EXHIBIT 10.15
EXECUTION COPY
SECOND AMENDED AND RESTATED CONSULTING AGREEMENT
This SECOND AMENDED AND RESTATED CONSULTING AGREEMENT, dated as of February
12, 2003 (the "Agreement"), by and among RACI Holding, Inc., a Delaware
corporation ("Holding"), Remington Arms Company, Inc., a Delaware corporation
and wholly owned subsidiary of Holding (the "Company"), Clayton, Dubilier &
Rice, Inc., a Delaware corporation ("CD&R") and, for purposes of Section 4
only, Bruckmann, Rosser, Sherrill & Co. L.L.C., a Delaware limited liability
company ("BRS").
W I T N E S S E T H:
WHEREAS, the Company acquired its business in a transaction arranged by
CD&R, and in connection therewith CD&R provided consulting services to the
Company;
WHEREAS, after the acquisition Holding and the Company entered into a
Consulting Agreement, dated as of December 1, 1993 (the "Original Agreement"),
pursuant to which Holdings and the Company receive financial and managerial
advisory services from CD& R;
WHEREAS, on January 1, 2001, the parties to the Original Agreement amended
and restated the Original Agreement in its entirety and entered into the Amended
and Restated Agreement (the "Amended and Restated Agreement");
WHEREAS, pursuant to an Investment Agreement, dated as of December 19, 2002
(the "Investment Agreement"), by and among Holding, The Clayton & Dubilier
Private Equity Fund IV Limited Partnership (the "C&D Fund") and Bruckmann,
Rosser, Sherrill & Co. II, L.P. ( "BRS Fund II"), among other things, Holding
issued to BRS Fund II 135,954 shares of Class A Common Stock, par value $0.01
per share of Holding ("Common Stock") for a cash purchase price equal to $220.31
per share (the "Share Purchase Price") for an aggregate purchase price of
$29,952,025 (the "Investment") as of the date hereof;
WHEREAS, in connection with the closing of the transactions contemplated by
the Investment Agreement, Holding, the Company, BRS and CD&R entered into a
Consulting Agreement, dated as of the date hereof (the "BRS Consulting
Agreement"), pursuant to which, among other things, BRS will provide consulting
services to each of Holding and the Company, and each of Holding and the Company
will compensate BRS for such consulting services; and
WHEREAS, in connection with the closing of the transactions contemplated by
the Investment Agreement and in connection with the BRS Consulting Agreement,
the parties to the Amended and Restated Agreement wish to extend the term of the
Amended and Restated Agreement and amend certain provisions of the Amended and
Restated Agreement and, in connection therewith, to amend and restate the
Amended and Restated Agreement in its entirety;
NOW, THEREFORE, in consideration of the premises and the respective
agreements hereinafter set forth and the mutual benefits to be derived herefrom,
the parties hereto hereby agree as follows:
1. Engagement. Holding and the Company hereby engage CD&R as a
consultant, and CD&R hereby agrees to provide financial and managerial advisory
services to Holding and the Company, all on the terms and subject to the
conditions set forth below.
2. Services, etc. (a) CD&R hereby agrees during the term of this
engagement to assist, advise and consult with the respective Boards of Directors
and management of Holding and the Company and their respective subsidiaries in
such manner and on such business, management and financial matters, and provide
such other financial and managerial advisory services, as may be reasonably
requested from time to time by the Boards of Directors of Holding and the
Company (the "Continuing Services"), including but not limited to assistance in:
(i) establishing and maintaining banking, legal and other business
relationships for the Company and its subsidiaries;
(ii) developing and implementing corporate and business strategy and
planning for the Company and its subsidiaries, including plans and
programs for improving operating, marketing and financial performance
and budgeting of future corporate investments;
(iii) arranging future debt and equity financings and refinancings; and
(iv) providing professional employees to serve as directors of Holding and
the Company.
(b) CD&R hereby agrees during the term of this engagement to provide the
Company and Holding financial advisory, investment banking and other similar
services (the "Transaction Services") with respect to any proposal for an
acquisition, merger, recapitalization or any other similar transaction directly
or indirectly involving Holding the Company and their subsidiaries and any other
person or entity (collectively, "Add-on Transactions").
(c) Holding and the Company will furnish CD&R with such information as
CD&R believes appropriate to its engagement hereunder (all such information so
furnished being referred to herein as the "Information"). Holding and the
Company recognize and confirm that (i) CD&R will use and rely primarily on the
Information and on information available from generally recognized public
sources in performing the services to be performed hereunder and (ii) CD&R does
not assume responsibility for the accuracy or completeness of the Information
and such other information.
(d) As used in this Agreement, "affiliate" means, with respect to any
person or entity, any other person or entity directly or indirectly controlling,
controlled by
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or under common control with such first person or entity and "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management policies of a person or entity by reason of
ownership of voting securities, by contract or otherwise.
(e) Notwithstanding anything in the foregoing to the contrary, the
following services are specifically excluded from the definitions of "Consulting
Services" and "Transaction Services":
(i) Accounting services rendered to Holding, the Company or CD&R by an
independent accounting firm or accountant (i.e., an accountant who is
not an employee of BRS);
(ii) Legal services to Holding, the Company or CD&R by an independent law
firm or attorney (i.e., an attorney who is not an employee of
CD&R); and
(iii) Actuarial services rendered to Holding, the Company or CD&R by an
independent actuarial firm or actuary (i.e., an actuary who is not an
employee of CD&R).
3. Compensation; Payment of Expenses. (a) The Company agrees to pay to
CD&R, as compensation for services rendered and to be rendered under this
Agreement pursuant to Section 2 hereof by CD&R hereunder, a fee of $500,000 per
year (the "Continuing Services Fee"), one quarter of which shall be payable
quarterly in advance on the first day of each of January, April, July and
October commencing on January 1, 2003. CD&R acknowledges that the Continuing
Services Fee payable by the Company to CD&R for the quarterly period commencing
January 1, 2003 has been paid by the Company in full. Such Continuing Services
Fee may be increased with the approval of a majority of the members of the
Company's Board of Directors who are not employees of Holding, the Company, CD&R
or any affiliate of CD&R (the "Disinterested Directors") but may not be
decreased without the prior written consent of CD&R. If any employee of CD&R
shall be elected to serve on the Board of Directors of Holding or the Company or
any of their affiliates (a "Designated Director"), in consideration of the
Continuing Services Fee being paid to CD&R, CD&R shall cause such Designated
Director to waive any and all fees to which such director would otherwise be
entitled as a director for any period for which the Continuing Services Fee or
any installment thereof is paid.
(b) If an employee of CD&R is appointed to an executive management
position (or a position of comparable responsibility), whether in addition to or
other than as a Designated Director, in the Company or Holding, then for the
period of such employee's service in such position the Continuing Services Fee
shall be increased by an amount to be determined by CD&R, such amount not to
exceed 100% of the Continuing Services Fee in effect at such time.
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(c) The Company agrees to pay to CD&R upon consummation of any Add-on
Transaction, as compensation for Transaction Services rendered by CD&R hereunder
with respect to such Add-on Transaction, a cash fee equal to 1.0% of the
Transaction Value of such Add-on Transaction (the "Add-on Fee"). Payment by the
Company of an Add-on Fee in excess of 1.0% of the Transaction Value of the
Add-on Transaction shall require the approval of a majority of the Disinterested
Directors, provided that an Add-on Fee shall not be payable in connection with
the sale by way of merger or otherwise of all or substantially all of the
outstanding shares of capital stock of Holding or the sale of all or
substantially all of the assets of Holding and its subsidiaries. As used herein,
the term "Transaction Value" means the total value of the Add-on Transaction,
including, without limitation, the aggregate amount of the cash funds or other
securities required to complete the Add-on Transaction (excluding any fees
payable pursuant to this Section 3(c)) including the amount of any indebtedness,
preferred stock or similar items assumed, refinanced or left outstanding. For
purposes of calculating the Add-on Fee, the value of any securities included in
the Transaction Value will be determined by the average of the last sales prices
for such securities on the five trading days ending five days prior to the
consummation of the Add-on Transaction, provided that if such securities do not
have an existing public trading market, the value of the securities shall be
their fair market value as mutually agreed between the Company and CD&R on the
day prior to consummation of the Add-on Transaction.
(d) The Company shall pay directly or reimburse CD&R for such reasonable
travel and other out-of-pocket expenses ("Expenses") as may be incurred by CD&R
and its employees and agents in the course or on account of rendering any
services hereunder, including but not limited to any fees and expenses of any
legal, accounting or other professional advisors to CD&R engaged in connection
with the services being provided hereunder and any expenses incurred by any
Designated Director in connection with the performance of his or her duties.
CD&R may submit monthly expense statements, which shall be payable within thirty
days.
4. Pro Rata Payment. Each of Holding, the Company, BRS and CD&R hereto
acknowledges that Holding and the Company entered into the BRS Consulting
Agreement with BRS as of the date hereof, and that pursuant to the terms of such
agreement, Holding and the Company shall be obligated to make payments to BRS of
the fees and expenses set forth therein. Each of Holding, the Company, BRS and
CD&R hereto agree that payments required to be made to CD&R under this Agreement
and payments required to be made to BRS under the BRS Agreement shall be made
pro rata and neither BRS nor CD&R shall receive a preference or priority with
respect to such payment unless BRS and CD&R otherwise agree in writing or unless
this Agreement or the BRS Agreement has terminated in accordance with the terms
hereof or thereof, respectively.
5. Term, etc. (a) This Agreement shall be in effect until, and shall
terminate upon, February 12, 2013, and thereafter, will be extended for
successive one year periods. This Agreement may be earlier terminated by either
party hereto upon 30 days' prior written notice to the other party hereto. The
provisions of this Agreement shall survive any termination of this Agreement,
except for the provisions of Section 1,
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Section 2(b), Section 2(a), the first sentence of Section 2(c) and (solely as to
any portion of any Continuing Services Fee, any Add-on Fee or any Expense not
paid or reimbursed prior to such termination and not required to be paid or
reimbursed thereafter pursuant to Section 5(c) hereof) Section 3 hereof.
(b) Upon any consolidation or merger, or any conveyance, transfer or
lease of all or substantially all of the assets of Holding or the Company as an
entirety, the successor corporation formed by such consolidation or into which
Holding or the Company is merged or to which such conveyance, transfer or lease
is made shall succeed to, and be substituted for, Holding or the Company under
this Agreement with the same effect as if such successor corporation has been a
party thereto. No such consolidation, merger or conveyance, transfer or lease of
all or substantially all of the assets of Holding or the Company shall have the
effect of terminating this Agreement or of releasing Holding or the Company or
any such successor corporation from its obligations hereunder.
(c) Upon any termination of this Agreement, any accrued and unpaid
installment of the Continuing Services Fee or portion thereof (pro rated, with
respect to the month in which such termination occurs, for the portion of such
month that precedes such termination), any accrued and unpaid Add-on Fee or
portion thereof and any unpaid and unreimbursed Expenses that shall have been
incurred prior to such termination (whether or not such Expenses shall then have
become payable), shall be immediately paid or reimbursed, as the case may be, by
the Company. In the event of the liquidation of the Company, all amounts due
CD&R hereunder shall be paid to CD&R before any liquidating distributions or
similar payments are made to stockholders of Holding or the Company.
6. Indemnification. (a) Holding and the Company confirm and reaffirm
their obligations pursuant to the Indemnification Agreement, dated as of
November 30, 1993, (the "Indemnification Agreement"), among Holding, the
Company, CD&R and The Clayton & Dubilier Private Equity Fund IV Limited
Partnership, as the same may be amended, waived, modified or supplemented from
time to time in accordance with the terms thereof. Without limiting the
generality of the foregoing, Holding and the Company confirm and agree that (a)
Holding and the Company shall indemnify, defend and hold harmless CD&R, the C&D
Fund (as defined in the Indemnification Agreement), C&D Associates (as defined
in the Indemnification Agreement) and each of the respective directors,
officers, principals, members, partners, employees, agents, advisors,
representatives, affiliates and controlling persons (within the meaning of the
Securities Act of 1933, as amended) of CD&R, the C&D Fund and C&D Associates
(collectively, "Indemnitees") from and against any and all claims, obligations,
liabilities (joint or several), causes of action, actions, suits, proceedings,
investigations, judgments, decrees, losses, damages, fees, costs and expenses
(including without limitation interest, penalties and fees and disbursements of
attorneys, accountants, investment bankers and other professional advisors)
(collectively, "Obligations"), whether incurred with respect to third parties or
otherwise, in any way resulting from, arising out of or in connection with,
based upon or relating to, the performance of the services contemplated hereby,
except to the extent that any such Obligation is found in a
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final judgment by a court having jurisdiction from which no further appeal may
be taken to have resulted from the gross negligence or intentional misconduct of
CD&R, (b) no Indemnitee shall have any liability (whether direct or indirect, in
contract or tort or otherwise) to Holding, the Company or their respective
security holders or creditors with respect to any Obligation in any way
resulting from, arising out of or in connection with, based upon or relating to,
the performance of the services contemplated hereby, except to the extent that
any such Obligation is found in a final judgment by a court having jurisdiction
from which no further appeal may be taken to have resulted from the gross
negligence or intentional misconduct of CD&R, and (c) the rights of each
Indemnitee to be indemnified under any agreement, document, certificate or
instrument or applicable law are independent of and in addition to any rights of
such Indemnitee under any other agreement, document, certificate or instrument
or applicable law.
(b) The Company hereby agrees to advance costs and expenses, including
attorneys' fees, incurred by CD&R (acting on its own behalf or, if requested by
any such Indemnitee other than itself, on behalf of such Indemnitee) or any
Indemnitee in defending any claim relating to any Obligation in advance of the
final disposition of such claim within 30 days of receipt from CD&R of (i) a
notice setting forth the amount of such costs and expenses (a "Payment Notice")
and (ii) an undertaking by or on behalf of CD&R or such Indemnitee to repay
amounts so advanced if it shall ultimately be determined that CD&R or such
Indemnitee is not entitled to be indemnified by the Company as authorized by
this Agreement. CD&R may submit Payment Notices to the Company monthly.
7. Independent Contractor Status. The parties agree that CD&R shall
perform services hereunder as an independent contractor, retaining control over
and responsibility for its own operations and personnel. Neither CD&R nor any of
its employees or agents shall, solely by virtue of the Agreement or the
arrangements hereunder, be considered employees or agents of Holding or the
Company nor shall any of them have authority to contract in the name of or bind
the Company or Holding, except (a) to the extent that any professional employee
of CD&R may be serving as an officer of the Company pursuant to Section 3(b)
hereof, (b) as expressly agreed to in writing by Holding or the Company and (c)
the Company hereby acknowledges and agrees that any agreements, arrangements or
understandings entered into by CD&R on behalf of the Company prior to the date
hereof in connection with the formation of the Company and the acquisition by
the Company of its business (including, but not limited to, any confidentiality
agreements, agreements with brokers or finders and any arrangements relating to
the financing of such acquisition) shall be obligations of the Company binding
on it to the same extent as such obligations may be binding on CD&R and the
Company shall fully perform, and shall indemnify and hold harmless CD&R from and
against, all such obligations pursuant to Section 6. Any duties of CD&R arising
out of its engagement to perform services hereunder shall be owed solely to
Holding and the Company.
8. Notices. Any notice or other communication required or permitted to
be given or made under this Agreement by one party to the other parties shall be
in writing and shall be deemed to have been duly given and effective (i) on the
date of
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delivery if delivered personally or (ii) when sent if sent by prepaid telegram,
or mailed first-class, postage prepaid, registered or certified mail, or
facsimile transmission as follows (or to such other address as shall be given in
writing by one party to the other parties in accordance herewith):
If to the Company to:
Remington Arms Company, Inc.
870 Remington Drive
P.O. Box 700
Madison, North Carolina 27025-0700
Fax Number: (336) 548-7779
Attention: Secretary
If to Holding, to it care of
the Company at the address set
forth above.
If to CD&R to:
Clayton, Dubilier & Rice, Inc.
126 East 56th Street
New York, New York 10022
Attention: Joseph L. Rice, III
Telephone: (212) 355-0740
Telecopy: (212) 752-7629
In any case, with a copy to:
Debevoise & Plimpton
919 Third Avenue
New York, New York 10022
Telecopy: (212) 909-6836
Attention: Paul S. Bird, Esq.
9. Entire Agreement. This Agreement, together with the Indemnification
Agreement (a) contain the complete and entire understanding and agreement of
CD&R, Holding and the Company with respect to the subject matter hereof, and (b)
supersede all prior and contemporaneous understandings, conditions and
agreements, oral or written, express or implied, in respect of the subject
matter hereof, including but not limited to the Original Agreement, the Amended
and Restated Agreement and in respect of the engagement of CD&R in connection
with the subject matter hereof. There are no representations or warranties of
CD&R in connection with this Agreement or the services to be provided hereunder,
except as expressly made and contained in this Agreement.
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10. Headings. The headings contained in this Agreement are for purposes
of convenience only and shall not affect the meaning or interpretation of this
Agreement.
11. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed an original and all of which shall together
constitute one and the same instrument.
12. Binding Effect; Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties to this Agreement and their respective
successors and assigns and to each Indemnitee, provided that none of CD&R,
Holding or the Company may assign any of its rights or obligations under this
Agreement without the express written consent of the other party hereto, except
(i) pursuant to Section 5(b) and (ii) CD&R may assign its rights and obligations
hereunder to any other person or entity controlled, directly or indirectly, by
any principal of CD&R, so long as such person or entity manages the C&D Fund or
any other private equity investment fund that, at such time, owns the Common
Stock held by the C&D Fund as of the date hereof. This Agreement is not intended
to confer any right or remedy hereunder upon any person other than the parties
to this Agreement and their respective successors and permitted assigns and each
Indemnitee.
13. Permissible Activities. Nothing herein shall in any way preclude CD&R
or its affiliates or its respective officers, directors and partners from
engaging in any business activities or from performing services for its or their
own account or for the account of others, including, without limitation,
companies which may be in competition with the business conducted by the Company
or Holding.
14. No Joint Obligations of CD&R and BRS. The obligations of CD&R
hereunder relate only to itself and not to BRS and any obligations of CD&R and
BRS under their respective consulting agreements with the Company and Holding
are several and not joint.
15. Governing Law. This Agreement shall be deemed to be a contract made
under, and is to be governed and construed in accordance with, the laws of the
State of New York, without regard to the conflict of laws principles or rules
thereof. Holding, the Company and CD&R hereby irrevocably submit to the
jurisdiction of the courts of the State of New York and the Federal courts of
the United States of America located in the State, City and County of New York
solely in respect of the interpretation and enforcement of the provisions of
this Agreement, and hereby waive, and agree not to assert, as a defense in any
action, suit or proceeding for the interpretation or enforcement hereof, that it
is not subject thereto or that such action, suit or proceeding may not be
brought or is not maintainable in such courts or that the venue thereof may not
be appropriate or that this Agreement may not enforced in or by such courts, and
the parties hereto irrevocably agree that all claims with respect to such action
or proceeding shall be heard and determined in such a New York State or Federal
court. Holding, the Company and CD&R hereby consent to and grant any such court
jurisdiction over the person of such parties and over the subject matter of any
such dispute and agree that mailing of
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process or other papers in connection with any such action or proceeding in the
manner provided in Section 8, or in such other manner as may be permitted by
law, shall be valid and sufficient service thereof.
16. Waiver of Jury Trial. Each party hereto acknowledges and agrees that
any controversy that may arise under this Agreement is likely to involve
complicated and difficult issues, and therefore it hereby irrevocably and
unconditionally waives any right it may have to a trial by jury in respect of
any litigation directly or indirectly arising out of or relating to this
Agreement, or the breach, termination or validity of this Agreement, or the
transactions contemplated by this Agreement. Each party certifies and
acknowledges that (a) no representative, agent or attorney of any other party
has represented, expressly or otherwise, that such other party would not, in the
event of litigation, seek to enforce the foregoing waiver, (b) it understands
and has considered the implications of this waiver, (c) it makes this waiver
voluntarily, and (d) it has been induced to enter into this Agreement by, among
other things, the mutual waivers and certifications contained in this Section
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17. Amendment; Waivers. No amendment, modification, supplement or
discharge of this Agreement, and no waiver hereunder, shall be valid or binding
unless set forth in writing and duly executed by the party or Indemnitee against
whom enforcement of the amendment, modification, supplement, discharge or waiver
is sought (and in the case of Holding and the Company, approved by resolution of
the Boards of Directors of Holding and the Company). Any such waiver shall
constitute a waiver only with respect to the specific matter described in such
writing and shall in no way impair the rights of the party or Indemnitee
granting such waiver in any other respect or at any other time. Neither the
waiver by any of the parties hereto or any Indemnitee of a breach of or a
default under any of the provisions of this Agreement, nor the failure by any
party hereto or any Indemnitee on one or more occasions, to enforce any of the
provisions of this Agreement or to exercise any right, powers or privilege
hereunder, shall be construed as a waiver of any other breach or default of a
similar nature, or as a waiver of any of such provisions, rights, power or
privileges hereunder. The rights and remedies herein provided are cumulative and
are not exclusive of any rights or remedies that any party or Indemnitee may
otherwise have at law or in equity or otherwise.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
CLAYTON, DUBILIER & RICE, INC.
By: /s/ Donald J. Gogel
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Name: Donald J. Gogel
Title: President
RACI HOLDING, INC.
By: /s/ Samuel G. Grecco
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Name: Samuel G. Grecco
Title: Secretary
REMINGTON ARMS COMPANY, INC.
By: /s/ Samuel G. Grecco
-------------------------------
Name: Samuel G. Grecco
Title: Secretary
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The undersigned is executing and delivering this Agreement solely for the
purposes of agreeing to Section 4 hereof.
BRUCKMANN, ROSSER, SHERRILL & CO. L.L.C.
By: /s/ Stephen Sherrill
-------------------------------
Name: Stephen Sherrill
Title: Managing Director
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