EXHIBIT 4.10
CANNONDALE CORPORATION
1998 STOCK OPTION PLAN
1. PURPOSE. The purpose of the Cannondale Corporation 1998 Stock Option
Plan (the "Plan") is to enable Cannondale Corporation (the "Company") and its
stockholders to secure the benefits of common stock ownership by employees and
officers of the Company and its subsidiaries and by consultants and advisors to
the Company and its subsidiaries. The Board of Directors of the Company (the
"Board") believes that the granting of options under the Plan will foster the
Company's ability to attract, retain and motivate those individuals who will be
largely responsible for the continued profitability and long-term future growth
of the Company.
2. STOCK SUBJECT TO THE PLAN. The Company may issue and sell a total of
1,000,000 shares of its common stock, $0.01 par value per share (the "Common
Stock"), pursuant to the Plan. Such shares may be either authorized and unissued
or held by the Company in its treasury. New options may be granted under the
Plan with respect to shares of Common Stock which are covered by the unexercised
portion of an option which has terminated or expired by its terms, by
cancellation or otherwise.
3. ADMINISTRATION. The Plan will be administered by a committee (the
"Committee") consisting of at least two Non-Employee Directors within the
meaning of Rule 16b-3(b)(3) promulgated under the Securities Exchange Act of
1934, as amended (the "Act"), appointed by and serving at the pleasure of the
Board. Subject to the provisions of the Plan, the Committee, acting in its sole
and absolute discretion, will have full power and authority to grant options
under the Plan, to interpret the provisions of the Plan and option award
agreements made under the Plan, to supervise the administration of the Plan and
to take such other action as may be necessary or desirable in order to carry out
the provisions of the Plan. A majority of the members of the Committee will
constitute a quorum. The Committee may act by the vote of a majority of its
members present at a meeting at which there is a quorum or by unanimous written
consent. The decision of the Committee as to any disputed question, including
questions of construction, interpretation and administration, will be final and
conclusive on all persons. The Committee will keep a record of its proceedings
and acts and will keep or cause to be kept such books and records as may be
necessary in connection with the proper administration of the Plan. No member of
the Committee shall be liable for any action taken or decision made in good
faith relating to the Plan or any award thereunder.
4. ELIGIBILITY. Options may be granted under the Plan to individuals
who at present or in the future serve as employees or officers of the Company or
a subsidiary of the Company (a "Subsidiary") within the meaning of Section
424(f) of the Internal Revenue Code of 1986, as amended, or who at the time of
grant are engaged as consultants or advisors to the Company or a Subsidiary.
Subject to the provisions of the Plan, the Committee may from time to time
select the persons to whom options will be granted under the Plan, and will fix
the number of shares covered by each such option and establish the terms and
conditions thereof (including, without limitation, exercise price and
restrictions on exercisability of the option or on the shares of Common Stock
issued upon exercise thereof).
5. TERMS AND CONDITIONS OF OPTIONS. Each option granted under the Plan
will be evidenced by a written award agreement in substantially the form
attached hereto as Exhibit I, or such other form approved by the Committee from
time to time. Each such option will be subject to the terms and conditions set
forth in this paragraph and such additional terms and conditions not
inconsistent with the Plan as the Committee deems appropriate as reflected in
the written award agreement.
(a) OPTION EXERCISE PRICE. The exercise price per share may
not be less than 100% of the Fair Market Value of a share of the Common Stock on
the date of grant of the option. "Fair Market Value" shall mean the closing
price of a share of the Common Stock on the Nasdaq National Market, or, if the
Company elects to list or admit the Common Stock on another exchange or service
instead of the Nasdaq National Market, on such other exchange or service, on the
date immediately preceding the date of grant of the option, or if no shares were
traded on such determination date, the next preceding date on which the Common
Stock was traded, or the Fair Market Value as determined by any other method
adopted by the Committee from time to time, which the Committee may deem
appropriate under the circumstances, or as may be required in order to comply
with the requirements of applicable laws and regulations.
(b) EXERCISE OF OPTIONS. No option will become exercisable
unless the person to whom the option was granted remains in the continuous
employ or service as an officer of the Company or an affiliate (as defined
below) for at least one year (or for such other period as the Committee may
designate) from the date the option is granted; provided, however, that in the
case of an option granted to a consultant or advisor to the Company or a
Subsidiary, there shall be no requirement for such person's continued provision
of services to the Company or an affiliate unless such requirement is imposed by
the Committee at the time the option is granted. For purposes of this Plan,
"affiliate" means either a Subsidiary or any entity in an unbroken chain of
entities ending with the Company if each of the entities other than the Company
owns an equity interest holding 25% of the total combined voting power of all
equity holders in one of the other entities in such chain. Subject to earlier
termination of the option as provided herein, unless the Committee determines
otherwise, the option will become exercisable in accordance with the following
schedule based upon the number of full years of the optionee's continuous
employment or service with the Company or an affiliate following the date of
grant:
Full Years Incremental Cumulative
of Continuous Percentage of Percentage of
Employment/ Option Option
Service Exercisable Exercisable
------------- ------------- -------------
Less than 1 0% 0%
1 33 1/3% 33 1/3%
2 33 1/3% 66 2/3%
3 or more 33 1/3% 100%
2
PROVIDED, HOWEVER, that in the event the exercise period of an option is three
years or less, the foregoing schedule shall be deemed to be modified to provide
that any remaining portion of the option shares which have not yet become
exercisable shall become exercisable on the date which is one year prior to the
date of expiration of the option; and provided, further, that an option granted
to a consultant or advisor to the Company or an affiliate shall be immediately
exercisable in full unless the Committee determines otherwise at the time of the
option grant.
All or any part of the exercisable portion of an option may be
exercised at any time during the option period, except that, without the written
consent of the Committee, no partial exercise of an option may be for less than
50 shares. An option may be exercised by transmitting to the Company (i) a
written notice specifying the number of shares to be purchased and (ii) payment
of the exercise price, together with the amount, if any, deemed necessary by the
Committee to enable the Company to satisfy its income tax withholding
obligations with respect to such exercise (unless other arrangements acceptable
to the Company are made with respect to the satisfaction of such withholding
obligations).
(c) PAYMENT OF EXERCISE PRICE. The purchase price of shares of
Common Stock acquired pursuant to the exercise of an option granted under the
Plan may be paid in cash and/or such other form of payment as may be permitted
under the option award agreement, including, without limitation,
previously-owned shares of Common Stock owned for at least six months prior to
the date of option exercise.
(d) RIGHTS AS A STOCKHOLDER. No shares of Common Stock will be
issued in respect of the exercise of an option granted under the Plan until full
payment therefor has been made (and/or provided for where all or a portion of
the purchase price is being paid in installments). The holder of an option will
have no rights as a stockholder with respect to any shares covered by an option
until the date a stock certificate for such shares is issued to him or her.
Except as otherwise provided herein, no adjustments shall be made for dividends
or distributions or other rights for which the record date is prior to the date
such stock certificate is issued.
(e) nontransferability of options. No option granted under the
Plan may be assigned or transferred except by will or by the applicable laws of
descent and distribution and each such option may be exercised during the
optionee's lifetime only by the optionee.
(f) TERMINATION OF EMPLOYMENT OR OTHER SERVICE. If an optionee
ceases to be an employee or to perform services as an officer for the Company
and any affiliate for any reason other than death or disability (as defined
below), then each outstanding option granted to him or her under the Plan will
terminate on the date three months after the date of such termination of
employment or service (or, if earlier, the date specified in the option
agreement). If an optionee's employment or service is terminated by reason of
the optionee's death or disability (or if the optionee's employment or service
is terminated by reason of his or her disability and the optionee dies within
one year after such termination of employment or service), then each outstanding
option granted to the optionee under the Plan will terminate on the date one
year after the date of such termination of employment or service (or one year
after the later death of a disabled optionee) or, if earlier, the date specified
3
in the option agreement. For purposes hereof, the term "disability" means the
inability of an optionee to perform the customary duties of his or her
employment or other service for the Company or an affiliate by reason of a
physical or mental incapacity which is expected to result in death or be of
indefinite duration (but in any event no less than twelve months).
Notwithstanding the foregoing, if and to the extent that the option is
exercisable at the time of termination of services, an option granted to a
consultant or advisor to the Company or an affiliate shall not terminate because
such person ceases to provide services to the Company or an affiliate, unless
the Committee provides otherwise at the time the option is granted.
(g) OTHER PROVISIONS. The Committee may impose such other
conditions with respect to the exercise of options, including, without
limitation, any conditions relating to the application of federal or state
securities laws, as it may deem necessary or advisable.
6. CAPITAL CHANGES, REORGANIZATION, SALE.
(a) ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. The aggregate
number and class of shares for which options may be granted under the Plan, the
number and class of shares covered by each outstanding option and the exercise
price per share shall all be adjusted proportionately for any increase or
decrease in the number of issued shares of Common Stock resulting from a
split-up or consolidation of shares or any like capital adjustment, or the
payment of any stock dividend.
(b) CHANGE OF CONTROL. (i) Except as provided in subparagraph
(c) below, upon a Change of Control (as defined below), any option granted
hereunder shall immediately become vested, and the optionee shall have the right
to exercise his or her option in whole or in part, so long as such option
remains outstanding, whether or not any other vesting requirements set forth in
the option agreement or herein have been satisfied.
(ii) For the purpose of this Plan, a "Change of
Control" shall mean:
A. The acquisition by any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Act)
(a "Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Act) of 20% or more of either (i) the then outstanding
shares of Common Stock (the "Outstanding Company Common Stock") or (ii) the
combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that for purposes of this
subparagraph A, the following acquisitions shall not constitute a Change of
Control: (i) any acquisition directly from the Company, (ii) any acquisition by
the Company, (iii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation controlled by
the Company, or (iv) any acquisition by any corporation pursuant to a
transaction which complies with clauses (i), (ii) and (iii) of subparagraph C of
this Section 6(b)(ii); or
B. Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any reason to constitute
at least a majority of the Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose election, or nomination
4
for election by the Company's stockholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or
C. Approval by the stockholders of the
Company of a reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Business Combination would beneficially own, directly or indirectly, more than
60% of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the case may be; (ii)
no Person (excluding any corporation resulting from such Business Combination or
any employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the
Business Combination; and (iii) at least a majority of the members of the board
of directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination; or
D. Approval by the stockholders of the
Company of a complete liquidation or dissolution of the Company.
(c) CONVERSION OF OPTIONS ON STOCK FOR STOCK EXCHANGE. If the
stockholders of the Company receive capital stock of another corporation
("Exchange Stock") in exchange for their shares of Common Stock in any
transaction involving a merger (other than a merger of the Company in which the
holders of Common Stock immediately prior to the merger have the same
proportionate ownership of Common Stock in the surviving corporation immediately
after the merger), consolidation, acquisition of property or stock, separation
or reorganization (other than a mere reincorporation or the creation of a
holding company), all options granted hereunder shall be converted into options
to purchase shares of Exchange Stock unless the Company and the corporation
issuing the Exchange Stock, in their sole discretion, determine that any or all
such options granted hereunder shall not be converted into options to purchase
shares of Exchange Stock but instead shall vest in accordance with the
5
provisions of subparagraph (b) above. The amount and price of converted options
shall be determined by adjusting the amount and price of the options granted
hereunder in the same proportion as used for determining the number of shares of
Exchange Stock the holders of the Common Stock receive in such merger,
consolidation, acquisition of property or stock, separation or reorganization.
Unless the Board determines otherwise, the converted options shall be fully
vested whether or not the vesting requirements set forth in the option agreement
or herein have been satisfied.
(d) FRACTIONAL SHARES. In the event of any adjustment in the
number of shares covered by any option pursuant to the provisions hereof, any
fractional shares resulting from such adjustment will be disregarded, and each
such option will cover only the number of full shares resulting from the
adjustment.
(e) DETERMINATION OF BOARD TO BE FINAL. All adjustments under
this paragraph 6 shall be made by the Board, and its determination as to what
adjustments shall be made, and the extent thereof, shall be final, binding and
conclusive.
7. AMENDMENT AND TERMINATION OF THE PLAN. The Board may amend or
terminate the Plan. Except as otherwise provided in the Plan with respect to
equity changes, any amendment which would increase the aggregate number of
shares of Common Stock as to which options may be granted under the Plan,
materially increase the benefits under the Plan or modify the class of persons
eligible to receive options under the Plan shall be subject to the approval of
the stockholders of the Company and such other approvals as may be required by
the provisions of the Company's Certificate of Incorporation or otherwise. No
amendment or termination may affect adversely any outstanding option without the
written consent of the optionee.
8. NO RIGHTS CONFERRED. Nothing contained herein will be deemed
to give any individual any right to receive an option under the Plan or to be
retained in the employ or service of the Company or any affiliate or interfere
in any way with the right of the Company to terminate the employment or service
of the optionee.
9. GOVERNING LAW. THE PLAN AND EACH OPTION AGREEMENT SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO ITS
CONFLICT OF LAWS RULES OR PRINCIPLES.
10. STOCKHOLDER APPROVAL; TERM OF THE PLAN. The Plan shall be effective
as of November 4, 1998, subject to the approval of the stockholders of the
Company on or before November 4, 1998. Any options awarded under the Plan prior
to such stockholder approval shall be conditioned upon such approval being
obtained and in the event such approval is not obtained all such options shall
be automatically null and void. The Plan will terminate on December 31, 2008,
unless sooner terminated by the Board. The rights of optionees under options
outstanding at the time of the termination of the Plan shall not be affected
solely by reason of the termination and shall continue in accordance with the
terms of the option (as then in effect or thereafter amended).
11. INTERPRETATION. The Plan is intended to enable transactions under
the Plan with respect to directors and officers (within the meaning of Section
16(a) under the Act) to satisfy the conditions of Rule 16b-3 or its successors;
6
to the extent that any provision of the Plan would cause a conflict with such
conditions or would cause the administration of the Plan as provided in Section
3 to fail to satisfy the conditions of Rule 16b-3, such provision shall be
deemed null and void to the extent permitted by applicable law. This Section
shall not be applicable if no class of the Company's equity securities is then
registered pursuant to Section 12 of the Act.
EXHIBIT I
FORM OF
CANNONDALE CORPORATION
NON-QUALIFIED STOCK OPTION AGREEMENT
This AGREEMENT has been made and entered into as of [ ], by and between
CANNONDALE CORPORATION, a Delaware corporation (the "Company") and [ ] (the
"Optionee").
Pursuant to the Cannondale Corporation 1998 Stock Option Plan (the
"Plan"), the Company desires to grant to the Optionee and the Optionee desires
to accept an option to purchase shares of the common stock, $0.01 par value per
share, of the Company (the "Common Stock") upon the terms and conditions set
forth in this Agreement.
NOW, THEREFORE, the Company and the Optionee agree as follows:
1. Grant of Option; Option Price. The Company hereby grants to the
Optionee an option to purchase [____] shares of the Common Stock at a purchase
price per share of $[ ] (the "Option"). The Option is intended to be treated as
an option which is not an incentive stock option within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code").
2. Entitlement to Exercise Option; Term of Option. The Option shall
only become exercisable in accordance with the following schedule based upon the
number of full years of the Optionee's continuous employment, or continuous
service as an officer of the Company or an affiliate (as defined in the Plan) of
the Company following the date of grant:
Full Years Incremental Cumulative
of Continuous Percentage of Percentage of
Employment/ Option Option
Service Exercisable Exercisable
-------------- ------------- -------------
Less than 1 0% 0%
1 33 1/3% 33 1/3%
2 33 1/3% 66 2/3%
3 or more 33 1/3% 100%
[FOR NON-EMPLOYEE ADVISORS AND CONSULTANTS ONLY:] The option shall be
immediately exercisable in full.
[OTHER ALTERNATIVES MAY BE CHOSEN BY THE COMMITTEE]
Unless sooner terminated pursuant to the terms of this Agreement, the
Option will expire if and to the extent it is not exercised on or before [ ].
3. EXERCISE OF OPTION. Once the Optionee has satisfied the required
continuous employment, service as an officer or other requirements, if any, in
accordance with Section 2, the Option may be exercised in whole at any time or
in part from time to time during the term of the Option, except that no partial
exercise may be for less than 50 shares. To exercise the Option, the Optionee
shall deliver to the President of the Company (a) a written notice specifying
the number of shares of Common Stock to be purchased; (b) payment in full of the
exercise price, together with the amount, if any, deemed necessary by the
Company to enable it to satisfy any income tax withholding obligations with
respect to the exercise of the Option (unless other arrangements, acceptable to
the Company, are made for the satisfaction of such withholding obligations); and
(c) the Stockholders Agreement described in Section 12 below, fully executed by
Optionee. The Company may (in its sole and absolute discretion) permit all or
part of the exercise price to be paid with previously-owned shares of Common
Stock owned for at least six months prior to the date of option exercise.
4. RIGHTS AS A STOCKHOLDER. No shares of Common Stock will be issued
and delivered pursuant to an exercise of the Option until full payment for such
shares has been made. The Optionee shall have no rights as a stockholder with
respect to any shares covered by the Option until a stock certificate for such
shares is issued to the Optionee. Except as otherwise provided herein, no
adjustment shall be made for dividends or distributions or other rights for
which the record date is prior to the date such stock certificate is issued.
5. NONTRANSFERABILITY OF OPTION. The Option is not assignable or
transferable except by will or by the applicable laws of descent and
distribution and is exercisable during the Optionee's lifetime only by the
Optionee.
6. TERMINATION OF EMPLOYMENT OR SERVICE AS AN OFFICER. If the Optionee
ceases to be employed by or to be an officer of the Company or any affiliate for
any reason other than death or disability (as defined in the Plan), then, unless
sooner terminated under the terms hereof, the Option will terminate on the date
three months after the date of the Optionee's termination of employment or
service. If the Optionee's employment or service is terminated by reason of the
Optionee's death or disability (or if the Optionee's employment or service is
terminated by reason of the Optionee's disability and the Optionee dies within
one year after such termination of employment or service), then, unless sooner
terminated under the terms hereof, the Option will terminate on the date one
year after the date of such termination of employment or service (or one year
after the disabled Optionee's later death). This paragraph shall not be
applicable to an Option granted to an Optionee as an outside consultant or
advisor to the Company. [NOTE - THE COMMITTEE MAY DETERMINE OTHERWISE, IN WHICH
CASE THIS PARAGRAPH WOULD BE MODIFIED].
2
7. INVESTMENT REPRESENTATION. In consideration of the grant of the
Option, the Optionee hereby represents and warrants to the Company that upon an
exercise of the Option, the shares purchased by the Optionee pursuant to such
exercise, will be acquired for the Optionee's account for the purpose of
investment and not with a view to or for sale in connection with any
distribution thereof. The Optionee further acknowledges that neither the Option
nor any shares of Common Stock issuable upon exercise of the Option have been
registered under the Securities Act of 1933, as amended (the "Act"), and may not
be sold unless a registration under the Act is in effect with respect to the
shares and all relevant state securities laws have been complied with or unless
an exemption from such registration or compliance is available under the Act or
any relevant state securities law. The certificates representing any shares of
Common Stock issued upon exercise of the Option shall bear a legend to such
effect as the Company's counsel shall deem necessary or desirable. The Option
shall in no event be exercisable and shares shall not be issued hereunder if, in
the opinion of counsel to the Company, such exercise and/or issuance would
result in a violation of federal or state securities laws.
8. CAPITAL CHANGES, REORGANIZATION, SALE. (a) In case of any split-up
or consolidation of shares or any like capital adjustment, or the payment of a
stock dividend, which increases or decreases the number of outstanding shares of
Common Stock, appropriate adjustment shall be made to the number of shares and
the exercise price per share which may still be purchased under this Agreement.
(b) Upon a Change of Control (as defined in the Plan), the
Option granted hereunder shall immediately become vested, and the Optionee shall
have the right to exercise the Option in whole or in part, so long as the Option
remains outstanding, whether or not the one year of continuous employment or
service as an officer as provided in Section 2 has been satisfied.
(c) However, if the stockholders of the Company receive
capital stock of another corporation ("Exchange Stock") in exchange for their
shares of Common Stock in any transaction involving a merger (other than a
merger of the Company in which the holders of Common Stock immediately prior to
the merger have the same proportionate ownership of common stock in the
surviving corporation immediately after the merger), consolidation, acquisition
of property or stock, separation or reorganization (other than a mere
reincorporation or the creation of a holding company), the Option granted
hereunder shall be converted into an option to purchase shares of Exchange Stock
unless the Company and the corporation issuing the Exchange Stock, in their sole
discretion, determine that the Option shall not be converted into an option to
purchase shares of Exchange Stock but instead shall vest in accordance with the
provisions set forth in subparagraph (b) above. The amount and price of the
converted option shall be determined by adjusting the amount and price of the
Option granted hereunder in the same proportion as used for determining the
number of shares of Exchange Stock the holders of the Common Stock receive in
such merger, consolidation, acquisition of property or stock, separation or
reorganization. Unless the Board of Directors of the Company determines
otherwise, the converted options shall be fully vested whether or not the
requirements set forth in this Agreement shall have been satisfied.
3
(d) In the event of any adjustment in the number of shares
covered by the Option pursuant to the provisions hereof, any fractional shares
resulting from such adjustment will be disregarded, and the Option will cover
only the number of full shares resulting from the adjustment.
(e) All adjustments under this Section 8 shall be made by the
Board of Directors, and its determination as to what adjustments shall be made,
and the extent thereof, shall be final, binding and conclusive.
9. NO RIGHTS CONFERRED. Nothing in this Agreement shall give the
Optionee any right to continue in the employ or service of the Company or an
affiliate or interfere in any way with the right of the Company to terminate the
employment or service of the Optionee.
10. PLAN PROVISIONS CONTROL. The provisions of the Plan shall govern if
and to the extent that there are inconsistencies between the provisions of the
Plan and the provisions of this Agreement. The Optionee acknowledges that the
Optionee has received a copy of the Plan prior to the execution of this
Agreement, and that the provisions of the Plan are incorporated herein by
reference.
11. TAX CONSIDERATIONS. Optionee hereby acknowledges and understands
that (a) pursuant to the Code as currently in effect, the difference between the
Fair Market Value (as defined in the Plan) of the Stock on the date he or she
exercises the Option and the option price will be taxable income to him or her
in the year he or she exercises the Option; and (b) the Company may be required
to withhold federal, state or local taxes with respect to the compensation
income, if any, realized by the Optionee upon an exercise of the Option. If the
Company determines that such withholding is required, the Optionee agrees either
to provide the Company at the time of any exercise of the Option with funds
equal to the amount of taxes which the Company determines must be withheld or to
make other arrangements satisfactory to the Company regarding such payment,
including authorizing the Company to withhold such amounts from any payments to
which he or she is entitled. All matters with respect to the withholding of
taxes resulting from an exercise of the Option shall be determined by the Board
of Directors of the Company and such determination shall be conclusive and
binding.
12. STOCKHOLDERS AGREEMENT. The Optionee hereby acknowledges and agrees
that all shares of Common Stock issued upon an exercise of the Option shall be
subject to the restrictions and obligations on transfer imposed on a stockholder
as provided in the form of Stockholders Agreement, attached hereto between the
Company and the Optionee (the "Stockholders Agreement"), a copy of which
accompanies this Agreement as Exhibit A. The Optionee, as a condition to the
receipt of the Option, hereby agrees to execute the Stockholders Agreement upon
exercise of the Option in whole or in part and to be bound by all the terms and
conditions imposed on a stockholder under the Stockholders Agreement with
respect to the shares of Common Stock issuable upon exercise of the Option and
consents to the legending of the stock certificates for such shares in
accordance with the Stockholders Agreement.
4
13. BINDING EFFECT. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors and permitted assigns; provided, however,
that this Agreement and the grant of an Option hereunder shall be null and void
and of no further force and effect in the event the Plan is not approved by the
stockholders of the Company on or before November 4, 1998.
14. GOVERNING LAW; ENTIRE AGREEMENT. This Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware, without
giving effect to its conflict of laws rules or principles. This Agreement
constitutes the entire agreement between the parties with respect to the subject
matter hereof and may not be modified except by written instrument executed by
the parties.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
CANNONDALE CORPORATION
By: ___________________________________
Name:
Title:
OPTIONEE
_______________________________________
Name:
5
EXHIBIT A
FORM OF
STOCKHOLDERS AGREEMENT UNDER 1998 STOCK OPTION PLAN
Cannondale Corporation is a Delaware corporation maintaining
its principal place of business at 16 Trowbridge Drive, Bethel, Connecticut. It
will be referred to in this Agreement as "Cannondale." You and the other parties
to this Agreement are all employees or officers of Cannondale, or consultants or
advisors to Cannondale, who have acquired shares of common stock in Cannondale
under options granted pursuant to the Cannondale Corporation 1998 Stock Option
Plan (the "Plan"). Each such stockholder is referred to in this Agreement as
"Stockholder," and the Cannondale common stock (or other capital stock of
Cannondale issuable in respect of the common stock pursuant to an adjustment
under the Plan) acquired by the person under an option granted pursuant to the
Plan from time to time is referred to as "Stock". You have so acquired [ ]
shares of Stock and understand that the difference between the fair market value
of such stock and the price you paid for such stock constitutes taxable income
to you. As a condition of its receipt, you, as a Stockholder, have entered into
this Agreement.
This Agreement imposes restrictions on the sale or transfer of
any Stock held by a Stockholder. The Stockholder agrees with Cannondale as
follows:
1. So long as the Stockholder owns Stock, the Stockholder
agrees to the restrictions described below on any voluntary or involuntary sale,
gift, transfer, encumbrance or other disposition of any of the Stock or any
interest in the Stock.
2. Unless the Stockholder shall have obtained the prior
written approval of Cannondale, a Stockholder must offer to sell his or her
Stock to Cannondale if any of the following events happen:
(a) the Stockholder intends or attempts to
sell or in any way transfers or encumbers any of the Stock or an interest in it
to another party (except incident to the sale or transfer of substantially all
of the outstanding Stock of Cannondale), or the Stock becomes subject to an
involuntary transfer, such as by court order;
(b) the Stockholder's employment by Cannondale
is terminated for any reason, or in the case of a non-employee officer of
Cannondale, the Stockholder ceases to be an officer of Cannondale for any
reason;
(c) the Stockholder seeks protection under any
laws relating to debtors' or creditors' rights;
(d) the death or permanent disability of the
Stockholder; or
(e) the Stockholder does not comply with this
Agreement.
If either of the events listed under (a) or (c) above occur,
the Stockholder must give written notice to Cannondale. If either of the events
listed under (b) or (d) occur, Cannondale will be deemed to have notice on the
date the event happens, and if the event listed in paragraph (e) occurs, notice
will be deemed to have occurred on the date ten days following the date on which
Cannondale notifies a Stockholder that he or she is in breach of this Agreement,
providing the Stockholder has not cured that breach to the satisfaction of
Cannondale during that ten-day period.
3. The receipt of actual or deemed notice by Cannondale will
constitute an offer by the affected Stockholder to sell all his or her Stock to
Cannondale. Cannondale will then have a period of 90 days after the receipt of
that notice to send written notice to the Stockholder (or in the case of the
death of a Stockholder, to his or her legal representative) that Cannondale
chooses to purchase the Stockholder's Stock. The purchase price for the Stock
will be calculated in the manner described in paragraph 4 below. In addition to
choosing to purchase the Stock itself, Cannondale may also designate another
party to purchase the Stock, providing that party pays the same purchase price
as Cannondale would.
Once Cannondale provides notice that it accepts the offer to
purchase the Stock, the Stockholder (or his or her legal representative) shall
sell the Stock to Cannondale or its designee at a closing to be held at
Cannondale's office within 90 days after that date, or sooner at Cannondale's
election.
If Cannondale chooses not to accept the offer to purchase the
Stock prior to the end of the 90-day period, then the Stockholder shall have an
additional 90-day period during which the Stockholder may sell or transfer the
Stock free and clear of the restrictions set forth in this Agreement, provided
the Stockholder first notifies Cannondale of the terms and conditions of any
such sale or transfer and gives Cannondale a ten-day option to purchase the
Stock on the same terms and conditions. If the Stockholder chooses not to sell
or transfer the Stock during that additional 90-day period, the restrictions
will continue, and the Stockholder agrees to give notice to Cannondale of the
occurrence of any subsequent event described in paragraph 2.
4. At the closing for the purchase of the Stock, the
Stockholder (or his or her personal representative upon furnishing appropriate
evidence of authority) shall deliver the Stock, duly endorsed for transfer or
accompanied by a fully executed stock power, and shall receive the Purchase
Price (as defined below) for each share of Stock sold.
The "Purchase Price" shall mean that number as determined by
multiplying the Earnings Per Share (as defined below) of Stock times five.
"Earnings Per Share" shall mean that number equal to Average Net Income (as
defined below) per share based on the weighted average number of shares of
common stock outstanding during the most recent fiscal year determined on a
fully diluted basis, taking into account all unexercised options and other
2
similar arrangements as to rights to acquire common stock of Cannondale.
"Average Net Income" shall mean that amount equal to the sum of the following
divided by four: (i) two times the consolidated net after tax income for
Cannondale's most recent fiscal year preceding the occurrence of the event
causing the sale, (ii) consolidated net after tax income for the second most
recent fiscal year preceding such an event and (iii) consolidated net after tax
income for the third most recent fiscal year preceding such event. For purposes
of the computation: (A) net income in any given year shall not be less than
zero; (B) the following shall be excluded in the computation of net income: (i)
income (or loss) from the sale or other disposition of assets outside the
ordinary course of the Cannondale business and (ii) income (or loss) from any
extraordinary items; and (C) in any year in which there are outstanding shares
of preferred stock of Cannondale which provide for payment of dividends on a
cumulative basis, the dividends paid or accrued on such preferred stock for such
year shall be treated as expenses. All such computations shall be made in
accordance with generally accepted accounting principles, except as otherwise
specifically provided herein, applied by Cannondale's principal financial
officer, or at Cannondale's election by its independent auditors, and shall be
final and binding for the purposes of this Agreement unless shown to have been
prepared in bad faith.
5. Notwithstanding anything to the contrary contained herein,
the restrictions contained in this Agreement on sale, gift, transfer,
encumbrance or other disposition of the Stock or any interest in the Stock shall
not be in effect for so long as stock of the same class as the Stock is publicly
traded.
6. Each Stockholder understands that each certificate
representing the Stock and any further certificates representing the Stock
issued to him or her will bear such legends as are applicable, including without
limitation, the following:
The securities represented by this certificate are subject
to the limitations and restrictions on their transfer
provided in an agreement entitled "Stockholders Agreement
Under 1998 Stock Option Plan," a copy of which is on file at
Cannondale Corporation at its principal business office.
This Agreement shall be governed by and construed under the
laws of the State of Delaware, without giving effect to its conflict of laws
rules or principles. It may be signed in one or more counterparts, each of which
shall be deemed an original, but all of which together will constitute one and
the same agreement. It shall be binding upon and enforceable by all of the
parties who sign it and their respective successors, assigns, heirs, executors,
administrators, other legal representatives or transferees. If any part of this
Agreement is determined to be unenforceable, the remainder of this Agreement
will continue in full force and effect.
Any notices or communications given pursuant to this Agreement
shall be either hand delivered or mailed by certified or registered mail to
Cannondale at its principal office or to any Stockholder at the address shown on
the employment records of Cannondale unless another address is provided in
writing to Cannondale.
3
This Agreement is effective as of [ ], [_____].
CANNONDALE CORPORATION
By: ________________________________
Name:
Title:
STOCKHOLDER
____________________________________
Name:
4