<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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):
December 22, 1997 (December 19, 1997)
Cannondale Corporation
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-24884 06-0871823
- --------------- ------------ -------------
(State or other (Commission (IRS employer
jurisdiction of file number) identification no.)
incorporation)
16 Trowbridge Drive, Bethel, Connecticut 06801
---------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code:
(203) 749-7000
<PAGE> 2
Item 5. Other Events
On December 19, 1997, the Registrant's Board of Directors adopted a Rights
Agreement pursuant to which Rights to purchase shares of the Registrant's Common
Stock will be distributed as a dividend, one Right per share, to record owners
of the Registrant's Common Stock as of the close of business on December ,
1997. The Rights Agreement was not adopted in response to any known offers for
the Registrant. The Registrant's press release announcing the Board's action,
dated December 22, 1997, is attached hereto as Exhibit 20.1 and is incorporated
in its entirety herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(c) Exhibits.
The following documents are filed as exhibits to this report:
4.1 Rights Agreement dated December 22, 1997 between Cannondale
Corporation and BankBoston, N.A., as Rights Agent.
20.1 Press release dated December 22, 1997.
<PAGE> 3
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 hereto duly authorized.
Date: December 19, 1997
CANNONDALE CORPORATION
By: /s/ William A. Luca
William A. Luca
Chief Financial Officer
<PAGE> 4
EXHIBIT INDEX
4.1 Rights Agreement dated December 22, 1997 between Cannondale
Corporation and BankBoston, N.A., as Rights Agent.
20.1 Press release dated December 22, 1997.
<PAGE> 1
CANNONDALE CORPORATION
and
BANKBOSTON, N.A.
---------------------------------
as Rights Agent
RIGHTS AGREEMENT
December 22, 1997
<PAGE> 2
Table of Contents
Section Page
1. Certain Definitions 1
2. Appointment of Rights Agent 4
3. Issue of Rights Certificates 4
4. Form of Rights Certificates 6
5. Countersignature and Registration 6
6. Transfer, Split Up, Combination, and Exchange of
Rights Certificates; Mutilated, Destroyed, Lost, or
Stolen Rights Certificates 7
7. Exercise of Rights; Purchase Price;
Expiration Date of Rights 8
8. Cancellation and Destruction of Rights Certificates 9
9. Reservation and Availability of Capital Stock 10
10. Common Stock Record Date 11
11. Adjustment of Purchase Price, Number and Kind of Shares, or
Number of Rights 11
12. Certificate of Adjusted Purchase Price or Number of Shares 18
13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power 18
14. Fractional Rights and Fractional Shares 20
15. Rights of Action 21
16. Agreement of Rights Holders 21
17. Rights Certificate Holder Not Deemed a Stockholder 22
18. Concerning the Rights Agent 22
19. Merger or Consolidation or Change of Name of Rights Agent 23
20. Duties of Rights Agent 23
21. Change of Rights Agent 25
22. Issuance of New Rights Certificates 26
23. Redemption and Termination 26
24. Exchange 27
25. Notice of Certain Events 28
26. Notices 28
27. Supplement and Amendments 29
28. Successors 29
29. Determinations and Actions by the Board of Directors, etc. 29
30. Benefits of this Agreement 30
31. Severability 30
32. Governing Law 30
33. Counterparts 31
34. Interpretation 31
Exhibit A -- Form of Right Certificate
Exhibit B -- Form of Summary of Rights
i
<PAGE> 3
CANNONDALE CORPORATION
RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of December 22, 1997 (the "Agreement"),
between Cannondale Corporation, a Delaware corporation (the "Company"), and
BankBoston, N.A. (the "Rights Agent").
BACKGROUND
On December 19, 1997 (the "Rights Dividend Declaration Date"), the
Board of Directors of the Company authorized and declared a dividend
distribution of one Right for each share of Common Stock, par value $0.01 per
share, of the Company (the "Common Stock") as outstanding at the Close of
Business on December 22, 1997 (the "Record Date"), and has authorized the
issuance of one Right (as such number may be adjusted pursuant to the
provisions of Section 11(p)) for each share of Common Stock issued between the
Record Date (whether originally issued or delivered from the Company's
treasury) and the Distribution Date, each Right initially representing the
right to purchase one share of Common Stock of the Company upon the terms and
subject to the conditions set forth below (the "Rights");
NOW THEREFORE, in consideration of the premises and the mutual
agreements set forth in this Agreement, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the following
terms have the meanings indicated:
(a) "Act" means the Securities Act of 1933.
(b) "Acquiring Person" means any Person that, together with all
Affiliates and Associates of such Person, is the Beneficial Owner of 20% or more
of the shares of Common Stock then outstanding, but does not include (i) the
Company; (ii) any Subsidiary of the Company; (iii) any employee benefit plan of
the Company or of any Subsidiary of the Company; (iv) any Person organized,
appointed, or established by the Company for or pursuant to the terms of any
such plan; (v) any Person that becomes an Acquiring Person pursuant to a
Permitted Transaction; (vi) an Excluded Person (as such term is hereinafter
defined); (vii) any Person that has become an Acquiring Person inadvertently
and, within five Business Days of being requested by the Company to advise it
regarding the same, certifies to the Company that such Person acquired
beneficial ownership of shares of Common Stock in excess of 19.9% inadvertently
or without knowledge of the terms of the Rights and such certification is
accepted as true by a Requisite Majority acting in good faith, and such Person
divests as promptly as practicable a sufficient amount of Common Stock so that
such Person would no longer hold in excess of 19.9% of the Common Stock then
outstanding; or (viii) any Person that becomes an Acquiring Person solely as a
result of a reduction in the number of outstanding shares of Common Stock in a
transaction that is approved by a Requisite Majority, provided that such Person
will immediately be an Acquiring Person in the event such Person
2
<PAGE> 4
thereafter acquires any additional shares of Common Stock (other than as a
result of a stock split or stock dividend) while the Beneficial Owner of 20% or
more of the shares of Common Stock then outstanding.
(c) "Affiliate" and "Associate" have the respective meanings ascribed
to such terms in Rule 12b-2 of the General Rules and Regulations under the
Exchange Act and in effect on the date of this Agreement.
(d) A Person will be deemed the "Beneficial Owner" of, and will be
deemed to "beneficially own," any securities that:
(i) such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether such right
is exercisable immediately or only after the passage of time or upon the
occurrence of certain events) pursuant to any agreement, arrangement, or
understanding (whether or not in writing) or upon the exercise of conversion
rights, exchange rights, rights, warrants or options, or otherwise; provided,
however, that a Person will not be deemed the "Beneficial Owner" of, or to
"beneficially own," (A) securities tendered pursuant to a tender or exchange
offer made by such Person or any of such Person's Affiliates or Associates until
such tendered securities are accepted for purchase or exchange, (B) securities
issuable upon exercise of Rights at any time prior to the occurrence of a
Distribution Date, or (C) securities issuable upon exercise of Rights, which
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 (the
"Original Rights") or pursuant to Section 11(i) in connection with an adjustment
made with respect to any Original Rights;
(ii) such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose of or has
"beneficial ownership" of (as determined pursuant to Rule 13d-3 of the General
Rules and Regulations under the Exchange Act), including pursuant to any
agreement, arrangement, or understanding, whether or not in writing; provided,
however, that a Person will not be deemed the "Beneficial Owner" of, or to
"beneficially own," any security under this Section 1(c)(ii) as a result of an
agreement, arrangement, or understanding to vote such security if such
agreement, arrangement, or understanding: (1) arises solely from a revocable
proxy given in response to a public proxy or consent solicitation made pursuant
to, and in accordance with, the applicable provisions of the General Rules and
Regulations under the Exchange Act, and (2) is not also then reportable by such
Person on Schedule 13D under the Exchange Act (or any comparable or successor
report); or
(iii) are beneficially owned, directly or indirectly, by any
other Person (or any Affiliate or Associate of such Person) with which such
Person (or any of such Person's Affiliates or Associates) has any agreement,
arrangement, or understanding (whether or not in writing), for the purpose of
acquiring, holding, voting (except pursuant to a revocable proxy as described in
the proviso in Section 1(d)(ii)), or disposing of any voting securities of the
Company;
3
<PAGE> 5
provided, however, that nothing in this Section 1(d) will cause a Person engaged
in business as an underwriter of securities to be the "Beneficial Owner" of, or
to "beneficially own," any securities acquired through such Person's
participation in good faith in a bona fide firm commitment underwriting until
the expiration of forty days after the date of such acquisition.
(e) "Business Day" means any day other than a Saturday, Sunday, or a
day on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
(f) "Close of Business" on any given date will mean 5:00 p.m., New
York, New York time, on such date; provided, however, that if such date is not a
Business Day it will mean 5:00 p.m., New York, New York time, on the next
succeeding Business Day.
(g) "Common Stock" means the common stock, par value $0.01 per share,
of the Company. "Common Stock" when used with reference to any Person other than
the Company will mean the capital stock of such Person with the greatest voting
power, or the equity securities or other equity interest having power to control
or direct the management, of such Person.
(h) "Continuing Director" means (i) any member of the Board of
Directors of the Company who (i) is not an Acquiring Person or an Affiliate or
Associate of an Acquiring Person and (ii) was either a member of the Board of
Directors of the Company on the date of this Agreement or who subsequently
became a director of the Company and whose initial election or initial
nomination for election was approved by a majority of the Continuing Directors
then on the Board of Directors of the Company.
(i) "Distribution Date" means the Close of Business on the tenth
Business Day after the earlier to occur of (i) the Stock Acquisition Date or
(ii) the date any Person commences or publicly announces an intention to
commence a tender offer or exchange offer for the Common Stock which would
result in, upon the consummation of such offer, the Person making such offer,
together with all of its Affiliates and Associates, being the Beneficial Owner
of 20% or more of the Common Stock then outstanding (including any such date
that is after the date of this Agreement and prior to the issuance of the
Rights); provided, however, that if the tender offer or exchange offer that gave
rise to the Distribution Date is canceled, terminated or otherwise withdrawn
within ten Business Days of its announcement, such offer shall be deemed never
to have been made and no Distribution Date shall occur with respect thereto.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(k) "Excluded Stockholder" shall mean Joseph S. Montgomery and James
Scott Montgomery so long as such persons collectively beneficially own 25% or
less of the outstanding common stock; provided, however, that Joseph S.
Montgomery and James Scott Montgomery shall not be excluded stockholders if they
collectively beneficially own more than 25% of the outstanding Common Stock
without the prior approval of the Board of Directors of the Company.
4
<PAGE> 6
(l) "Permitted Transaction" means a stock acquisition or a tender or
exchange offer pursuant to a definitive agreement by which a Person (who is not
at the time an Acquiring Person) would become an Acquiring Person and which has
been approved by a Requisite Majority prior to the execution of the definitive
agreement providing for the acquisition or the public announcement of the offer,
as the case may be.
(m) "Person" means any individual, firm, corporation, partnership,
limited liability company or other public or private entity.
(n) "Redemption Price" with respect to each Right means $0.01, as such
amount may from time to time be adjusted in accordance with Section 11. All
references herein to the Redemption Price mean the Redemption Price as in effect
at the time in question.
(o) "Requisite Majority" means, at any time, the affirmative vote of a
majority of the Continuing Directors then in office.
(p) "Rights Shares" means the shares of Common Stock issuable or issued
upon the exercise of the Rights.
(q) "Section 11(a)(ii) Event" means any event described in Section
11(a)(ii).
(r) "Section 13 Event" means any event described in clauses (i), (ii),
or (iii) of Section 13(a).
(s) "Stock Acquisition Date" means the first date of public
announcement (which, for purposes of this definition, will include, without
limitation, a report filed pursuant to Section 13(d) under the Exchange Act) by
the Company or an Acquiring Person that an Acquiring Person has become an
Acquiring Person.
(t) "Subsidiary" means, with reference to any Person, any entity of
which an amount of voting securities sufficient to elect at least a majority of
the directors or similar Persons of such entity is beneficially owned, directly
or indirectly, by such Person, or otherwise controlled by such Person.
(u) "Trading Day" means a day on which the principal national
securities exchange or quotation system on which the shares of Common Stock are
listed or admitted to trading is open for the transaction of business or, if the
shares of Common Stock are not listed or admitted to trading on any national
securities exchange, a Business Day.
(v) "Triggering Event" means 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 of this Agreement, 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.
5
<PAGE> 7
Section 3. Issue of Rights Certificates.
(a) Prior to the Distribution Date, (i) the Rights will be evidenced
(subject to the provisions of Section 3(b) and 3(c)) by the certificates for the
Common Stock registered in the names of the holders of the Common Stock (which
certificates for Common Stock will be deemed also to be certificates for Rights)
and not by separate certificates, and (ii) the Rights will be transferable only
in connection with the transfer of the underlying shares of Common Stock,
including a transfer to the Company. As soon as practicable after the
Distribution Date, the Rights Agent will send by first-class, insured, postage
prepaid mail, to each record holder of the Common Stock as of the Distribution
Date, at the address of such holder shown on the records of the Company, one or
more rights certificates, in substantially the form of Exhibit A (the "Rights
Certificates"), evidencing one Right for each share of Common Stock so held,
subject to adjustment as provided in this Agreement. In the event that an
adjustment in the number of Rights per share of Common Stock has been made
pursuant to Section 11(p), at the time of distribution of the Rights
Certificates, the Company will make the necessary and appropriate rounding
adjustments (in accordance with Section 14(a)) so that Rights Certificates
representing only whole numbers of Rights are distributed and cash is paid in
lieu of any fractional Rights. As of and after the Distribution Date, the Rights
will be evidenced solely by such Rights Certificates.
(b) As soon as practicable following the Record Date, the Company will
send a copy of a Summary of Rights, in substantially the form of Exhibit B, by
first-class, postage prepaid mail, to each record holder of the Common Stock as
of the Close of Business on the Record Date, at the address of such holder shown
on the records of the Company. With respect to certificates for the Common Stock
outstanding as of the Record Date, until the Distribution Date, the Rights will
be evidenced by such certificates for the Common Stock and the registered
holders of the Common Stock will also be the registered holders of the
associated Rights. Until the earlier of the Distribution Date or the Final
Expiration Date (as defined in Section 7), the transfer of any certificates
representing shares of Common Stock in respect of which Rights have been issued
will also constitute the transfer of the Rights associated with such shares of
Common Stock.
(c) Rights will 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 representing such shares of Common Stock will also be deemed
to be certificates for Rights, and will bear the following legend:
THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER TO CERTAIN
RIGHTS AS SET FORTH IN THE RIGHTS AGREEMENT BETWEEN CANNONDALE CORPORATION (THE
"COMPANY") AND BANKBOSTON, N.A. (THE "RIGHTS AGENT") DATED AS OF DECEMBER 22,
1997 (AS AMENDED FROM TIME TO TIME, THE "RIGHTS AGREEMENT"), THE TERMS OF
WHICH ARE HEREBY INCORPORATED IN THIS CERTIFICATE BY REFERENCE AND A COPY OF
WHICH IS ON FILE AT THE PRINCIPAL OFFICES OF THE COMPANY. UNDER CERTAIN
CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, SUCH RIGHTS
6
<PAGE> 8
WILL BE EVIDENCED BY SEPARATE CERTIFICATES AND WILL NO LONGER BE EVIDENCED BY
THIS CERTIFICATE. THE COMPANY WILL MAIL TO THE HOLDER OF THIS CERTIFICATE A COPY
OF THE RIGHTS AGREEMENT, AS IN EFFECT ON THE DATE OF MAILING, WITHOUT CHARGE
PROMPTLY AFTER RECEIPT OF A WRITTEN REQUEST. UNDER CERTAIN CIRCUMSTANCES SET
FORTH IN THE RIGHTS AGREEMENT, RIGHTS BENEFICIALLY OWNED BY ANY PERSON WHO IS,
WAS, OR BECOMES AN ACQUIRING PERSON OR ANY AFFILIATE OR ASSOCIATE OF AN
ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT), WHETHER
CURRENTLY HELD BY OR ON BEHALF OF SUCH PERSON OR BY ANY SUBSEQUENT HOLDER, MAY
BECOME NULL AND VOID.
With respect to shares of Common Stock issued after the Record Date,
until the earlier of (i) the Distribution Date or (ii) the Expiration Date, the
Rights associated with the Common Stock represented by such certificates will be
evidenced by such certificates alone, and registered holders of Common Stock
will also be the registered holders of the associated Rights, and the transfer
of any of such certificates will also constitute the transfer of the Rights
associated with the Common Stock represented by such certificates.
Section 4. Form of Rights Certificates.
The Rights Certificates (and the forms of election to purchase and of
assignment to be printed on the reverse of the Rights Certificates) will each be
substantially in the form set forth in Exhibit A and may have such marks of
identification or designation and such legends, summaries, or endorsements 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 quotation 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, the Rights Certificates, whenever distributed, will be dated as
of the Record Date and on their face will entitle the holders of such Rights
Certificates to purchase such number of shares of Common Stock as is set forth
in such Rights Certificates at the price set forth in such Rights Certificates
(such exercise price per share, the "Purchase Price"), but the amount and type
of securities purchasable upon the exercise of each Right and the Purchase Price
will be subject to adjustment as provided in this Agreement.
Section 5. Countersignature and Registration.
(a) The Rights Certificates will be executed on behalf of the Company
by its Chairman of the Board, its Chief Executive Officer, its Chief Financial
Officer, its President, or any Executive Vice President, either manually or by
facsimile signature, will have affixed thereto the Company's seal or a facsimile
thereof, and will be attested by the Secretary or an Assistant Secretary of the
Company, either manually or by facsimile signature. The Rights Certificates will
be countersigned by the Rights Agent, either manually or by facsimile signature
and will not be valid for any purpose unless so countersigned. In case any
officer of the Company who has signed any of the Rights Certificates ceases to
be such officer of the Company before
7
<PAGE> 9
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, is 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 principal office or offices designated as the
appropriate place for surrender of Rights Certificates upon exercise or
transfer, books for registration and transfer of the Rights Certificates issued
under this Agreement. Such books will show the names and addresses of the
respective holders of the Rights Certificates, the number of Rights evidenced on
the face of the Rights Certificates, and the date of each of the Rights
Certificates.
Section 6. Transfer, Split up, Combination, and Exchange of Rights Certificates;
Mutilated, Destroyed, Lost, or Stolen Rights Certificates.
(a) Subject to the provisions of Section 7(e) and Section 14, at any
time after the Distribution Date, and at or prior to the Expiration Date, any
Rights Certificate or Certificates may be transferred, split up, combined, or
exchanged for another Rights Certificate or Rights Certificates, entitling the
registered holder to purchase a like number of Rights Shares (or, following a
Triggering Event, preferred stock, other securities, cash, or other assets, as
the case may be) as the Rights Certificate or Certificates surrendered then
entitled such holder (or former holder in the case of a transfer) to purchase.
Any registered holder desiring to transfer, split up, combine, or exchange any
Rights Certificate or Rights Certificates will make such request in writing
delivered to the Rights Agent, and will surrender the Rights Certificate or
Rights Certificates to be transferred, split up, combined, or exchanged at the
principal office or offices of the Rights Agent designated for such purpose.
Neither the Rights Agent nor the Company will be obligated to take any action
whatsoever with respect to the transfer of any such surrendered Rights
Certificate until the registered holder has completed and signed the certificate
contained in the form of assignment on the reverse side of such Rights
Certificate and has provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company requests in good faith. Thereupon, the Rights Agent will,
subject to Section 4, Section 7(e) and Section 14, 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 any Rights
Certificate.
(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 satisfactory to them, and reimbursement to the Company and
the Rights Agent of all reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the Rights Certificate if
8
<PAGE> 10
mutilated, the Company will execute and deliver a new Rights Certificate of like
tenor to the Rights Agent for countersignature and delivery to the registered
owner in lieu of the Rights Certificate so lost, stolen, destroyed, or
mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
(a) Subject to Section 7(e), the registered holder of any Rights
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided in this Agreement including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(a)(iii), Section 23(a) and
Section 24) 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
the certificate on the reverse side of the Rights Certificate duly executed, to
the Rights Agent at the principal office or offices of the Rights Agent
designated for such purpose, together with payment of the aggregate Purchase
Price for each share of Common Stock (or other securities, cash or other assets,
as the case may be) as to which such surrendered Rights are then exercisable, at
or prior to the earlier of (i) the Close of Business on December , 2007, (the
"Final Expiration Date"), (ii) the time at which the Rights are redeemed as
provided in Section 23 or (iii) the time at which such rights are exchanged as
provided in Section 24 (the earlier of the times, the "Expiration Date")).
(b) The Purchase Price for each share of Common Stock pursuant to the
exercise of a Right will initially be $100.00, subject to adjustment from time
to time as provided in Section 11 and Section 13(a). The Purchase Price will be
payable in accordance with Section 7(c).
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase and the certificate duly executed,
accompanied by payment of the Purchase Price for the shares of Common Stock (or
other shares, securities, cash or other assets, as the case may be) to be
purchased and an amount equal to any applicable transfer tax, the Rights Agent
will, subject to Section 20(k), promptly (i) (A) requisition from any transfer
agent of the shares of Common Stock (or make available, if the Rights Agent is
the transfer agent for such shares) certificates for the total number of shares
of Common Stock to be purchased (the Company hereby irrevocably authorizing its
transfer agent to comply with all such requests) or (B) if the Company has
elected to deposit the shares of Common Stock with a depository agent,
requisition from the depository agent depository receipts representing such
number of shares of Common Stock as are to be purchased (in which case
certificates for the shares of Common Stock represented by such receipts will be
deposited by the transfer agent with the depository agent) and the Company will
direct the depository agent to comply with such request; (ii) requisition from
the Company the amount of cash, if any, to be paid in lieu of fractional shares
in accordance with Section 14; (iii) after receipt of such certificates or
depository receipts, cause such certificates or depository receipts 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) after receipt thereof, deliver such cash, if any, to or upon
the order of the registered holder of such Rights Certificate. The payment of
the Purchase Price (as such amount may be reduced pursuant to Section
11(a)(iii)) will 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
9
<PAGE> 11
Company, pay cash, or distribute other property pursuant to Section 11(a), the
Company will make all arrangements necessary so that such other securities,
cash, 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 any exercise of Rights, a number of
Rights be exercised so that only whole shares of Common Stock would be issued.
(d) If the registered holder of any Rights Certificate exercises less
than all the Rights evidenced by such certificate, a new Rights Certificate
evidencing the unexercised Rights will be issued by the Rights Agent and
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, subject to the provisions of Section 14.
(e) Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of a Section 11(a)(ii) Event, any Rights
beneficially owned by any Person referred to in Clauses (i) through (iii) below
will become null and void without any further action and no holder of such
Rights will have any rights whatsoever with respect to such Rights, under any
provision of this Agreement or otherwise: (i) an Acquiring Person or an
Associate or Affiliate of an Acquiring Person, (ii) a transferee from an
Acquiring Person (or from any Associate or Affiliate of an Acquiring Person)
that becomes a transferee after the Acquiring Person becomes such, or (iii) a
transferee from an Acquiring Person (or of any such Associate or Affiliate) that
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 that the Board of Directors of the Company has
determined is part of an agreement, plan, arrangement, or understanding that has
as a substantial purpose or effect the avoidance of this Section 7(e). The
Company will use reasonable efforts to insure that the provisions of this
Section 7(e) and Section 4(b) are complied with, but will have no liability
under this Agreement to any holder of Rights Certificates or other Person as a
result of its failure to make any determinations with respect to an Acquiring
Person, or any of its Affiliates, Associates, or transferees.
(f) Notwithstanding anything in this Agreement to the contrary, neither
the Rights Agent nor the Company will 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 has (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
requests in good faith.
Section 8. Cancellation and Destruction of Rights Certificates. All Rights
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange will, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, will be canceled by it, and no Rights
Certificates will be issued in lieu thereof except as expressly permitted by any
of
10
<PAGE> 12
the provisions of this Agreement. The Company will deliver to the Rights Agent
for cancellation and retirement, and the Rights Agent will so cancel and retire,
any other Rights Certificate purchased or acquired by the Company otherwise than
upon the exercise thereof. The Rights Agent will deliver all canceled Rights
Certificates to the Company, or will, at the written request of the Company,
destroy such canceled Rights Certificates, and in such case will deliver a
certificate of destruction to the Company.
Section 9. Reservation and Availability of Capital Stock.
(a) The Company will use its best efforts to reserve and keep available
out of its authorized and unissued shares of Common Stock (and/or or other
securities) or its authorized and issued shares of Common Stock (and/or or other
securities) held in its treasury, the number of shares of Common Stock (and/or
other securities) that will be sufficient to permit the exercise in full of all
outstanding Rights.
(b) So long as the shares of Common Stock (and, following the
occurrence of a Triggering Event, Common Stock or other securities) issuable and
deliverable upon the exercise of the Rights may be listed on any national
securities exchange or automated quotation system, the Company will use its
reasonable efforts to cause, from and after such time as the Rights become
exercisable, all shares reserved for such issuance to be listed on such exchange
or automated quotation system upon official notice of issuance upon such
exercise.
(c) The Company will use its best efforts to (i) file, as soon as
practicable following the first occurrence of a Section 11(a)(ii) Event on which
the consideration to be delivered by the Company upon exercise of the Rights has
been determined in accordance with Section 11(a)(iii), a registration statement
under the Act, with respect to the securities purchasable upon exercise of the
Rights or issued in an exchange pursuant to Section 24 on an appropriate form,
(ii) cause such registration statement to become effective as soon as
practicable after such filing, and (iii) cause such registration statement to
remain effective (with a prospectus at all times meeting the requirements of the
Act) until the 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 applicable state securities laws in connection with the exercisability of
the Rights. The Company may temporarily suspend, for up to 90 days after the
date described in Clause (i) 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 will 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 no
longer remains in effect. In addition, if the Company determines 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 will not be exercisable
in any jurisdiction if the requisite qualification in such jurisdiction has not
been obtained, the exercise of such Rights is not permitted under applicable
law, or a registration statement has not been declared effective.
11
<PAGE> 13
(d) The Company covenants and agrees that it will take all such action
as may be necessary to ensure that all shares of Common Stock (and/or other
securities) delivered upon exercise of Rights will, at the time of delivery of
the certificates for such shares upon payment of the Purchase Price, be duly and
validly authorized and issued and fully paid and nonassessable.
(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 that may be
payable in respect of the issuance or delivery of the Rights Certificates and
any Common Stock or other certificates issued upon the exercise of Rights. The
Company will not, however, be required to pay any transfer tax that may be
payable in respect of any transfer or delivery of Rights Certificates to a
Person other than, or the issuance or delivery of Common Stock (or other
securities, as the case may be) in respect of a name other than that of the
registered holder of the Rights Certificates or to issue or deliver any Common
Stock or other certificates in a name other than that of the registered holder
until such tax has been paid (any such tax being payable by the holder of such
Rights Certificate at the time of surrender) or until it has been established to
the Company's satisfaction that no such tax is due.
Section 10. Common Stock Record Date. Each Person in whose name any Rights Share
certificate is issued will, for all purposes, be deemed to have become the
record holder of such Rights Shares represented thereby, and such certificate
will be dated, on the date upon which the Rights Certificate evidencing such
Rights was duly surrendered and payment of the Purchase Price (and all
applicable transfer taxes) was made; provided, however, that if the date of such
surrender and payment is a date upon which the Common Stock (or other
securities, as the case may be) transfer books of the Company are closed, such
Person will be deemed to have become the record holder of the Rights Shares on,
and such certificate will be dated, the next succeeding Business Day on which
the Common Stock (or other securities, as the case may be) transfer books of the
Company are open. Prior to the exercise of the Rights evidenced thereby, the
Rights Certificate holders will not be entitled to any stockholder rights with
respect to Rights Shares, including, without limitation, the right to vote, to
receive dividends or other distributions, or to exercise any preemptive rights,
and will not be entitled to receive any notice of any proceedings of the
Company, except as provided in this Agreement.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares, or Number
of Rights. The Purchase Price, the number and kind of shares covered by each
Right and the number of Rights outstanding are subject to adjustment from time
to time as provided in this Section 11.
(a) (i) In the event the Company at any time after the date of this
Agreement (A) declares a dividend on the Common Stock payable in shares of
Common Stock, (B) subdivides the outstanding Common Stock, (C) combines the
outstanding Common Stock into a smaller number of shares, or (D) issues any
shares of its capital stock in a reclassification of the Common Stock
(including, without limitation, 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), the Purchase Price in effect at the time of the record date for such
dividend or of the effective date of such subdivision,
12
<PAGE> 14
combination or reclassification, and the number and kind of shares of Common
Stock or capital stock, as the case may be, issuable on such date, will be
proportionately adjusted so that the holder of any Right exercised after such
time will be entitled to receive, upon payment of the Purchase Price then in
effect, the aggregate number and kind of shares of Common Stock or capital
stock, as the case may be, that, if such Right had been exercised immediately
prior to such date and at a time when the Common 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. If an event occurs that 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) will be in addition to, and will be made prior to, any
adjustment required pursuant to Section 11(a)(ii).
(ii) In the event that any Person, alone or together with its
Affiliates and Associates, at any time after the Rights Dividend Declaration
Date, becomes an Acquiring Person, then, proper provision will be made so that
each Right holder (except as provided in Section 7(e)) will thereafter have the
right to receive, upon exercise of such Right at the then current Purchase Price
in accordance with the terms of this Agreement, such number of Rights Shares
equal to the result obtained by (x) multiplying the then current Purchase Price
by the then number of Rights Shares for which a Right is then exercisable and
(y) dividing that product by 50% of the Current Market Price (defined in Section
11(d)) per share of Common Stock on the date such Person became an Acquiring
Person (such number of Rights Shares, the "Adjustment Shares").
(iii) In the event that the number of shares of Common Stock
that are authorized by the Company's certificate of incorporation but not
issued, or issued but not outstanding, are not sufficient to permit the exercise
in full of the Rights in accordance with Section 11(a)(ii), the Company will,
upon the exercise of a Right and payment of the applicable Purchase Price, (A)
determine the value of the Adjustment Shares issuable upon the exercise of a
Right (the "Current Value"), and (B) with respect to each Right (subject to
Section 7(e)), make adequate provision to substitute for the Adjustment Shares
(1) cash, (2) a reduction in the Purchase Price, (3) other equity securities of
the Company (including, without limitation, shares, or units of shares, of
preferred stock), that a Requisite Majority has deemed to have essentially the
same rights, privileges and preferences as shares of Common Stock ("Common Stock
Equivalents")), (4) debt securities of the Company, (5) other assets, or (6) any
combination of the foregoing, having an aggregate value equal to the Current
Value, where such aggregate value has been conclusively determined by a
Requisite Majority based upon the advice of a nationally recognized investment
banking firm selected by a Requisite Majority; provided, however, that if the
Company has not made adequate provision to deliver value pursuant to Clause (B)
above within 30 days following the first occurrence of a Section 11(a)(ii)
Event, then the Company will be obligated to deliver, upon the surrender for
exercise of a Right and without requiring payment of the Purchase Price, shares
of Common Stock (to the extent available) and then, if necessary, cash, which
shares or cash have an aggregate value equal to the Spread. The term "Spread"
means the excess of (i) the Current Value over (ii) the Purchase Price. If the
Board of Directors 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 30-day period set forth above may be extended to the
extent necessary,
13
<PAGE> 15
but not more than 90 days after the Section 11(a)(ii) Trigger Date, in order
that the Company may seek stockholder approval for the authorization of such
additional shares (such 30-day period, as it may be extended, being the
"Substitution Period"). To the extent that action is to be taken pursuant to
this Section 11(a)(iii), the Company (1) will provide, subject to Section 7(e),
that such action will 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 any required stockholder approval or to
decide the appropriate form of distribution to be made and the value thereof. In
the event of any such suspension, the Company will 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 no longer remains
in effect. For purposes of this Section 11(a)(iii), the Current Value of each
Adjustment Share will be the Current Market Price per share of the Common Stock
on the effective date of the Section 11(a)(ii) Event and the per share or per
unit value of any Common Stock Equivalent will be deemed to equal the Current
Market Price per share of the Common Stock on such date.
(b) In case the Company fixes a record date for the issuance of rights,
options or warrants to all holders of Common Stock entitling them to subscribe
for or purchase (for a period expiring within 45 calendar days after such record
date) Common Stock (and/or Common Stock Equivalents) (or securities convertible
into Common Stock) at a price per share of Common Stock (or having a conversion
price per share, if a security convertible into Common Stock) less than the
Current Market Price per share of Common Stock on such record date, the Purchase
Price to be in effect after such record date will be determined by multiplying
the Purchase Price in effect immediately prior to such record date by a
fraction, (i) the numerator of which is the number of shares of Common Stock
outstanding on such record date, plus the number of shares of Common Stock that
the aggregate offering price of the total number of shares of Common Stock
(and/or Common Stock Equivalents) so to be offered (or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such Current Market Price, and (ii) the denominator of which is the number of
shares of Common Stock outstanding on such record date, plus the number of
additional shares of Common Stock (and/or Common Stock Equivalents) to be
offered for subscription or purchase (or into which the convertible securities
so to be offered are initially convertible). In the event that the number of
shares of Common Stock issuable under the terms of a convertible security, or
the conversion or exercise price of such convertible security, changes after the
initial issuance of such convertible security, an adjustment will be made to the
Purchase Price that conforms with the adjustment set forth in this Section
11(b). In case such subscription price may be paid by delivery of consideration
part or all of which may be in a form other than cash, the value of such
consideration will be as conclusively determined in good faith by the Board of
Directors of the Company, whose determination will be described in a statement
filed with the Rights Agent and will be binding on the Rights Agent and the
holders of the Rights. Shares of Common Stock owned by or held for the account
of the Company will be deemed not to be outstanding for the purpose of any such
computation. Such adjustment will be made successively whenever such a record
date is fixed, and in the event that such rights or warrants are not so issued,
the Purchase Price will be adjusted to be the Purchase Price that would then be
in effect if such record date had not been fixed.
14
<PAGE> 16
(c) In case the Company fixes a record date for a distribution to all
holders of Common Stock (including any such distribution made in connection with
a consolidation or merger in which the Company is the continuing corporation) of
evidences of indebtedness, cash (other than a regular quarterly cash dividend
out of the earnings or retained earnings of the Company), assets (other than a
dividend payable in Common Stock, but including any dividend payable in stock
other than Common Stock) or subscription rights or warrants (excluding those
referred to in Section 11(b)), the Purchase Price to be in effect after such
record date will be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, (i) the numerator of which
is the Current Market Price per share of Common Stock on such record date, less
the fair market value (as conclusively determined in good faith by the Board of
Directors of the Company, whose determination will be described in a statement
filed with the Rights Agent) of the portion of the cash, assets, or evidences of
indebtedness so to be distributed or of such subscription rights or warrants
applicable to a share of Common Stock and (ii) the denominator of which is such
Current Market Price per share of Common Stock. Such adjustments will be made
successively whenever such a record date is fixed, and in the event that such
distribution is not so made, the Purchase Price will be adjusted to be the
Purchase Price that would have been in effect if such record date had not been
fixed.
(d) The "Current Market Price" per share of Common Stock on any date
will be deemed to be the average of the daily closing prices per share of such
Common Stock for the 30 consecutive Trading Days immediately prior to such date;
provided, however, that in the event that the Current Market Price per share of
the Common Stock is determined during a period following the announcement by the
issuer of such Common Stock of (i) a dividend or distribution on such Common
Stock payable in shares of such Common Stock or securities convertible into
shares of such Common Stock (other than the Rights), or (ii) any subdivision,
combination, or reclassification of such Common Stock, and the ex-dividend date
for such dividend or distribution, or the record date for such subdivision,
combination, or reclassification has not occurred prior to the commencement of
the requisite 30 Trading Day period, as set forth above, then, and in each such
case, the Current Market Price will be properly adjusted to take into account
ex-dividend trading. The closing price for each day will be the last sale price,
regular way, or, in case no such sale takes place on such day, the average of
the closing bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange or, if the shares
of Common Stock are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the shares of Common Stock are listed or admitted to trading or, if the
shares of Common Stock are not listed or admitted to trading on any national
securities exchange, the last quoted 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 shares of
Common Stock are not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker making a market
in the Common Stock selected by the Board of Directors. If on any such date no
market maker is making a market in the Common Stock, the fair value of such
shares on such date as determined in good faith by the Board of Directors
15
<PAGE> 17
will be used. If the Common Stock is not publicly held or not so listed or
traded, Current Market Price per share will mean the fair value per share as
determined in good faith by the Board of Directors, the determination of which
will be described in a statement filed with the Rights Agent and will be
conclusive for all purposes.
(e) Anything in this Agreement to the contrary notwithstanding, no
adjustment in the Purchase Price will be required unless such adjustment would
require an increase or decrease of at least one percent (1%) in the Purchase
Price; provided, however, that any adjustments that by reason of this Section
11(e) are not required to be made will be carried forward and taken into account
in any subsequent adjustment. All calculations under this Section 11 will be
made to the nearest cent or to the nearest one-hundredth of a share of Common
Stock. Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 will be made no later than the earlier of (i) three
(3) years from the date of the transaction that mandates such adjustment or (ii)
the Final Expiration Date.
(f) If, as a result of an adjustment made pursuant to Section 11(a)(ii)
or Section 13(a), the holder of any Right thereafter exercised becomes entitled
to receive any shares of capital stock other than Common Stock, then the number
of such other shares so receivable upon exercise of any Right and the Purchase
Price will be subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with respect to the Common
Stock contained in Sections 11(a), (b), (c), (e), (g), (h), (i), (j), (k), (m),
and (q) and the provisions of Sections 7, 9, 10, 13, and 14 with respect to the
Common Stock will apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price under this Agreement will evidence the
right to purchase, at the adjusted Purchase Price, the number of Rights Shares
purchasable from time to time under this Agreement, all subject to further
adjustment as provided in this Agreement.
(h) Unless the Company has 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 will thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of Rights Shares
(calculated to the nearest one-hundredth) obtained by (i) multiplying (x) the
number of Rights Shares covered by a Right immediately prior to this adjustment,
by (y) the Purchase Price in effect immediately prior to such adjustment of the
Purchase Price, and (ii) dividing the product so obtained by the Purchase Price
in effect immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Rights, in lieu of any adjustment in the
number of Rights Shares purchasable upon the exercise of a Right. Each of the
Rights outstanding after such an adjustment in the number of Rights will be
exercisable for the number of Rights Shares 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 will become that number of Rights (calculated
to the nearest one-hundredth) obtained by dividing the Purchase Price in effect
16
<PAGE> 18
immediately prior to adjustment of the Purchase Price by the Purchase Price in
effect immediately after adjustment of the Purchase Price. The Company will 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, will be at least ten Business 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
will, 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, the additional Rights to which such holders are entitled
as a result of such adjustment, or, at the option of the Company, will 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 are entitled after such
adjustment. Rights Certificates so to be distributed will be issued, executed,
and countersigned in the manner provided for in this Agreement (and may bear, at
the option of the Company, the adjusted Purchase Price) and will 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 Rights Shares, the Rights Certificates theretofore and thereafter issued may
continue to express the Purchase Price per Rights Shares and the number of
Rights Shares that were expressed in the initial Rights Certificates issued
under this Agreement.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then stated value, if any, of the number of Rights
Shares, the Company will take any corporate action that may, in the opinion of
its counsel, be necessary in order that the Company may validly and legally
issue such number of fully paid and nonassessable Rights Shares at such adjusted
Purchase Price.
(l) In any case in which this Section 11 requires that an adjustment in
the Purchase Price be made effective as of a record date for a specified event,
the Company may elect to defer until the occurrence of such event the issuance
to the holder of any Right exercised after such record date the number of Rights
Shares and other capital stock or securities of the Company, if any, issuable
upon such exercise over and above the number of Rights Shares and other capital
stock or securities of the Company, if any, issuable upon such exercise on the
basis of the Purchase Price in effect prior to such adjustment; provided,
however, that the Company will deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
shares (fractional or otherwise) or securities upon the occurrence of the event
requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company will be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that, in its good faith judgment, the Board of Directors of the
Company determines it to be advisable in order that any (i)
17
<PAGE> 19
consolidation or subdivision of the Common Stock, (ii) issuance wholly for cash
of any shares of Common Stock at less than the current market price, (iii)
issuance wholly for cash of shares of Common Stock or securities that by their
terms are convertible into or exchangeable for shares of Common Stock, (iv)
stock dividends, or (v) issuance of rights, options, or warrants referred to in
this Section 11, hereafter made by the Company to holders of its Common Stock
will not be taxable to such stockholders.
(n) The Company covenants and agrees that it will not, at any time
after the Distribution Date, (i) consolidate with any other Person (other than a
Subsidiary of the Company in a transaction that complies with Section 11(o)),
(ii) merge with, from, or into any other Person (other than a Subsidiary of the
Company in a transaction that 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 related 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 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 that could reasonably be expected to
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 stockholders of the Person that
constitutes, or would constitute, the "Principal Party" for purposes of Section
13(a) has received a distribution of Rights previously owned by such Person or
any of its Affiliates and Associates.
(o) The Company covenants and agrees that, after the Distribution Date,
it will not, except as permitted by 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) Notwithstanding anything in this Agreement to the contrary, in the
event that the Company at any time after the Rights Dividend Declaration Date
and prior to the Distribution Date (i) declares a dividend on the outstanding
shares of Common Stock, payable in shares of Common Stock, (ii) subdivides the
outstanding shares of Common Stock, or (iii) combines the outstanding shares of
Common Stock into a smaller number of shares, the number of Rights associated
with each share of Common Stock then outstanding, or issued or delivered
thereafter but prior to the Distribution Date, will be appropriately and
proportionately adjusted so that the number of Rights thereafter associated with
each share of Common Stock, following any such event will equal the result
obtained by multiplying the number of Rights associated with each share of
Common Stock immediately prior to such event by a fraction the numerator of
which is the total number of shares of Common Stock outstanding immediately
prior to the occurrence of the event and the denominator of which is the total
number of shares of Common Stock outstanding immediately following the
occurrence of such event.
(q) In the event that the Rights become exercisable following a Section
11(a)(ii) Event, the Company, by action of a Requisite Majority, may permit the
Rights, subject to Section 7(e), to be exercised for 50% of the shares of Common
Stock (or cash or other securities or
18
<PAGE> 20
assets to be substituted for the Adjustment Shares pursuant to Section
11(a)(iii)) that would otherwise be purchasable under Section 11(a) in
consideration of the surrender to the Company of the Rights so exercised and
without other payment of the Purchase Price. Rights exercised under this Section
11(q) will be deemed to have been exercised in full and will be canceled.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares. Whenever
an adjustment is made as provided in Section 11 or Section 13, the Company will
(a) promptly prepare a certificate setting forth such adjustment and a brief
statement of the facts accounting for such adjustment, (b) promptly file with
the Rights Agent, and with each transfer agent for the Common Stock, a copy of
such certificate, and (c) mail a brief summary thereof to each holder of a
Rights Certificate (or, if prior to the Distribution Date, to each holder of a
certificate representing shares of Common Stock in accordance with Section 25.
The Rights Agent will be fully protected in relying on any such certificate and
on any adjustment contained in such certificate.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power.
(a) In the event that, following the Stock Acquisition Date, directly
or indirectly, (i) the Company consolidates with, or merges with, or into, any
other Person (other than a Subsidiary of the Company in a transaction that
complies with Section 11(o)), and the Company is not the continuing or surviving
Person of such consolidation or merger; (ii) any Person (other than a Subsidiary
of the Company in a transaction that complies with Section 11(o)) consolidates
with, or merges with, or into, the Company, and the Company is the continuing or
surviving corporation of such consolidation or merger and, in connection with
such consolidation or merger, all or part of the outstanding shares of Common
Stock are changed into or exchanged for stock or other securities of any other
Person or cash or any other property; or (iii) the Company sells or otherwise
transfers (or one or more of its Subsidiaries sells or otherwise transfers), in
one transaction or a series of related 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 Person or Persons (other than the Company
or any Subsidiary of the Company in one or more transactions each of which
complies with Section 11(o)), then, and in each such case (except as
contemplated by Section 13(d)), proper provision will be made so that (A) each
holder of a Right, except as provided in Section 7(e) or Section 13(E), will
thereafter have the right to receive, upon the exercise of such Right at the
then current Purchase Price in accordance with the terms of this Agreement, such
number of validly authorized and issued, fully paid, nonassessable, and freely
tradable shares of Common Stock of the Principal Party (as defined below), not
subject to any liens, encumbrances, preemptive rights, rights of first refusal,
or other adverse claims, as are equal to the result obtained by (1) multiplying
the then current Purchase Price by the number of Rights Shares 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 Rights Shares for which a
Right was exercisable immediately prior to the first occurrence of a Section
11(a)(ii) Event by the Purchase Price in effect immediately prior to such first
occurrence), and (2) dividing that product (which, following the first
occurrence of a Section 13 Event, will be referred to as the "Purchase Price"
for each Right and for all purposes of this Agreement) by 50% of the Current
19
<PAGE> 21
Market Price per share of the Common Stock of such Principal Party on the date
of consummation of such Section 13 Event; (B) such Principal Party will
thereafter be liable for, and will assume, by virtue of such Section 13 Event,
all the obligations and duties of the Company pursuant to this Agreement; (C)
the term "Company" will thereafter be deemed to refer to such Principal Party,
it being specifically intended that the provisions of Section 11 will apply only
to such Principal Party following the first occurrence of a Section 13 Event;
(D) such Principal Party will take such steps (including, but not limited to,
the reservation of a sufficient number of shares of its Common Stock) in
connection with the consummation of any such transaction as may be necessary to
assure that the provisions of this Agreement will thereafter be applicable, as
nearly as may be, in relation to its shares of Common Stock thereafter
deliverable upon the exercise of the Rights; and (E) the provisions of Section
11(a)(ii) will be of no effect following the first occurrence of any Section 13
Event.
(b) "Principal Party" means
(i) in the case of any transaction described in Clause (i) or
(ii) of the first sentence of Section 13(a), the Person that
is the issuer of any securities into which shares of Common Stock of the Company
are converted in such merger or consolidation, and if no securities are so
issued, the Person that is the other party to such merger or consolidation; and
(iii) in the case of any transaction described in Clause (iii)
of the first sentence of Section 13(a), the Person that is the party receiving
the greatest portion of the assets or earning power transferred pursuant to such
transaction or transactions;
provided, however, that in any such case, (1) if the Common Stock of such Person
is not at such time and has not been continuously over the preceding twelve (12)
month period registered under Section 12 of the Exchange Act, and such Person is
a direct or indirect Subsidiary of another Person the Common Stock of which is
and has been so registered, "Principal Party" will refer to such other Person;
and (2) in case such Person is a Subsidiary, directly or indirectly, of more
than one Person, with Common Stock that is and has been so registered,
"Principal Party" will refer to whichever of such Persons is the issuer of the
Common Stock having the greatest aggregate market value.
(c) The Company will not consummate any such consolidation, merger,
sale, or transfer unless the Principal Party has a sufficient number of
authorized shares of its Common Stock that have not been issued or reserved for
issuance to permit the exercise in full of the Rights in accordance with this
Section 13 and unless prior thereto the Company and such Principal Party have
executed and delivered to the Rights Agent a supplemental agreement providing
for the Principal Party to assume and perform the terms set forth in Section
13(a) and (b) and further providing that, as soon as practicable after the date
of any consolidation, merger, or transfer mentioned in Section 13(a), the
Principal Party will
(i) prepare and file a registration statement under the Act,
with respect to the Rights and the securities purchasable upon exercise of the
Rights on an appropriate form, and
20
<PAGE> 22
will use its best efforts to cause such registration statement to (A) become
effective as soon as practicable after such filing and (B) remain effective
(with a prospectus at all times meeting the requirements of the Act) until the
Final Expiration Date; and
(ii) will deliver to holders of the Rights historical
financial statements for the Principal Party and each of its Affiliates that
comply in all respects with the requirements for registration on Form 10 under
the Exchange Act.
(d) In the event that the Rights become exercisable under Section
13(a), the Company, by action of a Requisite Majority, may agree with the
Principal Party that the Principal Party may permit the Rights to be exercised
for 50% of the Common Shares of the Principal Party that would otherwise be
purchasable under Section 13(a), in consideration of the surrender to the
Principal Party, as the successor to the Company under Section 13(a)(ii), of the
Rights so exercised and without other payment of the Purchase Price. Rights
exercised under this Section 13(e) will be deemed to have been exercised in full
and canceled.
(e) The provisions of this Section 13 will similarly apply to
successive mergers, consolidations, and sales or other transfers. In the event
that a Section 13 Event occurs at any time after the occurrence of a Section
11(a)(ii) Event, the Rights that have not theretofore been exercised will
thereafter become exercisable in the manner described in Section 13(a).
Section 14. Fractional Rights and Fractional Shares.
(a) The Company will not be required to issue fractions of Rights,
except prior to the Distribution Date as provided in Section 11(p), or to
distribute Rights Certificates that evidence fractional Rights. In lieu of such
fractional Rights, there will be paid to the registered holders of the Rights
Certificates with regard to which such fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For purposes of this Section 14(a), the current market
value of a whole Right will be the closing price of the Rights for the Trading
Day immediately prior to the date on which such fractional Rights would have
been otherwise issuable. The closing price of the Rights for any day will be the
last sale price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Rights are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Rights are listed or admitted to trading, or if the Rights are not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by NASDAQ or such other
system then in use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights selected by the Board of
Directors of the Company. If on any such date no such market maker is making a
market in the Rights the fair value of the Rights on such date as conclusively
determined in good faith by the Board of Directors of the Company will be used.
21
<PAGE> 23
(b) The Company will not be required to issue fractions of shares of
Common Stock upon exercise of the Rights or to distribute certificates that
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 provided in this Agreement
an amount in cash equal to the same fraction of the Current Market Price of one
share of Common Stock as of the Trading Day immediately prior to the date of
such exercise.
(c) The holder of a Right, by the acceptance of the Rights, expressly
waives the right to receive any fractional Rights or any fractional shares upon
exercise of a Right, except as permitted by this Section 14.
Section 15. Rights of Action. All rights of action in respect of this Agreement
are vested in the respective registered holders of the Rights Certificates (and,
prior to the Distribution Date, the registered holders of the Common Stock); and
any registered holder of any Rights Certificate (or, prior to the Distribution
Date, of the Common Stock, without the consent of the Rights Agent or of the
holder of any other Rights Certificate (or, prior to the Distribution Date, of
the Common Stock), may, on its own behalf and for its own benefit, enforce, and
may institute and maintain any suit, action, or proceeding against the Company
to enforce, or otherwise act in respect of, its right to exercise the Rights
evidenced by such Rights Certificate in the manner provided in such Rights
Certificate and in this Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Agreement and will be entitled to specific performance of the
obligations under this Agreement and injunctive relief against actual or
threatened violations of the obligations under this Agreement of any Person
subject to this Agreement.
Section 16. Agreement of Rights Holders. Every holder of a Right by accepting
the Rights consents and agrees with the Company and the Rights Agent and with
every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office or offices of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper instrument of transfer, and
with the appropriate forms and certificates fully executed;
(c) subject to Section 6(a) and Section 7(f), the Company and the
Rights Agent may deem and treat the person in whose name a Rights Certificate
(or, prior to the Distribution Date, the associated certificate for Common
Stock), is registered as the absolute owner of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on the Rights
Certificates or the associated certificate for Common Stock made by anyone other
than the
22
<PAGE> 24
Company or the Rights Agent) for all purposes whatsoever, and neither the
Company nor the Rights Agent will 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 will 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 will use its
reasonable 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 will be entitled to vote or receive dividends or
be deemed for any purpose the holder of the number of shares of Common Stock or
any other securities of the Company that may at any time be issuable on the
exercise of the Rights represented thereby, nor will anything contained in this
Agreement or in any Rights Certificate be construed to confer upon the holder of
any Rights Certificate, as such, any of the rights of a stockholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to stockholders, 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), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by such Rights
Certificate have been exercised in accordance with the provisions of this
Agreement.
Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it under this Agreement and, from time
to time, on demand of the Rights Agent, its reasonable expenses and counsel fees
and disbursements and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties under
this Agreement. 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, bad faith, or willful misconduct on the part of the Rights
Agent, for anything done or omitted to be done by the Rights Agent in connection
with the acceptance and administration of this Agreement, including, without
limitation, the costs and expenses of defending against any claim of liability.
Anything to the contrary notwithstanding, in no event shall the Rights Agent be
liable for special, indirect, consequential or incidental loss or damage of any
kind.
(b) The Rights Agent will be protected and will incur no liability for
or in respect of any action taken, suffered, or omitted by it in connection with
its administration of this Agreement in reliance upon any Rights Certificate or
certificate for Common Stock or for other securities of the Company, instrument
of assignment or transfer, power of attorney, endorsement, affidavit, letter,
notice, direction, consent, certificate, statement, or other paper
23
<PAGE> 25
or document believed by it to be genuine and to be signed, executed, and, where
necessary, verified or acknowledged, by the proper Person or Persons.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
(a) Any Person into or with which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any Person
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent is a party, or any corporation succeeding to the
corporate trust or stockholder services business of the Rights Agent or any
successor Rights Agent, will be the successor to the Rights Agent under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties to this Agreement; provided, however, that such
corporation would be eligible for appointment as a successor Rights Agent under
the provisions of Section 21. In case at the time such successor Rights Agent
succeeds to the agency created by this Agreement, any of the Rights Certificates
have been countersigned but not delivered, any such successor Rights Agent may
adopt the countersignature of a predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates have not been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor or in
the name of the successor Rights Agent; and in all such cases such Rights
Certificates will 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 is changed and at
such time any of the Rights Certificates 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 have not 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 will have the full force
provided in the Rights Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the duties and
obligations imposed by this Agreement upon the following terms and conditions,
by all of which the Company and the holders of Rights Certificates, by their
acceptance of such Rights Certificates, will be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel will be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent deems it necessary or desirable that any fact or matter (including,
without limitation, the identity of any Acquiring Person or Adverse Person and
the determination of "Current Market Price") be proved or established by the
Company prior to taking or suffering any action under this Agreement, such fact
or matter (unless other evidence in respect of such fact or matter is
specifically prescribed in this Agreement) may be deemed to be conclusively
proved and
24
<PAGE> 26
established by a certificate signed by the Chairman of the Board, the Chief
Executive Officer, the Chief Operating Officer, the President, any Executive
Vice President, the Treasurer, any Assistant Treasurer, the Secretary, or any
Assistant Secretary of the Company and delivered to the Rights Agent; and such
certificate will be full authorization to the Rights Agent for any action taken
or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
(c) The Rights Agent will be liable under this Agreement only for its
own gross negligence, bad faith or willful misconduct.
(d) The Rights Agent will not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Rights
Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and will be deemed to have been made by the Company only.
(e) The Rights Agent will not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery of this Agreement
(except the due execution of this Agreement by the Rights Agent) or in respect
of the validity or execution of any Rights Certificate (except its
countersignature); nor will it be responsible for any breach by the Company of
any covenant or condition contained in this Agreement or in any Rights
Certificate; nor will it be responsible for any adjustment required under the
provisions of Section 11 or Section 13, or responsible for the manner, method,
or amount of any such adjustment or the ascertaining of the existence of facts
that would require any such adjustment (except with respect to the exercise of
Rights evidenced by Rights Certificates after actual notice of any such
adjustment); nor will it by any act under this Agreement be deemed to make any
representation or warranty as to the authorization or reservation of any shares
of Common Stock to be issued pursuant to this Agreement or any Rights
Certificate or as to whether any shares of Common Stock will, when so issued, be
validly authorized or issued, fully paid, or nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge, and
deliver or cause to be performed, executed, acknowledged, and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties under this Agreement
from the Chairman of the Board, the Chief Executive Officer, the Chief Operating
Officer, the President, any Executive Vice President, the Secretary, any
Assistant Secretary, the Treasurer, or any Assistant Treasurer of the Company,
and to apply to such officers for advice or instructions in connection with its
duties, and it will not be liable for any action taken or suffered to be taken
by it in good faith in accordance with instructions of any such officer.
(h) The Rights Agent and any 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, contract
25
<PAGE> 27
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 in this Agreement
will preclude the Rights Agent from acting in any other capacity for the Company
or for any other Person.
(i) The Rights Agent may execute and exercise any of the rights or
powers vested by this Agreement in it or perform any duty under this Agreement
either itself or by or through its attorneys or agents, and the Rights Agent
will 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, however,
reasonable care was exercised in the selection and continued employment of such
Person.
(j) No provision of this Agreement will 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 under this Agreement or in the exercise of its
rights if there are reasonable grounds for believing that repayment of such
funds or adequate indemnification against such risk or liability is not
reasonably assured to it.
(k) If, with respect to any Right Certificate surrendered to the Rights
Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 or 2 of such
certificate, the Rights Agent will not take any further action with respect to
such requested exercise of transfer without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any successor Rights
Agent may resign and be discharged from its duties under this Agreement upon 30
days' notice in writing mailed to the Company, and to each transfer agent of the
Common Stock, by registered or certified mail, and to the holders of the Rights
Certificates by first-class mail. The Company may remove the Rights Agent or any
successor Rights Agent upon 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, by registered or certified mail, and to the holders of the
Rights Certificates by first-class mail. If the Rights Agent resigns or is
removed or otherwise becomes incapable of acting, the Company will appoint a
successor to the Rights Agent. If the Company fails to make such appointment
within a period of 30 days after giving notice of such removal or after it has
been notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Rights Certificate (who will,
with such notice, submit such holder's Rights Certificate for inspection by the
Company), then any 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,
will be a corporation organized and doing business under the laws of the United
States or a State of the United States, in good standing, that is authorized
under such laws to exercise corporate trust powers and is subject to supervision
or examination by federal or state authority and that has at the time of its
appointment as Rights Agent a combined capital and surplus of at least
$25,000,000. After appointment, the successor Rights Agent will 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, except that the
predecessor Rights Agent will deliver and transfer to the successor Rights Agent
any property
26
<PAGE> 28
at the time held by it under this Agreement 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 will file notice of such
appointment in writing with the predecessor Rights Agent and each transfer agent
of the Common Stock and mail a notice of such appointment in writing to the
registered holders of the Rights Certificates. Failure to give any notice
provided for in this Section 21, however, or any defect in such notice, will 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,
in its discretion, 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, 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) will, with respect to
shares of Common Stock so issued or sold pursuant to the exercise of stock
options or under any employee plan or arrangement, granted or awarded as of the
Distribution Date, or upon the exercise, conversion, or exchange of securities
issued by the Company, and (b) may, in any other case, if deemed necessary or
appropriate by the Board of Directors of the Company, issue Rights Certificates
representing the appropriate number of Rights in connection with such issuance
or sale; provided, however, that (y) no such Rights Certificate will be issued
if, and to the extent that, the Company is advised by counsel that such issuance
would create a significant risk of material adverse tax consequences to the
Company or the Person to whom such Rights Certificate would be issued, and (z)
no such Rights Certificate will be issued if, and to the extent that,
appropriate adjustment has otherwise been made in lieu of the issuance of such
Rights Certificate.
Section 23. Redemption and Termination.
(a) The Company may, at its option, by action of a Requisite Majority,
at any time prior to the earlier of (i) the tenth day following the date a
Person becomes an Acquiring Person (subject to extension by the Company as
provided in Section 26 hereof), or (ii) the Final Expiration Date, redeem all
but not fewer than all the then outstanding Rights at the Redemption Price (the
date of such redemption, the "Redemption Date"), and the Company, at its option,
may pay the Redemption Price either in cash or Common Stock or other securities
of the Company, deemed by the Board of Directors, in the exercise of its sole
discretion, to be at least equivalent in value to the Redemption Price.
(b) Immediately upon the action of a Requisite Majority ordering the
redemption of the Rights, evidence of which has been filed with the Rights Agent
and without any further action and without any notice, the right to exercise the
Rights will terminate and the only right thereafter of the holders of Rights
will be to receive the Redemption Price. Promptly after the action of a
Requisite Majority ordering the redemption of the Rights, the Company will give
notice of such redemption to the Rights Agent and to the holders of the then
outstanding Rights by mailing such notice to all such holders at each holder's
last address as it appears upon the
27
<PAGE> 29
registry books of the Rights Agent or, prior to the Distribution Date, on the
registry books of the transfer agent for the Common Stock. Each such notice of
redemption will state the method by which the payment of the Redemption Price
will be made. Any notice that is mailed in the manner in this Agreement provided
will be deemed given, whether or not the holder receives such notice. In any
case, failure to give such notice by mail, or any defect in the notice, to any
particular holder of Rights shall not affect the sufficiency of the notice to
other holders of Rights.
Section 24. Exchange.
(a) The Board of Directors of the Company may, at its option, at any
time after a Triggering Event, exchange all or part of the then outstanding and
exercisable Rights (which will not include Rights that have become void pursuant
to the provisions of Section 7(e) hereof) for shares of Common Stock, each Right
being exchangeable for one share of Common Stock, appropriately adjusted to
reflect any transaction specified in Section 11(a)(i) occurring after the Record
Date (such number of shares of Common Stock issuable in exchange for one Right
being referred to herein as the "Exchange Shares"). Notwithstanding the
foregoing, the Board of Directors shall not be empowered to effect such exchange
at any time after any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or any of its Subsidiaries or
any Person or entity organized, appointed or established by the Company for or
pursuant to the terms of any such Plan), together with all Affiliates and
Associates of such Person, becomes the Beneficial Owner of 50% or more of the
Common Stock then outstanding.
(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 the Exchange Shares. 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 that is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of exchange will state the method by which the exchange
of the Common Stock for Rights will be effected and, in the event of any partial
exchange, the number of Rights which will be exchanged. Any partial exchange
shall be effected pro rata based on the number of Rights (other than Rights
which have become void pursuant to the provisions of Section 7(e) hereof) held
by each holder of Rights.
(c) In the event that there shall not be sufficient Common Stock issued
but not outstanding, or authorized but unissued, to permit any exchange of
Rights as contemplated in accordance with this Section 24, the Company shall
take all such action as may be necessary to authorize additional Common Stock
for issuance upon exchange of the Rights or shall take such other action
specified in Section 11(a)(iii) hereof.
28
<PAGE> 30
(d) The Company shall not be required to issue fractions of shares of
Common Stock to distribute certificates which evidence fractional Common Stock.
In lieu of such fractional shares, the Company shall pay to the registered
holders of the Right Certificates with regard to which such fractional shares
would otherwise be issuable an amount in cash equal to the same fraction of the
Current Market Price of a whole share of Common Stock. For the purposes of this
subsection (d), the Current Market Value of a whole share of Common Stock shall
be determined as of the Trading Day immediately prior to the date of exchange
pursuant to this Section 24.
Section 25. Notice of Certain Events.
(a) In case the Company proposes, at any time after the Distribution
Date, (i) to pay any dividend payable in stock of any class to the holders of
Common Stock or to make any other distribution to the holders of Common Stock
(other than a regular quarterly cash dividend out of earnings or retained
earnings of the Company), or (ii) to offer to the holders of Common Stock rights
or warrants to subscribe for or to purchase any additional shares of Common
Stock or shares of stock of any class or any other securities, rights or
options, or (iii) to effect any reclassification of its Common Stock (other than
a reclassification involving only the subdivision of outstanding shares), or
(iv) to effect any consolidation or merger into, or with any other Person (other
than a Subsidiary of the Company in a transaction that 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 transaction or a
series of related transactions, of 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 or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(o)), or (v) to effect the
liquidation, dissolution or winding up of the Company, then, in each such case,
the Company will give to each holder of a Rights Certificate, to the extent
feasible and in accordance with Section 26, a notice of such proposed action,
which will specify the record date for the purposes of such stock dividend,
distribution of rights or warrants, or the date on which such reclassification,
consolidation, merger, sale, transfer, liquidation, dissolution, or winding up
is to take place and the date of participation therein by the holders of the
shares of Common Stock, if any such date is to be fixed, and such notice will be
so given in the case of any action covered by Clause (i) or (ii) above at least
20 days prior to the record date for determining holders of the shares of Common
Stock for purposes of such action, and in the case of any such other action, at
least 20 days prior to the date of the taking of such proposed action or the
date of participation therein by the holders of the shares of Common Stock,
whichever is the earlier.
(b) In case of a Triggering Event, then (i) the Company will as soon as
practicable give to each holder of a Rights Certificate, to the extent feasible
and in accordance with Section 26, a notice of the occurrence of such event,
which will specify the event and the consequences of the event to holders of
Rights under this Agreement, and (ii) all references in Section 25(a) to Common
Stock will be deemed thereafter to refer to other securities, if appropriate.
29
<PAGE> 31
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 will 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:
Cannondale Corporation
16 Trowbridge Drive
Bethel, Connecticut 06801
Attention: Chief Financial Officer
with a copy to:
Levett Rockwood & Sanders
33 Riverside Avenue
Westport, Connecticut 06881
Attention: John Sanders, Esq.
Subject to the provisions of Section 21, any notice or demand
authorized by this Agreement to be given or made by the Company or by the holder
of any Rights Certificate to or on the Rights Agent will be sufficiently given
or made if sent by first-class mail, postage prepaid, addressed (until another
address is filed in writing with the Company) as follows:
BankBoston, N.A.
c/o Boston Equiserve Limited Partnership
150 Royall Street
Canton, Massachusetts 02021
Attention: Client Administration
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) will 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. Supplement and Amendments. The Company, by action of its Board of
Directors, and the Rights Agent may from time to time supplement or amend this
Agreement without the approval of any holders of Rights in order to cure any
ambiguity, to correct or supplement any provision contained in this Agreement
that may be defective or inconsistent with any other provisions in this
Agreement, or to make any other provisions in regard to matters or questions
arising under this Agreement that the Company and Rights Agent may deem
necessary or desirable and that will be consistent with, and for the purpose of
fulfilling, the objectives of the Board of Directors in adopting this Agreement;
provided, however, that following the Distribution Date, this Agreement shall
not be amended in any manner that would adversely affect the basic economic
terms of the Rights; provided, further, that, once the Rights are no longer
redeemable in accordance with Section 23 of this Agreement, no amendment to this
Agreement may have the effect of making the Rights redeemable.
Section 28. Successors. All the covenants and provisions of this Agreement by or
for the benefit of the Company or the Rights Agent will bind and inure to the
benefit of their respective successors and assigns under this Agreement.
30
<PAGE> 32
Section 29. Determinations and Actions by the Board of Directors, etc. 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, will be made in accordance with the last
sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the
Exchange Act as in effect on the date of this Agreement. The Board of Directors
of the Company (with, where specifically provided for in this Agreement, the
concurrence of the Continuing Directors) will have the exclusive power and
authority to administer this Agreement and to exercise all rights and powers
specifically granted to the Board of Directors (with, where specifically
provided for in this Agreement, the concurrence of the Continuing Directors) or
to the Company, or as may be necessary or advisable in the administration of
this Agreement, including, without limitation, the right and power to (a)
interpret the provisions of this Agreement, and (b) make all determinations
deemed necessary or advisable for the administration of this Agreement
(including, without limitation, 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) that are done or made by the Board
of Directors (with, where specifically provided for in this Agreement, the
concurrence of the Continuing Directors) in good faith, will (x) be final,
conclusive, and binding on the Company, the Rights Agent, the holders of the
Rights, 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 will be
construed to give to any Person other than the Company, the Rights Agent, and
the registered holders of the Rights Certificates (and, prior to the
Distribution Date, registered holders of the Common Stock) any legal or
equitable right, remedy, or claim under this Agreement; and this Agreement will
be for the sole and exclusive benefit of the Company, the Rights Agent, and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Stock).
Section 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 will remain in full force and
effect and will 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 will be
reinstated and will not expire until the Close of Business on the tenth Business
Day following the date of such determination by the Board of Directors. Without
limiting the foregoing, if any provision requiring action by a Requisite
Majority is held by any court of competent jurisdiction or other authority to be
invalid, void, or unenforceable, such determination will then be made by the
Board of Directors of the
31
<PAGE> 33
Company in accordance with applicable law and the Company's certificate of
incorporation and by-laws.
Section 32. Governing Law. THIS AGREEMENT, EACH RIGHT, AND EACH RIGHTS
CERTIFICATE ISSUED UNDER THIS AGREEMENT WILL BE DEEMED TO BE A CONTRACT MADE
UNDER THE LAWS OF THE STATE OF DELAWARE AND FOR ALL PURPOSES WILL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF SUCH STATE APPLICABLE TO CONTRACTS
MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
Section 33. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts will for all purposes be deemed to be
an original, and all such counterparts will together constitute but one and the
same instrument.
Section 34. Interpretation. Descriptive headings of the several Sections of this
Agreement are inserted for convenience only and will not control or affect the
meaning or construction of any of the provisions of this Agreement. References
in this Agreement to Sections and Exhibits are references to the Sections of and
Exhibits to this Agreement unless the context requires otherwise. In this
Agreement, the word "or" is not exclusive.
32
<PAGE> 34
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
CANNONDALE CORPORATION
By: _______________________
Name: _______________________
Title: _______________________
BANKBOSTON, N.A.
By: _______________________
Name: _______________________
Title: _______________________
33
<PAGE> 35
Exhibit A
to Rights Agreement
Certificate No. R-
[FORM OF RIGHTS CERTIFICATE]
________ RIGHTS NOT EXERCISABLE AFTER DECEMBER 22, 2007 OR EARLIER IF REDEEMED
BY THE COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE
COMPANY, AT $0.01 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON
(AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER
OF SUCH RIGHTS MAY BECOME NULL AND VOID.
Rights Certificate
CANNONDALE 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 December 22, 1997 (as amended from time to time,
the "Rights Agreement"), between Cannondale Corporation, a Delaware corporation
(the "Company"), and BankBoston, N.A. (the "Rights Agent"), to purchase from
the Company at any time prior to 5:00 p.m. (New York City time) on December ,
2007 at the office or offices of the Rights Agent designated for such purpose,
or its successors as Rights Agent, one fully paid, nonassessable share of
Common Stock (the "Common Stock") of the Company, at a purchase price of
$100.00 per share (the "Purchase Price"), upon presentation and surrender of
this Rights Certificate with the Form of Election to Purchase and related
Certificate duly executed. The number of Rights evidenced by this Rights
Certificate (and the number of shares that may be purchased upon exercise
thereof) set forth above, and the Purchase Price per share set forth above, are
the number and Purchase Price as of December 22, 1997 based on the Common Stock
as constituted at such date. As provided in the Rights Agreement, the Purchase
Price and the number and kind of shares of Common Stock or other securities,
that 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 incorporated herein by reference and made a part of this
certificate and to which Rights Agreement reference is hereby made for a full
description of the rights, limitations of rights, obligations, duties, and
immunities hereunder of the Rights Agent, the Company, and the holders of the
Rights Certificates, which limitations of rights include the temporary
suspension of the exercisability of such Rights under the certain circumstances
set forth in the Rights Agreement. Copies of the Rights Agreement are on file
at the above-mentioned office of the
34
<PAGE> 36
Rights Agent and are also available upon written request to the Rights Agent.
All capitalized terms not otherwise defined have the meaning set forth in the
Rights Agreement.
Upon the occurrence of a Section 11(a)(ii) Event, if the Rights
evidenced by this Rights Certificate are beneficially owned by (i) an Acquiring
Person or an Affiliate or Associate of any such Acquiring Person, (ii) a
transferee of any such Acquiring Person, Associate, or Affiliate, or (iii)
under certain circumstances specified in the Rights Agreement, a transferee of
a Person who, after such transfer, became an Acquiring Person or an Affiliate
or Associate of an Acquiring Person, such Rights will become null and void and
no holder of this certificate will have any right with respect to such Rights
from and after the occurrence of such Section 11(a)(ii) Event.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the principal office or offices of the Rights Agent designated
for such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of shares of Common Stock as the Rights
evidenced by the Rights Certificate or Rights Certificates surrendered have
entitled such holder to purchase. If this Rights Certificate is exercised in
part, the holder will be entitled to receive upon surrender of this certificate
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 its option at a redemption
price of $0.01 per Right. In addition, in certain circumstances the Rights may
be exchanged, in whole or in part, for shares of the Common Stock. Immediately
upon the action of the Board of Directors of the Company authorizing any such
exchange, and without any further action or any notice, the Rights (other than
Rights that are not subject to such exchange) will terminate and the Rights will
only enable holders to receive the shares issuable upon such exchange. Under
certain circumstances set forth in the Rights Agreement, the decision to redeem
the Rights will require the concurrence of a majority of the Continuing
Directors.
No fractional shares of Common Stock will be issued upon the exercise
of any Right or Rights evidenced hereby, but in lieu thereof a cash payment will
be made, as provided in the Rights Agreement.No holder of this Rights
Certificate will be entitled to vote or receive dividends or be deemed for any
purpose the holder of shares of Common Stock or of any other securities of the
Company that may at any time be issuable on the exercise hereof, nor will
anything contained in the Rights Agreement or herein be construed to confer upon
the holder of this 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 the Rights Agreement), or
to receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by this Rights Certificate have been exercised as provided in
the Rights Agreement.
This Rights Certificate will not be valid or obligatory for any purpose
until it has been countersigned by the Rights Agent.
A-2
<PAGE> 37
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal.
Dated as of: ____________________
CANNONDALE CORPORATION
By: _______________________
Name: _______________________
Title: _______________________
Countersigned:
[ RIGHTS AGENT ]
By: _______________________
Name: _______________________
Title: _______________________
A-3
<PAGE> 38
[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 transfer 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:
Certificate
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned, or
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (as such terms are defined
pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it [ ] did
[ ] did not acquire the Rights evidenced by this Rights Certificate from any
Person who is, was or subsequently became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated: ___________________
Signature: ______________________
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
A-4
<PAGE> 39
FORM OF ELECTION TO PURCHASE
The signature to the foregoing Assignment and Certificate must correspond to the
name as written upon the face of this Rights Certificate in every particular,
without alteration or enlargement or any change whatsoever.
To: CANNONDALE CORPORATION:
The undersigned hereby irrevocably elects to exercise __________ Rights
represented by this Rights Certificate to purchase the shares of Common Stock
issuable upon the exercise of the Rights (or such other securities of the
Company or of any other person that may be issuable upon the exercise of the
Rights) and requests that certificates for such shares be issued in the name of
and delivered to:
Please insert social security or other identifying number: ___________
Please print name and address: _______________________________________
If such number of Rights are not all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights will
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:
Certificate
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not being
exercised by or on behalf of a Person who is or was an Acquiring Person or an
Adverse Person or an Affiliate or Associate of any such Acquiring Person or an
Adverse Person (as such terms are defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Rights Certificate from
any Person who is, was or became
A-5
<PAGE> 40
an Acquiring Person or Adverse Person or an Affiliate or Associate of an
Acquiring Person or an Adverse Person.
Dated: ____________________
Signature: ___________________________
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
A-6
<PAGE> 41
Exhibit B
to Rights Agreement
SUMMARY OF RIGHTS TO PURCHASE
SHARES OF CANNONDALE CORPORATION
COMMON STOCK
On December 19, 1997, the Board of Directors of Cannondale Corporation
(the "Company") declared a dividend of one common share purchase right (a
"Right") for each outstanding share of common stock, $0.01 par value (the
"Common Stock"), of the Company. The dividend was made on December 22, 1997 (the
"Record Date") to the stockholders of record at the close of business on that
date. Each Right entitles the registered holder to purchase from the Company one
share of Common Stock of the Company, at a price of $100.00 (the "Purchase
Price"), subject to adjustment. The description and terms of the Rights are set
forth in a Rights Agreement dated as of December 22, 1997 (the "Rights
Agreement") between the Company and BankBoston, N.A., as Rights Agent (the
"Rights Agent").
Until the earlier to occur of (i) ten Business Days following a public
announcement that a person or group of affiliated or associated persons has
acquired, or obtained the right to acquire, beneficial ownership of 20% or more
of the outstanding Common Stock (an "Acquiring Person") or (ii) ten Business
Days 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 the "Distribution Date"), the
Rights will be evidenced, with respect to any of the certificates for Common
Stock outstanding as of the Record Date, by such certificates for Common Stock
with a copy of this Summary of Rights attached to the certificate.
The Rights Agreement provides that, until the Distribution Date, 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
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 even without such notation or a copy of this Summary of Rights being
attached to such Certificate, 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 (the "Right Certificates") will be mailed to holders of record of the
Common Stock as of the close of business on the Distribution Date and such
separate Right Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The Rights
will expire on December 22, 2007 (the "Final Expiration Date"), unless the
Final Expiration Date is extended or unless the Rights are earlier redeemed by
the Company, in each case, as described below.
<PAGE> 42
The Purchase Price payable and the number of shares of Common 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 Common
Stock, (ii) upon the grant to holders of the Common Stock of certain rights or
warrants to subscribe for or purchase Common Stock at a price or securities
convertible into Common Stock with a conversion price less than the then current
market price of the Common Stock; or (iii) upon the distribution to holders of
the Common Stock of evidences of indebtedness or assets or of subscription
rights or warrants (other than those referred to above).
In the event that any person or entity becomes an Acquiring Person (the
beneficial owner of 20% or more of the Common Stock), provision will be made so
that each holder of a Right, other than Rights beneficially owned by the
Acquiring Person (which will then be void), will have the right to receive upon
exercise that number of shares of Common Stock having a market value of two
times the applicable exercise price of the Right.
The Rights Agreement excludes from the definition of Acquiring Person,
persons who certify to the Company that they inadvertently acquired in excess of
19.9% of the outstanding Common Stock and thereafter divest such excess Common
Stock or who acquire 20% or more of the Common Stock in a Permitted Transaction.
A "Permitted Transaction" is a stock acquisition or tender or exchange offer
pursuant to a definitive agreement which would result in a person beneficially
owning 20% or more of the Common Stock and which has been approved by the Board
of Directors (including a majority of the Directors not in association with an
Acquiring Person) prior to the execution of the agreement or the public
announcement of the offer.
In the event that the Company is acquired in a merger or other business
combination transaction, or 50% or more of its consolidated assets or earning
power are sold, proper provisions will be made so that each holder of a Right
will have the right to receive, upon the exercise of the Right at the then
applicable exercise price, that number of shares of common stock of the
acquiring company that at the time of such transaction will have a market value
of two times the applicable exercise price of the Right.
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 Common Stock will be issued and, in
lieu of such fractional shares, an adjustment in cash will be made based on the
market price of the Common Stock on the last trading day prior to the date of
exercise.
After a person becomes an Acquiring Person, the Company's Board of
Directors may exchange the Rights, other than those Rights owned by the
Acquiring Person, in whole or in part, at an exchange ratio of one share of
Common Stock per Right, subject to adjustment. However, the Board of Directors
cannot conduct an exchange at any time after any Person, together with its
Affiliates and Associates, becomes the Beneficial Owner of 50% or more of the
outstanding Common Stock.
B-2
<PAGE> 43
At any time prior to any Person becoming an Acquiring Person, a
Requisite Majority of the Board of Directors (as defined in the Rights
Agreement) may redeem the Rights in whole, but not in part, at a price
of $0.01 per Right (the "Redemption Price"). In addition, the Board of Directors
may extend or reduce the period during which the Rights are redeemable, so long
as the Rights are redeemable at the time of such extension or reduction.
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 terms of the Rights may be amended by the Board of Directors of the
Company without the consent of the holders of the Rights, including an amendment
to extend the Final Expiration Date, except that from and after the Distribution
Date no such amendment may adversely affect the economic interests of the
holders of the Rights.
Until a Right is exercised, the holder of the Right, as such, will have
no rights as a stockholder of the Company, including, without limitation, the
right to vote, or to receive dividends.
B-3
<PAGE> 1
CONTACT
William A. Luca
Cannondale Corporation
(203) 749-7000
FOR IMMEDIATE RELEASE
CANNONDALE CORPORATION
ADOPTS STOCKHOLDERS' RIGHTS PLAN
BETHEL, CONNECTICUT (December 22, 1997) Cannondale Corporation (Nasdaq:BIKE)
announced today that its Board of Directors has adopted a Stockholders' Rights
Plan in which Rights to purchase shares of Cannondale Corporation. Common Stock
(the "Common Stock") will be distributed as a dividend, one Right per share, to
record owners of Common Stock as of the close of business on December 22, 1997.
The Stockholders' Rights Plan was not adopted in response to any known offers
for Cannondale Corporation.
Upon becoming exercisable, each Right entitles holders to purchase a
certain amount of common stock. The Rights are not exercisable, however, until a
person or group acquires more than 20% of Common Stock or announces a tender
offer which would result in the ownership of more than 20% of the Common
Stock. Details of the Plan and the Rights are outlined in a letter that is
being mailed to all Cannondale stockholders.
In the letter to Cannondale stockholders, Joseph S. Montgomery, Chairman
and CEO of the Corporation, stated that the Board of Directors had adopted the
plan to help assure that all stockholders would be treated fairly in the event
any party were to seek to acquire control of Cannondale. Mr. Montgomery noted
that rights plans, which have been adopted by approximately 2,000 public
companies, are a means of protecting stockholders from the adverse effects of
unfair or coercive takeover tactics.
Cannondale Corporation is the world's leading manufacture of
high-performance aluminum bicycles. The Company's bicycles, wheelchairs and
bicycle accessories, which include clothing, packs and bags, HeadShok suspension
forks and CODA components, are marked under the Cannondale brand name and
"Handmade in USA" logo, and are sold in the U.S. and in more than 60 foreign
countries.
