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Exhibit 10.6
MANAGEMENT STOCK OPTION AGREEMENT - SERVICE OPTION
MANAGEMENT STOCK OPTION AGREEMENT, dated as of June 24, 1999,
between RACI Holding, Inc., a Delaware corporation (the "Holding"), and the
Grantee whose name appears on the signature page hereof (the "Grantee").
W I T N E S S E T H:
WHEREAS, the Board of Directors of Holding (the "Board")
approved the grant to the Grantee of nonqualified stock options to purchase
shares of Class A Common Stock, par value $.01 per share ("Common Stock"), of
Holding set forth on the signature page hereof (each, a "Share" and,
collectively, the "Shares") pursuant to the RACI Holding, Inc. Stock Incentive
Plan (the "Plan"), at an exercise price of $200.00 per Share by unanimous
written consent dated May 21, 1999 (the "Grant Date"); and
WHEREAS, the Grantee and Holding desire to enter into an
agreement to evidence and confirm the grant of such options on the terms and
conditions set forth herein;
NOW, THEREFORE, to evidence the stock options so granted, and
to set forth the terms and conditions thereof, Holding and the Grantee hereby
agree as follows:
1. Confirmation of Grant; Option Price. Holding hereby
evidences and confirms its grant to the Grantee, effective as of the Grant Date,
of options (the "Options") to purchase the Shares at an option price of $200.00
per share (the "Option Price"). The Options are not intended to be incentive
stock options under the U.S. Internal Revenue Code of 1986, as amended. This
Agreement is subordinate to, and the terms and conditions of the Options granted
hereunder are subject to, the terms and conditions of the Plan.
2. Exercisability. Except as otherwise provided in this
Agreement, the Options shall become vested and exercisable in three equal
installments, on each of the third, fourth and fifth anniversaries of the Grant
Date, subject in the case of each such installment to the continued employment
of the Grantee until the applicable vesting date; provided that the Board may
accelerate the exercisability of any Option, all Options or any class of
Options, at any time and from time to time. Shares eligible for purchase
pursuant to vested and exercisable Options may be purchased, subject to the
provisions hereof, and pursuant to and subject to the provisions contained in
the Management Stock Subscription Agreement (as defined in Section 5) related to
such Shares, at any time and from time to time on or after the date the related
Options become vested and exercisable until the date one day prior to the date
on which such Options terminate.
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3. Termination of Option.
(a) Normal Termination Date. Unless an earlier termination
date is specified in Section 3(b), the Options shall terminate on the tenth
anniversary of the date hereof (the "Normal Termination Date").
(b) Early Termination. If the Grantee's Active Employment (as
defined below) is voluntarily or involuntarily terminated for any reason other
than a Special Termination (as defined below) prior to the Normal Termination
Date, any Options that have not become vested and exercisable on or before the
effective date of such termination of employment shall terminate on such
effective date. Subject to the provisions of Section 4(c), if the Grantee's
Active Employment is terminated by reason of the Grantee's death, Permanent
Disability or Retirement (each a "Special Termination"), then all Options held
by the Grantee shall become immediately vested and exercisable and shall remain
exercisable until the first to occur of (A) the 180th day following the
effective date of such Special Termination or (B) the Normal Termination Date.
Subject to Section 4(c), if the Grantee's Active Employment is terminated for
any reason other than (i) a Special Termination or (ii) for Cause, any vested
and exercisable Options then held by the Grantee shall remain exercisable for a
period of sixty days following the earliest of (x) the expiration of the Second
Purchase Period (as defined in Section 4(c)(i) hereof), (y) receipt by the
Grantee of written notice that the C&D Fund (as defined in Section 4(d) hereof)
does not intend to exercise its right to purchase pursuant to Section 4(c)(i)
and (z) in the case of any such termination of the Grantee's employment on or
after the effective date of a Public Offering (as defined in Section 4), the
effective date of such termination of employment. Notwithstanding anything else
contained in this Agreement, if the Grantee's Active Employment is terminated
for Cause, then all Options (whether or not then vested or exercisable) shall
terminate and be canceled immediately upon such termination, regardless of
whether then vested or exercisable. Nothing in this Agreement shall be deemed to
confer on the Grantee any right to continue in the employ of the Company or any
of its direct or indirect subsidiaries, or to interfere with or limit in any way
the right of the Company or any of such subsidiaries to terminate the Grantee's
employment at any time.
4. Restrictions on Exercise; Non-Transferability of Option;
Repurchase of Options.
(a) Restrictions on Exercise. The Options may be exercised
only with respect to full shares of Common Stock. No fractional shares of Common
Stock shall be issued. Notwithstanding any other provision of this Agreement,
the Options may not be exercised in whole or in part, and no certificates
representing Shares shall be delivered, (i) unless all requisite approvals and
consents of any governmental authority of any kind having jurisdiction over the
exercise of the Options shall have been secured, (ii) unless the
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purchase of the Shares upon the exercise of the Options shall be exempt from
registration under applicable U.S. federal and state securities laws, or the
Shares shall have been registered under such laws, (iii) unless all applicable
U.S. federal, state and local and non-U.S. tax withholding requirements shall
have been satisfied or (iv) if such exercise would cause a change in control of
Holding and thereby result in a violation of the terms or provisions of or a
default or an event of default under any of the Financing Agreements (as such
term is defined in Section 9). Holding shall use reasonable best efforts to
obtain the consents and approvals referred to in clause of the preceding
sentence.
(b) Non-Transferability of Options. Except as contemplated by
Section 4(c), the Options may be exercised only by the Grantee or by the
Grantee's estate. Except as contemplated by Section 4(c), the Options are not
assignable or transferable, in whole or in part, and they may not, directly or
indirectly, be offered, transferred, sold, pledged, assigned, alienated,
hypothecated or otherwise disposed of or encumbered (including without
limitation by gift, operation of law or otherwise) other than by will or by the
laws of descent and distribution to the estate of the Grantee upon the Grantee's
death, provided that the deceased Grantee's beneficiary or the representative of
the Grantee's estate shall acknowledge and agree in writing, in a form
reasonably acceptable to Holding, to be bound by the provisions of this
Agreement and the Plan as if such beneficiary or the estate were the Grantee.
(c) Repurchase of Options on Termination of Employment.
(i) Termination of Employment. If the Grantee's Active
Employment is terminated for any reason, Holding shall have an option
to purchase all or any of the Options that have become vested and
exercisable on or prior to the effective date of such termination of
Active Employment (such vested and exercisable Options, "Covered
Options"), and shall have 30 days from the effective date of such
termination (the "First Purchase Period") during which to give notice
in writing to the Grantee of its election to exercise or not to
exercise such right to purchase the Covered Options provided that such
30-day period may be extended by mutual agreement between the Grantee
and Holding. Holding hereby undertakes to use reasonable efforts to act
as promptly as practicable following such termination to make such
election. If Holding (i) fails to give notice that it intends to
exercise its right to purchase the Options within the First Purchase
Period, or (ii) chooses to repurchase none or only a portion of the
Options, by giving such notice, the C&D Fund shall have the right to
purchase all or any of the Options not purchased by Holding, and shall
have until the expiration of the earlier of (x) 30 days following the
end of the First Purchase Period, or (y) 30 days from the date of
receipt by the C&D Fund of written notice that Holding does not intend
to exercise its right with respect to all of the Options (such 30-day
period being
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hereinafter referred to as the "Second Purchase Period"), to give
notice in writing to the Grantee of the C&D Fund's exercise of its
right to purchase all or any of such Options. If the rights to purchase
all of the Options of Holding and the C&D Fund granted in this
subsection are not fully exercised as provided herein, the Grantee
shall be entitled to retain any Options not so purchased, subject to
all of the provisions of this Agreement, including Section 3(b).
(ii) Purchase Price, etc. All purchases pursuant to this
Section 4(c) by Holding or the C&D Fund shall be for a purchase price
determined in accordance with, and shall take place at the time and in
the manner prescribed by, Sections 4(g), (h) and (i).
(d) Certain Definitions. As used in this Agreement the
following terms shall have the following meanings:
(i) "Active Employment" shall mean the Grantee's active
employment with the Company or any Subsidiary.
(ii) "C&D Fund" shall mean The Xxxxxxx & Dubilier Private
Equity Fund IV Limited Partnership, a Connecticut limited partnership,
together with any successor investment vehicle managed by Xxxxxxx,
Dubilier & Rice, Inc.
(iii) "Cause" shall mean (A) the willful failure by the
Grantee to perform substantially his duties as an employee of the
Company or any Subsidiary (other than any such failure due to physical
or mental illness) after a demand for substantial performance is
delivered to the Grantee by the executive to whom the Grantee reports
or by the Board, which notice identifies the manner in which such
executive or the Board, as the case may be, believes that the Grantee
has not substantially performed his duties, (B) the Grantee's engaging
in willful and serious misconduct that is injurious to the Company or
any Subsidiary, (C) the Grantee's having been convicted of, or entered
a plea of guilty or nolo contendere to, a crime that constitutes a
felony, (D) the willful and material breach by the Grantee of any
written covenant or agreement with the Company or any Subsidiary not to
disclose any information pertaining to the Company or any Subsidiary or
not to compete or interfere with the Company or any Subsidiary or (E)
the breach by the Grantee of his obligations pursuant to the
"take-along" provisions set forth in any Management Stock Subscription
Agreement to which he is or becomes a party.
(iv) "Company" shall mean Remington Arms Company, Inc., a
Delaware corporation formerly named RACI Acquisition Corporation, and
any successor thereto.
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(v) "Permanent Disability" shall mean a physical or mental
disability or infirmity that prevents the performance of the Grantee's
employment-related duties lasting (or likely to last, based on
competent medical evidence presented to the Board) for a continuous
period of six months or longer. The Board's reasoned and good faith
judgment of Permanent Disability shall be final, binding and conclusive
on all parties hereto and shall be based on such competent medical
evidence as shall be presented to it by the Grantee or by any physician
or group of physicians or other competent medical expert employed by
the Grantee or Holding to advise the Board.
(vi) "Retirement" shall mean the Grantee's retirement from
Active Employment at age 65 or later.
(vii) "Subsidiary" shall mean any corporation, a majority of
whose outstanding voting securities is owned, directly or indirectly,
by Holding.
(e) Notice of Termination. Holding shall give written notice
of any termination of the Grantee's Active Employment to the C&D Fund, except
that if such termination (if other than as a result of death) is by the Grantee,
the Grantee shall give written notice of such termination to Holding and Holding
shall give written notice of such termination to the C&D Fund.
(f) Public Offering. In the event that an under-written public
offering in the United States of the Common Stock led by one or more
underwriters at least one of which is an underwriter of nationally recognized
standing (a "Public Offering") has been consummated, none of Holding, the C&D
Fund or the Grantee shall have any rights to purchase or sell the Covered
Options, as the case may be, pursuant to this Section 4, and this Section 4
shall not apply to a sale as part of a Public Offering.
(g) Purchase Price. Subject to Section 9(c), the purchase
price to be paid to the Grantee (or, in the event of the Grantee's death, the
Grantee's estate) for any Covered Options to be purchased by Holding or the C&D
Fund pursuant to this Section 4(c) (the "Purchase Price") shall be equal to the
excess of (A) the fair market value (the "Fair Market Value") of the Shares
subject to the Covered Options, in each case, as of the effective date of the
termination of Active Employment that gives rise to the right of Holding and the
C&D Fund to repurchase (the "Determination Date") and (B) the aggregate exercise
price of the Covered Options. Whenever determination of the Fair Market Value of
such Shares is required by this Agreement, such Fair Market Value shall be such
amount as is determined in good faith by the Board. In making a determination of
Fair Market Value, the Board shall give due consideration to such factors as it
deems appropriate, including, without limitation, the earnings and certain other
financial and
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operating information of Holding and the Subsidiaries in recent periods, the
potential value of Holding as a whole, the future prospects of Holding and the
Subsidiaries and the industries in which they compete, the history and
management of Holding and the Subsidiaries, the general condition of the
securities markets, the fair market value of securities of companies engaged in
businesses similar to those of Holding and the Subsidiaries and the Applicable
Share Valuation (as defined below). The determination of Fair Market Value will
not give effect to any restrictions on transfer of the Shares or the fact that
such Shares would represent a minority interest in Holding. For purposes of this
Agreement, the term "Applicable Share Valuation" shall mean the annual valuation
of the Common Stock performed as of the last day of the last fiscal year of
Holding ending prior to the Determination Date by an independent valuation firm
chosen by the Board, except that, in the case of a Determination Date occurring
during the period beginning on September 1 of any fiscal year of Holding and
ending on December 31 of that fiscal year beginning with the period beginning on
September 1, 1999 and ending on December 31, 1999, the term "Applicable Share
Valuation" shall mean the annual valuation of the Common Stock performed as of
the last day of such fiscal year by an independent valuation firm chosen by the
Board. Such annual valuations shall be performed as promptly as practicable
following the end of each fiscal year of Holding, beginning with the 1999 fiscal
year of Holding. The Fair Market Value as determined in good faith by the Board
and in the absence of fraud shall be binding and conclusive upon all parties
hereto and the C&D Fund. If Holding subdivides (by any stock split, stock
dividend or otherwise) the Common Stock into a greater number of shares, or
combines (by reverse stock split or otherwise) the Common Stock into a smaller
number of shares after the Board shall have determined the Purchase Price for
the Covered Options (without taking into consideration such subdivision or
combination) and prior to the consummation of the purchase, the Purchase Price
shall be appropriately adjusted to reflect such subdivision or combination and
the Board's determination as to any such judgment in good faith shall be binding
and conclusive on all parties hereto and the C&D Fund.
(h) Payment. Subject to Section 9, the completion of a
purchase pursuant to this Section 4 shall take place at the principal office of
Holding on the tenth business day following the later of (i) the receipt by the
Grantee (or the Grantee's estate) of the C&D Fund's or Holding's notice of its
exercise of the right to purchase the Covered Options pursuant to Section 4(c)
and (ii) the receipt by Holding of the independent valuation of the Common Stock
referred to in Section 4(g). The Purchase Price shall be paid by delivery to the
Grantee (or the Grantee's estate) of a certified or bank check for the Purchase
Price payable to the order of the Grantee (or the Grantee's estate), against
delivery of such instruments as Holding may reasonably request signed by the
Grantee (or the Grantee's estate), free and clear of all security interests,
liens, claims, encumbrances, charges, options, restrictions on transfer, proxies
and voting and other agreements of whatever nature.
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(i) Application of the Purchase Price to Certain Loans. The
Grantee agrees that Holding and the C&D Fund shall be entitled to apply any
amounts to be paid by Holding or the C&D Fund, as the case may be, to repurchase
the Covered Options pursuant to this Section 4 to discharge any indebtedness of
the Grantee to Holding or any Subsidiary, or indebtedness that is guaranteed by
Holding or any such Subsidiary, including, but not limited to, any indebtedness
of the Grantee incurred to purchase any shares of Common Stock.
(j) Withholding. Whenever Shares are to be issued pursuant to
the Options, Holding may require the recipient of the Shares to remit to Holding
an amount sufficient to satisfy any applicable U.S. federal, state and local and
non-U.S. tax withholding requirements. In the event any cash is paid to the
Grantee or the Grantee's estate or beneficiary pursuant to this Section 4,
Holding shall have the right to withhold (or, if applicable, to direct the C&D
Fund to remit to Holding) an amount from such payment sufficient to satisfy any
applicable U.S. federal, state and local and non-U.S. tax withholding
requirements.
5. Manner of Exercise. To the extent that any of the Options
shall have become and remain exercisable as provided in Section 2 and subject to
such reasonable administrative regulations as the Board may have adopted, the
Options may be exercised, in whole or in part, by notice to the Secretary of
Holding in writing given 15 business days prior to the date on which the Grantee
will so exercise the Options (the "Exercise Date"), specifying the number of
Shares with respect to which the Options are being exercised (the "Exercise
Shares") and the Exercise Date, provided that if shares of Common Stock are
traded on a U.S. national securities exchange or bid and ask prices for shares
of Common Stock are quoted over NASDAQ, notice may be given five business days
before the Exercise Date. On or before any Exercise Date occurring prior to a
Public Offering, Holding and the Grantee shall enter into a Management Stock
Subscription Agreement substantially in the form attached to the Plan as Exhibit
A-1 ("Management Stock Subscription Agreement"), or in such other form as may be
agreed upon by Holding and the Grantee, such Management Stock Subscription
Agreement to contain provisions corresponding to Section 4(c) hereof. In
addition, (a) on or before the Exercise Date, the Grantee shall deliver to
Holding full payment for the Exercise Shares in United States dollars in cash,
or cash equivalent satisfactory to Holding, and in an amount equal to the
product of the number of Exercise Shares and $200.00 (the "Exercise Price") and
(b) on the Exercise Date, subject to any bailment arrangement agreed to by
Holding and the Grantee, Holding shall deliver to the Grantee a certificate or
certificates representing the Exercise Shares, registered in the name of the
Grantee. If shares of Common Stock are traded on a U.S. national securities
exchange or bid and ask prices for shares of Common Stock are quoted over
NASDAQ, the Grantee may, in lieu of cash, tender shares of Common Stock that
have been owned by the Grantee for a minimum period of six months,
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having a market price on the Exercise Date equal to the Exercise Price or may
deliver a combination of cash and such shares of Common Stock having a market
price equal to the difference between the Exercise Price and the amount of such
cash as payment of the Exercise Price, subject to such rules and regulations as
may be adopted by the Board to provide for the compliance of such payment
procedure with applicable law, including Section 16(b) of the Exchange Act.
Holding may require the Grantee to furnish or execute such other documents as
Holding shall reasonably deem necessary (i) to evidence such exercise, (ii) to
determine whether registration is then required under the U.S. Securities Act of
1933, as amended (the "Securities Act"), and (iii) to comply with or satisfy the
requirements of the Securities Act, applicable state or non-U.S. securities laws
or any other law.
6. Grantee's Representations, Warranties and Covenants.
(a) Investment Intention. The Grantee represents and warrants
that the Options have been, and covenants that any Exercise Shares will be,
acquired by the Grantee solely for the Grantee's own account for investment and
not with a view to or for sale in connection with any distribution thereof. The
Grantee agrees that the Grantee will not, directly or indirectly, offer,
transfer, sell, pledge, hypothecate or otherwise dispose of all or any of the
Options or any of the Exercise Shares (or solicit any offers to buy, purchase or
otherwise acquire or take a pledge of all or any of the Options or any of the
Exercise Shares), except in compliance with the Securities Act and the rules and
regulations of the Securities and Exchange Commission (the "Commission")
thereunder, and in compliance with applicable state and foreign securities or
"blue sky" laws. The Grantee further understands, acknowledges and agrees that
none of the Exercise Shares may be transferred, sold, pledged, hypothecated or
otherwise disposed of unless the provisions of any related Management Stock
Subscription Agreement shall have been complied with or have expired.
(b) Legend. The Grantee acknowledges that any certificate
representing the Exercise Shares shall bear an appropriate legend, which will
include, without limitation, the following language in the case of any such
certificates issued prior to a Public Offering:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
PROVISIONS OF A MANAGEMENT STOCK SUBSCRIPTION AGREEMENT, DATED
AS OF ___________, ____, AND NEITHER THIS CERTIFICATE NOR THE
SHARES REPRESENTED BY IT ARE ASSIGNABLE OR OTHERWISE
TRANSFERABLE EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF SUCH
MANAGEMENT STOCK
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SUBSCRIPTION AGREEMENT, AS THE SAME MAY BE AMENDED FROM TIME
TO TIME, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE
ISSUER. THE SHARES REPRESENTED BY THIS CERTIFICATE ARE BOUND
BY THE OBLIGATIONS SET FORTH IN AND MAY BE ENTITLED TO SOME OF
THE BENEFITS OF A REGISTRATION AND PARTICIPATION AGREEMENT,
DATED AS OF NOVEMBER 30, 1993, AMONG THE ISSUER AND CERTAIN
STOCKHOLDERS OF THE ISSUER A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE ISSUER."
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED
UNDER ANY STATE OR FOREIGN SECURITIES LAWS AND MAY NOT BE
TRANSFERRED, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED
OF UNLESS (i) (A) SUCH DISPOSITION IS PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, (B) THE HOLDER HEREOF SHALL HAVE DELIVERED TO THE
ISSUER AN OPINION OF COUNSEL, WHICH OPINION AND COUNSEL SHALL
BE REASONABLY SATISFACTORY TO THE ISSUER, TO THE EFFECT THAT
SUCH DISPOSITION IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF
SUCH ACT OR (C) A NO-ACTION LETTER FROM THE SECURITIES AND
EXCHANGE COMMISSION, REASONABLY SATISFACTORY TO COUNSEL FOR
HOLDING, SHALL HAVE BEEN OBTAINED WITH RESPECT TO SUCH
DISPOSITION AND (ii) SUCH DISPOSITION IS PURSUANT TO
REGISTRATION UNDER ANY APPLICABLE STATE OR FOREIGN SECURITIES
LAWS OR AN EXEMPTION THEREFROM.
(c) Securities Law Matters. The Grantee acknowledges receipt
of advice from Holding that (i) the Exercise Shares have not been registered
under the Securities Act based on an exemption provided under Rule 701
promulgated under the Securities Act or qualified under any state or foreign
securities or "blue sky" laws, (ii) it is not anticipated that there will be any
public market for the Exercise Shares, (iii) the Exercise Shares must be held
indefinitely and the Grantee must continue to bear the
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economic risk of the investment in the Exercise Shares unless the Exercise
Shares are subsequently registered under the Securities Act and such state laws
or an exemption from registration is available, (iv) Rule 144 promulgated under
the Securities Act ("Rule 144") is not presently available with respect to the
sales of the Exercise Shares and Holding has made no covenant to make Rule 144
available, (v) when and if the Exercise Shares may be disposed of without
registration in reliance upon Rule 144, such disposition can be made only in
accordance with the terms and conditions of such Rule, (vi) Holding does not
plan to file reports with the Commission or make public information concerning
Holding available unless required to do so by law or by the terms of its
Financing Agreements (as hereinafter defined), (vii) if the exemption afforded
by Rule 144 is not available, sales of the Exercise Shares may be difficult to
effect because of the absence of public information concerning Holding, (viii) a
restrictive legend in the form heretofore set forth shall be placed on the
certificates representing the Exercise Shares and (ix) a notation shall be made
in the appropriate records of Holding indicating that the Exercise Shares are
subject to restrictions on transfer set forth in this Agreement and, if Holding
should in the future engage the services of a stock transfer agent, appropriate
stop-transfer restrictions will be issued to such transfer agent with respect to
the Exercise Shares.
(d) Compliance with Rule 144. If any of the Exercise Shares
are to be disposed of in accordance with Rule 144 under the Securities Act, the
Grantee shall transmit to Holding an executed copy of Form 144 (if required by
Rule 144) no later than the time such form is required to be transmitted to the
Commission for filing and such other documentation as Holding may reasonably
require to assure compliance with Rule 144 in connection with such disposition.
(e) Ability to Bear Risk. The Grantee covenants that the
Grantee will not exercise all or any of the Options unless (i) the financial
situation of the Grantee is such that the Grantee can afford to bear the
economic risk of Holding the Exercise Shares for an indefinite period and (ii)
the Grantee can afford to suffer the complete loss of the Grantee's investment
in the Exercise Shares.
(f) Access to Information. The Grantee represents and warrants
that the Grantee has received the Confidential Offering Memorandum dated May 14,
1999, as supplemented by the supplement to offering memorandum dated June 8,
1999 (as so supplemented , the "Offering Memorandum") and has carefully reviewed
the Offering Memorandum (together with the Annexes thereto) and the other
materials furnished to the Grantee in connection with the transaction
contemplated hereby.
(g) Registration; Restrictions on Sale upon Public Offering.
In respect of any Shares purchased upon exercise of all or any of the Options,
the Grantee shall be entitled to the rights and subject to the obligations
created under the Registration and
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Participation Agreement, dated as of November 30, 1993 as the same may be
amended, modified or supplemented from time to time (the "Registration and
Participation Agreement"), among Holding and certain stockholders of Holding, to
the extent set forth therein. The Grantee agrees that, in the event that Holding
files a registration statement under the Securities Act with respect to a Public
Offering of any shares of its capital stock, the Grantee will not effect any
public sale or distribution of any shares of the Common Stock (other than as
part of such Public Offering) during the 20 days prior to and the 180 days after
the effective date of such registration statement.
(h) Section 83(b) Election. The Grantee agrees that, within 20
days of any Exercise Date that occurs prior to a Public Offering, the Grantee
shall give notice to Holding as to whether or not the Grantee has made an
election pursuant to Section 83(b) of the Internal Revenue Code of 1986, as
amended, with respect to the Exercise Shares purchased on such date, and
acknowledges that the Grantee will be solely responsible for any and all tax
liabilities payable by the Grantee in connection with the Grantee's exercise of
any Options or receipt of the Exercise Shares or attributable to the Grantee's
making or failing to make such an election.
7. Representations and Warranties of Holding. Holding
represents and warrants to the Grantee that (a) Holding has been duly
incorporated and is an existing corporation in good standing under the laws of
the State of Delaware, (b) this Agreement has been duly authorized, executed and
delivered by Holding and constitutes a valid and legally binding obligation of
Holding enforceable against Holding in accordance with its terms and (c) the
Exercise Shares, when issued, delivered and paid for, upon exercise of the
Options in accordance with the terms hereof and the Management Stock
Subscription Agreement, will be duly authorized, validly issued, fully paid and
nonassessable, and free and clear of any liens or encumbrances other than those
created pursuant to this Agreement, the Management Stock Subscription Agreement
or otherwise in connection with the transactions contemplated hereby.
8. Change in Control
(a) Accelerated Vesting and Payment. Unless the Board shall
otherwise determine in the manner set forth in Section 8(b), in the event of a
Change in Control, the Options shall be canceled in exchange for a payment in
cash of an amount equal to the product of (i) the excess, if any, of the Change
in Control Price over the Option Price multiplied by (ii) the number of Shares
then subject to the Options.
(b) Alternative Options. Notwithstanding Section 8(a), no
cancellation, acceleration of exercisability, vesting or cash settlement or
other payment shall occur with respect to the Options if the Board reasonably
determines in good faith,
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prior to the occurrence of a Change in Control, that the Options shall be
honored or assumed, or new rights substituted therefor (such honored, assumed or
substituted Options being hereinafter referred to as an "Alternative Options")
by the New Employer, provided that any such Alternative Options must:
(i) provide the Grantee with rights and entitlements
substantially equivalent to or better than the rights, terms and
conditions applicable under the Options, including, but not limited to,
an identical or better exercise and vesting schedule, identical or
better timing and methods of payment and, if the Alternative Options or
the securities underlying them are not publicly traded, identical or
better rights to require Holding or the New Employer to repurchase the
Alternative Options;
(ii) have substantially equivalent economic value to the
Options (determined at the time of the Change in Control); and
(iii) have terms and conditions which provide that in the
event that the Grantee suffers an Involuntary Termination within two
years following a Change in Control:
(A) any conditions on the Grantee's rights under, or
any restrictions on transfer or exercisability applicable to,
each such Alternative Options shall be waived or shall lapse,
as the case may be; or
(B) the Grantee shall have the right to surrender
such Alternative Options within 30 days following such
termination in exchange for a payment in cash equal to the
excess of the Fair Market Value of the Common Stock subject to
the Alternative Options over the price, if any, that the
Grantee would be required to pay to exercise such Alternative
Options.
(c) Certain Definitions. As used in this Agreement the
following terms shall have the following meanings:
(i) "Change in Control" means the first to occur of the
following events after the date hereof:
(A) the acquisition by any person, entity or "group"
(as defined in Section 13(d) of the Securities Exchange Act of
1934, as amended), other than Holding, any Subsidiary, any
employee benefit plan of Holding
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or any Subsidiary, or the C&D Fund, of 50% or more of the
combined voting power of Holding's then outstanding voting
securities;
(B) the merger or consolidation of Holding as a
result of which persons who were stockholders of Holding, as
the case may be, immediately prior to such merger or
consolidation, do not, immediately thereafter, own, directly
or indirectly, more than 50% of the combined voting power
entitled to vote generally in the election of directors of the
merged or consolidated company;
(C) the liquidation or dissolution of Holding or the
Company, other that the liquidation of Holding or the Company
into the other; or
(D) the sale, transfer or other disposition of all or
substantially all of the assets of Holding or the Company to
one or more persons or entities that are not, immediately
prior to such sale, transfer or other disposition, affiliates
of the Company or the C&D Fund.
(ii) "Change in Control Price" means the price per share of
Common Stock paid in conjunction with any transaction resulting in a
Change in Control (as determined in good faith by the Board if any part
of the offered price is payable other than in cash).
(iii) "Involuntary Termination" means a termination by the New
Employer for any reason.
(iv) "New Employer" means the Grantee's employer, or the
parent or a subsidiary of such employer, immediately following a Change
in Control.
9. Certain Restrictions on Repurchases.
(a) Financing Agreements, etc. Notwithstanding any other
provision of this Agreement, Holding shall not be permitted to repurchase any
Covered Options from the Grantee if (i) such repurchase would result in a
violation of the terms or provisions of, or result in a default or an event of
default under (A) the Credit Agreement, dated as of November 30, 1993 (the
"Credit Agreement"), among Holding, The Chase Manhattan Bank (f/k/a Chemical
Bank) ("Chase"), Union Bank of Switzerland, New York Branch, as co-agents, and
certain other lenders, and Chase, as administrative agent thereunder, (B) the
Guarantee, dated as of November 30, 1993 (the "Guarantee"), made by Holding, as
guarantor, in favor of Chase as administrative agent for several banks and other
financial institutions named thereunder, (C) the Indenture, dated as of November
30,
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1993, (the "Indenture") among Holding, as guarantor, and First Trust National
Association, as Trustee, or (D) any other financing or security agreement or
document entered into in connection with the acquisition by Holding of
substantially all the assets of Sporting Goods Properties, Inc. ("Sporting
Goods") and certain related assets of Sporting Goods' parent E.I. du Pont de
Nemours and Company ("DuPont"), from Sporting Goods and DuPont, on December 1,
1993 (the "Acquisition"), or the financing of the Acquisition or in connection
with the operations of Holding or its subsidiaries from time to time (the Credit
Agreement, the Guarantee, any Indenture, and such other agreements and
documents, as each may be amended, modified or supplemented from time to time,
are hereinafter referred to as the "Financing Agreements"), in each case as the
same may be amended, modified or supplemented from time to time, (ii) such
repurchase would violate any of the terms or provisions of the Certificate of
Incorporation of Holding, or (iii) Holding has no funds legally available
therefor under the General Corporation Law of the State of Delaware.
(b) Delay of Repurchase. In the event that a repurchase by
Holding otherwise permitted under Section 4(c) is prevented solely by the terms
of Section 9(a), (i) such repurchase will be postponed and will take place
without the application of further conditions or impediments (other than as set
forth in Section 4 hereof or in this Section 9) at the first opportunity
thereafter when Holding has funds legally available therefor and when such
repurchase will not result in any default, event of default or violation under
any of the Financing Agreements or in a violation of any term or provision of
the Certificate of Incorporation of Holding and (ii) Holding's obligation to
effect such repurchase shall rank against other similar repurchase obligations
of Holding with respect to shares of Common Stock or options in respect thereof
according to priority in time of the effective date of the event giving rise to
such obligation of Holding to repurchase; provided that any such repurchase
obligations as to which a common date determines priority shall be of equal
priority and shall share pro rata in any repurchase payments made pursuant to
clause (i) above and provided, further, that any obligation to repurchase shares
of Common Stock pursuant to the election of the holder of such shares shall have
priority over any other repurchase obligation.
(c) Purchase Price Adjustment. In the event that a repurchase
of the Covered Options from the Grantee is delayed pursuant to this Section 9,
the purchase price for such Covered Options when the repurchase of such Covered
Options eventually takes place as contemplated by Section 9(b) shall be the sum
of (a) the Purchase Price of such Covered Options determined in accordance with
Section 4(g) at the time that the repurchase of such Covered Options would have
occurred but for the operation of this Section 9, plus (b) an amount equal to
interest on such Purchase Price for the period from the date on which the
completion of the repurchase would have taken place but for the operation of
this Section 9 to the date on which such repurchase actually takes place (the
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"Delay Period") at a rate equal to the weighted average cost of Holding's bank
indebtedness obligations outstanding during the Delay Period.
10. No Rights as Stockholder. The Grantee shall have no voting
or other rights as a stockholder of Holding with respect to any Shares covered
by the Options until the exercise of the Options and the issuance of a
certificate or certificates to the Grantee for such Shares. No adjustment shall
be made for dividends or other rights for which the record date is prior to the
issuance of such certificate or certificates.
11. Capital Adjustments. The number and price of the Shares
covered by the Options shall be proportionately adjusted to reflect any stock
dividend, stock split or share combination of the Common Stock or any
recapitalization of Holding. Subject to any required action by the stockholders
of Holding and Section 8 hereof, in any merger, consolidation, reorganization,
exchange of shares, liquidation or dissolution, the Options shall pertain to the
securities and other property, if any, that a holder of the number of shares of
Common Stock covered by the Options would have been entitled to receive in
connection with such event.
12. Miscellaneous.
(a) Notices. All notices and other communications required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been given if delivered personally or sent by certified or
express mail, return receipt requested, postage prepaid, or by any recognized
international equivalent of such delivery, to Holding, the C&D Fund or the
Grantee, as the case may be, at the following addresses or to such other address
as Holding, the C&D Fund or the Grantee, as the case may be, shall specify by
notice to the others:
(i) if to Holding, to it at:
RACI Holding, Inc.
c/o Remington Arms Company, Inc.
000 Xxxxxxxxx Xxxxx
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Chief Financial Officer
(ii) if to the Grantee, to the Grantee at the address set
forth on the signature page hereof.
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(iii) if to the C&D Fund, to:
The Xxxxxxx & Dubilier Private Equity
Fund IV Limited Partnership
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxxx & Dubilier Associates
IV Limited Partnership,
Xxxxxx X. Xxxx, III
All such notices and communications shall be deemed to have been received on the
date of delivery or on the third business day after the mailing thereof. Copies
of any notice or other communication given under this Agreement shall also be
given to:
Xxxxxxx, Dubilier & Rice, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxx, III
and
Debevoise & Xxxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxxx, Esq.
The C&D Fund also shall be given a copy of any notice or other communication
between the Grantee and Holding under this Agreement at its address as set forth
above.
(b) Binding Effect; Benefits. This Agreement shall be binding
upon and inure to the benefit of the parties to this Agreement and their
respective successors and assigns. Except as provided in Section 4, nothing in
this Agreement, express or implied, is intended or shall be construed to give
any person other than the parties to this Agreement or their respective
successors or assigns any legal or equitable right, remedy or claim under or in
respect of any agreement or any provision contained herein.
(c) Waiver; Amendment.
(i) Waiver. Any party hereto or beneficiary hereof may by
written notice to the other parties (A) extend the time for the
performance of any of the obligations or other actions of the other
parties under this Agreement, (B) waive
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compliance with any of the conditions or covenants of the other parties
contained in this Agreement and (C) waive or modify performance of any
of the obligations of the other parties under this Agreement, provided
that any waiver of the provisions of Section 4 or Section 6(f) must be
consented to in writing by the C&D Fund. Except as provided in the
preceding sentence, no action taken pursuant to this Agreement,
including, without limitation, any investigation by or on behalf of any
party or beneficiary, shall be deemed to constitute a waiver by the
party or beneficiary taking such action of compliance with any
representations, warranties, covenants or agreements contained herein.
The waiver by any party hereto or beneficiary hereof of a breach of any
provision of this Agreement shall not operate or be construed as a
waiver of any preceding or succeeding breach and no failure by a party
or beneficiary to exercise any right or privilege hereunder shall be
deemed a waiver of such party's or beneficiary's rights or privileges
hereunder or shall be deemed a waiver of such party's or beneficiary's
rights to exercise the same at any subsequent time or times hereunder.
(ii) Amendment. This Agreement may not be amended, modified or
supplemented orally, but only by a written instrument executed by the
Grantee and Holding, and (in the case of any amendment modification or
supplement that adversely affects the rights of the C&D Fund hereunder)
consented to by the C&D Fund in writing. The parties hereto acknowledge
that Holding's consent to an amendment or modification of this
Agreement may be subject to the terms and provisions of the Financing
Agreements.
(d) Assignability. Neither this Agreement nor any right,
remedy, obligation or liability arising hereunder or by reason hereof shall be
assignable by Holding or the Grantee without the prior written consent of the
other parties and the C&D Fund. The C&D Fund may assign from time to time all or
any portion of its rights under Section 4 to one or more persons or other
entities designated by it.
(e) Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE.
(f) Section and Other Headings, etc. The section and other
headings contained in this Agreement are for reference purposes only and shall
not affect the meaning or interpretation of this Agreement.
(g) Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original and all of
which together shall constitute one and the same instrument.
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(h) Delegation by the Board. All of the powers, duties and
responsibilities of the Board specified in this Agreement may, to the full
extent permitted by applicable law, be exercised and performed by any duly
constituted committee thereof to the extent authorized by the Board to exercise
and perform such powers, duties and responsibilities.
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IN WITNESS WHEREOF, Holding and the Grantee have executed this
Agreement as of the date first above written.
RACI HOLDING, INC.
By:
----------------------------------
Name:
Title:
THE GRANTEE:
By:
----------------------------------
Name:
Attorney-in-Fact
Address of the Grantee:
Total Number of Shares
of Common Stock for
the Purchase of Which
Service Options Have
Been Granted:
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