<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____ TO _____
COMMISSION FILE NUMBER: 333-4520
RACI HOLDING, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 51-0350929
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
870 REMINGTON DRIVE
P.O. BOX 700
MADISON, NORTH CAROLINA 27025-0700
(Address of principal executive offices)
(Zip Code)
(336) 548-8700
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
<TABLE>
<S> <C>
Class A Common Stock, par value $.01 per share, outstanding at August 6, 1999 768,132 shares
Class B Common Stock, par value $.01 per share, outstanding at August 6, 1999 0 shares
</TABLE>
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RACI HOLDING, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Dollars in Millions, Except Per Share Data)
<TABLE>
<CAPTION>
JUNE 30, December 31,
1999 1998
-------- --------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets
Cash and Cash Equivalents $ 1.8 $ 4.9
Accounts Receivable Trade - net 90.9 63.0
Inventories 80.5 71.7
Supplies 10.5 10.6
Prepaid Expenses and Other Current Assets 10.9 9.6
Deferred Income Taxes 14.1 15.3
-------- --------
Total Current Assets 208.7 175.1
Property, Plant and Equipment - net 84.3 86.3
Intangibles and Debt Issuance Costs - net 86.5 88.7
Deferred Income Taxes 1.8 2.0
Other Noncurrent Assets 2.2 2.4
-------- --------
TOTAL ASSETS $ 383.5 $ 354.5
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts Payable $ 32.2 $ 28.2
Short-Term Debt 1.0 0.9
Current Portion of Long-Term Debt 27.0 24.9
Product and Environmental Liabilities 3.1 3.1
Other Accrued Liabilities 28.2 26.9
-------- --------
Total Current Liabilities 91.5 84.0
Long-Term Debt 129.0 122.0
Retiree Benefits 36.7 35.6
Product and Environmental Liabilities 9.8 9.4
Deferred Stock Payable 4.7 --
Commitments and Contingencies
Shareholders' Equity
Class A Common Stock, par value $.01; 1,250,000 shares
authorized, 768,132 issued and outstanding -- --
Class B Common Stock, par value $.01; 1,250,000 shares
authorized, none issued and outstanding -- --
Paid in Capital 77.6 76.0
Due from Shareholders (0.5) --
Retained Earnings 34.7 27.5
-------- --------
Total Shareholders' Equity 111.8 103.5
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 383.5 $ 354.5
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
2
<PAGE> 3
RACI HOLDING, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Dollars in Millions, Except Per Share Data)
<TABLE>
<CAPTION>
------------------------------------------------------------
UNAUDITED
------------------------------------------------------------
QUARTER ENDED JUNE 30, YEAR-TO-DATE JUNE 30,
------------------------- -------------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Sales (1) $ 95.0 $ 90.9 $ 185.5 $ 179.9
Cost of Goods Sold 65.1 59.4 125.3 119.7
------ ------ ------- -------
Gross Profit 29.9 31.5 60.2 60.2
Selling, General and Administrative
Expenses 15.1 15.9 31.8 31.3
Research and Development Expense 1.9 2.0 3.8 3.9
Other Expense 3.7 0.7 4.1 1.2
Restructuring and Nonrecurring Items 0.2 0.2 - (0.2)
------ ------ ------- -------
Operating Profit 9.0 12.7 20.5 24.0
Interest Expense 3.8 5.3 7.8 10.4
------ ------ ------- -------
Profit Before Income Taxes 5.2 7.4 12.7 13.6
Provision for Income Taxes 2.5 2.8 5.5 5.3
------ ------ ------- -------
Net Income $ 2.7 $ 4.6 $ 7.2 $ 8.3
====== ====== ====== =======
Per Share Data:
Basic Income Per Share $ 3.54 $ 6.05 $ 9.45 $ 10.92
====== ====== ====== =======
Diluted Income Per Share $ 3.45 $ 5.95 $ 9.22 $ 10.74
====== ====== ====== =======
Weighted Average Common Shares Outstanding (000's) 763 760 762 760
====== ====== ====== =======
Weighted Average Common Shares Outstanding and
Dilutive Potential Common Shares (000's) 782 773 781 773
====== ====== ====== =======
</TABLE>
(1) Sales are presented net of Federal Excise Taxes of $7.8 and $7.2 for
the quarter and $15.3 and $14.0 for the year-to-date periods ended June
30, 1999 and 1998, respectively.
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE> 4
RACI HOLDING, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Dollars in Millions)
<TABLE>
<CAPTION>
-----------------------
UNAUDITED
-----------------------
YEAR-TO-DATE JUNE 30,
-----------------------
1999 1998
----- ------
<S> <C> <C>
Operating Activities
Net Cash used in Operating Activities $(8.1) $(13.1)
----- ------
Investing Activities
Capital Expenditures (4.9) (1.5)
----- ------
Net Cash used in Investing Activities (4.9) (1.5)
----- ------
Financing Activities
Net Borrowings under Revolving Credit Facility 27.0 28.4
Repurchase of Senior Subordinated Notes (5.5) --
Proceeds from Issuance of Common Stock 0.7 --
Principal Payments on Long-Term Debt (12.4) (10.7)
Net Borrowings (Payments) on Short-Term Debt 0.1 (0.5)
----- ------
Net Cash provided by Financing Activities 9.9 17.2
----- ------
Increase (Decrease) in Cash and Cash Equivalents (3.1) 2.6
Cash and Cash Equivalents at Beginning of Period 4.9 0.6
----- ------
Cash and Cash Equivalents at End of Period $ 1.8 $ 3.2
===== ======
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE> 5
RACI HOLDING, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Shareholders' Equity
(Dollars in Millions)
<TABLE>
<CAPTION>
TOTAL
PAID-IN DUE FROM RETAINED SHAREHOLDERS'
CAPITAL SHAREHOLDERS EARNINGS EQUITY
------- ------------ -------- -------------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1998 $76.0 $ -- $27.5 $103.5
----- ----- ----- ------
Net Income (unaudited) -- -- 7.2 7.2
Issuance of 1,800 shares of Common
Stock under the 1994 Directors'
Stock Plan (unaudited) 0.4 -- -- 0.4
Purchase of 6,332 shares of Common
Stock under the 1999 Stock Incentive
Plan (unaudited) 1.2 (0.5) -- 0.7
----- ----- ----- ------
BALANCE, JUNE 30, 1999 (UNAUDITED) $77.6 $(0.5) $34.7 $111.8
===== ===== ===== ======
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE> 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Data)
NOTE 1 - BASIS OF PRESENTATION
The condensed consolidated financial statements of RACI Holding, Inc.
("Holding") include the accounts of its subsidiary, Remington Arms Company, Inc.
("Remington") and Remington's wholly owned subsidiary, Remington International,
Ltd. (together with Remington and Holding, the "Company"). Holding has no
material assets other than its investment in Remington. All intercompany
accounts and transactions have been eliminated in consolidation.
The accompanying unaudited interim condensed consolidated financial
statements of Holding have been prepared by the Company in accordance with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X, and accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of items of a normal recurring
nature) considered necessary for a fair presentation have been included.
Operating results for the six month period ended June 30, 1999 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1999.
Pursuant to an asset purchase agreement (the "Asset Purchase
Agreement"), on December 1, 1993, the Company acquired certain assets and
assumed certain liabilities (the "Acquisition") of the Sporting Goods Business
formerly operated by E. I. du Pont de Nemours and Company ("DuPont") and one of
DuPont's subsidiaries (together with DuPont, the "Sellers").
These condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements of RACI Holding,
Inc. and Subsidiaries as of and for the year ended December 31, 1998.
Certain reclassifications were made to the prior period's financial
information to conform with the current presentation format.
NOTE 2 - INVENTORIES
Inventories consisted of the following at:
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
----------- -----------
(Unaudited)
<S> <C> <C>
Raw Materials $ 13.4 $ 10.7
Semi-Finished Products 16.9 17.4
Finished Product 50.2 43.6
------ ---------
Total $ 80.5 $ 71.7
====== =========
</TABLE>
NOTE 3 - LONG-TERM DEBT
Long-term debt consisted of the following at:
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
----------- -----------
(Unaudited)
<S> <C> <C>
Credit Agreement:
Term Loans $ 38.6 $ 50.0
Revolving Credit Facility 27.0 -
9.5% Senior Subordinated Notes due 2003 87.4 92.9
Capital Lease Obligations 2.5 3.5
Other 0.5 0.5
--------- ---------
Subtotal 156.0 146.9
Less: Current Portion 27.0 24.9
--------- ---------
Total $ 129.0 $ 122.0
========= =========
</TABLE>
6
<PAGE> 7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Data)
NOTE 4 - RESTRUCTURING
The Company recorded charges for restructuring in 1996 of $4.9. The
reserve balance of $0.2 included in other accrued liabilities in the
accompanying balance sheet at December 31, 1998 was reversed in February 1999 to
reflect changes between the amount originally estimated and the actual amount
incurred.
NOTE 5 - INCOME PER SHARE
The basic and diluted income per share was determined as follows:
<TABLE>
<CAPTION>
(Unaudited)
-----------
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Basic Income Per Share:
Net Income Available to Common Shareholders $ 2.7 $ 4.6 $ 7.2 $ 8.3
Weighted Average Common Shares 763,296 760,000 761,666 760,000
Basic Income Per Share $ 3.54 $ 6.05 $ 9.45 $ 10.92
Diluted Income Per Share:
Net Income Available to Common Shareholders $ 2.7 $ 4.6 $ 7.2 $ 8.3
Weighted Average Common Shares 763,296 760,000 761,666 760,000
Effect of Outstanding Options 18,983 12,655 18,983 12,655
Weighted Average Common Shares and Dilutive
Potential Common Stock 782,279 772,655 780,649 772,655
Diluted Income Per Share $ 3.45 $ 5.95 $ 9.22 $ 10.74
Options Outstanding at June 30, 77,460 37,965 77,460 37,965
</TABLE>
NOTE 6 - DEFERRED STOCK PAYABLE
As of June 30, 1999, deferred stock payable consists of:
(1) 7,912 deferred shares of Class A Common Stock, par value $.01
per share, of Holding ("Common Stock") priced at $200 per
share and issued to certain employees in lieu of 1998
incentive compensation ($1.6),
(2) 14,560 matching deferred shares of Common Stock granted (or
likely to be granted) to certain employees ($2.9), and
(3) 1,250 matching deferred shares of Common Stock granted to a
Director ($0.2).
NOTE 7 - STOCK PURCHASE AND OPTION PLAN
On May 14, 1999, the board of directors of Holding adopted the RACI
Holding, Inc. Stock Incentive Plan (the "1999 Stock Incentive Plan"). Under the
1999 Stock Incentive Plan, the Company reserved 87,900 shares of Common Stock
for issuance. The 1999 Stock Incentive Plan provides for (1) stock purchase
rights to purchase up to 29,300 shares of Common Stock or deferred share awards,
(2) options to purchase up to 40,725 shares of Common Stock and (3) up to 17,875
additional deferred share awards.
During the second quarter of 1999, the Company:
(1) issued 6,332 shares of Common Stock to certain employees and a
Director at a price of $200 per share,
(2) granted 7,912 deferred shares to certain employees in lieu of
1998 incentive compensation priced at $200 per share, and
(3) granted (or likely to be granted) 15,810 deferred share
awards to certain employees and a Director, at no cost, which
resulted in a charge of approximately $3.1,
7
<PAGE> 8
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Data)
(4) granted 15,773 options to purchase Common Stock to certain
employees at an exercise price of $200 per share. Of these
options, 3,079 options vest ratably over five years and expire
in 2009 and 12,694 options vest based on the financial
performance of the Company in 1999 and 2000, but no later than
2008.
In addition, the Company issued 1,800 shares of Common Stock to
directors on April 27, 1999 under the 1994 Directors' Stock Plan.
NOTE 8 - SEGMENT INFORMATION
Information on Segments:
<TABLE>
<CAPTION>
(Unaudited)
------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ------------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Sales:
Hunting/Shooting Sports $ 80.8 $ 74.7 $ 158.5 $ 150.8
All Other 14.2 16.2 27.0 29.1
--------- --------- --------- ---------
Consolidated Net Sales $ 95.0 $ 90.9 $ 185.5 $ 179.9
========= ========= ========= =========
EBITDA:
Hunting/Shooting Sports $ 13.7 $ 12.0 $ 26.6 $ 25.0
All Other 3.3 4.4 6.0 7.0
--------- --------- --------- ---------
Consolidated EBITDA $ 17.0 $ 16.4 $ 32.6 $ 32.0
========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
-------- --------
(Unaudited)
<S> <C> <C>
Assets:
Hunting/Shooting Sports $ 231.0 $ 195.4
All Other 152.5 159.1
-------- --------
Consolidated Assets $ 383.5 $ 354.5
======== ========
</TABLE>
Reconciliation of Reportable Segments:
<TABLE>
<CAPTION>
(Unaudited)
-----------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Consolidated EBITDA $ 17.0 $ 16.4 $ 32.6 $ 32.0
Less: Interest Expense 3.8 5.3 7.8 10.4
Depreciation and Amortization (1) 3.9 3.9 7.8 7.8
Other Noncash Charges 3.9 (0.4) 4.3 0.4
Nonrecurring and Restructuring Items 0.2 0.2 -- (0.2)
------- ------- ------- -------
11.8 9.0 19.9 18.4
------- ------- ------- -------
Consolidated Income from Continuing
Operations Before Taxes $ 5.2 $ 7.4 $ 12.7 $ 13.6
======= ======= ======= =======
</TABLE>
(1) Excludes amortization of deferred financing costs of $0.5 and $0.5 for the
quarter, and $0.8 deferred financing costs and $0.2 loss on early extinguishment
of debt and $0.9 deferred financing costs for the year-to-date periods ended
June 30, 1999 and 1998, respectively, which were included in interest expense.
8
<PAGE> 9
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Data)
NOTE 9 - FINANCIAL POSITION AND RESULTS OF OPERATIONS OF HOLDING AND REMINGTON
The following condensed consolidating financial data provides
information regarding the financial position and results of operations of
Holding and its wholly owned subsidiary, Remington, including Remington's wholly
owned subsidiary Remington International, Ltd. Separate financial statements of
Holding are not presented because management has determined that they would not
be material to holders of the Company's public securities, Remington's 9.5%
Senior Subordinated Notes due 2003, Series B (the "Notes"). Further, the Notes
are fully and unconditionally guaranteed by Holding.
RACI HOLDING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
June 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
RACI
Holding,
Inc. and
Holding Remington Eliminations Subsidiaries
------- --------- ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets $ -- $ 208.7 $ -- $ 208.7
Receivable from Remington 0.9 -- 0.9 --
Noncurrent Assets 110.9 174.8 110.9 174.8
-------- -------- -------- --------
Total Assets $ 111.8 $ 383.5 $ 111.8 $ 383.5
======== ======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities $ -- $ 91.5 $ -- $ 91.5
Payable to RACI Holding, Inc. -- 0.9 0.9 --
Noncurrent Liabilities -- 180.2 -- 180.2
Shareholders' Equity 111.8 110.9 110.9 111.8
-------- -------- -------- --------
Total Liabilities and
Shareholders' Equity $ 111.8 $ 383.5 $ 111.8 $ 383.5
======== ======== ======== ========
</TABLE>
RACI HOLDING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
December 31, 1998
<TABLE>
<CAPTION>
RACI
Holding,
Inc. and
Holding Remington Eliminations Subsidiaries
------- --------- ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets $ -- $ 175.1 $ -- $ 175.1
Receivable from Remington 0.9 -- 0.9 --
Noncurrent Assets 102.6 179.4 102.6 179.4
-------- -------- -------- --------
Total Assets $ 103.5 $ 354.5 $ 103.5 $ 354.5
======== ======== ======== ========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current Liabilities $ -- $ 84.0 $ -- $ 84.0
Payable to RACI Holding, Inc. -- 0.9 0.9 --
Noncurrent Liabilities -- 167.0 -- 167.0
Shareholders' Equity 103.5 102.6 102.6 103.5
-------- -------- -------- --------
Total Liabilities and
Shareholders' Equity $ 103.5 $ 354.5 $ 103.5 $ 354.5
======== ======== ======== ========
</TABLE>
9
<PAGE> 10
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Data)
RACI HOLDING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
RACI
Holding,
Inc. and
Holding Remington Eliminations Subsidiaries
------- --------- ------------ ------------
<S> <C> <C> <C> <C>
QUARTER ENDED
JUNE 30, 1999
Sales $ -- $ 95.0 $ -- $ 95.0
Gross Profit -- 29.9 -- 29.9
Equity in Earnings of Subsidiary 2.7 -- 2.7 --
Net Income 2.7 2.7 2.7 2.7
QUARTER ENDED
JUNE 30, 1998
Sales $ -- $ 90.9 $ -- $ 90.9
Gross Profit -- 31.5 -- 31.5
Equity in Earnings of Subsidiary 4.6 -- 4.6 --
Net Income 4.6 4.6 4.6 4.6
</TABLE>
RACI HOLDING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
RACI
Holding,
Inc. and
Holding Remington Eliminations Subsidiaries
------- --------- ------------ ------------
<S> <C> <C> <C> <C>
SIX MONTHS ENDED
JUNE 30, 1999
Sales $ -- $ 185.5 $ -- $ 185.5
Gross Profit -- 60.2 -- 60.2
Equity in Earnings of Subsidiary 7.2 -- 7.2 --
Net Income 7.2 7.2 7.2 7.2
SIX MONTHS ENDED
JUNE 30, 1998
Sales $ -- $ 179.9 $ -- $ 179.9
Gross Profit -- 60.2 -- 60.2
Equity in Earnings of Subsidiary 8.3 -- 8.3 --
Net Income 8.3 8.3 8.3 8.3
</TABLE>
NOTE 10 - COMMITMENTS AND CONTINGENCIES
The Company is subject to various lawsuits and claims with respect to
product liabilities, governmental regulations and other matters arising in the
normal course of business. Under the Asset Purchase Agreement, the Company
generally bears financial responsibility for all product liability cases and
claims relating to occurrences after the closing of the Acquisition, except that
the Sellers remain responsible for certain costs in connection with cases and
claims relating to certain shotguns, and for all cases and claims relating to
discontinued products. Although it is difficult to forecast the outcome of
litigation, the Company does not believe, in light of relevant circumstances
(including the current availability of insurance for personal injury and
property damage with respect
10
<PAGE> 11
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Data)
to cases and claims involving occurrences arising after the Acquisition, its
accruals for the uninsured costs of such cases and claims and the Sellers'
retention of liability or agreement to be responsible for certain product
liability costs), that the outcome of all pending product liability cases and
claims will be likely to have a material adverse effect upon the financial
condition or results of operations of the Company. Nonetheless, in part because
of the uncertainty as to the nature and extent of manufacturer liability for
personal injury due to alleged product defects, there can be no assurance that
the Company's resources will be adequate to cover future product liability
occurrences, cases or claims, in the aggregate, or that such a material adverse
effect will not result therefrom. Because of the nature of its products, the
Company anticipates that it will continue to be involved in product liability
litigation in the future.
NOTE 11 - RECENT ACCOUNTING DEVELOPMENTS
During 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 requires all
entities to recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. In
June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments
and Hedging Activities-Deferral of the Effective Date of FASB Statement No.
133-an amendment of FASB Statement No. 133", that revises SFAS No. 133 to become
effective in the first quarter of fiscal 2001. The Company is evaluating the
provisions of SFAS No. 133 and No. 137, but the impact, if any, of their
adoption has not yet been determined.
11
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the accompanying Condensed Consolidated Financial Statements and related
notes of Holding and its subsidiary, Remington and Remington's wholly owned
subsidiary, Remington International, Ltd., and with the Company's audited
consolidated financial statements as of and for the year ended December 31,
1998, on file with the Securities and Exchange Commission. The results of
operations for the six month period ended June 30, 1999 are not necessarily
indicative of results that may be expected for the year ending December 31,
1999, in part due to the seasonality of the Company's business.
BUSINESS TRENDS AND INITIATIVES
The markets in which the Company competes are highly competitive.
Product image, quality and innovation are the dominant competitive factors in
firearms products and price is the dominant factor in ammunition products. While
the Company intends to respond to competitive pressures, such responses may
affect quarterly results. The Company believes that the market for firearms and
ammunition is a mature market, which the Company expects will remain flat, at
least in the near term.
Although the Company believes that consumer concerns about regulation
have not had a significant influence on the market for its firearms and
ammunition products for the periods presented herein, there can be no assurance
that the regulation of firearms and ammunition will not become more restrictive
in the future and that any such development would not adversely affect these
markets or the Company. See "-Regulatory Developments" and "Legal Proceedings."
In light of market constraints on sales growth opportunities and its
liquidity and working capital needs, the Company continues to focus on
increasing profitability by increasing brand name awareness, introducing new
products and containing costs. The Company continues to review all aspects of
its operations with a view towards managing costs in response to competitive
pressures.
RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 1999 AS
COMPARED TO THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 1998
Sales. Sales for the second quarter of 1999 were $95.0 million, an
increase of $4.1 million, or 4.5%, from 1998 second quarter sales.
Hunting/Shooting Sports sales were $80.8 million for the second quarter of 1999,
an increase of $6.1 million, or 8.2%, from 1998 second quarter sales. Sales for
the first six months of 1999 were $185.5 million, an increase of $5.6 million,
or 3.1%, from the same period in 1998. Year-to-date Hunting/Shooting Sports
sales were $158.5 million for the first six months of 1999, an increase of $7.7
million, or 5.1%, from sales in the first six months of 1998.
Firearms sales increased $4.0 million, or 10.0%, to $44.0 million for
the second quarter of 1999 from the second quarter of 1998, primarily resulting
from higher sales volumes, mainly in shotguns, partly offset by softness in
demand for certain higher-priced specialty rifles. Year-to-date firearms sales
were $93.2 million, an increase of $5.3 million, or 6.0%, from the same period
in 1998, primarily as a result of the same factors underlying the second quarter
firearms sales results.
Ammunition sales for the second quarter of 1999 were $36.8 million, an
increase of $2.1 million, or 6.1%, from comparable 1998 sales, primarily as a
result of increased sales volumes of all product categories except higher-priced
centerfire rifle ammunition, which was lower this year solely as a result of
last year's second quarter centerfire rifle sales program initiatives. This
year's increase in sales volumes was mostly offset by price concessions due to
competitive pressures in the marketplace. Sales for the first six months of 1999
were $65.3 million, an increase of $2.4 million, or 3.8%, from the same period
in 1998, primarily due to the same factors underlying the second quarter
ammunition sales results.
Sales of all other products, including fishline, accessories, targets
and powder metal products, for the second quarter of 1999 declined $2.0 million,
or 12.3%, from the second quarter of 1998, primarily due to softness in demand
for fishline products. Year-to-date sales were $27.0 million, or 7.2%, lower
than the comparable 1998 period sales, primarily as a result of that softening
in demand combined with an unfavorable mix of lower-priced fishline products.
12
<PAGE> 13
Cost of Goods Sold. Cost of goods sold for the second quarter of 1999
was $65.1 million, an increase of $5.7 million, or 9.6%, versus the second
quarter of 1998. For the first six months of 1999, cost of goods sold increased
$5.6 million, or 4.7%, to $125.3 million from $119.7 million for the same period
in 1998. The increase in both the quarter and year-to-date periods principally
was due to increased sales volume in Hunting/Shooting Sports, offset in part by
favorable commodity prices and reductions in other manufacturing costs. As a
percentage of sales, cost of goods sold for the second quarter of 1999 increased
to 68.5% from 65.3% and for the first six months of 1999 increased to 67.5% from
66.5% for the same periods in 1998. These increases, as a percentage of sales,
are due mainly to the increased volumes of lower margin ammunition products,
partially offset by higher volumes of a favorable mix of firearms products.
Operating Expenses. Operating expenses consist of selling, general and
administrative expense, research and development expense, restructuring and
nonrecurring items and other income and expense. Operating expenses for the
second quarter of 1999 were $20.9 million, an increase of $2.1 million, or
11.2%, from $18.8 million for the second quarter of 1998. Year-to-date operating
expenses for 1999 were $39.7 million, an increase of $3.5 million, or 9.7%, from
$36.2 million for the same period of 1998.
Selling, general and administrative expenses for the second quarter of
1999 were $15.1 million, a decrease of $0.8 million, or 5.0%, from the second
quarter of 1998, primarily as a result of reduced legal expense. Year-to-date
selling, general and administrative expenses were $31.8 million, a $0.5 million
increase from $31.3 million in the prior year-to-date period primarily due to
planned increases in marketing communications spending and increases in
provision for bad debt expense, mostly offset by the savings realized in the
second quarter of 1999 described above.
Restructuring and nonrecurring items include $0.2 million in the second
quarter of 1999 for nonrecurring professional fees related to a transaction that
was not consummated, and reserve reductions of $0.2 million in the first quarter
of 1999 to eliminate estimated restructuring accruals not realized.
Other expense for the quarter and year-to-date periods ended June 30,
1999 includes $3.1 million for the Company's portion of expenses incurred in
connection with the issuance of stock and the grant of options under the 1999
Stock Incentive Plan. See Note 7 of the Notes to Condensed Consolidated
Financial Statements herein.
Interest Expense. Interest expense for the quarter ended June 30, 1999
was $3.8 million, a decrease of $1.5 million, or 28.3%, from the second quarter
of 1998. Year-to-date interest expense was $7.8 million as compared to $10.4
million in the prior year-to-date period. The decrease in interest expense for
the periods was primarily a result of a reduction in average outstanding debt
and, to a lesser extent, reductions in the interest rate charged under the
credit agreement, dated as of November 30, 1993, as amended, among Remington and
certain lending institutions (the "Credit Agreement"), related to improved
financial performance. See "-Liquidity and Capital Resources - Liquidity."
Provision for Income Taxes. The Company's effective tax rate was 43.3%
for year-to-date 1999 and 39.0% during the comparable prior year period. The
effective rates for 1999 and 1998 exceed the federal statutory rate of 35% due
primarily to the impact of state income taxes and nondeductible expenses.
Net Income. Net income for the second quarter of 1999 was $2.7 million,
a decrease of $1.9 million from the second quarter 1998. Net income for the six
months ended June 30, 1999 was $7.2 million, a decrease of $1.1 million from the
1998 net income of $8.3 million, due primarily to the factors discussed above.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows. Net cash used in operating activities for the six month
period ended June 30, 1999 was $8.1 million, resulting primarily from increases
in accounts receivable of $27.9 million and in inventories of $8.8 million,
partly offset by net income adjusted for $16.7 million of noncash items and an
increase in accounts payable and other accrued liabilities of $4.7 million.
Accounts receivable increased to $90.9 million at June 30, 1999 principally due
to approximately $34.6 million of firearms sales on extended payment terms.
These terms provide cash discount incentives and require payment by October
1999. The terms are granted to customers consistent with industry-wide programs
and with the Company's prior years' experience. The Company intends to apply the
proceeds from these receivables to the outstanding balance on its revolving
credit facility. Net cash used in investing activities in the first six months
of 1999 was $4.9 million, consisting primarily of capital expenditures. Net cash
provided by financing activities during the first six months of 1999 was $9.9
million, primarily resulting
13
<PAGE> 14
from borrowing under the revolving credit facility of $27.0 million and proceeds
from issuance of Common Stock of $0.7 million, partly offset by $12.4 million of
principal payments on outstanding indebtedness and the repurchase of
approximately $5.5 million of the Notes, at an average price of 99.8% of the
face value on the open market. From time to time, the Company may continue to
repurchase additional amounts of the Notes on the open market.
At present, the principal sources of liquidity for the Company's
business and operating needs are internally generated funds from its operations
and revolving credit borrowings under the Credit Agreement. The Credit Agreement
contains various default provisions and affirmative and negative covenants,
including a negative pledge with respect to the Company's unencumbered assets,
and certain financial covenants that require the Company to meet certain
financial ratios and tests. As of June 30, 1999, the Company was in compliance
in all material respects with the financial covenants under the Credit
Agreement. The Company believes that it will be able to meet its debt service
obligations and fund its operating requirements with cash flow from operations
and revolving credit borrowings prior to the maturity of the revolving credit
facility, although no assurance can be given in this regard. In addition, the
Company has implemented certain programs and initiatives in order to improve
cash flow from operations. The Company expects that it will have to replace the
revolving credit facility and refinance any outstanding amounts thereunder upon
its maturity on December 31, 2000. No assurance can be given that the Company
will be able to obtain such a replacement working capital facility or refinance
such amounts on terms acceptable to the Company.
Working Capital. Working capital increased to $117.2 million at June
30, 1999 from $91.1 million at December 31, 1998, primarily as a result of the
increases in accounts receivable and inventories, partly offset by the increase
in accounts payable and other accrued liabilities. See "-Cash Flows." The
seasonality of the Company's business causes accounts receivable and inventories
generally to be higher in the first three quarters of the year. See
"-Seasonality." The Company continues to focus on working capital management,
including the collection of accounts receivable, maintaining inventory levels in
line with sales projections and management of accounts payable.
Capital Expenditures. Capital expenditures for the six months ended
June 30, 1999 were $4.9 million, including approximately $2.8 million for new
equipment related to the manufacture of firearms, as well as replacement
equipment and improvement projects concentrated on enhancing the operating
efficiency throughout existing facilities.
Liquidity. The Company incurred substantial indebtedness in connection
with the Acquisition. As of June 30, 1999, the Company had outstanding $156.0
million of indebtedness, consisting of approximately $87.4 million ($87.7
million face amount) of the Notes, $38.6 million in term loan borrowings and
$27.0 million in revolving credit borrowings under the Credit Agreement, $2.5
million in capital lease obligations and $0.4 million of other long-term debt.
As of June 30, 1999, the Company also had aggregate letters of credit
outstanding of $4.0 million. The Company's revolving credit facility had $120.1
million available for borrowing as of June 30, 1999.
SEASONALITY
The Company produces and markets a broad range of firearms and
ammunition products used in various shooting sports. Several models of the
Company's shotguns and several types of ammunition are intended for target
shooting that generally occurs in the "off season." The majority of the
Company's firearms and ammunition products, however, are manufactured for
hunting use. As a result, sales of the Company's products are seasonal and
concentrated toward the fall hunting season. The Company follows the industry
practice of selling firearms pursuant to a "dating" plan allowing the customer
to buy the products commencing at the beginning of the Company's dating plan
year and pay for them on extended terms. The Company believes that this dating
plan has partially offset the seasonality of the Company's business by shifting
some firearms sales to the first quarter.
RECENT ACCOUNTING DEVELOPMENTS
During 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 requires all
entities to recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. In
June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments
and Hedging Activities-Deferral of the Effective Date of FASB Statement No.
133-an amendment of FASB Statement No. 133", that revises SFAS No. 133 to become
effective in the first quarter of fiscal 2001. The Company is evaluating the
provisions of SFAS No. 133 and No. 137, but the impact, if any, of their
adoption has not yet been determined.
14
<PAGE> 15
YEAR 2000 COMPLIANCE
The year 2000 issue is the result of programming code that was written
to use only two digits to define calendar year dates. As a result, computers,
software and other equipment that include such programming code could fail to
operate or to produce correct results.
In 1995, the Company completed the first phase of replacing its
computer systems with an enterprise-wide, fully-integrated system from SAP
America, Inc., that, upon implementation, will handle accounts payable, accounts
receivable, general ledger, fixed assets, sales and distribution, plant
maintenance and certain manufacturing systems. This system will eliminate most
stand-alone legacy systems and result in all facilities operating within the
same application software package. The new system accommodates the dating
changes necessary to permit correct recording of dates for the year 2000 and
later years. Systems that will not be replaced with the SAP software include
human resources and payroll, which are already year 2000 compliant.
The Company has also commenced a year 2000 project to address the
Company's remaining systems, including both information technology and
non-information technology systems. The work plan developed by the Company has
four phases: site analysis, site assessment, testing and implementation. In the
site analysis phase, which has been completed, the Company identified primary
areas of concern such as software, networks, products, production equipment,
trucking, telecommunications, customers, vendors, and other third parties such
as banks and government agencies to be evaluated. Appropriate people at the
Company's various facilities were asked to rank these areas at their facility as
critical, which might include a single source supplier, somewhat critical, such
as a preferred supplier, or not critical, where several alternatives are
available.
The site assessment phase, which consisted of on-site visits to
determine which of the previously-identified areas of concern needed to be
addressed at each facility, has been completed for both information technology
and non-information technology systems at all facilities. The Company identified
70 customers, representing approximately 80% of its 1998 sales, from whom it
requested information on their year 2000 compliant status. The Company also
contacted approximately 380 vendors, which supply approximately 90% of the raw
materials and finished goods used by the Company, as well as banks, health care
and service providers. The initial surveying of these significant third parties
was completed in November 1998. As of June 30, 1999, the Company has received
positive responses from 95% of the vendors that are critical to the Company's
operations. The Company is seeking alternative sources to supply the necessary
raw materials currently provided by the remaining 5% of the vendors. Based on
responses received from customers with whom the Company does business
electronically, the Company has conducted transaction tests utilizing electronic
data interchange for 85% of its customers. The Company expects to complete the
testing of the remaining customers during the third and fourth quarters of 1999.
The Company has completed the testing for year 2000 compliant dates of
existing equipment at all of its facilities for both information technology
systems and non-information technology systems, including microcontrollers used
in plant operations. The Company believes that the existing equipment will be
able to perform all critical functions into the year 2000 on a basis comparable
to their current operation.
In the implementation phase, the Company will replace non-compliant
systems with tested compliant systems. The Company has begun implementing year
2000 compliant information technology and non-information technology systems at
all of its facilities and has completed the implementation phase related to
manufacturing operations. The Company expects to complete the implementation
phase related to parts and repairs during the third quarter of 1999. The Company
estimates that, with respect to its information technology systems and
non-information technology systems that were not replaced by the installation of
the SAP software, it has completed approximately 90% of the reprogramming or
replacement necessary to upgrade these systems to be year 2000 compliant. The
Company's telecommunications systems have been upgraded and are year 2000
compliant.
Due to the implementation of the new computer system in 1995, costs
related specifically to year 2000 compliance, including allocation of internal
salaries and related costs, are estimated to be less than $1.0 million. The
Company estimates that it has spent less than $0.4 million on the year 2000
project to date. Costs of this project have been satisfied from the Company's
cash flows and have been expensed as incurred except for hardware, which has
been capitalized. Accordingly, the Company does not expect that the cost of year
2000 compliance will be material to its financial condition, results of
operations or cash flows.
15
<PAGE> 16
While the Company currently believes its year 2000 project addresses its
material areas of concern, the failure to correct material year 2000 problems
could result in an interruption in, or a failure of, certain normal business
activities or operations. Such failures could materially and adversely affect
the Company's results of operations, liquidity and financial condition. Due to
the general uncertainty inherent in the year 2000 problem, resulting in part
from the uncertainty of the year 2000 readiness of third-party suppliers and
customers, the Company is unable to determine at this time whether the
consequences of year 2000 failures could have a material impact on the Company's
results of operations, liquidity or financial condition. The Company believes
that, with the implementation of new business systems and completion of the
project as scheduled, the possibility of significant interruptions of normal
operations should be reduced. Although the Company recognizes that some risks
still exist, it has not yet adopted any formal contingency plan in the event the
Company is not able to complete its year 2000 project in a timely manner. In the
ensuing months, the Company will continue to review and evaluate all known risks
associated with the completion of the year 2000 project and take action as
deemed appropriate. In the event the Company does not complete all phases of its
year 2000 systems project by December 31, 1999, the most likely worst case
scenario would be that certain accounting functions related to the manufacturing
operations at the Ilion, New York facility would have to be processed outside of
the SAP software until the SAP software was functional at that site.
The discussion of the Company's efforts and expectations relating to
year 2000 compliance are forward-looking statements and should be read in
conjunction with the Company's disclosures under the heading: "Information
Concerning Forward-Looking Statements." The Company's ability to achieve year
2000 compliance and the costs associated therewith could be adversely impacted
by, among other things, the availability of resources, the ability of customers,
vendors or third parties to achieve year 2000 compliance and unanticipated
problems in the testing and implementation phases of its year 2000 project.
REGULATORY DEVELOPMENTS
The Brady Handgun Violence Prevention Act of 1993 (the "Brady Bill")
was extended to shotguns and rifles in November 1998. The extension of the Brady
Bill mandates a new national system of instant background checks for all firearm
buyers, to be operated by the Federal Bureau of Investigation and state
governments, that replaces the system of checks on handgun buyers that has been
in place at the state and local level since February 1994.
In addition, certain federal, state and local governments have
considered various measures designed to restrict the distribution of firearms,
particularly handguns and so-called "assault weapons." Although the Company does
not produce "assault weapons" (as defined in the federal law enacted in 1994) or
handguns, there can be no assurance that any such measures, if enacted, would
not have a material adverse effect on the financial condition or results of
operations of the Company.
The Company believes that recent federal, state and local legislation
relating to the regulation of firearms and ammunition has not had a material
adverse effect on its sale of these products or its financial condition, results
of operations or cash flows during the periods presented. However, there can be
no assurance that federal, state, local or foreign regulation of firearms and
ammunition will not become more restrictive in the future and that any such
development would not have a material adverse effect on the business of the
Company. See also "Legal Proceedings."
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS
Certain of the statements contained in this report (other than the
financial statements and other statements of historical fact) are
forward-looking statements, including, without limitation, (i) the statements in
"-Business Trends and Initiatives" concerning (a) the Company's belief that the
market for firearms and ammunition will remain flat, at least in the near term
and (b) the Company's intention to respond to competitive pressure, which may
affect quarterly results; (ii) the statements in "-Liquidity and Capital
Resources - Cash Flows" concerning (a) the Company's intention to apply the
proceeds from receivables from sales on extended payment terms to the
outstanding balance on its revolving credit facility, (b) the Company's belief
that it will be able to meet its debt service obligations and fund its operating
requirements with cash flow from operations and revolving credit borrowings
prior to the maturity of the revolving credit facility, (c) the Company's
expectation that it will have to replace the revolving credit facility and
refinance any outstanding amounts thereunder upon its maturity on December 31,
2000 and (d) the Company's expectation that it may continue to repurchase the
Notes on the open
16
<PAGE> 17
market from time to time; (iii) the statements in "-Year 2000 Compliance"
concerning (a) the functions that will be handled by the SAP software and such
software's expected replacement of most stand-alone legacy systems, (b) the
Company's expectation that it will complete the testing of the remaining
customers with whom it does business electronically during the third and fourth
quarters of 1999; (c) the Company's belief that its existing equipment will be
able to perform all critical functions into the year 2000 on a basis comparable
to their current operation; (d) the Company's expectation that it will complete
the implementation phase related to parts and repairs during the third quarter
of 1999; (e) the Company's expectation that the cost of year 2000 compliance
will not be material to its financial condition, results of operations or cash
flows, (f) the Company's belief that its year 2000 project addresses its
material areas of concern, (g) the Company's belief that the implementation of
new business systems and the completion of the year 2000 project will reduce the
possibility of significant interruptions of normal operations and (h) the
Company's identification of the most likely worst case scenario; (iv) other
statements as to management's or the Company's expectations and beliefs
presented in this "Management's Discussion and Analysis of Financial Condition
and Results of Operations"; (v) the statements in "Legal Proceedings" concerning
(a) the Company's belief that the outcome of all pending product liability cases
and claims will not be likely to have a material adverse effect upon the
financial condition or results of operations of the Company and (b) the
Company's anticipation that because of the nature of its products, it will
continue to be involved in product liability cases and claims in the future; and
(vi) other statements as to management's or the Company's expectations and
beliefs presented in "Legal Proceedings."
Forward-looking statements are made based upon management's current
expectations and beliefs concerning future developments and their potential
effects upon the Company. There can be no assurance that future developments
will be in accordance with management's expectations or that the effect of
future developments on the Company will be those anticipated by management. The
important factors described in this report (including, without limitation, those
discussed in "-Business Trends and Initiatives", "-Results of Operations for the
Three and Six Month Periods Ended June 30, 1999 as Compared to the Three and Six
Month Periods Ended June 30, 1998", "-Liquidity and Capital Resources", "-Year
2000 Compliance" and "Legal Proceedings"), in the Company's Annual Report on
Form 10-K for the period ended December 31, 1998, or in other Securities and
Exchange Commission filings (which factors are incorporated herein by
reference), could affect (and in some cases have affected) the Company's actual
results and could cause such results to differ materially from estimates or
expectations reflected in such forward-looking statements.
While the Company periodically reassesses material trends and
uncertainties affecting the operations and financial condition in connection
with its preparation of management's discussion and analysis of results of
operations and financial condition contained in its quarterly and annual
reports, the Company does not intend to review or revise any particular
forward-looking statement referenced in this report in light of future events.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Certain of the Company's financial instruments are subject to market
risks, including interest rate risk. The Company was not a party to any interest
rate cap or other protection arrangements with respect to its $65.6 million of
variable rate indebtedness as of June 30, 1999. The Company uses commodity
futures contracts to hedge against the risk of increased prices for lead, copper
and zinc to be used in the manufacture of the Company's products. At June 30,
1999, the market value of the Company's outstanding contracts relating to firm
commitments and anticipated purchases up to one year from the respective balance
sheet date was $0.7 million. The Company believes that a near-term change in
commodity prices will not materially impact the consolidated financial position,
results of operations, future earnings, fair value or cash flows of the Company.
Additionally, the Company believes it does not have a material exposure to
fluctuations in foreign currencies. The Company does not hold or issue financial
instruments for speculative or trading purposes.
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<PAGE> 18
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Pursuant to the Asset Purchase Agreement, the Sellers retained
liability for, and are required to indemnify the Company against, (1) all
product liability cases and claims (whenever they may arise) involving
discontinued products and (2) all product liability cases and claims involving
products that had not been discontinued as of the Acquisition (the "Closing")
and which relate to occurrences that took place prior to the Closing. Except for
all cases and claims relating to discontinued products and for certain costs in
connection with cases and claims relating to certain shotguns, the Company
generally bears financial responsibility for product liability cases and claims
relating to occurrences after the Closing.
The Company and the Sellers are engaged in the joint defense of product
liability litigation involving Remington brand firearms and Company ammunition
products. As of June 30, 1999, approximately 25 such cases were pending,
primarily alleging defective product design or manufacture, or failure to
provide adequate warnings, all of which are individual actions alleging personal
injury. Many of these cases seek punitive as well as compensatory damages. Of
these pending individual cases, approximately five involve either discontinued
products or pre-Closing occurrences, for which the Sellers retained liability
and are required to indemnify the Company. The remaining approximately 20 of the
pending cases involve post-Closing occurrences for which the Company bears
responsibility under the Asset Purchase Agreement; the Sellers have some
responsibility for the costs of three of these cases involving certain shotguns.
The Company has previously disposed of a number of other cases involving
post-Acquisition occurrences by settlement.
In addition, Remington has been named as a defendant in two of the
lawsuits recently brought against numerous firearms manufacturers. As of August
1, 1999, approximately 20 municipalities and counties had filed actions against
various firearms manufacturers, distributors, sellers and trade organizations
seeking to recover health care, public safety and other costs incurred in
connection with the accidental or illegal use of firearms. Most of these
lawsuits, which allege strict liability, negligent manufacture and distribution
and nuisance theories, have focused on handgun manufacturers. However, the
Company and other long-gun manufacturers were named as defendants in a lawsuit
filed by the city of Boston, Massachusetts on June 3, 1999. The Boston lawsuit
seeks to recover health care, public safety and other costs incurred in
connection with the use of firearms, based on claims including product
liability, design defect, failure to warn and negligence. The case, City of
Boston v. Smith & Wesson, et al., was filed in state court but has been removed
to Federal district court. In addition, on July 16, 1999, Remington was one of
over 100 defendants named in a lawsuit filed in Federal district court in
Brooklyn, New York by the NAACP. This case seeks injunctive relief in connection
with the manufacture, sale and distribution of handguns, which the Company does
not manufacture, sell or distribute. There can be no assurance that the Company,
as a manufacturer of long-guns and ammunition, will not be named in future
lawsuits of this nature or that the outcome of such litigation will not
materially adversely affect the Company or its business, financial condition and
results of operations.
Although it is difficult to forecast the outcome of litigation, the
Company does not believe, in light of relevant circumstances (including the
current availability of insurance for personal injury and property damage with
respect to cases and claims involving occurrences arising after the Acquisition,
its accruals for the uninsured costs of such cases and claims and the Sellers'
retention of liability or agreement to be responsible for certain product
liability costs), that the outcome of all pending product liability cases and
claims will be likely to have a material adverse effect upon the financial
condition or results of operations of the Company. Nonetheless, in part because
of the uncertainty as to the nature and extent of manufacturer liability for
personal injury due to alleged product defects, there can be no assurance that
the Company's resources will be adequate to cover future product liability
occurrences, cases or claims, in the aggregate, or that such a material adverse
effect will not result therefrom. Because of the nature of its products, the
Company anticipates that it will continue to be involved in product liability
litigation in the future.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On April 27, 1999, the stockholders of Holding, at their annual
meeting, unanimously re-elected in its entirety the board of directors of
Holding. On the same day, the stockholders of Remington, at its annual meeting,
unanimously re-elected in its entirety the board of directors of Remington.
18
<PAGE> 19
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
(a) Exhibits
--------
<S> <C>
10.1 Director Stock Subscription Agreement.
10.2 Director Matching Deferred Share Award Agreement.
10.3 1999 RACI Holding, Inc. Stock Incentive Plan.
10.4 Form of Management Stock Subscription Agreement.
10.5 Form of Management Stock Option Agreement - Performance
Option.
10.6 Form of Management Stock Option Agreement - Service Option.
10.7 Form of Stock Purchase Right Deferred Share Award Agreement.
10.8 Form of Matching Deferred Share Award Agreement.
10.9 Form of Pledge and Security Agreement.
10.10 Form of Promissory Note.
10.11 Profit Based Bonus Plan.
27.1 Financial Data Schedule. (for SEC use only)
99.1 Reconciliation of Income from Operations to EBITDA.
</TABLE>
(b) Reports on Form 8-K
During the quarter ended June 30, 1999, the Company filed no reports on Form
8-K.
19
<PAGE> 20
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RACI HOLDING, INC.
/s/Mark A. Little
---------------------------------------------
Mark A. Little
Vice President, Chief Financial Officer
and Controller (Principal Financial Officer)
August 11, 1999
20
<PAGE> 21
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
10.1 Director Stock Subscription Agreement.
10.2 Director Matching Deferred Share Award Agreement.
10.3 1999 RACI Holding, Inc. Stock Incentive Plan.
10.4 Form of Management Stock Subscription Agreement.
10.5 Form of Management Stock Option Agreement - Performance
Option.
10.6 Form of Management Stock Option Agreement - Service
Option.
10.7 Form of Stock Purchase Right Deferred Share Award
Agreement.
10.8 Form of Matching Deferred Share Award Agreement.
10.9 Form of Pledge and Security Agreement.
10.10 Form of Promissory Note.
10.11 Profit Based Bonus Plan.
27.1 Financial Data Schedule. (for SEC use only)
99.1 Reconciliation of Income from Operations to EBITDA.
</TABLE>
21
<PAGE> 1
Exhibit 10.1
DIRECTOR STOCK SUBSCRIPTION AGREEMENT
STOCK SUBSCRIPTION AGREEMENT, dated as of June 25, 1999 (the
"Agreement"), between RACI Holding, Inc., a Delaware corporation ("Holding"),
and the Purchaser whose name appears on the signature page hereof (the
"Purchaser").
W I T N E S S E T H :
WHEREAS, on December 1, 1993, Remington Arms Company, Inc., a
Delaware corporation formerly named RACI Acquisition Corporation, and a
wholly-owned subsidiary of Holding, acquired (the "Acquisition") substantially
all the assets and business of Sporting Goods Properties, Inc., formerly named
Remington Arms Company, Inc. ("Sporting Goods"), and certain related assets of
Sporting Goods' parent E. I. du Pont de Nemours and Company;
WHEREAS, the Board of Directors of Holding (the "Board") has
authorized Holding to offer the Purchaser the opportunity to purchase 1,250
shares of Class A Common Stock, par value $.01 per share ("Common Stock"), of
Holding (each a "Share" and, collectively, the "Shares"), at a price of $200.00
per share;
WHEREAS, the Purchaser desires to subscribe for and purchase
from Holding all of such Shares;
WHEREAS, the terms of the offering of the Shares of Common
Stock being made as of the date hereof are set forth in the RACI Holding, Inc.
June 22, 1999 Supplement to Confidential Offering Memorandum dated May 14, 1999
together with the Confidential Offering Memorandum dated May 14, 1999, as
supplemented by the supplement to offering memorandum dated June 8, 1999
(collectively, the "Offering Memorandum"), a copy which has been furnished to
the Purchaser by Holding; and
WHEREAS, Holding desires to sell to the Purchaser and the
Purchaser desires to purchase from Holding the Shares, on the terms and subject
to the conditions set forth herein;
NOW, THEREFORE, to implement the foregoing and in
consideration of the mutual agreements contained herein, the parties hereto
hereby agree as follows:
1. Purchase and Sale of Common Stock.
(a) Purchase of Common Stock. Subject to all of the terms and
conditions of this Agreement, the Purchaser hereby subscribes for and shall
purchase and Holding shall sell to the Purchaser, the Shares, at a purchase
price of $200.00 per Share, at the Closing referred to in Section 2(a) hereof.
Notwithstanding anything in this Agreement to the contrary, Holding shall have
no obligation to sell any shares of Common Stock to any person who is a resident
of a jurisdiction in which the sale of Common Stock to such person would
constitute a violation of the securities, "blue sky" or other laws of such
jurisdiction.
<PAGE> 2
(b) Consideration. Subject to all of the terms and conditions
of this Agreement, the Purchaser shall deliver to Holding at the Closing
referred to in Section 2(a) hereof, immediately available funds in the amount of
$250,000.
2. Closing.
(a) Time and Place. Except as otherwise mutually agreed by
Holding and the Purchaser, the closing (the "Closing") of the transaction
contemplated by this Agreement shall be held at the offices of Debevoise &
Plimpton, 875 Third Avenue, New York, New York at 10:00 a.m. (New York time) on
June 25, 1999.
(b) Delivery by Holding. At the Closing, Holding shall deliver
to the Purchaser a stock certificate registered in such Purchaser's name and
representing the Shares, which certificate shall bear the legends set forth in
Section 3(b) hereof.
(c) Delivery by the Purchaser. At the Closing, the Purchaser
shall deliver to Holding the consideration referred to in Section 1(b) hereof.
3. Purchaser's Representations, Warranties and Covenants.
(a) Investment Intention. The Purchaser represents and
warrants that the Purchaser is acquiring the Shares solely for the Purchaser's
own account for investment and not with a view to or for sale in connection with
any distribution thereof. The Purchaser agrees that the Purchaser will not,
directly or indirectly, offer, transfer, sell, pledge, hypothecate or otherwise
dispose of any of the Shares (or solicit any offers to buy, purchase or
otherwise acquire or take a pledge of any Shares), except in compliance with the
Securities Act of 1933, as amended (the "Securities Act"), and the rules and
regulations of the Securities and Exchange Commission (the "Commission")
thereunder, and in compliance with applicable state securities or "blue sky"
laws and foreign securities laws, if any. The Purchaser further understands,
acknowledges and agrees that none of the Shares may be transferred, sold,
pledged, hypothecated or otherwise disposed of (i) unless any transferee of the
Purchaser shall have agreed in writing, pursuant to an instrument of assumption
satisfactory in form and substance to Holding, to make the representations and
warranties set forth in Section 3 hereof, other than Section 3(f), and to be
bound by the provisions of Sections 3 through 5 hereof, inclusive, (ii) unless
(A) such disposition is pursuant to an effective registration statement under
the Securities Act, (B) the Purchaser shall have delivered to Holding an opinion
of counsel, which opinion and counsel shall be reasonably satisfactory to
Holding, to the effect that such disposition is exempt from the provisions of
Section 5 of the Securities Act or (C) a no-action letter from the Commission,
reasonably satisfactory to Holding, shall have been obtained with respect to
such disposition and (iii) unless such disposition is pursuant to registration
under any applicable state or foreign securities laws or an exemption therefrom.
(b) Legends. The Purchaser acknowledges that the certificate
or certificates representing the Shares shall bear the following legends:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
PROVISIONS OF A STOCK SUBSCRIPTION AGREEMENT, DATED AS OF JUNE
25, 1999, AND NEITHER THIS
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<PAGE> 3
CERTIFICATE NOR THE SHARES REPRESENTED BY IT ARE ASSIGNABLE OR
OTHERWISE TRANSFERABLE EXCEPT IN ACCORDANCE WITH THE
PROVISIONS OF SUCH STOCK SUBSCRIPTION AGREEMENT, AS THE SAME
MAY BE AMENDED FROM TIME TO TIME, A COPY OF THE CURRENT FORM
OF WHICH IS ON FILE WITH THE SECRETARY OF HOLDING. THE SHARES
REPRESENTED BY THIS CERTIFICATE ARE ENTITLED TO THE BENEFITS
OF AND ARE BOUND BY THE OBLIGATIONS SET FORTH IN A
REGISTRATION AND PARTICIPATION AGREEMENT, DATED AS OF NOVEMBER
30, 1993, AMONG HOLDING AND CERTAIN STOCKHOLDERS OF HOLDING,
AS THE SAME MAY BE AMENDED FROM TIME TO TIME, A COPY OF THE
CURRENT FORM OF WHICH IS ON FILE WITH THE SECRETARY OF
HOLDING."
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
TRANSFERRED, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED
OF (i) UNLESS ANY TRANSFEREE OF THE HOLDER HEREOF SHALL HAVE
AGREED IN WRITING TO MAKE THE REPRESENTATIONS AND AGREEMENTS
SET FORTH IN SECTION 3 OF THE STOCK SUBSCRIPTION AGREEMENT AND
TO BE BOUND BY THE PROVISIONS OF SECTIONS 3 THROUGH 5,
INCLUSIVE, OF SUCH STOCK SUBSCRIPTION AGREEMENT, (ii) UNLESS
(A) SUCH DISPOSITION IS PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (B)
THE HOLDER HEREOF SHALL HAVE DELIVERED TO HOLDING AN OPINION
OF COUNSEL, WHICH OPINION AND COUNSEL SHALL BE REASONABLY
SATISFACTORY TO HOLDING, TO THE EFFECT THAT SUCH DISPOSITION
IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF SUCH ACT OR (C)
A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE
COMMISSION, REASONABLY SATISFACTORY TO HOLDING, SHALL HAVE
BEEN OBTAINED WITH RESPECT TO SUCH DISPOSITION AND (iii) SUCH
DISPOSITION IS PURSUANT TO REGISTRATION UNDER ANY APPLICABLE
STATE SECURITIES LAWS OR AN EXEMPTION THEREFROM. IF THE HOLDER
HEREOF IS A CITIZEN OR RESIDENT OF ANY JURISDICTION OTHER THAN
THE UNITED STATES, OR SUCH HOLDER DESIRES TO EFFECT ANY
TRANSFER IN ANY SUCH JURISDICTION, THEN, IN ADDITION TO THE
FOREGOING, COUNSEL FOR SUCH HOLDER (WHICH COUNSEL SHALL BE
REASONABLY SATISFACTORY TO HOLDING) SHALL HAVE FURNISHED
HOLDING WITH AN OPINION OR OTHER ADVICE REASONABLY
SATISFACTORY TO HOLDING TO THE EFFECT THAT SUCH TRANSFER WILL
COMPLY WITH THE SECURITIES LAWS OF SUCH JURISDICTION."
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<PAGE> 4
(c) Securities Law Matters. The Purchaser acknowledges receipt
of advice from Holding that (i) the offer and sale of the Shares hereby have not
been registered under the Securities Act based on an exemption provided under
Rule 701 promulgated under the Securities Act or qualified under any state
securities or "blue sky" laws or foreign securities laws, (ii) it is not
anticipated that there will be any public market for the Shares, (iii) the
Shares must be held indefinitely and the Purchaser must continue to bear the
economic risk of the investment in the Shares unless the Shares are subsequently
registered under the Securities Act and such state and foreign laws or an
exemption from registration is available, (iv) Rule 144 promulgated under the
Securities Act ("Rule 144") is not presently available with respect to sales of
the Shares, and Holding has made no covenant to make Rule 144 available, (v)
when and if the Shares may be disposed of without registration in reliance upon
Rule 144, such disposition can be made only in accordance with the terms and
conditions of Rule 144, (vi) Holding does not plan to file reports with the
Commission or make public information concerning Holding available unless
required to do so by law or the terms of its financing agreements, (vii) if the
exemption afforded by Rule 144 is not available, sales of the Shares may be
difficult to effect because of the absence of public information concerning
Holding, (viii) a restrictive legend in the form heretofore set forth shall be
placed on the certificates representing the Shares and (ix) a notation shall be
made in the appropriate records of Holding indicating that the Shares are
subject to restrictions on transfer set forth in this Agreement and, if Holding
should in the future engage the services of a stock transfer agent, appropriate
stop-transfer restrictions will be issued to such transfer agent with respect to
the Shares.
(d) Compliance with Rule 144. If any of the Shares are to be
disposed of in accordance with Rule 144, the Purchaser shall transmit to Holding
an executed copy of Form 144 (if required by Rule 144) no later than the time
such form is required to be transmitted to the Commission for filing and such
other documentation as Holding may reasonably require to assure compliance with
Rule 144 in connection with such disposition.
(e) Ability to Bear Risk. The Purchaser represents and
warrants that (i) the financial situation of the Purchaser is such that the
Purchaser can afford to bear the economic risk of holding the Shares for an
indefinite period and (ii) the Purchaser can afford to suffer the complete loss
of the Purchaser's investment in the Shares.
(f) Access to Information. The Purchaser represents and
warrants that (i) the Purchaser has received the Offering Memorandum relating to
this offering of the Shares and the Purchaser has carefully reviewed such
Offering Memorandum and such other materials furnished to the Purchaser in
connection with the transaction contemplated hereby and (ii) the Purchaser has
been granted the opportunity to ask questions of, and receive answers from,
representatives of Holding concerning the terms and conditions of the purchase
of the Shares and to obtain any additional information that the Purchaser deems
necessary to verify the accuracy of the information contained in such materials.
(g) Restrictions on Sale upon Public Offering. The Purchaser
acknowledges and agrees that the Purchaser shall be entitled to the rights and
subject to the obligations created under the Registration and Participation
Agreement, dated as of November 30, 1993, among Holding and certain stockholders
of Holding, as the same may be amended from time to time (the "Registration and
Participation Agreement"), and
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<PAGE> 5
the Shares shall be deemed to be "registrable securities," as defined in the
Registration and Participation Agreement, in each case, to the extent provided
therein.
(h) Registration. The Purchaser acknowledges and agrees that,
in the event that Holding files a registration statement under the Securities
Act with respect to an underwritten public offering of any shares of its capital
stock led by one or more underwriters at least one of which is an underwriter of
nationally recognized standing (a "Public Offering"), the Purchaser will not
effect any public sale or distribution of any shares of the Common Stock (other
than as part of such underwritten public offering), including but not limited
to, pursuant to Rule 144 or Rule 144A under the Securities Act, during the 20
days prior to and the 180 days after the effective date of such registration
statement. The Purchaser further understands and acknowledges that any sale,
transfer or other disposition of the Shares by him following a public offering
will be subject to compliance with, and may be limited under, the federal
securities laws and/or state "blue sky" securities laws.
4. Options of Holding and the C&D Fund Upon Proposed
Disposition.
(a) Rights of First Refusal. If the Purchaser desires to
accept an offer (which must be in writing and for cash, be irrevocable by its
terms for at least 60 days and be a bona fide offer as determined in good faith
by the Board) from any prospective purchaser to purchase all or any part of the
Shares at any time owned by the Purchaser, the Purchaser shall give notice in
writing to Holding and The Clayton & Dubilier Private Equity Fund IV Limited
Partnership, a Connecticut limited partnership (together with any successor
investment vehicle managed by Clayton, Dubilier & Rice, Inc., the "C&D Fund")
(i) designating the number of Shares proposed to be sold, (ii) naming the
prospective purchaser of such Shares and (iii) specifying the price (the "Offer
Price") at and terms (the "Offer Terms") upon which the Purchaser desires to
sell the same. During the 30-day period following receipt of such notice by
Holding and the C&D Fund (the "First Refusal Period"), Holding shall have the
right to purchase from the Purchaser the Shares specified in such notice, at the
Offer Price and on the Offer Terms. Holding hereby undertakes to use reasonable
efforts to act as promptly as practicable following such notice to determine
whether it shall elect to exercise such right. If Holding fails to exercise such
rights within the First Refusal Period, the C&D Fund shall have the right to
purchase the Shares specified in such notice, at the Offer Price and on the
Offer Terms, at any time during the period beginning at the earlier of (x) the
end of the First Refusal Period and (y) the date of receipt by the C&D Fund of
written notice that Holding has elected not to exercise its rights and ending 30
days thereafter (the "Second Refusal Period"). The rights provided hereunder
shall be exercised by written notice to the Purchaser given at any time during
the applicable period. If such right is exercised, Holding or the C&D Fund, as
the case may be, shall deliver to the Purchaser, within the applicable Refusal
Period, a check for the Offer Price, payable to the order of the Purchaser,
against delivery of certificates or other instruments representing the Shares so
purchased, appropriately endorsed by the Purchaser. If such right shall not have
been exercised, including the delivery to the Purchaser of a check for the Offer
Price, prior to the expiration of the Second Refusal Period, then at any time
during the 30 days following the expiration of the Second Refusal Period, the
Purchaser may sell such Shares to (but only to) the intended purchaser named in
the Purchaser's notice to Holding and the C&D
5
<PAGE> 6
Fund at the Offer Price and on the Offer Terms specified in such notice, free of
all restrictions or obligations imposed by, and free of any rights or benefits
set forth in, Section 4 of this Agreement, provided that such intended purchaser
shall have agreed in writing, pursuant to an instrument of assumption
satisfactory in substance and form to Holding, to make and be bound by the
representations, warranties and covenants set forth in Section 3 hereof, other
than those set forth in Sections 3(f), this Section 4 (as to any subsequent sale
of the Shares) and Section 5 hereof.
(b) Public Offering. In the event that a Public Offering has
been consummated, neither Holding nor the C&D Fund shall have any rights to
purchase the Shares from the Purchaser pursuant to this Section 4 and this
Section 4 shall not apply to a sale to the underwriters as part of a Public
Offering.
5. Take-Along Rights.
(a) Take-Along Notice. So long as the C&D Fund holds a number
of shares of Common Stock equal to at least one-third of the Common Stock
originally purchased by the C&D Fund at the closing of the Acquisition, if the
C&D Fund intends to effect a sale of all of its shares of Common Stock to a
third party (a "100% Buyer") and elects to exercise its rights under this
Section 5, the C&D Fund shall deliver written notice (a "Take-Along Notice") to
the Purchaser, which notice shall (a) state (i) that the C&D Fund wishes to
exercise its rights under this Section 5 with respect to such transfer, (ii) the
name and address of the 100% Buyer, (iii) the per share amount and form of
consideration the C&D Fund proposes to receive for its shares of Common Stock
and (iv) the terms and conditions of payment of such consideration and all other
material terms and conditions of such transfer, (b) contain an offer (the
"Take-Along Offer") by the 100% Buyer to purchase from the Purchaser all of his
Shares on and subject to the same terms and conditions offered to the C&D Fund
and (c) state the anticipated time and place of the closing of the purchase and
sale of the shares (a "Section 5 Closing"), which (subject to such terms and
conditions) shall occur not fewer than five (5) days nor more than ninety (90)
days after the date such Take-Along Notice is delivered, provided that if such
Section 5 Closing shall not occur prior to the expiration of such 90-day period,
the C&D Fund shall be entitled to deliver additional Take-Along Notices with
respect to such Take-Along Offer.
(b) Conditions to Take-Along. Upon delivery of a Take-Along
Notice, the Purchaser shall have the obligation to transfer all of his Shares
pursuant to the Take-Along Offer, as the same may be modified from time to time,
provided that the C&D Fund transfers all of its Shares to the 100% Buyer at the
Section 5 Closing. Within 10 days of receipt of the Take-Along Notice, the
Purchaser shall (i) execute and deliver to the C&D Fund a power of attorney and
a letter of transmittal and custody agreement in favor of, and in form and
substance satisfactory to, the C&D Fund, constituting the C&D Fund, Clayton,
Dubilier & Rice, Inc. ("CD&R") or one or more of their respective affiliates
designated by the C&D Fund (the "Custodian"), the true and lawful
attorney-in-fact and custodian for the Purchaser, with full power of
substitution, and authorizing the Custodian to take such actions as the
Custodian may deem necessary or appropriate to effect the sale and transfer of
the Shares to the 100% Buyer, upon receipt of the purchase price therefor at the
Section 5 Closing, free and clear of all security interests, liens, claims,
encumbrances, charges, options, restrictions on transfer, proxies and voting and
other
6
<PAGE> 7
agreements of whatever nature, and to take such other action as may be necessary
or appropriate in connection with such sale, including consenting to any
amendments, waivers, modifications or supplements to the terms of the sale
(provided that the C&D Fund also so consents, and sells and transfers its shares
of Common Stock on the same terms as so amended, waived, modified or
supplemented) and (ii) deliver to the C&D Fund certificates representing the
Shares, together with all necessary duly executed stock powers.
(c) Remedies. The Purchaser acknowledges that the C&D Fund
would be irreparably damaged in the event of a breach or a threatened breach by
the Purchaser of any of its obligations under this Section 5 and the Purchaser
agrees that, in the event of a breach or a threatened breach by the Purchaser of
any such obligation, the C&D Fund shall, in addition to any other rights and
remedies available to it in respect of such breach, be entitled to an injunction
from a court of competent jurisdiction granting it specific performance by the
Purchaser of its obligations under this Section 5. In the event that the C&D
Fund shall file suit to enforce the covenants contained in this Section 5 (or
obtain any other remedy in respect of any breach thereof), the prevailing party
in the suit shall be entitled to recover, in addition to all other damages to
which it may be entitled, the costs incurred by such party in conducting the
suit, including reasonable attorney's fees and expenses. In the event that,
following a breach or a threatened breach by the Purchaser of the provisions of
this Section 5, the C&D Fund does not obtain an injunction granting it specific
performance of the Purchaser's obligations under this Section 5 in connection
with such proposed sale prior to the time the C&D Fund completes the sale of its
shares or, in its sole discretion, abandons such sale, then Holding shall have
the option to purchase the Shares from the Purchaser at a purchase price per
Share equal to the lesser of (i) the fair market value of such Shares as of the
date of the breach or threatened breach that gives rise to the right to
repurchase and (ii) the price at which the Purchaser purchased such Shares from
Holding.
(d) Public Offering. In the event that a Public Offering has
been consummated, the provisions of this Section 5 shall terminate and cease to
have further effect.
6. Representations and Warranties of Holding. Holding
represents and warrants to the Purchaser that (a) Holding has been duly
incorporated and is an existing corporation in good standing under the laws of
the State of Delaware, (b) this Agreement has been duly authorized, executed and
delivered by Holding and constitutes a valid and legally binding obligation of
Holding enforceable against Holding in accordance with its terms, (c) the
Shares, when issued, delivered and paid for in accordance with the terms hereof,
will be duly and validly issued, fully paid and nonassessable, and free and
clear of any liens or encumbrances other than those created pursuant to this
Agreement, or otherwise in connection with the transactions contemplated hereby,
and (d) the Shares, when issued and held by the Purchaser, by the Purchaser's
estate upon transfer by operation of law on the Purchaser's death or by the C&D
Fund, shall be "Registrable Securities" as provided in the Registration and
Participation Agreement.
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<PAGE> 8
7. Covenants of Holding.
(a) Rule 144. Holding agrees that at all times after it has
filed a registration statement after the date hereof pursuant to the
requirements of the Securities Act or Section 12 of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), relating to any class of equity
securities of Holding (other than (i) the registration of equity securities of
Holding and/or options or interests in respect thereof to be offered primarily
to directors and/or members of management or employees, sales agents or similar
representatives of Holding, or any subsidiary of Holding, directors or senior
executives of corporations in which entities managed or sponsored by CD&R have
made equity investments and/or other persons with whom CD&R has consulting or
other advisory relationships, or (ii) the registration of equity securities
and/or options or other interests in respect thereof solely on Form S-4 or S-8
or any successor form), it will file the reports required to be filed by it
under the Securities Act and the Exchange Act and the rules and regulations
adopted by the Commission thereunder (or, if Holding is not required to file
such reports, it will, upon the request of the Purchaser, make publicly
available such information as necessary to permit sales pursuant to Rule 144
under the Securities Act), to the extent required from time to time to enable
the Purchaser to sell the Shares without registration under the Securities Act
within the limitation of the exemptions provided by (i) Rule 144, as such Rule
may be amended from time to time, or (ii) any successor rule or regulation
hereafter adopted by the Commission.
(b) State Securities Laws. Holding agrees to use its best
efforts to comply with all state securities or "blue sky" laws applicable to the
sale of the Shares to the Purchaser, provided that Holding shall not be
obligated to qualify or register the Shares under any such law or to qualify as
a foreign corporation or file any consent to service of process under the laws
of any jurisdiction or subject itself to taxation as doing business in any such
jurisdiction.
8. Miscellaneous.
(a) Notices. All notices and other communications required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been given if delivered personally or sent by certified or
express mail, return receipt requested, postage prepaid, or by any recognized
international equivalent of such mail delivery, to Holding or the Purchaser, as
the case may be, at the following addresses or to such other address as Holding
or the Purchaser, as the case may be, shall specify by notice to the others:
(i) if to Holding, to it at:
RACI Holding, Inc.
c/o Remington Arms Company, Inc.
870 Remington Drive
P.O. Box 700
Madison, North Carolina 27025-0700
Attention: Chairman
8
<PAGE> 9
(ii) if to the Purchaser, to the Purchaser at the address set forth
on the signature page hereof.
All such notices and communications shall be deemed to have been received on the
date of delivery if delivered personally or on the third business day after the
mailing thereof. Copies of any notice or other communication given under this
Agreement shall also be given to:
Clayton, Dubilier & Rice, Inc.
375 Park Avenue
New York, New York 10152
Attention: Joseph L. Rice, III
and
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention: Franci J. Blassberg, Esq.
The C&D Fund shall also be given a copy of any notice or other communication
between the Purchaser and Holding under this Agreement at its address as set
forth below:
The Clayton & Dubilier Private Equity
Fund IV Limited Partnership
270 Greenwich Avenue
Greenwich, Connecticut 06830
Attention: Clayton & Dubilier Associates
IV Limited Partnership,
Joseph L. Rice, III
(b) Binding Effect; Benefits. This Agreement shall be binding
upon the parties to this Agreement and their respective successors and assigns
and shall inure to the benefit of the parties to the Agreement, the C&D Fund and
their respective successors and assigns. Except as provided in Sections 4 and 5,
nothing in this Agreement, express or implied, is intended or shall be construed
to give any person other than the parties to this Agreement, the C&D Fund or
their respective successors or assigns any legal or equitable right, remedy or
claim under or in respect of any agreement or any provision contained herein.
(c) Waiver; Amendment.
(i) Waiver. Any party hereto or beneficiary hereof may by
written notice to the other parties (A) extend the time for the
performance of any of the obligations or other actions of the other
parties under this Agreement, (B) waive compliance with any of the
conditions or covenants of the other parties contained in this
Agreement and (C) waive or modify performance of any of the obligations
of the other parties under this Agreement, provided that any waiver of
the provisions of Sections 4 and 5 must be consented to in writing by
the C&D Fund.
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<PAGE> 10
Except as provided in the preceding sentence, no action taken pursuant
to this Agreement, including, without limitation, any investigation by
or on behalf of any party or beneficiary shall be deemed to constitute
a waiver by the party or beneficiary taking such action of compliance
with any representations, warranties, covenants or agreements contained
herein. The waiver by any party hereto or beneficiary hereof of a
breach of any provision of this Agreement shall not operate or be
construed as a waiver of any preceding or succeeding breach and no
failure by a party to exercise any right or privilege hereunder shall
be deemed a waiver of such party's or beneficiary's rights or
privileges hereunder or shall be deemed a waiver of such party's or
beneficiary's rights to exercise the same at any subsequent time or
times hereunder.
(ii) Amendment. This Agreement may not be
amended, modified or supplemented orally, but only by a written
instrument executed by the Purchaser and Holding, and (in the case of
any amendment, modification or supplement to or affecting Section 4 or
5 hereof, or that adversely affects the rights of the C&D Fund
hereunder) consented to by the C&D Fund in writing. The parties hereto
acknowledge that Holding's consent to an amendment or modification of
this Agreement may be subject to the terms and provisions of Holding's
financing agreements.
(d) Assignability. Neither this Agreement nor any right,
remedy, obligation or liability arising hereunder or by reason hereof shall be
assignable by Holding or the Purchaser without the prior written consent of the
other parties and the C&D Fund. The C&D Fund may assign from time to time all or
any portion of its rights under Sections 4 and 5 hereof to one or more persons
or other entities designated by it.
(e) Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK, EXCEPT TO THE
EXTENT THAT THE CORPORATE LAW OF THE STATE OF DELAWARE SPECIFICALLY AND
MANDATORILY APPLIES.
(f) Section and Other Headings, etc. The section and other
headings contained in this Agreement are for reference purposes only and shall
not affect the meaning or interpretation of this Agreement.
(g) Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original and all of
which together shall constitute one and the same instrument.
(h) Delegation by the Board. All of the powers, duties and
responsibilities of the Board specified in this Agreement may, to the full
extent permitted by applicable law, be exercised and performed by any duly
constituted committee thereof to the extent authorized by the Board to exercise
and perform such powers, duties and responsibilities.
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<PAGE> 11
IN WITNESS WHEREOF, Holding and the Purchaser have executed
this Agreement as of the date first above written.
RACI HOLDING, INC.
By:
------------------------------------
Name:
Title:
THE PURCHASER:
By:
------------------------------------
H. Norman Schwarzkopf as Trustee for
the H. Norman Schwarzkopf Revocable
Trust of 1992
Address of the Purchaser:
400 North Ashley Street
Suite 3050
Tampa, FL 33602
Total Number of Shares
of Common Stock to be
Purchased: 1,250
Cash Purchase
Price: $250,000
11
<PAGE> 1
Exhibit 10.2
RACI HOLDING, INC.
DIRECTOR MATCHING DEFERRED SHARE AWARD AGREEMENT
Deferred Share Award, dated as of June 25, 1999 (the "Award"), made
by RACI Holding, Inc., a Delaware corporation ("Holding"), to the Grantee whose
name appears on the signature page hereof (the "Grantee").
1. Grant of Deferred Shares. Effective as of the date hereof, Holding
hereby evidences and confirms its grant to the Grantee, on the terms and
conditions of this Award, of the number of shares of Deferred Shares set forth
on the signature page hereof, which represent Holding's contractual obligation
to deliver one share of the Class A Common Stock, par value $.01 per shares of
Holding ("Common Stock") to the Grantee for each Deferred Share Award granted
upon the terms and conditions set forth herein. The Deferred Shares granted
hereby shall be fully vested upon grant.
2. Nonassignability. The Deferred Shares granted hereby are not
assignable or transferable, in whole or in part, and may not, directly or
indirectly, be offered, transferred, sold, pledged, assigned, alienated,
hypothecated or otherwise disposed of or encumbered (including without
limitation by gift, operation of law or otherwise) other than by will or by the
laws of descent and distribution to the estate of the Grantee upon the Grantee's
death.
3. No Rights as a Stockholder. Neither the Grantee nor any person or
persons to whom the Grantee's rights under this Award shall have passed by will
or by the laws of descent and distribution, as the case may be, shall have any
voting, dividend or other rights or privileges as a stockholder of Holding with
respect to any shares of Common Stock ("Shares") corresponding to the Deferred
Shares granted hereby unless and until a certificate for Shares is issued in
respect thereof.
4. Delivery Event. The Board of Holding (the "Board") may permit the
Grantee to further defer the distribution of Deferred Shares until such time or
times as the Grantee shall elect, in each case on such terms and conditions and
subject to such restrictions (including, without limitation, those deemed
necessary or appropriate to avoid the constructive receipt of such shares of
Common Stock by the Grantee) as the Board may impose from time to time. A
deferral opportunity does not have to made available to all grantees, and
different terms and conditions may apply with respect to the deferral
opportunities made available to different grantees. Unless the Grantee shall
electively defer such distribution by written notice to Holding at least 12
months prior to a Delivery Event in accordance with such conditions as the Board
of Directors of Holding (the "Board") shall impose, upon the occurrence of a
Delivery Event (as defined in Section 5),
<PAGE> 2
the Grantee shall receive, without payment, one share of Common Stock in
settlement of each Deferred Share that he or she then holds. As a condition to
the delivery of any Common Stock in respect of Deferred Shares, the holder of
such Deferred Shares (and anyone whose rights derive therefrom) shall execute a
subscription agreement (or such other agreement having comparable terms but
modified to reflect differences between such shares and shares purchased from
Holding as shall be required by Holding) (the "Subscription Agreement"). The
Grantee acknowledges and agrees that the Subscription Agreement will have
restrictions on transfer, take-along rights and other legal and contractual
restrictions similar to those contained in the Director Stock Subscription
Agreement described in the June 22 Supplement to the Confidential Offering
Memorandum dated May 14, 1999, a copy of which has been received by the Grantee,
or such other terms and provisions as Holding shall determine.
5. Distributions in Respect of Deferred Shares. The shares of Common
Stock related to any Deferred Shares granted hereunder shall be issued to the
Grantee upon the first to occur of (each such event, a "Delivery Event"):
(i) immediately prior to the first to occur of the following events
after the date hereof:
(a) the acquisition of 50% or more of the combined voting
power of Holding's then outstanding voting securities by
any person, entity or "group" (as defined in Section 13(d)
of the Securities Exchange Act of 1934, as amended), other
than Holding any of its direct or indirect subsidiaries,
any employee benefit plan of Holding or any of its direct
or indirect subsidiaries, or The Clayton & Dubilier
Private Equity Fund IV Limited Partnership, a Connecticut
limited partnership, or any successor investment vehicle
managed by Clayton, Dubilier & Rice, Inc. (the "C&D
Fund"),;
(b) the merger or consolidation of Holding, as a result of
which persons who were stockholders of Holding immediately
prior to such merger or consolidation do not, immediately
thereafter, own, directly or indirectly, more than 50% of
the combined voting power entitled to vote generally in
the election of directors of the merged or consolidated
company;
(c) the liquidation or dissolution of Holding or Remington
Arms Company, Inc., a Delaware corporation (the
"Company"); or
(d) the sale, transfer or other disposition of all or
substantially all of the assets of Holding or the Company
to one or more persons or entities
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<PAGE> 3
that are not, immediately prior to such sale, transfer or
other disposition, affiliates of Holding or the Company.
(ii) the expiration of any lock-up period following the first day as
of which sales of Common Stock are made to the public in the United States
pursuant to an underwritten public offering of the Common Stock led by one or
more underwriters at least one of which is an underwriter of nationally
recognized standing (a "Public Offering") ;
(iii) immediately prior to the record date for a leveraged
recapitalization of Holding in which the C&D Fund has a realization event with
respect to a substantial portion of its investment unless (a) the holders of
Deferred Shares receive in such leveraged recapitalization the same per share
consideration as is paid or distributed in such recapitalization to the holders
of common stock and (b) the Grantee has not elected prior to such
recapitalization to receive the shares with respect to his Deferred Shares; and
(iv) the Grantee's termination of service as a director of Holding
(other than for Cause, as defined in Section 6), provided that no distribution
shall be made under this subclause (iv) unless Holding agrees to withhold enough
shares of Common Stock to satisfy the Grantee's applicable income and employment
tax withholding requirements with respect to such distribution.
6. Termination for Cause. In the event that the Grantee's service as
a director of Holding is terminated for Cause (as defined below), all Deferred
Shares credited to such Grantee shall terminate and be canceled immediately upon
such termination of service. "Cause" means (i) the willful failure by the
Grantee to perform substantially his duties as a director of Holding or the
Company (other than any such failure due to physical or mental illness) after a
demand for substantial performance is delivered to the Grantee by the Board,
which notice identifies the manner in which the Board believes that the Grantee
has not substantially performed his duties, (ii) the Grantee's engaging in
willful and serious misconduct that is injurious to Holding, the Company or any
subsidiary thereof, (iii) the Grantee's having been convicted of, or entered a
plea of guilty or nolo contendere to, a crime that constitutes a felony, (iv)
the willful and material breach by the Grantee of any written covenant or
agreement with Holding, the Company or any subsidiary thereof not to disclose
any information pertaining to Holding, the Company or any subsidiary thereof or
not to compete or interfere with Holding, the Company or any subsidiary thereof
or (v) the breach by the Grantee of his obligations pursuant to the "take-along"
provisions set forth in any Subscription Agreement to which he is a party.
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<PAGE> 4
7. Capital Adjustments. If Holding is a party to any merger,
consolidation, divestiture (including a spin-off), reorganization,
reclassification, stock split-up, combination of shares, dividend on shares
payable in stock, liquidation or other transaction, such that an adjustment is
required to preserve, or to prevent enlargement of, the benefits or potential
benefits made available under an Award, then the Board shall, in such manner as
the Board shall deem equitable, adjust any or all of (i) the number and kind of
shares to which the Deferred Shares may relate and (ii) the number and kinds of
securities deliverable pursuant to Section 4 hereof. In any adjustment of shares
of Deferred Shares subject to this Award, fractional shares shall be omitted.
8. Tax Withholding. Whenever shares of Common Stock or other property
are to be distributed in respect to any Deferred Shares awarded hereunder,
Holding shall have the power to withhold, or require the Grantee to remit to
Holding, an amount sufficient to satisfy Federal, state, local and foreign
withholding tax requirements, including but not limited to income and employment
taxes, relating to such issuance, and Holding may defer issuance of such Shares
or other property until such requirements are satisfied. The Board may, in its
discretion, permit the Grantee to elect, subject to such conditions as the Board
shall impose, to satisfy his withholding obligation hereunder with Shares or any
other property issuable hereunder.
9. No Right to Continued Service. Nothing in this Award shall
interfere with or limit in any way the right of Holding or any of its
subsidiaries or their respective stockholders to terminate the Grantee's service
as a director of Holding or any of its subsidiaries at any time, or confer upon
the Grantee any right to continue in the service as a director of Holding or any
of its Subsidiaries.
10. Interpretation. The Board shall have full power and discretion to
construe and interpret this Award. Any determination or interpretation by the
Board under or pursuant to this Award shall be final and conclusive on all
persons affected hereby.
11. Binding Effect; Benefits. This Award shall be binding upon and
inure to the benefit of Holding and the Grantee and their respective successors
and assigns. Nothing in this Award, express or implied, is intended or shall be
construed to give any person other than Holding or the Grantee or their
respective successors or assigns any legal or equitable right, remedy or claim
under or in respect of any agreement or any provision contained herein. This
grant is made in full and complete satisfaction of any claim the Grantee may
have regarding the promise by Holding to permit the Grantee to purchase its
Common Stock as of a date prior hereto.
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<PAGE> 5
12. Waiver; Amendment.
(a) Waiver. Holding, the Grantee (each of Holding and the Grantee, a
"Party") or any beneficiary hereof may by written notice to the other Parties
(i) extend the time for the performance of any of the obligations or other
actions of the other Parties under this Award, (ii) waive compliance with any of
the conditions or covenants of the other Parties contained in this Award and
(iii) waive or modify performance of any of the obligations of the other Parties
under this Award. Except as provided in the preceding sentence, no action taken
pursuant to this Award, including, without limitation, any investigation by or
on behalf of any Party or beneficiary shall be deemed to constitute a waiver by
the Party or beneficiary taking such action of compliance with any
representations, warranties, covenants or agreements contained herein. The
waiver by any Party hereto or beneficiary hereof of a breach of any provision of
this Award shall not operate or be construed as a waiver of any preceding or
succeeding breach and no failure by a Party to exercise any right or privilege
hereunder shall be deemed a waiver of such Party's or beneficiary's rights or
privileges hereunder or shall be deemed a waiver of such Party's or
beneficiary's rights to exercise the same at any subsequent time or times
hereunder.
(b) Amendment. This Award may not be altered, modified, or amended
except by a written instrument signed by Holding and the Grantee.
13. Severability. In the event that any one or more of the provisions
of this Award shall be or become invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not be affected thereby.
14. Notices. All notices and other communications required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been given if delivered personally or sent by certified or
express mail, return receipt requested, postage prepaid, or by any recognized
international equivalent of such delivery, to Holding or the Grantee, as the
case may be, at the following addresses or to such other address as Holding or
the Grantee, as the case may be, shall specify by notice to the others:
if to Holding, to it at:
RACI Holding, Inc.
c/o Remington Arms Company, Inc.
870 Remington Drive
Madison, North Carolina 27025
Attention: Chief Financial Officer
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<PAGE> 6
if to the Grantee, to the Grantee at the address set forth on
the signature page hereof.
All such notices and communications shall be deemed to have been received on the
date of delivery or on the third business day after the mailing thereof. Copies
of any notice or other communication given under this Agreement shall also be
given to:
The Clayton & Dubilier Private Equity
Fund IV Limited Partnership
270 Greenwich Avenue
Greenwich, Connecticut 06830
Attention: Clayton & Dubilier Associates
IV Limited Partnership,
Joseph L. Rice, III
with copies to:
Clayton, Dubilier & Rice, Inc.
375 Park Avenue
New York, New York 10152
Attention: Joseph L. Rice, III
and
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention: Franci J. Blassberg, Esq.
15. Sections and Other Headings. The section and other headings
contained in this Award are for reference purposes only and shall not affect the
meaning or interpretation of this Award.
16. Governing Law. This Award shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to the
principles of conflict of laws.
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IN WITNESS WHEREOF, Holding has executed this Award as of the date
first above written.
RACI HOLDING, INC.
By
---------------------------------
Name:
Title:
Number of Deferred Shares: 1,250
ACCEPTED AND AGREED
AS OF THE DATE FIRST
ABOVE WRITTEN
THE GRANTEE:
Gen. H. Norman Schwarzkopf, Retired
400 North Ashley Street
Suite 3050
Tampa, FL 33602
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<PAGE> 1
Exhibit 10.3
RACI HOLDING, INC
STOCK INCENTIVE PLAN
Section 1. Purpose
The purpose of this RACI Holding Inc. Stock Incentive Plan is
to foster and promote the long-term financial success of Holding and the Company
and to increase materially stockholder value by (a) motivating superior
performance by Participants in the Plan, (b) providing Participants in the Plan
with an ownership interest in Holding and (c) enabling Holding, the Company and
the Subsidiaries to attract and retain the services of an outstanding management
team upon whose judgment, interest and special effort the successful conduct of
its operations is largely dependent.
Section 2. Definitions
2.1. Definitions. Whenever used herein, the following terms
shall have the respective meanings set forth below:
(1) "Award" shall mean an Option, Stock Purchase Right or a
Deferred Share award granted pursuant to the terms of the Plan.
(2) "Alternative Award" has the meaning given in Section 8.2.
(3) "Board" means the Board of Directors of Holding.
(4) "C&D Fund" means The Clayton & Dubilier Private Equity
Fund IV Limited Partnership, a Connecticut limited partnership, and any
successor investment vehicle managed by Clayton, Dubilier & Rice, Inc.
(5) "Cause" means (i) the willful failure by a Participant to
perform substantially his duties as an employee of Holding, the Company
or any Subsidiary (other than any such failure due to physical or
mental illness) after a demand for substantial performance is delivered
to the Participant by the executive to whom the Participant reports or
by the Board, which notice identifies the manner in which such
executive or the Board, as the case may be, believes that the
Participant has not substantially performed his duties, (ii) the
Participant's engaging in willful and serious misconduct that is
injurious to Holding, the Company or any Subsidiary,
<PAGE> 2
(iii) the Participant's having been convicted of, or entered a plea of
guilty or nolo contendere to, a crime that constitutes a felony, (iv)
the willful and material breach by the Participant of any written
covenant or agreement with Holding, the Company or any Subsidiary not
to disclose any information pertaining to Holding, the Company or any
Subsidiary or not to compete or interfere with Holding, the Company or
any Subsidiary or (v) the breach by the Participant of his obligations
pursuant to the "take-along" provisions set forth in any Subscription
Agreement to which he is a party.
(6) "Change in Control" means the first to occur of the
following events after the Effective Date:
(i) the acquisition by any person, entity or "group"
(as defined in Section 13(d) of the Securities Exchange Act of
1934, as amended), other than Holding, the Company, any
Subsidiary, any employee benefit plan of Holding, the Company
or any Subsidiary, or the C&D Fund, of 50% or more of the
combined voting power of Holding's then outstanding voting
securities;
(ii) the merger or consolidation of Holding, as a
result of which persons who were stockholders of Holding
immediately prior to such merger or consolidation, do not,
immediately thereafter, own, directly or indirectly, more than
50% of the combined voting power entitled to vote generally in
the election of directors of the merged or consolidated
company;
(iii) the liquidation or dissolution of Holding or
the Company; or
(iv) the sale, transfer or other disposition of all
or substantially all of the assets of Holding or the Company
to one or more persons or entities that are not, immediately
prior to such sale, transfer or other disposition, affiliates
of Holding or the Company.
(7) "Change in Control Price" means the price per share of
Common Stock offered in conjunction with any transaction resulting in a
Change in Control (as determined in good faith by the Board if any part
of the offered price is payable other than in cash).
(8) "Code" means the Internal Revenue Code of 1986, as
amended, and any successor provisions thereto.
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(9) "Common Stock" means the Class A Common Stock, par value
$.01 per share, of Holding.
(10) "Company" means Remington Arms Company, Inc., a Delaware
corporation and any successor thereto.
(11) "Covered Options" means, at any time, Options granted to
a Participant that have vested and are exercisable at such time.
(12) "Deferred Share" shall mean a contractual right to
receive one share of Common Stock on a deferred basis in accordance
with the terms and conditions of the Plan; provided that, if Holding
and/or the C&D Fund would have the right to purchase any Options held
by a Participant pursuant to the provisions of Section 9.4, the Board
may direct that such Participant be paid cash in an amount equal to the
Fair Market Value of the number of Shares corresponding to any Deferred
Shares distributable to a Participant, in lieu of distributing Shares
to such Participant.
(13) "Effective Date" means April 1, 1999.
(14) "Employee" means any executive or senior officer or other
executive or key employee of Holding, the Company or any Subsidiary.
(15) "Exercise Shares" means shares of Common Stock that may
be purchased by a Participant upon the exercise of his Covered Options.
(16) "Fair Market Value" means, as of any date, the fair
market value on such date per share of Common Stock as determined in
good faith by the Board. In making a determination of Fair Market
Value, the Board shall give due consideration for such factors as it
deems appropriate, including, without limitation, the earnings and
certain other financial and operating information of Holding in recent
periods, the potential value of Holding as a whole, the future
prospects of Holding and the industries in which it competes, the
history and management of Holding, the general condition of the
securities markets, the fair market value of securities of companies
engaged in businesses similar to those of Holding and, if a valuation
of the Common Stock shall have been performed by an independent
valuation firm, such valuation. Nothing herein shall obligate the Board
to obtain any such independent valuation. The determination of Fair
Market Value will not give effect to any restrictions on transfer of
the Shares or the fact that such Shares would represent a minority
interest in Holding. The Fair
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<PAGE> 4
Market Value as determined in good faith by the Board and in the
absence of fraud shall be binding and conclusive upon Holding, the
Company and each Participant.
(17) "Grant Date" means, with respect to any Award, the date
on which such Award is granted pursuant to the Plan.
(18) "Holding" means RACI Holding, Inc., a Delaware
corporation and any successor thereto.
(19) "Involuntary Termination" means a termination of a
Participant as an employee or consultant, as the case may be, by the
New Employer for any reason.
(20) "New Employer" means the Participant's employer or the
entity retaining the Participant as a consultant, as the case may be,
or the parent or a subsidiary of such employer or entity, immediately
following a Change in Control.
(21) "Option" means the right granted pursuant to the Plan to
purchase one share of Common Stock at a price determined in accordance
with Section 7.2.
(22) "Option Agreement" means an agreement between Holding and
the Participant embodying the terms of any Options granted hereunder,
which agreement shall, unless the Board otherwise determines, be
substantially in the form of the management stock option agreement
attached hereto as Exhibit A-1.
(23) "Participant" means any Employee who is a participant in
the Plan.
(24) "Permanent Disability" means a physical or mental
disability or infirmity that prevents the performance of a
Participant's employment-related duties for a continuous period of six
months or longer. The Board's reasoned and good faith judgment of
Permanent Disability shall be final and shall be based on such
competent medical evidence as shall be presented to it by the
Participant or by any physician or group of physicians or other
competent medical expert employed by the Participant or Holding to
advise the Board.
(25) "Plan" means this RACI Holding, Inc. Stock Incentive
Plan.
(26) "Public Offering" means the first day as of which sales
of Common Stock are made to the public in the United States pursuant to
an underwritten public offering of the Common Stock led by one or more
underwriters at least one of which is an underwriter of nationally
recognized standing.
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<PAGE> 5
(27) "Retirement" means a Participant's retirement at age 65
or later.
(28) "Special Termination" has the meaning given in Section
9.1.
(29) "Stock Purchase Right" shall mean the right to purchase
one Share or one Deferred Share at a purchase price equal to the Fair
Market Value during a limited period of time specified by the Board.
(30) "Subscription Agreement" means a stock subscription
agreement between Holding and the Participant embodying the terms of
any stock purchase made pursuant to the Plan, which agreement shall,
unless the Board otherwise determines, be substantially in the form of
the management stock subscription agreement attached hereto as Exhibit
B-1.
(31) "Subsidiary" means any corporation, a majority of whose
outstanding voting securities is owned, directly or indirectly, by
Holding.
2.2. Gender and Number. Except when otherwise indicated by the
context, words in the masculine gender used in the Plan shall include the
feminine gender, the singular shall include the plural, and the plural shall
include the singular.
Section 3. Eligibility and Participation
Participants in the Plan shall be those Employees selected by
the Board to participate in the Plan. The selection of an Employee as a
Participant shall neither entitle such Employee to nor disqualify such Employee
from participation in any other award or incentive plan.
Section 4. Powers of the Board
4.1. Power to Grant. The Board shall determine the
Participants to whom Awards shall be granted and the terms and conditions of any
and all Awards granted to Participants. In making such determination, the Board
shall give due consideration to such factors as it deems appropriate.
4.2. Administration. The Board shall be responsible for the
administration of the Plan. Any authority exercised by the Board under the Plan
shall be exercised by the Board in its sole discretion. Subject to the terms of
the Plan, the Board, by majority
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<PAGE> 6
action thereof, is authorized to prescribe, amend and rescind rules and
regulations relating to the administration of the Plan, to provide for
conditions and assurances deemed necessary or advisable to protect the interests
of Holding and the Company, and to make all other determinations necessary or
advisable for the administration and interpretation of the Plan in order to
carry out its provisions and purposes. Determinations, interpretations or other
actions made or taken by the Board pursuant to the provisions of the Plan shall
be final, binding and conclusive for all purposes and upon all persons.
4.3. Delegation by the Board. All of the powers, duties and
responsibilities of the Board specified in this Plan may, to the full extent
permitted by applicable law, be exercised and performed by any duly constituted
committee thereof to the extent authorized by the Board to exercise and perform
such powers, duties and responsibilities.
Section 5. Shares Subject to Plan
5.1. Number. Subject to the provisions of Sections 5.2 and
5.3, the maximum number of shares of Common Stock that may be issued under the
Plan or be subject to Stock Purchase Rights or Options granted under the Plan
may not exceed ________. The shares of Common Stock to be delivered under the
Plan may consist, in whole or in part, of treasury Common Stock or authorized
but unissued Common Stock, not reserved for any other purpose.
5.2. Canceled, Terminated or Forfeited Options. The shares of
Common Stock subject to any Option, Stock Purchase Right or Deferred Share which
for any reason is canceled, terminated or otherwise forfeited, in whole or in
part, without having been exercised, shall again be available for grant under
the Plan.
5.3. Adjustment in Capitalization. The number of shares of
Common Stock available for issuance under the Plan, the number and class of any
outstanding Deferred Share, and the number, class and exercise price of any
outstanding Options (and the number of shares of Common Stock subject to
outstanding Deferred Shares and Options), may be adjusted by the Board, in its
sole discretion, if it shall deem such an adjustment to be necessary or
appropriate to reflect any Common Stock dividend, stock split or share
combination or any recapitalization, merger, consolidation, exchange of shares,
liquidation or dissolution of Holding.
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<PAGE> 7
Section 6. Stock Purchase Rights.
6.1. Awards and Administration. The Board may grant Stock
Purchase Rights to eligible Participants. The terms of Stock Purchase Rights
need not be the same with respect to each Participant.
6.2. Payment for Stock Purchase Rights. The purchase price
with respect to Stock Purchase Rights may be paid in cash simultaneously with
the closing of the purchase of such Common Stock. Any Participant who elects to
exercise a Stock Purchase Right for cash shall enter into a Subscription
Agreement. Notwithstanding the foregoing, the Committee may grant Stock Purchase
Rights in respect of Deferred Shares, and allow a Participant electively to
defer payment of any amount otherwise payable to the Participant as an annual
bonus compensation payment and to deem the amount so deferred delivered as
payment for such Deferred Shares. Notwithstanding the foregoing, in no event
shall any amount otherwise payable in respect of any such annual bonus actually
transfer from the Company to Holding. If the Committee permits a Participant to
use his bonus compensation to pay the purchase price for a Stock Purchase Right
in respect of Deferred Shares, the number of Deferred Shares to be credited to
the Participant's account shall equal the greatest number of whole Deferred
Shares derived from the quotient of (i) the dollar amount of the bonus
compensation elected to be deferred and deemed invested in such Deferred Shares
and (ii) the Fair Market Value on the date such bonus compensation would
otherwise have been payable to the Participant, but shall not be greater than
the number of Stock Purchase Rights granted to such participant. If a
Participant elects to apply any such bonus compensation to the exercise of a
Stock Purchase Right for Deferred Shares and the Participant ceases to be
employed by Holding, the Company and the Subsidiaries (other than on account of
a Special Termination) prior to the date such bonus compensation would otherwise
have been paid, such election shall be void and without effect. If the amount
actually payable in respect of a Participant's bonus compensation is less than
the amount the Participant had committed to the acquisition of Deferred Shares,
the Participant may purchase shares of Common Stock having a value equal to the
value of the Deferred Shares not acquired because the actual amount available as
an annual bonus payment is less than the amount committed; provided that such a
make-whole opportunity shall not apply if one reason for the shortfall in the
bonus compensation amount is that the amount actually payable to the Participant
is a pro-rated amount because of the termination of the Participant's employment
or the termination of the bonus plan due to a Change of Control.
6.3. Loans. The Committee may permit a Participant who holds
options in respect of shares of Common Stock to purchase shares of Common Stock
pursuant to a Stock Purchase Right in whole or in part by the execution of a
full recourse promissory
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<PAGE> 8
note in favor of Holding; provided that, in no event shall the principal amount
of any and all such notes issued by the same Participant exceed 75% of the
unrealized gain in the Participant's outstanding options, based on the excess,
if any, of the then Fair Market Value of the Common Stock over the option
exercise price. Any shares of Common Stock purchased pursuant to a Stock
Purchase Right (whether with loan proceeds or otherwise) and the outstanding
options used to calculate such unrealized gains must be pledged as collateral
for any such loan. Any such loan shall bear interest at the applicable Federal
rate, as defined in Section 1274(d) of the Code, and accumulated interest shall
be payable at least annually. As a condition to the receipt of any such loan, a
Participant must agree that, if any accumulated interest on the loan were not
paid when due, a sufficient portion of the outstanding options (taking into
account any required tax withholding related to the exercise of the option)
would be deemed exercised in order to pay the interest due in shares of Common
Stock. Any such loan would be due and payable upon the earlier of the
Participant's termination of employment for any reason or the date on which the
Participant sells the underlying stock, which sale shall only be permitted if
the Participant agrees to arrangements for the payment of the outstanding
amounts due in respect of such loan from the proceeds of any such sale that are
satisfactory to Holding and the Company.
Section 7. Terms of Options
7.1. Grant of Options. Options may be granted to Participants
at such time or times as shall be determined by the Board. Options granted
pursuant to the Plan will not be qualified as incentive stock options under the
Code unless otherwise determined by the Board. Each Option granted to a
Participant shall be evidenced by an Option Agreement that shall specify the
number of shares of Common Stock that may be purchased pursuant to such Option,
the exercise price at which a share of Common Stock may be purchased pursuant to
such Option, the duration of such Option and such other terms consistent with
the Plan as the Board shall determine, including customary representations,
warranties and covenants with respect to securities law matters. The Board has
determined that the initial grant of Options shall be contingent upon the
exercise of Stock Purchase Rights in accordance with the provisions of Appendix
A hereto.
7.2. Exercise Price. The exercise price per share of Common
Stock to be purchased upon exercise of an Option shall be determined by the
Board but shall not be less than the Fair Market Value on the Grant Date.
7.3. Exercise of Options. The Options granted to a Participant
at any time shall become exercisable in accordance with the vesting schedule
and/or upon the
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<PAGE> 9
attainment of such performance criteria as shall be specified by the Board on or
before the Grant Date, provided that (a) 100% of such Options shall become
exercisable to the extent provided in Section 8.1, (b) the Board may accelerate
the exercisability of any Option, all Options or any class of Options, at any
time and from time to time and (c) if the Board does not specify a vesting
schedule for Options granted to any Participant on the Grant Date, one-third of
the Options shall vest and become exercisable at the end of each of the third,
fourth and fifth anniversaries of the date of the grant of such Options. No
Options may be exercised until all requisite governmental approvals and consents
have been obtained, the Exercise Shares to be issued in connection with the
exercise of such Options have been registered under the applicable securities
laws (or the issuance of such Exercise Shares is exempt from such registration),
and all applicable tax withholding requirements have been satisfied. As a
condition to the exercise of any Option, such Participant shall enter into a
Subscription Agreement. Notwithstanding any other provision of the Plan, each
Option shall terminate and shall not be exercisable on or after the tenth
anniversary of the Grant Date of such Option.
7.4. Payment. The Board shall establish procedures governing
the exercise of Options, which procedures shall generally require that written
notice of the exercise thereof be given and that the exercise price thereof be
paid in full in cash or cash equivalents, including by personal check, at the
time of exercise. However, in the event that shares of Common Stock are listed
for trading on a national securities exchange or bid and ask prices for shares
of Common Stock are quoted over the NASDAQ National Market System operated by
the National Association of Securities Dealers, Inc., the Participant may, in
lieu of cash, tender shares of Common Stock having a market price on the date of
exercise of his Option equal to the purchase price of such Exercise Shares or
may deliver a combination of cash and shares of Common Stock having a market
price equal to the difference between the exercise price and the amount of such
cash being delivered as payment for the purchase price of such Exercise Shares,
subject to such rules and regulations as may be adopted by the Board to provide
for the compliance of such payment procedure with applicable law. Holding and
the Company may require the Participant to furnish or execute such other
documents as it shall reasonably deem necessary to (i) evidence such exercise,
(ii) determine whether registration is then required under the U.S. federal
securities laws, and (iii) comply with or satisfy the requirements of the U.S.
federal securities laws, applicable state or non-U.S. securities laws or any
other law. As soon as practicable after receipt of a written exercise notice and
payment in full of the exercise price of any Covered Options, Holding shall
deliver to the Participant a certificate or certificates representing the shares
of Common Stock acquired upon the exercise thereof.
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<PAGE> 10
Section 8. Deferred Stock.
8.1. Grant. The Board may grant Deferred Shares to
Participants, and may grant Stock Purchase Rights that are exercisable for
Deferred Shares. The Board shall determine the eligible persons to whom and the
time or times at which Deferred Shares shall be awarded, the number of shares of
Deferred Shares to be awarded to any person, the duration of the period (the
"Deferred Period") during which, and the conditions under which, receipt of the
Stock will be deferred, and the other terms and conditions of the award in
addition to those set forth in Section 8.2. Deferred Shares may be awarded
alone, in addition to or in tandem with other Awards granted under the Plan. The
Board may condition the grant of Deferred Shares upon the attainment of
specified performance goals, the timely exercise of Stock Purchase Rights or
such other factors or criteria as the Board shall determine, in its sole
discretion. The Board has determined that the initial offering of Deferred
Shares shall be contingent upon the exercise of Stock Purchase Rights in
accordance with Appendix A hereto.
8.2. Terms and Conditions. The shares of Deferred Shares
awarded pursuant to this Section 8 shall be subject to the following terms and
conditions:
(i) Based on service, performance and/or such other factors or
criteria as the Board may determine, the Board may, at or after grant,
accelerate the vesting of all or any part of any Deferred Shares award
and/or waive the deferral limitations for all or any part of such
award.
(ii) Deferred Shares awards may not be sold, assigned,
transferred, pledged or otherwise encumbered during the Deferral
Period. At the expiration of the Deferral Period (or the Elective
Deferral Period referred to in Section 8.2 (v), where applicable),
share certificates shall be delivered to the Participant, or his legal
representative, in a number equal to the Shares corresponding to the
Deferred Shares.
(iii) Unless otherwise determined by the Board at grant,
amounts equal to any dividends or other distributions declared on
shares during the Deferral Period with respect to the number of shares
covered by a Deferred Shares award will be deferred and deemed to be
reinvested in additional Deferred Stock, otherwise reinvested or
distributed to holders of Deferred Shares, as determined at or after
the time of the award by the Board, in its sole discretion.
(iv) Subject to the provisions of any Award agreement
evidencing the grant of Deferred Shares conveyed hereby, upon
termination of a Participant's
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employment with Holding, the Company and any Subsidiary or Affiliate
for any reason during the Deferral Period for a given award, the
Deferred Shares in question will vest, or be forfeited, in accordance
with the provisions of Section 9 hereof.
(v) A Participant may elect to further defer receipt of an
shares of Common Stock issuable in respect of Deferred Shares (or an
installment of an award) for a specified period or until a specified
event (the "Elective Deferral Period"), subject in each case to the
Board's approval and to such terms as are determined by the Board, all
in its sole discretion. Subject to any exceptions adopted by the Board,
such election must generally be made at least 12 months prior to
completion of the Deferral Period for such Deferred Shares (or any such
installment thereof).
(vi) Each award shall be confirmed by, and subject to the
terms of, a Deferred Shares agreement executed by Holding and the
Participant.
8.3. Distributions in Respect of Deferred Shares. The shares of Common
Stock related to any Deferred Shares granted or any Deferred Shares acquired
upon the exercise of Stock Purchase Rights exercised with deferred bonus
compensation shall generally be issued to Participants upon the earlier to occur
of:
(i) immediately prior to a Change of Control, unless (a)
Deferred Shares of the acquiror in the Change of Control with
substantially similar terms are available as provided in Section 10.2
and (b) the Participant has not elected prior to the Change of Control
to receive the shares with respect to his Deferred Shares;
(ii) the expiration of any lock-up period following a Public
Offering;
(iii) immediately prior to the record date for a leveraged
recapitalization of Holding in which the C&D Fund has a realization
event with respect to a substantial portion of its investment unless
(a) the holders of Deferred Shares receive in such leveraged
recapitalization the same per share consideration as is paid or
distributed in such recapitalization to the holders of common stock and
(b) the Participant has not elected prior to such recapitalization to
receive the shares with respect to his Deferred Shares; and
(iv) the Participant's termination of employment (other than
for Cause), provided that no distribution shall be made under this
subclause (iv) unless Holding agrees to withhold enough shares of
Common Stock to satisfy the Participant's
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<PAGE> 12
applicable income and employment tax withholding requirements with
respect to such distribution.
Without limiting the generality of the foregoing, the Board may permit a
Participant to further defer the distribution of Deferred Shares until such time
or times as the Participant shall elect, in each case on such terms and
conditions and subject to such restrictions (including, without limitation,
those deemed necessary or appropriate to avoid the constructive receipt of such
shares of Common Stock by a Participant) as the Board may impose from time to
time. A deferral opportunity does not have to made available to all
Participants, and different terms and conditions may apply with respect to the
deferral opportunities made available to different participants.
Section 9. Termination of Employment
9.1. Special Termination. Unless otherwise provided in the
agreement governing any Award or otherwise determined by the Board at the Grant
Date, in the event that a Participant's employment with Holding, the Company and
the Subsidiaries terminates by reason of the Participant's death, Permanent
Disability or Retirement (each, a "Special Termination"), then any Options or
Deferred Shares held by the Participant shall immediately vest. Any such Option
shall be exercisable and shall remain exercisable until the first to occur of
(i) the 180th day following the date of the Participant's termination of
employment, or (ii) the expiration of the term of such Options. Any Options
described in the preceding sentence that are not exercised within the period
specified shall terminate and be canceled upon the expiration of such period.
The shares of Common Stock related to any Deferred Shares held by a Participant
at the time of a Special Termination shall be issued to such Participant upon
such Special Termination as provided in Section 8.3.
9.2. Termination for Cause. In the event that a Participant's
employment with Holding, the Company and the Subsidiaries is terminated for
Cause, any Options (whether or not then exercisable) held by and any Deferred
Shares credited to such Participant shall terminate and be canceled immediately
upon such termination of employment.
9.3. Other Termination of Employment. Unless otherwise
provided in the agreement governing any Award or otherwise determined by the
Board at or after the Grant Date, in the event that a Participant's employment
with Holding, the Company and the Subsidiaries terminates for any reason other
than (i) a Special Termination or (ii) for Cause, any Covered Options held by
such Participant shall remain exercisable for a period of 60 days after (a) the
termination of employment [or (b) if Holding and/or the C&D
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<PAGE> 13
Fund have a right to repurchase the Options, the expiration of such right to
repurchase or the date of receipt by the Participant of notice from Holding
and/or the C&D Fund that they will not exercise such right to repurchase] (or,
if shorter, during the remaining term of the Options). Any Options held by the
Participant that are not exercisable or Deferred Shares that are not vested at
the date of the Participant's termination of employment shall terminate and be
canceled immediately upon such termination, and any Covered Options described in
the preceding sentence that are not exercised within the period specified shall
terminate and be canceled upon the expiration of such period. The shares of
Common Stock related to any vested Deferred Shares held by the Participant shall
be issued to such Participant upon Participant's termination of employment
pursuant to Section 8.3.
9.4. Certain Rights upon Termination of Employment Prior to
Public Offering. Unless otherwise provided in the agreement governing an Award
or otherwise determined by the Board at the Grant Date, the Board shall provide
in each Subscription Agreement that (a) Holding and the C&D Fund shall have
successive rights to purchase all or any of a Participant's shares (including
shares issued with respect to Deferred Shares as provided in Section 8.3) and
Covered Options upon the termination of his employment for any reason prior to a
Public Offering at the purchase price provided in such agreement and (b) a
Participant may require Holding to repurchase all (but not less than all) of his
shares (including shares issued with respect to Deferred Shares, provided that
such shares were held by the Participant for at least 6 months) upon the
termination of the Participant's employment due to a Special Termination prior
to a Public Offering for a purchase price per share equal to the Fair Market
Value of a share of Common Stock, determined on the date of the Participant's
termination of employment, and upon such additional terms and conditions as are
set forth in the applicable Award Agreement. The foregoing right of a
Participant to require Holding to repurchase any shares shall (a) be subject to
the terms of the Subscription Agreement pursuant to which shares are issued and
to Holding having the ability to do so under the terms of its financing
arrangements and under Delaware law and (b) shall terminate on a Public
Offering.
Section 10. Change in Control
10.1. Accelerated Vesting and Payment. Unless the Board shall
otherwise determine in the manner set forth in Section 8.2, in the event of a
Change in Control, each Option shall be canceled in exchange for a payment in
cash of an amount equal to the excess, if any, of the Change in Control Price
over the exercise price for such Option. Any Stock Purchase Right that has not
been exercised shall be canceled, provided that, any Stock Purchase Right
exercised with respect to Deferred Shares by means of the commitment of a bonus
payment yet to be made shall be deemed exercised immediately prior to the Change
of Control in respect of that number, if any, of Deferred Shares as can
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<PAGE> 14
be purchased using the amount actually payable in respect of such bonus
compensation amount in connection with such Change of Control.
10.2. Alternative Options. Notwithstanding Section 10.1, no
cancellation, acceleration of exercisability, issuance of shares, vesting or
cash settlement or other payment shall occur with respect to any Deferred Share
or Option if the Board reasonably determines in good faith, prior to the
occurrence of a Change in Control, that such Deferred Share or Option shall be
honored or assumed, or new rights substituted therefor (such honored, assumed or
substituted Deferred Share or Option being hereinafter referred to as an
"Alternative Award") by the New Employer, provided that any such Alternative
Award must:
(a) provide the Participant that held such Award with rights
and entitlements substantially equivalent to or better than the rights,
terms and conditions applicable under such Award, including, but not
limited to, an identical or better exercise and vesting schedule,
identical or better timing and methods of payment and, if the
Alternative Award or the securities underlying them are not publicly
traded, identical or better rights to require Holding or the New
Employer to repurchase the Alternative Awards;
(b) have substantially equivalent economic value to such Award
(determined at the time of the Change in Control); and
(c) have terms and conditions that provide that if such
Participant suffers an Involuntary Termination within two years
following a Change in Control:
(i) any conditions on such Participant's rights
under, or any restrictions on transfer or exercisability
applicable to, each such Alternative Award shall be waived or
shall lapse, as the case may be; or
(ii) such Participant shall have the right to
surrender such Alternative Award within 30 days following such
termination in exchange for a payment in cash equal to, in the
case of an Alternative Award related to Deferred Shares, the
Fair Market Value of the Common Stock subject to such Award,
or, in the case of an Alternative Award related to an Option,
the excess of the Fair Market Value of the Common Stock
subject to the Alternative Award over the price, if any, that
such Participant would be required to pay to exercise such
Alternative Award.
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<PAGE> 15
Notwithstanding the foregoing, with respect to any Deferred Share, each
Participant shall have the right to elect, prior to a Change in Control, to be
issued shares pursuant to Section 8.3 rather than receive an Alternative Award.
Section 11. Amendment, Modification, and
Termination of the Plan
The Board at any time may terminate or suspend the Plan, and
from time to time may amend or modify the Plan. No amendment, modification,
termination or suspension of the Plan shall in any manner adversely affect any
Award theretofore granted under the Plan without the consent of the Participant
holding such Award. Shareholder approval of any such amendment, modification,
termination or suspension shall be obtained to the extent mandated by applicable
law, or if otherwise deemed appropriate by the Board.
Section 12. Miscellaneous Provisions
12.1. Nontransferability of Awards, Options or Deferred
Shares. Subject to the rights of Holding and C&D Fund pursuant to Section 9.4 to
purchase Options granted under the Plan, no Awards granted under the Plan may be
sold, transferred, pledged, assigned, encumbered or otherwise alienated or
hypothecated, other than by will or by the laws of descent and distribution and
provided that the deceased Participant's beneficiary or the representative of
his estate acknowledges and agrees in writing, in a form reasonably acceptable
to to be bound by the provisions of the Plan (including the purchase rights
described in Section 9.4) and the agreement covering such Awards as if such
beneficiary or estate were the Participant. All rights with respect to Awards
granted to a Participant under the Plan shall be exercisable during his
life-time by such Participant only. Following a Participant's death, all rights
with respect to Awards that were outstanding at the time of such Participant's
death and have not terminated shall be exercised by his designated beneficiary
or by his estate.
12.2. Beneficiary Designation. Each Participant under the Plan
may from time to time name any beneficiary or beneficiaries (who may be named
contingently or successively) by whom any right under the Plan is to be
exercised in case of his death. Each designation will revoke all prior
designations by the same Participant, shall be in a form reasonably prescribed
by the Board, and will be effective only when filed by the Participant in
writing with the Board during his lifetime.
12.3. No Guarantee of Employment or Participation. Nothing in
the Plan or in any agreement granted hereunder shall interfere with or limit in
any way the right of
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<PAGE> 16
Holding, the Company or any Subsidiary to terminate any Participant's employment
or retention at any time, or confer upon any Participant any right to continue
in the employ or retention of Holding, the Company or any Subsidiary. No
Employee shall have a right to be selected as a Participant or, having been so
selected, to receive any Awards.
12.4. Tax Withholding. Holding, the Company or the Subsidiary
employing or retaining a Participant shall have the power to withhold, or to
require such Participant to remit to Holding, the Company or such Subsidiary,
subject to such other arrangements as the Board may set forth in the agreement
governing such Award to which such Participant is a party, an amount sufficient
to satisfy all federal, state, local and foreign withholding tax requirements in
respect of any Award granted under the Plan.
12.5. Indemnification. Each person who is or shall have been a
member of the Board or any committee of the Board shall be indemnified and held
harmless by Holding to the fullest extent permitted by law from and against any
and all losses, costs, liabilities and expenses (including any related
attorneys' fees and advances thereof) in connection with, based upon or arising
or resulting from any claim, action, suit or proceeding to which he may be made
a party or in which he may be involved by reason of any action taken or failure
to act under or in connection with the Plan and from and against any and all
amounts paid by him in settlement thereof, with Holding's approval, or paid by
him in satisfaction of any judgment in any such action, suit or proceeding
against him, provided that he shall give Holding an opportunity, at its own
expense, to defend the same before he undertakes to defend it on his own behalf.
The foregoing right of indemnification shall not be exclusive and shall be
independent of any other rights of indemnification to which such persons may be
entitled under Holding's Certificate of Incorporation or By-laws, by contract,
as a matter of law, or otherwise.
12.6. No Limitation on Compensation. Nothing in the Plan shall
be construed to limit the right of Holding, the Company or any Subsidiary to
establish other plans or to pay compensation to its employees or consultants, in
cash or property, in a manner that is not expressly authorized under the Plan.
12.7. Requirements of Law. The granting of Options and the
issuance of shares of Common Stock pursuant to the Plan shall be subject to all
applicable laws, rules and regulations, and to such approvals by any
governmental agencies or national securities exchanges as may be required. No
Awards shall be granted under the Plan, and no shares of Common Stock shall be
issued under the Plan, if such grant or issuance would result in a violation of
applicable law, including the federal securities laws and any applicable state
securities laws.
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12.8. Freedom of Action. Subject to Section 11, nothing in the
Plan or any Option Agreement shall be construed as limiting or preventing
Holding, the Company or any Subsidiary from taking any action that it deems
appropriate or in its best interest.
12.9. Term of Plan. The Plan shall be effective as of the
Effective Date. The Plan shall continue in effect, unless sooner terminated
pursuant to Section 11, until the tenth anniversary of the Effective Date. The
provisions of the Plan, however, shall continue thereafter to govern all
outstanding Options theretofore granted.
12.10. No Voting Rights. Except as otherwise required by law,
no Participant holding any Awards granted under the Plan shall have any right,
in respect of such Awards, to vote on any matter submitted to Holding's
stockholders until such time as the shares of Common Stock related to any Stock
Purchase Right or any Deferred Share award or issuable upon exercise of such
Options have been issued.
12.11. Governing Law. The Plan, and all agreements hereunder,
shall be governed by and construed in accordance with the law of the State of
Delaware.
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Appendix A
1. OPTIONS TO BE GRANTED IN CONNECTION WITH STOCK PURCHASE RIGHTS.
A. PERFORMANCE OPTION GRANTS.
1999 Purchases. All executives who exercise Stock Purchase Rights
(whether with respect to actual shares of Common Stock or Deferred
Shares) in 1999 shall be granted a performance stock option for a
number of shares equal to the number of shares purchased pursuant to
such Stock Purchase Rights; provided that, if a Change of Control of
the Company occurs in 1999 no "matching" options would be granted to an
executive who uses his pro-rated bonus for 1999 to acquire an interest
in Deferred Shares.
Each such option would have an exercise price of $200 per share. Up to
one-half of the option generally would become exercisable, if at all,
based on achievement against targeted levels of EBITDA for 1999. Five
percent of the option shares would become exercisable if EBITDA for
1999 is at least 91% of business plan ($70 million). An additional five
percent of such shares will become exercisable upon the achievement of
an additional one percent of the planned EBITDA. Thus, fifty percent of
the option shares would become exercisable if EBITDA for 1999 equals or
exceeds $70 million. Thus, vesting would occur in accordance with the
following schedule:
EBITDA ACHIEVED
(in millions of dollars) Percent Vested
------------------------ --------------
Below $63.7 0%
63.7 5%
64.4 10%
65.1 15%
65.8 20%
66.5 25%
67.2 30%
67.9 35%
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68.6 40%
69.3 45%
70.0 50%
Whatever portion of the options related to Stock Purchase Rights
exercised in 1999 has not become vested based on 1999 performance will
be become exercisable in the following manner: Ten percent of the
remaining unvested option shares would become exercisable if EBITDA for
2000 is at least 91% of a target of EBITDA of $80 (or such lesser
target objective as the Board shall hereinafter determine). An
additional ten percent of such unvested shares will become exercisable
upon the achievement of an additional one percent of the planned
EBITDA. Thus, one hundred percent of the option shares would become
exercisable if EBITDA for 2000 equals or exceeds $80 (or such other
lower number as the Board may hereafter determine). Thus, fifty percent
of the option shares would become exercisable if EBITDA for 1999 equals
or exceeds the business plan. Thus, vesting of the remainder of the
option (i.e., the portion that has not become exercisable in respect of
1999 performance) would occur in accordance with the following
schedule:
EBITDA ACHIEVED(1)
(in millions of dollars) Percent Vested
------------------------ --------------
Below $72.8 0%
72.8 0%
73.6 20%
74.4 30%
75.2 40%
76.0 55%
76.8 60%
77.6 70%
78.4 80%
- -----------------
1. Subject to adjustment.
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79.2 90%
80.0 100%
Purchases in 2000. An executive who exercises a Stock Purchase Right to
purchase shares in 2000 will receive a performance option for a number
of shares equal to only one-half of the number of shares purchased.
This option would have an exercise price equal to then appraised value
of the stock and generally will become exercisable on the same basis as
described above with regard to 2000 performance.
Notwithstanding the foregoing, all such performance options will become
exercisable, to the extent not exercisable at an earlier date, on the
ninth anniversary of the date of grant, so long as the optionee is
still employed on such date.
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B. SERVICE OPTION GRANTS.
Executives who exercise Stock Purchase Rights (whether with respect to
actual shares of Common Stock or Deferred Shares) will also receive
stock options that vest over five years, in three installments on each
of the third, fourth and fifth anniversaries of the date of grant, so
long as the optionee is still employed on each such date. The number of
shares subject to such service options will be one share of Common
Stock for each share of Common Stock or each Deferred Share purchased
in 1999, one-half of a share of Common Stock for each share of Common
Stock or each Deferred Share purchased in 2000; except that no such
service option grants will be made in respect of any Stock Purchase
Right exercised by an Original Offeree (as defined below) which is
treated as a Matchable Share (as defined below) and as to which is a
Deferred Share is granted as provided below. The grant date will be the
date on which the corresponding Stock Purchase Rights are exercised
(that is, the shares of Common Stock are purchased or the Deferred
Shares acquired). The exercise price of each service option will be
equal to the fair market value of the stock when the option is granted,
which will also be the purchase price for the corresponding Stock
Purchase Rights. For options granted and Stock Purchase Rights
exercised prior to June 30, 1999, such fair market value has been
determined by the Board to be $200 per share. Any later purchases or
grants may only be made after a new appraisal has been obtained and
reviewed by the Board.
2. OUTRIGHT AWARD OF DEFERRED SHARES.
Each executive who was advised that he or she would have the
opportunity to purchase stock at or about the time of the acquisition
of the Company by the C&D Fund (each, an "Original Offeree") shall be
granted that number of Deferred Shares as is equal to the maximum
number of whole shares of Common Stock (the "Matchable Shares") as can
be and are purchased (regardless of whether on an after-tax basis,
using loan proceeds or using deferred incentive compensation amounts)
under a Stock Purchase Right at $200 per share using the dollar amount
he would have invested at closing had he then purchased all of the
shares of Common Stock that have previously been identified as to be
made available to him for purchase (the "Original Share Offer").
"Matching" Deferred Shares would be granted to an Original Offeree who,
in the event of a 1999 transaction, uses his pro-rated bonus for 1999
to acquire an interest in stock, with the match to be based on the
number of Deferred Shares actually credited to the executive in respect
of such pro-rated bonus.
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TO AVOID ANY DOUBT, THE PERSONS WHO ARE ORIGINAL OFFEREES, AND THE
NUMBER OF SHARES OF COMMON STOCK SUBJECT TO THE ORIGINAL SHARE OFFER
FOR EACH SUCH ORIGINAL OFFEREE, ARE LISTED ON A SCHEDULE THAT HAS BEEN
APPROVED BY THE BOARD, WHICH SCHEDULE SHALL BE FINAL, BINDING AND
CONCLUSIVE FOR PURPOSES OF DETERMINING THE RIGHTS OF ANY PERSON TO
RECEIVE A GRANT OF DEFERRED SHARES HEREUNDER.
The Board may allow an Original Offeree to exercise Stock Purchase
Rights in respect of more shares than were the subject of the Original
Share Offer (the "Additional Shares"). Only the Matchable Shares will
be eligible for a "matching" grant of Deferred Shares. No Deferred
Shares will be granted in respect of Additional Shares; however,
Additional Shares will be eligible for a matching grant of service
options as described above.
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Exhibit 10.4
MANAGEMENT STOCK SUBSCRIPTION AGREEMENT
MANAGEMENT STOCK SUBSCRIPTION AGREEMENT, dated as of June 24,
1999, between RACI Holding, Inc., a Delaware corporation ("Holding"), and the
Purchaser whose name appears on the signature page hereof (the "Purchaser").
W I T N E S S E T H:
WHEREAS, pursuant to the terms of the RACI Holding, Inc. 1999
Stock Incentive Plan (the "Plan"), the Board of Directors of Holding (the
"Board") has granted to the Purchaser Stock Purchase Rights to purchase the
aggregate number of shares of Class A Common Stock, par value $.01 per share
("Common Stock"), of Holding set forth on the signature page hereof (each a
"Share" and, collectively, the "Shares") at the purchase price provided for
herein; and
WHEREAS, the terms of the offering of the Shares and certain
other shares of Common Stock being made as of the date hereof ("the Offering")
are set forth in a Confidential Offering Memorandum dated May 14, 1999, as
supplemented by the supplement to offering memorandum dated June 8, 1999 (as so
supplemented, the "Offering Memorandum"), each of which has been furnished to
the Purchaser by Holding;
NOW, THEREFORE, to implement the foregoing and in
consideration of the mutual agreements contained herein, the parties hereto
hereby agree as follows:
1. Purchase and Sale of Common Stock.
(a) Purchase of Common Stock. Subject to all of the terms and
conditions of this Agreement and the Plan, the Purchaser hereby subscribes for
and shall purchase, and Holding shall sell to the Purchaser, the Shares at a
purchase price of $200.00 per Share at the Closing provided for in Section 2(a)
hereof. Notwithstanding anything in this Agreement to the contrary, Holding
shall have no obligation to sell any Common Stock to (i) any person who will not
be an employee of Holding or a direct or indirect subsidiary of Holding
immediately following the Closing at which such Common Stock is to be sold or
(ii) any person who is a resident of a jurisdiction in which the sale of Common
Stock to such person would constitute a violation of the securities, "blue sky"
or other laws of such jurisdiction.
<PAGE> 2
(b) Consideration. Subject to all of the terms and conditions
of this Agreement and the Plan, the Purchaser shall deliver to Holding at the
Closing (as defined in Section 2(a) hereof) immediately available funds in the
amount of the aggregate purchase price set forth on the signature page hereof.
2. Closing.
(a) Time and Place. Except as otherwise mutually agreed by
Holding and the Purchaser, the closing (the "Closing") of the transaction
contemplated by this Agreement shall be held at the offices of Debevoise &
Plimpton, 875 Third Avenue, New York, New York at 10:00 a.m. (New York time) on
June 24, 1999.
(b) Delivery by Holding. At the Closing, Holding shall deliver
to the Purchaser a stock certificate registered in such Purchaser's name and
representing the Shares, which certificate shall bear the legends set forth in
Section 3(b).
(c) Delivery by the Purchaser. At the Closing, the Purchaser
shall deliver to Holding the consideration referred to in Section 1(b) hereof.
3. Purchaser's Representations, Warranties and Covenants.
(a) Investment Intention. The Purchaser represents and
warrants that the Purchaser is acquiring the Shares solely for the Purchaser's
own account for investment and not with a view to or for sale in connection with
any distribution thereof. The Purchaser agrees that the Purchaser will not,
directly or indirectly, offer, transfer, sell, pledge, hypothecate or otherwise
dispose of any of the Shares (or solicit any offers to buy, purchase or
otherwise acquire or take a pledge of any Shares), except in compliance with the
Securities Act of 1933, as amended (the "Securities Act"), and the rules and
regulations of the Securities and Exchange Commission (the "Commission")
thereunder, and in compliance with applicable state and foreign securities or
"blue sky" laws. The Purchaser further understands, acknowledges and agrees that
none of the Shares may be transferred, sold, pledged, hypothecated or otherwise
disposed of (i) unless the provisions of Sections 4 through 8 hereof, inclusive,
shall have been complied with or have expired, (ii) unless (A) such disposition
is pursuant to an effective registration statement under the Securities Act, (B)
the Purchaser shall have delivered to Holding an opinion of counsel, which
opinion and counsel shall be reasonably satisfactory to Holding, to the effect
that such disposition is exempt from the provisions of Section 5 of the
Securities Act or (C) a no-action letter from the Commission, reasonably
satisfactory to Holding, shall have been obtained with respect to such
disposition and (iii) unless such disposition is pursuant to registration under
any applicable state or foreign securities laws or an exemption therefrom.
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<PAGE> 3
(b) Legends. The Purchaser acknowledges that the certificate
or certificates representing the Shares shall bear the following legends or
other appropriate legends:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
PROVISIONS OF A MANAGEMENT STOCK SUBSCRIPTION AGREEMENT, DATED
AS OF JUNE 24, 1999, AND NEITHER THIS CERTIFICATE NOR THE
SHARES REPRESENTED BY IT ARE ASSIGNABLE OR OTHERWISE
TRANSFERABLE EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF SUCH
MANAGEMENT STOCK SUBSCRIPTION AGREEMENT, AS THE SAME MAY BE
AMENDED FROM TIME TO TIME, A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE ISSUER. THE SHARES REPRESENTED BY THIS
CERTIFICATE ARE BOUND BY THE OBLIGATIONS SET FORTH IN AND MAY
BE ENTITLED TO SOME OF THE BENEFITS OF A REGISTRATION AND
PARTICIPATION AGREEMENT, DATED AS OF NOVEMBER 30, 1993, AMONG
THE ISSUER AND CERTAIN STOCKHOLDERS OF THE ISSUER, AS AMENDED
AND AS THE SAME MAY BE AMENDED FROM TIME TO TIME, A COPY OF
WHICH IS ON FILE WITH THE SECRETARY OF THE ISSUER."
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED
UNDER ANY STATE OR FOREIGN SECURITIES LAWS AND MAY NOT BE
TRANSFERRED, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED
OF UNLESS (i) (A) SUCH DISPOSITION IS PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, (B) THE HOLDER HEREOF SHALL HAVE DELIVERED TO HOLDING
AN OPINION OF COUNSEL, WHICH OPINION AND COUNSEL SHALL BE
REASONABLY SATISFACTORY TO THE ISSUER, TO THE EFFECT THAT SUCH
DISPOSITION IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF SUCH
ACT OR (C) A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE
COMMISSION, REASONABLY SATISFACTORY TO THE ISSUER, SHALL HAVE
BEEN OBTAINED WITH RESPECT TO SUCH DISPOSITION AND (ii) SUCH
DISPOSITION IS PURSUANT TO REGISTRATION
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UNDER ANY APPLICABLE STATE AND FOREIGN SECURITIES LAWS OR AN
EXEMPTION THEREFROM."
(c) Securities Law Matters. The Purchaser acknowledges receipt
of advice from Holding that (i) the Shares have not been registered under the
Securities Act based on an exemption provided under Rule 701 promulgated under
the Securities Act or qualified under any state or foreign securities or "blue
sky" laws, (ii) it is not anticipated that there will be any public market for
the Shares, (iii) the Shares must be held indefinitely and the Purchaser must
continue to bear the economic risk of the investment in the Shares unless the
Shares are subsequently registered under the Securities Act and such state laws
or an exemption from registration is available, (iv) Rule 144 promulgated under
the Securities Act ("Rule 144") is not presently available with respect to the
sales of the Shares, and Holding has made no covenant to make Rule 144
available, (v) when and if the Shares may be disposed of without registration in
reliance upon Rule 144, such disposition can be made only in accordance with the
terms and conditions of such Rule, (vi) Holding does not plan to file reports
with the Commission or make public information concerning Holding available
unless required to do so by law or by the terms of its Financing Agreements (as
hereinafter defined), (vii) if the exemption afforded by Rule 144 is not
available, sales of the Shares may be difficult to effect because of the absence
of public information concerning Holding, (viii) a restrictive legend in the
form heretofore set forth shall be placed on the certificates representing the
Shares and (ix) a notation shall be made in the appropriate records of Holding
indicating that the Shares are subject to restrictions on transfer set forth in
this Agreement and, if Holding should in the future engage the services of a
stock transfer agent, appropriate stop-transfer restrictions will be issued to
such transfer agent with respect to the Shares.
(d) Compliance with Rule 144. If any of the Shares are to be
disposed of in accordance with Rule 144, the Purchaser shall transmit to Holding
an executed copy of Form 144 (if required by Rule 144) no later than the time
such form is required to be transmitted to the Commission for filing and such
other documentation as Holding may reasonably require to assure compliance with
Rule 144 in connection with such disposition.
(e) Ability to Bear Risk. The Purchaser represents and
warrants that (i) the financial situation of the Purchaser is such that the
Purchaser can afford to bear the economic risk of holding the Shares for an
indefinite period and (ii) the Purchaser can afford to suffer the complete loss
of the Purchaser's investment in the Shares.
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<PAGE> 5
(f) Access to Information. The Purchaser represents and
warrants that the Purchaser has received the Offering Memorandum and has
carefully reviewed the Offering Memorandum (together with the Annexes thereto)
and the other materials furnished to the Purchaser in connection with the
transaction contemplated hereby.
(g) Registration; Restrictions on Sale upon Public Offering.
The Purchaser shall be entitled to the rights and subject to the obligations
created under the Registration and Participation Agreement, dated as of November
30, 1993, among Holding and certain stockholders of Holding (the "Registration
and Participation Agreement"), to the extent set forth therein. The Purchaser
agrees that, in the event that Holding files a registration statement under the
Securities Act with respect to an underwritten public offering of any shares of
its capital stock, the Purchaser will not effect any public sale or distribution
of any shares of the Common Stock (other than as part of such underwritten
public offering) during the 20 days prior to and the 180 days after the
effective date of such registration statement.
(h) Section 83(b) Election. The Purchaser agrees that, within
20 days of the Closing, the Purchaser shall give notice to Holding as to whether
or not the Purchaser has made an election pursuant to Section 83(b) of the
Internal Revenue Code of 1986, as amended, with respect to the Shares purchased
at such Closing, and acknowledges that the Purchaser will be solely responsible
for any and all tax liabilities payable by the Purchaser in connection with the
Purchaser's receipt of the Shares or attributable to the Purchaser's making or
failing to make such an election.
4. Restrictions on Disposition of Shares. Neither the
Purchaser nor any of the Purchaser's heirs or representatives shall sell,
assign, transfer, pledge or otherwise directly or indirectly dispose of or
encumber any of the Shares to or with any other person, firm, trust,
association, corporation or entity (including, without limitation, transfers to
any other holder of Holding's capital stock, dispositions by gift, by will, by a
corporation as a distribution in liquidation and by operation of law other than
a transfer of Shares by operation of law to the estate of the Purchaser upon the
death of the Purchaser, provided that such estate shall be bound by all
provisions of this Agreement) except as provided in Sections 5 through 8 hereof,
inclusive. The restrictions contained in this Section 4 shall terminate in the
event that an underwritten public offering of the Common Stock led by one or
more underwriters at least one of which is an underwriter of nationally
recognized standing (a "Public Offering") has been consummated and shall not
apply to a sale to the underwriters as part of a Public Offering.
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<PAGE> 6
5. Options of Holding and the C&D Fund Upon Proposed
Disposition.
(a) Rights of First Refusal. If the Purchaser desires to
accept an offer (which must be in writing and for cash, be irrevocable by its
terms for at least 60 days and be a bona fide offer as determined in good faith
by the Board) from any prospective purchaser to purchase all or any part of the
Shares at any time owned by the Purchaser, the Purchaser shall give notice in
writing to Holding and The Clayton Dubilier Private Equity Fund IV Limited
Partnership, a Connecticut limited partnership (together with any successor
investment vehicle managed by Clayton, Dubilier & Rice, Inc., the "C&D Fund")
(i) designating the number of Shares proposed to be sold, (ii) naming the
prospective purchaser of such Shares and (iii) specifying the price (the "Offer
Price") at and terms (the "Offer Terms") upon which the Purchaser desires to
sell the same. During the 30-day period following receipt of such notice by
Holding and the C&D Fund (the "First Refusal Period"), Holding shall have the
right to purchase from the Purchaser the Shares specified in such notice, at the
Offer Price and on the Offer Terms. Holding hereby undertakes to use reasonable
efforts to act as promptly as practicable following such notice to determine
whether it shall elect to exercise such right. If Holding fails to exercise such
rights within the First Refusal Period, the C&D Fund shall have the right to
purchase the Shares specified in such notice, at the Offer Price and on the
Offer Terms, at any time during the period beginning at the earlier of (x) the
end of the First Refusal Period and (y) the date of receipt by the C&D Fund of
written notice that Holding has elected not to exercise its rights and ending 30
days thereafter (the "Second Refusal Period"). The rights provided hereunder
shall be exercised by written notice to the Purchaser given at any time during
the applicable period. If such right is exercised, Holding or the C&D Fund, as
the case may be, shall deliver to the Purchaser a certified or bank check for
the Offer Price, payable to the order of the Purchaser, against delivery of
certificates or other instruments representing the Shares so purchased,
appropriately endorsed by the Purchaser. If such right shall not have been
exercised prior to the expiration of the Second Refusal Period, then at any time
during the 30 days following the expiration of the Second Refusal Period, the
Purchaser may sell such Shares to (but only to) the intended purchaser named in
the Purchaser's notice to Holding and the C&D Fund at the Offer Price and on the
Offer Terms specified in such notice, free of all restrictions or obligations
imposed by, and free of any rights or benefits set forth in, Sections 6 and 7 of
this Agreement, provided that such intended purchaser shall have agreed in
writing, pursuant to an instrument of assumption satisfactory in substance and
form to Holding, to make and be bound by (i) the representations, warranties and
covenants set forth in Section 3 hereof, other than those set forth in Sections
3(f) and 3(h) and (ii) the agreements set forth in Sections 4, 5 and 8 of this
Agreement. The right of the Purchaser to sell Shares set forth in this Section
5(a), subject to the rights of first refusal set forth in this Section 5(a),
shall be suspended during the Option Periods referred to in Section 6 hereof,
but the provisions of Section 6 shall not otherwise restrict the ability of the
Purchaser to sell the Shares, whether before or
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<PAGE> 7
after such Option Periods, pursuant to the terms and subject to the restrictions
set forth in this Section 5(a).
(b) Public Offering. In the event that a Public Offering has
been consummated, neither Holding nor the C&D Fund shall have any rights to
purchase the Shares from the Purchaser pursuant to this Section 5 and this
Section 5 shall not apply to a sale to the underwriters as part of a Public
Offering.
6. Options Effective on Termination of Employment or
Unforeseen Personal Hardship of the Purchaser.
(a) Termination of Employment. If the Purchaser's Active
Employment with Holding is terminated for any reason whatsoever, Holding shall
have an option to purchase all or any portion of the Shares then held by the
Purchaser (or, if the Purchaser's Active Employment was terminated by the
Purchaser's death, his estate) and shall have 60 days from the date of the
Purchaser's termination (such 60-day period being hereinafter referred to as the
"First Option Period") during which to give notice in writing to the Purchaser
(or his estate) of its election to exercise or not to exercise such option,
provided that such 60-day period may be extended by mutual agreement between the
Purchaser and Holding. Holding hereby undertakes to use reasonable efforts to
act as promptly as practicable following such termination to make such election.
If Holding (i) fails to give notice that it intends to exercise such option
within the First Option Period or (ii) chooses to repurchase none or only a
portion of the Shares then held by the Purchaser (or his estate), by giving such
notice, the C&D Fund shall have the right to purchase all or any portion of the
Shares not repurchased by Holding, and shall have until the expiration of the
earlier of (x) 60 days following the end of the First Option Period, or (y) 60
days from the date of receipt by the C&D Fund of written notice that Holding
does not intend to exercise its option with respect to all of the Purchaser's
Shares (such 60-day period being hereinafter referred to as the "Second Option
Period"), to give notice in writing to the Purchaser (or his estate) of the C&D
Fund's exercise of its option. If the options of Holding and the C&D Fund to
purchase all of the Shares granted in this subsection are not fully exercised as
provided herein (other than as a result of Section 11 hereof), the Purchaser (or
his estate) shall be entitled to retain any Shares which could have been
acquired on exercise thereof, subject to all of the provisions of this Agreement
(including without limitation Section 5(a)). If Holding and the C&D Fund have
failed to exercise their respective options pursuant to this Section 6(a) or
have exercised such options with respect to less than all of the Shares held by
the Purchaser (or his estate) within the time periods specified herein, and if
the Purchaser's Active Employment is terminated (A) by the Purchaser by
Retirement or (B) by reason of the death or Permanent Disability of the
Purchaser, then on notice from the Purchaser (or his estate) in writing and
delivered to Holding within [30] days following the end of the Second Option
Period, Holding shall be
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<PAGE> 8
required to purchase all (but not less than all) of the Shares then held by the
Purchaser (or his estate). All purchases pursuant to this Section 6(a) by
Holding or the C&D Fund shall be for a purchase price and in the manner
prescribed by Section 7 hereof.
(b) Unforeseen Personal Hardship. In the event that the
Purchaser, while in the employment of Holding or any direct or indirect
subsidiary of Holding, experiences Unforeseen Personal Hardship, the Board will
carefully consider any request by the Purchaser that Holding repurchase the
Purchaser's Shares at a price determined in accordance with Section 7 hereof,
but Holding shall have no obligation to repurchase such Shares. The Board shall
consider such request with respect to Unforeseen Personal Hardship as soon as
practicable after receipt by Holding of a written request by the Purchaser, such
request to include sufficient details of the Purchaser's Unforeseen Personal
Hardship to permit the Board to review the request and the circumstances in an
informed manner.
(c) Certain Definitions. Capitalized terms used in this
Agreement without definition shall have the respective meanings set forth in the
Plan. As used in this Agreement, the following terms shall have the following
meanings:
(i) "Active Employment" shall mean active employment with
Holding or any direct or indirect subsidiary of Holding.
(ii) "Cause" shall mean (A) the willful failure by the
Purchaser to perform substantially his duties as an employee of
Holding, the Company or any Subsidiary (other than any such failure due
to physical or mental illness) after a demand for substantial
performance is delivered to the Purchaser by the executive to whom the
Purchaser reports or by the Board, which notice identifies the manner
in which such executive or the Board, as the case may be, believes that
the Purchaser has not substantially performed his duties, (B) the
Purchaser's engaging in willful and serious misconduct that is
injurious to Holding, the Company or any Subsidiary, (C) the
Purchaser's having been convicted of, or entered a plea of guilty or
nolo contendere to, a crime that constitutes a felony, (D) the willful
and material breach by the Purchaser of any written covenant or
agreement with Holding, the Company or any Subsidiary not to disclose
any information pertaining to Holding, the Company or any Subsidiary or
not to compete or interfere with Holding, the Company or any Subsidiary
or (E) the breach by the Purchaser of the Purchaser's obligations
pursuant to Section 8 hereof.
(iii) "Company" shall mean the Remington Arms Company, Inc., a
Delaware corporation formerly named RACI Acquisition Corporation, and
any successor thereto.
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<PAGE> 9
(iv) "Permanent Disability" shall mean a physical or mental
disability or infirmity that prevents the performance of Purchaser's
employment-related duties for a continuous period of six months or
longer. The Board's reasoned and good faith judgment of Permanent
Disability shall be final, binding and conclusive on all parties hereto
and shall be based on such competent medical evidence as shall be
presented to it by the Purchaser or by any physician or group of
physicians or other competent medical expert employed by the Purchaser
or Holding to advise the Board.
(v) "Retirement" shall mean retirement at age 65 or later.
(vi) "Subsidiary" shall mean any corporation, a majority of
whose outstanding voting securities is owned, directly or indirectly,
by the Company or Holding.
(vii) "Unforeseen Personal Hardship" shall mean financial
hardship arising from (x) extraordinary medical expenses or other
expenses directly related to illness or disability of the Purchaser, a
member of the Purchaser's immediate family or one of the Purchaser's
parents or (y) payments necessary or required to prevent the eviction
of Purchaser from Purchaser's principal residence or foreclosure on the
mortgage on that residence. The Board's reasoned and good faith
determination of Unforeseen Personal Hardship shall be binding on
Holding and the Purchaser.
(d) Notice of Termination. Holding shall give written notice
of any termination of the Purchaser's Active Employment to the C&D Fund, except
that if such termination (if other than as a result of death) is by the
Purchaser, the Purchaser shall give written notice of such termination to
Holding and Holding shall give written notice of such termination to the C&D
Fund.
(e) Public Offering. In the event that a Public Offering has
been consummated, none of Holding, the C&D Fund or the Purchaser shall have any
rights to purchase or sell the Shares, as the case may be, pursuant to this
Section 6 and this Section 6 shall not apply to a sale as part of a Public
Offering.
7. Determination of the Purchase Price; Manner of Payment.
(a) Purchase Price. For the purposes of any purchase of the
Shares pursuant to Section 6, and subject to Section 11(c), the purchase price
per Share to be paid to the Purchaser (or his estate) for each Share (the
"Purchase Price") shall be the fair market value (the "Fair Market Value") of
such Share as of the effective date of the termination of employment that gives
rise to the right or obligation to repurchase or, in the case
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<PAGE> 10
of a repurchase as a result of Unforeseen Personal Hardship, as of the date such
Shares are repurchased (such date of termination or repurchase, as applicable,
the "Determination Date"); provided that if the Purchaser's employment is
terminated by Holding or any of its direct or indirect subsidiaries for Cause,
the Purchase Price for such Share shall be the lesser of (i) the Fair Market
Value of such Share as of the effective date of the termination of employment
that gives rise to the right or obligation to repurchase and (ii) the price at
which the Purchaser purchased such Share from Holding. Whenever determination of
the Fair Market Value of such Shares is required by this Agreement, such Fair
Market Value shall be such amount as is determined in good faith by the Board.
In making a determination of Fair Market Value, the Board shall give due
consideration to such factors as it deems appropriate, including, without
limitation, the earnings and certain other financial and operating information
of the Company in recent periods, the potential value of the Company as a whole,
the future prospects of the Company and the industries in which it competes, the
history and management of the Company, the general condition of the securities
markets, the fair market value of securities of companies engaged in businesses
similar to those of the Company and the Applicable Share Valuation (as defined
below). The determination of Fair Market Value will not give effect to any
restrictions on transfer of the Shares or the fact that such Shares would
represent a minority interest in Holding. For purposes of this Agreement, the
term "Applicable Share Valuation" shall mean the annual valuation of the Common
Stock performed as of the last day of the last fiscal year of Holding ending
prior to the Determination Date by an independent valuation firm chosen by the
Board, except that, in the case of a Determination Date occurring during the
period beginning on September 1 of any fiscal year of Holding and ending on
December 31 of that fiscal year beginning with the period beginning on September
1, 1999 and ending on December 31, 1999, the term "Applicable Share Valuation"
shall mean the annual valuation of the Common Stock performed as of the last day
of such fiscal year by an independent valuation firm chosen by the Board. Such
annual valuations shall be performed as promptly as practicable following the
end of each fiscal year of Holding, beginning with the 1999 fiscal year of
Holding. The Fair Market Value as determined in good faith by the Board and in
the absence of fraud shall be binding and conclusive upon all parties hereto and
the C&D Fund. If Holding subdivides (by any stock split, stock dividend or
otherwise) the Common Stock into a greater number of shares, or combines (by
reverse stock split or otherwise) the Common Stock into a smaller number of
shares after the Board shall have determined the Purchase Price for the Shares
(without taking into consideration such subdivision or combination) and prior to
the consummation of the purchase, the Purchase Price (including any minimum or
maximum Purchase Price specified herein or in effect as a result of a prior
adjustment) shall be appropriately adjusted to reflect such subdivision or
combination and the Board's determination as to any such judgment in good faith
shall be binding and conclusive on all parties hereto and the C&D Fund.
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<PAGE> 11
(b) Payment. Subject to Section 11 hereof, the completion of a
purchase pursuant to Section 6 hereof shall take place at the principal office
of Holding on the tenth business day following (i) the receipt by the Purchaser
(or his or her estate) of the notice of the C&D Fund or Holding, as the case may
be, of its exercise of its option to purchase pursuant to Section 6(a) or (ii)
Holding's receipt of notice by the Purchaser (or his or her estate) of the
election to sell Shares pursuant to Section 6(a) or (iii) the Board's
determination (which shall be delivered to the Purchaser) that it is willing and
able to purchase Shares as a result of Unforeseen Personal Hardship pursuant to
Section 6(b). The Purchase Price shall be paid by delivery to the Purchaser (or
his or her estate) of a certified or bank check for the Purchase Price payable
to the order of the Purchaser (or his estate), against delivery of certificates
or other instruments representing the Shares so purchased, appropriately
endorsed by the Purchaser (or his estate), free and clear of all security
interests, liens, claims, encumbrances, charges, options, restrictions on
transfer, proxies and voting and other agreements of whatever nature; provided,
however, that if the Determination Date occurs during the period between
September 1 and December 31 of any fiscal year of Holding or during the first
fiscal quarter of any fiscal year of Holding, Holding or the C&D Fund, as the
case may be, may elect to pay the Purchase Price in two installments. In any
such event, (i) at the closing of the purchase of the Shares, Holding or the C&D
Fund, as the case may be, shall pay to the Purchaser (or his or her estate) an
amount (the "First Installment Amount") equal to 80% of the Fair Market Value of
the Shares, determined pursuant to Section 7(a) hereof on the basis of the most
recent available valuation of the Shares, and (ii) no later than the tenth
business day following receipt by Holding of the Applicable Share Valuation,
Holding or the C&D Fund, as the case may be, shall pay an additional amount to
the Purchaser (or his or her estate) equal to the sum of (1) the excess (the
"Excess Payment"), if any, of (A) the Purchase Price for the Shares, over (B)
the First Installment Amount and (2) an amount calculated by multiplying the
Excess Payment by a percentage equal to the average annual prime rate charged
during such period by The Chase Manhattan Bank or such other nationally
recognized bank as may be designated by Holding.
(c) Application of the Purchase Price to Certain Loans. The
Purchaser agrees that Holding and the C&D Fund shall be entitled to apply any
amounts to be paid by Holding or the C&D Fund, as the case may be, to repurchase
Shares pursuant to Section 5 or 6 hereof to discharge any indebtedness of the
Purchaser to Holding or any of its direct or indirect subsidiaries, including,
without limitation, indebtedness of the Purchaser incurred to purchase the
Shares or indebtedness that is guaranteed by Holding or any of its direct or
indirect subsidiaries.
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<PAGE> 12
8. Take-Along Rights.
(a) Take-Along Notice. So long as the C&D Fund holds a number
of shares of Common Stock equal to at least one-third of the Common Stock
originally purchased by the C&D Fund at the closing of the Acquisition of the
Company, if the C&D Fund intends to effect a sale of all of its shares of Common
Stock to a third party (a "100% Buyer") and elects to exercise its rights under
this Section 8, the C&D Fund shall deliver written notice (a "Take-Along
Notice") to the Purchaser, which notice shall (a) state (i) that the C&D Fund
wishes to exercise its rights under this Section 8 with respect to such
transfer, (ii) the name and address of the 100% Buyer, (iii) the per share
amount and form of consideration the C&D Fund proposes to receive for its shares
of Common Stock and (iv) the terms and conditions of payment of such
consideration and all other material terms and conditions of such transfer, (b)
contain an offer (the "Take-Along Offer") by the 100% Buyer to purchase from the
Purchaser all of its Shares on and subject to the same terms and conditions
offered to the C&D Fund and (c) state the anticipated time and place of the
closing of the purchase and sale of the shares (a "Section 8 Closing"), which
(subject to such terms and conditions) shall occur not fewer than five (5) days
nor more than ninety (90) days after the date such Take-Along Notice is
delivered, provided that if such Section 8 Closing shall not occur prior to the
expiration of such 90-day period, the C&D Fund shall be entitled to deliver
another Take-Along Notice with respect to such Take-Along Offer.
(b) Conditions to Take-Along. Upon delivery of a Take-Along
Notice, the Purchaser shall have the obligation to transfer all of its Shares
pursuant to the Take-Along Offer, as the same may be modified from time to time,
provided that the C&D Fund transfers all of its Shares to the 100% Buyer at the
Section 8 Closing. Within 10 days of receipt of the Take-Along Notice, the
Purchaser shall (i) execute and deliver to the C&D Fund a power of attorney and
a letter of transmittal and custody agreement in favor of, and in form and
substance satisfactory to, the C&D Fund constituting the C&D Fund, Clayton,
Dubilier & Rice, Inc. or one or more of their respective affiliates designated
by the C&D Fund (the "Custodian"), the true and lawful attorney-in-fact and
custodian for the Purchaser, with full power of substitution, and authorizing
the Custodian to take such actions as the Custodian may deem necessary or
appropriate to effect the sale and transfer of the Shares to the 100% Buyer,
upon receipt of the purchase price therefor at the Section 8 Closing, free and
clear of all security interests, liens, claims, encumbrances, charges, options,
restrictions on transfer, proxies and voting and other agreements of whatever
nature, and to take such other action as may be necessary or appropriate in
connection with such sale, including consenting to any amendments, waivers,
modifications or supplements to the terms of the sale (provided that the C&D
Fund also so consents, and sells and transfers its Shares on the same terms as
so amended, waived,
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modified or supplemented) and (ii) deliver to the C&D Fund certificates
representing the Shares, together with all necessary duly executed stock powers.
(c) Remedies. The Purchaser acknowledges that the C&D Fund
would be irreparably damaged in the event of a breach or a threatened breach by
the Purchaser of any of its obligations under this Section 8 and the Purchaser
agrees that, in the event of a breach or a threatened breach by the Purchaser of
any such obligation, the C&D Fund shall, in addition to any other rights and
remedies available to it, in respect of such breach, be entitled to an
injunction from a court of competent jurisdiction granting it specific
performance by the Purchaser of its obligations under this Section 8. In the
event that the C&D Fund shall file suit to enforce the covenants contained in
this Section 8 (or obtain any other remedy in respect of any breach thereof),
the prevailing party in the suit shall be entitled to recover, in addition to
all other damages to which it may be entitled, the costs incurred by such party
in conducting the suit, including reasonable attorney's fees and expenses. In
the event that, following a breach or a threatened breach by the Purchaser of
the provisions of this Section 8, the C&D Fund does not obtain an injunction
granting it specific performance of the Purchaser's obligations under this
Section 8 in connection with such proposed sale prior to the time the C&D Fund
completes the sale of its shares or, in its sole discretion, abandons such sale,
then Holding shall have the option to purchase the Shares from the Purchaser at
a purchase price per Share equal to the lesser of (i) the Fair Market Value of
such Shares as of the date of the breach or threatened breach that gives rise to
the right to repurchase and (ii) the price at which the Purchaser purchased such
Shares from Holding.
(d) Public Offering. In the event that a Public Offering has
been consummated, the provisions of this Section 8 shall terminate and cease to
have further effect.
9. Representations and Warranties of Holding. Holding
represents and warrants to the Purchaser that (a) Holding has been duly
incorporated and is an existing corporation in good standing under the laws of
the State of Delaware, (b) this Agreement has been duly authorized, executed and
delivered by Holding and constitutes a valid and legally binding obligation of
Holding enforceable against Holding in accordance with its terms, (c) the
Shares, when issued, delivered and paid for in accordance with the terms hereof,
will be duly and validly issued, fully paid and nonassessable, and free and
clear of any liens or encumbrances other than those created pursuant to this
Agreement, or otherwise in connection with the transactions contemplated hereby,
and (d) the Shares, when issued and held by the Purchaser, by the Purchaser's
estate upon transfer by operation of law on the Purchaser's death or by the C&D
Fund, shall be "Registrable Securities" as provided in the Registration and
Participation Agreement.
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10. Covenants of Holding.
(a) Rule 144. Holding agrees that at all times after it has
filed a registration statement after the date hereof pursuant to the
requirements of the Securities Act or Section 12 of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), relating to any class of equity
securities of Holding (other than (i) the registration of equity securities of
Holding and/or options or interests in respect thereof to be offered primarily
to directors and/or members of management or employees of Holding or its direct
or indirect subsidiaries, and senior executives of corporations in which
entities managed or sponsored by Clayton, Dubilier & Rice, Inc. have made equity
investments and/or other persons with whom Clayton, Dubilier & Rice, Inc. has
consulting or other advisory relationships, or (ii) the registration of equity
securities and/or options or other interests in respect thereof solely on Form
S-4 or S-8 or any successor form), it will file the reports required to be filed
by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the Commission thereunder (or, if Holding is not required
to file such reports, it will, upon the request of the Purchaser, make publicly
available such information as necessary to permit sales pursuant to Rule 144
under the Securities Act), and will take such further action as the Purchaser
may reasonably request, all to the extent required from time to time to enable
the Purchaser to sell Shares without registration under the Securities Act
within the limitation of the exemptions provided by (i) Rule 144, as such Rule
may be amended from time to time, or (ii) any successor rule or regulation
hereafter adopted by the Commission.
(b) State Securities Laws. Holding agrees to use efforts to
comply with all state and foreign securities or "blue sky" laws applicable to
the sale of the Shares to the Purchaser, provided that Holding shall not be
obligated to qualify or register the Shares under any such law or to qualify as
a foreign corporation or file any consent to service of process under the laws
of any jurisdiction or subject itself to taxation as doing business in any such
jurisdiction.
11. Certain Restrictions on Repurchases.
(a) Financing Agreements, etc. Notwithstanding any other
provision of this Agreement, Holding shall not be permitted or obligated to
repurchase any Shares from the Purchaser if (i) such repurchase (or the payment
by the Company of a dividend to Holding to fund such repurchase) would result in
a violation of the terms or provisions of, or result in a default or an event of
default under, (A) the Credit Agreement, dated as of November 30, 1993 (the
"Credit Agreement"), among the Company, Chemical Bank ("Chemical"), The Chase
Manhattan Bank, N.A. ("Chase"), Union Bank of Switzerland, New York Branch
("UBS"), as co-agents, and certain other lenders, and Chemical, as
14
<PAGE> 15
administrative agent thereunder, as amended, (B) the Guarantee, dated as of
November 30, 1993 (the "Guarantee"), made by Holding, as Guarantor, in favor of
Chemical Bank as administrative agent for several banks and other financial
institutions named thereunder, (C) the Indenture, dated as of November 30, 1993,
(the "Indenture") among the Company, Holding, as guarantor, and First Trust
National Association, as Trustee, or (D) any other financing or security
agreement or document entered into in connection with the acquisition by Holding
of substantially all the assets of the corporation then named Sporting Goods
Properties, Inc. ("Sporting Goods") and certain related assets of Sporting
Goods' parent E.I. du Pont de Nemours and Company ("DuPont"), a Delaware
corporation, from Sporting Goods and DuPont, on December 1, 1993 (the
"Acquisition"), or the financing of the Acquisition or in connection with the
operations of Holding or its subsidiaries from time to time (the Credit
Agreement, the Guarantee, any Indenture, and such other agreements and
documents, as each may be amended, modified or supplemented from time to time,
are hereinafter referred to as the "Financing Agreements"), in each case as the
same may be amended, modified or supplemented from time to time, (ii) such
repurchase would violate any of the terms or provisions of the Certificate of
Incorporation of Holding or (iii) Holding has no funds legally available
therefor under the General Corporation Law of the State of Delaware.
(b) Delay of Repurchase. In the event that a repurchase by
Holding, otherwise permitted or required under Section 6(a) is prevented solely
by the terms of Section 11(a), (i) such repurchase will be postponed and will
take place without the application of further conditions or impediments (other
than as set forth in Section 7 hereof or in this Section 11) at the first
opportunity thereafter when Holding has funds legally available therefor and
when such repurchase will not result in any default, event of default or
violation under any of the Financing Agreements or in a violation of any term or
provision of the Certificate of Incorporation of Holding and (ii) such
repurchase obligation shall rank against other similar repurchase obligations
with respect to Shares or options in respect thereof according to priority in
time of (A) the effective date of the termination of employment in connection
with any repurchase obligation arising pursuant to an exercise of the option of
Holding under Section 6(a), or (B) as to any repurchase obligation arising
pursuant to an exercise of any Purchaser's right to require a repurchase under
Section 6(a), the date upon which Holding receives written notice of such
exercise, provided that any such repurchase obligations as to which a common
date determines priority under clause (A) or (B) above shall be of equal
priority and shall share pro rata in any repurchase payments made pursuant to
clause (i) above and provided, further, that any repurchase commitment arising
from Permanent Disability, death or Retirement or any repurchase commitment made
by the Board pursuant to Section 6(b) shall have priority over any other
repurchase obligation.
15
<PAGE> 16
(c) Purchase Price Adjustment. In the event that a repurchase
of Shares from the Purchaser is delayed pursuant to this Section 11, the
purchase price per Share when the repurchase of such Shares eventually takes
place as contemplated by Section 11(b) shall be the sum of (a) the Purchase
Price determined in accordance with Section 7 hereof at the time that the
repurchase of such Shares would have occurred but for the operation of this
Section 11, plus (b) an amount equal to interest on such Purchase Price for the
period from the date on which the completion of the repurchase would have taken
place but for the operation of this Section 11 to the date on which such
repurchase actually takes place (the "Delay Period") at a rate equal to the
average prime rate charged during such period by The Chase Manhattan Bank or
such other nationally recognized bank as may be designated by Holding.
12. Miscellaneous.
(a) Notices. All notices and other communications required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been given if delivered personally or sent by certified or
express mail, return receipt requested, postage prepaid, or by any recognized
international equivalent of such mail delivery, to Holding, the C&D Fund or the
Purchaser, as the case may be, at the following addresses or to such other
address as Holding, the C&D Fund or the Purchaser, as the case may be, shall
specify by notice to the others:
(i) if to Holding, to it at:
RACI Holding, Inc.
c/o Remington Arms Company, Inc.
870 Remington Drive
P.O. Box 700
Madison, North Carolina 27025-0700
(ii) if to the Purchaser, to the Purchaser at the address set
forth on the signature page hereof.
16
<PAGE> 17
(iii) if to the C&D Fund, to:
The Clayton & Dubilier Private Equity
Fund IV Limited Partnership
270 Greenwich Avenue
Greenwich, Connecticut 06830
Attention: Clayton & Dubilier Associates
IV Limited Partnership,
Joseph L. Rice, III
All such notices and communications shall be deemed to have been received on the
date of delivery if delivered personally or on the third business day after the
mailing thereof. Copies of any notice or other communication given under this
Agreement shall also be given to:
Clayton, Dubilier & Rice, Inc.
375 Park Avenue
New York, New York 10152
Attention: Joseph L. Rice, III
and
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention: Franci J. Blassberg, Esq.
The C&D Fund also shall be given a copy of any notice or other communication
between the Purchaser and Holding under this Agreement at its address as set
forth above.
(b) Binding Effect; Benefits. This Agreement shall be binding
upon the parties to this Agreement and their respective successors and assigns
and shall inure to the benefit of the parties to the Agreement, the C&D Fund and
their respective successors and assigns. Except as provided in Sections 4
through 8, inclusive, nothing in this Agreement, express or implied, is intended
or shall be construed to give any person other than the parties to this
Agreement, the C&D Fund or their respective successors or assigns any legal or
equitable right, remedy or claim under or in respect of any agreement or any
provision contained herein.
17
<PAGE> 18
(c) Waiver; Amendment.
(i) Waiver. Any party hereto or beneficiary hereof may by
written notice to the other parties (A) extend the time for the
performance of any of the obligations or other actions of the other
parties under this Agreement, (B) waive compliance with any of the
conditions or covenants of the other parties contained in this
Agreement and (C) waive or modify performance of any of the obligations
of the other parties under this Agreement, provided that any waiver of
the provisions of Sections 4 through 8, inclusive, must be consented to
in writing by the C&D Fund. Except as provided in the preceding
sentence, no action taken pursuant to this Agreement, including,
without limitation, any investigation by or on behalf of any party or
beneficiary shall be deemed to constitute a waiver by the party or
beneficiary taking such action of compliance with any representations,
warranties, covenants or agreements contained herein. The waiver by any
party hereto or beneficiary hereof of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any
preceding or succeeding breach and no failure by a party to exercise
any right or privilege hereunder shall be deemed a waiver of such
party's or beneficiary's rights or privileges hereunder or shall be
deemed a waiver of such party's or beneficiary's rights to exercise the
same at any subsequent time or times hereunder.
(ii) Amendment. This Agreement may not be amended, modified or
supplemented orally, but only by a written instrument executed by the
Purchaser and Holding, and (in the case of any amendment modification
or supplement to or affecting Section 8 hereof, or that adversely
affects the rights of the C&D Fund hereunder) consented to by the C&D
Fund in writing. The parties hereto acknowledge that Holding's consent
to an amendment or modification of this Agreement may be subject to the
terms and provisions of the Financing Agreements.
(d) This Agreement, together with each Management Stock Option
Agreement, Management Deferred Share Award Agreement and election form entered
into between the Purchaser and Holding on or prior to the date hereof, is the
entire agreement of the parties with respect to the subject matter hereof and
supersedes all other prior agreements, understandings, documents, statements,
representations and warranties, oral or written, express or implied, between the
parties hereto and their respective affiliates, representatives and agents in
respect of the subject matter hereof.
(e) Assignability. Neither this Agreement nor any right,
remedy, obligation or liability arising hereunder or by reason hereof shall be
assignable by Holding or the Purchaser without the prior written consent of the
other parties and the C&D Fund.
18
<PAGE> 19
The C&D Fund may assign from time to time all or any portion of its rights under
Sections 4 through 8 hereof to one or more persons or other entities designated
by it.
(f) Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK, EXCEPT TO THE
EXTENT THAT THE CORPORATE LAW OF THE STATE OF DELAWARE SPECIFICALLY AND
MANDATORILY APPLIES.
(g) Section and Other Headings, etc. The section and other
headings contained in this Agreement are for reference purposes only and shall
not affect the meaning or interpretation of this Agreement.
(h) Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original and all of
which together shall constitute one and the same instrument.
(i) Delegation by the Board. All of the powers, duties and
responsibilities of the Board specified in this Agreement may, to the full
extent permitted by applicable law, be exercised and performed by any duly
constituted committee thereof to the extent authorized by the Board to exercise
and perform such powers, duties and responsibilities.
19
<PAGE> 20
IN WITNESS WHEREOF, Holding and the Purchaser have executed
this Agreement as of the date first above written.
RACI HOLDING, INC.
By:
---------------------------------
Name:
Title:
THE PURCHASER:
By:
---------------------------------
Name:
Attorney-in-Fact
Address of the Purchaser:
Total Number of Shares
of Common Stock to be
Purchased:
Cash Purchase
Price: $
20
<PAGE> 1
Exhibit 10.5
MANAGEMENT STOCK OPTION AGREEMENT - PERFORMANCE OPTION
MANAGEMENT STOCK OPTION AGREEMENT, dated as of June 24, 1999,
between RACI Holding, Inc., a Delaware corporation (the "Holding"), and the
Grantee whose name appears on the signature page hereof (the "Grantee").
W I T N E S S E T H:
WHEREAS, the Board of Directors of Holding (the "Board")
approved the grant to the Grantee of nonqualified stock options to purchase
shares of Class A Common Stock, par value $.01 per share ("Common Stock"), of
Holding set forth on the signature page hereof (each, a "Share" and,
collectively, the "Shares") pursuant to the RACI Holding, Inc. Stock Incentive
Plan (the "Plan"), at an exercise price of $200.00 per Share by unanimous
written consent dated May 21, 1999 (the "Grant Date"); and
WHEREAS, the Grantee and Holding desire to enter into an
agreement to evidence and confirm the grant of such options on the terms and
conditions set forth herein;
NOW, THEREFORE, to evidence the stock options so granted, and
to set forth the terms and conditions thereof, Holding and the Grantee hereby
agree as follows:
1. Confirmation of Grant; Option Price. Holding hereby
evidences and confirms its grant to the Grantee, effective as of the Grant Date,
of options (the "Options") to purchase the Shares at an option price of $200.00
per share (the "Option Price"). The Options are not intended to be incentive
stock options under the U.S. Internal Revenue Code of 1986, as amended. This
Agreement is subordinate to, and the terms and conditions of the Options granted
hereunder are subject to, the terms and conditions of the Plan.
2. Exercisability. Except as otherwise provided in this
Agreement, the Options shall become vested and exercisable, depending on the
earnings performance of Holding, in the percentages shown on the page attached
hereto as Annex A, subject to the continued employment of the Grantee until the
applicable vesting date; provided that the Board may accelerate the
exercisability of any Option, all Options or any class of Options, at any time
and from time to time and that any Option which remains unvested shall become
vested and exercisable on the ninth anniversary of the Grant Date. Shares
eligible for purchase pursuant to vested and exercisable Options may be
purchased, subject to the provisions hereof, and pursuant to and subject to the
provisions contained in the Management Stock Subscription Agreement (as defined
in Section 5) related to such
<PAGE> 2
Shares, at any time and from time to time on or after the date the related
Options become vested and exercisable until the date one day prior to the date
on which such Options terminate.
3. Termination of Option.
(a) Normal Termination Date. Unless an earlier termination
date is specified in Section 3(b), the Options shall terminate on the tenth
anniversary of the date hereof (the "Normal Termination Date").
(b) Early Termination. If the Grantee's Active Employment (as
defined below) is voluntarily or involuntarily terminated for any reason other
than a Special Termination (as defined below) prior to the Normal Termination
Date, any Options that have not become vested and exercisable on or before the
effective date of such termination of employment shall terminate on such
effective date. Subject to the provisions of Section 4(c), if the Grantee's
Active Employment is terminated by reason of the Grantee's death, Permanent
Disability or Retirement (each a "Special Termination"), then all Options held
by the Grantee shall become immediately vested and exercisable and shall remain
exercisable until the first to occur of (A) the 180th day following the
effective date of such Special Termination or (B) the Normal Termination Date.
Subject to Section 4(c), if the Grantee's Active Employment is terminated for
any reason other than (i) a Special Termination or (ii) for Cause, any vested
and exercisable Options then held by the Grantee shall remain exercisable for a
period of sixty days following the earliest of (x) the expiration of the Second
Purchase Period (as defined in Section 4(c)(i) hereof), (y) receipt by the
Grantee of written notice that the C&D Fund (as defined in Section 4(d) hereof)
does not intend to exercise its right to purchase pursuant to Section 4(c)(i)
and (z) in the case of any such termination of the Grantee's employment on or
after the effective date of a Public Offering (as defined in Section 4), the
effective date of such termination of employment. Notwithstanding anything else
contained in this Agreement, if the Grantee's Active Employment is terminated
for Cause, then all Options (whether or not then vested or exercisable) shall
terminate and be canceled immediately upon such termination, regardless of
whether then vested or exercisable. Nothing in this Agreement shall be deemed to
confer on the Grantee any right to continue in the employ of the Company or any
of its direct or indirect subsidiaries, or to interfere with or limit in any way
the right of the Company or any of such subsidiaries to terminate the Grantee's
employment at any time.
4. Restrictions on Exercise; Non-Transferability of Option;
Repurchase of Options.
(a) Restrictions on Exercise. The Options may be exercised
only with respect to full shares of Common Stock. No fractional shares of Common
Stock shall be
2
<PAGE> 3
issued. Notwithstanding any other provision of this Agreement, the Options may
not be exercised in whole or in part, and no certificates representing Shares
shall be delivered, (i) unless all requisite approvals and consents of any
governmental authority of any kind having jurisdiction over the exercise of the
Options shall have been secured, (ii) unless the purchase of the Shares upon the
exercise of the Options shall be exempt from registration under applicable U.S.
federal and state securities laws, or the Shares shall have been registered
under such laws, (iii) unless all applicable U.S. federal, state and local and
non-U.S. tax withholding requirements shall have been satisfied or (iv) if such
exercise would cause a change in control of Holding and thereby result in a
violation of the terms or provisions of or a default or an event of default
under any of the Financing Agreements (as such term is defined in Section 9).
Holding shall use reasonable best efforts to obtain the consents and approvals
referred to in clause of the preceding sentence.
(b) Non-Transferability of Options. Except as contemplated by
Section 4(c), the Options may be exercised only by the Grantee or by the
Grantee's estate. Except as contemplated by Section 4(c), the Options are not
assignable or transferable, in whole or in part, and they may not, directly or
indirectly, be offered, transferred, sold, pledged, assigned, alienated,
hypothecated or otherwise disposed of or encumbered (including without
limitation by gift, operation of law or otherwise) other than by will or by the
laws of descent and distribution to the estate of the Grantee upon the Grantee's
death, provided that the deceased Grantee's beneficiary or the representative of
the Grantee's estate shall acknowledge and agree in writing, in a form
reasonably acceptable to Holding, to be bound by the provisions of this
Agreement and the Plan as if such beneficiary or the estate were the Grantee.
(c) Repurchase of Options on Termination of Employment.
(i) Termination of Employment. If the Grantee's Active
Employment is terminated for any reason, Holding shall have an option
to purchase all or any of the Options that have become vested and
exercisable on or prior to the effective date of such termination of
Active Employment (such vested and exercisable Options, "Covered
Options"), and shall have 30 days from the effective date of such
termination (the "First Purchase Period") during which to give notice
in writing to the Grantee of its election to exercise or not to
exercise such right to purchase the Covered Options provided that such
30-day period may be extended by mutual agreement between the Grantee
and Holding. Holding hereby undertakes to use reasonable efforts to act
as promptly as practicable following such termination to make such
election. If Holding (i) fails to give notice that it intends to
exercise its right to purchase the Options within the First Purchase
Period, or (ii) chooses to repurchase none or only a portion of the
Options, by giving such notice, the C&D Fund shall have the right to
purchase all or any of the Options not
3
<PAGE> 4
purchased by Holding, and shall have until the expiration of the
earlier of (x) 30 days following the end of the First Purchase Period,
or (y) 30 days from the date of receipt by the C&D Fund of written
notice that Holding does not intend to exercise its right with respect
to all of the Options (such 30-day period being hereinafter referred to
as the "Second Purchase Period"), to give notice in writing to the
Grantee of the C&D Fund's exercise of its right to purchase all or any
of such Options. If the rights to purchase all of the Options of
Holding and the C&D Fund granted in this subsection are not fully
exercised as provided herein, the Grantee shall be entitled to retain
any Options not so purchased, subject to all of the provisions of this
Agreement, including Section 3(b).
(ii) Purchase Price, etc. All purchases pursuant to this
Section 4(c) by Holding or the C&D Fund shall be for a purchase price
determined in accordance with, and shall take place at the time and in
the manner prescribed by, Sections 4(g), (h) and (i).
(d) Certain Definitions. As used in this Agreement the
following terms shall have the following meanings:
(i) "Active Employment" shall mean the Grantee's active
employment with the Company or any Subsidiary.
(ii) "C&D Fund" shall mean The Clayton & Dubilier Private
Equity Fund IV Limited Partnership, a Connecticut limited partnership,
together with any successor investment vehicle managed by Clayton,
Dubilier & Rice, Inc.
(iii) "Cause" shall mean (A) the willful failure by the
Grantee to perform substantially his duties as an employee of the
Company or any Subsidiary (other than any such failure due to physical
or mental illness) after a demand for substantial performance is
delivered to the Grantee by the executive to whom the Grantee reports
or by the Board, which notice identifies the manner in which such
executive or the Board, as the case may be, believes that the Grantee
has not substantially performed his duties, (B) the Grantee's engaging
in willful and serious misconduct that is injurious to the Company or
any Subsidiary, (C) the Grantee's having been convicted of, or entered
a plea of guilty or nolo contendere to, a crime that constitutes a
felony, (D) the willful and material breach by the Grantee of any
written covenant or agreement with the Company or any Subsidiary not to
disclose any information pertaining to the Company or any Subsidiary or
not to compete or interfere with the Company or any Subsidiary or (E)
the breach by the Grantee of his obligations pursuant to the
"take-along" provisions set forth in any Management Stock Subscription
Agreement to which he is or becomes a party.
4
<PAGE> 5
(iv) "Company" shall mean Remington Arms Company, Inc., a
Delaware corporation formerly named RACI Acquisition Corporation, and
any successor thereto.
(v) "Permanent Disability" shall mean a physical or mental
disability or infirmity that prevents the performance of the Grantee's
employment-related duties lasting (or likely to last, based on
competent medical evidence presented to the Board) for a continuous
period of six months or longer. The Board's reasoned and good faith
judgment of Permanent Disability shall be final, binding and conclusive
on all parties hereto and shall be based on such competent medical
evidence as shall be presented to it by the Grantee or by any physician
or group of physicians or other competent medical expert employed by
the Grantee or Holding to advise the Board.
(vi) "Retirement" shall mean the Grantee's retirement from
Active Employment at age 65 or later.
(vii) "Subsidiary" shall mean any corporation, a majority of
whose outstanding voting securities is owned, directly or indirectly,
by Holding.
(e) Notice of Termination. Holding shall give written notice
of any termination of the Grantee's Active Employment to the C&D Fund, except
that if such termination (if other than as a result of death) is by the Grantee,
the Grantee shall give written notice of such termination to Holding and Holding
shall give written notice of such termination to the C&D Fund.
(f) Public Offering. In the event that an under-written public
offering in the United States of the Common Stock led by one or more
underwriters at least one of which is an underwriter of nationally recognized
standing (a "Public Offering") has been consummated, none of Holding, the C&D
Fund or the Grantee shall have any rights to purchase or sell the Covered
Options, as the case may be, pursuant to this Section 4, and this Section 4
shall not apply to a sale as part of a Public Offering.
(g) Purchase Price. Subject to Section 9(c), the purchase
price to be paid to the Grantee (or, in the event of the Grantee's death, the
Grantee's estate) for any Covered Options to be purchased by Holding or the C&D
Fund pursuant to this Section 4(c) (the "Purchase Price") shall be equal to the
excess of (A) the fair market value (the "Fair Market Value") of the Shares
subject to the Covered Options, in each case, as of the effective date of the
termination of Active Employment that gives rise to the right of Holding and the
C&D Fund to repurchase (the "Determination Date") and (B) the aggregate exercise
price of the Covered Options. Whenever determination of the Fair
5
<PAGE> 6
Market Value of such Shares is required by this Agreement, such Fair Market
Value shall be such amount as is determined in good faith by the Board. In
making a determination of Fair Market Value, the Board shall give due
consideration to such factors as it deems appropriate, including, without
limitation, the earnings and certain other financial and operating information
of Holding and the Subsidiaries in recent periods, the potential value of
Holding as a whole, the future prospects of Holding and the Subsidiaries and the
industries in which they compete, the history and management of Holding and the
Subsidiaries, the general condition of the securities markets, the fair market
value of securities of companies engaged in businesses similar to those of
Holding and the Subsidiaries and the Applicable Share Valuation (as defined
below). The determination of Fair Market Value will not give effect to any
restrictions on transfer of the Shares or the fact that such Shares would
represent a minority interest in Holding. For purposes of this Agreement, the
term "Applicable Share Valuation" shall mean the annual valuation of the Common
Stock performed as of the last day of the last fiscal year of Holding ending
prior to the Determination Date by an independent valuation firm chosen by the
Board, except that, in the case of a Determination Date occurring during the
period beginning on September 1 of any fiscal year of Holding and ending on
December 31 of that fiscal year beginning with the period beginning on September
1, 1999 and ending on December 31, 1999, the term "Applicable Share Valuation"
shall mean the annual valuation of the Common Stock performed as of the last day
of such fiscal year by an independent valuation firm chosen by the Board. Such
annual valuations shall be performed as promptly as practicable following the
end of each fiscal year of Holding, beginning with the 1999 fiscal year of
Holding. The Fair Market Value as determined in good faith by the Board and in
the absence of fraud shall be binding and conclusive upon all parties hereto and
the C&D Fund. If Holding subdivides (by any stock split, stock dividend or
otherwise) the Common Stock into a greater number of shares, or combines (by
reverse stock split or otherwise) the Common Stock into a smaller number of
shares after the Board shall have determined the Purchase Price for the Covered
Options (without taking into consideration such subdivision or combination) and
prior to the consummation of the purchase, the Purchase Price shall be
appropriately adjusted to reflect such subdivision or combination and the
Board's determination as to any such judgment in good faith shall be binding and
conclusive on all parties hereto and the C&D Fund.
(h) Payment. Subject to Section 9, the completion of a
purchase pursuant to this Section 4 shall take place at the principal office of
Holding on the tenth business day following the later of (i) the receipt by the
Grantee (or the Grantee's estate) of the C&D Fund's or Holding's notice of its
exercise of the right to purchase the Covered Options pursuant to Section 4(c)
and (ii) the receipt by Holding of the independent valuation of the Common Stock
referred to in Section 4(g). The Purchase Price shall be paid by delivery to the
Grantee (or the Grantee's estate) of a certified or bank check for the Purchase
Price payable to the order of the Grantee (or the Grantee's estate), against
6
<PAGE> 7
delivery of such instruments as Holding may reasonably request signed by the
Grantee (or the Grantee's estate), free and clear of all security interests,
liens, claims, encumbrances, charges, options, restrictions on transfer, proxies
and voting and other agreements of whatever nature.
(i) Application of the Purchase Price to Certain Loans. The
Grantee agrees that Holding and the C&D Fund shall be entitled to apply any
amounts to be paid by Holding or the C&D Fund, as the case may be, to repurchase
the Covered Options pursuant to this Section 4 to discharge any indebtedness of
the Grantee to Holding or any Subsidiary, or indebtedness that is guaranteed by
Holding or any such Subsidiary, including, but not limited to, any indebtedness
of the Grantee incurred to purchase any shares of Common Stock.
(j) Withholding. Whenever Shares are to be issued pursuant to
the Options, Holding may require the recipient of the Shares to remit to Holding
an amount sufficient to satisfy any applicable U.S. federal, state and local and
non-U.S. tax withholding requirements. In the event any cash is paid to the
Grantee or the Grantee's estate or beneficiary pursuant to this Section 4,
Holding shall have the right to withhold (or, if applicable, to direct the C&D
Fund to remit to Holding) an amount from such payment sufficient to satisfy any
applicable U.S. federal, state and local and non-U.S. tax withholding
requirements.
5. Manner of Exercise. To the extent that any of the Options
shall have become and remain exercisable as provided in Section 2 and subject to
such reasonable administrative regulations as the Board may have adopted, the
Options may be exercised, in whole or in part, by notice to the Secretary of
Holding in writing given 15 business days prior to the date on which the Grantee
will so exercise the Options (the "Exercise Date"), specifying the number of
Shares with respect to which the Options are being exercised (the "Exercise
Shares") and the Exercise Date, provided that if shares of Common Stock are
traded on a U.S. national securities exchange or bid and ask prices for shares
of Common Stock are quoted over NASDAQ, notice may be given five business days
before the Exercise Date. On or before any Exercise Date occurring prior to a
Public Offering, Holding and the Grantee shall enter into a Management Stock
Subscription Agreement substantially in the form attached to the Plan as Exhibit
A-1 ("Management Stock Subscription Agreement"), or in such other form as may be
agreed upon by Holding and the Grantee, such Management Stock Subscription
Agreement to contain provisions corresponding to Section 4(c) hereof. In
addition, (a) on or before the Exercise Date, the Grantee shall deliver to
Holding full payment for the Exercise Shares in United States dollars in cash,
or cash equivalent satisfactory to Holding, and in an amount equal to the
product of the number of Exercise Shares and $200.00 (the "Exercise Price") and
(b) on the Exercise Date, subject to any bailment arrangement agreed to by
Holding and the
7
<PAGE> 8
Grantee, Holding shall deliver to the Grantee a certificate or certificates
representing the Exercise Shares, registered in the name of the Grantee. If
shares of Common Stock are traded on a U.S. national securities exchange or bid
and ask prices for shares of Common Stock are quoted over NASDAQ, the Grantee
may, in lieu of cash, tender shares of Common Stock that have been owned by the
Grantee for a minimum period of six months, having a market price on the
Exercise Date equal to the Exercise Price or may deliver a combination of cash
and such shares of Common Stock having a market price equal to the difference
between the Exercise Price and the amount of such cash as payment of the
Exercise Price, subject to such rules and regulations as may be adopted by the
Board to provide for the compliance of such payment procedure with applicable
law, including Section 16(b) of the Exchange Act. Holding may require the
Grantee to furnish or execute such other documents as Holding shall reasonably
deem necessary (i) to evidence such exercise, (ii) to determine whether
registration is then required under the U.S. Securities Act of 1933, as amended
(the "Securities Act"), and (iii) to comply with or satisfy the requirements of
the Securities Act, applicable state or non-U.S.
securities laws or any other law.
6. Grantee's Representations, Warranties and Covenants.
(a) Investment Intention. The Grantee represents and warrants
that the Options have been, and covenants that any Exercise Shares will be,
acquired by the Grantee solely for the Grantee's own account for investment and
not with a view to or for sale in connection with any distribution thereof. The
Grantee agrees that the Grantee will not, directly or indirectly, offer,
transfer, sell, pledge, hypothecate or otherwise dispose of all or any of the
Options or any of the Exercise Shares (or solicit any offers to buy, purchase or
otherwise acquire or take a pledge of all or any of the Options or any of the
Exercise Shares), except in compliance with the Securities Act and the rules and
regulations of the Securities and Exchange Commission (the "Commission")
thereunder, and in compliance with applicable state and foreign securities or
"blue sky" laws. The Grantee further understands, acknowledges and agrees that
none of the Exercise Shares may be transferred, sold, pledged, hypothecated or
otherwise disposed of unless the provisions of any related Management Stock
Subscription Agreement shall have been complied with or have expired.
(b) Legend. The Grantee acknowledges that any certificate
representing the Exercise Shares shall bear an appropriate legend, which will
include, without limitation, the following language in the case of any such
certificates issued prior to a Public Offering:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
PROVISIONS OF A MANAGEMENT
8
<PAGE> 9
STOCK SUBSCRIPTION AGREEMENT, DATED AS OF ___________, ____,
AND NEITHER THIS CERTIFICATE NOR THE SHARES REPRESENTED BY IT
ARE ASSIGNABLE OR OTHERWISE TRANSFERABLE EXCEPT IN ACCORDANCE
WITH THE PROVISIONS OF SUCH MANAGEMENT STOCK SUBSCRIPTION
AGREEMENT, AS THE SAME MAY BE AMENDED FROM TIME TO TIME, A
COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE ISSUER. THE
SHARES REPRESENTED BY THIS CERTIFICATE ARE BOUND BY THE
OBLIGATIONS SET FORTH IN AND MAY BE ENTITLED TO SOME OF THE
BENEFITS OF A REGISTRATION AND PARTICIPATION AGREEMENT, DATED
AS OF NOVEMBER 30, 1993, AMONG THE ISSUER AND CERTAIN
STOCKHOLDERS OF THE ISSUER A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE ISSUER."
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED
UNDER ANY STATE OR FOREIGN SECURITIES LAWS AND MAY NOT BE
TRANSFERRED, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED
OF UNLESS (i) (A) SUCH DISPOSITION IS PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, (B) THE HOLDER HEREOF SHALL HAVE DELIVERED TO THE
ISSUER AN OPINION OF COUNSEL, WHICH OPINION AND COUNSEL SHALL
BE REASONABLY SATISFACTORY TO THE ISSUER, TO THE EFFECT THAT
SUCH DISPOSITION IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF
SUCH ACT OR (C) A NO-ACTION LETTER FROM THE SECURITIES AND
EXCHANGE COMMISSION, REASONABLY SATISFACTORY TO COUNSEL FOR
HOLDING, SHALL HAVE BEEN OBTAINED WITH RESPECT TO SUCH
DISPOSITION AND (ii) SUCH DISPOSITION IS PURSUANT TO
REGISTRATION UNDER ANY APPLICABLE STATE OR FOREIGN SECURITIES
LAWS OR AN EXEMPTION THEREFROM.
9
<PAGE> 10
(c) Securities Law Matters. The Grantee acknowledges receipt
of advice from Holding that (i) the Exercise Shares have not been registered
under the Securities Act based on an exemption provided under Rule 701
promulgated under the Securities Act or qualified under any state or foreign
securities or "blue sky" laws, (ii) it is not anticipated that there will be any
public market for the Exercise Shares, (iii) the Exercise Shares must be held
indefinitely and the Grantee must continue to bear the economic risk of the
investment in the Exercise Shares unless the Exercise Shares are subsequently
registered under the Securities Act and such state laws or an exemption from
registration is available, (iv) Rule 144 promulgated under the Securities Act
("Rule 144") is not presently available with respect to the sales of the
Exercise Shares and Holding has made no covenant to make Rule 144 available, (v)
when and if the Exercise Shares may be disposed of without registration in
reliance upon Rule 144, such disposition can be made only in accordance with the
terms and conditions of such Rule, (vi) Holding does not plan to file reports
with the Commission or make public information concerning Holding available
unless required to do so by law or by the terms of its Financing Agreements (as
hereinafter defined), (vii) if the exemption afforded by Rule 144 is not
available, sales of the Exercise Shares may be difficult to effect because of
the absence of public information concerning Holding, (viii) a restrictive
legend in the form heretofore set forth shall be placed on the certificates
representing the Exercise Shares and (ix) a notation shall be made in the
appropriate records of Holding indicating that the Exercise Shares are subject
to restrictions on transfer set forth in this Agreement and, if Holding should
in the future engage the services of a stock transfer agent, appropriate
stop-transfer restrictions will be issued to such transfer agent with respect to
the Exercise Shares.
(d) Compliance with Rule 144. If any of the Exercise Shares
are to be disposed of in accordance with Rule 144 under the Securities Act, the
Grantee shall transmit to Holding an executed copy of Form 144 (if required by
Rule 144) no later than the time such form is required to be transmitted to the
Commission for filing and such other documentation as Holding may reasonably
require to assure compliance with Rule 144 in connection with such disposition.
(e) Ability to Bear Risk. The Grantee covenants that the
Grantee will not exercise all or any of the Options unless (i) the financial
situation of the Grantee is such that the Grantee can afford to bear the
economic risk of Holding the Exercise Shares for an indefinite period and (ii)
the Grantee can afford to suffer the complete loss of the Grantee's investment
in the Exercise Shares.
(f) Access to Information. The Grantee represents and warrants
that the Grantee has received the Confidential Offering Memorandum dated May 14,
1999, as supplemented by the supplement to offering memorandum dated June 8,
1999 (as so supplemented, the "Offering Memorandum") and has carefully reviewed
the Offering
10
<PAGE> 11
Memorandum (together with the Annexes thereto) and the other materials furnished
to the Grantee in connection with the transaction contemplated hereby.
(g) Registration; Restrictions on Sale upon Public Offering.
In respect of any Shares purchased upon exercise of all or any of the Options,
the Grantee shall be entitled to the rights and subject to the obligations
created under the Registration and Participation Agreement, dated as of November
30, 1993 as the same may be amended, modified or supplemented from time to time
(the "Registration and Participation Agreement"), among Holding and certain
stockholders of Holding, to the extent set forth therein. The Grantee agrees
that, in the event that Holding files a registration statement under the
Securities Act with respect to a Public Offering of any shares of its capital
stock, the Grantee will not effect any public sale or distribution of any shares
of the Common Stock (other than as part of such Public Offering) during the 20
days prior to and the 180 days after the effective date of such registration
statement.
(h) Section 83(b) Election. The Grantee agrees that, within 20
days of any Exercise Date that occurs prior to a Public Offering, the Grantee
shall give notice to Holding as to whether or not the Grantee has made an
election pursuant to Section 83(b) of the Internal Revenue Code of 1986, as
amended, with respect to the Exercise Shares purchased on such date, and
acknowledges that the Grantee will be solely responsible for any and all tax
liabilities payable by the Grantee in connection with the Grantee's exercise of
any Options or receipt of the Exercise Shares or attributable to the Grantee's
making or failing to make such an election.
7. Representations and Warranties of Holding. Holding
represents and warrants to the Grantee that (a) Holding has been duly
incorporated and is an existing corporation in good standing under the laws of
the State of Delaware, (b) this Agreement has been duly authorized, executed and
delivered by Holding and constitutes a valid and legally binding obligation of
Holding enforceable against Holding in accordance with its terms and (c) the
Exercise Shares, when issued, delivered and paid for, upon exercise of the
Options in accordance with the terms hereof and the Management Stock
Subscription Agreement, will be duly authorized, validly issued, fully paid and
nonassessable, and free and clear of any liens or encumbrances other than those
created pursuant to this Agreement, the Management Stock Subscription Agreement
or otherwise in connection with the transactions contemplated hereby.
8. Change in Control
(a) Accelerated Vesting and Payment. Unless the Board shall
otherwise determine in the manner set forth in Section 8(b), in the event of a
Change in Control, the Options shall be canceled in exchange for a payment in
cash of an amount
11
<PAGE> 12
equal to the product of (i) the excess, if any, of the Change in Control Price
over the Option Price multiplied by (ii) the number of Shares then subject to
the Options.
(b) Alternative Options. Notwithstanding Section 8(a), no
cancellation, acceleration of exercisability, vesting or cash settlement or
other payment shall occur with respect to the Options if the Board reasonably
determines in good faith, prior to the occurrence of a Change in Control, that
the Options shall be honored or assumed, or new rights substituted therefor
(such honored, assumed or substituted Options being hereinafter referred to as
an "Alternative Options") by the New Employer, provided that any such
Alternative Options must:
(i) provide the Grantee with rights and entitlements
substantially equivalent to or better than the rights, terms and
conditions applicable under the Options, including, but not limited to,
an identical or better exercise and vesting schedule, identical or
better timing and methods of payment and, if the Alternative Options or
the securities underlying them are not publicly traded, identical or
better rights to require Holding or the New Employer to repurchase the
Alternative Options;
(ii) have substantially equivalent economic value to the
Options (determined at the time of the Change in Control); and
(iii) have terms and conditions which provide that in the
event that the Grantee suffers an Involuntary Termination within two
years following a Change in Control:
(A) any conditions on the Grantee's rights under, or
any restrictions on transfer or exercisability applicable to,
each such Alternative Options shall be waived or shall lapse,
as the case may be; or
(B) the Grantee shall have the right to surrender
such Alternative Options within 30 days following such
termination in exchange for a payment in cash equal to the
excess of the Fair Market Value of the Common Stock subject to
the Alternative Options over the price, if any, that the
Grantee would be required to pay to exercise such Alternative
Options.
(c) Certain Definitions. As used in this Agreement the
following terms shall have the following meanings:
12
<PAGE> 13
(i) "Change in Control" means the first to occur of the
following events after the date hereof:
(A) the acquisition by any person, entity or "group"
(as defined in Section 13(d) of the Securities Exchange Act of
1934, as amended), other than Holding, any Subsidiary, any
employee benefit plan of Holding or any Subsidiary, or the C&D
Fund, of 50% or more of the combined voting power of Holding's
then outstanding voting securities;
(B) the merger or consolidation of Holding as a
result of which persons who were stockholders of Holding, as
the case may be, immediately prior to such merger or
consolidation, do not, immediately thereafter, own, directly
or indirectly, more than 50% of the combined voting power
entitled to vote generally in the election of directors of the
merged or consolidated company;
(C) the liquidation or dissolution of Holding or the
Company, other that the liquidation of Holding or the Company
into the other; or
(D) the sale, transfer or other disposition of all or
substantially all of the assets of Holding or the Company to
one or more persons or entities that are not, immediately
prior to such sale, transfer or other disposition, affiliates
of the Company or the C&D Fund.
(ii) "Change in Control Price" means the price per share of
Common Stock paid in conjunction with any transaction resulting in a
Change in Control (as determined in good faith by the Board if any part
of the offered price is payable other than in cash).
(iii) "Involuntary Termination" means a termination by the New
Employer for any reason.
(iv) "New Employer" means the Grantee's employer, or the
parent or a subsidiary of such employer, immediately following a Change
in Control.
9. Certain Restrictions on Repurchases.
(a) Financing Agreements, etc. Notwithstanding any other
provision of this Agreement, Holding shall not be permitted to repurchase any
Covered Options from the Grantee if (i) such repurchase would result in a
violation of the terms or provisions of,
13
<PAGE> 14
or result in a default or an event of default under (A) the Credit Agreement,
dated as of November 30, 1993 (the "Credit Agreement"), among Holding, The Chase
Manhattan Bank (f/k/a Chemical Bank) ("Chase"), Union Bank of Switzerland, New
York Branch, as co-agents, and certain other lenders, and Chase, as
administrative agent thereunder, (B) the Guarantee, dated as of November 30,
1993 (the "Guarantee"), made by Holding, as guarantor, in favor of Chase as
administrative agent for several banks and other financial institutions named
thereunder, (C) the Indenture, dated as of November 30, 1993, (the "Indenture")
among Holding, as guarantor, and First Trust National Association, as Trustee,
or (D) any other financing or security agreement or document entered into in
connection with the acquisition by Holding of substantially all the assets of
Sporting Goods Properties, Inc. ("Sporting Goods") and certain related assets of
Sporting Goods' parent E.I. du Pont de Nemours and Company ("DuPont"), from
Sporting Goods and DuPont, on December 1, 1993 (the "Acquisition"), or the
financing of the Acquisition or in connection with the operations of Holding or
its subsidiaries from time to time (the Credit Agreement, the Guarantee, any
Indenture, and such other agreements and documents, as each may be amended,
modified or supplemented from time to time, are hereinafter referred to as the
"Financing Agreements"), in each case as the same may be amended, modified or
supplemented from time to time, (ii) such repurchase would violate any of the
terms or provisions of the Certificate of Incorporation of Holding, or (iii)
Holding has no funds legally available therefor under the General Corporation
Law of the State of Delaware.
(b) Delay of Repurchase. In the event that a repurchase by
Holding otherwise permitted under Section 4(c) is prevented solely by the terms
of Section 9(a), (i) such repurchase will be postponed and will take place
without the application of further conditions or impediments (other than as set
forth in Section 4 hereof or in this Section 9) at the first opportunity
thereafter when Holding has funds legally available therefor and when such
repurchase will not result in any default, event of default or violation under
any of the Financing Agreements or in a violation of any term or provision of
the Certificate of Incorporation of Holding and (ii) Holding's obligation to
effect such repurchase shall rank against other similar repurchase obligations
of Holding with respect to shares of Common Stock or options in respect thereof
according to priority in time of the effective date of the event giving rise to
such obligation of Holding to repurchase; provided that any such repurchase
obligations as to which a common date determines priority shall be of equal
priority and shall share pro rata in any repurchase payments made pursuant to
clause (i) above and provided, further, that any obligation to repurchase shares
of Common Stock pursuant to the election of the holder of such shares shall have
priority over any other repurchase obligation.
(c) Purchase Price Adjustment. In the event that a repurchase
of the Covered Options from the Grantee is delayed pursuant to this Section 9,
the purchase
14
<PAGE> 15
price for such Covered Options when the repurchase of such Covered Options
eventually takes place as contemplated by Section 9(b) shall be the sum of (a)
the Purchase Price of such Covered Options determined in accordance with Section
4(g) at the time that the repurchase of such Covered Options would have occurred
but for the operation of this Section 9, plus (b) an amount equal to interest on
such Purchase Price for the period from the date on which the completion of the
repurchase would have taken place but for the operation of this Section 9 to the
date on which such repurchase actually takes place (the "Delay Period") at a
rate equal to the weighted average cost of Holding's bank indebtedness
obligations outstanding during the Delay Period.
10. No Rights as Stockholder. The Grantee shall have no voting
or other rights as a stockholder of Holding with respect to any Shares covered
by the Options until the exercise of the Options and the issuance of a
certificate or certificates to the Grantee for such Shares. No adjustment shall
be made for dividends or other rights for which the record date is prior to the
issuance of such certificate or certificates.
11. Capital Adjustments. The number and price of the Shares
covered by the Options shall be proportionately adjusted to reflect any stock
dividend, stock split or share combination of the Common Stock or any
recapitalization of Holding. Subject to any required action by the stockholders
of Holding and Section 8 hereof, in any merger, consolidation, reorganization,
exchange of shares, liquidation or dissolution, the Options shall pertain to the
securities and other property, if any, that a holder of the number of shares of
Common Stock covered by the Options would have been entitled to receive in
connection with such event.
12. Miscellaneous.
(a) Notices. All notices and other communications required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been given if delivered personally or sent by certified or
express mail, return receipt requested, postage prepaid, or by any recognized
international equivalent of such delivery, to Holding, the C&D Fund or the
Grantee, as the case may be, at the following addresses or to such other address
as Holding, the C&D Fund or the Grantee, as the case may be, shall specify by
notice to the others:
(i) if to Holding, to it at:
RACI Holding, Inc.
c/o Remington Arms Company, Inc.
870 Remington Drive
Madison, North Carolina 27025
15
<PAGE> 16
Attention: Chief Financial Officer
(ii) if to the Grantee, to the Grantee at the address set
forth on the signature page hereof.
(iii) if to the C&D Fund, to:
The Clayton & Dubilier Private Equity
Fund IV Limited Partnership
270 Greenwich Avenue
Greenwich, Connecticut 06830
Attention: Clayton & Dubilier Associates
IV Limited Partnership,
Joseph L. Rice, III
All such notices and communications shall be deemed to have been received on the
date of delivery or on the third business day after the mailing thereof. Copies
of any notice or other communication given under this Agreement shall also be
given to:
Clayton, Dubilier & Rice, Inc.
375 Park Avenue
New York, New York 10152
Attention: Joseph L. Rice, III
and
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention: Franci J. Blassberg, Esq.
The C&D Fund also shall be given a copy of any notice or other communication
between the Grantee and Holding under this Agreement at its address as set forth
above.
(b) Binding Effect; Benefits. This Agreement shall be binding
upon and inure to the benefit of the parties to this Agreement and their
respective successors and assigns. Except as provided in Section 4, nothing in
this Agreement, express or implied, is intended or shall be construed to give
any person other than the parties to this Agreement or their respective
successors or assigns any legal or equitable right, remedy or claim under or in
respect of any agreement or any provision contained herein.
16
<PAGE> 17
(c) Waiver; Amendment.
(i) Waiver. Any party hereto or beneficiary hereof may by
written notice to the other parties (A) extend the time for the
performance of any of the obligations or other actions of the other
parties under this Agreement, (B) waive compliance with any of the
conditions or covenants of the other parties contained in this
Agreement and (C) waive or modify performance of any of the obligations
of the other parties under this Agreement, provided that any waiver of
the provisions of Section 4 or Section 6(f) must be consented to in
writing by the C&D Fund. Except as provided in the preceding sentence,
no action taken pursuant to this Agreement, including, without
limitation, any investigation by or on behalf of any party or
beneficiary, shall be deemed to constitute a waiver by the party or
beneficiary taking such action of compliance with any representations,
warranties, covenants or agreements contained herein. The waiver by any
party hereto or beneficiary hereof of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any
preceding or succeeding breach and no failure by a party or beneficiary
to exercise any right or privilege hereunder shall be deemed a waiver
of such party's or beneficiary's rights or privileges hereunder or
shall be deemed a waiver of such party's or beneficiary's rights to
exercise the same at any subsequent time or times hereunder.
(ii) Amendment. This Agreement may not be amended, modified or
supplemented orally, but only by a written instrument executed by the
Grantee and Holding, and (in the case of any amendment modification or
supplement that adversely affects the rights of the C&D Fund hereunder)
consented to by the C&D Fund in writing. The parties hereto acknowledge
that Holding's consent to an amendment or modification of this
Agreement may be subject to the terms and provisions of the Financing
Agreements.
(d) Assignability. Neither this Agreement nor any right,
remedy, obligation or liability arising hereunder or by reason hereof shall be
assignable by Holding or the Grantee without the prior written consent of the
other parties and the C&D Fund. The C&D Fund may assign from time to time all or
any portion of its rights under Section 4 to one or more persons or other
entities designated by it.
(e) Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE.
17
<PAGE> 18
(f) Section and Other Headings, etc. The section and other
headings contained in this Agreement are for reference purposes only and shall
not affect the meaning or interpretation of this Agreement.
(g) Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original and all of
which together shall constitute one and the same instrument.
(h) Delegation by the Board. All of the powers, duties and
responsibilities of the Board specified in this Agreement may, to the full
extent permitted by applicable law, be exercised and performed by any duly
constituted committee thereof to the extent authorized by the Board to exercise
and perform such powers, duties and responsibilities.
18
<PAGE> 19
IN WITNESS WHEREOF, Holding and the Grantee have executed this
Agreement as of the date first above written.
RACI HOLDING, INC.
By:
------------------------------------
Name:
Title:
THE GRANTEE:
By:
------------------------------------
Name:
Attorney-in-Fact
Address of the Grantee:
Total Number of Shares
of Common Stock for
the Purchase of Which
Performance Options
Have Been Granted:
19
<PAGE> 20
Annex A
EBITDA TARGETS FOR PERFORMANCE OPTIONS
<TABLE>
<CAPTION>
1999 2000
---- ----
Percent Vested
EBITDA ACHIEVED EBITDA ACHIEVED(1) (of those unvested
(in millions of dollars) Percent Vested (in millions of dollars) after 1999)
- ------------------------ -------------- ------------------------ ------------------
<S> <C> <C> <C>
Below $63.7 0% Below $72.8 0%
63.7 5% 72.8 0%
64.4 10% 73.6 20%
65.1 15% 74.4 30%
65.8 20% 75.2 40%
66.5 25% 76.0 55%
67.2 30% 76.8 60%
67.9 35% 77.6 70%
68.6 40% 78.4 80%
69.3 45% 79.2 90%
70.0 50% 80.0 100%
</TABLE>
- -----------------
1. These EBITDA targets are subject to adjustment by Holding's Board of
Directors.
<PAGE> 1
Exhibit 10.6
MANAGEMENT STOCK OPTION AGREEMENT - SERVICE OPTION
MANAGEMENT STOCK OPTION AGREEMENT, dated as of June 24, 1999,
between RACI Holding, Inc., a Delaware corporation (the "Holding"), and the
Grantee whose name appears on the signature page hereof (the "Grantee").
W I T N E S S E T H:
WHEREAS, the Board of Directors of Holding (the "Board")
approved the grant to the Grantee of nonqualified stock options to purchase
shares of Class A Common Stock, par value $.01 per share ("Common Stock"), of
Holding set forth on the signature page hereof (each, a "Share" and,
collectively, the "Shares") pursuant to the RACI Holding, Inc. Stock Incentive
Plan (the "Plan"), at an exercise price of $200.00 per Share by unanimous
written consent dated May 21, 1999 (the "Grant Date"); and
WHEREAS, the Grantee and Holding desire to enter into an
agreement to evidence and confirm the grant of such options on the terms and
conditions set forth herein;
NOW, THEREFORE, to evidence the stock options so granted, and
to set forth the terms and conditions thereof, Holding and the Grantee hereby
agree as follows:
1. Confirmation of Grant; Option Price. Holding hereby
evidences and confirms its grant to the Grantee, effective as of the Grant Date,
of options (the "Options") to purchase the Shares at an option price of $200.00
per share (the "Option Price"). The Options are not intended to be incentive
stock options under the U.S. Internal Revenue Code of 1986, as amended. This
Agreement is subordinate to, and the terms and conditions of the Options granted
hereunder are subject to, the terms and conditions of the Plan.
2. Exercisability. Except as otherwise provided in this
Agreement, the Options shall become vested and exercisable in three equal
installments, on each of the third, fourth and fifth anniversaries of the Grant
Date, subject in the case of each such installment to the continued employment
of the Grantee until the applicable vesting date; provided that the Board may
accelerate the exercisability of any Option, all Options or any class of
Options, at any time and from time to time. Shares eligible for purchase
pursuant to vested and exercisable Options may be purchased, subject to the
provisions hereof, and pursuant to and subject to the provisions contained in
the Management Stock Subscription Agreement (as defined in Section 5) related to
such Shares, at any time and from time to time on or after the date the related
Options become vested and exercisable until the date one day prior to the date
on which such Options terminate.
<PAGE> 2
3. Termination of Option.
(a) Normal Termination Date. Unless an earlier termination
date is specified in Section 3(b), the Options shall terminate on the tenth
anniversary of the date hereof (the "Normal Termination Date").
(b) Early Termination. If the Grantee's Active Employment (as
defined below) is voluntarily or involuntarily terminated for any reason other
than a Special Termination (as defined below) prior to the Normal Termination
Date, any Options that have not become vested and exercisable on or before the
effective date of such termination of employment shall terminate on such
effective date. Subject to the provisions of Section 4(c), if the Grantee's
Active Employment is terminated by reason of the Grantee's death, Permanent
Disability or Retirement (each a "Special Termination"), then all Options held
by the Grantee shall become immediately vested and exercisable and shall remain
exercisable until the first to occur of (A) the 180th day following the
effective date of such Special Termination or (B) the Normal Termination Date.
Subject to Section 4(c), if the Grantee's Active Employment is terminated for
any reason other than (i) a Special Termination or (ii) for Cause, any vested
and exercisable Options then held by the Grantee shall remain exercisable for a
period of sixty days following the earliest of (x) the expiration of the Second
Purchase Period (as defined in Section 4(c)(i) hereof), (y) receipt by the
Grantee of written notice that the C&D Fund (as defined in Section 4(d) hereof)
does not intend to exercise its right to purchase pursuant to Section 4(c)(i)
and (z) in the case of any such termination of the Grantee's employment on or
after the effective date of a Public Offering (as defined in Section 4), the
effective date of such termination of employment. Notwithstanding anything else
contained in this Agreement, if the Grantee's Active Employment is terminated
for Cause, then all Options (whether or not then vested or exercisable) shall
terminate and be canceled immediately upon such termination, regardless of
whether then vested or exercisable. Nothing in this Agreement shall be deemed to
confer on the Grantee any right to continue in the employ of the Company or any
of its direct or indirect subsidiaries, or to interfere with or limit in any way
the right of the Company or any of such subsidiaries to terminate the Grantee's
employment at any time.
4. Restrictions on Exercise; Non-Transferability of Option;
Repurchase of Options.
(a) Restrictions on Exercise. The Options may be exercised
only with respect to full shares of Common Stock. No fractional shares of Common
Stock shall be issued. Notwithstanding any other provision of this Agreement,
the Options may not be exercised in whole or in part, and no certificates
representing Shares shall be delivered, (i) unless all requisite approvals and
consents of any governmental authority of any kind having jurisdiction over the
exercise of the Options shall have been secured, (ii) unless the
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purchase of the Shares upon the exercise of the Options shall be exempt from
registration under applicable U.S. federal and state securities laws, or the
Shares shall have been registered under such laws, (iii) unless all applicable
U.S. federal, state and local and non-U.S. tax withholding requirements shall
have been satisfied or (iv) if such exercise would cause a change in control of
Holding and thereby result in a violation of the terms or provisions of or a
default or an event of default under any of the Financing Agreements (as such
term is defined in Section 9). Holding shall use reasonable best efforts to
obtain the consents and approvals referred to in clause of the preceding
sentence.
(b) Non-Transferability of Options. Except as contemplated by
Section 4(c), the Options may be exercised only by the Grantee or by the
Grantee's estate. Except as contemplated by Section 4(c), the Options are not
assignable or transferable, in whole or in part, and they may not, directly or
indirectly, be offered, transferred, sold, pledged, assigned, alienated,
hypothecated or otherwise disposed of or encumbered (including without
limitation by gift, operation of law or otherwise) other than by will or by the
laws of descent and distribution to the estate of the Grantee upon the Grantee's
death, provided that the deceased Grantee's beneficiary or the representative of
the Grantee's estate shall acknowledge and agree in writing, in a form
reasonably acceptable to Holding, to be bound by the provisions of this
Agreement and the Plan as if such beneficiary or the estate were the Grantee.
(c) Repurchase of Options on Termination of Employment.
(i) Termination of Employment. If the Grantee's Active
Employment is terminated for any reason, Holding shall have an option
to purchase all or any of the Options that have become vested and
exercisable on or prior to the effective date of such termination of
Active Employment (such vested and exercisable Options, "Covered
Options"), and shall have 30 days from the effective date of such
termination (the "First Purchase Period") during which to give notice
in writing to the Grantee of its election to exercise or not to
exercise such right to purchase the Covered Options provided that such
30-day period may be extended by mutual agreement between the Grantee
and Holding. Holding hereby undertakes to use reasonable efforts to act
as promptly as practicable following such termination to make such
election. If Holding (i) fails to give notice that it intends to
exercise its right to purchase the Options within the First Purchase
Period, or (ii) chooses to repurchase none or only a portion of the
Options, by giving such notice, the C&D Fund shall have the right to
purchase all or any of the Options not purchased by Holding, and shall
have until the expiration of the earlier of (x) 30 days following the
end of the First Purchase Period, or (y) 30 days from the date of
receipt by the C&D Fund of written notice that Holding does not intend
to exercise its right with respect to all of the Options (such 30-day
period being
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hereinafter referred to as the "Second Purchase Period"), to give
notice in writing to the Grantee of the C&D Fund's exercise of its
right to purchase all or any of such Options. If the rights to purchase
all of the Options of Holding and the C&D Fund granted in this
subsection are not fully exercised as provided herein, the Grantee
shall be entitled to retain any Options not so purchased, subject to
all of the provisions of this Agreement, including Section 3(b).
(ii) Purchase Price, etc. All purchases pursuant to this
Section 4(c) by Holding or the C&D Fund shall be for a purchase price
determined in accordance with, and shall take place at the time and in
the manner prescribed by, Sections 4(g), (h) and (i).
(d) Certain Definitions. As used in this Agreement the
following terms shall have the following meanings:
(i) "Active Employment" shall mean the Grantee's active
employment with the Company or any Subsidiary.
(ii) "C&D Fund" shall mean The Clayton & Dubilier Private
Equity Fund IV Limited Partnership, a Connecticut limited partnership,
together with any successor investment vehicle managed by Clayton,
Dubilier & Rice, Inc.
(iii) "Cause" shall mean (A) the willful failure by the
Grantee to perform substantially his duties as an employee of the
Company or any Subsidiary (other than any such failure due to physical
or mental illness) after a demand for substantial performance is
delivered to the Grantee by the executive to whom the Grantee reports
or by the Board, which notice identifies the manner in which such
executive or the Board, as the case may be, believes that the Grantee
has not substantially performed his duties, (B) the Grantee's engaging
in willful and serious misconduct that is injurious to the Company or
any Subsidiary, (C) the Grantee's having been convicted of, or entered
a plea of guilty or nolo contendere to, a crime that constitutes a
felony, (D) the willful and material breach by the Grantee of any
written covenant or agreement with the Company or any Subsidiary not to
disclose any information pertaining to the Company or any Subsidiary or
not to compete or interfere with the Company or any Subsidiary or (E)
the breach by the Grantee of his obligations pursuant to the
"take-along" provisions set forth in any Management Stock Subscription
Agreement to which he is or becomes a party.
(iv) "Company" shall mean Remington Arms Company, Inc., a
Delaware corporation formerly named RACI Acquisition Corporation, and
any successor thereto.
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(v) "Permanent Disability" shall mean a physical or mental
disability or infirmity that prevents the performance of the Grantee's
employment-related duties lasting (or likely to last, based on
competent medical evidence presented to the Board) for a continuous
period of six months or longer. The Board's reasoned and good faith
judgment of Permanent Disability shall be final, binding and conclusive
on all parties hereto and shall be based on such competent medical
evidence as shall be presented to it by the Grantee or by any physician
or group of physicians or other competent medical expert employed by
the Grantee or Holding to advise the Board.
(vi) "Retirement" shall mean the Grantee's retirement from
Active Employment at age 65 or later.
(vii) "Subsidiary" shall mean any corporation, a majority of
whose outstanding voting securities is owned, directly or indirectly,
by Holding.
(e) Notice of Termination. Holding shall give written notice
of any termination of the Grantee's Active Employment to the C&D Fund, except
that if such termination (if other than as a result of death) is by the Grantee,
the Grantee shall give written notice of such termination to Holding and Holding
shall give written notice of such termination to the C&D Fund.
(f) Public Offering. In the event that an under-written public
offering in the United States of the Common Stock led by one or more
underwriters at least one of which is an underwriter of nationally recognized
standing (a "Public Offering") has been consummated, none of Holding, the C&D
Fund or the Grantee shall have any rights to purchase or sell the Covered
Options, as the case may be, pursuant to this Section 4, and this Section 4
shall not apply to a sale as part of a Public Offering.
(g) Purchase Price. Subject to Section 9(c), the purchase
price to be paid to the Grantee (or, in the event of the Grantee's death, the
Grantee's estate) for any Covered Options to be purchased by Holding or the C&D
Fund pursuant to this Section 4(c) (the "Purchase Price") shall be equal to the
excess of (A) the fair market value (the "Fair Market Value") of the Shares
subject to the Covered Options, in each case, as of the effective date of the
termination of Active Employment that gives rise to the right of Holding and the
C&D Fund to repurchase (the "Determination Date") and (B) the aggregate exercise
price of the Covered Options. Whenever determination of the Fair Market Value of
such Shares is required by this Agreement, such Fair Market Value shall be such
amount as is determined in good faith by the Board. In making a determination of
Fair Market Value, the Board shall give due consideration to such factors as it
deems appropriate, including, without limitation, the earnings and certain other
financial and
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operating information of Holding and the Subsidiaries in recent periods, the
potential value of Holding as a whole, the future prospects of Holding and the
Subsidiaries and the industries in which they compete, the history and
management of Holding and the Subsidiaries, the general condition of the
securities markets, the fair market value of securities of companies engaged in
businesses similar to those of Holding and the Subsidiaries and the Applicable
Share Valuation (as defined below). The determination of Fair Market Value will
not give effect to any restrictions on transfer of the Shares or the fact that
such Shares would represent a minority interest in Holding. For purposes of this
Agreement, the term "Applicable Share Valuation" shall mean the annual valuation
of the Common Stock performed as of the last day of the last fiscal year of
Holding ending prior to the Determination Date by an independent valuation firm
chosen by the Board, except that, in the case of a Determination Date occurring
during the period beginning on September 1 of any fiscal year of Holding and
ending on December 31 of that fiscal year beginning with the period beginning on
September 1, 1999 and ending on December 31, 1999, the term "Applicable Share
Valuation" shall mean the annual valuation of the Common Stock performed as of
the last day of such fiscal year by an independent valuation firm chosen by the
Board. Such annual valuations shall be performed as promptly as practicable
following the end of each fiscal year of Holding, beginning with the 1999 fiscal
year of Holding. The Fair Market Value as determined in good faith by the Board
and in the absence of fraud shall be binding and conclusive upon all parties
hereto and the C&D Fund. If Holding subdivides (by any stock split, stock
dividend or otherwise) the Common Stock into a greater number of shares, or
combines (by reverse stock split or otherwise) the Common Stock into a smaller
number of shares after the Board shall have determined the Purchase Price for
the Covered Options (without taking into consideration such subdivision or
combination) and prior to the consummation of the purchase, the Purchase Price
shall be appropriately adjusted to reflect such subdivision or combination and
the Board's determination as to any such judgment in good faith shall be binding
and conclusive on all parties hereto and the C&D Fund.
(h) Payment. Subject to Section 9, the completion of a
purchase pursuant to this Section 4 shall take place at the principal office of
Holding on the tenth business day following the later of (i) the receipt by the
Grantee (or the Grantee's estate) of the C&D Fund's or Holding's notice of its
exercise of the right to purchase the Covered Options pursuant to Section 4(c)
and (ii) the receipt by Holding of the independent valuation of the Common Stock
referred to in Section 4(g). The Purchase Price shall be paid by delivery to the
Grantee (or the Grantee's estate) of a certified or bank check for the Purchase
Price payable to the order of the Grantee (or the Grantee's estate), against
delivery of such instruments as Holding may reasonably request signed by the
Grantee (or the Grantee's estate), free and clear of all security interests,
liens, claims, encumbrances, charges, options, restrictions on transfer, proxies
and voting and other agreements of whatever nature.
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(i) Application of the Purchase Price to Certain Loans. The
Grantee agrees that Holding and the C&D Fund shall be entitled to apply any
amounts to be paid by Holding or the C&D Fund, as the case may be, to repurchase
the Covered Options pursuant to this Section 4 to discharge any indebtedness of
the Grantee to Holding or any Subsidiary, or indebtedness that is guaranteed by
Holding or any such Subsidiary, including, but not limited to, any indebtedness
of the Grantee incurred to purchase any shares of Common Stock.
(j) Withholding. Whenever Shares are to be issued pursuant to
the Options, Holding may require the recipient of the Shares to remit to Holding
an amount sufficient to satisfy any applicable U.S. federal, state and local and
non-U.S. tax withholding requirements. In the event any cash is paid to the
Grantee or the Grantee's estate or beneficiary pursuant to this Section 4,
Holding shall have the right to withhold (or, if applicable, to direct the C&D
Fund to remit to Holding) an amount from such payment sufficient to satisfy any
applicable U.S. federal, state and local and non-U.S. tax withholding
requirements.
5. Manner of Exercise. To the extent that any of the Options
shall have become and remain exercisable as provided in Section 2 and subject to
such reasonable administrative regulations as the Board may have adopted, the
Options may be exercised, in whole or in part, by notice to the Secretary of
Holding in writing given 15 business days prior to the date on which the Grantee
will so exercise the Options (the "Exercise Date"), specifying the number of
Shares with respect to which the Options are being exercised (the "Exercise
Shares") and the Exercise Date, provided that if shares of Common Stock are
traded on a U.S. national securities exchange or bid and ask prices for shares
of Common Stock are quoted over NASDAQ, notice may be given five business days
before the Exercise Date. On or before any Exercise Date occurring prior to a
Public Offering, Holding and the Grantee shall enter into a Management Stock
Subscription Agreement substantially in the form attached to the Plan as Exhibit
A-1 ("Management Stock Subscription Agreement"), or in such other form as may be
agreed upon by Holding and the Grantee, such Management Stock Subscription
Agreement to contain provisions corresponding to Section 4(c) hereof. In
addition, (a) on or before the Exercise Date, the Grantee shall deliver to
Holding full payment for the Exercise Shares in United States dollars in cash,
or cash equivalent satisfactory to Holding, and in an amount equal to the
product of the number of Exercise Shares and $200.00 (the "Exercise Price") and
(b) on the Exercise Date, subject to any bailment arrangement agreed to by
Holding and the Grantee, Holding shall deliver to the Grantee a certificate or
certificates representing the Exercise Shares, registered in the name of the
Grantee. If shares of Common Stock are traded on a U.S. national securities
exchange or bid and ask prices for shares of Common Stock are quoted over
NASDAQ, the Grantee may, in lieu of cash, tender shares of Common Stock that
have been owned by the Grantee for a minimum period of six months,
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<PAGE> 8
having a market price on the Exercise Date equal to the Exercise Price or may
deliver a combination of cash and such shares of Common Stock having a market
price equal to the difference between the Exercise Price and the amount of such
cash as payment of the Exercise Price, subject to such rules and regulations as
may be adopted by the Board to provide for the compliance of such payment
procedure with applicable law, including Section 16(b) of the Exchange Act.
Holding may require the Grantee to furnish or execute such other documents as
Holding shall reasonably deem necessary (i) to evidence such exercise, (ii) to
determine whether registration is then required under the U.S. Securities Act of
1933, as amended (the "Securities Act"), and (iii) to comply with or satisfy the
requirements of the Securities Act, applicable state or non-U.S. securities laws
or any other law.
6. Grantee's Representations, Warranties and Covenants.
(a) Investment Intention. The Grantee represents and warrants
that the Options have been, and covenants that any Exercise Shares will be,
acquired by the Grantee solely for the Grantee's own account for investment and
not with a view to or for sale in connection with any distribution thereof. The
Grantee agrees that the Grantee will not, directly or indirectly, offer,
transfer, sell, pledge, hypothecate or otherwise dispose of all or any of the
Options or any of the Exercise Shares (or solicit any offers to buy, purchase or
otherwise acquire or take a pledge of all or any of the Options or any of the
Exercise Shares), except in compliance with the Securities Act and the rules and
regulations of the Securities and Exchange Commission (the "Commission")
thereunder, and in compliance with applicable state and foreign securities or
"blue sky" laws. The Grantee further understands, acknowledges and agrees that
none of the Exercise Shares may be transferred, sold, pledged, hypothecated or
otherwise disposed of unless the provisions of any related Management Stock
Subscription Agreement shall have been complied with or have expired.
(b) Legend. The Grantee acknowledges that any certificate
representing the Exercise Shares shall bear an appropriate legend, which will
include, without limitation, the following language in the case of any such
certificates issued prior to a Public Offering:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
PROVISIONS OF A MANAGEMENT STOCK SUBSCRIPTION AGREEMENT, DATED
AS OF ___________, ____, AND NEITHER THIS CERTIFICATE NOR THE
SHARES REPRESENTED BY IT ARE ASSIGNABLE OR OTHERWISE
TRANSFERABLE EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF SUCH
MANAGEMENT STOCK
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SUBSCRIPTION AGREEMENT, AS THE SAME MAY BE AMENDED FROM TIME
TO TIME, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE
ISSUER. THE SHARES REPRESENTED BY THIS CERTIFICATE ARE BOUND
BY THE OBLIGATIONS SET FORTH IN AND MAY BE ENTITLED TO SOME OF
THE BENEFITS OF A REGISTRATION AND PARTICIPATION AGREEMENT,
DATED AS OF NOVEMBER 30, 1993, AMONG THE ISSUER AND CERTAIN
STOCKHOLDERS OF THE ISSUER A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE ISSUER."
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED
UNDER ANY STATE OR FOREIGN SECURITIES LAWS AND MAY NOT BE
TRANSFERRED, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED
OF UNLESS (i) (A) SUCH DISPOSITION IS PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, (B) THE HOLDER HEREOF SHALL HAVE DELIVERED TO THE
ISSUER AN OPINION OF COUNSEL, WHICH OPINION AND COUNSEL SHALL
BE REASONABLY SATISFACTORY TO THE ISSUER, TO THE EFFECT THAT
SUCH DISPOSITION IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF
SUCH ACT OR (C) A NO-ACTION LETTER FROM THE SECURITIES AND
EXCHANGE COMMISSION, REASONABLY SATISFACTORY TO COUNSEL FOR
HOLDING, SHALL HAVE BEEN OBTAINED WITH RESPECT TO SUCH
DISPOSITION AND (ii) SUCH DISPOSITION IS PURSUANT TO
REGISTRATION UNDER ANY APPLICABLE STATE OR FOREIGN SECURITIES
LAWS OR AN EXEMPTION THEREFROM.
(c) Securities Law Matters. The Grantee acknowledges receipt
of advice from Holding that (i) the Exercise Shares have not been registered
under the Securities Act based on an exemption provided under Rule 701
promulgated under the Securities Act or qualified under any state or foreign
securities or "blue sky" laws, (ii) it is not anticipated that there will be any
public market for the Exercise Shares, (iii) the Exercise Shares must be held
indefinitely and the Grantee must continue to bear the
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<PAGE> 10
economic risk of the investment in the Exercise Shares unless the Exercise
Shares are subsequently registered under the Securities Act and such state laws
or an exemption from registration is available, (iv) Rule 144 promulgated under
the Securities Act ("Rule 144") is not presently available with respect to the
sales of the Exercise Shares and Holding has made no covenant to make Rule 144
available, (v) when and if the Exercise Shares may be disposed of without
registration in reliance upon Rule 144, such disposition can be made only in
accordance with the terms and conditions of such Rule, (vi) Holding does not
plan to file reports with the Commission or make public information concerning
Holding available unless required to do so by law or by the terms of its
Financing Agreements (as hereinafter defined), (vii) if the exemption afforded
by Rule 144 is not available, sales of the Exercise Shares may be difficult to
effect because of the absence of public information concerning Holding, (viii) a
restrictive legend in the form heretofore set forth shall be placed on the
certificates representing the Exercise Shares and (ix) a notation shall be made
in the appropriate records of Holding indicating that the Exercise Shares are
subject to restrictions on transfer set forth in this Agreement and, if Holding
should in the future engage the services of a stock transfer agent, appropriate
stop-transfer restrictions will be issued to such transfer agent with respect to
the Exercise Shares.
(d) Compliance with Rule 144. If any of the Exercise Shares
are to be disposed of in accordance with Rule 144 under the Securities Act, the
Grantee shall transmit to Holding an executed copy of Form 144 (if required by
Rule 144) no later than the time such form is required to be transmitted to the
Commission for filing and such other documentation as Holding may reasonably
require to assure compliance with Rule 144 in connection with such disposition.
(e) Ability to Bear Risk. The Grantee covenants that the
Grantee will not exercise all or any of the Options unless (i) the financial
situation of the Grantee is such that the Grantee can afford to bear the
economic risk of Holding the Exercise Shares for an indefinite period and (ii)
the Grantee can afford to suffer the complete loss of the Grantee's investment
in the Exercise Shares.
(f) Access to Information. The Grantee represents and warrants
that the Grantee has received the Confidential Offering Memorandum dated May 14,
1999, as supplemented by the supplement to offering memorandum dated June 8,
1999 (as so supplemented , the "Offering Memorandum") and has carefully reviewed
the Offering Memorandum (together with the Annexes thereto) and the other
materials furnished to the Grantee in connection with the transaction
contemplated hereby.
(g) Registration; Restrictions on Sale upon Public Offering.
In respect of any Shares purchased upon exercise of all or any of the Options,
the Grantee shall be entitled to the rights and subject to the obligations
created under the Registration and
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Participation Agreement, dated as of November 30, 1993 as the same may be
amended, modified or supplemented from time to time (the "Registration and
Participation Agreement"), among Holding and certain stockholders of Holding, to
the extent set forth therein. The Grantee agrees that, in the event that Holding
files a registration statement under the Securities Act with respect to a Public
Offering of any shares of its capital stock, the Grantee will not effect any
public sale or distribution of any shares of the Common Stock (other than as
part of such Public Offering) during the 20 days prior to and the 180 days after
the effective date of such registration statement.
(h) Section 83(b) Election. The Grantee agrees that, within 20
days of any Exercise Date that occurs prior to a Public Offering, the Grantee
shall give notice to Holding as to whether or not the Grantee has made an
election pursuant to Section 83(b) of the Internal Revenue Code of 1986, as
amended, with respect to the Exercise Shares purchased on such date, and
acknowledges that the Grantee will be solely responsible for any and all tax
liabilities payable by the Grantee in connection with the Grantee's exercise of
any Options or receipt of the Exercise Shares or attributable to the Grantee's
making or failing to make such an election.
7. Representations and Warranties of Holding. Holding
represents and warrants to the Grantee that (a) Holding has been duly
incorporated and is an existing corporation in good standing under the laws of
the State of Delaware, (b) this Agreement has been duly authorized, executed and
delivered by Holding and constitutes a valid and legally binding obligation of
Holding enforceable against Holding in accordance with its terms and (c) the
Exercise Shares, when issued, delivered and paid for, upon exercise of the
Options in accordance with the terms hereof and the Management Stock
Subscription Agreement, will be duly authorized, validly issued, fully paid and
nonassessable, and free and clear of any liens or encumbrances other than those
created pursuant to this Agreement, the Management Stock Subscription Agreement
or otherwise in connection with the transactions contemplated hereby.
8. Change in Control
(a) Accelerated Vesting and Payment. Unless the Board shall
otherwise determine in the manner set forth in Section 8(b), in the event of a
Change in Control, the Options shall be canceled in exchange for a payment in
cash of an amount equal to the product of (i) the excess, if any, of the Change
in Control Price over the Option Price multiplied by (ii) the number of Shares
then subject to the Options.
(b) Alternative Options. Notwithstanding Section 8(a), no
cancellation, acceleration of exercisability, vesting or cash settlement or
other payment shall occur with respect to the Options if the Board reasonably
determines in good faith,
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prior to the occurrence of a Change in Control, that the Options shall be
honored or assumed, or new rights substituted therefor (such honored, assumed or
substituted Options being hereinafter referred to as an "Alternative Options")
by the New Employer, provided that any such Alternative Options must:
(i) provide the Grantee with rights and entitlements
substantially equivalent to or better than the rights, terms and
conditions applicable under the Options, including, but not limited to,
an identical or better exercise and vesting schedule, identical or
better timing and methods of payment and, if the Alternative Options or
the securities underlying them are not publicly traded, identical or
better rights to require Holding or the New Employer to repurchase the
Alternative Options;
(ii) have substantially equivalent economic value to the
Options (determined at the time of the Change in Control); and
(iii) have terms and conditions which provide that in the
event that the Grantee suffers an Involuntary Termination within two
years following a Change in Control:
(A) any conditions on the Grantee's rights under, or
any restrictions on transfer or exercisability applicable to,
each such Alternative Options shall be waived or shall lapse,
as the case may be; or
(B) the Grantee shall have the right to surrender
such Alternative Options within 30 days following such
termination in exchange for a payment in cash equal to the
excess of the Fair Market Value of the Common Stock subject to
the Alternative Options over the price, if any, that the
Grantee would be required to pay to exercise such Alternative
Options.
(c) Certain Definitions. As used in this Agreement the
following terms shall have the following meanings:
(i) "Change in Control" means the first to occur of the
following events after the date hereof:
(A) the acquisition by any person, entity or "group"
(as defined in Section 13(d) of the Securities Exchange Act of
1934, as amended), other than Holding, any Subsidiary, any
employee benefit plan of Holding
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or any Subsidiary, or the C&D Fund, of 50% or more of the
combined voting power of Holding's then outstanding voting
securities;
(B) the merger or consolidation of Holding as a
result of which persons who were stockholders of Holding, as
the case may be, immediately prior to such merger or
consolidation, do not, immediately thereafter, own, directly
or indirectly, more than 50% of the combined voting power
entitled to vote generally in the election of directors of the
merged or consolidated company;
(C) the liquidation or dissolution of Holding or the
Company, other that the liquidation of Holding or the Company
into the other; or
(D) the sale, transfer or other disposition of all or
substantially all of the assets of Holding or the Company to
one or more persons or entities that are not, immediately
prior to such sale, transfer or other disposition, affiliates
of the Company or the C&D Fund.
(ii) "Change in Control Price" means the price per share of
Common Stock paid in conjunction with any transaction resulting in a
Change in Control (as determined in good faith by the Board if any part
of the offered price is payable other than in cash).
(iii) "Involuntary Termination" means a termination by the New
Employer for any reason.
(iv) "New Employer" means the Grantee's employer, or the
parent or a subsidiary of such employer, immediately following a Change
in Control.
9. Certain Restrictions on Repurchases.
(a) Financing Agreements, etc. Notwithstanding any other
provision of this Agreement, Holding shall not be permitted to repurchase any
Covered Options from the Grantee if (i) such repurchase would result in a
violation of the terms or provisions of, or result in a default or an event of
default under (A) the Credit Agreement, dated as of November 30, 1993 (the
"Credit Agreement"), among Holding, The Chase Manhattan Bank (f/k/a Chemical
Bank) ("Chase"), Union Bank of Switzerland, New York Branch, as co-agents, and
certain other lenders, and Chase, as administrative agent thereunder, (B) the
Guarantee, dated as of November 30, 1993 (the "Guarantee"), made by Holding, as
guarantor, in favor of Chase as administrative agent for several banks and other
financial institutions named thereunder, (C) the Indenture, dated as of November
30,
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1993, (the "Indenture") among Holding, as guarantor, and First Trust National
Association, as Trustee, or (D) any other financing or security agreement or
document entered into in connection with the acquisition by Holding of
substantially all the assets of Sporting Goods Properties, Inc. ("Sporting
Goods") and certain related assets of Sporting Goods' parent E.I. du Pont de
Nemours and Company ("DuPont"), from Sporting Goods and DuPont, on December 1,
1993 (the "Acquisition"), or the financing of the Acquisition or in connection
with the operations of Holding or its subsidiaries from time to time (the Credit
Agreement, the Guarantee, any Indenture, and such other agreements and
documents, as each may be amended, modified or supplemented from time to time,
are hereinafter referred to as the "Financing Agreements"), in each case as the
same may be amended, modified or supplemented from time to time, (ii) such
repurchase would violate any of the terms or provisions of the Certificate of
Incorporation of Holding, or (iii) Holding has no funds legally available
therefor under the General Corporation Law of the State of Delaware.
(b) Delay of Repurchase. In the event that a repurchase by
Holding otherwise permitted under Section 4(c) is prevented solely by the terms
of Section 9(a), (i) such repurchase will be postponed and will take place
without the application of further conditions or impediments (other than as set
forth in Section 4 hereof or in this Section 9) at the first opportunity
thereafter when Holding has funds legally available therefor and when such
repurchase will not result in any default, event of default or violation under
any of the Financing Agreements or in a violation of any term or provision of
the Certificate of Incorporation of Holding and (ii) Holding's obligation to
effect such repurchase shall rank against other similar repurchase obligations
of Holding with respect to shares of Common Stock or options in respect thereof
according to priority in time of the effective date of the event giving rise to
such obligation of Holding to repurchase; provided that any such repurchase
obligations as to which a common date determines priority shall be of equal
priority and shall share pro rata in any repurchase payments made pursuant to
clause (i) above and provided, further, that any obligation to repurchase shares
of Common Stock pursuant to the election of the holder of such shares shall have
priority over any other repurchase obligation.
(c) Purchase Price Adjustment. In the event that a repurchase
of the Covered Options from the Grantee is delayed pursuant to this Section 9,
the purchase price for such Covered Options when the repurchase of such Covered
Options eventually takes place as contemplated by Section 9(b) shall be the sum
of (a) the Purchase Price of such Covered Options determined in accordance with
Section 4(g) at the time that the repurchase of such Covered Options would have
occurred but for the operation of this Section 9, plus (b) an amount equal to
interest on such Purchase Price for the period from the date on which the
completion of the repurchase would have taken place but for the operation of
this Section 9 to the date on which such repurchase actually takes place (the
14
<PAGE> 15
"Delay Period") at a rate equal to the weighted average cost of Holding's bank
indebtedness obligations outstanding during the Delay Period.
10. No Rights as Stockholder. The Grantee shall have no voting
or other rights as a stockholder of Holding with respect to any Shares covered
by the Options until the exercise of the Options and the issuance of a
certificate or certificates to the Grantee for such Shares. No adjustment shall
be made for dividends or other rights for which the record date is prior to the
issuance of such certificate or certificates.
11. Capital Adjustments. The number and price of the Shares
covered by the Options shall be proportionately adjusted to reflect any stock
dividend, stock split or share combination of the Common Stock or any
recapitalization of Holding. Subject to any required action by the stockholders
of Holding and Section 8 hereof, in any merger, consolidation, reorganization,
exchange of shares, liquidation or dissolution, the Options shall pertain to the
securities and other property, if any, that a holder of the number of shares of
Common Stock covered by the Options would have been entitled to receive in
connection with such event.
12. Miscellaneous.
(a) Notices. All notices and other communications required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been given if delivered personally or sent by certified or
express mail, return receipt requested, postage prepaid, or by any recognized
international equivalent of such delivery, to Holding, the C&D Fund or the
Grantee, as the case may be, at the following addresses or to such other address
as Holding, the C&D Fund or the Grantee, as the case may be, shall specify by
notice to the others:
(i) if to Holding, to it at:
RACI Holding, Inc.
c/o Remington Arms Company, Inc.
870 Remington Drive
Madison, North Carolina 27025
Attention: Chief Financial Officer
(ii) if to the Grantee, to the Grantee at the address set
forth on the signature page hereof.
15
<PAGE> 16
(iii) if to the C&D Fund, to:
The Clayton & Dubilier Private Equity
Fund IV Limited Partnership
270 Greenwich Avenue
Greenwich, Connecticut 06830
Attention: Clayton & Dubilier Associates
IV Limited Partnership,
Joseph L. Rice, III
All such notices and communications shall be deemed to have been received on the
date of delivery or on the third business day after the mailing thereof. Copies
of any notice or other communication given under this Agreement shall also be
given to:
Clayton, Dubilier & Rice, Inc.
375 Park Avenue
New York, New York 10152
Attention: Joseph L. Rice, III
and
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention: Franci J. Blassberg, Esq.
The C&D Fund also shall be given a copy of any notice or other communication
between the Grantee and Holding under this Agreement at its address as set forth
above.
(b) Binding Effect; Benefits. This Agreement shall be binding
upon and inure to the benefit of the parties to this Agreement and their
respective successors and assigns. Except as provided in Section 4, nothing in
this Agreement, express or implied, is intended or shall be construed to give
any person other than the parties to this Agreement or their respective
successors or assigns any legal or equitable right, remedy or claim under or in
respect of any agreement or any provision contained herein.
(c) Waiver; Amendment.
(i) Waiver. Any party hereto or beneficiary hereof may by
written notice to the other parties (A) extend the time for the
performance of any of the obligations or other actions of the other
parties under this Agreement, (B) waive
16
<PAGE> 17
compliance with any of the conditions or covenants of the other parties
contained in this Agreement and (C) waive or modify performance of any
of the obligations of the other parties under this Agreement, provided
that any waiver of the provisions of Section 4 or Section 6(f) must be
consented to in writing by the C&D Fund. Except as provided in the
preceding sentence, no action taken pursuant to this Agreement,
including, without limitation, any investigation by or on behalf of any
party or beneficiary, shall be deemed to constitute a waiver by the
party or beneficiary taking such action of compliance with any
representations, warranties, covenants or agreements contained herein.
The waiver by any party hereto or beneficiary hereof of a breach of any
provision of this Agreement shall not operate or be construed as a
waiver of any preceding or succeeding breach and no failure by a party
or beneficiary to exercise any right or privilege hereunder shall be
deemed a waiver of such party's or beneficiary's rights or privileges
hereunder or shall be deemed a waiver of such party's or beneficiary's
rights to exercise the same at any subsequent time or times hereunder.
(ii) Amendment. This Agreement may not be amended, modified or
supplemented orally, but only by a written instrument executed by the
Grantee and Holding, and (in the case of any amendment modification or
supplement that adversely affects the rights of the C&D Fund hereunder)
consented to by the C&D Fund in writing. The parties hereto acknowledge
that Holding's consent to an amendment or modification of this
Agreement may be subject to the terms and provisions of the Financing
Agreements.
(d) Assignability. Neither this Agreement nor any right,
remedy, obligation or liability arising hereunder or by reason hereof shall be
assignable by Holding or the Grantee without the prior written consent of the
other parties and the C&D Fund. The C&D Fund may assign from time to time all or
any portion of its rights under Section 4 to one or more persons or other
entities designated by it.
(e) Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE.
(f) Section and Other Headings, etc. The section and other
headings contained in this Agreement are for reference purposes only and shall
not affect the meaning or interpretation of this Agreement.
(g) Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original and all of
which together shall constitute one and the same instrument.
17
<PAGE> 18
(h) Delegation by the Board. All of the powers, duties and
responsibilities of the Board specified in this Agreement may, to the full
extent permitted by applicable law, be exercised and performed by any duly
constituted committee thereof to the extent authorized by the Board to exercise
and perform such powers, duties and responsibilities.
18
<PAGE> 19
IN WITNESS WHEREOF, Holding and the Grantee have executed this
Agreement as of the date first above written.
RACI HOLDING, INC.
By:
----------------------------------
Name:
Title:
THE GRANTEE:
By:
----------------------------------
Name:
Attorney-in-Fact
Address of the Grantee:
Total Number of Shares
of Common Stock for
the Purchase of Which
Service Options Have
Been Granted:
19
<PAGE> 1
Exhibit 10.7
RACI HOLDING, INC.
STOCK INCENTIVE PLAN
STOCK PURCHASE RIGHT
DEFERRED SHARE AWARD AGREEMENT
Deferred Share Award, dated as of June 24, 1999 (the "Award"), made
in connection with the exercise of a Stock Purchase Right, made by RACI Holding,
Inc., a Delaware corporation ("Holding") to the Purchaser whose name appears on
the signature page hereof (the "Purchaser") under the terms of the RACI Holding,
Inc. Stock Incentive Plan (the "Plan").
1. Plan Controls. Capitalized terms used in this Award and not
otherwise defined herein shall have the meaning given such terms in the Plan. If
any provision of this Award is inconsistent with any provision of the Plan (as
either may be interpreted from time to time by the Board), the Plan shall
control.
2. Grant of Deferred Shares. Effective as of the date hereof, Holding
hereby evidences and confirms its sale to the Purchaser, on the terms and
conditions of this Award and the Plan, of the number of shares of Deferred
Shares set forth on the signature page hereof, which represent Holding's
contractual obligation to deliver shares of Holding's Common Stock ("Shares") to
the Purchaser upon the terms and conditions set forth herein and the Plan. The
Deferred Shares granted hereby shall be fully vested upon grant.
3. Purchaser's Representations, Warranties and Covenants.
(a) Investment Intention. The Purchaser represents and warrants that
the Purchaser is acquiring the Deferred Shares solely for the Purchaser's own
account for investment and not with a view to or for sale in connection with any
distribution thereof. The Purchaser further understands, acknowledges and agrees
that none of the Deferred Shares may be transferred, sold, pledged, hypothecated
or otherwise disposed of except to the extent permitted hereby.
(b) Securities Law Matters. The Purchaser acknowledges receipt of
advice from Holding that (i) the Deferred Shares and the Shares have not been
registered under the Securities Act based on an exemption provided under Rule
701 promulgated under the Securities Act or qualified under any state or foreign
securities or "blue sky" laws, (ii) it is not anticipated that there will be any
public market for the Shares, (iii) the Deferred Shares and the Shares must be
held indefinitely and the Purchaser must continue to bear the
<PAGE> 2
economic risk of the investment in the Deferred Shares and the Shares unless the
Shares are subsequently registered under the Securities Act and such state laws
or an exemption from registration is available, (iv) Rule 144 promulgated under
the Securities Act ("Rule 144") is not presently available with respect to the
sales of the Shares, and Holding has made no covenant to make Rule 144
available, (v) when and if the Shares may be disposed of without registration in
reliance upon Rule 144, such disposition can be made only in accordance with the
terms and conditions of such Rule, (vi) Holding does not plan to file reports
with the Commission or make public information concerning Holding available
unless required to do so by law or by the terms of its financing agreements,
(vii) if the exemption afforded by Rule 144 is not available, sales of the
Shares may be difficult to effect because of the absence of public information
concerning Holding, (viii) a restrictive legend in the form set forth in the
Agreement referred to in Section 7 shall be placed on the certificates
representing the Shares and (ix) a notation shall be made in the appropriate
records of Holding indicating that the Shares are subject to restrictions on
transfer set forth in the Agreement referred to in Section 7 and, if Holding
should in the future engage the services of a stock transfer agent, appropriate
stop-transfer restrictions will be issued to such transfer agent with respect to
the Shares.
(c) Ability to Bear Risk. The Purchaser represents and warrants that
(i) the financial situation of the Purchaser is such that the Purchaser can
afford to bear the economic risk of holding the Deferred Shares and Shares for
an indefinite period and (ii) the Purchaser can afford to suffer the complete
loss of the Purchaser's investment in the Deferred Shares and Shares.
(d) Access to Information. The Purchaser represents and warrants that
the Purchaser has received the Confidential Offering Memorandum dated May 14,
1999, as supplemented by the supplement to offering memorandum dated June 8,
1999 (as so supplemented, the "Offering Memorandum"), relating to the Award, the
Deferred Shares and the Shares and has carefully reviewed the Offering
Memorandum (together with the Annexes thereto) and the other materials furnished
to the Purchaser in connection with the transactions contemplated hereby and
thereby.
4. Representations and Warranties of Holding. Holding represents and
warrants to the Purchaser that (a) Holding has been duly incorporated and is an
existing corporation in good standing under the laws of the State of Delaware,
(b) this Agreement has been duly authorized, executed and delivered by Holding
and constitutes a valid and legally binding obligation of Holding enforceable
against Holding in accordance with its terms and (c) the Deferred Shares, when
issued, delivered and paid for in accordance with the terms hereof, will be duly
and validly issued, fully paid and nonassessable, and free and clear of any
liens or encumbrances other than those created pursuant to this Agreement, or
otherwise in connection with the transactions contemplated hereby.
2
<PAGE> 3
5. Nonassignability. The Deferred Shares granted hereby are not
assignable or transferable, in whole or in part, and may not, directly or
indirectly, be offered, transferred, sold, pledged, assigned, alienated,
hypothecated or otherwise disposed of or encumbered (including without
limitation by gift, operation of law or otherwise) other than by will or by the
laws of descent and distribution to the estate of the Purchaser upon the
Purchaser's death.
6. No Rights as a Stockholder. Neither the Purchaser nor any person
or persons to whom the Purchaser's rights under this Award shall have passed by
will or by the laws of descent and distribution, as the case may be, shall have
any voting, dividend or other rights or privileges as a stockholder of Holding
with respect to any Shares corresponding to the Deferred Shares granted hereby
unless and until a certificate for Shares is issued in respect thereof.
7. Delivery Event. Unless the Purchaser shall electively defer such
distribution by written notice to Holding in accordance with the Plan and such
conditions as the Board shall impose, upon the occurrence of an event described
in Section 8.3 of the Plan, the Purchaser shall receive, without payment, one
share of Common Stock in settlement of each share of Deferred Shares that he or
she then holds. As a condition to the delivery of any Common Stock in respect of
Deferred Shares, the holder of such Deferred Shares (and anyone whose rights
derive therefrom) shall execute a Subscription Agreement (or such other
agreement having comparable terms but modified to reflect differences between
such shares and shares purchased from Holding as shall be required by Holding).
The Purchaser acknowledges and agrees that the Subscription Agreement will have
restrictions on transfer, repurchase rights on the part of Holding and The
Clayton & Dubilier Private Equity Fund IV Limited Partnership on termination of
employment, take-along rights and other legal and contractual restrictions
similar to those contained in the Management Stock Subscription Agreements
described in the Offering Memorandum.
8. Capital Adjustments. If Holding is a party to any merger,
consolidation, divestiture (including a spin-off), reorganization,
reclassification, stock split-up, combination of shares, dividend on shares
payable in stock, liquidation or other transaction, such that an adjustment is
required to preserve, or to prevent enlargement of, the benefits or potential
benefits made available under an Award, then the Board shall, in such manner as
the Board shall deem equitable, adjust any or all of (i) the number and kind of
shares to which the Deferred Shares may relate and (ii) the number and kinds of
securities deliverable pursuant to Section 7 hereof. In any adjustment of shares
of Deferred Shares subject to this Award, fractional shares shall be omitted.
3
<PAGE> 4
9. Tax Withholding. Whenever shares of Common Stock or other property
are to be distributed in respect to any Deferred Shares awarded hereunder,
Holding shall have the power to withhold, or require the Purchaser to remit to
Holding, an amount sufficient to satisfy Federal, state, local and foreign
withholding tax requirements, including but not limited to income and employment
taxes, relating to such issuance, and Holding may defer issuance of such Shares
or other property until such requirements are satisfied. The Board may, in its
discretion, permit the Purchaser to elect, subject to such conditions as the
Board shall impose, to satisfy his withholding obligation hereunder with Shares
or any other property issuable hereunder.
10. No Right to Continued Employment. Nothing in the Plan or this
Award shall interfere with or limit in any way the right of Holding or any of
its Subsidiaries to terminate the Purchaser's employment at any time, or confer
upon the Purchaser any right to continue in the employ of Holding or any of its
Subsidiaries.
11. Interpretation. The Board shall have full power and discretion to
construe and interpret the Plan (and any rules and regulations issued
thereunder) and this Award. Any determination or interpretation by the Board
under or pursuant to this Award shall be final and binding and conclusive on all
persons affected hereby.
12. Binding Effect; Benefits. This Award shall be binding upon and
inure to the benefit of Holding and the Purchaser and their respective
successors and assigns. Nothing in this Award, express or implied, is intended
or shall be construed to give any person other than Holding or the Purchaser or
their respective successors or assigns any legal or equitable right, remedy or
claim under or in respect of any agreement or any provision contained herein.
This grant is made in full and complete satisfaction of any claim the Purchaser
may have regarding the promise by Holding to permit the Purchaser to purchase
its Common Stock as of a date prior hereto.
13. Waiver; Amendment.
(a) Waiver. Holding, the Purchaser (each of Holding and the
Purchaser, a "Party") or any beneficiary hereof may by written notice to the
other Parties (i) extend the time for the performance of any of the obligations
or other actions of the other Parties under this Award, (ii) waive compliance
with any of the conditions or covenants of the other Parties contained in this
Award and (iii) waive or modify performance of any of the obligations of the
other Parties under this Award. Except as provided in the preceding sentence, no
action taken pursuant to this Award, including, without limitation, any
investigation by or on behalf of any Party or beneficiary shall be deemed to
constitute a waiver by the Party or beneficiary taking such action of compliance
with any representations, warranties, covenants or agreements contained herein.
The waiver by any Party hereto or
4
<PAGE> 5
beneficiary hereof of a breach of any provision of this Award shall not operate
or be construed as a waiver of any preceding or succeeding breach and no failure
by a Party to exercise any right or privilege hereunder shall be deemed a waiver
of such Party's or beneficiary's rights or privileges hereunder or shall be
deemed a waiver of such Party's or beneficiary's rights to exercise the same at
any subsequent time or times hereunder.
(b) Amendment. This Award may not be altered, modified, or amended
except by a written instrument signed by Holding and the Purchaser.
14. Severability. In the event that any one or more of the provisions
of this Award shall be or become invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not be affected thereby.
15. Entire Agreement. This Agreement, together with each Management
Stock Subscription Agreement, Management Stock Option Agreement, Matching
Deferred Share Award Agreement [and management deferred share award election]
entered into between the Purchaser and Holding on the date hereof, is the entire
agreement of the parties with respect to the subject matter hereof and thereof
and supersedes all other prior agreements, understandings, documents,
statements, representations and warranties, oral or written, express or implied,
between the parties hereto and their respective affiliates, representatives and
agents in respect of the subject matter hereof and thereof.
16. Notices. All notices and other communications required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been given if delivered personally or sent by certified or
express mail, return receipt requested, postage prepaid, or by any recognized
international equivalent of such delivery, to Holding or the Purchaser, as the
case may be, at the following addresses or to such other address as Holding or
the Purchaser, as the case may be, shall specify by notice to the others:
if to Holding, to it at:
RACI Holding, Inc.
c/o Remington Arms Company, Inc.
870 Remington Drive
Madison, North Carolina 27025
Attention: Chief Financial Officer
if to the Purchaser, to the Purchaser at the address set forth on the
signature page hereof.
5
<PAGE> 6
All such notices and communications shall be deemed to have been received on the
date of delivery or on the third business day after the mailing thereof. Copies
of any notice or other communication given under this Agreement shall also be
given to:
The Clayton & Dubilier Private Equity
Fund IV Limited Partnership
270 Greenwich Avenue
Greenwich, Connecticut 06830
Attention: Clayton & Dubilier Associates
IV Limited Partnership,
Joseph L. Rice, III
with copies to:
Clayton, Dubilier & Rice, Inc.
375 Park Avenue
New York, New York 10152
Attention: Joseph L. Rice, III
and
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention: Franci J. Blassberg, Esq.
17. Sections and Other Headings. The section and other headings
contained in this Award are for reference purposes only and shall not affect the
meaning or interpretation of this Award.
18. Governing Law. This Award shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to the
principles of conflict of laws.
6
<PAGE> 7
IN WITNESS WHEREOF, Holding and the Purchaser have executed this
Award as of the date first above written.
RACI HOLDING, INC.
By:
--------------------------------------
Name:
Title:
THE PURCHASER:
By:
--------------------------------------
Name:
Attorney-in-Fact
Number of Deferred Shares:
7
<PAGE> 1
Exhibit 10.8
RACI HOLDING, INC.
STOCK INCENTIVE PLAN
MATCHING DEFERRED SHARE AWARD AGREEMENT
Deferred Share Award, dated as of June 24, 1999 (the "Award"), made
by RACI Holding, Inc., a Delaware corporation ("Holding"), to the Grantee whose
name appears on the signature page hereof (the "Grantee") under the terms of
RACI Holding, Inc. Stock Incentive Plan (the "Plan").
1. Plan Controls. Capitalized terms used in this Award and not
otherwise defined herein shall have the meaning given such terms in the Plan. If
any provision of this Award is inconsistent with any provision of the Plan (as
either may be interpreted from time to time by the Board), the Plan shall
control.
2. Grant of Deferred Shares. Effective as of the date hereof, Holding
hereby evidences and confirms its grant to the Grantee, on the terms and
conditions of this Award and the Plan, of the number of shares of Deferred
Shares set forth on the signature page hereof, which represent Holding's
contractual obligation to deliver shares of Holding's Common Stock ("Shares") to
the Grantee upon the terms and conditions set forth herein and in the Plan. The
Deferred Shares granted hereby shall be fully vested upon grant.
3. Nonassignability. The Deferred Shares granted hereby are not
assignable or transferable, in whole or in part, and may not, directly or
indirectly, be offered, transferred, sold, pledged, assigned, alienated,
hypothecated or otherwise disposed of or encumbered (including without
limitation by gift, operation of law or otherwise) other than by will or by the
laws of descent and distribution to the estate of the Grantee upon the Grantee's
death.
4. No Rights as a Stockholder. Neither the Grantee nor any person or
persons to whom the Grantee's rights under this Award shall have passed by will
or by the laws of descent and distribution, as the case may be, shall have any
voting, dividend or other rights or privileges as a stockholder of Holding with
respect to any Shares corresponding to the Deferred Shares granted hereby unless
and until a certificate for Shares is issued in respect thereof.
5. Delivery Event. Unless the Grantee shall electively defer such
distribution by written notice to Holding in accordance with the Plan and such
conditions as the Board shall impose, upon the occurrence of an event described
in Section 8.3 of the Plan, the Grantee shall receive, without payment, one
share of Common Stock in settlement of each
<PAGE> 2
share of Deferred Shares that he or she then holds. As a condition to the
delivery of any Common Stock in respect of Deferred Shares, the holder of such
Deferred Shares (and anyone whose rights derive therefrom) shall execute a
Subscription Agreement (or such other agreement having comparable terms but
modified to reflect differences between such shares and shares purchased from
Holding as shall be required by Holding). The Grantee acknowledges and agrees
that the Subscription Agreement will have restrictions on transfer, repurchase
rights on the part of Holding and The Clayton & Dubilier Private Equity Fund IV
Limited Partnership on termination of employment, take-along rights and other
legal and contractual restrictions similar to those contained in the Management
Stock Subscription Agreements described in the Confidential Offering Memorandum
dated May 14, 1999, a copy of which has been received by the Grantee, or such
other terms and provisions as Holding shall determine.
6. Capital Adjustments. If Holding is a party to any merger,
consolidation, divestiture (including a spin-off), reorganization,
reclassification, stock split-up, combination of shares, dividend on shares
payable in stock, liquidation or other transaction, such that an adjustment is
required to preserve, or to prevent enlargement of, the benefits or potential
benefits made available under an Award, then the Board shall, in such manner as
the Board shall deem equitable, adjust any or all of (i) the number and kind of
shares to which the Deferred Shares may relate and (ii) the number and kinds of
securities deliverable pursuant to Section 5 hereof. In any adjustment of shares
of Deferred Shares subject to this Award, fractional shares shall be omitted.
7. Tax Withholding. Whenever shares of Common Stock or other property
are to be distributed in respect to any Deferred Shares awarded hereunder,
Holding shall have the power to withhold, or require the Grantee to remit to
Holding, an amount sufficient to satisfy Federal, state, local and foreign
withholding tax requirements, including but not limited to income and employment
taxes, relating to such issuance, and Holding may defer issuance of such Shares
or other property until such requirements are satisfied. The Board may, in its
discretion, permit the Grantee to elect, subject to such conditions as the Board
shall impose, to satisfy his withholding obligation hereunder with Shares or any
other property issuable hereunder.
8. No Right to Continued Employment. Nothing in the Plan or this
Award shall interfere with or limit in any way the right of Holding or any of
its Subsidiaries to terminate the Grantee's employment at any time, or confer
upon the Grantee any right to continue in the employ of Holding or any of its
Subsidiaries.
2
<PAGE> 3
9. Interpretation. The Board shall have full power and discretion to
construe and interpret the Plan (and any rules and regulations issued
thereunder) and this Award. Any determination or interpretation by the Board
under or pursuant to this Award shall be final and conclusive on all persons
affected hereby.
10. Binding Effect; Benefits. This Award shall be binding upon and
inure to the benefit of Holding and the Grantee and their respective successors
and assigns. Nothing in this Award, express or implied, is intended or shall be
construed to give any person other than Holding or the Grantee or their
respective successors or assigns any legal or equitable right, remedy or claim
under or in respect of any agreement or any provision contained herein. This
grant is made in full and complete satisfaction of any claim the Grantee may
have regarding the promise by Holding to permit the Grantee to purchase its
Common Stock as of a date prior hereto.
11. Waiver; Amendment.
(a) Waiver. Holding, the Grantee (each of Holding and the Grantee, a
"Party") or any beneficiary hereof may by written notice to the other Parties
(i) extend the time for the performance of any of the obligations or other
actions of the other Parties under this Award, (ii) waive compliance with any of
the conditions or covenants of the other Parties contained in this Award and
(iii) waive or modify performance of any of the obligations of the other Parties
under this Award. Except as provided in the preceding sentence, no action taken
pursuant to this Award, including, without limitation, any investigation by or
on behalf of any Party or beneficiary shall be deemed to constitute a waiver by
the Party or beneficiary taking such action of compliance with any
representations, warranties, covenants or agreements contained herein. The
waiver by any Party hereto or beneficiary hereof of a breach of any provision of
this Award shall not operate or be construed as a waiver of any preceding or
succeeding breach and no failure by a Party to exercise any right or privilege
hereunder shall be deemed a waiver of such Party's or beneficiary's rights or
privileges hereunder or shall be deemed a waiver of such Party's or
beneficiary's rights to exercise the same at any subsequent time or times
hereunder.
(b) Amendment. This Award may not be altered, modified, or amended
except by a written instrument signed by Holding and the Grantee.
12. Severability. In the event that any one or more of the provisions
of this Award shall be or become invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not be affected thereby.
3
<PAGE> 4
13. Notices. All notices and other communications required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been given if delivered personally or sent by certified or
express mail, return receipt requested, postage prepaid, or by any recognized
international equivalent of such delivery, to Holding or the Grantee, as the
case may be, at the following addresses or to such other address as Holding or
the Grantee, as the case may be, shall specify by notice to the others:
if to Holding, to it at:
RACI Holding, Inc.
c/o Remington Arms Company, Inc.
870 Remington Drive
Madison, North Carolina 27025
Attention: Chief Financial Officer
if to the Grantee, to the Grantee at the address set forth on the
signature page hereof.
All such notices and communications shall be deemed to have been received on the
date of delivery or on the third business day after the mailing thereof. Copies
of any notice or other communication given under this Agreement shall also be
given to:
The Clayton & Dubilier Private Equity
Fund IV Limited Partnership
270 Greenwich Avenue
Greenwich, Connecticut 06830
Attention: Clayton & Dubilier Associates
IV Limited Partnership,
Joseph L. Rice, III
with copies to:
Clayton, Dubilier & Rice, Inc.
375 Park Avenue
New York, New York 10152
Attention: Joseph L. Rice, III
and
4
<PAGE> 5
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention: Franci J. Blassberg, Esq.
14. Sections and Other Headings. The section and other headings
contained in this Award are for reference purposes only and shall not affect the
meaning or interpretation of this Award.
15. Governing Law. This Award shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to the
principles of conflict of laws.
5
<PAGE> 6
IN WITNESS WHEREOF, Holding has executed this Award as of the date
first above written.
RACI HOLDING, INC.
By
------------------------------
Name:
Title:
Number of Deferred Shares:
ACCEPTED AND AGREED
AS OF THE DATE FIRST
ABOVE WRITTEN
THE GRANTEE:
6
<PAGE> 1
Exhibit 10.9
PLEDGE AND SECURITY AGREEMENT
PLEDGE AND SECURITY AGREEMENT, dated as of June 24, 1999, delivered
by , an individual residing at the address set forth at the end of this
Agreement (the "Pledgor"), to RACI Holding, Inc., a Delaware corporation (the
"Pledgee").
W I T N E S S E T H
WHEREAS, the Pledgee has offered to the Pledgor Stock Purchase Rights
to purchase up to ________ shares of Class A Common Stock, par value $.01 per
share (the "Common Stock") or deferred shares of Common Stock and certain other
securities, as described in a Confidential Offering Memorandum dated May 14,
1999, as supplemented by the supplement to offering memorandum dated June 8,
1999 (as so supplemented, the "Offering Memorandum");
WHEREAS, the Pledgor has purchased shares (the "Pledged Shares") of
Common Stock pursuant to a Management Stock Subscription Agreement (the "Stock
Subscription Agreement"), dated as of the date hereof, among the Pledgor and the
Pledgee;
WHEREAS, prior to the date hereof, the Pledgor has been granted
options to purchase _____ shares of Common Stock (the "Pledged Options")
pursuant to one or more Management Stock option Agreements (each such agreement,
a "Stock Option Agreement");
WHEREAS, in connection with the purchase under the Stock Subscription
Agreement, the Pledgor has delivered to the Pledgee a promissory note, dated the
date hereof (the "Note"); and
WHEREAS, the Note requires that the Pledgor execute and deliver this
Pledge Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
agreements contained herein, the parties agree as follows:
1. Definitions.
a. "Event of Default" shall mean any one of the following events (whatever
the reason for such Event of Default and whether it shall be effected
voluntarily or
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involuntarily, by operation of law or pursuant to judgment, decree or
order of any court or any order, rule or regulation of any governmental
body): (i) a default in the payment of any principal of or interest on the
Note whenever it becomes due and payable (whether at maturity or any date
fixed for prepayment or by declaration or otherwise); (ii) a default in
the performance or the breach of any covenant, representation or warranty
of the Pledgor contained in the Note, this Agreement, the Stock
Subscription Agreement or a Stock Option Agreement; (iii) the Pledgor's
(A) application for or consent to the appointment of a receiver, trustee,
custodian or liquidator of any of his property, (B) admission in writing
of his inability to pay his debts as they mature, (C) making of a general
assignment for the benefit of creditors, (D) adjudication as a bankrupt or
insolvent or being the subject of an order for relief under Chapter 13 of
the United States Bankruptcy Code or (E) filing a voluntary petition in
bankruptcy, or a petition or an answer seeking an arrangement with
creditors or to take advantage of any bankruptcy, insolvency, readjustment
of debt or liquidation law or statute, or an answer admitting the material
allegations of a petition filed against him in any proceeding under any
such law; or (iv) the entry of an order, judgment or decree, without the
application, approval or consent of the Pledgor, by any court of competent
jurisdiction, approving a petition appointing a receive, trustee,
custodian or liquidator of all or a substantial part of the assets of the
Pledgor, and such order, judgment or decree continuing unstayed and in
effect for a period of thirty days.
2. Security for Obligations. This Agreement is being delivered and is made
for the benefit of the Pledgee to secure the due and timely payment by the
Pledgor of the principal amount of and interest on the Note and all other
amounts payable by the Pledgor under the Note and this Agreement (the
"Secured Obligations").
3. Pledge of Collateral. As security for the prompt payment and performance
of the Secured Obligations when due (whether at stated maturity, by
acceleration or otherwise), Pledgor hereby grants to the Pledgee a
security interest in all the following property, whether now owned or
hereafter acquired and whether now or in the future existing
(collectively, the "Collateral"): (i) the Pledged Shares; (ii) the Pledged
Options; (iii) all additional shares of Common Stock from time to time
acquired by Pledgor upon exercise of the Pledged Options; (iv) all
dividends, instruments, cash and other property or rights of any kind at
any time received, receivable or otherwise distributed or distributable
with respect to any of the foregoing; (v) all other Pledged Property (as
defined in Section 6) and (vi) all proceeds of any of the property
described in clauses (i) through (v) above; and the Pledgor hereby pledges
and deposits with the Pledgee the Pledged Shares, and assigns and
transfers to the Pledgee all of his or her right, title and interest in
and to the
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Pledged Shares, to be held by the Pledgee in accordance with this
Agreement. The certificates representing the Pledged Shares, accompanied
by duly executed stock powers endorsed in blank by the Pledgor, have been
delivered by the Pledgor to the Pledgee. The Pledgor hereby assigns to the
Pledgee all of his or her right, title and interest in and to the Pledged
Options and under the Stock Option Agreements.
4. Agreement to Pledge Option Shares. The certificates representing all
shares of Common Stock purchased upon the exercise of the Pledged Options,
accompanied by duly executed stock powers endorsed in blank by the
Pledgor, shall be delivered by the Pledgor to the Pledgee promptly
following such exercise and receipt of such certificates and held in
pledge hereunder as Pledged Shares to secure the due and timely payment of
the principal amount of and interest on the Note.
5. Voting. The Pledgor shall be entitled to vote any and all of the Pledged
Shares and to give consents, waivers and ratifications in respect thereof
and to exercise all rights with respect to the Pledged Options and to give
consents, waivers and ratifications in respect thereof until the
occurrence of an Event of Default pursuant to Section 7 of the Note. From
and after the occurrence of an Event of Default, until the date that there
does not exist an Event of Default, the Pledgee shall vote the Pledged
Shares, give consents, waivers and ratifications in respect thereof, in
the same proportion as the votes of all other stockholders of the Pledgee
voting on any matter submitted to the stockholders, and shall have the
right to exercise all Pledged Options, and give consents, waivers and
ratifications in respect thereof.
6. Dividends and Distributions.
a. Non-Cash Dividends. (i) All non-cash dividends and distributions (less
any portion of such non-cash dividends that is applied to pay any tax due
thereon) paid with respect to the Pledged Shares and the Pledged Options
(the "Pledged Non-Cash Dividends"), (ii) all non-cash property (less any
portion of such non-cash property that is applied to pay any tax due
thereon) distributed with respect to the Collateral and (iii) all other
non-cash Collateral that may be pledged (together with the Pledged
Non-Cash Dividends, the "Pledged Property") shall be delivered to the
Pledgee and held in pledge hereunder to secure the due and timely payment
of the principal amount of and interest on the Note.
b. Cash Dividends, Etc. All cash dividends and distributions (less the
amount of such cash dividends and distributions necessary to pay any tax
due thereon) paid on the Collateral and other cash Collateral shall be
assigned to the Pledgee for the payment of the Loan Balance. Any assigned
cash dividends or
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distributions shall be applied first to accrued interest on the Note and
then to the outstanding principal amount of the Note.
7. Repurchase Obligations of the Pledgee. If the Pledgee, Remington Arms
Company, Inc., a Delaware corporation ("Remington"), or The Clayton &
Dubilier Private Equity Fund IV Limited Partnership, a Connecticut limited
partnership ("C&D Fund IV") repurchases any or all of the Pledged Shares
or Pledged Options, the shares repurchased shall be released from this
pledge and the Pledgee may apply, or Remington or C&D Fund IV may pay to
the Pledgee to be applied, as the case may be, the proceeds of such
repurchase in accordance with the provisions of Section 9 hereof.
8. Remedies in Case of Event of Default. Upon the occurrence and continuance
of an Event of Default, the Pledgee (a) may transfer into its name, or
into the name of its nominee or nominees, all or any portion of the
Collateral and (b) may sell, assign and deliver the whole or, from time to
time, any part of the Collateral, at any private sale or at public
auction, and may buy in the same or participate in the purchase thereof,
in any manner consistent with the requirements of Article 9 of the Uniform
Commercial Code as in effect from time to time in the State of New York
(or any successor statute thereto). The Pledgee shall apply the proceeds
of any sale or buying in, together with any other monies at the time held
by it hereunder, as provided in Section 9 hereof. Neither the failure nor
delay on the part of the Pledgee to exercise any right, remedy, power or
privilege provided for herein or by statute or at law or in equity shall
operate as a waiver thereof, nor shall any single or partial exercise of
such right, remedy, power or privilege preclude any other or further
exercise thereto or the exercise of any such other right, remedy, power or
privilege. Each right, power and remedy of the Pledgee provided for in
this Agreement, the Stock Subscription Agreement, a Stock Option Agreement
or the Note or now or hereafter existing at law or in equity or by statute
shall be cumulative and concurrent and shall be in addition to every other
such right, power or remedy. The exercise or beginning of the exercise by
the Pledgee of any one or more of the Stock Subscription Agreement, Stock
Option Agreement or the Note or in any such other instrument or agreement
or now or hereafter existing at law or in equity or by statute or
otherwise shall not preclude the simultaneous or later exercise by the
Pledgee of all such other rights, powers or remedies and no failure or
delay on the part of the Pledgee to exercise any such right, power or
remedy shall operate as a waiver thereof.
9. Use of Proceeds. The proceeds of any sale, payment on, settlement of
collection, or other use or disposition of the Collateral shall be applied
by the Pledgee as follows:
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a. Expenses and Advances. In the event of any foreclosure on the
Collateral pursuant to Section 7 hereof, first to the payment of all
reasonable expenses, out-of-pocket costs and advances made or incurred by
the Pledgee in connection with such foreclosure;
b. Other Indebtedness. After payment of any expenses and advances as
described above, or if no such expenses or advances are payable hereunder,
first to the payment of accrued interest on the Note and then to the
unpaid principal amount thereof; and
c. Surplus. If any surplus remains after satisfaction of the Note, to the
Pledgor or his or her successors and assigns.
10. Pledgor's Obligations Not Affected. The obligations of the Pledgor under
this Agreement shall remain in full force and effect without regard to,
and shall not be impaired or affected by: (a) any amendment or
modifications of or addition or supplement to the Note, the Stock
Subscription Agreement or any Stock Option Agreement, or any instrument
referred to in any or all of them; (b) any exercise or non-exercise by the
Pledgee of any right, remedy, power or privilege under or in respect of
this Agreement; (c) any waiver, consent, extension or other action or
inaction in respect of this Agreement; (d) any bankruptcy, insolvency,
reorganization or the like, of the Pledgor or the Pledgee or any other
corporation, association, partnership or person; or (e) any other
circumstances, whether or not the Pledgor shall have notice or knowledge
or any of the foregoing.
11. Bailment Agreement. Pledgor and Remington are parties to a Master Bailment
Agreement, dated as of June 24, 1999 (the "Bailment Agreement"), pursuant
to which Pledgor has agreed to deliver his shares of Common Stock to
Remington, as bailee, for safekeeping on the terms and conditions set
forth in the Bailment Agreement. It is understood and agreed that the
Bailment Agreement shall be suspended by this Agreement for so long as
this Agreement is in full force and effect. Pledgor and Pledgee
acknowledge and agree that, immediately upon the termination of this
Agreement pursuant to Section 12 hereof, the Bailment Agreement shall be
binding upon the parties thereto in accordance with its terms and all
Pledged Shares shall be delivered to Remington to be held pursuant to the
terms of the Bailment Agreement.
12. Termination. Upon payment in full of the Secured Obligations, this
Agreement shall terminate and (i) the Pledgor shall be bound by the terms
and conditions of the Bailment Agreement with respect to the Pledged
Shares and (ii) except for such Pledged Shares as are delivered to
Remington to be held pursuant to the Bailment Agreement, Pledgee shall
deliver to the Pledgor the property or evidences of
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ownership with respect to the Pledged Property. Notwithstanding the
foregoing, the Pledgee shall not be obligated to redeliver any such
certificates, property or evidence to the extent that such certificates,
property or evidence have been pledged by the Pledgor to the Pledgee as
security for the obligations of the Pledgor under any promissory note
other than the Note.
13. Miscellaneous.
a. Miscellaneous. Pledgor hereby authorizes the Pledgee to date this
Agreement as of the date of the making of the Note and to complete any
blank space herein according to the terms upon which the loan under the
Note was granted.
b. Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been duly given if (a)
delivered personally, (b) mailed, certified or registered mail with
postage prepaid, (c) sent by next-day or overnight mail or delivery or (d)
sent by telecopy or telegram, as follows:
(i) if to the Pledgee, to:
RACI Holding, Inc.
870 Remington Drive
Madison, North Carolina 27025
Attention: Chief Financial Officer
(ii) if to the Pledgor, to him or her at the address set forth at the
end of this Agreement.
c. Binding Effect; Benefits. This Agreement shall be binding upon and
inure to the benefit of the parties to this Agreement and their respective
successors and assigns. Nothing in this Agreement, express or implied, is
intended or shall be construed to give any person other than the parties
hereto, or their respective successors and assigns, any legal or equitable
right, remedy or claim under or in respect of any agreement or any
provision contained herein.
d. Waiver. Either party hereto may by written notice to the other (i)
extend the time for the performance of any of the obligations or other
actions of the other under this Agreement; (ii) waive compliance with any
of the conditions or covenants of the other contained in this Agreement;
and (iii) waive or modify performance of any of the obligations of the
other under this Agreement. Except
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as provided in the preceding sentence, no action taken pursuant to this
Agreement, including, without limitation, any investigation by or on
behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties,
covenants or agreements contained herein. The waiver by any party hereto
of a breach of any provision of this Agreement shall not operate or be
construed as a waiver of any preceding or succeeding breach and no failure
by either party to exercise any right or privilege hereunder shall be
deemed a waiver of such party's rights or privileges hereunder or shall be
deemed a waiver of such party's rights to exercise the same any time or
times hereunder.
e. Amendment. This Agreement may be amended, modified or supplemented only
by a written instrument executed by the Pledgor and the Pledgee.
f. Assignability. This Agreement or any right or remedy hereunder may be
transferred or wholly assigned by the Pledgee to (I) any direct or
indirect subsidiary of the Pledgee or (ii) any creditor of the Pledgee or
any of its subsidiaries. Except as aforesaid, neither this Agreement nor
any right, remedy, obligation or liability arising hereunder or by reason
hereof shall be assignable by either the Pledgee or the Pledgor without
the prior written consent of the other party.
g. Withholding of Taxes. The Pledgee shall have the right to require the
Pledgor to pay the amount of any taxes that are required to be withheld
with respect to the non-cash dividends paid on the Pledged Shares or the
Pledged Options or with respect to any other property delivered to the
Pledgor, or to sell such shares or other property if the proceeds of such
sale will be sufficient to satisfy such withholding requirement, and shall
have the right to withhold the amount of any taxes that are required to be
withheld from any cash dividends or any repurchase proceeds.
h. Further Assurances. Pledgor agrees to execute and deliver such further
documents, certificates, assignments, security agreements and financing
statements and to take such further actions as Pledgee may reasonably
request to confirm or perfect the pledge and security interest intended to
be granted by Pledgor to Pledgee hereby.
i. GOVERNING LAW. THE PROVISIONS OF THIS NOTE SHALL BE CONSTRUED AND
INTERPRETED AND ALL RIGHTS AND OBLIGATIONS HEREUNDER DETERMINED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
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PRINCIPLES OF CONFLICT OF LAWS TO THE EXTENT SUCH PRINCIPLES WOULD REQUIRE
OR PERMIT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
j. Sections and Other Headings. The section and other headings contained
in this Agreement are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
k. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of
which together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the date first above written.
RACI HOLDING, INC.
By:
--------------------------------
Name:
Title:
THE PLEDGOR
-----------------------------------
Address of Pledgor:
Social Security Number:
-----------------------------------
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Exhibit 10.10
PROMISSORY NOTE
$_____________ June 24, 1999
FOR VALUE RECEIVED, the undersigned and its successors,
assigns, heirs and personal representatives ("Borrower"), hereby unconditionally
promises to pay to the order of RACI Holding, Inc., a Delaware corporation, and
its successors and assigns (the "Company") at the office of the Company, 870
Remington Drive, Madison, North Carolina 27025, in lawful money of the United
States and in immediately available funds, the aggregate principal sum set forth
on the signature page hereof, as follows:
1. Repayment of Principal. On June 30, 2009, the entire unpaid
principal balance of this Note shall be due and payable, together with all
interest and other charges due hereunder, unless earlier due and payable by
reason of the acceleration of the maturity of this Note.
2. Interest. Borrower agrees to pay interest on this Note
("Note"), which interest payment shall be due and payable, annually in arrears
commencing June 30, 2000 and continuing on each and every June 30 thereafter
while this Note is outstanding at a rate per annum equal to five and
seventy-nine hundredths of a percent (5.79%) (the "Interest Rate"), adjusted
annually on each June 30th to the applicable Federal rate (as defined in Section
1274(d) of the Internal Revenue Code of 1986, as amended, and the regulations
promulgated thereunder) then in effect. Borrower agrees that the Company shall
not be obligated to notify Borrower of any change in said Federal Rate.
Interest at the Interest Rate shall be calculated by computing
a daily amount of interest for a 360-day year, then multiplying such amount by
the actual number of days elapsed in an interest calculation period.
If any payment which is to be made hereunder is not paid when
due, such payment shall bear interest, payable on demand, at a rate per annum
equal to the Interest Rate plus two percent (2%), but not to exceed the maximum
amount permitted by law.
If the payment of principal or interest on this Note becomes
payable on a Saturday, Sunday or a day on which the Company is to be closed,
then such payment shall be extended to the next succeeding business day, and
interest on such payment shall be payable at the Interest Rate during such
extension.
3. Use of Funds. Borrower covenants and agrees that the funds
advanced pursuant to this Note shall be used to finance Borrower's purchase of
shares of Class A
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common stock, par value $.01 per share (hereinafter referred to as the "Common
Stock"), of the Company, pursuant to the Management Stock Subscription
Agreement, dated as of the date hereof, between Borrower and the Company.
4. Full Recourse. This Note shall be the personal obligation
of the Borrower and the Company shall be entitled to full recourse against the
Borrower for performance and satisfaction of all obligations of the Borrower
hereunder. In addition, the obligations of the Borrower under this Note shall be
secured, pursuant to a Pledge and Security Agreement, dated as of the date
hereof (the "Pledge Agreement"), between the Borrower and the Company, by the
pledge of (i) shares of Common Stock and all shares of Common Stock issued upon
the exercise of the Pledged Options (as defined below) (collectively, the
"Pledged Shares"), (ii) options to purchase _____ shares of Common Stock (the
"Pledged Options") under one or more Management Stock Option Agreements entered
into prior to the date hereof (the "Stock Option Agreement") and (iii) all
non-cash dividends and distributions (including any non-cash property
distributed in connection therewith but less any portion of such non-cash
dividends and distributions that is applied to pay any tax due thereon) paid
with respect to the Pledged Shares and the Pledged Options.
5. Optional Prepayment. The Borrower may, at his or her
option, prepay at any time all or any portion of the outstanding principal
amount of this Note then outstanding, together with all accrued interest on the
outstanding principal amount of this Note through the date of such prepayment,
without premium or penalty.
6. Mandatory Prepayment.
a. Borrower hereby covenants and agrees that if Borrower shall
sell, transfer or otherwise dispose of any shares of Common Stock or any options
to purchase shares of Common Stock (collectively, a "Stock Sale") to any person,
including, but not limited to, the Company, Remington Arms Company, Inc.
("Remington") or The Clayton & Dubilier Private Equity Fund IV Limited
Partnership, or to any of either of their respective successors or assigns, then
Borrower shall be obligated to, immediately after Borrower's receipt of the
proceeds of such Stock Sale, prepay this Note by the amount equal to the
proceeds of such Stock Sale (less any necessary fees, commissions or expenses
paid by Borrower in connection therewith and other than proceeds previously
offset against this Note pursuant to Section 8), which amount, together with
interest on the amount required to be prepaid through the date of prepayment,
shall be automatically due and payable under this Note on such date. Such
prepayment(s) shall be without premium or penalty. Borrower covenants and agrees
to notify the Company immediately in writing if Borrower sells, transfers or
otherwise disposes of any shares of Common Stock or any options to purchase
shares of Common Stock to any person other than the Company. Such amount will be
applied first to accrued interest on the outstanding
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principal amount of this Note and then to the repayment of such outstanding
principal amount.
b. The Borrower shall prepay, concurrently with the payment of
any cash dividends or distributions in respect of the Pledged Shares or the
Pledged Options or the receipt of any other cash Collateral (as defined in the
Pledge Agreement), an amount equal to the cash dividends or distributions paid
on any Pledged Shares or the Pledged Options or other cash Collateral received
(less the portion of any such dividends, distributions or cash Collateral
necessary to pay any tax due thereon), such amount to be applied first to
accrued interest on the outstanding principal amount of this Note and then to
the repayment of such outstanding principal amount.
c. In the event a "Termination Event" (as defined below)
occurs, the Company may demand prepayment in full of the obligations evidenced
by this Note by written notice to Borrower (an "Acceleration Notice"). If the
Company sends an Acceleration Notice to Borrower requiring prepayment as set
forth above, Borrower shall be required to prepay the outstanding principal
balance of this Note in full, together with all unpaid accrued interest and
other charges, on (i) if the Termination Date occurs prior to an underwritten
public offering of the common stock of the Company led by one or more
underwriters, at least one of which has a nationally recognized standing, the
first day immediately following the expiration of the periods during which (A)
The Clayton & Dubilier Private Equity Fund IV Limited Partnership may repurchase
any shares of Stock or (B) if applicable, the Borrower may require the Company
to repurchase the shares of stock or (ii) in all other events, the date which is
ten days after the delivery of the Acceleration Notice. For purposes of this
Note, a "Termination Event" shall be deemed to have occurred in the event that
Borrower's employment with the Company or Remington is terminated for any reason
whatsoever.
7. Events of Defaults. If any of the following events (each,
an "Event of Default") shall occur: (i) a default in the payment of any
principal of or interest on this Note whenever it becomes due and payable
(whether at maturity or any date filed for prepayment or by declaration or
otherwise); or (ii) a default in the performance or the material breach of any
covenant, representation or warranty of the Borrower contained in this Note, the
Pledge Agreement, the Stock Subscription Agreement or a Stock Option Agreement;
or (iii) the Borrower's (A) application for or consent to the appointment of a
receiver, trustee, custodian or liquidator of any of his property, (B) admission
in writing of his inability to pay his debts as they mature, (C) making of a
general assignment for the benefit of creditors, (D) adjudication as a bankrupt
or insolvent or being the subject of an order for relief under Chapter 13 of the
United States Bankruptcy Code or (E) filing a voluntary petition in bankruptcy,
or a petition or an answer seeking an arrangement with creditors or to take
advantage of any bankruptcy, insolvency, readjustment of debt or liquidation law
or statute, or an answer admitting the material allegations of a petition filed
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against him in any preceding under any such law; or (iv) the entry of an order,
judgment or decree, without the application, approval or consent of the
Borrower, by any court of competent jurisdiction, approving a petition
appointing a receiver, trustee, custodian or liquidator of all or a substantial
part of the assets of the Borrower, and such order, judgment or decree
continuing unstayed and in effect for a period of thirty days, then this Note
and all other obligations of Borrower shall become due and payable forthwith,
upon declaration to that effect by the Company, without notice to Borrower,
anything contained herein or in any other document, instrument or agreement to
the contrary notwithstanding. This Note shall become immediately and
automatically due and payable, without presentment, demand, protest or notice of
any kind, upon the commencement by or against Borrower of a case or proceeding
under any bankruptcy, insolvency or other law relating to the relief of debtors,
the readjustment, composition or extension of indebtedness or reorganization or
liquidation.
8. Company's Right of Set-Off. The Company may apply, and
Remington or The Clayton & Dubilier Private Equity Fund IV Limited Partnership,
a Connecticut limited partnership ("C&D Fund IV"), may pay over to the Company
to be applied, any amounts to be paid by the Company, Remington or C&D Fund IV,
respectively, to repurchase shares of Class A Common Stock or options for such
shares from the Borrower pursuant to the terms of a Stock Subscription Agreement
or a Stock Option Agreement, as the case may be, against the outstanding
principal amount of this Note and accrued interest thereon. Such amounts shall
be applied first to accrued interest on the outstanding principal amount of this
Note and then to such outstanding principal amount.
9. Costs. Borrower agrees to pay on demand all reasonable
costs and expenses incurred by the Company incidental to or in any way relating
to the Company's collection of this Note, enforcement of the obligations of
Borrower hereunder or the administration, supervision, preservation or
protection of the Company's rights in connection herewith, including, but not
limited to, reasonable attorneys' fees and expenses.
10. WAIVER OF JURY TRIAL. BORROWER AND THE COMPANY HEREBY
WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING
OUT OF OR IN ANY WAY CONNECTED WITH THIS NOTE OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
11. GOVERNING LAW. THE PROVISIONS OF THIS NOTE SHALL BE
CONSTRUED AND INTERPRETED AND ALL RIGHTS AND OBLIGATIONS HEREUNDER DETERMINED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICT OF LAWS TO THE EXTENT SUCH PRINCIPLES WOULD
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REQUIRE OR PERMIT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
12. Advice of Counsel. Borrower acknowledges that it has had
the opportunity to obtain the advice of counsel of its own choosing in entering
into this Note and the transactions contemplated hereby. Borrower is fully aware
of the contents of this Note and its legal effect and is entering into this Note
without threat, coercion, fraud or duress of any kind. Borrower is not relying
on any representation, statement, warranty of any party regarding this Note or
the transaction contemplated hereby.
13. Miscellaneous. Borrower hereby authorizes the Company to
date this Note as of the date of the making of the loan evidenced hereby and to
complete any blank space herein according to the terms upon which said loan was
granted. No amendment of this Note shall be effective unless in writing and
signed by the Borrower and the Company.
14. Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Note shall be in
writing and shall be deemed to have been duly given if (a) delivered personally,
(b) mailed, certified or registered mail with postage prepaid, (c) sent by
next-day or overnight mail or delivery or (d) sent by telecopy or telegram, as
follows:
(i) if to the Company, to:
RACI Holding, Inc.
870 Remington Drive
Madison, North Carolina 27025
Attention: Chief Financial Officer
(ii) if to the Borrower, to him or her at the address set
forth at the end of this Note.
15. Counter-Claims, Set-Off. Borrower waives the right to
interpose any counterclaim or set-off of any kind in any litigation relating to
this Note or the transaction contemplated hereby.
16. Assignment. This Note shall be assignable in full or in
part by the Company without the consent of Borrower. No obligation or rights of
Borrower hereunder can be assigned or transferred without the prior written
consent of the Company.
5
<PAGE> 6
17. No Waiver; Cumulative Remedies. No failure on the part of
the Company to exercise, and no delay in exercising, any right, remedy or power
hereunder shall operate as waiver thereof, nor shall any single or partial
exercise by the Company of any right, remedy or power hereunder preclude any
other or future exercises of any other right, remedy or power.
Each and every right, remedy and power hereby granted to the
Company or allowed it by law or other agreement shall be cumulative and not
exclusive the one of any other, and may be exercised by the Company from time to
time.
18. Severability. Every provision of this Note is intended to
be severable; if any term or provision of this Note shall be invalid, illegal or
unenforceable for any reason whatsoever, the validity, legality and
enforceability of the remaining provisions hereof shall not in any way be
affected or impaired.
19. Headings. The section headings in this Note are for
convenience only and are not intended to effect the construction of the
provisions of this Note.
6
<PAGE> 7
20. ENTIRE AGREEMENT. THIS NOTE REPRESENTS THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NOT
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Principal Amount of Loan: $______________
Signature of Borrower:___________________________
Social Security of Borrower: _____ ___ _____
------------------
Date:
Address of Borrower:
<PAGE> 8
Individual Acknowledgment
STATE OF )
) SS:
COUNTY OF )
Be it remembered that on this ___ day of __________ 1999,
personally came before me, the undersigned, a Notary Public in and for said
State duly commissioned and sworn,___________, party to the within and foregoing
instrument, known to me personally to be such and the person who executed such
instrument, and acknowledged to me that such instrument was his own act and
deed, that the signature therein is his own proper handwriting, and that the
facts stated therein are true. Given under my hand and seal of office the day
and year aforesaid.
[Seal]
--------------------------
Signature of Notary Public
My Commission expires:
<PAGE> 1
Exhibit 10.11
REMINGTON ARMS CO., INC.
Profit Based Bonus Plan
An incentive bonus, based on the profits of Remington Arms Co., Inc., may be
declared at the discretion of the Remington Compensation Committee. The
following outlines the purpose, administration, and features of the Profit Based
Bonus Plan.
PURPOSE
The purpose of the Remington Profit Based Bonus Plan is to create a financial
incentive for the Corporate Office and Research and Development Division
salaried employees who are not participants of the Management Incentive
Compensation Plan.
The Profit Based Bonus Plan aims to:
- -- Increase efficiency
- -- Stimulate company growth; and
- -- Improve the company's ability to attract, motivate and retain competent
employees.
ADMINISTRATION
The Plan will be administered by the Human Resources Department. The Plan may be
amended, modified or terminated by the Compensation Committee at any time, in
whole or in part, and, at the discretion of the Committee, may be renewed
annually.
ELIGIBILITY
- -- Employees must be on the active payroll at the time a bonus is paid. If
an employee is hired after Jan.1 and before Sept. 30, the bonus will be
pro-rated, based on the end of the month in which he/she is hired.
- -- Payments will be based on the employee's base salary as of Dec. 31st,
and the bonus, if declared, is paid during the first quarter of the
year.
- -- Only full-time employees are eligible for the bonus. Temporary,
seasonal, co-op or part-time employees are not eligible.
- -- Eligibility for participation in the Plan shall be established
independently each year.
- -- An employee must be performing at or above "meets expectations",
determined by their supervisor, to be eligible to receive an incentive
payment.
<PAGE> 2
PLAN FEATURES
- -- As determined by the Compensation Committee, all of the bonus payment
will be calculated based on the Total Company's performance against the
earnings before interest and taxes (EBIT) target or based on an
individual Business Unit performance against the individual Business
Unit EBIT target.
- -- Bonus Pay-Out target will be set at 3.5% and can range from 80% to 125%
of target or 2.8% to 4.375%. There is no minimum or guaranteed bonus
payment.
- -- Payment to participants shall be made as soon as practicable after the
close of each fiscal year for which the Plan is in effect.
- -- Applicability of bonus earnings for retirement purposes will be in
accordance with the provisions of the Company Pension Plan.
COMPANY PREROGATIVES
Neither the establishment of the Plan hereby created nor any modification(s)
thereof, nor the payment of any benefits hereunder, shall be construed as giving
to any participant, or any other person, any legal or equitable rights against
the Company, its affiliated or associated companies, or the Officers or
Directors thereof. Establishment of this Plan does not give any employee of the
Company or its affiliated or associated companies, any right to be participants
in the Plan, nor does it give any participant in the Plan any right to be
retained as an employee of the Company, or its affiliated or associated
companies, and all participants shall be subject to separation and/or discharge
to the same extent as if this Plan had never been established.
Any action taken or decision made by the Company, its affiliated and associated
companies, or their respective Board of Directors, arising out of or in
connection with the construction, administration, interpretation or effect of
the Plan, shall lie within their absolute discretion and be conclusive and
binding upon all participants.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF RACI HOLDING, INC. FOR THE YEAR-TO-DATE ENDED JUNE 30,
1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 1,800
<SECURITIES> 0
<RECEIVABLES> 94,200
<ALLOWANCES> 3,300
<INVENTORY> 80,500
<CURRENT-ASSETS> 208,700
<PP&E> 144,200
<DEPRECIATION> 59,900
<TOTAL-ASSETS> 383,500
<CURRENT-LIABILITIES> 91,500
<BONDS> 129,000
0
0
<COMMON> 0
<OTHER-SE> 111,800
<TOTAL-LIABILITY-AND-EQUITY> 383,500
<SALES> 185,500
<TOTAL-REVENUES> 185,500
<CGS> 125,300
<TOTAL-COSTS> 125,300
<OTHER-EXPENSES> 39,700
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,800
<INCOME-PRETAX> 12,700
<INCOME-TAX> 5,500
<INCOME-CONTINUING> 7,200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,200
<EPS-BASIC> 9.45
<EPS-DILUTED> 9.22
</TABLE>
<PAGE> 1
EXHIBIT 99.1
<TABLE>
<CAPTION>
------------------------------------------------------
UNAUDITED
------------------------------------------------------
QUARTER ENDED JUNE 30, YEAR-TO-DATE JUNE 30,
------------------------- ------------------------
1999 1998 1999 1998
--------- ---------- -------- ---------
<S> <C> <C> <C> <C>
Net Income from Operations(A) $ 2.7 $ 4.6 $ 7.2 $ 8.3
Interest Expense 3.8 5.3 7.8 10.4
Provision for Income Taxes 2.5 2.8 5.5 5.3
Depreciation and Amortization(B) 3.9 3.9 7.8 7.8
Other Noncash Charges(C) 3.9 (0.4) 4.3 0.4
Nonrecurring and Restructuring Expense(D) 0.2 0.2 - (0.2)
------ ------ ------ ------
Total 14.3 11.8 25.4 23.6
------ ------ ------ ------
EBITDA $ 17.0 $ 16.4 $ 32.6 $ 32.0
====== ====== ====== =======
</TABLE>
Notes:
(A) EBITDA as presented may not be comparable to similar measures
reported by other companies. Generally, EBITDA is defined to consist
of net income (loss), adjusted to exclude cash interest expense,
income tax expense, depreciation, amortization, noncash expenses and
charges, gain or loss on sale or write-off of assets and
extraordinary, unusual or nonrecurring gains, losses, charges or
credits. EBITDA is presented to facilitate a more complete analysis
of the Company's financial performance, by adding back non-cash and
nonrecurring items to operating income, as an indicator of the
Company's ability to generate cash to service debt and other fixed
obligations. Investors should not rely on EBITDA as an alternative
to operating income or cash flows, as determined in accordance with
generally accepted accounting principles, as an indicator of the
Company's operating performance, liquidity or ability to meet cash
needs. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" for further discussion of the
Company's operating income and cash flows.
(B) Excludes amortization of deferred financing costs of $0.8 and loss
on early extinguishment of debt of $0.2 for the year-to-date period
ended June 30, 1999 and $0.9 amortization of deferred financing
costs for the comparable year-to-date period, which is included in
interest expense.
(C) Non-cash charges consist of a $3.2 stock subscription accrual, $0.8
pension accrual and $0.3 for loss on disposal of assets for the six
months ended June 30, 1999 and a $0.2 pension accrual and $0.2 for
loss on disposal of assets in 1998.
(D) Nonrecurring and restructuring expenses excluded in calculating
EBITDA consist of $0.2 nonrecurring professional fee, related to a
proposed transaction that was not consummated, offset by $0.2 write
down of restructuring accrual for the year-to-date period ended June
30, 1999 and a $0.4 write-down of restructuring accrual and $0.2
accrual for nonrecurring legal in the same period for 1998.
