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EXHIBIT 4.2
CANNONDALE CORPORATION
1994 STOCK OPTION PLAN
(As amended as of February 5, 1998)
l. Purpose. The purpose of the Cannondale Corporation 1994 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,
officers and directors of 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
50,000 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 directors appointed by and serving at
the pleasure of the Board, none of whom is, during the one year period prior to
service on the Committee or during such service, granted or awarded any options
pursuant to the Plan or any other plan of the Company (except under
circumstances which will not result in such director ceasing to be a
"disinterested person" within the meaning of Rule 16b-3(c) promulgated under the
Securities Exchange Act of 1934, as amended (the "Act")). If a Committee is not
so established, the Board will perform the duties and functions ascribed herein
to the Committee; provided, however, that from and after the date on which the
Company first registers a class of equity securities under Section 12 of the
Act, the Plan will be administered by a Committee as provided in the preceding
sentence of this paragraph 3. Subject to the provisions of the Plan, the
Committee, acting it 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 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.
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4. Eligibility. Options may be granted under the Plan to individuals
who at present or in the future serve as directors, officers or employees 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 (the "Code").
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 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.
(a) Option Exercise Price. The exercise price per share may
not be less than $1.00 per share.
(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 or director 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. For purposes hereof, "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 Percentage of
Years of Continuous Option
Employment/Service Exercisable
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Less than 3 0%
3 or more 100%
provided, however, that in the event the exercise period of an Option is five
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.
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All or part of the exercisable portion of an option may be exercised at
any time during the option period, except that, without the 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 (l) 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 agreement, including, without limitation, previously-owned
shares of Common Stock owned for at least six months prior to the date of the
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 or director 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).
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(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 such 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 Exchange 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
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
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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 reorganization 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 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
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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 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.
l0. Term of the Plan. The Plan shall be effective as of January l, 1994
subject to the approval of the stockholders of the Company. The Plan will
terminate on December 31, 2003, 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).
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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 1994 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 or director of the Company or an affiliate of the Company
following the date of grant:
Full Years of Continuous Cumulative Percentage
Employment/Service of Option Exercisable
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Less than 1 0%
3 or more 100%
[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 or service as an officer 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
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Stock to be purchased, and (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 Officer or Director. If the
Optionee ceases to be employed by or to be an officer or director 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 an officer or 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).
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
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hereunder if, in the opinion of counsel to the Company, such exercise and/or
issuance would result in a violation of federal and 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 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.
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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 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. 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. 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.
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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AMENDMENT dated as of _____________ to the Non-qualified Stock Option
Agreement (the "Agreement") by and between CANNONDALE CORPORATION (the
"Company") and ____________________ (the "Optionee").
Pursuant to the Cannondale Corporation 1994 Stock Option Plan, the
Company has heretofore granted to the Optionee the option to purchase shares of
the Company's Common Stock pursuant to the Agreement. The Company has agreed to
accelerate the vesting schedule set forth in the Agreement conditioned upon the
Optionee's agreements set forth herein. Now, therefore, in consideration of the
foregoing the Company and the Optionee agree that the Agreement is amended as
follows:
Paragraph 2 of the Agreement is deleted and-replaced in its entirety
with the following:
2. Entitlement to Exercise Option; Term of Option.
The Option shall be exercisable from and after July
2, 1994.
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 December 31,
2002.
Except as amended as provided herein, the Agreement remains full force
and effect in accordance with its terms.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
CANNONDALE CORPORATION
By:____________________________
Its:___________________________
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FORM OF
STOCKHOLDERS AGREEMENT UNDER 1994 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 directors, officers or employees of Cannondale who have
acquired shares of common stock in Cannondale under options granted pursuant to
the Cannondale Corporation 1994 Stock Option Plan (the "Plan"). Each such
Stockholder is referred to 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 officer
or employee 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 to 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 director of Cannondale the Stockholder
ceases to be a member of the Cannondale Board of Directors 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.
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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 in 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.
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 the 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
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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 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
state either on the front or back of the certificate that:
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.
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or under any state
securities laws. Such shares have been acquired for investment purposes
only and not with a view to distribution thereof. They may not be sold,
offered for sale, transferred or otherwise disposed of in the absence
of an effective registration statement under said Act or compliance
with the requirements of any relevant state securities laws, or an
opinion of counsel satisfactory to Cannondale Corporation that such
registration or compliance is not required.
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
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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 o 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:________________________
Joseph S. Montgomery
Its President
STOCKHOLDER
___________________________
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