EXHIBIT 10.16
EXECUTION COPY
CONSULTING AGREEMENT
This 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"), Bruckmann, Rosser, Sherrill & Co. L.L.C. a Delaware
limited liability corporation ("BRS") and, for purposes of Section 4 only,
Clayton, Dubilier & Rice, Inc. ("CD&R").
W I T N E S S E T H:
WHEREAS, BRS Fund II is managed by BRS, and the general partner of BRS Fund
II is BRSE, L.L.C., a Delaware limited liability company (together with any
general partner of any other investment vehicle managed by BRS, "BRSE");
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 BRS Fund II,
pursuant to which, among other things, Holding issued to Bruckmann, Rosser,
Sherrill & Co. II, L.P. ("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"); and
WHEREAS, it is a condition to the closing of the Investment that the
parties enter into this Agreement;
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 BRS as a
consultant, and BRS 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) BRS 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; and
(iii) arranging future debt and equity financings and refinancings.
(b) BRS 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 BRS with such information
as BRS 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) BRS 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) BRS 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 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 BRS 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 BRS by an independent
law firm or attorney (i.e., an attorney who is not an employee of BRS);
and
(iii) Actuarial services rendered to Holding, the Company or BRS by an
independent actuarial firm or actuary (i.e., an actuary who is not an
employee of BRS).
3. Compensation; Payment of Expenses. (a) The Company agrees to pay
to BRS, as compensation for services rendered and to be rendered under this
Agreement pursuant to Section 2 hereof by BRS hereunder, a fee of $500,000 per
year (the "Continuing Services Fee") commencing upon the date of this Agreement,
one
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quarter of which shall be payable quarterly in advance on the first day of each
of January, April, July and October. Any Continuing Services Fees due for the
period commencing on the date of this Agreement through March 31, 2003 shall be
payable on the date hereof. 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, BRS or any affiliate of BRS (the
"Disinterested Directors") but may not be decreased without the prior written
consent of BRS.
(b) As used in this Agreement, "Designated Director" means an
employee of BRS elected to serve on the Board of Directors of Holding or the
Company or any of their affiliates. If an employee of BRS 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 BRS,
such amount not to exceed 100% of the Continuing Services Fee in effect at such
time.
(c) The Company agrees to pay to BRS upon consummation of any Add-on
Transaction, as compensation for Transaction Services rendered by BRS 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 BRS on the
day prior to consummation of the Add-on Transaction.
(d) The Company shall pay directly or reimburse BRS for such
reasonable travel and other out-of-pocket expenses ("Expenses") as may be
incurred by BRS 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 BRS 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. BRS may submit monthly expense statements, which shall be payable
within thirty days.
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4. Pro Rata Payment. Each of Holding, the Company, BRS and CD&R
hereto acknowledges that Holding and the Company entered into an Amended and
Restated Consulting Agreement with CD&R, dated January 1, 2001 (the "CD&R
Agreement"), and that pursuant to the terms of such agreement, Holding and the
Company shall be obligated to make payments to CD&R 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 BRS under this Agreement and payments required
to be made to CD&R under the CD&R 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
CD&R 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, 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 BRS
hereunder shall be paid to BRS before any liquidating distributions or similar
payments are made to stockholders of Holding or the Company.
6. Indemnification. (a) Holding and the Company confirm their
obligations pursuant to the Indemnification Agreement, dated as of the date of
this Agreement (the "Indemnification Agreement"), among Holding, the Company,
BRS and
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BRS Fund II, 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 BRS, the BRS
Fund (as defined in the Indemnification Agreement), BRSE (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 BRS, the BRS Fund and BRSE (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 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 BRS, (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
BRS, 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 BRS (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
BRS 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 BRS or such
Indemnitee to repay amounts so advanced if it shall ultimately be determined
that BRS or such Indemnitee is not entitled to be indemnified by the Company as
authorized by this Agreement. BRS may submit Payment Notices to the Company
monthly.
7. Independent Contractor Status. The parties agree that BRS shall
perform services hereunder as an independent contractor, retaining control over
and responsibility for its own operations and personnel. Neither BRS 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 BRS may be serving as an officer of the Company pursuant to Section 3(b)
hereof and (b) as expressly agreed to in
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writing by Holding or the Company. Any duties of BRS 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 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.
In either case, with a copy to:
Debevoise & Plimpton
919 Third Avenue
New York, New York 10022
Fax Number: (212) 909-6836
Attention: Paul S. Bird, Esq.
If to BRS to:
Bruckmann, Rosser, Sherrill & Co., L.L.C.
126 East 56th Street
New York, New York 10022
Fax Number: (212) 521-3799
Attention: Stephen C. Sherrill
With a copy (which shall not constitute notice to BRS) to:
Kirkland & Ellis
Citigroup Center
153 East 53rd Street
New York, New York 10022-4675
Fax Number: (212) 446-4900
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Attention: Kim Taylor, Esq.
9. Entire Agreement. This Agreement, together with the
Indemnification Agreement, (a) contain the complete and entire understanding and
agreement of BRS, 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 in respect of the
engagement of BRS in connection with the subject matter hereof. There are no
representations or warranties of BRS in connection with this Agreement or the
services to be provided hereunder, except as expressly made and contained in
this Agreement.
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 BRS,
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) BRS may assign its rights and obligations
hereunder to any other person or entity controlled, directly or indirectly, by
Bruce Bruckmann, Harold O. Rosser II, Stephen C. Sherrill, Thomas Baldwin,
and/or Paul Kaminski, so long as such person or entity manages BRS Fund II or
any other private equity investment fund that, at such time, owns the Common
Stock purchased by BRS Fund II under the Investment Agreement. 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
BRS 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 BRS
hereunder relate only to itself and not to CD&R and any obligations of BRS and
CD&R 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
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of New York, without regard to the conflict of laws principles or rules thereof.
Holding, the Company and BRS 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 BRS 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 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.
BRUCKMANN, ROSSER, SHERRILL & CO. L.L.C.
By: /s/ Stephen Sherrill
-----------------------------------
Name: Stephen Sherrill
Title: Managing Director
RACI HOLDING, INC.
By: /s/ Mark Little
-----------------------------------
Name: Mark Little
Title: Chief Financial Officer
REMINGTON ARMS COMPANY, INC.
By: /s/ Mark Little
-----------------------------------
Name: Mark Little
Title: Executive Vice President
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The undersigned is executing and delivering this Agreement solely for
the purposes of agreeing to Section 4 hereof.
CLAYTON, DUBILIER & RICE, INC.
By: /s/ Donald J. Gogel
-----------------------------------
Name: Donald J. Gogel
Title: President
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