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EXHIBIT 4.4
CANNONDALE CORPORATION
1996 STOCK OPTION PLAN
(AS AMENDED AS OF NOVEMBER 19, 1996)
1. Purpose. The purpose of the Cannondale Corporation 1996 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 750,000 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
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Internal Revenue Code of 1986, as amended (the "Code"), 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 the Common Stock on another exchange instead of
the Nasdaq National Market, on such other exchange, 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 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
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optionee's continuous employment or service with the Company or an affiliate
following the date of grant:
Full Incremental Cumulative
Years 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%
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
(1) a written notice specifying the number of shares to be purchased, and (2)
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 of 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
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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
(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 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.
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(b) Cash, Stock or Other Property for Stock. Except as
provided in subparagraph (c) below, upon 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, reorganization (other than a mere
reincorporation or the creation of a holding company) or liquidation of the
Company, as a result of which the stockholders of the Company receive cash,
stock or other property in exchange for or in connection with their shares of
Common Stock, any option granted hereunder shall terminate, but the optionee
shall have the right immediately prior to any such merger, consolidation,
acquisition of property or stock, separation, reorganization or liquidation to
exercise his or her option in whole or in part, whether or not the vesting
requirements set forth in the option agreement or herein have been satisfied.
(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 be exercisable
and terminate in accordance with the 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.
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(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 holders of a majority of the Common Stock issued and outstanding 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 Subsidiary.
9. Governing Law. The Plan and each option agreement shall be
governed by the laws of the State of Delaware.
10. Shareholder Approval; Term of the Plan. The Plan shall be
effective as of May 17, 1996, subject to the approval of the stockholders of
the Company on or before May 17, 1997. 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,
2006, 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; 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.
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EXHIBIT I
FORM OF
CANNONDALE CORPORATION
NON-QUALIFIED STOCK OPTION AGREEMENT
AGREEMENT made as of [_________________], 199_ by and between
CANNONDALE CORPORATION, a Delaware corporation (the "Company") and
[_____________________] (the "Optionee").
Pursuant to the Cannondale Corporation 1996 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, 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 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.
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 of the Company
following the date of grant:
Full Incremental Cumulative
Years 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]
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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, held for more than six months.
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
subsidiary for any reason other than death or disability, 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 as
director. 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
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advisor to the Company. [NOTE - THE COMMITTEE MAY DETERMINE OTHERWISE, IN
WHICH CASE PARAGRAPH WOULD BE MODIFIED].
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 (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 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, reorganization (other than a mere reincorporation or the creation
of a holding company) or liquidation of the Company, as a result of which the
stockholders of the Company receive cash, stock or other property in exchange
for or in connection with their shares of Common Stock, the Option granted
hereunder shall terminate, but the Optionee shall have the right immediately
prior to any such merger, consolidation, acquisition of property or stock,
separation, reorganization or liquidation to exercise the Option in whole or in
part, 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
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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 terminate 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 on the same basis 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 option shall be fully vested, whether or not the
requirements set forth in this Agreement shall have been satisfied.
(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 Internal Revenue Code as currently
in effect, the difference between the fair market value of the Stock on the date
he exercises the Option and the Option price will be taxable income to him in
the year he exercises the Option and (b) the Company may be required to withhold
Federal, state or local taxes with respect to the compensation income, if
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any, realized by Optionee upon an exercise of the Option. If the Company
determines that such withholding is required, 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 payment, including
authorizing the Company to withhold such amounts from any payments to which he
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. Stockholder 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 "Stockholder Agreement"), a copy of
which accompanies this Agreement. 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.
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 May 17, 1997.
14. Governing Law; Entire Agreement. This Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware.
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.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
CANNONDALE CORPORATION
By:
-------------------------------
Its
----------------------------
----------------------------------
[signature of Optionee]
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EXHIBIT II
FORM OF
STOCKHOLDERS AGREEMENT UNDER 1996 OPTION PLAN
Cannondale Corporation is a Delaware corporation maintaining its
principal place of business at 9 Brookside Place, Georgetown, 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 1996
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 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 the Corporation), 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;
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(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 occurs, 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 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 Stock to
Cannondale. Cannondale will then have a period of ninety 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 legal representative) shall sell the Stock
to Cannondale or its designee at a closing to be held at Cannondale's office
within ninety 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 ninety-day period, then the Stockholder shall have an
additional ninety-day period during which the Stockholder may sell or transfer
the Stock free and clear of 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 ninety-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.
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4. At the closing for the purchase of the Stock, the Stockholder (or
his 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 for each share of
the Stock sold.
The Purchase Price shall be computed by multiplying the Earnings Per
Share of Stock times five. Earnings Per Share shall be equal to Average Net
Income per share based on the weighted average number of shares of common stock
during the most recent fiscal year determined on a fully diluted basis, taking
into account all unexercised options and other similar arrangements as to
rights to acquire common stock of Cannondale. Average Net Income shall be an
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
the Corporation 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.
In the event that the Corporation causes to be filed with the United
States Securities and Exchange Commission (the "S.E.C.") a registration
statement in connection with the sale of the common stock of the Corporation,
from and after the date that such registration is deemed effective by the
S.E.C. and for so long as such stock remains publicly traded, the Purchase
Price shall be equal to the sum of the average closing sales prices per share
of such stock on the principal market on which such stock is traded on each of
the five trading days prior to (but not including) the date of closing of the
purchase hereunder, divided by five.
5. Notwithstanding anything to the contrary contained herein, the
restrictions contained in this Agreement on sale, gift, transfer, encumbrance
or other disposition of Stock or any interest in Stock shall not be in effect
for so long as stock of
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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
will bear such legends as are applicable, including without limitation, the
following:
The securities represented by the certificate are subject to the
limitations and restrictions on their transfer provided in an
agreement entitled "Stockholders Agreement," 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. 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 the
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.
This Agreement is effective as of _____________, 199_.
CANNONDALE CORPORATION
By:
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Joseph S. Montgomery
Its President
STOCKHOLDER
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