EXHIBIT 20.1
November __, 2000
To Our Stockholders:
After extensive study, the Board of Directors of Performance
Technologies, Incorporated (the "Company") has adopted a Rights Agreement
designed to ensure that all of the Company's stockholders receive fair and equal
treatment in the event of any proposal to acquire the Company. The agreement is
intended to protect the interests of our stockholders in the event of abusive or
unfair takeover tactics. It is not designed to prevent the acquisition of the
Company on terms beneficial to all stockholders.
Terms of the agreement are contained in the Summary of Rights enclosed
with this letter. This letter is for informational purposes only, and no action
is required of you at this time.
Effective as of the close of business on November 8, 2000, the rights
were implicitly attached to all shares of the Company's Common Stock. Because
the rights are not currently exercisable and have no current market value,
certificates representing the rights will not be issued at this time; the rights
will trade with and be represented by your Common Stock certificate. The rights
detach and trade separately from the Common Stock and become exercisable
following the acquisition by a person or group of 15% or more of the Company's
Common Stock or, at the Board's option, following the announcement of a tender
or exchange offer to acquire an interest in the Company of 15% or more or upon
the Board's determination that a person or group owning more than 10% intends or
is reasonably likely to cause pressure on the Company to enter into a
transaction which would provide that person or group with short-term financial
gain not in the Company's best long-term interest or is causing or reasonably
likely to cause a material adverse impact on the Company's business or prospects
(an "Adverse Person"). A person or group who or which, at the time of the
adoption of the Rights Agreement, already was the beneficial owner of 15% or
more of the then outstanding shares of Common Stock will not be deemed an
Acquiring Person for any purposes of the Rights Agreement unless and until such
person or group becomes the beneficial owner of any additional shares of Common
Stock after the adoption of the Rights Agreement. If the rights become
exercisable, they entitle all holders - except the prospective acquiror or
Adverse Person to purchase Preferred Stock in the Company or capital stock from
the resulting entity from a merger involving the Company at a discounted price.
One objective of the plan is to encourage a prospective acquiror to negotiate a
transaction that is fair to all stockholders with the Board of Directors of the
Company.
The Company currently has no stockholder with an interest of 10% or
more, and the Board is not aware of any current attempt to take control of the
Company. Management, however, believes that the Company's current market value
(based on the price at which the Company's Common Stock is currently trading)
does not reflect the true value of the Company. We have a great deal of optimism
about the future of our Company, and the Rights Agreement helps to ensure that
our stockholders will have greater opportunity to enjoy the benefits of the
Company's success.
Statements contained in this letter which are not historical facts are
forward-looking statements as that term is defined in the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements are subject to
risks and uncertainties (contained in the company's SEC filings) which could
cause actual results to differ.
Very truly yours,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President and Chief Executive
Officer
Enclosure
PERFORMANCE TECHNOLOGIES, INCORPORATED
SUMMARY OF RIGHTS
Exercisability of Rights
Initially, the Rights will not be exercisable or transferable apart
from the shares of Common Stock with respect to which they will be distributed,
and will be evidenced only by the certificates representing such shares of
Common Stock. The Rights will become exercisable and transferable apart from the
Common Stock on a date (the "Separation Date") that is the earlier of (i) the
close of business on the tenth business day after a Stock Acquisition Date,
defined as the first date of a public announcement by the Company that a person
or group of affiliated or associated persons has become an Acquiring Person or
Adverse Person (each as described below), or (ii) the close of business on the
tenth business day following the commencement of, or first public disclosure of
an intention to commence, a tender or exchange offer by any person (other than a
Permitted Offer as described below) if, upon consummation of that offer, such
person would become an Acquiring Person (as described below). The Rights will be
exercisable from the Separation Date until the Expiration Date, which is the
earlier of (i) the close of business on the ten-year anniversary of the date of
the Rights Agreement (the "Final Expiration Date"), (ii) the date the Rights are
redeemed by the Company, (iii) the date the Rights are exchanged by the Company,
or (iv) immediately prior to the effective time of a consolidation, merger or
share exchange of the Company (A) into another corporation or (B) with another
corporation in which the Company is the surviving corporation but Common Stock
is converted into cash and/or securities of another corporation, in each case
pursuant to an agreement entered into by the Company prior to a Stock
Acquisition Date, at which time the Rights will expire.
A person or group becomes an Acquiring Person under the Rights
Agreement when such person or group acquires or obtains the right to acquire
beneficial ownership of 15% or more of the then outstanding shares of the
Company's Common Stock, with certain exceptions described in the Rights
Agreement (including exceptions for shares owned by the Company or a subsidiary
or employee benefit plan of the Company, and for shares owned by any person who
the Board determines inadvertently reached such 15% beneficial ownership level
and who promptly divests sufficient shares such that 15% or greater beneficial
ownership ceases). An Adverse Person under the Rights Agreement is a person who
beneficially owns more than 10% of the then outstanding shares of the Company's
Common Stock and whose ownership of that stock, in the opinion of the Board, is
intended or reasonably likely to cause pressure on the Company to enter into a
transaction which would provide that person with short-term financial gain not
in the Company's best long-term interest or is causing or reasonably likely to
cause a material adverse impact on the Company's business or prospects.
A Permitted Offer under the Rights Agreement is a tender or exchange
offer for all outstanding shares of the Company's Common Stock at a price and on
terms determined, prior to the purchase of shares under such tender or exchange
offer, by at least a majority of the members of the Board who are not officers
of the Company and who are not Acquiring Persons or Adverse Persons to be
adequate and otherwise in the best interests of the Company and its
stockholders.
Transferability of Rights
Prior to the Separation Date, the Rights will not be transferable apart
from the shares of Common Stock to which they are attached. Thus, the surrender
or transfer of any Common Stock certificate prior to that date will also
constitute the transfer of the Rights associated with the shares represented by
such certificate. Until the Separation Date (or earlier redemption, exchange or
expiration of the Rights), new Common Stock certificates issued after the Record
Date, upon transfer or new issuance of shares of Common Stock, will contain a
notation incorporating the Rights Agreement by reference. Until the Separation
Date (or earlier redemption, exchange or expiration of the Rights), the
surrender for transfer of any certificates for shares of Common Stock,
outstanding as of the Record Date, even without such notation or a copy of a
Summary of Rights being attached thereto, will also constitute the transfer of
the Rights associated with the shares of Common Stock represented by such
certificate. As soon as practicable after a Separation Date, separate
certificates evidencing the Rights ("Rights Certificates") will be mailed to
each record holder of shares of Common Stock as of the close of business on such
Separation Date and, in certain circumstances, holders of certain shares issued
after such Separation Date. Until exercised, the holders of Rights will not have
any rights as holders of Preferred Stock, including any rights to vote or
receive dividends on the Preferred Stock.
Flip-In Rights
It is at the time that the "flip-in" right is triggered that the Rights
have a real economic value. Upon the tender for or the acquisition of 15% of the
Common Stock by an Acquiring Person or the determination and announcement by the
Board that a person has become an Adverse Person (a "Flip-In Event"), each
holder of a Right will thereafter have the right (the "Flip-In Right") to
receive, upon exercise and payment of the Exercise Price, the number of shares
of Preferred Stock having a market value immediately prior to the Flip-In Event
equal to two times the then current Exercise Price of the Right. Any Right that
is (or, in certain circumstances specified in the Rights Agreement, was)
beneficially owned by an Acquiring Person or Adverse Person (or any of its
affiliates or associates, as defined) will become null and void upon the
occurrence of the Flip-In Event. Cash will be paid in lieu of fractional shares.
For example, at the Exercise Price of $110 per Right, if any person
becomes the Acquiring Person of 15% or more of the outstanding Common Stock of
the Company or is determined to be an Adverse Person, thereafter each Right
(other than Rights owned by such 15% Acquiring Person or Adverse Person or any
of its affiliates or associates, which will have become void) would entitle its
holder to purchase $220 worth of the Company's Preferred Stock for $110.
Assuming that each one one-thousandth share of Preferred Stock is the economic
equivalent of one share of Common Stock and further assuming that the Common
Stock had a per share value of $11.00 at such time, each Right would effectively
entitle its holder to purchase twenty one-thousandth shares of the Company's
Preferred Stock for $110.
Flip-Over Rights
If, at any time following a Flip-in Event, either (i) the Company is
acquired in a merger or other business combination transaction, the Acquiring
Person or Adverse Person controls the Board of the Company and either (A) the
investment of the shares owned by those other than the Acquiring Person or
Adverse Person are not identified to the shares owned by the Acquiring Person or
Adverse Person or (B) the transaction is with the Acquiring Person or Adverse
Person or a related party; or (ii) the Company sells or otherwise transfers more
than 50% of its aggregate assets or earning power to a related party if approved
by Company after the Acquiring Person or Adverse Person controls the Board of
the Company, each holder of a Right (except Rights previously voided as
described above) will thereafter have the right (the "Flip-Over Right") to
receive, upon exercise, shares of common stock of the Acquiring Person or
Adverse Person having a value equal to twice the Exercise Price of the Right.
The Flip-Over Right will be exercisable apart from, and regardless of the
exercise or surrender of, the Flip-In Right.
Again, as with the flip-in trigger, because the Acquiring Person or
Adverse Person is not able to exercise its rights, the Acquiring Person or
Adverse Person and (assuming that the Acquiring Person or Adverse Person is the
party acquiring the Company) its stockholders are significantly diluted as a
result of the triggering of the flip-over event.
Exercise Price for Rights
The Exercise Price is intended to represent the Board's informed
prediction as to the likely market price of one share of the Company's Common
Stock at the end of the term of the Rights Agreement, and is not an expression
as to what would be a fair or adequate price for the sale of the Company.
Redemption of the Rights
At any time prior to the close of business on the tenth business day
following a public announcement that a party is an Acquiring Person or Adverse
Person, the Board may redeem the Rights in whole but not in part at a Redemption
Price of $.001 per Right. Immediately upon any redemption of the Rights, the
right to exercise the Rights will terminate and the only right of the holders of
Rights will be to receive the Redemption Price.
Exchange of the Rights
At any time after a Flip-in Event, the Board may exchange the Rights
(other than Rights owned by such Acquiring Person or Adverse Person or any of
its affiliates or associates which have become void), in whole or in part, for
Common Stock at an exchange ratio of one share of Common Stock per Right.
Adjustments
The Exercise Price payable, and the number of shares of Preferred Stock
or other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (i) in the event of
a stock dividend on, or a subdivision, combination or reclassification of the
Preferred Stock, (ii) upon the grant to holders of the Preferred Stock of
certain rights, options or warrants to subscribe for or purchase Common Stock at
a price, or securities convertible into Preferred Stock with a conversion price,
less than the then current market price of the Common Stock, or (iii) upon the
distribution to holders of the Preferred Stock of evidences of indebtedness or
assets (excluding regular periodic cash dividends paid out of earnings or
retained earnings or dividends payable in shares of Preferred Stock) or of
subscription rights or warrants (other than those referred to above). The number
of Rights associated with each share of Common Stock is also subject to
adjustment in the event of a stock split of the Common Stock or stock dividend
on the Common Stock payable in Common Stock or subdivisions, consolidations or
combinations of the Common Stock occurring, in any such case, prior to the
Separation Date.
Reserved Shares/Substitution of Assets
The Rights Agreement contemplates that the Company will reserve a
sufficient number of authorized but unissued shares of Preferred Stock to permit
the exercise of the right to exchange the Rights should the Rights become
exercisable. The Board may (and under certain circumstances is obligated to)
issue other equity securities or assets upon the exercise of the Rights if
sufficient shares of Preferred Stock are not available for issuance should the
Rights become exercisable. The Board may make adequate provision to substitute
for the shares of stock which are not available for issuance upon exercise of
such Rights either cash, other equity securities of the Company (including,
without limitation, shares of preferred stock of the Company), debt securities
of the Company, other assets, or a combination of the foregoing, having an
aggregate value (as determined by a majority of the Board after receiving advice
from a nationally recognized investment banking firm) equal to the value of the
shares of Preferred Stock unavailable for issuance upon exercise of the Rights.
In addition, the Board, subject to certain limitations, may amend the Rights to
change the Exercise Price and therefore the number of shares of Preferred Stock
issuable upon exercise of the Rights. If the Company does not take such action
within 30 days following the later of a Flip-In Event or the date on which the
Company's right of redemption with respect to the Rights expires, then the
Company will be required to deliver cash as the substitute for the unavailable
authorized shares of Preferred Stock.
Amendment of the Rights Agreement
The terms of the Rights and the Rights Agreement may be amended by the
Board without the consent of the holders of the Rights, except that from and
after such time as any Person becomes an Acquiring Person or Adverse Person no
such amendment may adversely affect the interests of the holders of the Rights
(other than the Acquiring Person, the Adverse Person or their Affiliates and
Associates).
Independent Director Review
The Rights Agreement final expiration date is ten years from the date of the
Rights Agreement. However, a committee of the Company's Directors who are
neither officers, employees or affiliates of the Company will review the Rights
Plan at least every three years and, if a majority of these Directors deems it
appropriate, may recommend a modification or termination of the Rights
Agreement.
