SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): April 23, 1999
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ANDREA ELECTRONICS CORPORATION
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(Exact Name of Registrant as Specified in Charter)
New York 1-4324 11-0482020
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
45 Melville Park Road, Melville, New York 11747
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (516) 719-1800
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Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
ITEM 5. OTHER EVENTS.
On April 23, 1999, the Board of Directors of Andrea Electronics
Corporation (the "Company") declared a dividend of one preferred share
purchase right (a "Right") for each outstanding share of Common Stock (the
"Common Stock"), par value $0.50 per share, of the Company. The dividend is
payable on May 7, 1999 (the "Record Date") to the stockholders of record on
that date. Each Right entitles the registered holder to purchase from the
Company one one-thousandth of a share (a "Unit") of Series A Junior
Participating Preferred Stock, par value $.01 per share (the "Series A
Preferred Stock"), of the Company at a price of $50.00 per Unit (the "Purchase
Price"), subject to adjustment. The description and terms of the Rights are
set forth in a Rights Agreement, dated as of April 23, 1999 (the "Rights
Agreement"), between the Company and Continental Stock Transfer & Trust
Company, as Rights Agent (the "Rights Agent").
Until the earlier to occur of (i) 10 days following a public
announcement that an Acquiring Person (as defined herein) has acquired
beneficial ownership of 20% or more of the outstanding Common Stock 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 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 such outstanding
Common Stock (the earlier of such dates being called the "Distribution Date"),
the Rights will be evidenced, with respect to any of the Common Stock
certificates outstanding as of the Record Date or issued prior to the
Distribution Date, by such Common Stock 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 Stock. Until the Distribution Date
(or earlier redemption or expiration of the Rights), new Common Stock
certificates issued after the Record Date, upon transfer or new issuance of
Common Stock will contain a notation incorporating the Rights Agreement by
reference. Until the Distribution Date (or earlier redemption or expiration of
the Rights), the surrender for transfer of any certificates for Common Stock,
outstanding as of the Record Date, even without such notation, will also
constitute the transfer of the Rights associated with the Common Stock
represented by such certificate. As soon as practicable following the
Distribution Date, separate certificates evidencing the Rights ("Rights
Certificates") will be mailed to holders of record of the Common Stock as of
the Close of Business on the Distribution Date and such separate Rights
Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The
Rights will expire at the close of business on May 7, 2009 (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 Units of Preferred
Stock or other securities or property issuable, upon exercise of the Rights
are subject to adjustment from time to time to prevent dilution (i) in the
event of a stock dividend on, or a subdivision, combination or
reclassification of, the Preferred Stock, (ii) upon the grant to holders of
the Units of Preferred Stock of certain rights or warrants to subscribe for or
purchase Units of Preferred Stock at a price, or securities convertible into
Units of Preferred Stock with a conversion price, less than the then current
market price of the Units of Preferred Stock or (iii) upon the distribution to
holders of the Units of Preferred Stock of evidences of indebtedness or assets
(excluding regular periodic cash dividends paid out of earnings or retained
earnings or dividends payable in Units of Preferred Stock) or of subscription
rights or warrants (other than those referred to above).
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 shares of Preferred Stock will be issued
(other than fractions which are integral multiples of one one-thousandth of a
share of Preferred Stock, 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 Units of Preferred Stock on the
last trading day prior to the date of exercise.
The number of outstanding Rights and the number of Units of Preferred
Stock issuable upon exercise of each Right are also subject to adjustment in
the event of a stock split of the Common Stock or a stock dividend on the
Common Stock payable in Common Stock or subdivisions, consolidations or
combinations of the Common Stock occurring, in any such case, prior to the
Distribution Date.
Shares of Preferred Stock purchasable upon exercise of the Rights
will not be redeemable. Each share of Preferred Stock will be entitled to a
dividend equal to one thousand times any dividend declared per share of Common
Stock. In the event of liquidation, each share of Preferred Stock will be
entitled to a payment equal to one thousand times any payment made per share
of Common Stock. Each share of Preferred Stock will have one thousand votes,
voting together with the Common Stock. Finally, in the event of any merger,
consolidation or other transaction in which shares of Common Stock are
exchanged, each share of Preferred Stock will be entitled to receive an amount
equal to one thousand times the amount received per share of Common Stock.
These rights are protected by customary antidilution provisions.
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 will thereafter be void),
will thereafter have the right to receive upon exercise that number of shares
of Common Stock (or cash, other securities or property) having a market value
of two times the exercise price of the Rights.
For example, at an exercise price of $50.00 per Right, each Right not
owned by an Acquiring Person (or by certain related parties and transferees)
following an event set forth in the preceding paragraph would entitle its
holder to purchase $100.00 worth of Common Stock (or other consideration, as
noted above) for $50.00. Assuming that the Common Stock had a per share value
of $25.00 at such time, the holder of each valid Right would be entitled to
purchase four shares of Common Stock for $50.00.
In the event that, after the Rights become exercisable, the Company
is acquired in a merger or other business combination transaction with an
Acquiring Person or an affiliate thereof, or 50% or more of its consolidated
assets or earning power are sold to an Acquiring Person or an affiliate
thereof, proper provision will be made so that each holder of a Right will
thereafter have the right to receive, upon exercise thereof at the then
current exercise price of the Rights, 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 Rights.
"Acquiring Person" shall mean any person who constitutes an
"Interested Shareholder" as defined in Section 912 of the New York Business
Corporation Law, in effect from time to time, (generally defined to include
any person who or which, together with all persons affiliated or associated
with it, shall be the beneficial owner of 20% or more of the shares of Common
Stock then outstanding), but shall not include the Company, any subsidiary of
the Company, any employee benefit plan of the Company or of any subsidiary of
the Company, or any person or entity organized, appointed or established by
the Company for or pursuant to the terms of any such plan.
At any time after the acquisition by a person or group of affiliated
or associated persons of beneficial ownership of 20% or more of the
outstanding shares of Common Stock and prior to the acquisition by such person
or group of 50% or more of the outstanding Common Stock, the Board of
Directors of the Company may exchange all or part of the Rights (other than
Rights owned by such person or group which have become void) for shares of
Common Stock at an exchange ratio which shall equal one share of Common Stock
per Right, subject to adjustment to reflect stock splits, stock dividends and
similar transactions occurring after the date hereof.
At any time within ten (10) business days after a person or group of
affiliated or associated persons becomes an Acquiring Person or within ten
(10) business days after the announcement of a tender or exchange offer
(unless the Board of Directors extends such ten-day period), the Board of
Directors of the Company may redeem the Rights in whole, but not in part, at a
price of $0.01 per Right (the "Redemption Price"). The redemption of the
rights may be made effective at such time on such basis and with such
conditions as the Board of Directors in its sole discretion may establish.
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. The Rights are also redeemable under other
circumstances as specified in the Rights Agreement.
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 except that from
and after a Distribution Date 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 stockholder 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, except pursuant to
an offer conditioned on a substantial number of rights being acquired. The
Rights should not interfere with any merger or other business combination
approved by the Board of Directors because the Rights may be redeemed by the
Company at the Redemption Price prior to the occurrence of a Distribution
Date.
The information set forth in this report summarizes certain
provisions of the Rights Agreement. Such information is qualified in its
entirety by reference to the Rights Agreement.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits:
Exhibit
Number Description
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4.1 Rights Agreement dated as of April 23, 1999 between
the Company and Continental Stock Transfer and
Trust Company, as Rights Agent, including the form
of Certificate of Amendment to Certificate of
Incorporation as Exhibit A, the form of Rights
Certificate as Exhibit B and the Summary of Rights
to Purchase Shares of Series A Preferred Stock.
99.1 Press Release.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: May 7, 1999 ANDREA ELECTRONICS CORPORATION
(Registrant)
/s/ Patrick D. Pilch
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Patrick D. Pilch
Executive Vice President,
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
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Exhibit No. Description
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4.1 Rights Agreement dated as of April 23, 1999 between
the Company and Continental Stock Transfer and
Trust Company, as Rights Agent, including the form
of Certificate of Amendment to Certificate of
Incorporation as Exhibit A, the form of Rights
Certificate as Exhibit B and the Summary of Rights
to Purchase Shares of Series A Preferred Stock.
99.1 Press Release.
<PAGE>
EXHIBIT 4.1
ANDREA ELECTRONICS CORPORATION
AND
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
(RIGHTS AGENT)
RIGHTS AGREEMENT
DATED AS OF APRIL 23, 1999
<PAGE>
TABLE OF CONTENTS
Page
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Section 1. Certain Definitions 1
Section 2. Appointment of Rights Agent 4
Section 3. Issue of Rights Certificates 5
Section 4. Form of Rights Certificates 6
Section 5. Countersignature and Registration 7
Section 6. Transfer, Split-Up, Combination and Exchange of
Rights Certificates; Mutilated, Destroyed, Lost or
Stolen Rights Certificates 8
Section 7. Exercise of Rights; Purchase Price; Expiration Date
of Rights 9
Section 8. Cancellation and Destruction of Rights Certificates 10
Section 9. Reservation and Availability of Capital Stock 11
Section 10. Preferred Stock Record Date 12
Section 11. Adjustment of Purchase Price, Number of Shares or
Number of Rights 13
Section 12. Certificate of Adjusted Purchase Price or Number of Shares 20
Section 13. Consolidation, Merger or Sale or Transfer of Assets
or Earning Power 20
Section 14. Fractional Rights and Fractional Shares 23
Section 15. Rights of Action 24
Section 16. Agreement of Rights Holders 24
Section 17. Rights Certificate Holder Not Deemed a Stockholder 25
Section 18. Concerning the Rights Agent 25
Section 19. Merger or Consolidation or Change of Name of Rights Agent 26
Section 20. Duties of Rights Agent 26
Section 21. Change of Rights Agent 28
<PAGE>
TABLE OF CONTENTS (Continued)
Page
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Section 22. Issuance of New Rights Certificates 29
Section 23. Redemption and Termination 30
Section 24. Exchange 30
Section 25. Notice of Certain Events 32
Section 26. Notices 32
Section 27. Supplements and Amendments 33
Section 28. Successors 34
Section 29. Determinations and Actions by the Board of Directors 34
Section 30. Benefits of This Agreement 34
Section 31. Severability 34
Section 32. Governing Law 34
Section 33. Counterparts 35
Section 34. Descriptive Headings 35
EXHIBITS
Exhibit A Form of Certificate of Amendment to the Certificate of
Incorporation setting forth the number, designations,
powers, relative rights, limitations and other
distinguishing characteristics of the Series A Junior
Participating Preferred Stock
Exhibit B Form of Rights Certificate
Exhibit C Summary of Rights to Purchase Shares of Series A Preferred Stock
<PAGE>
RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of April 23, 1999 between Andrea
Electronics Corporation, a New York corporation (the "Company"), and
Continental Stock Transfer & Trust Company, a New York banking corporation
(the "Rights Agent").
WHEREAS, effective April 23, 1999 (the "Rights Dividend Declaration
Date"), the Board of Directors authorized and declared a distribution of one
Right (each, a "Right") for each share of Common Stock (as hereinafter
defined) of the Company outstanding as of the Close of Business (as
hereinafter defined) on May 7, 1999 (the "Record Date"), each Right initially
representing the right to purchase one one-thousandth of a share (a "Unit") of
Preferred Stock (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 (as such number may hereinafter be adjusted pursuant to
the provisions of Section 11(p) hereof) with respect to each share of Common
Stock that shall become outstanding between the Record Date and the earliest
of the Distribution Date, the Redemption Date or the Final Expiration Date (as
hereinafter defined).
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms have the meanings indicated:
"Acquiring Person" shall mean any Person (as hereinafter defined) who
constitutes an "Interested Shareholder" as defined in Section 912 of the NYBCL
(as hereinafter defined), but shall not include (i) the Company, (ii) any
Subsidiary (as hereinafter defined) of the Company, (iii) any employee benefit
plan of the Company or of any Subsidiary of the Company, (iv) any Person or
entity organized, appointed or established by the Company for or pursuant to
the terms of any such plan, (v) any Person who becomes an "Interested
Shareholder" as a result of a reduction in the number of shares of Common
Stock outstanding due to the repurchase of shares of Common Stock from time to
time by the Company unless and until such Person, after becoming aware that
such Person has become an "Interested Shareholder" acquires beneficial
ownership of additional shares of Common Stock representing one percent (1%)
or more of the shares of Common Stock then outstanding or (vi) any such Person
who has reported or is required to report such ownership on Schedule 13G under
the Exchange Act (as hereinafter defined) (or any comparable or successor
report) or on Schedule 13D under the Exchange Act (or any comparable or
successor report) which Schedule 13D does not state any intention to or
reserve the right to control or influence the management or policies of the
Company or engage in any of the actions specified in Item 4 (or any comparable
or successor Item) of such Schedule (other than the disposition of the Common
Stock) and, within ten (10) business days of being requested by the Company to
advise it regarding the same, certifies to the Company that such Person
acquired shares of Common Stock causing such Person to become an "Interested
Shareholder" inadvertently or without knowledge of the terms of the Rights and
who, together with all Affiliates and Associates, thereafter does not acquire
additional shares of Common Stock while such Person is an "Interested
Shareholder;" provided, however, that if the Person requested to so certify
fails to do so within ten (10) business days, then such Person shall become an
Acquiring Person immediately after such ten (10) business day period;
provided, further, however, that any transferee from such Person who becomes
the Beneficial Owner of 20% or more of the Common Shares of the Company then
outstanding shall nevertheless be deemed to be an "Acquiring Person;"
provided, further, however, that for purposes of determining whether such
Person is an "Acquiring Person," a Person engaged in business as an
underwriter of securities shall not be deemed to be an Acquiring Person as a
result of such Person becoming the "Beneficial Owner" of any securities
acquired through such Person's participation in good faith in a firm
commitment underwriting unless such Person is the "Beneficial Owner" of such
securities upon the expiration of forty (40) days after the date of such
acquisition.
"Adjustment Shares" has the meaning set forth in Section 11(a)(ii).
"Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Section 912 of the NYBCL.
"AMEX" shall have the meaning set forth in Section 11(d)(i) hereof.
A Person shall be deemed the "Beneficial Owner" of, and shall be
deemed to "beneficially own," any securities if such Person constitutes, with
respect to such securities, a "Beneficial Owner" as defined in Section 912 of
the NYBCL; provided, however, that for purposes of this Agreement (including
for purposes of determining whether a Person will be deemed an Interested
Shareholder under Section 912 of the NYBCL), a Person engaged in business as
an underwriter of securities shall not be deemed to be the "Beneficial Owner"
of, or to "beneficially own," (A) any securities acquired through such
Person's participation in good faith in a firm commitment underwriting until
the expiration of forty (40) days after the date of such acquisition, (B)
securities issuable upon exercise of Rights at any time prior to the
occurrence of a Triggering Event or (C) securities issuable upon exercise of
Rights from and after the occurrence of a Triggering Event which Rights were
acquired by such Person or any of such Person's Affiliates or Associates prior
to the Distribution Date or pursuant to Section 3(a) or Section 22 hereof (the
"Original Rights") or pursuant to Section 11(i) hereof in connection with an
adjustment made with respect to any Original Rights.
"Business Day" shall mean any day other than a Saturday, a Sunday, or
a day on which banking institutions in the State of New York or the state in
which the principal office of the Rights Agent is located are authorized or
obligated by law or executive order to close.
"Certificate of Incorporation" shall mean the Restated Certificate of
Incorporation of the Company, as amended from time to time.
"Close of Business" on any given date shall mean 5:00 P.M., New York
time, on such date; provided, however, that if such date is not a Business Day
it shall mean 5:00 P.M., New York time, on the next succeeding Business Day.
"Common Stock" when used with reference to the Company shall mean the
shares of common stock, par value $0.50, of the Company. "Common Stock" when
used with reference to any Person other than the Company shall mean the
capital stock (or other equity interest) with the greatest voting power of
such other Person or, if such other Person is a Subsidiary of another Person,
the Person or Persons which ultimately control such first-mentioned Person.
"common stock equivalents" shall have the meaning set forth in
Section 11(a)(iii) hereof.
"Company" shall have the meaning set forth in the recitals to this
Agreement.
"current per share market price" shall have the meaning set forth in
Section 11(d)(i) hereof.
"Current Value" shall have the meaning set forth in Section
11(a)(iii) hereof.
"Distribution Date" shall have the meaning set forth in Section 3(a)
hereof.
"equivalent preferred shares" shall have the meaning set forth in
Section 11(b) hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Exchange Act Regulations" shall mean the General Rules and
Regulations under the Exchange Act.
"Exchange Ratio" shall have the meaning set forth in Section 24(a)
hereof.
"Expiration Date" shall have the meaning set forth in Section 7(a)
hereof.
"Final Expiration Date" shall have the meaning set forth in Section
7(a) hereof.
"NASDAQ" shall have the meaning set forth in Section 11(d)(i) hereof.
"NYBCL" shall mean the New York Business Corporation Law in effect
from time to time.
"Person" shall mean any individual, firm, corporation or other
entity, and shall include any successor (by merger or otherwise) of such
entity.
"Preferred Stock" shall mean shares of Series A Preferred Stock, par
value $.01, of the Company having the rights and preferences set forth in the
Form of Certificate of Amendment to the Certificate of Incorporation attached
to this Agreement as Exhibit A.
"Purchase Price" shall have the meaning set forth in Section 4(a) and
Section 7(b) hereof, subject to adjustment.
"Record Date" shall have the meaning set forth in the recitals to
this Agreement.
"Redemption Date" shall have the meaning set forth in Section 7(a)
hereof.
"Redemption Price" shall have the meaning set forth in Section 23(a)
hereof.
"Right" shall have the meaning set forth in the recitals to this
Agreement.
"Rights Agent" shall have the meaning set forth in the recitals to
this Agreement.
"Rights Certificate" shall have the meaning set forth in Section 3(a)
hereof.
"Rights Dividend Declaration Date" shall have the meaning set forth
in the recitals to this Agreement.
"Section 11(a)(ii) Event" shall mean any event described in Section
11(a)(ii)(A) or (B) hereof.
"Section 11(a)(ii) Trigger Date" shall have the meaning set forth in
Section 11(a)(iii) hereof.
"Section 13 Event" shall mean any event described in clause (x), (y)
or (z) of Section 13(a) hereof.
"Section 24(a) Exchange Ratio" has the meaning set forth in Section
24(a) hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Shares Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) of the Exchange Act) by
the Company or an Acquiring Person that an Acquiring Person has become such.
"Spread" shall have the meaning set forth in Section 11(a)(iii) hereof.
"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.
"Summary of Rights" shall have the meaning set forth in Section 3(b)
hereof.
"Trading Day" shall have the meaning set forth in Section 11(d)(i)
hereof.
"Triggering Event" shall mean any Section 11(a)(ii) Event or any
Section 13 Event.
Section 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints
the Rights Agent to act as agent for the Company in accordance with the terms
and conditions hereof, and the Rights Agent hereby accepts such appointment.
The Company may from time to time appoint such co-Rights Agents as it may deem
necessary or desirable.
Section 3. ISSUE OF RIGHTS CERTIFICATES.
(a) Until the earlier of (i) the Close of Business on the tenth
Business Day following a Shares Acquisition Date (or, if the tenth Business
Day after the Shares Acquisition Date occurs before the Record Date, the Close
of Business on the Record Date) and (ii) the Close of Business on the tenth
Business Day (or such later date as may be determined by action of the
Company's Board of Directors prior to such time as any Person becomes an
Acquiring Person and of which the Company will give the Rights Agent prompt
written notice) after the date that a tender or exchange offer by any Person
(other than the Company, any Subsidiary of the Company, any employee benefit
plan of the Company or of any Subsidiary of the Company or any entity holding
shares of Common Stock for or pursuant to the terms of any such plan) is first
published or sent or given within the meaning of Rule 14d-4(a) of the Exchange
Act Regulations or any successor rule 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 shares of Common Stock for or pursuant to the
terms of any such plan) to commence, a tender or exchange offer, if upon
consummation thereof such Person would be an Acquiring Person, including any
such date which is after the date of this Agreement and prior to the issuance
of the Rights (the earlier of (i) and (ii) above being the "Distribution
Date"), (x) the Rights will be evidenced (subject to the provisions of Section
3(b) hereof) by the certificates for shares of Common Stock registered in the
names of the holders thereof (which certificates shall also be deemed to be
Rights Certificates) and not by separate Rights Certificates, and (y) the
right to receive Rights Certificates will be transferable only in connection
with the transfer of shares of Common Stock. As soon as practicable after the
Distribution Date, the Company will notify the Rights Agent thereof and the
Company will prepare and execute, the Rights Agent will countersign, and the
Company will send or cause to be sent (and the Rights Agent will, if
requested, send) by first-class, insured, postage-prepaid mail, to each record
holder of shares of Common Stock as of the Close of Business on the
Distribution Date, at the address of such holder shown on the records of the
Company, a Rights Certificate, in substantially the form of Exhibit B hereto
(a "Rights Certificate"), evidencing one Right for each share of Common Stock
so held. In the event that an adjustment in the number of Rights per share of
Common Stock has been made pursuant to Section 11(p) hereof, at the time of
distribution of the Right Certificates, the Company shall make the necessary
and appropriate rounding adjustments (in accordance with Section 14(a) hereof)
so that Rights Certificates representing only whole numbers of Rights are
distributed and cash is paid in lieu of any fractional Rights. As of the
Distribution Date, the Rights will be evidenced solely by such Rights
Certificates.
(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 Stock,
in substantially the form of Exhibit C hereto (the "Summary of Rights"), by
first-class, postage-prepaid mail, to each record holder of shares of Common
Stock as of the Close of Business on the Record Date, at the address of such
holder shown on the records of the Company. With respect to certificates for
shares of Common Stock outstanding as of the Record Date or issued subsequent
to the Record Date, until the Distribution Date, the Rights will be evidenced
by such certificates registered in the names of the holders thereof together
with a copy of the Summary of Rights attached thereto. Until the Distribution
Date (or the Expiration Date), the surrender for transfer of any certificate
for shares of Common Stock outstanding on the Record Date, with or without a
copy of the Summary of Rights attached thereto, shall also constitute the
transfer of the Rights associated with the shares of Common Stock represented
thereby.
(c) Subject to Section 22 hereof, Rights shall be issued in respect
of all shares of Common Stock that are issued (whether originally issued or
from the Company's treasury) after the Record Date but prior to the earlier of
the Distribution Date or the Expiration Date. Certificates for shares of
Common Stock which become outstanding (including, without limitation,
reacquired shares of Common Stock referred to in the last sentence of this
paragraph (c)) after the Record Date but prior to the earlier of the
Distribution Date and the Expiration Date shall have impressed on, printed on,
written on or otherwise affixed to them the following legend:
This certificate also evidences and entitles the holder hereof
to certain rights as set forth in a Rights Agreement between
Andrea Electronics Corporation and Continental Stock Transfer
& Trust Company, as Rights Agent, dated as of April 23, 1999
(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 Andrea Electronics
Corporation. 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. Andrea Electronics Corporation will mail to the
holder of this certificate a copy of the Rights Agreement
without charge after receipt of a written request therefor.
Under certain circumstances, as set forth in the Rights
Agreement, Rights issued to any Person who becomes an Acquiring
Person (as defined in the Rights Agreement), whether currently
held by or on behalf of such person or by any subsequent holder,
may become null and void.
With respect to such certificates containing the foregoing legend, until the
earlier of the Distribution Date and the Expiration Date, the Rights
associated with the shares of Common Stock 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 shares of Common Stock represented thereby. In the event
that the Company purchases or acquires any shares of Common Stock after the
Record Date but prior to the Distribution Date, any Rights associated with
such shares of Common Stock shall be deemed cancelled and retired so that the
Company shall not be entitled to exercise any Rights associated with the
shares of Common Stock which are no longer outstanding.
Section 4. FORM OF RIGHTS CERTIFICATES.
(a) The Rights Certificates (and the forms of election to purchase
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 are not inconsistent with the provisions
of this Agreement, or as may be required to comply with any applicable law or
with any rule or regulation made pursuant thereto or with any rule or
regulation of any stock exchange or transaction reporting system on which the
Rights may from time to time be listed, or to conform to usage. Subject to the
provisions of Section 11 and Section 22 hereof, the Rights Certificates shall
entitle the holders thereof to purchase the number of Units of Preferred Stock
as shall be set forth therein at the price per Unit of Preferred Stock set
forth therein (such exercise price per Unit, the "Purchase Price"), but the
amount and type of securities purchasable upon the exercise of each Right and
the Purchase Price shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant hereto that represents
Rights beneficially owned by: (i) an Acquiring Person or any Associate or
Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or
of any such Associate or Affiliate) who becomes a transferee after the
Acquiring Person becomes such or (iii) a transferee of an Acquiring Person (or
of any such Associate or Affiliate) who becomes a transferee prior to or
concurrently with the Acquiring Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from the
Acquiring Person to holders of equity interests in such Acquiring Person or to
any Person with whom such Acquiring Person has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a
transfer which the Board of Directors of the Company has determined is part of
a plan, arrangement or understanding which has as a primary purpose or effect
avoidance of Section 7(e) hereof, and any Rights Certificate issued pursuant
to Section 6 or Section 11 hereof upon the transfer, exchange, replacement or
adjustment of any other Rights Certificate referred to in this sentence, shall
contain (to the extent feasible) the following legend:
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring
Person or an Affiliate or Associate of an Acquiring Person (as
such terms are defined in the Rights Agreement between Andrea
Electronics Corporation and Continental Stock Transfer & Trust
Company, as Rights Agent, dated as of April 23, 1999 (the
"Rights Agreement"). Accordingly, this Rights Certificate and
the Rights represented hereby may become null and void in the
circumstances specified in Section 7(e) of the Rights Agreement.
Section 5. COUNTERSIGNATURE AND REGISTRATION.
(a) The Rights Certificates shall be executed on behalf of the
Company by any Co-Chairman of the Board, its President or its Executive Vice
President, either manually or by facsimile signature, shall have affixed
thereto the Company's seal or a facsimile thereof, and shall be attested by
the Secretary of the Company, either manually or by facsimile signature. The
Rights Certificates shall be manually countersigned by the Rights Agent and
shall not be valid for any purpose unless countersigned. In case any officer
of the Company who shall have signed any of the Rights Certificates shall
cease to be such officer of the Company before countersignature by the Rights
Agent and issuance and delivery by the Company, such Rights Certificates,
nevertheless, may be countersigned by the Rights Agent and issued and
delivered by the Company with the same force and effect as though the person
who signed such Rights Certificates had not ceased to be such officer of the
Company; and any Rights Certificate may be signed on behalf of the Company by
any person who, at the actual date of the execution of such Rights
Certificate, shall be a proper officer of the Company to sign such Rights
Certificate, although at the date of the execution of this Rights Agreement
any such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its office designated for such purpose, books for
registration and transfer of the Rights Certificates issued hereunder. Such
books shall show the names and addresses of the respective holders of the
Rights Certificates, the number of Rights evidenced on its face by each of the
Rights Certificates and the date of each of the Rights Certificates.
Section 6. TRANSFER, SPLIT-UP, COMBINATION AND EXCHANGE OF RIGHTS
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS CERTIFICATES.
(a) Subject to the provisions of Sections 4(b), 7(e) and 14 hereof,
at any time after the Close of Business on the Distribution Date, and at or
prior to the Close of Business on the Expiration Date, any Rights Certificate
or Rights Certificates (other than Rights Certificates representing Rights
that have been exchanged pursuant to Section 24 hereof) may be transferred,
split up, combined or exchanged for another Rights Certificate or Rights
Certificates, entitling the registered holder to purchase a like number of
Units of Preferred Stock (or, following a Triggering Event, Common Stock,
other securities, cash or other assets, as the case may be) as the Rights
Certificate or Rights Certificates surrendered then entitled such holder to
purchase. Any registered holder desiring to transfer, split up, combine or
exchange any Rights Certificate or Rights Certificates shall make such request
in writing delivered to the Rights Agent, and shall surrender the Rights
Certificate or Rights Certificates to be transferred, split up, combined or
exchanged at the office of the Rights Agent designated for such purpose.
Neither the Rights Agent nor the Company shall be obligated to take any action
whatsoever with respect to the transfer of any such surrendered Rights
Certificate until the registered holder shall have completed and signed the
certificate contained in the form of assignment on the reverse side of such
Rights Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request. Thereupon the
Rights Agent shall, subject to Sections 4(b), 7(e) and 14 hereof, countersign
and deliver to the person entitled thereto a Rights Certificate or Rights
Certificates, as the case may be, as so requested. The Company may require
payment of a sum sufficient to cover any tax or governmental charge that may
be imposed in connection with any transfer, split up, combination or exchange
of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation
of a Rights Certificate, and, in case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to them, and, at the Company's
request, reimbursement to the Company and the Rights Agent of all reasonable
expenses incidental thereto, and upon surrender to the Rights Agent and
cancellation of the Rights Certificate if mutilated, the Company will make and
deliver a new Rights Certificate of like tenor to the Rights Agent for
delivery to the registered holder in lieu of the Rights Certificate so lost,
stolen, destroyed or mutilated.
Section 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF
RIGHTS.
(a) Except as provided in Sections 23(c) and 7(e), the registered
holder of any Rights Certificate may exercise the Rights evidenced thereby
(except as otherwise provided herein) in whole or in part at any time after
the Distribution Date upon surrender of the Rights Certificate, with the form
of election to purchase and certification on the reverse side thereof duly
executed, to the Rights Agent at the office of the Rights Agent designated for
such purpose, together with payment of the Purchase Price for each Unit of
Preferred Stock (or other securities, cash or other assets, as the case may
be) as to which the Rights are then exercisable, at or prior to the earliest
of (i) the Close of Business on the tenth anniversary hereof (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 (the earlier of (i),
(ii) and (iii) being the "Expiration Date").
(b) The Purchase Price for each Unit of Preferred Stock pursuant to
the exercise of a Right shall initially be $50.00, shall be subject to
adjustment from time to time as provided in Sections 11 and 13 hereof and
shall be payable in lawful money of the United States of America in accordance
with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase duly executed, accompanied by
payment of the Purchase Price for the number of Units of Preferred Stock (or
other securities, cash or other assets, as the case may be) to be purchased
and an amount equal to any applicable transfer tax required to be paid by the
holder of such Rights Certificate in accordance with Section 9 hereof in cash,
or by certified check or cashier's check payable to the order of the Company,
the Rights Agent shall, subject to Section 20(k) hereof, thereupon promptly
(i) (A) requisition from any transfer agent of the Preferred Stock (or make
available, if the Rights Agent is the transfer agent for the Preferred Stock)
a certificate or certificates for the number of Units of Preferred Stock to be
purchased and the Company hereby irrevocably authorizes its transfer agent to
comply with all such requests or (B) if the Company shall have elected to
deposit the total number of Units of Preferred Stock issuable upon exercise of
the Rights hereunder with a depositary agent, requisition from the depositary
agent of a depositary receipt or depositary receipts representing such number
of Units of Preferred Stock as are to be purchased (in which case certificates
for the Units of Preferred Stock represented by such receipt or receipts shall
be deposited by the transfer agent with the depositary agent) and the Company
hereby directs the 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
Rights Certificate, registered in such name or names as may be designated by
such holder and (iv) when appropriate, after receipt thereof, deliver such
cash to or upon the order of the registered holder of such Rights Certificate.
The payment of the Purchase Price (as such amount may be reduced (including to
zero) pursuant to Section 11(a)(iii) hereof) may be made in cash or by
certified bank check or bank draft payable to the order of the Company. In the
event that the Company is obligated to issue other securities (including
Common Stock) of the Company, pay cash and/or distribute other property
pursuant to Section 11(a) hereof, the Company will make all arrangements
necessary so that such other securities, cash and/or other property are
available for distribution by the Rights Agent, if and when appropriate. The
Company reserves the right to require prior to the occurrence of a Triggering
Event that, upon exercise of the Rights, a number of Rights be exercised so
that only whole shares of Preferred Stock would be issued.
(d) In case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights Certificate
evidencing a number of Rights equivalent to the number of Rights remaining
unexercised shall be issued by the Rights Agent to the registered holder of
such Rights Certificate or to such registered holder's duly authorized
assigns, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of a Triggering Event, any Rights beneficially
owned by (i) an Acquiring Person or an Associate or Affiliate of an Acquiring
Person, (ii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee after the Acquiring Person becomes such,
(iii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee prior to or concurrently with the
Acquiring Person becoming such and receives such Rights pursuant to either (A)
a transfer (whether or not for consideration) from the Acquiring Person to
holders of equity interests in such Acquiring Person or to any Person with
whom the Acquiring Person has any continuing agreement, arrangement or
understanding regarding the transferred Rights or (B) a transfer which the
Board of Directors of the Company has determined is part of a plan,
arrangement or understanding which has as a primary purpose or effect the
avoidance of this Section 7(e) or (iv) any subsequent transferee shall become
null and void without any further action and no holder of such Rights shall
have any rights whatsoever with respect to such Rights, whether under any
provision of this Agreement or otherwise. The Company shall use all reasonable
efforts to ensure that the provisions of this Section 7(e) and Section 4(b)
hereof are complied with, but shall have no liability to any holder of Rights
Certificates or to any other Person as a result of its failure to make any
determinations with respect to an Acquiring Person or any of such Acquiring
Person's Affiliates, Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder upon the occurrence of any
purported exercise as set forth in this Section 7 unless such registered
holder shall have (i) completed and signed the certificate contained in the
form of election to purchase set forth on the reverse side of the Rights
Certificate surrendered for such exercise and (ii) provided such additional
evidence of the identity of the Beneficial Owner (or former Beneficial Owner)
or Affiliates or Associates thereof as the Company shall reasonably request.
Section 8. CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATES. All
Rights Certificates surrendered for the purpose of exercise, transfer, split
up, combination or exchange shall, if surrendered to the Company or 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
Rights Certificates shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Rights Agreement. The Company shall
deliver to the Rights Agent for cancellation and retirement, and the Rights
Agent shall so cancel and retire, any other Rights Certificate purchased or
acquired by the Company otherwise than upon the exercise thereof. The Rights
Agent shall deliver all cancelled Rights Certificates to the Company, or
shall, at the written request of the Company, destroy such cancelled Rights
Certificates, and in such case shall deliver a certificate of destruction
thereof to the Company.
Section 9. RESERVATION AND AVAILABILITY OF CAPITAL STOCK.
(a) The Company covenants and agrees that it will cause to be
reserved and kept available out of and to the extent of its authorized and
unissued shares of Preferred Stock (and, following the occurrence of a
Triggering Event, out of its authorized and unissued shares of Common Stock
and/or other securities or out of its authorized and issued shares held in its
treasury) not reserved for another purpose that will be sufficient to permit
the exercise in full of all outstanding Rights. Upon the occurrence of any
events resulting in an increase in the aggregate number of shares of Preferred
Stock (and, following the occurrence of a Triggering Event, Common Stock
and/or other securities) issuable upon exercise of all outstanding Rights
above the number then reserved, the Company shall make appropriate increases
in the number of shares so reserved.
(b) If the shares of Preferred Stock (and, following the occurrence
of a Triggering Event, Common Stock and/or other securities) to be issued and
delivered upon the exercise of the Rights are at any time listed on a national
securities exchange or included for quotation on any transaction reporting
system, the Company shall during the period from the Distribution Date to the
Expiration Date use its best efforts to cause all shares reserved for such
issuance to be listed on such exchange or included for quotation on any such
transaction reporting system upon official notice of issuance upon such
exercise.
(c) The Company shall use its best efforts to (i) file, as soon as
practicable following the earliest date after the first occurrence of a
Section 11(a)(ii) Event in which the consideration to be delivered by the
Company upon exercise of the Rights has been determined in accordance with
Section 11(a)(iii) hereof, or as soon as is required by law following the
Distribution Date, as the case may be, a registration statement under the
Securities Act, with respect to the securities purchasable upon exercise of
the Rights on an appropriate form, (ii) cause such registration statement to
become effective as soon as practicable after such filing and (iii) cause such
registration statement to remain effective (with a prospectus at all times
meeting the requirements of the Securities Act) until the earlier of (A) the
date as of which the Rights are no longer exercisable for such securities and
(B) the Expiration Date. The Company will also take such action as may be
appropriate under, or to ensure compliance with, the securities or "blue sky"
laws of the various states in connection with the exercisability of the
Rights. The Company may temporarily suspend, for a period of time not to
exceed ninety (90) days after the date set forth in clause (i) of the first
sentence of this Section 9(c), the exercisability of the Rights in order to
prepare and file such registration statement and permit it to become
effective. Upon any such suspension, the Company shall issue a public
announcement stating that the exercisability of the Rights has been
temporarily suspended, as well as a public announcement at such time as the
suspension is no longer in effect. In addition, if the Company shall determine
that a registration statement is required following the Distribution Date, the
Company may temporarily suspend the exercisability of the Rights until such
time as a registration statement has been declared effective. Notwithstanding
any provision of this Agreement to the contrary, the Rights shall not be
exercisable in any jurisdiction, unless the requisite qualification in such
jurisdiction shall have been obtained, or an exemption therefrom shall be
available and until a registration statement has been declared effective.
(d) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all Units of Preferred Stock (and,
following the occurrence of a Triggering Event, shares of Common Stock and/or
other securities) delivered upon exercise of a Right shall, at the time of
delivery of the certificates for such Units or shares (subject to payment of
the Purchase Price), be duly and validly authorized and issued and fully paid
and non-assessable.
(e) The Company further covenants and agrees that it will pay when
due and payable any and all federal and state transfer taxes and charges which
may be payable in respect of the issuance or delivery of the Rights
Certificates or of any Units of Preferred Stock (or shares Common Stock and/or
other securities, as the case may be) upon the exercise of Rights. The Company
shall not, however, be required to pay any transfer tax which may be payable
in respect of any transfer or delivery of Rights Certificates to a person
other than, or the issuance or delivery of certificates or depositary receipts
for Units of Preferred Stock (or shares of Common Stock and/or other
securities, as the case may be) in a name other than that of, the registered
holder of the Rights Certificate evidencing Rights surrendered for exercise or
to issue or to deliver any certificates or depositary receipts for Units of
Preferred Stock (or shares of Common Stock and/or other securities, as the
case may be) in a name other than that of the registered holder upon the
exercise of any Rights until any such tax shall have been paid (any such tax
being payable by the holder of such Rights Certificate at the time of
surrender) or until it has been established to the Company's reasonable
satisfaction that no such tax is due.
Section 10. PREFERRED STOCK RECORD DATE. Each person in whose name
any certificate for Units of Preferred Stock (or, following the occurrence of
a Triggering Event, shares of Common Stock and/or other securities) is issued
upon the exercise of Rights shall for all purposes be deemed to have become
the holder of record of the Units of Preferred Stock (or, following the
occurrence of a Triggering Event, shares of Common Stock and/or other
securities) represented thereby on, and such certificate shall be dated, the
date upon which the Rights Certificate evidencing such Rights was duly
surrendered and payment of the Purchase Price (and any applicable transfer
taxes) was made; provided, however, that if the date of such surrender and
payment is a date upon which the Preferred Stock (or Common Stock and/or other
securities, as the case may be) transfer books of the Company are closed, such
person shall be deemed to have become the record holder of such shares on, and
such certificate shall be dated, the next succeeding Business Day on which the
Preferred Stock (or Common Stock and/or other securities, as the case may be)
transfer books of the Company are open; provided further, however, that if
delivery of Units of Preferred Stock (or shares of Common Stock and/or other
securities, as the case may be) is delayed pursuant to Section 9(c), such
Persons shall be deemed to have become the record holders of such Units of
Preferred Stock (or shares of Common Stock and/or other securities, as the
case may be) only when such Units (or shares) first become deliverable. Prior
to the exercise of the Rights evidenced thereby, the holder of a Rights
Certificate shall not be entitled to any rights of a stockholder of the
Company with respect to securities for which the Rights shall be exercisable,
including, without limitation, the right to vote, to receive dividends or
other distributions or to exercise any preemptive rights, and shall not be
entitled to receive any notice of any proceedings of the Company, except as
provided herein.
Section 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER OF SHARES OR NUMBER
OF RIGHTS. The Purchase Price, the number and kinds of securities covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
(a)(i) In the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Preferred Stock payable in shares
of Preferred Stock, (B) subdivide the outstanding shares of Preferred Stock,
(C) combine the outstanding Preferred Stock into a smaller number of shares
Preferred Stock or (D) issue any shares of its capital stock in a
reclassification of the Preferred Stock (including any such reclassification
in connection with a consolidation or merger in which the Company is the
continuing or surviving corporation), except as otherwise provided in this
Section 11(a) and Section 7(e) hereof, the Purchase Price in effect at the
time of the record date for such dividend or of the effective date of such
subdivision, combination or reclassification, and the number and kind of
shares of Preferred Stock or capital stock, as the case may be, issuable on
such date, shall be proportionately adjusted so that the holder of any Rights
exercised after such time shall be entitled to receive the aggregate number
and kind of shares of Preferred Stock or capital stock, as the case may be,
which, if such Rights had been exercised immediately prior to such date and at
a time when the Preferred Stock transfer books of the Company were open, such
holder would have owned upon such exercise and been entitled to receive by
virtue of such dividend, subdivision, combination or reclassification;
provided, however, that in no event shall the consideration to be paid upon
the exercise of one Right be less than the aggregate par value of the shares
of capital stock of the Company issuable upon exercise of one Right. If an
event occurs which would require an adjustment under both this Section
11(a)(i) and Section 11(a)(ii), the adjustment provided for in this Section
11(a)(i) shall be in addition to, and shall be made prior, to any adjustment
required pursuant to Section 11(a)(ii).
(ii) Subject to Section 24 of this Agreement, in the event that (A)
any Person shall become an Acquiring Person, unless the event causing the
Person to become an Acquiring Person is a transaction set forth in Section
13(a); or (B) during such time as there is an Acquiring Person, there shall be
any reclassification of securities (including any reverse stock split), or
recapitalization of the Company, or any merger or consolidation of the Company
with any of its Subsidiaries or any other transaction or series of
transactions involving the Company or any of its Subsidiaries, other than a
transaction or transactions to which the provisions of Section 13(a) apply
(whether or not with or into or otherwise involving an Acquiring Person),
which has the effect, directly or indirectly, of increasing by more than 1%
the proportionate share of the outstanding shares of any class of equity
securities of the Company or any of its Subsidiaries that is directly or
indirectly beneficially owned by any Acquiring Person or any Person or any
Associate or Affiliate of any Acquiring Person;
then promptly following the occurrence of an event described in Section
11(a)(ii)(A) or (B) (a "Section 11(a)(ii) Event"), proper provision shall be
made so that each holder of a Right, except as provided in Section 7(e)
hereof, shall thereafter have the right to receive for each Right, upon
exercise thereof in accordance with the terms of this Agreement and payment of
the then-current Purchase Price, in lieu of the number of Units of Preferred
Stock, such number of shares of Common Stock as shall equal the result
obtained by (x) multiplying the then-current Purchase Price by the then number
of Units of Preferred Stock for which a Right was exercisable (or would have
been exercisable if the Distribution Date had occurred) immediately prior to
the first occurrence of a Triggering Event, and (y) dividing that product by
50% of the current per share market price (determined pursuant to Section
11(d) hereof) for shares of Common Stock on the date of occurrence of the
Triggering Event (such number of shares being hereinafter referred to as the
"Adjustment Shares").
(iii) In the event that the number of shares of Common Stock which
are authorized by the Company's Certificate of Incorporation but not
outstanding or reserved for issuance for purposes other than upon exercise of
the Rights are not sufficient to permit the exercise in full of the Rights, or
if any necessary regulatory approval for such issuance has not been obtained
by the Company, the Company shall, in lieu of issuing shares of Common Stock
in accordance with Section 11(a)(ii) hereof: (A) determine the excess of (1)
the value of the Adjustment Shares issuable upon the exercise of a Right (the
"Current Value") over (2) the Purchase Price (such excess being referred to as
the "Spread") and (B) with respect to each Right, make adequate provision to
substitute for such Adjustment Shares, upon exercise of the Rights, (1) cash,
(2) a reduction in the Purchase Price, (3) Common Stock or other equity
securities of the Company (including, without limitation, shares or units of
shares of any series of preferred stock, such as the Preferred Stock, which
the Board of Directors of the Company has deemed to have the same value as the
Common Stock (such shares or units of preferred stock are herein called
"common stock equivalents")), except to the extent that the Company has not
obtained any necessary regulatory approval for such issuance, (4) debt
securities of the Company, except to the extent that the Company has not
obtained any necessary regulatory approval for such issuance, (5) other assets
or (6) any combination of the foregoing, having an aggregate value equal to
the Current Value, where such aggregate value has been determined by the Board
of Directors of the Company based upon the advice of a nationally recognized
investment banking firm selected by the Board of Directors of the Company;
provided, however, if the Company shall not have made adequate provision to
deliver value pursuant to clause (B) above within thirty (30) days following
the later of (x) occurrence of a Section 11(a)(ii) Event, and (y) the date on
which the Company's right of redemption pursuant to Section 23(a) expires (the
later of (x) and (y) being referred to herein as the "Section 11(a)(ii)
Trigger Date"), then the Company shall be obligated to deliver, upon the
surrender for exercise of a Right and without requiring payment of the
Purchase Price, shares of Common Stock (to the extent available), except to
the extent that the Company has not obtained any necessary regulatory approval
for such issuance, and then, if necessary, cash, which shares and/or cash have
an aggregate value equal to the Spread. If the Board determines in good faith
that it is likely that sufficient additional shares of Common Stock could be
authorized for issuance upon exercise in full of the Rights, the thirty (30)
day period set forth above may be extended to the extent necessary, but not
more than ninety (90) days after the Section 11(a)(ii) Trigger Date, in order
that the Company may seek shareholder approval for the authorization of such
additional shares (such thirty (30) day period, as it may be extended, is
herein called the "Substitution Period"). To the extent that action is to be
taken pursuant to the first and/or third sentences of this Section 11(a)(iii),
the Company (1) shall provide, subject to Section 7(e) hereof, that such
action shall apply uniformly to all outstanding Rights, and (2) may suspend
the exercisability of the Rights until the expiration of the Substitution
Period in order to seek such shareholder approval for such authorization of
additional shares and/or to decide the appropriate form of distribution to be
made pursuant to such first sentence and to determine the value thereof. In
the event of any such suspension, the Company shall issue a public
announcement stating that the exercisability of the Rights has been
temporarily suspended, as well as a public announcement at such time as the
suspension is no longer in effect. For purposes of this Section 11(a)(iii),
the value of each Adjustment Share shall be the current per share market price
of the Common Stock on the Section 11(a)(ii) Trigger Date and the per share or
per unit value of any common stock equivalent shall be deemed to equal the
current per share market price of the Common Stock on such date.
(b) In the event that the Company shall fix a record date for the
issuance of rights, options or warrants to all holders of Units of Preferred
Stock entitling them (for a period expiring within 45 calendar days after such
record date) to subscribe for or purchase Units of Preferred Stock (or shares
having the same rights, privileges and preferences as the Preferred Stock
("equivalent preferred shares")) or securities convertible into Units of
Preferred Stock or equivalent preferred shares at a price per Unit of
Preferred Stock or equivalent preferred share (or having a conversion price
per share, if a security convertible into Units of Preferred Stock or
equivalent preferred shares) less than the then current per share market price
of a Unit of Preferred Stock (as determined pursuant to 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 Units of Preferred Stock outstanding on such record date plus the
number of Units of Preferred Stock which the aggregate offering price of the
total number of Units of Preferred Stock and/or equivalent preferred shares so
to be offered (and/or the aggregate initial conversion price of the
convertible securities so to be offered) would purchase at such current market
price and the denominator of which shall be the number of Units of Preferred
Stock outstanding on such record date plus the number of additional Units of
Preferred Stock and/or equivalent preferred shares to be offered for
subscription or purchase (or into which the convertible securities so to be
offered are initially convertible). In case such subscription price may be
paid in a consideration part or all of which shall be in a form other than
cash, the value of such consideration shall be as determined in good faith by
the Board of Directors of the Company, whose determination shall be described
in a statement filed with the Rights Agent and shall be binding on the Rights
Agent and the holders of the Rights. Units of Preferred Stock owned by or held
for the account of the Company shall not be deemed outstanding for the purpose
of any such computation. Such adjustment shall be made successively whenever
such a record date is fixed; and in the event that such rights, options or
warrants are not so issued, the Purchase Price shall be adjusted to be the
Purchase Price which would then be in effect if such record date had not been
fixed.
(c) In case the Company shall fix a record date for a distribution to
all holders of Units of Preferred Stock (including any such distribution made
in connection with a consolidation or merger in which the Company is the
continuing or surviving corporation) of evidences of indebtedness, cash (other
than a regular quarterly cash dividend), assets (other than a dividend payable
in Units of Preferred Stock but including any dividend payable in equity
securities other than Preferred Stock) 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 (as
determined pursuant to Section 11(d) hereof) of the Preferred Stock 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 the holder of rights) of the cash, assets or evidences of indebtedness to
be distributed or of such subscription rights or warrants distributable in
respect of a share of Preferred Stock and the denominator of which shall be
such current per share market price (as determined pursuant to Section 11(d)
hereof) of a share of Preferred Stock. Such adjustments shall be made
successively whenever such a record date is fixed; and in the event that such
distribution is not so made, the Purchase Price shall again be adjusted to be
the Purchase Price which would then be in effect if such record date had not
been fixed.
(d)(i) For the purpose of any computation hereunder, the "current per
share market price" per share of Common Stock on any date shall be deemed to
be the average of the daily closing prices per share of such Security for the
thirty (30) consecutive Trading Days (as hereinafter defined) immediately
prior to such date; provided, however, that in the event that the "current per
share market price" per share of Common Stock is determined during a period
following the announcement by the issuer of such Common Stock of (A) a
dividend or distribution on such Common Stock payable in shares of such Common
Stock or securities convertible into such shares (other than the Rights), or
(B) any subdivision, combination or reclassification of such Common Stock and
prior to the expiration of thirty (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 Common Stock. 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 American Stock Exchange, Inc. ("AMEX") or, if the Common Stock
is not listed or admitted to trading on AMEX, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Common Stock is listed
or admitted to trading or, if the Common Stock is not listed or admitted to
trading on any national securities exchange, the last quoted price or, if not
so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotations System ("NASDAQ") or such other system then
in use, or, if on any such date the Common Stock 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 Common Stock selected by
the Board of Directors of the Company. If on any such date no market maker is
making a market in the Common Stock, the "current per share market price" of
such Common Stock on such date as determined in good faith by the Board of
Directors of the Company as provided for above shall be used. The term
"Trading Day" shall mean a day on which the principal national securities
exchange on which the Common Stock is listed or admitted to trading is open
for the transaction of business or, if the Common Stock 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 Stock shall be determined in accordance
with the method set forth in Section 11(d)(i). If the "current per share
market price" of the Preferred Stock cannot be determined in the manner
provided above or if the Preferred Stock is not publicly held or listed or
traded in a manner described in clause (i) of this Section 11(d), the "current
per share market price" of the Preferred Stock shall be conclusively deemed to
be an amount equal to $1,000 (as such amount may be appropriately adjusted for
such events as stock splits, stock dividends and recapitalizations with
respect to shares of Common Stock occurring after the date of this Agreement)
multiplied by the current market price per share of Common Stock. If neither
the Common Stock nor Preferred Stock is publicly held or so listed or traded,
"current per share market price" of the Common Stock or the Preferred Stock,
as the case may be, 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 and shall be binding on
the Rights Agent and the holders of the Rights.
(e) No adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in the
Purchase Price; provided, however, that any adjustments 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-thousandth of a share of Preferred Stock or one one-hundredth 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 Expiration Date.
(f) If as a result of an adjustment made pursuant to Section
11(a)(ii) or Section 13 hereof, the holder of any Rights thereafter exercised
shall become entitled to receive any shares of capital stock of the Company
other than Units of Preferred Stock, thereafter the number of such other
shares so receivable upon exercise of any Rights and the Purchase Price
thereof shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to
the Preferred Stock contained in Section 11(a), (b), (c), (d), (e), (g), (h),
(i), (j), (k), (l) and (m), and the provisions of Sections 7, 9, 10, 13 and 14
with respect to the Preferred Stock shall apply on like terms to any such
other shares; provided, however, the Company shall not be liable for its
inability to reserve and keep available for issuance upon exercise of the
Rights pursuant to Section 11(a)(ii) a number of shares of Common Stock
greater than the number then authorized by the Certificate of Incorporation
but not outstanding or reserved for other purposes.
(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 Units of Preferred
Stock purchasable from time to time hereunder upon exercise of the Rights, all
subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided
in Section 11(i), upon each adjustment of the Purchase Price as a result of
the calculations made in Sections 11(b) and (c), each Right outstanding
immediately prior to the making of such adjustment shall thereafter evidence
the right to purchase, at the adjusted Purchase Price, that number of Units of
Preferred Stock (calculated to the nearest one-millionth of a share of
Preferred Stock) obtained by dividing (i) the product obtained by multiplying
(x) the number of Units 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 by, (ii) 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 Units of Preferred Stock purchasable upon the
exercise of a Right. Each of the Rights outstanding after such adjustment of
the number of Rights shall be exercisable for the number of Units of Preferred
Stock for which a Right was exercisable immediately prior to such adjustment.
Each Right held of record prior to such adjustment of the number of Rights
shall become that number of Rights (calculated to the nearest one
one-thousandth) obtained by dividing the Purchase Price in effect immediately
prior to adjustment of the Purchase Price by the Purchase Price in effect
immediately after adjustment of the Purchase Price. The Company shall make a
public announcement of its election to adjust the number of Rights, indicating
the record date for the adjustment, and, if known at the time, the amount of
the adjustment to be made. This record date may be the date on which the
Purchase Price is adjusted or any day thereafter, but, if the Rights
Certificates have been issued, shall be at least ten days later than the date
of the public announcement. If Rights Certificates have been issued, upon each
adjustment of the number of Rights pursuant to this Section 11(i), the Company
shall, as promptly as practicable, cause to be distributed to holders of
record of Rights Certificates on such record date Rights Certificates
evidencing, subject to Section 14 hereof, the additional Rights to which such
holders shall be entitled as a result of such adjustment, or, at the option of
the Company, shall cause to be distributed to such holders of record in
substitution and replacement for the Rights Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by
the Company, new Rights Certificates evidencing all the Rights to which such
holders shall be entitled after such adjustment. Rights Certificates to be so
distributed shall be issued, executed and countersigned in the manner provided
for herein and shall be registered in the names of the holders of record of
Rights Certificates on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or
the number of Units of Preferred Stock issuable upon the exercise of the
Rights, the Rights Certificates theretofore and thereafter issued may continue
to express the Purchase Price per Unit and the number of Units which were
expressed in the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then par value of the number of Units of
Preferred Stock issuable upon exercise of the Rights, the Company shall take
any corporate action which may, in the opinion of its counsel, be necessary in
order that the Company may validly and legally issue fully paid and
nonassessable number of Units of Preferred Stock 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 Rights exercised after such record date
of that number of Units of Preferred Stock and other capital stock or
securities of the Company, if any, issuable upon such exercise over and above
the Units of Preferred Stock and other capital stock or securities of the
Company, if any, issuable upon such exercise on the basis of the Purchase
Price in effect prior to such adjustment; provided, however, that the Company
shall deliver to such holder a due bill or other appropriate instrument
evidencing such holder's right to receive such additional shares (fractional
or otherwise) upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it in its sole discretion shall determine to be advisable in
order that any (i) consolidation or subdivision of the Preferred Stock, (ii)
issuance wholly for cash of any Unit of Preferred Stock at less than the
current market price, (iii) issuance wholly for cash of Preferred Stock or
securities which by their terms are convertible into or exchangeable for
Preferred Stock, (iv) stock dividends or (v) issuance of rights, options or
warrants referred to in this Section 11, hereafter made by the Company to
holders of Units of its Preferred Stock shall not be taxable to such
stockholders.
(n) The Company shall not, at any time after the Distribution Date,
(i) consolidate with any other Person (other than a Subsidiary of the Company
in a transaction which complies with Section 11(o)), (ii) merge with or into
any other Person (other than a Subsidiary of the Company in a transaction
which complies with Section 11(o)), or (iii) sell or transfer (or permit any
Subsidiary to sell or transfer), in one transaction, or a series of
transactions, assets or earning power aggregating more than 50% of the assets
or earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person or Persons (other than the Company and/or any of its Subsidiaries
in one or more transactions each of which complies with Section 11(o)), if (x)
at the time of or immediately after such consolidation, merger or sale there
are any rights, warrants or other instruments or securities outstanding or
agreements in effect which would substantially diminish or otherwise eliminate
the benefits intended to be afforded by the Rights or (y) prior to,
simultaneously with or immediately after such consolidation, merger or sale,
the Person which constitutes, or would constitute the "Principal Party" for
purposes of Section 13(a) shall have distributed or otherwise transferred to
its stockholders or other persons holding an equity interest in such Person
Rights previously owned by such Person or any of its Affiliates and
Associates; provided, however, this Section 11(n) shall not affect the ability
of any Subsidiary of the Company to consolidate with, merge with or into, or
sell or transfer assets or earning power to, any other Subsidiary of the
Company.
(o) After the Distribution Date, the Company shall not, except as
permitted by Section 23 or Section 27, take (or permit any Subsidiary to take)
any action if at the time such action is taken it is reasonably foreseeable
that such action will diminish substantially or otherwise eliminate the
benefits intended to be afforded by the Rights.
(p) 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 outstanding shares of Common Stock payable in shares of Common
Stock or (ii) effect a subdivision, combination or consolidation of the Common
Stock (by reclassification or otherwise than by payment of dividends in shares
of Common Stock) into a greater or lesser number of shares of Common Stock,
then in any such case the number of Rights associated with each share of
Common Stock following any such event (or issued or delivered thereafter but
prior to the Distribution Date) shall be proportionately adjusted so that the
number of Rights thereafter associated with each share of Common Stock shall
equal the result obtained by multiplying the number of Rights associated with
each share of Common Stock immediately prior to such event so purchasable
immediately prior to such event by a fraction, the numerator of which is the
number of shares of Common Stock outstanding immediately before such event and
the denominator of which is the number of shares of Common Stock outstanding
immediately after such event. The adjustments provided for in this Section
11(p) shall be made successively whenever such a dividend is declared or paid
or such a subdivision, combination or consolidation is effected.
Section 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF
SHARES. Whenever an adjustment is made as provided in Sections 11 and 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 shares of Common Stock or Units of Preferred Stock a copy of such
certificate and (c) mail a brief summary thereof to each holder of a Rights
Certificate in accordance with Section 26 hereof. Notwithstanding the
foregoing sentence, the failure by the Company to make such certification or
give such notice shall not affect the validity of or the force or effect of
the requirement for such adjustment. The Rights Agent shall be fully protected
in relying on any such certificate and on any adjustment contained therein and
shall not be deemed to have knowledge of such adjustment unless and until it
shall have received such certificate.
Section 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR
EARNING POWER.
(a) Except as provided in Section 13(b) hereof, in the event that,
following a Shares Acquisition Date, directly or indirectly, (x) the Company
shall consolidate with, or merge with and into, any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)),
and the Company shall not be the continuing or surviving corporation of such
consolidation or merger, (y) any Person (other than a Subsidiary of the
Company in a transaction which complies with Section 11(o)) shall consolidate
with the Company, or merge with and into the Company and the Company shall be
the continuing or surviving corporation of such consolidation or merger and,
in connection with such consolidation or merger, all or part of the shares of
Common Stock shall be changed into or exchanged for stock or other securities
of any other Person or cash or any other property, or (z) the Company shall
sell or otherwise transfer (or one or more of its Subsidiaries shall sell or
otherwise transfer) to any Person or Persons (other than a Subsidiary of the
Company in a transaction which complies with Section 11(o)), in one or more
transactions, directly or indirectly, assets or earning power aggregating 50%
or more of the assets or earning power of the Company and its Subsidiaries
(taken as a whole), (any such event being a "Section 13 Event"), then, and in
each such case, proper provision shall be made so that: (i) each holder of a
Right, except as provided in Section 7(e), shall thereafter have the right to
receive, upon the exercise thereof at the then current Purchase Price, such
number of validly authorized and issued, fully paid and non-assessable shares
of Common Stock of the Principal Party (as hereinafter defined), which shares
shall not be subject to any liens, encumbrances, rights of first refusal,
transfer restrictions or other adverse claims, as shall be equal to the result
obtained by (1) multiplying the then current Purchase Price by the number of
Units of Preferred Stock for which a Right is exercisable immediately prior to
the first occurrence of a Section 13 Event (or, if a Section 11(a)(ii) Event
has occurred prior to the first occurrence of a Section 13 Event, multiplying
the number of such Units of Preferred Stock for which a Right would be
exercisable hereunder but for the occurrence of such Section 11(a)(ii) Event
by the Purchase Price which would be in effect hereunder but for such first
occurrence) and (2) dividing that product (which, following the direct
occurrence of a Section 13 Event, shall be the "Purchase Price" for each Right
and for all purposes of this Agreement) by 50% of the current per share market
price (determined pursuant to Section 11(d)) of the shares of Common Stock of
such Principal Party on the date of consummation of such Section 13 Event;
(ii) such Principal Party shall thereafter be liable for, and shall assume, by
virtue of such Section 13 Event, all the obligations and duties of the Company
pursuant to this Agreement; (iii) the term "Company" shall, for all purposes
of this Agreement, thereafter be deemed to refer to such Principal Party, it
being specifically intended that the provisions of Section 11 shall apply only
to such Principal Party following the first occurrence of a Section 13 Event;
(iv) such Principal Party shall take such steps (including, but not limited
to, the reservation of a sufficient number of shares of its Common Stock) in
connection with the consummation of any such transaction as may be necessary
to ensure that the provisions of this Agreement shall thereafter be applicable
to its shares of Common Stock thereafter deliverable upon the exercise of the
Rights; and (v) the provisions of Section 11(a)(ii) shall be of no further
effect following the first occurrence of any Section 13 Event.
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in clause (x) or (y) of
the first sentence of Section 13(a), (A) the Person that is the issuer of any
securities into which shares of Common Stock of the Company are converted in
such merger or consolidation, or, if there is more than one such issuer, the
issuer of shares of Common Stock that has the highest aggregate current market
price (determined pursuant to Section 11(d)) and (B) if no securities are so
issued, the Person that is the other party to such merger or consolidation,
or, if there is more than one such Person, the Person the Common Stock of
which has the highest aggregate current market price (determined pursuant to
Section 11(d)); and
(ii) in the case of any transaction described in clause (z) of the
first sentence of Section 13(a), the Person that is the party receiving the
largest portion of the assets or earning power transferred pursuant to such
transaction or transactions, or, if each Person that is a party to such
transaction or transactions receives the same portion of the assets or earning
power transferred pursuant to such transaction or transactions or if the
Person receiving the largest portion of the assets or earning power cannot be
determined, whichever Person the Common Stock of which has the highest
aggregate current market price (determined pursuant to Section 11(d));
provided, however, that in any such case, (1) if the Common Stock of such
Person is not at such time and has not been continuously over the preceding
twelve-month period registered under Section 12 of the Exchange Act
("Registered Common Stock"), or such Person is not a corporation, and such
Person is a direct or indirect Subsidiary of another Person that has
Registered Common Stock outstanding, "Principal Party" shall refer to such
other Person; (2) if the Common Stock of such Person is not Registered Common
Stock or such Person is not a corporation, and such Person is a direct or
indirect Subsidiary of another Person but is not a direct or indirect
Subsidiary of another Person which has Registered Common Stock outstanding,
"Principal Party" shall refer to the ultimate parent entity of such
first-mentioned Person; (3) if the Common Stock of such Person is not
Registered Common Stock or such Person is not a corporation, and such Person
is directly or indirectly controlled by more than one Person, and one or more
of such other Persons has Registered Common Stock outstanding, "Principal
Party" shall refer to whichever of such other Persons is the issuer of the
Registered Common Stock having the highest aggregate current per share market
price (determined pursuant to Section 11(d)); and (4) if the Common Stock of
such Person is not Registered Common Stock or such Person is not a
corporation, and such Person is directly or indirectly controlled by more than
one Person, and none of such other Persons has Registered Common Stock
outstanding, "Principal Party" shall refer to whichever ultimate parent entity
is the corporation having the greatest stockholders' equity or, if no such
ultimate parent entity is a corporation, shall refer to whichever ultimate
parent entity is the entity having the greatest net assets.
(c) The Company shall not consummate any such consolidation, merger,
sale or transfer unless the Principal Party shall have a sufficient number of
authorized shares of Common Stock which have not been issued or reserved for
issuance to permit the exercise in full of the Rights in accordance with this
Section 13, and unless prior thereto the Company and such Principal Party
shall have executed and delivered to the Rights Agent a supplemental agreement
providing for the terms set forth in paragraphs (a) and (b) of this Section 13
and further providing that the Principal Party will:
(i) (A) file on an appropriate form, as soon as practicable following
the execution of such agreement, a registration statement under the Securities
Act with respect to the shares of Common Stock that may be acquired upon
exercise of the Rights, (B) cause such registration statement to remain
effective (and to include a prospectus complying with the requirements of the
Securities Act) until the Expiration Date, and (C) as soon as practicable
following the execution of such agreement take such action as may be required
to ensure that any acquisition of such shares of Common Stock upon the
exercise of the Rights complies with any applicable state securities or "blue
sky" laws; and
(ii) deliver to holders of the Rights historical financial statements
for the Principal Party and each of its Affiliates which comply in all
respects with the requirements for registration on Form 10 under the Exchange
Act.
(d) In case the Principal Party which is to be a party to a
transaction referred to in this Section 13 has a provision in any of its
authorized securities or in its Certificate of Incorporation or Bylaws or
other instrument governing its corporate affairs, which provision would have
the effect of (i) causing such Principal Party to issue, in connection with,
or as a consequence of, the consummation of a transaction referred to in this
Section 13, shares of Common Stock of such Principal Party at less than the
then current market price per share (determined pursuant to Section 11(d)) or
securities exercisable for, or convertible into, shares of Common Stock of
such Principal Party at less than such then current market price (other than
to holders of Rights pursuant to this Section 13) or (ii) providing for any
special payment, tax or similar provisions in connection with the issuance of
the shares of Common Stock of such Principal Party pursuant to the provisions
of this Section 13, then, in such event, the Company shall not consummate any
such transaction unless prior thereto the Company and such Principal Party
shall have executed and delivered to the Rights Agent a supplemental agreement
providing that the provision in question of such Principal Party shall have
been cancelled, waived or amended, or that the authorized securities shall be
redeemed, so that the applicable provision will have no effect in connection
with, or as a consequence of, the consummation of the proposed transaction.
(e) The provisions of this Section 13 shall similarly apply to
successive mergers or consolidations or sales or other transfers. In the event
that a Section 13 Event shall occur at any time after the occurrence of a
Section 11(a)(ii) Event, the Rights which have not theretofore been exercised
shall thereafter become exercisable in the manner described in Section 13(a).
Section 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Company shall not be required to issue fractions of Rights or
to distribute Rights Certificates which evidence fractional Rights. In lieu of
such fractional Rights, there shall be paid to the registered holders of the
Rights Certificates with regard to which such fractional Rights would
otherwise be issuable, an amount in cash equal to the same fraction of the
current market value of a whole Right. For 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 AMEX or, if the Rights are not listed or admitted to trading on
AMEX, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities
exchange on which the Rights are listed or admitted to trading or, if the
Rights are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by NASDAQ
or such other system then in use or, if on any such date the Rights are not
quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the
Rights selected by the Directors. If on any such date no such market maker is
making a market in the Rights, the fair value of the Rights on such date as
determined in good faith by the Board of Directors of the Company, shall be
used.
(b) The Company shall not be required to issue fractions of Preferred
Stock (other than fractions which are integral multiples of one one-thousandth
of a share of Preferred Stock) upon exercise of the Rights or to distribute
certificates which evidence fractional Preferred Stock (other than fractions
which are integral multiples of one one-thousandth of a share of Preferred
Stock). Fractions of Preferred Stock in integral multiples of one
one-thousandth of a share of Preferred Stock may, at the election of the
Company, be evidenced by depositary receipts, pursuant to an appropriate
agreement between the Company and a depositary selected by it; provided,
however, 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 Stock represented by such
depositary receipts. In lieu of fractional shares of Preferred Stock that are
not integral multiples of one one-thousandth of a share of Preferred Stock,
the Company shall pay to the registered holders of Rights Certificates at the
time such Rights are exercised as herein provided an amount in cash equal to
the same fraction of the current market value of one a share of Preferred
Stock as determined pursuant to Section 11(d).
(c) Following the occurrence of a Triggering Event, the Company shall
not be required to issue fractions of shares of Common Stock upon exercise of
the Rights or to distribute certificates which evidence fractional shares of
Common Stock. In lieu of fractional shares of Common Stock, the Company may
pay to the registered holders of Rights Certificates at the time such Rights
are exercised as herein provided an amount in cash equal to the same fraction
of the current market value of one (1) share of Common Stock. For purposes of
this Section 14(c), the current market value of one share of Common Stock (as
determined pursuant to Section 11(d)(i) hereof) for the Trading Day
immediately prior to the date of such exercise.
(d) The holder of a Right by the acceptance of the 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
Rights Certificates (and, prior to the Distribution Date, the registered
holders of certificates representing shares of Common Stock); and any
registered holder of any Rights Certificate (or, prior to the Distribution
Date, a certificate representing shares of Common Stock), without the consent
of the Rights Agent or of the holder of any other Rights Certificate (or,
prior to the Distribution Date, of a certificate representing shares of Common
Stock), 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 Rights Certificate (or, prior to the
Distribution Date, certificates for Common Stock) in the manner provided in
such Rights Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at
law for any breach of this Agreement and will be entitled to specific
performance of the obligations hereunder, and injunctive relief against actual
or threatened violations of the obligations of any Person subject to this
Agreement.
Section 16. AGREEMENT OF RIGHTS HOLDERS. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of shares of the Common Stock;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the office of the Rights Agent designated for such purpose, duly endorsed or
accompanied by a proper instrument of transfer;
(c) subject to Sections 6(a) and 7(f) hereof, the Company and the
Rights Agent may deem and treat the person in whose name the Rights
Certificate (or, prior to the Distribution Date, the associated Common Stock
certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on
the Rights Certificates or the associated Common Stock certificate made by
anyone other than the Company or the Rights Agent) for all purposes
whatsoever, and neither the Company nor the Rights Agent shall be affected by
any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any
holder of a Right or other Person as a result of its inability to perform any
of its obligations under this Agreement by reason of any preliminary or
permanent injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or administrative
agency or commission, or any statute, rule, regulation or executive order
promulgated or enacted by any governmental authority, prohibiting or otherwise
restraining performance of such obligation; provided, however, the Company
must use its best efforts to have any such order, decree or ruling lifted or
otherwise overturned as soon as possible.
Section 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the Units of Preferred
Stock or any other securities of the Company which may at any time be issuable
upon the exercise of the Rights represented thereby, nor shall anything
contained herein or in any Rights Certificate be construed to confer upon the
holder of any Rights evidenced by either a certificate for Common Stock or by
any Rights Certificate, as such, any of the rights of a stockholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to give or withhold
consent to any corporate action, or to receive notice of meetings or other
actions affecting stockholders (except as provided in Section 25 hereof), or
to receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such certificate for Common Stock or Rights Certificate,
as the case may be, shall have been exercised in accordance with the
provisions hereof.
Section 18. CONCERNING THE RIGHTS AGENT.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
other disbursements incurred in the administration and execution of this
Agreement and the exercise and performance of its duties hereunder. The
Company also agrees to indemnify the Rights Agent for, and to hold it harmless
against, any loss, liability, or expense, incurred without gross negligence,
or willful misconduct on the part of the Rights Agent, for any action taken,
suffered or omitted by the Rights Agent in connection with the execution,
acceptance and administration of this Agreement and the exercise and
performance hereunder of its duties, including the costs and expenses of
defending against and appealing any claim of liability in the premises. The
indemnity provided herein shall survive the termination of this Agreement and
the expiration of the Rights. The costs and expenses incurred in enforcing
this right of indemnification shall be paid by the Company.
(b) The Rights Agent may conclusively rely upon and 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 and
the exercise and performance of its duties hereunder in reliance upon any
Rights Certificate or certificate for Common Stock or for other securities of
the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledged, by the proper
person or persons, or otherwise upon the advice of counsel as set forth in
Section 20 hereof.
Section 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS
AGENT.
(a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights
Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to the stock transfer or corporate trust business of the Rights
Agent or any successor Rights Agent, shall be the successor to the Rights
Agent under this Agreement without the execution or filing of any paper or any
further act on the part of any of the parties hereto, provided that such
corporation would be eligible for appointment as a successor Rights Agent
under the provisions of Section 21 hereof. In case at the time such successor
Rights Agent shall succeed to the agency created by this Agreement any of the
Rights Certificates shall have been countersigned but not delivered, any such
successor Rights Agent may adopt the countersignature of the predecessor
Rights Agent and deliver such Rights Certificates so countersigned; and in
case at that time any of the Rights Certificates shall not have been
countersigned, any successor Rights Agent may countersign such Rights
Certificates either in the name of the predecessor Rights Agent or in the name
of the successor Rights Agent; and in all such cases such Rights Certificates
shall have the full force provided in the Rights Certificates and in this
Agreement.
(b) In case at any time the name of the Rights Agent shall be changed
and at such time any of the Rights Certificates shall have been countersigned
but not delivered, the Rights Agent may adopt the countersignature under its
prior name and deliver Rights Certificates so countersigned; and in case at
that time any of the Rights Certificates shall not have been countersigned,
the Rights Agent may countersign such Rights Certificates either in its prior
name or in its changed name; and in all such cases such Rights Certificates
shall have the full force provided in the Rights Certificates and in this
Agreement.
Section 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions and no implied duties or obligations shall be read into this
Agreement against the Rights Agent, by all of which the Company and the
holders of Rights Certificates, by their acceptance thereof, shall be bound:
(a) Before the Rights Agent acts or refrains from acting, it may
consult with legal counsel of its choice (who may be legal counsel for the
Company), and the advice or opinion of such counsel shall be full and complete
authorization and protection to the Rights Agent as to any action taken,
suffered or omitted by it in good faith and in accordance with such advice or
opinion.
(b) Whenever in the administration, exercise and performance of its
duties under this Agreement the Rights Agent shall deem it necessary or
desirable that any fact or matter be proved or established by the Company
prior to taking, suffering or omitting any action hereunder, such fact or
matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by any one of a Co-Chairman of the Board, the President or
the Executive Vice President of the Company and delivered to the Rights Agent;
and such certificate shall be full authorization to the Rights Agent for any
action taken, suffered or omitted 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 gross negligence or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the
Rights Certificates (except its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and shall be deemed
to have been made by the Company only.
(e) The Rights Agent shall not be under any liability or
responsibility in respect of the legality, validity or enforceability of this
Agreement or the execution and delivery hereof (except the due execution
hereof by the Rights Agent) or in respect of the legality, validity or
enforceability or the execution of any Rights Certificate (except its
countersignature thereof and has actual knowledge of such change or
adjustment); nor shall it be liable or responsible for any breach by the
Company of any covenant or condition contained in this Agreement or in any
Rights Certificate; nor shall it be responsible for any change in the
exercisability of the Rights (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, or the ascertaining of the existence of facts that would
require any such change or adjustment (except with respect to the exercise of
Rights evidenced by Rights Certificates after receipt of the certificate
described in Section 12 hereof or has actual knowledge of such change or
adjustment); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any
shares of Common Stock or Preferred Stock to be issued pursuant to this
Agreement or any Rights Certificate or as to whether any shares of Common
Stock or Preferred Stock will, when 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 administration, exercise and performance of
its duties hereunder from any one of a Co-Chairman of the Board, the President
or the Executive Vice President of the Company, and to apply to such officers
for advice or instructions in connection with its duties, and it shall not be
responsible or liable for any action taken, suffered or omitted by it in good
faith in accordance with instructions of any such officer or for any delay in
acting while waiting for those instructions. Any application by the Rights
Agent for written instructions from the Company may, at the option of the
Rights Agent, set forth in writing any action proposed to be taken or omitted
by the Rights Agent under this Rights Agreement and the date on and/or after
which such action shall be taken or such omission shall be effective. The
Rights Agent shall not be liable for any action taken by, or omission of, the
Rights Agent in accordance with a proposal included in any such application on
or after the date specified in such application (which date shall not be less
than five (5) Business Days after the date any officer of the Company actually
received such application, unless any such officer shall have consented in
writing to an earlier date) unless, prior to taking any such action (or the
effective date in the case of an omission), the Rights Agent shall have
received written instructions in response to such application specifying the
action to be taken or omitted.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were
not Rights Agent under this Agreement. Nothing herein shall preclude the
Rights Agent from acting in any other capacity for the Company or for any
other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by
or through its attorneys or agents, and the Rights Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of any
such attorneys or agents or for any loss to the Company resulting from any
such act, default, neglect or misconduct, provided reasonable care was
exercised in the selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
the Rights Agent in good faith believes that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise, transfer, split up, combination or exchange, the
certification on the form of assignment or form of election to purchase, as
the case may be, that the Rights evidenced by the Rights Certificate are not
owned by an Acquiring Person, or an Affiliate or Associate thereof, has either
not been completed or in any manner indicates any other response thereto, the
Rights Agent shall not take any further action with respect to such requested
exercise, transfer, split up, combination or exchange, without first
consulting with the Company.
Section 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice in writing mailed to the Company and to each
transfer agent of the Common Stock or Preferred Stock (as to which the Rights
Agent has received prior written notice) by registered or certified mail, and
the Company shall mail notice thereof to the holders of the Rights
Certificates by first-class mail. The Company may remove the Rights Agent or
any successor Rights Agent upon thirty (30) days' notice in writing, mailed to
the Rights Agent or successor Rights Agent, as the case may be, and to each
transfer agent of the Common Stock or Preferred Stock (as to which the Rights
Agent has received prior written notice) by registered or certified mail, and
to the holders of the Rights Certificates by first-class mail. If the Rights
Agent shall resign or be removed or shall otherwise become incapable of
acting, the Company shall appoint a successor to the Rights Agent. If the
Company shall fail to make such appointment within a period of thirty (30)
days after giving notice of such removal or after it has been notified in
writing of such resignation or incapacity by the resigning or incapacitated
Rights Agent or by the holder of a Rights Certificate (who shall, with such
notice, submit such holder's Rights Certificate for inspection by the
Company), then the registered holder of any Rights Certificate may apply to
any court of competent jurisdiction for the appointment of a new Rights Agent.
Any successor Rights Agent, whether appointed by the Company or by such a
court, shall be a corporation organized and doing business under the laws of
the United States or the State of New York (or of any state of the United
States so long as such corporation is authorized to do business as a banking
institution in the State of New York), in good standing, authorized under such
laws to exercise corporate trust or stock transfer powers, and 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 $100 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 Stock or Preferred Stock, and mail a notice thereof in
writing to the registered holders of the Rights Certificates or, if prior to
the Distribution Date, to the registered holders of Common Stock. Failure to
give any notice provided for in this Section 21, however, or any defect
therein, shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent,
as the case may be.
Section 22. ISSUANCE OF NEW RIGHTS CERTIFICATES. Notwithstanding any
of the provisions of this Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Rights Certificates evidencing Rights in
such form as may be approved by its Board of Directors to reflect any
adjustment or change in the Purchase Price and the number or kind or class of
shares or other securities or property purchasable under the Rights
Certificates made in accordance with the provisions of this Agreement. In
addition, in connection with the issuance or sale of shares of Common Stock
following the Distribution Date and prior to the Expiration Date, the Company
(a) shall, with respect to shares of Common Stock so issued or sold pursuant
to the exercise of stock options or under any employee benefit plan or
arrangement or upon the exercise, conversion or exchange of securities of the
Company currently outstanding or issued at any time in the future by the
Company and (b) may, in any other case, if deemed necessary or appropriate by
the Board of Directors of the Company issue Rights Certificates representing
the appropriate number of Rights in connection with such issuance or sale;
provided, however, that (i) no such Rights Certificate shall be issued and
this sentence shall be null and void ab initio if, and to the extent that,
such issuance or this sentence would create a significant risk of or result in
material adverse tax consequences to the Company or the Person to whom such
Rights Certificate would be issued or would create a significant risk of or
result in such options' or employee plans' or arrangements' failing to qualify
for otherwise available special tax treatment and (ii) no such Rights
Certificate shall be issued if, and to the extent that, appropriate adjustment
shall otherwise have been made in lieu of the issuance thereof.
Section 23. REDEMPTION AND TERMINATION.
(a) The Company may, at its option, upon approval by a majority of the
Board of Directors, at any time prior to the earlier of (i) the Close of
Business on the tenth Business Day following a Shares Acquisition Date, or
(ii) the Final Expiration Date redeem all but not less than all the then
outstanding Rights at a redemption price of $0.01 per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such redemption price being hereinafter
referred to as the "Redemption Price"), and the Company may, at its option,
pay the Redemption Price either in cash, shares of Common Stock (based on the
current per share market price thereof (as determined pursuant to Section
11(d) hereof) at the time of redemption), or any other form of consideration
deemed appropriate by the Board of Directors. Notwithstanding anything
contained in this Agreement to the contrary, the Rights shall not be
exercisable after the first occurrence of a Section 11(a)(ii) Event until such
time as the Company's right of redemption hereunder as extended has expired.
The redemption of the Rights by the Board of Directors may be made effective
at such time on such basis and with such conditions as the Board of Directors
in its sole discretion may establish.
(b) Immediately upon the action of the Board of Directors 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 give notice of such redemption to the Rights Agent and 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 Stock. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of redemption will state the method by which the
payment of the Redemption Price will be made. 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 shares of Common Stock prior to the Distribution Date.
(c) Notwithstanding anything contained in this Agreement to the
contrary, the Rights shall not be exercisable pursuant to Section 7(a) at any
time when the Rights are redeemable hereunder.
Section 24. EXCHANGE.
(a) The Company, at its option, upon approval by the Board of
Directors, at any time after any Person becomes an Acquiring Person, may
exchange all or part of the then outstanding and exercisable Rights (which
shall not include Rights that have become void pursuant to the provisions of
Section 7(e) hereof) for shares of Common Stock at an exchange ratio equal to
one share of Common Stock per Right, subject to adjustment to reflect stock
splits, stock dividends and similar transactions occurring after the date
hereof (such exchange ratio being hereinafter referred to as the "Section
24(a) Exchange Ratio"). Notwithstanding the foregoing, the Company may not
effect such exchange at any time after any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan maintained by the Company
or any of its Subsidiaries, or any trustee or fiduciary with respect to such
plan acting in such capacity), together with all Affiliates and Associates of
such Person, becomes the Beneficial Owner of 50% or more of the shares of
Common Stock then outstanding.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to subsection (a) of this
Section 24 and without any further action and without any notice, the right to
exercise such Rights shall terminate and the only right thereafter of a holder
of such Rights shall be to receive that number of shares of Common Stock equal
to the number of such Rights held by such holder multiplied by the Section
24(a) Exchange Ratio. The Company shall promptly give public notice of any
such exchange; provided, however, that the failure to give, or any defect in,
such notice shall not affect the validity of such exchange. The Company
promptly shall mail a notice of any such exchange to all of the holders of
such Rights at their last addresses as they appear upon the registry books of
the Rights Agent. Any notice which is mailed in the manner herein provided
shall be deemed given, whether or not the holder receives the notice. Each
such notice of exchange will state the method by which the exchange of the
shares of Common Stock for Rights will be effected and, in the event of any
partial exchange, the number of Rights which will be exchanged. Any partial
exchange shall be effected pro rata based on the number of Rights (other than
Rights which have become void pursuant to the provisions of Section 7(e)
hereof) held by each holder of Rights.
(c) In the event that the number of shares of Common Stock which are
authorized by the Company's Certificate of Incorporation but not outstanding
or reserved for issuance for purposes other than upon exercise of the Rights
are not sufficient to permit 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 shares of Common Stock for issuance upon
exchange of the Rights or make adequate provision to substitute (1) cash, (2)
shares of Preferred Stock or other equity securities of the Company, (3) debt
securities of the Company, (4) other assets, or (5) any combination of the
foregoing, having an aggregate value equal to the Adjustment Spread, where
such aggregate value has been determined by the Company's Board of Directors.
To the extent that the Company determines that some action need be taken
pursuant to subsection (a) of this Section 24, the Board of Directors may
temporarily suspend the exercisability of the Rights for a period of up to
sixty (60) days following the date on which the event described in Section
24(a) shall have occurred, in order to seek any authorization of additional
shares of Common Stock and/or to decide the appropriate form of distribution
to be made pursuant to the above provision and to determine the value thereof.
In the event of any such suspension, the Company shall issue a public
announcement stating that the exercisability of the Rights has been
temporarily suspended.
(d) The Company shall not be required to issue fractions of Common
Stock or to distribute certificates that evidence fractional shares of Common
Stock. In lieu thereof, the Company shall pay to the registered holders of the
Rights Certificates with regard to which such fractional shares of Common
Stock would otherwise be issuable an amount in cash equal to the same fraction
of the current market value of a whole share of Common Stock. For purposes of
this paragraph (d), the current market value of a whole share of Common Stock
(as determined pursuant to Section 11(d) hereof) for the Trading Day
immediately prior to the date of the exchange pursuant to this Section 24.
Section 25. NOTICE OF CERTAIN EVENTS.
(a) In case the Company shall propose (i) to pay any dividend payable
in stock of any class to the holders of its Preferred Stock or to make any
other distribution to the holders of its Preferred Stock (other than a regular
quarterly cash dividend), (ii) to offer to the holders of its Preferred Stock
rights or warrants to subscribe for or to purchase any additional Units of
Preferred Stock or shares of stock of any class or any other securities,
rights or options, (iii) to effect any reclassification of its Preferred Stock
(other than a reclassification involving only the subdivision of outstanding
Preferred Stock), (iv) to effect any consolidation or merger into or with any
other Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o)), 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 Stock payable in shares of Common
Stock or to effect a subdivision, combination or consolidation of the shares
of Common Stock (by reclassification or otherwise than by payment of dividends
in shares of Common Stock), then, in each such case, the Company shall give to
each holder of a Rights 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 reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution, or winding up is to take place and the date of
participation therein by the holders of the shares of Common Stock and/or
shares of Preferred Stock, if any such date is to be fixed, and such notice
shall be so given in the case of any action covered by clause (i) or (ii)
above at least ten (10) days prior to the record date for determining holders
of the shares of Preferred Stock for purposes of such action, and in the case
of any such other action, at least ten (10) days prior to the date of the
taking of such proposed action or the date of participation therein by the
holders of the shares of Common Stock and/or shares of Preferred Stock,
whichever shall be the earlier.
(b) In case any of the events set forth in Section 11(a)(ii) hereof
shall occur, then (i) the Company shall as soon as practicable thereafter give
to each holder of a Rights 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, and (ii) all references in the preceding paragraph to
Preferred Stock shall be deemed thereafter to refer to Common Stock and/or, if
appropriate, other securities of the Company. In the event any Person becomes
an Acquiring Person, the Company will promptly notify the Rights Agent
thereof.
Section 26. NOTICES. Notices or demands authorized by this Agreement
to be given or made by the Rights Agent or by the holder of any Rights
Certificate to or on the Company shall be sufficiently given or made if sent
by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Rights Agent) as follows:
Andrea Electronics Corporation
45 Melville Park Road
Melville, New York 11747
Attention: Secretary
Subject to the provisions of Section 21 hereof, any notice or demand
authorized by this Agreement to be given or made by the Company or by the
holder of any Rights Certificate to or on the Rights Agent shall be sent by
registered or certified mail and shall be deemed given upon receipt and
addressed (until another address is filed in writing with the Company) as
follows:
Continental Stock Transfer & Trust Company
Two Broadway
New York, New York 10004
Attention: Compliance Department
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) 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. Prior to the Distribution
Date, the Company may supplement or amend this Agreement in any respect,
without the approval of any holders of certificates representing shares of
Common Stock, by action of its Board of Directors, and the Rights Agent shall,
if the Company so directs, execute such supplement or amendment. From and
after the Distribution Date, the Company may from time to time supplement or
amend this Agreement without the approval of any holders of Rights, by action
of its Board of Directors, in order (i) to cure any ambiguity, (ii) to correct
or supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, (iii) to shorten or lengthen
any time period hereunder or (iv) to change or supplement the provisions
hereunder in any manner which the Company may deem necessary or desirable and
which shall not adversely affect the interests of the holders of Rights
Certificates (other than an Acquiring Person or an Affiliate or Associate of
an Acquiring Person), including, without limitation, to change the Purchase
Price, the Redemption Price, any time periods herein specified, and any other
term hereof, 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. Upon receipt of a certificate from an appropriate
officer of the Company that the proposed supplement or amendment is consistent
with this Section 27 and, after such time as any Person has become an
Acquiring Person, that the proposed supplement or amendment does not adversely
affect the interests of the holders of Rights, the Rights Agent shall execute
such supplement or amendment.
Section 28. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS. For
all purposes of this Agreement, any calculation of the number of shares of
Common Stock outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Common
Stock of which any Person is the Beneficial Owner, shall be made in accordance
with Section 912 of the NYBCL. The Board of Directors of the Company shall
have the exclusive power and authority to administer this Agreement and to
exercise all rights and powers specifically granted to the Board of Directors,
or the Company, or as may be necessary or advisable in the administration of
this Agreement, including, without limitation, the right and power to (i)
interpret the provisions of this Agreement and (ii) make all determinations
deemed necessary or advisable for the administration of this Agreement
(including a determination to redeem or not redeem the Rights or to amend the
Agreement). All such actions, calculations, interpretations and determinations
(including, for purposes of clause (y) below, all omissions with respect to
the foregoing), which are done or made by the Board of Directors in good
faith, shall (x) be final, conclusive and binding on the Company, the Rights
Agent, the holders of the Rights Certificates and all other parties and (y)
not subject the Board of Directors or the Continuing Directors to any
liability to the holders of the Rights.
Section 30. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement
shall be construed to give to any person or corporation other than the
Company, the Rights Agent and the registered holders of the Rights
Certificates (and, prior to the Distribution Date, registered holders of
shares of Common Stock) any legal or equitable right, remedy or claim under
this Agreement; but this Agreement shall be for the sole and exclusive benefit
of the Company, the Rights Agent and the registered holders of the Rights
Certificates (and, prior to the Distribution Date, registered holders of
shares of Common Stock).
Section 31. SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated; provided, however, that notwithstanding anything in this
Agreement to the contrary, if any such term, provision, covenant or
restriction is held by such court or authority to be invalid, void or
unenforceable and the Board of Directors of the Company determines in its good
faith judgment that severing the invalid language from this Agreement would
adversely affect the purpose or effect of this Agreement, the right of
redemption set forth in Section 23 hereof shall be reinstated and shall not
expire until the tenth Business Day following the date of such determination
by the Board of Directors of the Company.
Section 32. GOVERNING LAW. This Agreement and each Rights Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of New York 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 33. COUNTERPARTS. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
Section 34. DESCRIPTIVE HEADINGS. Descriptive headings of the several
sections of this Agreement are inserted or 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.
ANDREA ELECTRONICS CORPORATION
By: /s/ John N. Andrea
_____________________________
Name: John N. Andrea
Title: Co-Chief Executive Officer
Attest:
By: /s/ Richard A. Maue
________________________
Name: Richard A. Maue
Title: Secretary
Countersigned:
CONTINENTAL STOCK TRANSFER &
TRUST COMPANY, as Rights Agent
By: /s/ William F. Seegraber
________________________
Name: William F. Seegraber
Title: Vice President
<PAGE>
EXHIBIT A
FORM
of
CERTIFICATE OF AMENDMENT TO CERTIFICATE OF INCORPORATION
THE SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
ANDREA ELECTRONICS CORPORATION
(Pursuant to Section 805 of the
New York Business Corporation Law)
----------------------------------
I, THE UNDERSIGNED, John N. Andrea, being the Co-Chief Executive
Officer of Andrea Electronics Corporation, do hereby certify and set forth:
(1) The name of the corporation is Andrea Electronics Corporation
(hereinafter, the "Corporation").
(2) The Certificate of Incorporation of the Corporation was filed with
the Department of State on March 15, 1934, under the name "F. A. D. Andrea,
Inc."
(3) Article Third of the Restated Certificate of Incorporaiton of the
Corporation is hereby amended for the purpose of creating a series of Preferred
Stock, par value $.01 per share, of the Corporation and hereby stating the
designation and number of shares, and fixing the relative rights, preferences,
and limitations thereof, and the text of said Article Third is hereby amended to
add the following text to the end of Article Third:
"Series A Junior Participating Preferred Stock:
Section 1. DESIGNATION AND AMOUNT. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock" (the "Series A
Preferred Stock") and the number of shares constituting the Series A Preferred
Stock shall be twenty-five thousand (25,000). 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) ranking prior and superior to the Series
A Preferred Stock with respect to dividends, each holder of a share of Series A
Preferred Stock, in preference to the holders of shares of Common Stock, par
value $.50 per share (the "Common Stock"), of the Corporation, and of any other
junior stock, shall be entitled to receive, if and when declared by the Board of
Directors out of funds legally available for the purpose, dividends payable in
cash on the date so designated for payment by the Board of Directors (each such
date being referred to herein as a "Dividend Payment Date"), commencing on the
first Dividend Payment Date after the first issuance of a share or fraction of a
share Series A Preferred Stock, in an amount per share (rounded to the nearest
cent) equal to, subject to the provision for adjustment hereinafter set forth,
One Thousand (1,000) times the aggregate per share amount of all cash dividends,
and One Thousand (1,000) times the aggregate per share amount (payable in kind)
of all non-cash dividends or other distributions, other than a dividend payable
in shares of Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock since the
immediately preceding Dividend Payment Date or, with respect to the first
Dividend Payment Date, since the first issuance of a share or fraction of Series
A Preferred Stock. In the event the Corporation shall at any time declare or pay
any dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the amount to which holders of shares of Series A Preferred
Stock were entitled immediately prior to such event under the preceding sentence
shall be adjusted by multiplying such amount by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the
shares of Series A Preferred Stock as provided in paragraph (A) of this Section
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock).
(C) Dividends shall begin to accrue and be cumulative on each
outstanding share of Series A Participating Preferred Stock from the Dividend
Payment Date next preceding the date of issue of such share of Series A
Participating Preferred Stock, unless the date of issue of such share is prior
to the record date for the first Dividend Payment Date, in which case dividends
on such share shall begin to accrue from the date of issue of such share, or
unless the date of issue is a 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 dividend and before such Dividend Payment Date, in
either of which events such dividends shall begin to accrue and be cumulative
from such Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the shares of Series A Preferred Stock in an amount
less than the total amount of such dividends at the time accrued and payable on
such shares shall be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. The Board of Directors may fix a record date for
the determination of holders of shares of Series A Preferred Stock entitled to
receive payment of a dividend or distribution declared thereon, which record
date shall be not more than 60 days prior to the date fixed for the payment
thereof.
Section 3. VOTING RIGHTS. The holders of shares of Series A Preferred
Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Series A Preferred Stock shall entitle the holder thereof to One
Thousand (1,000) votes on all matters submitted to a vote of the stockholders
of the Corporation. In the event the Corporation shall at any time 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 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
Amendment to the Certificate of Incorporation 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 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 shares of 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 shares of any such junior stock in exchange for shares of any stock of
the Corporation ranking junior (either as to dividends or upon dissolution,
liquidation or winding up) to the Series A Preferred Stock; or
(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 annual dividend rates and
other relative rights and preferences of the respective series and classes,
shall determine in good faith will result in fair and equitable treatment
among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (A) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
Section 5. REACQUIRED SHARES. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All
such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock and may be reissued as part of a new series of
Preferred Stock subject to the conditions and restrictions on issuance set
forth herein, in the Certificate of Incorporation, or in any other Certificate
of Designations creating a series of Preferred Stock or any similar stock or
as otherwise required by law.
Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP.
(A) Upon any liquidation, dissolution or winding up of the
Corporation, no distribution shall be made (1) 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 One Thousand
Dollars ($1,000) 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 1,000 times the
aggregate amount to be distributed per share to holders of shares of Common
Stock, or (2) 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
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 (1) 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 ("Adjustment Number").
(B) In the event, however, that there are not sufficient assets
available to permit payment in full to the Series A Liquidation Preference and
the liquidation preferences of all other series of Preferred Stock, if any,
which rank on a parity with the Series A Participating Preferred Stock, then
such remaining assets shall be distributed ratably to the holders of such
parity shares in proportion to their respective liquidation preferences. In
the event, however, that there are not sufficient assets available to permit
payment in full of the Common Adjustment, then such remaining assets shall be
distributed ratably to the holders of Common Stock.
(C) In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine
the outstanding Common Stock into a smaller number of shares, then in each
such case the Adjustment Number in effect immediately prior to such event
shall be adjusted by multiplying such Adjustment Number by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
Section 7. CONSOLIDATION, MERGER, ETC. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in
which the shares of Common Stock are exchanged for or changed into other stock
or securities, cash and/or any other property, then in any such case 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 One Thousand (1,000) times the
aggregate amount of stock, securities, cash and/or any other property (payable
in kind), as the case may be, into which or for which each share of Common
Stock is changed or exchanged. In the event the Corporation shall at any time
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 series of any other class of the Corporation's Preferred Stock.
Section 10. AMENDMENT. The Certificate 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 a majority of the outstanding shares of Series A Preferred
Stock, voting together as a single class."
(4) This Amendment to Article Third of the Certificate of Incorporation
of the Corporation was authorized by a resolution of the Board of Directors of
the Corporation duly adopted on April 23, 1999.
IN WITNESS WHEREOF, the undersigned has executed and signed this
Certificate this __ day of May, 1999, and I affirm the statements contained
herein as true under penalties of perjury.
ANDREA ELECTRONICS CORPORATION
By: ________________________
Name:
Title:
Attest:
By: ________________________
Name:
Title:
<PAGE>
EXHIBIT B
Form of Rights Certificate
Certificate No. R- ________ Rights
NOT EXERCISABLE AFTER MAY 7, 2009 OR EARLIER IF REDEMPTION OR
EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT THE OPTION OF THE
COMPANY AT $0.01 PER RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE
RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN
ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH
TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH
RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS
CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN
ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH
TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS
CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE
CIRCUMSTANCES SPECIFIED IN SUCH AGREEMENT.]
Rights Certificate
ANDREA ELECTRONICS CORPORATION
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 April 23, 1999 (the "Rights Agreement"),
between Andrea Electronics Corporation, a New York corporation (the
"Company"), and Continental Stock Transfer & Trust Company, a New York
banking corporation, as Rights Agent (the "Rights Agent"), to purchase from
the Company at any time after the Distribution Date (as such term is defined
in the Rights Agreement) and prior to 5:00 P.M., New York time, on May 7, 2009
at the office of the Rights Agent designated for such purpose, or at the
office of its successor as Rights Agent, one one-thousandth (a "Unit") of a
fully paid non-assessable share of Series A Junior Participating Preferred
Stock, par value $.01 per share (the "Series A Preferred Stock") of the
Company, at a purchase price of $[ ] per Unit of Series A Preferred Stock (the
"Purchase Price"), upon presentation and surrender of this Rights Certificate
with the Form of Election to Purchase duly executed. The number of Rights
evidenced by this Rights Certificate (and the number of Units of Series A
Preferred Stock 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 May 7, 1999 based on the Series A Preferred Stock as constituted at such
date. As provided in the Rights Agreement, the Purchase Price and the number
of Units of Series A Preferred Stock which may be purchased upon the exercise
of the Rights evidenced by this Rights Certificate are subject to modification
and adjustment upon the happening of certain events.
This Rights Certificate is subject to all of the terms, provisions
and conditions of the Rights Agreement, which terms, provisions and conditions
are hereby incorporated herein by reference and made a part hereof and to
which Rights Agreement reference is hereby made for a full description of the
rights, limitations of rights, obligations, duties and immunities hereunder of
the Rights Agent, the Company and the holders of the Rights Certificates.
Copies of the Rights Agreement are on file at the principal executive offices
of the Company.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the office of the Rights Agent designated for such purpose,
may be exchanged for another Rights Certificate or Rights Certificates of like
tenor and date evidencing Rights entitling the holder to purchase a like
aggregate number of Series A Preferred Stock as the Rights evidenced by the
Rights Certificate or Rights Certificates surrendered shall have entitled such
holder to purchase. If this Rights Certificate shall be exercised in part, the
holder shall be entitled to receive upon surrender hereof another Rights
Certificate or Rights Certificates for the number of whole Rights not
exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Company at a redemption
price of $0.01 per Right.
No fractional shares of Series A Preferred Stock will be issued upon
the exercise of any Rights or Rights evidenced hereby (other than fractions
which are integral multiples of one one-thousandth of a share of Series A
Preferred Stock, which may, at the election of the Company, be evidenced by
depositary receipts), but in lieu thereof a cash payment will be made, as
provided in the Rights Agreement.
No holder of this Rights Certificate, as such, shall be entitled to
vote or receive dividends or be deemed for any purpose the holder of Units of
Series A Preferred Stock or of any other securities of the Company which may
at any time be issuable on the exercise hereof, nor shall anything contained
in the Rights Agreement or herein be construed to confer upon the holder
hereof, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in the Rights Agreement), or to receive
dividends or subscription rights, or otherwise, until the Rights or Rights
evidenced by this Rights Certificate shall have been exercised as provided in
the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
WITNESS the signature of the proper officers of the Company and its
corporate seal.
Dated:
ANDREA ELECTRONICS CORPORATION
By: ________________________
Name: John N. Andrea
Title: Co-Chief Executive Officer
Attest:
By: ________________________
Name: Richard A. Maue
Title: Secretary
Countersigned:
CONTINENTAL STOCK TRANSFER &
TRUST COMPANY, as Rights Agent
By ________________________
Authorized Officer
<PAGE>
Form of Reverse Side of Rights Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED ____________________________ hereby sells, assigns
and transfers unto
______________________________________________________________________________
(Please print name and address of transferee)
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _______________ Attorney,
to transfer the within Rights Certificate on the books of the within-named
Company, with full power of substitution.
Dated: _____________, ____
________________________
Signature
Signature Guaranteed:
<PAGE>
CERTIFICATE
The undersigned hereby certifies that the Rights evidenced by this
Rights Certificate are not beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement).
________________________
Signature
---------------------------------
NOTICE
The signature in the foregoing Form of Assignment must conform to the
name as written upon the face of this Rights Certificate in every particular,
without alteration or enlargement or any change whatsoever.
In the event the certification set forth above in the Form of
Assignment is not completed, the Company and the Rights Agent will deem the
beneficial owner of the Rights evidenced by this Rights Certificate to be an
Acquiring Person or an Affiliate or Associate thereof (as defined in the
Rights Agreement) and such Assignment will not be honored.
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise the Rights Certificate.)
To Andrea Electronics Corporation
The undersigned hereby irrevocably elects to exercise ___________
Rights represented by this Rights Certificate to purchase the units of Series
A Preferred Stock (or such other securities of the Company issuable upon the
exercise of such Rights) and requests that certificates be issued in the name
of:
Please insert social security
or other identifying number __________________________________________________
(Please print name and address)
If such number of Rights shall not be all the Rights evidenced by this Rights
Certificate, a new Rights Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number __________________________________________________
(Please print name and address)
Dated: _____________, ____
________________________
Signature
Signature Guaranteed:
<PAGE>
CERTIFICATE
The undersigned hereby certifies that the Rights evidenced by this
Rights Certificate are not beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement).
________________________
Signature
-------------------------------
NOTICE
The signature in the foregoing Form of Election to Purchase must
conform to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
In the event the certification set forth above in 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 Rights Certificate to be an Acquiring Person or an Affiliate or Associate
thereof (as defined in the Rights Agreement) and such Election to Purchase
will not be honored.
<PAGE>
EXHIBIT C
ANDREA ELECTRONICS CORPORATION
SUMMARY OF RIGHTS TO PURCHASE
SHARES OF SERIES A PREFERRED STOCK
On April 23, 1999, the Board of Directors of Andrea Electronics
Corporation (the "Company") declared a dividend of one preferred share
purchase right (a "Right") for each outstanding share of Common Stock (the
"Common Stock"), par value $0.50 per share, of the Company. The dividend is
payable on May 7, 1999 (the "Record Date") to the stockholders of record on
that date. Each Right entitles the registered holder to purchase from the
Company one one-thousandth of a share (a "Unit") of Series A Junior
Participating Preferred Stock, par value $.01 per share (the "Series A
Preferred Stock"), of the Company at a price of $50.00 per Unit (the "Purchase
Price"), subject to adjustment. The description and terms of the Rights are
set forth in a Rights Agreement, dated as of April 23, 1999 (the "Rights
Agreement"), between the Company and Continental Stock Transfer & Trust
Company, as Rights Agent (the "Rights Agent").
Until the earlier to occur of (i) 10 days following a public
announcement that an Acquiring Person (as defined herein) has acquired
beneficial ownership of 20% or more of the outstanding Common Stock 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 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 such outstanding
Common Stock (the earlier of such dates being called the "Distribution Date"),
the Rights will be evidenced, with respect to any of the Common Stock
certificates outstanding as of the Record Date or issued prior to the
Distribution Date, by such Common Stock 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 Stock. Until the Distribution Date
(or earlier redemption or expiration of the Rights), new Common Stock
certificates issued after the Record Date, upon transfer or new issuance of
Common Stock will contain a notation incorporating the Rights Agreement by
reference. Until the Distribution Date (or earlier redemption or expiration of
the Rights), the surrender for transfer of any certificates for Common Stock,
outstanding as of the Record Date, even without such notation, will also
constitute the transfer of the Rights associated with the Common Stock
represented by such certificate. As soon as practicable following the
Distribution Date, separate certificates evidencing the Rights ("Rights
Certificates") will be mailed to holders of record of the Common Stock as of
the Close of Business on the Distribution Date and such separate Rights
Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The
Rights will expire at the close of business on May 7, 2009 (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 Units of Preferred
Stock or other securities or property issuable, upon exercise of the Rights
are subject to adjustment from time to time to prevent dilution (i) in the
event of a stock dividend on, or a subdivision, combination or
reclassification of, the Preferred Stock, (ii) upon the grant to holders of
the Units of Preferred Stock of certain rights or warrants to subscribe for or
purchase Units of Preferred Stock at a price, or securities convertible into
Units of Preferred Stock with a conversion price, less than the then current
market price of the Units of Preferred Stock or (iii) upon the distribution to
holders of the Units of Preferred Stock of evidences of indebtedness or assets
(excluding regular periodic cash dividends paid out of earnings or retained
earnings or dividends payable in Units of Preferred Stock) or of subscription
rights or warrants (other than those referred to above).
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 shares of Preferred Stock will be issued
(other than fractions which are integral multiples of one one-thousandth of a
share of Preferred Stock, 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 Units of Preferred Stock on the
last trading day prior to the date of exercise.
The number of outstanding Rights and the number of Units of Preferred
Stock issuable upon exercise of each Right are also subject to adjustment in
the event of a stock split of the Common Stock or a stock dividend on the
Common Stock payable in Common Stock or subdivisions, consolidations or
combinations of the Common Stock occurring, in any such case, prior to the
Distribution Date.
Shares of Preferred Stock purchasable upon exercise of the Rights will
not be redeemable. Each share of Preferred Stock will be entitled to a
dividend equal to one thousand times any dividend declared per share of Common
Stock. In the event of liquidation, each share of Preferred Stock will be
entitled to a payment equal to one thousand times any payment made per share
of Common Stock. Each share of Preferred Stock will have one thousand votes,
voting together with the Common Stock. Finally, in the event of any merger,
consolidation or other transaction in which shares of Common Stock are
exchanged, each share of Preferred Stock will be entitled to receive an amount
equal to one thousand times the amount received per share of Common Stock.
These rights are protected by customary antidilution provisions.
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 void), will thereafter have the right to
receive upon exercise that number of shares of Common Stock (or cash, other
securities or property) having a market value of two times the exercise price
of the Rights.
For example, at an exercise price of $50.00 per Right, each Right not
owned by an Acquiring Person (or by certain related parties and transferees)
following an event set forth in the preceding paragraph would entitle its
holder to purchase $100.00 worth of Common Stock (or other consideration, as
noted above) for $50.00. Assuming that the Common Stock had a per share value
of $25.00 at such time, the holder of each valid Right would be entitled to
purchase four shares of Common Stock for $50.00.
In the event that, after the Rights become exercisable, the Company
is acquired in a merger or other business combination transaction with an
Acquiring Person or an affiliate thereof, or 50% or more of its consolidated
assets or earning power are sold to an Acquiring Person or an affiliate
thereof, proper provision will be made so that each holder of a Right will
thereafter have the right to receive, upon exercise thereof at the then
current exercise price of the Rights, 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 Rights.
"Acquiring Person" shall mean any person who constitutes an
"Interested Shareholder" as defined in Section 912 of the New York Business
Corporation Law, in effect from time to time, (generally defined to include
any person who or which, together with all persons affiliated or associated
with it, shall be the beneficial owner of 20% or more of the shares of Common
Stock then outstanding), but shall not include the Company, any subsidiary of
the Company, any employee benefit plan of the Company or of any subsidiary of
the Company, or any person or entity organized, appointed or established by
the Company for or pursuant to the terms of any such plan.
At any time after the acquisition by a person or group of affiliated
or associated persons of beneficial ownership of 20% or more of the
outstanding shares of Common Stock and prior to the acquisition by such person
or group of 50% or more of the outstanding Common Stock, the Board of
Directors of the Company may exchange all or part of the Rights (other than
Rights owned by such person or group which have become void) for shares of
Common Stock at an exchange ratio which shall equal one share of Common Stock
per Right, subject to adjustment to reflect stock splits, stock dividends and
similar transactions occurring after the date hereof.
At any time within ten (10) business days after a person or group of
affiliated or associated persons becomes an Acquiring Person or within ten
(10) business days after the announcement of a tender or exchange offer
(unless the Board of Directors extends such ten-day period), the Board of
Directors of the Company may redeem the Rights in whole, but not in part, at a
price of $0.01 per Right (the "Redemption Price"). The redemption of the
rights may be made effective at such time on such basis and with such
conditions as the Board of Directors in its sole discretion may establish.
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. The Rights are also redeemable under other
circumstances as specified in the Rights Agreement.
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 except that from
and after a Distribution Date 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 stockholder 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, except pursuant to
an offer conditioned on a substantial number of rights being acquired. The
Rights should not interfere with any merger or other business combination
approved by the Board of Directors because the Rights may be redeemed by the
Company at the Redemption Price prior to the occurrence of a Distribution
Date.
A COPY OF THE RIGHTS AGREEMENT HAS BEEN FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION AS AN EXHIBIT TO A REGISTRATION STATEMENT ON FORM 8-A. A
COPY OF THE RIGHTS AGREEMENT IS AVAILABLE FREE OF CHARGE FROM THE COMPANY.
THIS SUMMARY DESCRIPTION OF THE RIGHTS DOES NOT PURPORT TO BE COMPLETE AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE RIGHTS AGREEMENT, WHICH IS
HEREBY INCORPORATED HEREIN BY REFERENCE.
<PAGE>
EXHIBIT 99.1
AT ANDREA ELECTRONICS
- ---------------------
Carolynne O'Grady,
Corporate Communications
(800) 442-7787
[email protected]
- -----------------------------
FOR IMMEDIATE RELEASE
- ---------------------
April 27, 1999
ANDREA ELECTRONICS CORPORATION ADOPTS
-------------------------------------
SHAREHOLDER RIGHTS PLAN
-----------------------
Melville, NY, April 27 - Andrea Electronics Corporation (Amex: AND) announced
today that its Board of Directors adopted a Shareholder Rights Plan.
Under the Shareholder Rights Plan, preferred stock purchase rights will be
distributed as a dividend at the rate of one Right for each share of Common
Stock outstanding as of the close of business on May 7, 1999. Each Right
entitles the holder to purchase from the Company one thousandth of a share of
Series A Junior Participating Preferred Stock of the Company at an exercise
price of $50. The Rights will expire on April 23, 2009.
The Rights will not be exercisable unless a person or group acquires, or
announces the intent to acquire, beneficial ownership of 20% or more of the
Company's Common Stock. The Rights are redeemable for $.01 per Right at the
option of the Board of Directors at any time prior to the close of business on
the tenth business day after the announcement that a person or group has
acquired, or intends to acquire, beneficial ownership of 20% or more of the
Company's Common Stock. Prior to the date upon which the rights would become
exercisable under the Plan, the Company's outstanding stock certificates will
represent both the shares of the Company's Common Stock and the rights, and
the rights will trade only with the shares of Common Stock.
Generally, if the Rights become exercisable by virtue of a person or group
acquiring beneficial ownership of 20% or more of the Company's Common Stock,
then each shareholder, other than the acquiror, is entitled to purchase, for
the exercise price, that number of shares of the Company's Common Stock that,
at the time of the transaction, will have a market value of two times the
exercise price of the Rights. In addition, if, after the Rights become
exercisable, the Company is acquired in a merger or other business
combination, or 50% or more of its assets or earning power are sold, each
Right will entitle the holder to purchase, at the exercise price of the
Rights, that number of shares of common stock of the acquiring company that,
at the time of the transaction, will have a market value of two times the
exercise price of the Rights.
The Rights are designed to provide the Board of Directors sufficient time to
evaluate proposed change-in-control transactions by encouraging potential
acquirors to negotiate with the Board of Directors before attempting a tender
offer for the Company. The Rights are not intended to prevent transactions on
terms that are fair to the Company's shareholders nor to deter any potential
acquiror who is willing to complete a transaction on such terms. The Rights
are not being issued in response to an existing attempt to gain control of the
Company.
Andrea Electronics Corporation designs, develops and manufactures audio
technologies and equipment for enhancing applications which require high
performance and high quality voice input. The Company's patented Active Noise
Reduction (ANR) earphone, Active Noise Cancellation (ANC) near-field
microphone, patented Digital Super Directional Array (DSDA(TM)) and
patent-pending Directional Finding and Tracking Array (DFTA(TM)) far-field
microphone technologies enhance a wide range of audio products to eliminate
background noise and ensure the optimum performance of voice applications.
Applications for the Company's technologies include: speech recognition
programs, Internet telephony, video/audio conferencing, automobile PCs, home
automation systems, hand-held devices and multiplayer online games, among
others. OEM and software publisher customers and strategic partners of Andrea
Electronics' include: IBM Corporation, Intel Corporation, Clarion Corporation
of America, Microsoft Corp., Lernout & Hauspie Speech Products, Lotus
Development Corporation, Conversational Computing Corporation, Mpath,
Multitude, IDT, ILINC and iSight, among others.
# # #
This press release may contain "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995. The words
"anticipates," "believes," "estimates," "expects," "intends," "plans,"
"seeks," variations of such words, and similar expressions are intended to
identify forward-looking statements. These statements are not guarantees of
future performance and involve matters that are subject to certain risks,
uncertainties and assumptions that are difficult to predict, including
economic, competitive, governmental, technological and other factors, that may
affect the business and prospects of Andrea Electronics Corporation (the
"Company"). The Company cautions investors about the following significant
factors, which, among others, have in some cases affected the Company's actual
results and are in the future likely to affect the Company's actual results
and could cause them to differ materially from those expressed in any forward-
looking statements: the rate at which Andrea Anti-Noise, DSDA, DFTA and other
Andrea technologies are accepted in the marketplace; the competitiveness of
Andrea Anti-Noise, DSDA, DFTA and other Andrea products in terms of technical
specifications, quality, price, reliability and service; the sufficiency of
the Company's funds for research and development, marketing and general and
administrative expenses; infringement and other disputes relating to patents
and other intellectual property rights held or licensed by the Company or
third parties; and the Company's continuing ability to enter and maintain
collaborative relationships with other manufacturers, software authoring and
publishing companies, and distributors. These and other similar factors are
discussed under the heading "Cautionary Statement Regarding Forward-looking
Statements" included in the Management's Discussion and Analysis of Financial
Condition and Results of Operations in the Company's Annual Report on Form
10-K and in the Company's Annual Report to shareholders, and in documents
subsequently filed by the Company with the Securities and Exchange Commission.
"Andrea Anti-Noise," "DSDA," DSDA-PRO" and "DFTA" are trademarks of Andrea
Electronics Corporation or an Andrea Electronics Corporation subsidiary.
Or visit Andrea Electronics' website at www.andreaelectronics.com.
