Agent or, prior
to the Distribution Date, on the registry books of the transfer agent for the
Common Shares. Any notice which is mailed in the manner herein provided shall
be deemed given, whether or not the holder receives the notice. Each such
notice
39
<PAGE>
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 set forth in this Section 23 or in Section 24 hereof, and
other than in connection with the purchase of Common Shares prior to the
Distribution Date.
Section 24. Exchange.
--------
(a) The Board of Directors of the Company may, at its option, at any
time after any Person becomes an Acquiring Person, exchange all or part of the
then outstanding and exercisable Rights (which shall not include Rights that
have become null and void pursuant to the provisions of Section 11(a)(ii)
hereof) for Common Shares at an exchange ratio of one Common Share per Right,
appropriately adjusted to reflect any adjustment in the number of Rights
pursuant to Section 11(i) (such exchange ratio being hereinafter referred to as
the "Exchange Ratio"). Notwithstanding the foregoing, the Board of Directors of
the Company 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 of the
Company ordering the exchange of any Rights pursuant to paragraph (a) of this
Section 24 and without any further action and without any notice, the right to
exercise such Rights shall terminate and the only right thereafter of a holder
of such Rights shall be to receive that number of Common Shares equal to the
number of such Rights held by such holder multiplied by the Exchange Ratio. The
Company shall
40
<PAGE>
promptly give public notice of any such exchange; provided, however, that the
-------- -------
failure to give, or any defect in, such notice shall not affect the validity of
such exchange. The Company promptly shall mail a notice of any such exchange to
all of the holders of such Rights at their last addresses as they appear upon
the registry books of the Rights Agent. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of exchange will state the method by which the exchange
of the Common 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 null and void pursuant to the provisions of Section
11(a)(ii) hereof) 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 this Section 24, the Company shall
take all such action as may be necessary to authorize additional Common Shares
for issuance upon exchange of the Rights. In the event the Company shall, after
good faith effort, be unable to take all such action as may be necessary to
authorize such additional Common Shares, the Company shall substitute, for each
Common Share that would otherwise be issuable upon exchange of a Right, a number
of Preferred Shares or fraction thereof such that the current per share market
price of one Preferred Share multiplied by such number or fraction is equal to
the current per share market price of one Common Share as of the date of
issuance of such Preferred Shares or fraction thereof.
(d) The Company shall not be required to issue fractions of Common
Shares or to distribute certificates which evidence fractional Common Shares.
In lieu of such fractional Common Shares, the Company shall pay to the
registered holders of the Right Certificates with regard to which
41
<PAGE>
such fractional Common Shares would otherwise be issuable an amount in cash
equal to the same fraction of the current market value of a whole Common Share.
For the purposes of this paragraph (d), the current market value of a whole
Common Share shall be the closing price of a Common Share (as determined
pursuant to the second sentence of Section 11(d)(i) hereof) for the Trading Day
immediately prior to the date of exchange pursuant to this Section 24.
Section 25. Notice of Certain Events.
------------------------
(a) In case the Company shall, at any time after the Distribution
Date, propose (i) to pay any dividend payable in stock of any class to the
holders of the Preferred Shares or to make any other distribution to the holders
of the Preferred Shares (other than a regular quarterly cash dividend), (ii) to
offer to the holders of the Preferred Shares rights or warrants to subscribe for
or to purchase any additional Preferred Shares or shares of stock of any class
or any other securities, rights or options, (iii) to effect any reclassification
of the Preferred Shares (other than a reclassification involving only the
subdivision of outstanding Preferred Shares), (iv) to effect any consolidation
or merger into or with, or to effect any sale or other transfer (or to permit
one or more of its Subsidiaries to effect any sale or other transfer), in one or
more transactions, of 50% or more of the assets or earning power of the Company
and its Subsidiaries (taken as a whole) to, any other Person, (v) to effect the
liquidation, dissolution or winding up of the Company, or (vi) to declare or pay
any dividend on the Common Shares payable in Common Shares or to effect a
subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise than by payment of dividends in Common Shares),
then, in each such case, the Company shall give to each holder of a Right
Certificate, in accordance with Section 26 hereof, a notice of such proposed
action, which shall specify the record date for the purposes of such stock
dividend, or distribution of rights or warrants, or the date on which such
42
<PAGE>
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the Common Shares and/or Preferred Shares, if any such
date is to be fixed, and such notice shall be so given in the case of any action
covered by clause (i) or (ii) above at least 10 days prior to the record date
for determining holders of the Preferred Shares for purposes of such action,
and, in the case of any such other action, at least 10 days prior to the date of
the taking of such proposed action or the date of participation therein by the
holders of the Common Shares and/or Preferred Shares, whichever shall be the
earlier.
(b) In case the event set forth in Section 11(a)(ii) hereof shall
occur, then the Company shall, as soon as practicable thereafter, give to each
holder of a Right Certificate, in accordance with Section 26 hereof, a notice
of the occurrence of such event, which notice shall describe such event and the
consequences of such event to holders of Rights under Section 11(a)(ii) hereof.
Section 26. Notices. Notices or demands authorized by this Agreement
-------
to be given or made by the Rights Agent or by the holder of any Right
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:
OSI Systems, Inc.
12525 Chadron Avenue
Hawthorne, California 90250
Attention: Chief Executive Officer
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Right Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:
43
<PAGE>
U.S. Stock Transfer Corporation
1745 Gardena Avenue
Glendale, California 91204
Attention: Rights Agent
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
Section 27. Supplements and Amendments. The Company may from time to
--------------------------
time supplement or amend this Agreement without the approval of any holders of
Right Certificates in order to cure any ambiguity, to correct or supplement any
provision contained herein which may be defective or inconsistent with any other
provisions herein, or to make any other provisions with respect to the Rights
which the Company may deem necessary or desirable, any such supplement or
amendment to be evidenced by a writing signed by the Company and the Rights
Agent; provided, however, that, from and after such time as any Person becomes
-------- -------
an Acquiring Person, this Agreement shall not be amended in any manner which
would adversely affect the interests of the holders of Rights. Without limiting
the foregoing, the Company may at any time prior to such time as any Person
becomes an Acquiring Person amend this Agreement to lower the thresholds set
forth in Sections 1(a) and 1(x) hereof to not less than the greater of (a) the
sum of .001% and the largest percentage of the outstanding Common Shares then
known by the Company to be beneficially owned by any Person (other than the
Company, any Subsidiary of the Company, any employee benefit plan of the Company
or any Subsidiary of the Company, or any entity holding Common Shares for or
pursuant to the terms of any such plan) and (b) 10%.
44
<PAGE>
Section 28. Successors. All the covenants and provisions of this
----------
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. Benefits of this Agreement. Nothing in this Agreement
--------------------------
shall be construed to give to any Person other than the Company, the Rights
Agent and the registered holders of the Right 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 Right Certificates (and, prior to the Distribution Date, the Common Shares).
Section 30. Severability. If any term, provision, covenant or
------------
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
Section 31. Governing Law. This Agreement and each Right Certificate
-------------
issued hereunder shall be deemed to be a contract made under the laws of the
State of California and for all purposes shall be governed by and construed in
accordance with the laws of such state applicable to contracts to be made and
performed entirely within such state.
Section 32. Counterparts. This Agreement may be executed in any number
------------
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
45
<PAGE>
Section 33. Descriptive Headings. Descriptive headings of the several
--------------------
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested, all as of the day and year first above written.
Attest: OSI SYSTEMS, INC.
By: ______________________________ By: _____________________________
Name: Ajay Mehra Name: Deepak Chopra
Title: Chief Financial Officer Title: President and Chief Executive
and Secretary Officer
Attest: U.S. STOCK TRANSFER CORPORATION
By: ______________________________ By: ____________________________
Name: Name:
Title: Title:
46
<PAGE>
EXHIBIT A
---------
FORM
of
CERTIFICATE OF DETERMINATION OF
RIGHTS, PREFERENCES AND PRIVILEGES OF
SERIES A PARTICIPATING PREFERRED STOCK
OF OSI SYSTEMS, INC.
The undersigned, Deepak Chopra and Ajay Mehra, do hereby certify:
1. That they are the duly elected and acting President and Chief
Executive Officer and Chief Financial Officer and Secretary, respectively, of
OSI Systems, Inc., a California corporation (the "Corporation").
2. That pursuant to the authority vested in the Board of Directors by the
amended and restated Articles of Incorporation of the said Corporation, the said
Board of Directors on July 31, 2000, adopted the following resolution creating a
series of 500,000 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 (the "Board of Directors" or the "Board") by the Articles of
Incorporation, the Board of Directors does hereby provide for the issue of a
series of Preferred Stock of the Corporation, to be designated "Series A
Participating Preferred Stock," without par value, initially consisting of
500,000 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 Articles of Incorporation does hereby fix and herein state and
express the designations, powers, preferences and relative and other special
rights and the qualifications, limitations and restrictions of such series of
Preferred Stock as follows:
Section 1. Designation and Amount. The shares of such series shall be
----------------------
designated as "Series A Participating Preferred Stock," without par value (the
"Series A Preferred Stock")
A-1
<PAGE>
and the number of shares constituting the Series A Preferred Stock shall be
500,000. Such number of shares may be increased or decreased by resolution of
the Board of Directors; provided, that no decrease shall reduce the number of
--------
shares of Series A Preferred Stock to a number less than the number of shares
then outstanding plus the number of shares reserved for issuance upon the
exercise of outstanding options, rights or warrants or upon the conversion of
any outstanding securities issued by the Corporation convertible into Series A
Preferred Stock.
Section 2. Dividends and Distributions.
---------------------------
(a) Subject to the rights of the holders of any shares of any series of
Preferred Stock (or any similar stock) of the Corporation ranking prior and
superior to the Series A Preferred Stock with respect to dividends, the holders
of shares of Series A Preferred Stock, in preference to the holders of Common
Stock, without par value (the "Common Stock"), of the Corporation, and of any
other junior stock of the Corporation, shall be entitled to receive, when, as
and if declared by the Board of Directors out of funds legally available for the
purpose, quarterly dividends payable in cash on the first day of March, June,
September and December in each year (each such date being referred to herein as
a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a share of
Series A Preferred Stock, in an amount per share (rounded to the nearest cent)
equal to the greater of (i) $1 or (ii) subject to the provision for adjustment
hereinafter set forth, 1000 times the aggregate per share amount of all cash
dividends, and 1000 times the aggregate per share amount (payable in kind) of
all non-cash dividends or other distributions, other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Preferred Stock. In the event the Corporation
shall at any time declare or pay any dividend on the Common Stock payable in
shares of Common Stock, or effect a subdivision or combination or consolidation
of the outstanding shares of Common Stock (by reclassification or otherwise than
by payment of a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then in each such case the amount to which
holders of shares of Series A Preferred Stock were entitled immediately prior to
such event under clause (ii) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
A-2
<PAGE>
(b) The Corporation shall declare a dividend or distribution on the Series
A Preferred Stock as provided in paragraph (a) of this Section immediately after
it declares a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); provided that, in the event no
dividend or distribution shall have been declared on the Common Stock during the
period between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $1 per share on the Series A
Preferred Stock shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
(c) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares, unless the date of issue of such
share is prior to the record date for the first Quarterly Dividend Payment Date,
in which case dividends on such shares shall begin to accrue from the date of
issue of such shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the determination of holders
of shares of Series A Preferred Stock entitled to receive a quarterly dividend
and before such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends
paid on the shares of Series A Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for the determination
of holders of shares of Series A Preferred Stock entitled to receive payment of
a dividend or distribution declared thereon, which record date shall be not more
than 30 days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A Preferred
-------------
Stock shall have the following voting rights:
(a) Subject to the provision for adjustment hereinafter set forth, each
share of Series A Preferred Stock shall entitle the holder thereof to 1000 votes
on all matters submitted to a vote of the stockholders of the Corporation. In
the event the Corporation shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the number of votes per share to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event shall be adjusted
by multiplying such number by a fraction, the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
A-3
<PAGE>
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(b) Except as otherwise provided herein, in any other Certificate of
Determination creating a series of Preferred Stock or any similar stock, or by
law, the holders of shares of Series A Preferred Stock and the holders of shares
of Common Stock and any other capital stock of the Corporation having general
voting rights shall vote together as one class on all matters submitted to a
vote of stockholders of the Corporation.
(c) Except as set forth herein, or as otherwise provided by law, holders
of Series A Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any corporate
action.
Section 4. Certain Restrictions.
--------------------
(a) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series A Preferred Stock outstanding shall have
been paid in full, the Corporation shall not:
(i) declare or pay dividends, or make any other distributions, on
any shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends, or make any other distributions, on
any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
except dividends paid ratably on the Series A Preferred Stock and all such
parity stock on which dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such shares are then
entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Stock,
provided that the Corporation may at any time redeem, purchase or otherwise
acquire share of any such junior stock in exchange for shares of any stock
of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Preferred Stock; or
A-4
<PAGE>
(iv) redeem or purchase or otherwise acquire for consideration any
shares of Series A Preferred Stock, or any shares of stock ranking on a
parity with the Series A 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 series and
classes, shall determine in good faith will result in fair and equitable
treatment among the respective series or classes.
(b) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (a) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any share of Series A Preferred Stock
-----------------
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein, in the
Articles of Incorporation, or in any other Certificate of Determination creating
a series of Preferred Stock or any similar stock or as otherwise required by
law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any
--------------------------------------
liquidation, dissolution or winding up of the Corporation, no distribution shall
be made (i) to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock unless, prior thereto, the holders of shares of Series A
Preferred Stock shall have received $100 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not declared,
to the date of such payment, provided that the holders of shares of Series A
Preferred Stock shall be entitled to receive an aggregate amount per share,
subject to the provision for adjustment hereinafter set forth, equal to 1000
times the aggregate amount to be distributed per share to holders of shares of
Common Stock, or (ii) to the holders of shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with the
Series A Preferred Stock, except distributions made ratably on the Series A
Preferred Stock and all such parity stock in proportion to the total amounts to
which the holders of all such shares are entitled upon such liquidation,
dissolution or winding up. In the event the Corporation shall at any time
declare or pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common
A-5
<PAGE>
Stock, then in each such case the aggregate amount to which holders of shares of
Series A Preferred Stock were entitled immediately prior to such event under the
proviso in clause (i) of the preceding sentence shall be adjusted by multiplying
such amount by a fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
--------------------------
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series A Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 1000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series A Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series A Preferred Stock shall
-------------
not be redeemable.
Section 9. Rank. The Series A Preferred Stock shall rank, with respect
----
to the payment of dividends and the distribution of assets, junior to all other
series of the Corporation's Preferred Stock, unless the terms of any such other
series shall provide otherwise.
Section 10. Amendment. The Articles of Incorporation of the Corporation
---------
shall not be amended in any manner which would materially alter or change the
powers, preferences or special rights of the Series A Preferred Stock so as to
affect them adversely without the affirmative vote of the holders of at least
two-thirds of the outstanding shares of Series A Preferred Stock, voting
together as a single class.
A-6
<PAGE>
Section 11. Fractional Shares. Series A Preferred Stock may be issued
-----------------
in fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, participate in dividends
and distributions and to have the benefit of all other rights of holders of
Series A Preferred Stock.
RESOLVED FURTHER, that the President and Chief Executive Officer and Chief
Financial Officer and Secretary, respectively, of this Corporation be, and they
hereby are, authorized and directed to prepare and file a Certificate of
Determination in accordance with the foregoing resolution and the provisions of
California law and to take such actions as they may deem necessary or
appropriate to carry out the intent of the foregoing resolution."
3. That the authorized number of shares of Preferred Stock of the
Corporation is 10,000,000 and that no such Preferred Stock has been issued and
is outstanding.
We further declare under penalty of perjury that the matters set forth in
the foregoing Certificate of Determination are true and correct of our own
knowledge.
Executed at Hawthorne, California on July 31, 2000.
______________________________
Deepak Chopra, President
and Chief Executive Officer
__________________________
Ajay Mehra, Chief Financial
Officer and Secretary
A-7
<PAGE>
EXHIBIT B
---------
Form of Right Certificate
Certificate No. R- ________ Rights
NOT EXERCISABLE AFTER JULY 31, 2010 OR EARLIER IF
REDEMPTION OR EXCHANGE OCCURS. THE RIGHTS ARE
SUBJECT TO REDEMPTION AT $.001 PER RIGHT AND TO
EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS
AGREEMENT.
Right Certificate
OSI SYSTEMS, INC.
This certifies that ___________, or registered assigns, is the registered
owner of the number of Rights set forth above, each of which entitles the owner
thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of July 31, 2000 (as from time to time amended, the "Rights
Agreement"), between OSI Systems, Inc., a California corporation (the
"Company"), and U.S. Stock Transfer Corporation (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., Los Angeles,
California time, on July 31, 2010 at the principal office of the Rights Agent,
or at the office of its successor as Rights Agent, one one-thousandth of a fully
paid non-assessable share of Series A Participating Preferred Stock, without
value, of the Company (the "Preferred Shares"), at a purchase price of $100 per
one one-thousandth of a Preferred Share (the "Purchase Price"), upon
presentation and surrender of this Right Certificate with the Form of Election
to Purchase duly executed. The number of Rights evidenced by this Right
Certificate (and the number of one one-thousandths of a Preferred Share which
may be purchased upon exercise hereof) set forth above, and the Purchase Price
set forth above, are the number and Purchase Price as of July 31, 2000, based on
the Preferred Shares as constituted at such date. As provided in the
B-1
<PAGE>
Rights Agreement, the Purchase Price and the number of one one-thousandths of a
Preferred Share which may be purchased upon the exercise of the Rights evidenced
by this Right Certificate are subject to modification and adjustment upon the
happening of certain events.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right Certificates. Copies of
the Rights Agreement are on file at the principal executive offices of the
Company and the offices of the Rights Agent.
This Right Certificate, with or without other Right Certificates, upon
surrender at the principal office of the Rights Agent, may be exchanged for
another Right Certificate or Right Certificates of like tenor and date
evidencing Rights entitling the holder to purchase a like aggregate number of
Preferred Shares as the Rights evidenced by the Right Certificate or Right
Certificates surrendered shall have entitled such holder to purchase. If this
Right Certificate shall be exercised in part, the holder shall be entitled to
receive upon surrender hereof another Right Certificate or Right Certificates
for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Right Certificate (i) may be redeemed by the Company at a redemption price
of $.001 per Right or (ii) may be exchanged in whole or in part for Preferred
Shares or shares of the Company's Common Stock, without par value.
No fractional Preferred Shares will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-thousandth of a Preferred Share, which may, at the election
of the Company, be evidenced by depositary receipts), but, in lieu thereof, a
cash payment will be made, as provided in the Rights Agreement.
No holder of this Right Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of the Preferred Shares or of
any other securities of the Company 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
B-2
<PAGE>
the Right or Rights evidenced by this Right Certificate shall have been
exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company.
Dated as of August 17, 2000.
ATTEST: OSI SYSTEMS, INC.
______________________________ By ________________________________
Name: Ajay Mehra Name: Deepak Chopra
Title: Secretary Title: Chief Executive Officer
Countersigned:
U.S. STOCK TRANSFER
CORPORATION
By ___________________________
Name:
Title:
B-3
<PAGE>
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)
FOR VALUE RECEIVED ___________________________ hereby sells, assigns and
transfers unto _________________________________________________________________
________________________________________________________________________________
(Please print name and address of transferee)
________________________________________________________________________________
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint ______ Attorney, to transfer the
within Right Certificate on the books of the within-named Company, with full
power of substitution.
Dated:___________________
___________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
--------------------------------------------------------------------------------
The undersigned hereby certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by an Acquiring Person or an Affiliate or
Associate thereof (as such terms are defined in the Rights Agreement).
___________________________________
Signature
--------------------------------------------------------------------------------
B-4
<PAGE>
Form of Reverse Side of Right Certificate -- continued
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to exercise
Rights represented by the Right Certificate.)
To: OSI SYSTEMS, INC.
The undersigned hereby irrevocably elects to exercise ______ Rights
represented by this Right Certificate to purchase the Preferred Shares issuable
upon the exercise of such Rights and requests that certificates for such
Preferred Shares be issued in the name of:
Please insert social security
or other identifying number
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
Dated: _______________
___________________________________
Signature
B-5
<PAGE>
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
--------------------------------------------------------------------------------
The undersigned hereby certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by an Acquiring Person or an Affiliate or
Associate thereof (as such terms are defined in the Rights Agreement).
_________________________________
Signature
--------------------------------------------------------------------------------
NOTICE
------
The signature in the Form of Assignment or Form of Election to Purchase, as
the case may be, must conform to the name as written upon the face of this Right
Certificate in every particular, without alteration or enlargement or any change
whatsoever.
In the event the certification set forth above in the Form of Assignment or
the Form of Election to Purchase, as the case may be, is not completed, the
Company and the Rights Agent will deem the beneficial owner of the Rights
evidenced by this Right Certificate to be an Acquiring Person or an Affiliate or
Associate thereof (as such terms are defined in the Rights Agreement) and such
Assignment or Election to Purchase will not be honored.
B-6
<PAGE>
EXHIBIT C
---------
FORM OF SUMMARY OF RIGHTS TO PURCHASE PREFERRED SHARES
On July 31, 2000, the Board of Directors of OSI Systems, Inc. (the
"Company") declared a dividend of one preferred share purchase right (a "Right")
for each outstanding share of common stock, without par value (the "Common
Shares"), of the Company. The dividend is payable on August 17, 2000 (the
"Record Date") to the shareholders of record on that date. Each Right entitles
the registered holder to purchase from the Company one one-thousandth of a share
of Series A Participating Preferred Stock, without par value (the "Preferred
Shares"), of the Company at a price of $100.00 per one one-thousandth of a
Preferred Share (the "Purchase Price"), subject to adjustment. The description
and terms of the Rights are set forth in a Rights Agreement (the "Rights
Agreement") between the Company and U.S. Stock Transfer Corporation, as Rights
Agent (the "Rights Agent").
Until the earlier to occur of (i) 10 days following a public announcement
that a person or group of affiliated or associated persons (an "Acquiring
Person") have acquired beneficial ownership of 20% or more of the outstanding
Common Shares or (ii) 10 business days (or such later date as may be determined
by action of the Board of Directors prior to such time as any person or group of
affiliated persons becomes an Acquiring Person) following the commencement of,
or announcement of an intention to make, a tender offer or exchange offer the
consummation of which would result in the beneficial ownership by a person or
group of 20% or more of the outstanding Common Shares (the earlier of such
dates being called the "Distribution Date"), the Rights will be evidenced, with
respect to any of the Common Share certificates outstanding as of the Record
Date, solely by such Common Share certificate.
The Rights Agreement provides that, until the Distribution Date (or earlier
redemption or expiration of the Rights), the Rights will be transferred with and
only with the Common Shares. Until the Distribution Date (or earlier redemption
or expiration of the Rights), new Common Share certificates issued after the
Record Date upon transfer or new issuance of Common Shares will contain a
notation incorporating the Rights Agreement by reference. Until the
Distribution Date (or earlier redemption or expiration of the Rights), the
surrender for transfer of any certificates for Common Shares outstanding as of
the Record Date, even without such notation or a copy of this Summary of Rights
being surrendered therewith, will also constitute the transfer of the Rights
associated with the Common Shares represented by such certificate. As soon as
practicable following the Distribution
C-1
<PAGE>
Date, separate certificates evidencing the Rights ("Right Certificates") will be
mailed to holders of record of the Common Shares as of the close of business on
the Distribution Date and such separate Right Certificates alone will evidence
the Rights.
The Rights are not exercisable until the Distribution Date. The Rights
will expire on July 31, 2010 (the "Final Expiration Date"), unless the Final
Expiration Date is extended or unless the Rights are earlier redeemed or
exchanged by the Company, in each case, as described below.
The Purchase Price payable, and the number of Preferred Shares or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Preferred
Shares, (ii) upon the grant to holders of the Preferred Shares of certain rights
or warrants to subscribe for or purchase Preferred Shares at a price, or
securities convertible into Preferred Shares with a conversion price, less than
the then-current market price of the Preferred Shares or (iii) upon the
distribution to holders of the Preferred Shares of evidences of indebtedness or
assets (excluding regular periodic cash dividends paid out of earnings or
retained earnings or dividends payable in Preferred Shares) or of subscription
rights or warrants (other than those referred to above).
The number of outstanding Rights and the number of one one-thousandths of a
Preferred Share issuable upon exercise of each Right are also subject to
adjustment in the event of a stock split of the Common Shares or a stock
dividend on the Common Shares payable in Common Shares or subdivisions,
consolidations or combinations of the Common Shares occurring, in any such case,
prior to the Distribution Date.
Preferred Shares purchasable upon exercise of the Rights will not be
redeemable. Each Preferred Share will be entitled to a minimum preferential
quarterly dividend payment of $1 per share but will be entitled to an aggregate
dividend of 1000 times the dividend declared per Common Share. In the event of
liquidation, the holders of the Preferred Shares will be entitled to a minimum
preferential liquidation payment of $100 per share but will be entitled to an
aggregate payment of 1,000 times the payment made per Common Share. Each
Preferred Share will have 1,000 votes, voting together with the Common Shares.
Finally, in the event of any merger, consolidation or other transaction in which
Common Shares are exchanged, each Preferred Share will be entitled to receive
1,000 times the amount received per Common Share. These rights are protected by
customary antidilution provisions.
Because of the nature of the Preferred Shares' dividend, liquidation and
voting rights, the value of the one one-thousandth interest in a Preferred Share
purchasable upon exercise of each Right should approximate the value of one
Common Share.
C-2
<PAGE>
In the event that any person or group of affiliated or associated persons
becomes an Acquiring Person each holder of a Right, other than Rights
beneficially owned by the Acquiring Person (which become null and void), will
thereafter have the right to receive upon exercise that number of Common Shares
having a market value of two times the Purchase Price of the Right (or, under
certain circumstances, Preferred Shares or fractions thereof having the same
market value).
In the event that the Company is acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets or earning
power are sold, after a person or group has become an Acquiring Person, proper
provision will be made so that each holder of a Right will thereafter have the
right to receive, upon the exercise thereof at the then-current exercise price
of the Right, in lieu of Preferred Shares, that number of shares of common stock
of the acquiring company which at the time of such transaction will have a
market value of two times the exercise price of the Right. In the event that
any person or group of affiliated or associated persons becomes an Acquiring
Person, proper provision shall be made so that each holder of a Right, other
than Rights beneficially owned by the Acquiring Person (which will thereafter be
null and void), will thereafter have the right to receive upon exercise, in lieu
of Preferred Shares, that number of Common Shares having a market value of two
times the exercise price of the Right.
At any time after any person or group becomes an Acquiring Person and prior
to the acquisition by such person or group of 50% or more of the outstanding
Common Shares, the Board of Directors of the Company may exchange the Rights
(other than Rights owned by such person or group which will have become null and
void), in whole or in part, at an exchange ratio of one Common Share, or one
one-thousandth of a Preferred Share (or of a share of a class or series of the
Company's preferred stock having equivalent rights, preferences and privileges),
per Right (subject to adjustment).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional Preferred Shares will be issued (other than
fractions which are integral multiples of one one-thousandth of a Preferred
Share, which may, at the election of the Company, be evidenced by depositary
receipts) and in lieu thereof, an adjustment in cash will be made based on the
market price of the Preferred Shares on the last trading day prior to the date
of exercise.
At any time prior to any person or group of affiliated or associated
persons becoming an Acquiring Person, the Board of Directors of the Company may
redeem the Rights in whole, but not in part, at a price of $.001 per Right (the
"Redemption Price"). The redemption of the Rights may be made effective at such
time on such basis with such conditions as the Board of Directors in its sole
discretion may establish. Immediately upon any redemption of the Rights, the
right to exercise the Rights will terminate and the only right of the holders of
Rights will be to receive the Redemption Price.
C-3
<PAGE>
The terms of the Rights may be amended by the Board of Directors of the
Company without the consent of the holders of the Rights, including an amendment
to lower certain thresholds described above to not less than the greater of (i)
the sum of .001% and the largest percentage of the outstanding Common Shares
then known to the Company to be beneficially owned by any person or group of
affiliated or associated persons and (ii) 10%, except that from and after such
time as any person or group of affiliated or associated persons becomes an
Acquiring Person no such amendment may adversely affect the interests of the
holders of the Rights.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
on terms not approved by the Company's Board of Directors. The Rights should
not interfere with any merger or other business combination approved by the
Board of Directors since the Rights may be redeemed by the Company at the
Redemption Price prior to the time that a person or group becomes an Acquiring
Person.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A dated
July 31, 2000. A copy of the Rights Agreement is available free of charge from
the Company. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement,
which is incorporated herein by this reference.
C-4
