Form of Letter to Shareholders
[THE QUIGLEY CORPORATION. LETTERHEAD]
September 25, 1998
To Our Shareholders:
Your Board of Directors has recently declared a dividend distribution
of Common Share Purchase Rights (the "Rights"), thereby creating a Shareholder
Rights Plan (the "Plan"). This letter describes the Plan and the reasons of the
Company's Board of Directors (the "Board") for adopting it.
The Rights contain provisions to protect shareholders in the event of
an unsolicited attempt to acquire the Company, including a gradual accumulation
of shares in the open market, a partial or two-tier tender offer that does not
treat all shareholders equally, a squeeze-out merger and other abusive takeover
tactics which the Board believes are not in the best interests of shareholders.
These tactics unfairly pressure shareholders, squeeze them out of their
investment without giving them any real choice and deprive them of the full
value of their shares.
Over 2,000 companies, including approximately 60% of the Fortune 500
companies, have issued rights to protect their shareholders against these
tactics. We consider the Plan to be the best available means of protecting both
your right to retain your equity investment in The Quigley Corporation and the
full value of that investment, while not foreclosing a fair acquisition bid for
the Company.
The Rights are not intended to prevent a takeover of the Company and
will not do so. However, they should deter any attempt to acquire the Company in
a manner or on terms not approved by the Board. The Rights are designed to deal
with the very serious problem of another person or company using abusive tactics
to deprive the Company's Board and its shareholders of any real opportunity to
determine the destiny of the Company.
The Rights may be redeemed by the Board for one cent per Right prior
to the accumulation, through open-market purchases, a tender offer or otherwise,
of 15% or more of the Company's shares by a single acquiror or group. Because of
the redemption feature, the Rights should not interfere with any merger or
business combination approved by the Board prior to that time.
The Board believes that the issuance of the Rights does not in any
way weaken the financial strength of the Company or interfere with its business
plans. The issuance of the Rights has no dilutive effect, will not affect
reported earnings per share, is
not taxable to the Company or to you, and will not change the way in which you
can presently trade the Company's shares. As explained in detail below, the
Rights will only be exercisable if and when the problem arises which they were
created to deal with. They will then operate to protect you against being
deprived of your right to share in the full measure of your Company's long-term
potential.
The Board was aware when it acted that some people have advanced
arguments that securities of the sort we are issuing deter legitimate
acquisition proposals. We carefully considered these views and concluded that
the arguments are speculative and do not justify leaving shareholders without
any protection against unfair treatment by an acquiror, who, after all, is
seeking his own company's advantage, not yours. The Board believes that these
Rights represent a sound and reasonable means of addressing the complex issues
of corporate governance and policy.
The Rights were issued on September 25, 1998 to shareholders of
record on that date and will expire in ten years. Initially, the Rights will not
be exercisable, certificates will not be sent to you, and the Rights will
automatically trade with the common shares. However, ten days after a person or
group acquires 15% or more of the Company's shares, or ten business days (or
such later date as may be determined by the Board prior to a person or group
acquiring 15% or more of the Company's shares) after a person or group announces
an offer the consummation of which would result in such person or group owning
15% or more of the shares (even if no purchases actually occur), the Rights will
become exercisable and separate certificates representing the Rights will be
distributed. We expect that the Rights will begin to trade independently from
the Company's shares at that time. At no time will the Rights have any voting
power.
When the Rights first become exercisable, unless a holder is a person
or group who has acquired 15% or more of the Company's shares, that holder will
be entitled to buy from the Company one share of Common Stock for $45.00. If the
Company is involved in a merger or other business combination with a person or
group or affiliate at any time after that person or group has acquired 15% or
more of the Company's shares, the Rights will entitle a holder to buy a number
of shares of common stock of the acquiring company having a market value of
twice the exercise price of each Right. For example, if at the time of the
business combination the acquiring company's stock has a per share value of $30,
the holder of each Right would be entitled to receive 3 shares of the acquiring
company's common stock for $45, i.e., at a 50% discount.
If any person or group acquires 15% or more of the Company's
outstanding common stock, the "flip-in" provision of the Rights will be
triggered and the Rights will entitle a holder (other than such person or any
member of such group) to buy a
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number of additional shares of common stock of the Company having a market value
of twice the exercise price of each Right. Thus, if at the time of the 15%
acquisition the Company's stock were to have a market value per share equal to
$10, the holder of each Right (other than such person or any member of such
group) would be entitled to receive 9 shares of the Company's common stock for
$45.
Following the acquisition by any person or group of 15% or more of
the Company's common stock, but only prior to the acquisition by a person or
group of a 50% stake, the Board will also have the ability to exchange the
Rights (other than Rights held by such person or group), in whole or in part,
for one share of common stock per Right. This provision will have an
economically dilutive effect on the acquiror, and provide a corresponding
benefit to the remaining rightsholders, that is comparable to the flip-in
without requiring rightsholders to go through the process and expense of
exercising their Rights.
While, as noted above, the distribution of the Rights will not be
taxable to you or the Company, shareholders may recognize taxable income upon
the occurrence of certain subsequent events.
In declaring the Rights dividend, we have expressed our confidence in
the future of the Company and our determination that you, our shareholders, be
given every opportunity to participate fully in that future.
On behalf of the Board of Directors,
By________________________________________________
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