Document:

exv10w7w1

Exhibit 10.7.1

EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT, dated as of October 4, 2010, is entered into between Colt
Defense LLC, a Delaware limited liability company (“Colt”), and Gerald R. Dinkel (“Executive”).

     In consideration of the mutual covenants contained herein, Colt and Executive hereby agree as
follows:

     1. Employment. Colt shall employ Executive upon the terms and conditions set forth in
this Employment Agreement, for the period beginning on the date hereof and ending as provided in
Paragraph 5 (the “Employment Period”).

     2. Position, Duties and Location.

          (a) Position. During the Employment Period, Executive shall serve as Chief Executive
Officer of Colt and, in such capacity, shall report to Colt’s Governing Board or its designee,
subject to the terms and conditions of the Amended and Restated Limited Liability Company
Agreement of Colt Defense LLC, dated as of June 12, 2003, reflecting the amendments adopted as of
July 9, 2007, or any subsequently adopted Colt limited liability company agreement (the
“Limited Liability Company Agreement”). Executive shall be eligible for election to the
Governing Board as of the next Governing Board meeting following Executive’s employment, which
will take place no later than January 1, 2011.

          (b) Duties. During the Employment Period, Executive shall faithfully and diligently
devote all of his business time and attention (except for permitted vacation periods and periods of
illness or incapacity) to the business and affairs of Colt. Notwithstanding the foregoing,
Executive may, subject to the approval of the Governing Board or its designee: (i) engage in civic
and charitable activities for which Executive receives no compensation or other pecuniary
advantage, including serving on the board, a committee or similar body of a charitable or
community based organization; and (ii) serve as an outside director for another company for
compensation from that company; provided, that such activities do not interfere with the
fulfillment of his obligations hereunder. Executive shall perform his duties in compliance with
applicable law, the policies of Colt, the directions received from the Governing Board or its
designee, and this Employment Agreement.

          (c) Location. Colt’s headquarters currently are located in West Hartford, Connecticut.
Executive agrees to live in the greater Hartford area, and, other than for normal personal and
business travel, work at Colt’s headquarters in Hartford and in any other city in which the
headquarters may subsequently be located.

          (d) Temporary Living Expense and Relocation. Colt will provide Executive temporary
living expense allowance of $5,000 per month, until Executive relocates his residence, but in no
case for more than 24 months. Colt will gross up that amount so that the receipt of that allowance
will be tax neutral to Executive. In the event Colt’s headquarters are relocated to another city,
Colt will provide Executive with reimbursement for his moving expenses of up to
$100,000, or pursuant to any policy that may be adopted by Colt to pay for the moving expenses of
executive employees, whichever is greater.

 

 

     3. Base Salary and Benefits.

          (a) Base Salary. Executive’s Base Salary shall be $450,000, paid in regular
installments in accordance with Colt’s payroll practices.

          (b) Expenses, Colt shall reimburse Executive for reasonable business expenses in
accordance with Colt’s policies. Executive shall comply with limitations and reporting requirements
with respect to expenses as may be established by Colt from time to time and communicated to
Executive.

          (c) Other Benefits. Executive will be entitled to participate in compensation or
employee benefit plans and programs for which senior executives of Colt generally are eligible.
Nothing in this Employment Agreement will preclude Colt from amending or terminating any of the
plans or programs applicable to senior executives as long as such amendment or termination is
applicable to all senior executives. In addition:

     (i) Executive will be eligible to take four weeks’ paid vacation annually
starting in 2011, and will be eligible to take one week of vacation in 2010.

     (ii) Colt will provide Executive with a leased car for Executive’s
business and personal use, consistent with Colt’s past practice with respect to cars
provided for use by its former Chief Executive Officers.

          (d) Taxes. All compensation payable to Executive hereunder shall be subject to all
applicable withholding taxes, normal payroll withholding and any other lawful deductions.

          (e) Performance Bonus. In addition to the Base Salary, Executive will be eligible to
participate in Colt’s discretionary Management Incentive Plan, pursuant to the terms and conditions
of that Plan. For 2010, Executive will be eligible for performance bonus consideration based on
the percentage of the days in 2010 Executive is employed by Colt. In the event of the termination
or notice of termination of Executive’s employment, during the performance period, regardless of
the reason therefor, and regardless of which party initiated the termination, or the Executive’s
termination for Cause, as defined in Paragraph 5, below, before the date on which the bonus would
have been paid, Executive will have no right to receive any bonus (full or pro rata) that otherwise
might have been paid following the date of termination or notice of termination. Executive will
receive any bonus for which he is eligible on the same date as will other participants in the Plan.

     4. Equity Participation. Executive will receive options to purchase 6,957 common units
of Colt at an exercise price equal to $100.00 per common unit (which may be non-voting at the
discretion of Colt’s Governing Board), subject to the provisions of an Option Plan to be
considered and adopted by Colt’s Governing Board as soon as reasonably practicable after the date of
this Employment Agreement but not later than December 31, 2010. The intention of the parties is
that the options shall be exempt from Section 409 A of the Code. The terms of that Option Plan,
with respect to Executive, shall not be inconsistent with the following:

          (a) The vesting of the options will depend on Colt’s financial performance against: (1)
budgeted financial metrics as established by Colt’s Governing Board for each fiscal

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year from 2011 through 2014 (the “Budget Goal”); (2) exceeding the sum of (x) Budget Goal plus (y)
15 percent (or, after fiscal year 2010, some other percentage set by the Governing Board in its
reasonable business discretion, the “Modified Percentage”) of the budget Goal (the “Target Goal”);
and (3) exceeding the sum of (x) the Target Goal plus (y) 15 percent or the Modified Percentage of
the Target Goal (the “Stretch Goal”). On the second through the fifth anniversary dates of this
Employment Agreement, the following vesting schedule will apply, based on Colt’s performance in the
preceding year:

     (i) 10 percent of the total options granted pursuant to this Paragraph 4 will
vest if Colt meets the Budget Goal; or

     (ii) 20 percent of the total options granted pursuant to this Paragraph 4 will
vest if Colt meets the Target Goal; or

     (iii) 30 percent of the total options granted pursuant to this Paragraph 4 will
vest if Colt meets the Stretch Goal.

          (b) On the first anniversary date of this Employment Agreement, the foregoing option vesting
schedule shall apply, with the Budget Goal for fiscal 2010 being previously provided to Executive.

          (c) If on any of the first four anniversary dates Executive did not vest 20 percent of the
options granted pursuant to this Paragraph 4, such 20 percent unvested options for that year may
vest on the next anniversary date; provided, that Colt’s performance against its Budget
Goal or Target Goal, as the case may be, for the previous year makes up the Budget Goal shortfall
or the Target Goal shortfall, as the case may be, from the next previous year, in addition to
meeting (without considering the performance necessary to make up the shortfall) the applicable
vesting target for the year at issue.

          (d) At any time Colt’s Governing Board may approve earlier vesting of then unvested options
granted pursuant to this Paragraph 4. Options granted pursuant to this Paragraph 4 will expire if
not vested and exercised within ten years from the date hereof.

          (e) Once all of the options granted pursuant to this Paragraph 4 have vested, there is no
right to further options under this Paragraph 4; for example, if 30 percent of the options granted
pursuant to this Paragraph 4 vested on each of the first three anniversary dates, only 10 percent
of the options granted pursuant to this Paragraph 4 could vest on the fourth or fifth anniversary
date, regardless of Colt’s performance.

          (f) In the event of a Public Offering or Change in Control within the first eighteen months of
Executive’s employment, pursuant to either of which Colt’s stock is valued at or above $1,000.00
per common unit, all unvested options will immediately vest upon the date of the Public Offering or
Change in Control. In the event of a Public Offering or Change in Control after the first eighteen
months of Executive’s employment, all unvested options will immediately vest upon the date of the
Public Offering or Change in Control.

          (g) In the event that Executive’s employment is terminated for any reason other than Cause, as
defined in Paragraph 5 below, within ninety days before or eighteen months

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after a Public Offering or Change in Control (or, if earlier, the signing of a purchase and sale
agreement that results in a Change in Control), pursuant to which Executive’s then-unvested options
did not immediately vest, all unvested options will immediately vest upon such employment
termination.

          (h) In the event that, within eighteen months after a Public Offering or Change in
Control, pursuant to which Executive’s then-unvested options did not immediately vest, Executive is
not the Chief Executive Officer of Colt or its successor, or reporting to the Governing Board of
Colt or its successor, or his responsibilities are materially diminished, Executive may resign and
a resignation under such circumstances will entitle Executive to be treated as if he had been
terminated by Colt without Cause. If, at any time during Executive’s employment, Colt materially
breaches this Employment Agreement and does not cure such breach within 30 days after Colt’s
receipt of written notice thereof in reasonable detail from Executive, Executive may resign and
will be treated as if he had been terminated by Colt without Cause. Executive shall provide notice
of any such termination within sixty days following the initial instance of such breach, and the
Executive’s notice of termination shall specific a date of termination that is no later than 30
days following the date of notice.

          
(i) Except as provided in Subparagraphs 4(g) and (h), above, Executive must be employed
on an anniversary date or the date of a Public Offering or Change in Control for any options to
vest. In the event of the termination or notice of termination of Executive’s employment,
regardless of the reason therefor, and regardless of which party initiated the termination, all
unvested options are forfeited.

          (j) For the purposes of this Paragraph 4:

     (i) “Change in Control” is defined as: (A) the consummation of a
merger or consolidation of Colt with or into another entity or any other corporate
reorganization, if persons, including their Affiliates, who were not
shareholders/unit holders of Colt immediately prior to such merger, consolidation or
other reorganization own immediately after such merger, consolidation or other
reorganization 50.0% or more of the voting power of the outstanding securities of
each of (1) the continuing or surviving entity and (2) any direct or indirect parent
corporation of such continuing or surviving entity; (B) the sale, transfer or other
disposition of all or substantially all of Colt’s assets; (C) the individuals
constituting Colt’s Governing Board as of the date of this Employment Agreement (the
“Incumbent Board”) cease for any reason to constitute a majority of the members of
Colt’s Governing Board; provided, however that if the election, or
nomination for election by Colt’s stockholders—unit holders, of any new director
was approved by a vote of at least a majority of the Incumbent Board, such new
director shall be considered a member of the Incumbent Board; or (D) any “person” or
“group” of related persons (as such terms are used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended) beneficially own, directly or
indirectly, a larger percentage of the voting equity stock then outstanding and
normally entitled to vote in the election of directors, managers or trustees, as
applicable, of Colt than the Permitted Holders (as defined below). A transaction
shall not constitute a Change in Control if its sole purpose is to change the state
of

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Colt’s incorporation or to create a holding company that will be owned in
substantially the same proportions by the persons who held Colt’s securities
immediately before such transaction.

  
   (ii) “Public Offering” is defined as an underwritten sale to the public
of Colt’s (or its successor’s) equity securities pursuant to an effective
registration statement filed with the Securities and Exchange Commission on Form S-1
(or any successor form) which results in gross proceeds to the Company and/or
selling stockholders of at least $75,000,000 and in which the managing underwriter
is a nationally recognized investment banking firm; provided, that a Public
Offering shall not include any issuance of equity securities in any merger or other
business combination, and shall not include any registration of the issuance of
securities to existing security holders or employees of Colt and its subsidiaries on
Form S-4 or Form S-8 (or any successor form).

     (iii) An “Affiliate” of a specified entity means an entity or person that
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the entity or person specified.

     (iv) “Permitted Holder” means Sciens Management LLC and its
Affiliates (including employees and directors thereof) and members of the management
employees of Colt, including the former Chief Executive Officer (who with respect to
the management employees of Colt as of the date hereof beneficially own equity
interests of Colt).

     (v) References to $100.00 and $1,000.00 per common unit price
shall be appropriately adjusted to reflect any dividend, unit split, combination of
units, reclassification, recapitalization or other similar event affecting the
number of outstanding common units (or such other stock or securities).

     5. Termination. Executive’s employment hereunder is “at will” and therefore may
be terminated by either Colt or Executive, at any time and for any reason upon written notice to
the other. In the event Colt terminates Executive’s employment other than for “Cause,” Colt will
pay Severance Benefits (as defined below) to the Executive commencing thirty days after such
employment termination; provided, however, payment of Severance Benefits shall be subject
to delivery of an executed Agreement and General Release in substantially the form attached hereto
as Exhibit A (with such change therein or additions thereto as needed under then applicable law to
give effect to its intent and purposes) within twenty-one days of presentation thereof by the
Company to Executive (which presentation by the Company shall be made no later than two business
days following the date of such employment termination), which is not subsequently revoked. The
Severance Benefits shall be made tip of (i) a lump sum payment equal to onetwelfth of Executive’s
then current Base Salary on the 30th day following such employment termination, and (ii) continued
payments, made in accordance with Colt’s schedule for the payment of its employee’s salaries, of
Base Salary for eleven months. For avoidance of doubt, the total amount of Severance Benefits under
this Section 5 shall equal one year of Base Salary at the amount in effect upon employment
termination. For avoidance of doubt, each payment to be

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provided under this Section 5 shall be treated as and considered a separate and distinct payment
for purposes of determining eligibility for exemptions to Section 409A. “Cause” shall mean:

          (a) A determination that any of the Executive’s representations set forth in Paragraph 8,
below, was materially false as of the date of this Employment Agreement;

          (b) Executive’s commission of a felony or of any other crime involving moral turpitude, or
Executive’s arrest for any crime, which arrest or the publicity surrounding same could reasonably
be expected to have an adverse effect on Colt’s business;

          (c) Executive’s commission of an act of fraud, embezzlement or theft with respect to Colt;

          (d) The refusal or failure of Executive to comply with any lawful directives of the Colt in
the performance of his services or the violation by Executive of any of the written policies or
procedures of Colt (other than on the advice of Colt’s legal counsel), or any other act or omission
constituting gross negligence or willful misconduct; or

          (e) The breach, non-performance or non-observance by Executive of any term of this Employment
Agreement, which failure or breach continues for a period of at least five days following a written
demand for such performance by Colt specifying in reasonable detail the action Colt alleges to be a
failure to perform or breach by the Executive.

6. Section 409A.

          (a) This Employment Agreement is intended to constitute an enforceable contract for the
payment of compensation, severance and certain other: benefits. The intention of the parties is
that each payment provided for under this Employment Agreement, including the Severance Benefits,
shall be exempt from Section 409A. In the event a determination is made that a payment under this
Employment Agreement is “nonqualified deferred compensation” subject to Section 409A of the Code,
the Executive consents to Colt adopting such conforming amendments as Colt deems necessary after
consultation with Executive to comply with Section 409 A of the Code, without reducing the amounts
of any benefits due to the Executive hereunder.

          (b) Notwithstanding anything to the contrary in Subparagraph 6(a), in the event that upon
Executive’s “separation from service” within the meaning of the Internal Revenue Code of 1986 (the
“Code”) Section 409A, Executive is then a “specified employee” within the meaning of Section 409A
of the Code, as determined in accordance with the Section 409A methodology in place or established
by Colt as in effect on the date of termination of employment with Colt (a “Specified Employee”),
then solely to the extent necessary to comply with Code Section 409A and avoid the imposition of
taxes under Code Section 409A, Colt shall defer payment of “nonqualified deferred compensation,”
subject to Code Section 409A, which is payable to the Executive under this Employment Agreement as
a result of (and would otherwise be paid within six months following) such separation from service,
shall instead be paid to the Executive on the Delayed Payment Date. The “Delayed Payment Date”
shall, for purposes of this Employment Agreement, mean the earlier of the first business day of the
seventh month after Executive’s separation from service, or the date of the Executive’s death; upon
the earlier of such dates, all payments deferred pursuant to this sentence shall be paid in a lump
sum to the Executive.

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All other payments that are not deferred in accordance with the preceding sentence shall be
paid on the dates, or according to the schedule, provided for herein. To the extent necessary to
comply with Section 409 A, the date of termination of employment with Colt must also represent a
“separation from service” within the meaning of Code Section 409A.

     7. Colt Property and Restrictive Covenants. Executive will execute and comply with the
document attached hereto as Exhibit B in consideration for his employment by Colt.

     8. Representations of Executive. Executive hereby represents and warrants to Colt that
the following statements are true as of the date of this Employment Agreement:

          (a) Legal Proceedings. Executive has not been: (i) the subject of any criminal
proceeding (other than a traffic violation or other similar minor offense) which has resulted in a
conviction against Executive, nor is Executive the subject of any pending criminal proceeding
(other than a traffic violation or other similar minor offense): (ii) indicted for, or charged in a
court of competent jurisdiction with, any felony or crime of moral turpitude: (iii) the defendant
in any civil complaint alleging damages in excess of $50,000; or (iv) the defendant or otherwise
named in any civil complaint alleging sexual harassment, discrimination or any other misconduct in
the workplace.

          (b) Securities Law. Executive has not been found in a civil action by the Securities
and Exchange Commission, Commodity Futures Trading Commission, a state securities authority or any
other regulatory agency to have violated any federal, state or other securities or commodities law.

          (c) Work History: Immigration Status. Executive’s resume, previously provided by
Executive to Colt, is true and complete in all material respects, and accurately reflects
Executive’s prior work history. Executive has the full legal right to be employed on a full-time
basis by Colt in the United States under all applicable immigration laws on the basis of Colt’s
continued willingness to employ him on a full-time basis, and has provided Colt with evidence of
legal immigration status and will do so at any time upon request. Colt will, if applicable,
continue to cooperate with Executive in maintaining Executive’s work visa status and/or any mutually
agreeable adjustment of status.

          (d) Employment Restrictions. Executive is not subject to any noncompetition,
non-solicitation, confidentiality or other work-related agreement that limits or restricts
Executive’s ability to provide services hereunder, and there is no such agreement that would be
violated by this Employment Agreement.

     9. Notices. Any notice provided for in this Employment Agreement must be in writing
and must be either personally delivered, mailed by first class mail postage prepaid and return
receipt requested) or sent by reputable overnight courier service (charges prepaid), or faxed, to
the recipient at the address below indicated:

          To Colt:

Colt Defense LLC 
547
New Park Ave.

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West Hartford, CT 06110 
Attn:
General Counsel

          With copies (which shall not constitute notice) to:

A. Robert Fischer

Jackson Lewis LLP

177 Broad Street, P.O. Box 251

Stamford, CT 06904-0251

To Executive:

Gerald R, Dinkel P.O. Box 27357

San Diego, CA 92198

     or to such other address or to the attention of such other person as the recipient party shall
have specified by prior written notice to the sending party. Any notice under this Employment
Agreement shall be deemed to have been given when personally delivered, one business day after sent
by reputable overnight courier service, five days after deposit in the U.S. mail or at such time as
it is transmitted via facsimile, with receipt confirmed.

     10. Assignment. Except as otherwise provided herein, this Employment Agreement shall
bind and inure to the benefit of and be enforceable by Executive, Colt and their respective
successors and assigns; provided, however, that the rights and obligations of Executive
under this Employment Agreement shall not be assignable.

     11. Governing Law. This Employment Agreement shall be construed in accordance with the
law of Connecticut, without regard to its conflicts of law principles.

     12. Arbitration. Any and all disputes, controversies or claims arising out of or
relating to this Employment Agreement, Executive’s employment by Colt, the termination of that
employment or Executive’s post-employment obligations shall be finally resolved by arbitration
administered by the American Arbitration Association (the “AAA”), although in the case of
Executive’s post-employment restrictions, Colt may seek a temporary restraining order and/or
injunctive relief in court pending arbitration or an arbitration award, Either party may
initiate arbitration by written notice to the other. The arbitration shall be conducted in accordance with
the AAA rules governing the resolution of employment disputes in effect at the time of the
arbitration (including, without limitation, rules applicable to the selection of the arbitrator), except
as they may be modified by the provisions of this Employment Agreement. The place of arbitration
shall be Hartford, Connecticut. The arbitration shall commence within thirty days after the
appointment of the arbitrator; the arbitration shall be completed within sixty days of commencement;
and the arbitrator’s award shall be made within thirty days following such completion. The parties
may agree to extend those time limits. The arbitrator will render an award and a written opinion in
support thereof. Such award shall include the costs related to the arbitration and reasonable
attorneys’ fees and expenses to the prevailing party or otherwise, as determined by the arbitrator.
The parties keep all aspects of the arbitration confidential, except as necessary to enforce any
award, or to respond to a lawfully issued subpoena or other governmental inquiry.

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     13. Complete Agreement. This Employment Agreement and the document attached hereto as
Exhibit A, embody the complete agreement and understanding between Colt and Executive and
supersede and preempt any prior understandings, agreements or representations by or among the
parties, written or oral, which may have been related to the subject matter hereof in any way. This
Employment Agreement may not be amended or modified in any respect other than in a writing signed
by Executive and a member of Colt’s Governing Board.

     14. Indemnification. Colt shall indemnify and hold harmless Executive from any and all
claims, liabilities, losses, damages, and expenses, including reasonable attorneys’ fees, as a
result of acts of Executive performed in the course and within the scope of his employment to the
maximum extent that any person is entitled to obtain indemnification under the Limited Liability
Company Agreement. This indemnification shall survive the death or other termination of employment
of Executive and the expiration or termination of this Employment Agreement. Executive shall, as a
condition precedent to receipt of such indemnification, cooperate with Colt and its legal counsel
in the defense of any related action, claim or proceeding.

[Signature Page Follows]

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     IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement as of
the date first written above.

	 	 	 	 	 	 	 

	 	 	COLT DEFENSE LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Daniel J. Standen	 	 
	 

	 		 	 

	 	 
	 

	 	Its:
	 	Member of Governing Board 

	 	 
	 

	 	 	 	 

	 	 
	 

	 	Date:	 	October 4, 2010	 	 
	 

	 	 	 	 

	 	 
	 
	 	/s/ Gerald R. Dinkel	 	 
	 	 	 	 	 
	 	 	Gerald R. Dinkel	 	 
	 
	 	 	 	 	 	 
	 

	 	Date:	 	October 4, 2010	 	 
	 

	 	 	 	 

	 	 

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EXHIBIT A

AGREEMENT AND GENERAL RELEASE

Colt Defense LLC (“Colt”), its parent, affiliates, subsidiaries, divisions, successors and assigns
in such capacity, and the current, and former shareholders, employees, officers, directors,
trustees, insurers, attorneys and agents thereof (collectively referred to throughout this
Agreement as “Employer”), and Gerald R. Dinkel (“Executive”), the Executive’s heir, executors,
administrators, successors and assigns (collectively referred to throughout this Agreement as
“Employee”) agree:

1. Last Day of Employment. Executive’s last day of employment with Employer is
                    . In addition, effective as of DATE, Executive resigns from the Executive’s
positions as
President of Colt and will not be eligible for any additional benefits or compensation after
                    , other than as specifically provided in Section 5 of the Employment Agreement
between
Employer and Executive effective as of                                         
(the “Employment Agreement”). Executive
further acknowledges and agrees that, after DATE, the Executive will not represent the Executive as
being a director, employee, officer, trustee, agent or representative of Employer for any purpose.
In addition, effective as of DATE, Executive resigns from all offices, directorships, trusteeships,
committee memberships and fiduciary capacities held with, or on behalf of, Employer or any benefit
plans of Employer. These resignations will become irrevocable as set forth in Section 3 below.

2. Consideration. The parties acknowledge that this Agreement and General Release is being
executed in accordance with Section 5 of the Employment Agreement in exchange for the consideration
set forth therein.

3. Revocation. Executive may revoke this Agreement and General Release for a period of
seven calendar days following the day Executive executes this Agreement and General Release. Any
revocation within this period must be submitted, in writing, to Employer and state, “I hereby
revoke my acceptance of our Agreement and General Release.” The revocation must be personally
delivered to Employer’s Chief Executive Officer, or his/her designee, or mailed to Colt Defense
LLC [insert: address and contact person], and postmarked within seven calendar days of execution of
this Agreement and General Release. This Agreement and General Release shall not become effective
or enforceable until the revocation period has expired. If the last day of the revocation period is
a Saturday, Sunday, or legal holiday in Hartford, Connecticut, then the revocation period shall
not expire until the next following day which is not a Saturday, Sunday, or legal holiday.

4. General Release of Claims. Subject to the full satisfaction by the Employer of its
obligations under the Employment Agreement, Employee knowingly and voluntarily releases and
forever discharges Employer from any and all claims, causes of action, demands, fees and liabilities
of any kind whatsoever, whether known and unknown, against Employer, Employee has, has ever had or
may have as of the date of execution of this Agreement and General Release, including, but not
limited to, any alleged violation of:

	—	 	Title VII of the Civil Rights Act of 1964, as amended;

 

 

	—	 	The Civil Rights Act of 1991;
	 
	—	 	Sections 1981 through 1988 of Title 42 of the United States Code, as amended;
	 
	—	 	The Employee Retirement Income Security Act of 1974, as amended;
	 
	—	 	The Immigration Reform and Control Act, as amended;
	 
	—	 	The Americans with Disabilities Act of 1990, as amended;
	 
	—	 	The Age Discrimination in Employment Act of 1967, as amended;
	 
	—	 	The Older Workers Benefit Protection Act of 1990;
	 
	—	 	The Worker Adjustment and Retraining Notification Act, as amended;
	 
	—	 	The Occupational Safety and Health Act, as amended;
	 
	—	 	The Family and Medical Leave Act of 1993;
	 
	—	 	Any wage payment and collection, equal pay and other similar laws, acts and statutes of the State of Connecticut;
	 
	—	 	Any other federal, state or local civil or human rights law or any other local,
state or federal law, regulation or ordinance;
	 
	—	 	Any public policy, contract, tort, or common law obligation; or
	 
	—	 	Any obligation to pay costs, fees, or other expenses including attorney’s fees.

Notwithstanding anything herein to the contrary, this Agreement and General Release do not affect:
(i) Employee’s rights to accrued vested benefits under any other employee benefit plan, policy,
payroll practice, or arrangement maintained by Employer or wider COBRA; (ii) Employee’s right to
exercise any vested options after employment termination as provided under the Option Plan; (iii)
Employee’s rights as a holder of any units or other form of equity in Colt under the Limited
Liability Company Agreement or applicable law; or (iv) any rights to defense or indemnification
provided for under Paragraph 14 of the Employment Agreement.

5. No Claims Permitted. Employee waives Executive’s right to file any charge or complaint
against Employer arising out of Executive’s employment with or separation from Employer before any
federal, state or local court or any state or local administrative agency, except where such
waivers are prohibited bylaw. In the event Employee brings a claim the waiver of which is not
prohibited by law, Employee will not (and hereby waives the right to) seek or accept any
compensation for such claims.

6. Affirmations. Employee affirms Executive has not filed, has not caused to be filed, and
is not presently a party to, any claim, complaint, or action against Employer in any forum.
Employee further affirms that the Executive has been paid and/or has received all compensation,
wages, bonuses, commissions, and/or benefits to which Executive may be entitled and no other

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compensation, wages, bonuses, commissions and/or benefits are due to Executive. Employee also
affirms Executive has no known workplace injuries.

7. Governing Law and Interpretation. This Agreement and General Release shall be governed
and conformed in accordance with the laws of the State of Connecticut without regard to its
conflict of laws provisions. In the event Employee or Employer breaches any provision of this
Agreement and General Release, Employee and Employer affirm either may institute an action to
specifically enforce any term or terms of this Agreement and General Release. Should any provision
of this Agreement and General Release be declared illegal or unenforceable by any court of
competent jurisdiction and should the provision be incapable of being modified to be enforceable,
such provision shall immediately become null and void, leaving the remainder of this Agreement and
General Release in full force and effect, Nothing herein, however, shall operate to void or
nullify any general release language contained in the Agreement and General Release.

8. No Admission of Wrongdoing. Employee agrees neither this Agreement and General Release
nor the furnishing of the consideration for this Release shall be deemed or construed at any time
for any purpose as an admission by Employer of any liability or unlawful conduct of any kind.

9. Amendment. This Agreement and General Release may not be modified, altered or changed
except upon express written consent of both parties wherein specific reference is made to this
Agreement and General Release.

10. Entire Agreement. This Agreement and General Release sets forth the entire agreement
between the parties hereto and fully supersedes any prior agreements or understandings between the
parties; provided, however, that notwithstanding anything in this Agreement and General
Release, the provisions in the Employment Agreement which are intended to survive termination of the
Employment Agreement, including but not limited to those contained in Paragraphs 5, 7 and 14
thereof, shall survive and continue in full force and effect. Employee acknowledges Executive has
not relied on any representations, promises, or agreements of any kind made to Executive in
connection with Executive’s decision to accept this Agreement and General Release.

EMPLOYEE HAS BEEN ADVISED THAT EXECUTIVE HAS UP TO TWENTY-ONE CALENDAR DAYS TO REVIEW THIS
AGREEMENT AND GENERAL RELEASE AND HAS BEEN ADVISED IN WRITING TO CONSULT WITH AN ATTORNEY PRIOR TO
EXECUTION OF THIS AGREEMENT AND GENERAL RELEASE.

EMPLOYEE AGREES ANY MODIFICATIONS, MATERIAL OR OTHERWISE, MADE TO THIS AGREEMENT AND GENERAL
RELEASE DO NOT RESTART OR AFFECT IN ANY MANNER THE ORIGINAL TWENTY-ONE CALENDAR DAY CONSIDERATION
PERIOD.

HAVING ELECTED TO EXECUTE THIS AGREEMENT AND GENERAL RELEASE, TO FULFILL THE PROMISES SET FORTH
HEREIN, AND TO RECEIVE THE SUMS AND BENEFITS SET FORTH IN THE EMPLOYMENT AGREEMENT, EMPLOYEE FREELY
AND KNOWINGLY, AND AFTER DUE CONSIDERATION, ENTERS INTO THIS

-3-

 

AGREEMENT AND GENERAL RELEASE INTENDING TO WAIVE, SETTLE AND RELEASE ALL CLAIMS EXECUTIVE HAS
OR MIGHT HAVE AGAINST EMPLOYER.

-4-

 

IN WITNESS WHEREOF, the parties hereto knowingly and voluntarily executed this Agreement and
General Release as of the date set forth below:

	 	 	 	 	 	 	 

	 	 	COLT DEFENSE LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

[NAME]
	 	 
	 

	 	Title:	 	 	 	 
	 

	 	Date:	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	GERALD R. DINKEL	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	Date:	 	 	 	 

-5-

 

EXHIBIT B

CONFIDENTIALITY, ASSIGNMENT OF INVENTIONS, NON-SOLICITATION

AND NON-COMPETITION AGREEMENT

     THIS CONFIDENTIALITY, ASSIGNMENT OF INVENTIONS, NON-SOLICITATION AND NON-COMPETITION
AGREEMENT (“Agreement”), dated as of October 4, 2010, is entered into between Colt Defense LLC, a
Delaware limited liability company (“Colt”), and Gerald R. Dinkel (“Executive”).

          Whereas, Colt has unique methods for manufacturing products; for locating and dealing with
factories and other vendors; for training, and providing incentives for, its employees; and for
marketing, selling and distributing its products;

          Whereas, Colt has made unique plans for the future, including, without limitation plans for
its products, for geographic and customer markets, and for marketing, selling and distributing its
products;

          Whereas, Colt has established near permanent relationships with its customers;

          Whereas, Colt’s unique methods of doing business and its near permanent relationships with
its customers give it a competitive advantage over companies that have not adopted those or other
comparably effective methods of doing business, and which have not otherwise been as successful as
Colt in developing their businesses;

          Whereas, as a result of Executive’s employment by Colt, Executive will acquire detailed
knowledge of, and experience in, Colt’s unique methods of doing business and its plans for the
future, as described above;

          Whereas, it would be unfair for Executive to use information obtained during and as a result
of Executive’s employment by Colt for the benefit of an individual or-entity other than Colt;

          Whereas, Executive wants to work for Colt, and has agreed to certain restrictions in exchange
for Colt hiring Executive in a position that will provide Executive with access to Executive’s
Business Information, as defined below;

          Now therefore, Colt and Executive have agreed to the following:

          1. Consideration. In consideration for Executive signing this Agreement, Colt will allow
Executive to begin employment with Colt pursuant to the Employment Agreement to which this
Agreement is attached as Exhibit A (the “Employment Agreement”). Executive understands and
agrees that his agreement to be bound by the terms of this Agreement was and is a necessary
condition of the Employment Agreement and for him being allowed to begin employment by Colt.

 

 

          2. Changes in
Position, Compensation and Employer. This Agreement will apply to any future
positions at Colt, or at any other subsidiary, affiliate, successor or assign of Colt to which
Executive may be assigned, and it will continue to apply notwithstanding any changes in Executive’s
job duties or compensation. Consequently, all references herein to “Colt” apply equally to any
such entities by which Executive may be employed.

          3. Business
Information. As used in this Agreement, the term “Business Information”
means any and all of Colt’s trade secrets, confidential and proprietary information, and all other
information and data that is not generally known to third persons who could derive economic value
from its use or disclosure, including, without limitation, the methods though which Colt
identifies, hires, trains and compensates its employees; details regarding Colt’s employees,
including their compensation, contact information, and their performance and conduct; methods to
locate and qualify contractors, vendors and third party factories; the identity of Colt’s
contractors, vendors and third party factories; the individuals, and their contact information, at
contractors, vendors and third party factories with whom Colt has dealt; the amounts and types of
goods and/or services purchased in the past from contractors, vendors and third party factories;
the amounts paid for such past purchases; the identity of Colt’s customers; the individuals, and
their contact information, at customers with whom Executive has dealt; the amounts and types of
goods purchased in the past by such customers; the amount paid for such past purchases, the timing
of such past purchases, and the method of payment for such past purchases; Colt’s plans for future
products; the details of any ongoing or planned negotiations for future products; Colt’s plans for
the future, including without limitation plans for its products, for geographic and customer
markets, and for marketing, promoting and distributing its products.

          4. Colt Property. All tangible materials, equipment, documents, copies of documents, data
compilations (in whatever form), software programs, and electronically created or stored materials
that Executive receives or makes in the course of employment with Coltare and shall remain the
property of Colt and Executive shall immediately return such property to Colt upon Colt’s request
and upon the termination of Executive’s employment, for whatever reason, with Colt. The obligation
to return property and documents extends to anything received or made during and as a result of
employment by Colt, regardless of whether it was received from Colt or a third party, such as an
actual or potential vendor or customers, and regardless of whether a document contains Business
Information. The only documents not subject to the obligation to return are documents directly
relating to Employee’s compensation and benefits, such as his pay stubs and benefit plan booklets.

          5. Non-Disclosure of Business Information. Executive will not at any time during his
employment by Colt, and for so long thereafter as the pertinent information or documentation
remains confidential, use or disclose to others any Business Information, except in the course of
his work for Colt.

          6. Inventions and Patents. Executive hereby assigns to Colt all right, title and interest to
all patents and patent applications, all inventions, innovations, improvements, developments,
methods, designs, analyses, drawings, reports and all similar or related information, all
copyrights and copyrightable works, and all other intellectual property rights that: (a) are
conceived, reduced to practice, developed or made by Executive in the course of his

 

 

employment by Colt; or (b) either (i) relate to Colt’s actual or anticipated business, research and
development or existing or future products or services and which were conceived, reduced to
practice, developed or made by Executive during or within two years following the Employment
Period, or (ii) are conceived, reduced to practice, developed or made using any of equipment,
supplies, facilities, assets or resources of Colt conceived, reduced to practice, developed or made
by Executive during or within two years following the Employment Period (all collectively referred
to herein as “Work Product”). Executive shall promptly disclose such Work Product to Colt and
perform all actions reasonably requested by Colt (whether during or after the Employment Period) to
establish and confirm Colt’s ownership thereof (including, but not limited to, assignments,
consents, powers of attorney, applications and other instruments).

          7. Nonsolicitation and Noncompetition. During the Employment Period and for twelve months
immediately thereafter, Executive will not, other than on behalf of Colt, directly or indirectly,
as a proprietor, partner, employee, agent or otherwise:

	 	A.	 	Directly or indirectly solicit any Colt employee,
contractor, vendor or third party factory to work for, or provide goods or
services to, any other employer or organization. For the purpose of this
provision, “Colt employee, contractor, vendor or third party factory” means
any individual who was employed or retained by, or any individual or entity
that provided goods or services to, Colt within the last twelve months of
Executive’s employment by Colt.
	 
	 	B.	 	Participate in, work for, or provide services to any
person or entity that is, or is actively planning to be, a “Competitive
Business.” The term “Competitive Business” shall mean any business
(however organized or conducted) that competes with a business in which
Colt is engaged, or in which Colt is actively planning to engage, at any
time during the last twelve-months of Executive’s employment by Colt.
	 
	 	C.	 	Act in any capacity for or with any Competitive
Business, or for or with any of their agents, if in such capacity Executive
would, because of the nature of his or her role with the such Competitive
Business and Executive’s knowledge of Colt’s Business Information,
inevitably use and/or disclose any of Colt’s Business Information in his
work for, or on behalf of, the Competitive Business or its agent.
	 
	 	D.	 	Otherwise interfere with, disrupt or attempt to disrupt
relations between Colt and any of its employees, contractors, vendors,
third party factories or customers.

          8. Executive Claim of Breach by Colt Not Defense. The provisions of Paragraphs 4, 5, 6 and 7
are, and shall be construed as, independent covenants, and no claimed or actual breach of any
contractual or legal duty by Colt shall excuse or terminate Executive’s obligations under this
Agreement or preclude Colt from obtaining injunctive relief for Executive’s violation, or
threatened violation, of any of those provisions.

 

 

          9. Disclosure. Executive will show this Agreement to any prospective employer of Executive,
and consents to Colt showing this Agreement to any third party believed by Colt to be a prospective
or actual employer of Executive, and to insisting on Executive’s compliance with the terms of this
Agreement. Executive will provide Colt with at least two weeks’ written notice of any change in
Executive’s address, contemplated new employment, and planned new business activities. Executive’s
obligations under this Paragraph will expire on that date which is twelve months after the
termination of Executive’s employment with Colt.

          10. Extension of Restrictive Period. The restrictive periods set forth in this Agreement shall
not expire, and shall be tolled, during any period in which Executive is in violation of the
restricted period.

          11. Severability; Modification of Restrictions. If any provision of this Agreement is
unenforceable as written, such provision shall automatically be deemed modified such that the
contested provision will have the closest effect permitted by applicable law to the original form
and shall be given effect and enforced as so modified to whatever extent would be reasonable and
enforceable under applicable law.

          12. Enforcement. This Agreement is intended to supplement, and does not in any way limit, any
of the obligations or duties Executive owes to Colt under statutory or common law. All of the
enforcement provisions, including, without limitation, the provisions regarding governing law,
arbitration, Colt’s ability to seek temporary restraining orders or other injunctive relief, and
the arbitrator awarding attorneys’ fees to the prevailing party set forth in the Employment
Agreement apply to the enforcement of obligations under this Agreement.

          13. Complete Agreement. This Agreement, and the Employment Agreement to which it is attached
as Exhibit A, embody the complete agreement and understanding between Colt and Executive and
supersede and preempt any prior understandings, agreements or representations by or among the
parties, written or oral, which may have been related to the subject matter hereof in any way.
This Agreement may not be amended or modified in any respect other than in a writing signed by
Executive and a member of Colt’s Governing Board.

[Signature Page Follows]

 

 

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
first written above.

	 	 	 	 	 	 	 

	 	 	COLT DEFENSE LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Daniel J. Standen	 	 
	 

	 	 	 	 

	 	 
	 

	 	Its:
	 	Member of Governing Board	 	 
	 
	 	 	Date: October 4, 2010	 	 
	 
	 	 	 	 	 	 
	 	 	/s/ Gerald R. Dinkel	 	 
	 	 	 	 	 
	 	 	Gerald R. Dinkel	 	 
	 
	 	 	Date: October 4, 2010exv10w7w2

Exhibit 10.7.2

LT.GEN. WM. M. KEYS (USMC RET)

President and CEO

(860) 244-1300 office (860)

244-1481 facsimile

wkeys@colt.com

August 30, 2005

Mr. Jeff Grody

110 High Wood Road

West Hartford, CT 06117

Dear Jeff:

It is my pleasure to invite you to become Senior Vice President and General Counsel of Colt Defense
LLC (“CD LLC”), and its wholly-owned subsidiaries, and, when the contemplated internal
restructuring of the CD LLC is complete, its future parent company, Colt Defense Inc. (“CDI”). The
term “Company” when used herein shall mean the following: (x) before the internal restructuring of
CD LLC, CD LLC; and (y) after the internal restructuring of CD LLC, CDI.

Duties and Responsibilities

Commencing September 6, 2005, you will perform the services and duties that are customarily
associated with this executive position and report to me. We also expect you to play a key role in
the Company’s expansion and future acquisition plans.

As we discussed during your interview, your specific duties and responsibilities will include, but
not be limited to, planning and directing of all aspects of corporate legal affairs, including the
following:

	 	•	 	General corporate legal matters;
	 
	 	•	 	Corporate governance;
	 
	 	•	 	Structuring and managing the Company’s internal legal function and staff
	 
	 	•	 	Selecting and managing the Company’s outside counsel;
	 
	 	•	 	Legal and regulatory compliance, including assuming ultimate responsibility for ensuring
the Company conducts its business in compliance with all applicable SEC, NYSE and other
securities laws and regulations;
	 
	 	•	 	All litigation matters;
	 
	 	•	 	All intellectual property matters;
	 
	 	•	 	Participating in the definition and development of corporate policies, procedures and
programs and providing continuing counsel and guidance on legal matters and on legal
implications of all matters to the Board of Directors of the Company (the “Board”) and
myself; and
	 
	 	•	 	Corporate development and serving as key lawyer/legal advisor on all major business
transactions, including acquisitions, divestitures and joint ventures.

 

 

In addition, you are expected to be a key member of my senior management team, and to work closely
with the other members of management and the Board.

As an exempt executive-level employee, your initial compensation package includes a weekly salary
of $6,730.76 (payable weekly) and you will be entitled to four weeks vacation per year. In
addition, you will be eligible to participate in whatever bonus, incentive compensation and similar
programs are hereafter implemented for executive-level employees. The Company does not currently
have a formal incentive compensation program for management-level employees, but, as we have
discussed, I/we intend to work with the Company’s management team to develop an incentive
compensation program and to recommend it to the Board for adoption and implementation commencing in
calendar year 2006.

          Effective with your start date of September 6, 2005, the Company will grant to you 2,349 unit
options (the “First Grant Options”), with an exercise price of $502 per unit and a five-year term.
Upon the earlier to occur of (x) consummation of the initial public offering of common stock of CDI
(the “IPO”), or (y) December 31, 2005, the Company will grant you five-year options to purchase 783
shares of common stock of CDI (as equitably adjusted by the Company to reflect the internal
restructuring) or units of CD LLC (the “Second Grant Options”), as applicable, in each case at the
fair market value (determined by the Board) of the common stock or units, as the case may be, on
the date of the grant. Notwithstanding the previous sentence, “fair market value” in the case of
the Second Grant Options granted upon consummation of the IPO shall be the initial public offering
price to the public. The First Grant Options and the Second Grant Options grants are designed to
approximate 2% of CD LLC’s current outstanding number of common units (155,588 shares X 2% =
3,132). Seven hundred eighty-three (783) of the First Grant Options will vest immediately upon the
date of the grant. The (i) remaining First Grant Options and (ii) Second Grant Options, in each
case, will vest ratably over three years in three equal tranches (1/3 each year) beginning on the
first anniversary date of the grant; provided, however, that no First Grant Options or Second Grant
Options granted to you in connection with this letter will vest upon consummation of the IPO. The
number of options and exercise price will be adjusted in the event of a stock or unit split, stock
or unit dividend or similar action that affects the number of shares or units outstanding, as
applicable, but does not affect the total equity of the Company. It is a condition to the future
grants of options contemplated by this letter that you are employed by the Company on the date of
the grant. The option plans will he provided to you in the near term. The remaining options will
vest immediately if, after a Change in Control (as hereinafter defined) (i) you are terminated
other than for cause (as hereinafter defined), or (ii) you cease to be General Counsel of the
Company at the Board’s written request or direction and therefore resign. A “Change of Control”
shall be deemed to have occurred with respect to the Company if

	 	(i)	 	the Company consummates a merger, consolidation, sale of substantially all its assets,
or substantially similar reorganization transaction, excluding, however, any merger,
consolidation, sale of substantially all its assets, or substantially similar
reorganization transaction (including the internal restructuring referred to above) in
which immediately after such transaction, the equityholders of the Company prior to the
transaction, in their capacities as such and as a result thereof, shall own at least fifty
percent (50%) in voting power of the then outstanding securities

-2-

 

	 	 	 	of the Company or of any surviving corporation or business entity pursuant to any
such transaction; on
	 
	 	(ii)	 	during any period of twenty-four (24) consecutive months, individuals who at the
beginning of such period constitute the Board cease for any reason to constitute a majority
of such Board, unless the election, or the nomination for election of each new Director was
approved by a vote of at least two-thirds (2/3) of the Directors then still in office who
were Directors at the beginning of such period.

Without affecting the nature of your employment at will, if, after a Change of Control, (i) you are
terminated other than for cause, or (ii) you cease to be the General Counsel of the Company at the
Board’s written request or direction and therefore resign, you shall receive, concurrently with
your termination or resignation, in addition to all other amounts to which you may be entitled, a
cash payment equal to one time your annual base compensation at the time of termination or
resignation.

For purposes of this letter, “cause’ means a finding by the Board that you have (i) committed a
felony or a crime involving moral turpitude, (ii) committed any act of gross negligence,
embezzlement or fraud, (iii) failed, refused or neglected to substantially perform your duties
(other than by reason of a physical or mental impairment) or to implement the lawful directives of
the Board or the Chief Executive Officer; provided that you have received written notice and a
reasonable opportunity to cure, (iv) materially breached any provision of this letter, (v)
willfully engaged in conduct that is materially injurious to the Company or its operations,
monetarily or otherwise or (vi) been disbarred or suspended from practicing law in any
jurisdiction.

You will be entitled to participate in all health insurance, life insurance, dental insurance,
401(k), vacation and any other employee benefit programs. Descriptions of the employee benefit
programs will be issued to you on your first day of employment.

The Company will reimburse you for travel and other out-of-pocket expenses incurred by you in the
ordinary and necessary discharge of your duties, in line with the Company’s policy.

This offer is made subject to your signing a business conduct, confidentiality and other employee
agreements, and the results of a reference check to be performed by the Company, as well as a
physical, drug test and other pre-employment verifications.

In accepting our offer of employment, you certify your understanding that your employment will be
on an at-will basis, and that neither you nor any representative of the Company has entered into a
contract regarding the terms or the duration of your employment. As an at-will employee, you will
be free to terminate your employment with the Company at any time, with or without advance notice.
Likewise, the Company will have the right to terminate your employment at any time, with or without
cause or advance notice.

If the terms set forth in this letter are acceptable to you, please sign a copy of this letter in
the space provided below and return it to me. This offer is in effect for fifteen days following
the date of this letter.

We look forward to a long and mutually rewarding employment relationship with you.

-3-

 

	 	 	 

	Sincerely,
	 	 
	 
	 	 
	Wm. M. Keys
	 	 
	 

/s/ William M. Keys
	 	 
	 

 

	 	 
	 
	 	 
	ACCEPTED AND AGREED:
	 	 
	 
	 	 
	/s/ Jeffrey G. Grody
	 	 
	 

Jeffrey G. Grody

	 	 

-4-

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