EXHIBIT 10.7
DCC SHARE OPTION AGREEMENT
THIS DCC SHARE OPTION AGREEMENT (the "Agreement") is made this 13/th/ day
of May, 1998 by and among THE DERBY CYCLE CORPORATION (dba Raleigh USA Bicycle
Company), a corporation organized and existing under the laws of Delaware,
having its principal office at 00000 00xx Xxxxxx Xxxxx, Xxxx, Xxxxxxxxxx 00000
(the "Company"), DERBY INTERNATIONAL CORPORATION S.A., a corporation (societe
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anonyme) organized and existing under the laws of the Grand Duchy of Luxembourg,
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having its registered office at 0 Xxxxxxxxx xx xx Xxxxx, X-0000 Xxxxxxxxxx,
Grand Duchy of Luxembourg ("Derby International"), DERBY FINANCE S.a.r.l., a
corporation (societe a responsibilite limitee) organized and existing under the
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laws of the Grand Duchy of Luxembourg, having its registered office at 00, xxx
xx xx Xxxxxxxx, X-0000 Xxxxxxxxxx, Grand Duchy of Luxembourg ("DFS"), DC CYCLE,
L.L.C., a limited liability company organized and existing under the laws of
Delaware, having its registered office at 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx,
Xxxxxxxx ("LLC"), PERSEUS CYCLE, L.L.C., a limited liability company organized
and existing under the laws of Delaware, having its principal office at Xxxxx
000, 0000 X Xxxxxx, X.X., Xxxxxxxxxx, X.X 00000 ("Perseus") and RALEIGH
INDUSTRIES OF CANADA LIMITED, a corporation organized and existing under the
laws of Canada, having its registered office at 0000 Xxxxxx Xxxx, Xxxxxxxx,
Xxxxxxx, X0X 0X0 Xxxxxx ("RIC").
WHEREAS, the Company, Derby International, DFS, LLC and Perseus are parties
to a certain Recapitalization Agreement dated as of March 11, 1998, as amended
(the "Recapitalization Agreement");
WHEREAS, DFS, LLC and Perseus hold or will hold all of the issued and
outstanding Class A Common Shares of the Company (the "Class A Common Shares")
and, in their capacity as shareholders of the Company, wish to agree to, and to
agree to cause the Company to perform its obligations under this Agreement;
WHEREAS, Derby International, holds or will hold all of the issued and
outstanding shares in the capital stock of DFS and, in its capacity as the sole
shareholder of DFS, Derby International wishes to agree to, and to agree to
cause DFS to perform its obligations under this Agreement;
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WHEREAS, pursuant to a reorganization of the capital structure of RIC (the
"Reorganization"), RIC has issued to Derby International fifteen thousand
(15,000) non-voting, cumulative, exchangeable and retractable preferred shares
(the "Exchangeable Shares") having attached thereto certain rights, privileges,
restrictions and conditions contained in the Articles of Continuance of the
Company, as amended by Articles of Amendment dated May 13, 1998, and as they may
otherwise be amended, varied or replaced from time to time (collectively, the
"Exchangeable Share Provisions");
WHEREAS, it is the intention of the parties that the Exchangeable Shares
shall have a fair market value at the Effective Time equal to the full fair
market value of RIC at the Effective Time, which fair market value was fully
reflected in the issued and outstanding Common Shares of RIC immediately before
the effective Time;
WHEREAS, in accordance with the Articles of Continuance of RIC, as amended,
and in order to implement the intention of the parties that, at the Effective
Time, the fair market value of the Exchangeable Shares is equal to the full fair
market value of RIC at the Effective Time, the Board of Directors of RIC have,
by resolution dated May 13, 1998, determined the Equivalent Number of ParentCo
Common Shares to be 15,000 Class B Common Shares (the "Class B Common Shares")
and 8,300 Class A Common Shares of the Company;
WHEREAS, in accordance with the Articles of Continuance of RIC, as amended,
and in particular in accordance with the Exchangeable Share Provisions, the
Board of Directors of RIC may, from time to time, adjust the Equivalent Number
of ParentCo Common Shares in order to insure that the fair market value of the
Exchangeable Shares at the Effective Time is equal to the full fair market value
of RIC at the Effective Time;
WHEREAS, pursuant to the Exchangeable Share Provisions, the holder of the
Exchangeable Shares may in certain circumstances receive the Equivalent Number
of ParentCo Common Shares as defined in the Exchangeable Share Provisions;
WHEREAS, pursuant to a Put and Call Option Agreement of even date between
the parties (the "Put and Call Option Agreement"), the holder of the
Exchangeable Shares may put and the Company may call the Exchangeable Shares.
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in certain circumstances, in exchange for the Equivalent Number of ParentCo
Common Shares (as defined in the Exchangeable Share Provisions);
WHEREAS, Derby International and the other parties hereto have agreed
pursuant to the Recapitalization Agreement on a value for the assets of Derby
International to be transferred to the Company (which value for this purpose
includes the fair market value of RIC) to be satisfied in part in cash, in part
by retention by DFS of Class A Common Shares of the Company and the purchase by
DFS of Class B Preferred Shares of the Company and in part by retention by Derby
International of the Exchangeable Shares;
WHEREAS, it is the intention of the parties that, at no time, shall
DFS and Derby International (and their respective Affiliates), hold or be deemed
to hold through exchange entitlements under the Exchangeable Shares from time
to time, by reason of rights or the exercise thereof under this Agreement, the
Put and Call Option Agreement, the Support Agreement of even date between the
parties hereto or otherwise, Class A Common Shares (in excess of an aggregate of
30,000 of such shares) and Class B Common Shares (in excess of an aggregate of
15,000 of such shares) of the Company, such holdings, for this purpose, to
include any Class A Common Shares or Class B Common Shares from time to time
held or to be held by DFS and the Equivalent Number of ParentCo Common Shares,
as determined by the Board of Directors of RIC, from time to time, in
accordance with the Exchangeable Share Provisions in respect of the
Exchangeable Shares held or to be held by Derby International; but shall not
include Class A Common Shares or Class B Common Shares of the Company purchased
by DFS, Derby International or their respective Affiliates or acquired by any of
them as Substitute Property (as defined in the Put and Call Option Agreement),
as a result of a Change or a Disposition (as such terms are defined in the Put
and Call Option Agreement), or as a result of dividends, distributions or other
payments on such shares; and
WHEREAS, pursuant to the Recapitalization Agreement, DFS will retain
21,700 Class A Common Shares in the Company at the Effective Time;
WHEREAS, in the event of an adjustment to the Equivalent Number of
ParentCo Common Shares, the parties have acknowledged and agreed that the value
of the other assets of Derby International transferred to the Company and of the
consideration received and retained by DFS and Derby International must be
increased or decreased, as the case may be, by a consequential and equal
offsetting
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adjustment so as to reflect the proper value of RIC and of the other assets
transferred;
WHEREAS, in furtherance of the intentions of the parties as described
above, the Company and DFS desire to agree to grant and receive the options
described in this Agreement and to take such other steps as may be required to
give effect thereto;
NOW, THEREFORE, in consideration of the mutual premises contained in
this Agreement and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Definitions. Capitalized terms not otherwise defined herein shall have
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the same meanings contained in the Exchangeable Share Provisions, the
Recapitalization Agreement, the Shareholders' Agreement (as defined in the
Recapitalization Agreement) and the Put and Call Agreement.
2. Calculations. For the purposes of calculating the Class A Entitlement
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and the Class B Entitlement hereunder, no regard should be had to the effect of
any stock splits, reverse stock splits, combinations, consolidations or
recapitalizations and the like effecting the Class A Common Shares or the Class
B Common Shares of the Company (the "Adjustment Events"). For purposes of
determining the rights and obligations of the Company and DFS hereunder, the
Class A Deficit, the Class A Excess and the Class B Deficit as described herein
shall then be deemed to be the number of Class A Common Shares or Class B Common
Shares of the Company or Substitute Property (as defined in the Put and Call
Option Agreement) as shall be obtained by applying the terms and conditions of
the Adjustment Event(s) to the number of such shares included in such excess or
deficit before the adjustment.
3. Notice of Adjustment to Equivalent Number of ParentCo Common Shares.
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If the Equivalent Number of ParentCo Common Shares is at any time after the
Effective Time adjusted by the Board of Directors of RIC otherwise than as a
result of the application of Section 10.1 of the Exchangeable Share Provisions,
RIC shall immediately give notice in writing to the Company and the holders of
the Exchangeable Shares specifying the adjusted Equivalent Number of ParentCo
Common Shares and detailing the number of Class A Common Shares (the initial
number of such Class A Common Shares and any adjusted number of such Class A
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Common Shares being herein referred to as the "Class A Entitlement") and Class B
Common Shares (the initial number of such Class B Common Shares and any adjusted
number of such Class B Common Shares being herein referred to as the "Class B
Entitlement") of the Company included in such adjusted Equivalent Number of
ParentCo Common Shares and providing the basis on which such adjustment has been
made.
4. Class A Common Stock Options.
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(a) On receipt of the notice from RIC described in Section 3 above,
and if the Class A Entitlement is less than eight thousand three hundred (8,300)
Class A Common Shares of the Company, then the parties agree to cause the
Company to issue to DFS, at one cent ($0.01) a share, such number of Class A
Common Shares of the Company as is equal to the number by which 8,300 Class A
Common Shares exceeds the Class A Entitlement (the "Class A Deficit").
(b) On receipt of the notice from RIC described in Section 3 above,
and if Class A Entitlement is greater than eight thousand three hundred (8,300)
Class A Common Shares of the Company, then the Company shall have the right to
require DFS to sell to the Company, for one cent ($0.01) a share, such number of
Class A Common Shares of the Company as is equal to the number by which the
Class A Entitlement exceeds 8,300 Class A Common Shares but is not more than
21,700 Class A Common Shares (the "Class A Excess").
5. Class B Common Stock Options.
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(a) On receipt of the notice from RIC described in Section 3 above and if the
Class B Entitlement is less than fifteen thousand (15,000) Class B Common Shares
of the Company, then the parties agree to cause the Company to issue to DPS, at
one cent ($0.01) a share, such number of Class B Common Shares of the Company as
is equal to the number by which 15,000 Class B Common Shares exceeds the Class B
Entitlement (the "Class B Deficit").
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6. Precondition.
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(a) to the Exchangeable Share Provisions shall not be operative in
determining the rights and obligations of the parties under this Agreement and
the Put and Call Option Agreement to the extent that DFS does not, at the time
the adjustment is made, own such number of Class A Common Shares of the Company
as will permit it to perform its obligations hereunder or otherwise compensate
the Company for the adjustment on a basis mutually agreed by the parties hereto
or to the extent that if DFS owns such number of Class A Common Shares, DFS
fails to transfer such shares under Section 4(b) hereof or, after payment by DFS
of the subscription price therefor, the Company fails to issue such number of
Class A Common Shares or Class B Common Shares as it is required to issue to DFS
under Section 4(a) or 5(a) hereof.
(b) For purposes of clarification, the parties acknowledge and agree
that DFS, Derby International and their respective Affiliates (the Derby
Affiliates") shall not, by virtue of the provisions of this Agreement, the
Support Agreement, the Put and Call Option Agreement or the Exchangeable Share
Provisions have greater rights in respect of ownership of and/or voting powers
of the Company than the Derby Affiliates (including for avoidance of any doubt
DFS and Derby International) in the aggregate would have had if the only
interest that they had in the Company and its Subsidiaries at the Effective Time
was 30,000 Class A Common Shares and 15,000 Class B Common Shares and not, for
the avoidance of any doubt any Exchangeable Shares.
7. Consents and Waivers.
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(a) The parties hereby consent to any new issue of shares as
described in sections 4(a) and 5(a) above and consent to and waive all
restrictions (including, without limitation, any anti-dilution, rights of first
offer and any other restrictions or adjustments) contained in the Shareholders'
Agreement.
(b) The parties hereby consent to the redemption of shares as
described in Section 4(b) above and waive all restrictions (including, without
limitation, any rights of first offer and any other restrictions or adjustments)
otherwise contained in the Shareholders' Agreement and the Certificate of
Incorporation of the Company.
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(c) The parties agree to cause the Company to take all actions which
may be necessary or desirable to effect the issue or redemption of such Class A
Common Shares and Class B Common Shares of the Company in accordance with the
terms and conditions contained in its Certificate of Incorporation, as amended
and restated from time to time.
(d) The parties further agree to cause the Company to take all
actions which may be necessary or desirable to enable the Company to effect the
issue or redemption of such Class A Common Shares and Class B Common Shares of
the Company in accordance with the terms and conditions contained in its
Financing Documents, as amended and restated from time to time.
8. Reserve. The Company shall, and LLC, Perseus and DFS shall cause the
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Company to, maintain sufficient Class A Common Shares and Class B Common Shares
necessary to allow the issue of additional such shares in accordance with
Sections 4(a) and 5(a) above.
9. Further Action. In case at any time any further action is necessary to
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carry out the purposes of this Agreement, each of the parties will take such
further action (including the execution and delivery of additional instruments
and documents) as any other party reasonably may request, all at the cost and
expense of the Company.
10. Amendments. This Agreement may not be waived, changed, modified or
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discharged orally, unless an agreement in writing is signed by all parties to
this agreement.
11. Assignment. Except as otherwise specifically provided herein, no party
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may assign any of its rights, interests or obligations hereunder without the
prior written consent of the other parties, which consent shall not be
unreasonably withheld; provided, however, that the Company may collaterally
assign its rights hereunder to any person providing financing to the Company.
12. Counterparts. This Agreement may be executed in any number of
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counterparts, all of which shall constitute one agreement, and each such
counterpart shall be deemed to have been made, executed and delivered on the
date set out at
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the head of this Agreement, without regard to the date when any of such
counterparts may actually have been made, executed or delivered.
13. Headings. The descriptive headings contained in this Agreement are for
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reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
14. Notices. Any consent, communication or notice required or permitted to be
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given under this Agreement shall be made in writing and shall be deemed to have
been duly and validly given: (i) in the case of notice sent by letter or cable,
upon receipt of same; and (ii) in the case of notice sent by telefax, upon
express acknowledgment (also by telefax) of receipt of transmission by the
receiving party, addressed, in each case, as follows;
(a) if to LLC and Perseus at the address indicated at the head of this
Agreement with copy to:
Xxxxxxxx & Xxxxx
000 00xx Xxxxxx X.X.
Xxxxxxxxxx X.X 00000
Attention: Xxxx X. Xxxxx, Esquire
Facsimile: 000-000-0000
(b) if to Derby International or DFS, to either or both at:
0 Xxxxxxxxx xx xx Xxxxx
X-0000 Xxxxxxxxxx
Grand Duchy of Luxembourg
Telefax: 352-451-23201
Attention: Chairman
with a copy to:
Xxxxxxxxx Xxxxx & Partners
0 Xxx Xxxxxx Xxxx
Xxxxxx XX0X 0XX
Telefax: 00-000-000-0000
Attention: Xxxxx X. Park.
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and a copy to:
Stikeman, Xxxxxxx
0000 Xxxx-Xxxxxxxx Xxxxxxxxx Xxxx
00xx Xxxxx
Xxxxxxxx, Xxxxxx X0X 0X0
Telefax: 000-000-0000
Attention: Xxxxxx X. Xxxxxxxxxx
(c) if to RIC or the Company, at their addresses set out at the head
of this Agreement
or at such other address and/or telefax number as either party may hereafter
furnish to the other by written notice, as herein provided.
15. No Waiver. The failure to enforce or to require the performance at any
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time of any of the binding provisions of this Agreement shall not be construed
to be a waiver of such provisions and shall not affect either the validity of
this Agreement or any part thereof or the right of either party to this
Agreement thereafter to enforce each and every provision in accordance with this
Agreement.
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16. Further Assistance. Each of the parties to this Agreement shall take
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all actions necessary to effect the actions contemplated in this Agreement,
including without limitation, preparing and filing of Articles of Amendment to
create the Exchangeable Shares, blue sky and other securities filings and
transfer forms, and to execute and deliver such further instruments and take
such other additional action as the other parties to the Agreement may
reasonably request to effect, consummate and confirm the transactions
contemplated in this Agreement.
17. Governing Law and Jurisdiction. All questions concerning the
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construction, validity and interpretation of this Agreement shall be governed by
and construed in accordance with the domestic laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of New York or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of New
York. Any legal action or proceeding with respect to any matter arising under or
in connection with this Agreement or the subject matter hereof may be brought in
the courts of the State of New York or of the United States of America for the
Southern District of New York, and, by execution and delivery of this Agreement,
each party hereto hereby accepts for themselves and in respect of their
property, generally and unconditionally, the jurisdiction of the aforesaid
courts.
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18. SEVERABILITY. If any provision of this Agreement is held to be
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invalid or unenforceable by any judgment of a tribunal of competent
jurisdiction, the remainder of the provisions of this Agreement shall not be
affected by such judgement and the understanding of the parties embodied in this
Agreement shall be carried out as nearly as possible according to their original
terms and intent.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date set out on the first page hereof.
DERBY INTERNATIONAL DERBY FINANCE S.a.r.l.
CORPORATION S.A.
By:________________ By:___________________
Title: Title:
THE DERBY CYCLE
DC CYCLE, L.L.C CORPORATION
By:________________ By:___________________
Title: Title:
RALEIGH INDUSTRIES OF
CANADA LIMITED PERSEUS CYCLE, L.L.C.
By:________________ By:___________________
Title: Title:
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18. SEVERABILITY. If any provision of this Agreement is held to be invalid
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or unenforceable by any judgment of a tribunal of competent jurisdiction the
remainder of the provisions of this Agreement shall not be affected by such
judgment, and the understanding of the parties embodied in this Agreement shall
be carried out as nearly as possible according to their original terms and
intent.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date set out on the first page hereof.
DERBY INTERNATIONAL DERBY FINANCIAL S.a.r.l
CORPORATION S.A.
By:/s/ Xxxx X. Finden-Crofts By:/s/ Xxxx X. Finden-Crofts
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Title: Title:
THE DERBY CYCLE
DC CYCLE, L.L.C. CORPORATION
By:/s/ Xxxx X. Finden-Crofts By:/s/ Xxxx X. Finden-Crofts
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Title: Title:
RALEIGH INDUSTRIES OF
CANADA LIMITED PERSEUS CYCLE, L.L.C.
By:/s/ Xxxx X. Finden-Crofts By:/s/ Xxxx X. Finden-Crofts
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Title: Title:
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18. Severability. If any provision of this Agreement is held to be invalid or
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unenforceable by any judgment of a tribunal of competent jurisdiction, the
remainder of the provisions of this Agreement shall not be affected by such
judgement, and the understanding of the parties embodied in this Agreement shall
be carried out as nearly as possible according to their original terms and
intent.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date set out on the first page hereof.
DERBY INTERNATIONAL DERBY FINANCE S.a.r.l.
CORPORATION S.A.
By:____________________________ By:____________________________
Title: Title:
THE DERBY CYCLE
DC CYCLE, L.L.C. CORPORATION
By: /s/ SIGNATURE ILLEGIBLE ^^ By:____________________________
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Title: Title:
RALEIGH INDUSTRIES OF PERSEUS CYCLE, L.L.C.
CANADA LIMITED
By:____________________________ By:____________________________
Title: Title:
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18. SEVERABILITY. If any provision of this Agreement is held to be invalid or
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unenforceable by any judgment of a tribunal of competent jurisdiction, the
remainder of the provisions of this Agreement shall not be affected by such
judgement, and the understanding of the parties embodied in this Agreement shall
be carried out as nearly as possible according to their original terms and
intent.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date set out on the first page hereof.
DERBY INTERNATIONAL DERBY FINANCE S.a.r.l.
CORPORATION S.A.
By:_______________________ By:_______________________
Title: Title:
THE DERBY CYCLE
DC CYCLE, L.L.C CORPORATION
By:/s/ [SIGNATURE ILLEGIBLE]^^ By:
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Title: _______________________
Title:
RALEIGH INDUSTRIES OF
CANADA LIMITED PERSEUS CYCLE, L.L.C.
By:_______________________ By:_______________________
Title: Title:
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18. Severability. If any provision of this Agreement is held to be invalid or
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unenforceable by any judgment of a tribunal of competent jurisdiction, the
remainder of the provisions of this Agreement shall not be affected by such
judgement, and the understanding of the parties embodied in this Agreement shall
be carried out as nearly as possible according to their original terms and
intent.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date set out on the first page hereof.
DERBY INTERNATIONAL DERBY FINANCE S.a.r.l.
CORPORATION S.A.
By:____________________________ By:____________________________
Title: Title:
THE DERBY CYCLE
DC CYCLE, L.L.C. CORPORATION
By:____________________________ By:____________________________
Title: Title:
RALEIGH INDUSTRIES OF PERSEUS CYCLE, L.L.C.
CANADA LIMITED
By:____________________________ By: /s/ SIGNATURE ILLEGIBLE ^^
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Title: Title:
