EXHIBIT 10.54
MANAGEMENT STOCK OPTION AGREEMENT
MANAGEMENT STOCK OPTION AGREEMENT, dated as of June 13, 2003, between
RACI Holding, Inc., a Delaware corporation ("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. 2003 Stock Option Plan (the "Plan") effective
as of June 13, 2003; 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 (a)
service options (the "Service Options") to purchase the number of Shares set
forth on the signature page hereof and designated as Service Options and (b)
performance options (the "Performance Options" and, together with the Service
Options, the "Options") to purchase the number of Shares set forth on the
signature page hereof and designated as Performance Options, in each case at the
option price per share set forth on the signature page hereof (as adjusted from
time to time pursuant to Section 10, 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. (a) Service Options. Except as otherwise
provided in this Agreement, one-half of the Service Options shall become vested
and exercisable on the fourth anniversary of the Grant Date and the remaining
half of the Service Options shall become vested and exerciseable on the fifth
anniversary of the Grant Date, subject to the continued employment of the
Grantee until the applicable vesting date.
(b) Performance Options. Except as otherwise provided in this
Agreement and subject to the continuous employment of the Grantee with Holding,
the Company, or any Subsidiary until the applicable vesting date, the
Performance Options shall become vested as follows:
(i) one-third of the total number of Performance Options
granted hereunder shall become vested on each of the first three
anniversaries of the Grant Date, provided in each such case that actual
EBITDA achieved by Holding and its consolidated Subsidiaries during the
immediately preceding Fiscal Year equals or exceeds the Annual EBITDA
Target for such Fiscal Year;
(ii) if less than one-third of the total number of
Performance Options granted hereunder shall have become vested on any of
the first three anniversaries of the Grant Date in accordance with the
preceding clause (i), such portion that has not become so vested shall
become vested on the second or third anniversary, as applicable, of the
Grant Date; provided in each such case that the actual aggregate EBITDA
achieved by Holding, the Company and the Subsidiaries during the period
from January 1, 2003 through the end of the Fiscal Year immediately
preceding such anniversary equals or exceeds the Cumulative EBITDA
Target for such period; and
(iii) any Performance Options that do not become vested in
accordance with the preceding clauses (i) or (ii) shall become vested on
the ninth anniversary of the Grant Date.
The Board shall determine in good faith whether and the extent to which Holding,
the Company and the Subsidiaries have achieved the Annual EBITDA Targets and the
determination of the Board shall be final, binding and conclusive.
(c) Notwithstanding the foregoing, 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.
3. Termination of Options.
(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. If the Grantee's Active Employment is terminated by reason of
the Grantee's death, Permanent Disability
2
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.
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 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.
(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 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 the Credit Agreement. 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. The Options may be exercised
only by the Grantee or by the Grantee's estate, 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.
3
(c) 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) "Annual EBITDA Target" shall mean, with respect to each
of the 2003, 2004 and 2005 Fiscal Years, actual aggregated EBITDA
achieved by Holding, the Company and the Subsidiaries of $60 million;
provided, however, that in the event Holding, the Company or any
Subsidiary consummates a significant acquisition, disposition or other
corporate transaction or series of transactions that, in the judgment of
the Board, would reasonably be expected to impact the consolidated
earnings of Holding, the Company and the Subsidiaries, the Annual EBITDA
Target for the relevant Fiscal Years may be appropriately adjusted by
the Board to reflect such transaction or series of transactions.
(iii) "BRS" shall mean Bruckmann, Rosser, Sherrill & Co. II,
L.P. together with any successor or other investment vehicle managed by
Bruckmann, Rosser, Sherrill & Co., Inc.
(iv) "C&D Fund" shall mean The Clayton & Dubilier Private
Equity Fund IV Limited Partnership, a Connecticut limited partnership,
together with any successor or other investment vehicle managed by
Clayton, Dubilier & Rice, Inc.
(v) "Cause" shall mean (A) the willful failure by the
Grantee to perform substantially his duties as an employee of Holding,
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 Holding, 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 Holding, the Company or any
Subsidiary not to disclose any information pertaining to Holding, the
Company or any Subsidiary or not to compete or interfere with Holding,
the Company or any Subsidiary or any code of conduct or ethics
maintained by Holding, 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.
(vi) "Credit Agreement" shall mean the Credit Agreement,
dated as of January 24, 2003, (the "Credit Agreement"), among the
Company, RA Factors,
4
Inc., Wachovia Bank, National Association, as administrative and
collateral agent, Fleet Capital Corporation, as syndication agent,
National City Commercial Finance, Inc., as documentation agent and the
other banks and financial institutions party thereto from time to time;
and the Indenture, dated as of January 24, 2003, (the "Indenture") among
the Company and RBC Holding, Inc., RA Brands, L.L.C. and RA Factors,
Inc., as guarantors, and U.S. Bank National Association, as Trustee, as
the same may be amended, modified or supplemented from time to time.
(vii) "Company" shall mean Remington Arms Company, Inc., a
Delaware corporation and any successor thereto.
(viii) "Cumulative EBITDA Target" shall mean, with respect to
the period from January 1, 2003 through the end of the 2004 Fiscal Year,
$120 million and, with respect to the period from January 1, 2003
through the end of the 2005 Fiscal Year, $180 million; provided,
however, that in the event Holding, the Company or any Subsidiary
consummates a significant acquisition, disposition or other corporate
transaction or series of transactions that, in the judgment of the
Board, would reasonably be expected to impact the consolidated earnings
of Holding, the Company and the Subsidiaries, the Cumulative EBITDA
Target for the relevant Fiscal Years may be appropriately adjusted by
the Board to reflect such transaction or series of transactions.
(ix) "EBITDA" shall have the meaning assigned to such term in
the Credit Agreement.
(x) "Fiscal Year" shall mean a fiscal year of Holding ending
on December 31.
(xi) "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.
(xii) "Retirement" shall mean the Grantee's retirement from
Active Employment at age 65 or later.
(xiii) "Subsidiary" shall mean any corporation, a majority of
whose outstanding voting securities is owned, directly or indirectly, by
Holding.
5
(d) 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.
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 as Exhibit B-1 to the
Plan ("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, and the
Exercise Shares shall be subject to the transfer restrictions, repurchase rights
and other provisions contained therein and in the Amended and Restated
Registration and Participation Agreement, dated as of February 12, 2003, among
Holding and each of the other persons party thereto (the "Registration and
Participation Agreement"). 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 the Option
Price (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, 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
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 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 AN AMENDED AND RESTATED
REGISTRATION AND PARTICIPATION AGREEMENT, DATED AS OF FEBRUARY
12, 2003, 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
7
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 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.
8
(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) 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 Participation Agreement 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.
(g) 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.
9
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, 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 and identical or
better timing and methods of payment;
(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:
10
(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 or any Subsidiary, or BRS 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 than a liquidation or dissolution of the Company
into Holding or Holding into the Company or for the purposes of
effecting a corporate restructuring or reorganization as a
result of which persons who were stockholders of Holding
immediately prior to such liquidation or dissolution continue to
own immediately therefore directly or indirectly, more than 50%
of the combined voting power entitled to vote generally in the
election of directors of the entity that owns, directly or
indirectly, substantially all of the assets of Holding or the
Company following such transaction; 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
Holding, the Company, BRS 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. 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
10. Capital Adjustments. The number and price of the Shares covered
by the Options shall be proportionately adjusted to reflect any dividend payable
in shares of capital stock, 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.
11. 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.
870 Remington Drive
Madison, North Carolina 27025
Attention: Chief Financial Officer
(ii) if to the Grantee, to the Grantee at the address set
forth on the signature page hereof.
(iii) if to BRS, to:
Bruckmann, Rosser, Sherill & Co. II, L.P.
c/o Bruckmann, Rosser, Sherrill & Co., Inc.
126 East 56th Street
New York, NY 10022
Attention: Stephen C. Sherrill
(iv) if to the C&D Fund, to:
The Clayton & Dubilier Private Equity
Fund IV Limited Partnership
270 Greenwich Avenue
Greenwich, Connecticut 06830
Attention: Clayton & Dubilier Associates
12
IV Limited Partnership,
Michael Babiarz
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:
Clayton, Dubilier & Rice, Inc.
375 Park Avenue
New York, New York 10152
Attention: Michael Babiarz
and
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention: Franci J. Blassberg, Esq.
BRS and 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 their
respective addresses 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 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
second sentence of Section 5 must be consented to in writing by BRS and
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
13
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 either or both of BRS
and/or the C&D Fund hereunder) consented to by BRS and/or the C&D Fund,
as applicable, 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, BRS and the C&D Fund.
(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.
(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.
14
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:
[Name]
----------------------------------------
Address of the Grantee:
[Address]
Total Number of Shares
Of Common Stock for
the Purchase of Which
Service Options
Have Been Granted: [Service_Options]
Total Number of Shares
of Common Stock for
the Purchase of Which
Performance Options
Have Been Granted: [Performance_Options]
Option Price: $[Price]
15