Document:

<PAGE>

                                                                    Exhibit 10.1

     SEPARATION AGREEMENT, dated as of July 31, 2001 (the "Agreement"), by and
among Remington Arms Company, Inc., a Delaware corporation (the "Company"), RACI
Holding, Inc., a Delaware corporation and parent of the Company ("Holding"), and
Arthur W. Wheaton ("Executive").

                             W I T N E S S E T H :
                             - - - - - - - - - -

     WHEREAS, the Company and Executive entered into an Employment Agreement,
dated as of September 1, 1998 (the "Employment Agreement");

     WHEREAS, pursuant to the Employment Agreement, Executive is currently
employed as Vice President, General Manager - Worldwide Sales;

     WHEREAS, Executive has previously been granted options (collectively, the
"Options") to purchase a total of 3,860 shares of class A common stock of
Holding pursuant to various  Management Stock Option Agreements between Holding
and Executive (the "Option Agreements");

     WHEREAS, Executive has previously been granted a total of 2,046 deferred
shares of the common stock of Holding (collectively, "Deferred Shares") pursuant
to various Matching Deferred Share Award Agreements and Stock Purchase Right
Deferred Share Award Agreements between Holding and Executive (collectively,
"Deferred Share Agreements");

     WHEREAS, Executive and the Company have determined that it would be in each
of their respective best interests for Executive's employment with the Company
to terminate;

     WHEREAS, pursuant to the Employment Agreement, Executive has agreed to be
bound by certain covenants and restrictions concerning noncompetition,
nondisclosure and nonsolicitation following any termination of his employment;

     WHEREAS, Holding, the Company and Executive wish to agree upon the
consequences of the termination Executive's employment.

     NOW, THEREFORE, in consideration of the premises and the mutual covenants
and promises contained herein and for other good and valuable consideration,
Holding, the Company and Executive hereby agree as follows:

                                       1
<PAGE>

     1.  Certain Definitions.  For purposes of this Agreement, all capitalized
         -------------------
terms used herein without definition shall have the respective meanings assigned
to such terms in the Employment Agreement.

     2.  Termination of Employment.  Effective as of July 31, 2001 (the
         -------------------------
"Termination Date"), Executive's employment with the Company is hereby
terminated and Executive hereby resigns from his position as Vice President,
General Manager - Worldwide Sales and from each other position he then holds
with the Company or any of its direct or indirect subsidiaries or affiliates.
Such termination of Executive's employment and resignation is hereinafter
referred to as "Executive's Termination".

     3.  Consequences of Executive's Termination Under Certain Agreements.
         ----------------------------------------------------------------

     (a)  In General.  Holding, the Company and Executive each hereby
          ----------
acknowledges and agrees that, for purposes of the Employment Agreement, the
Option Agreements and the Deferred Share Agreements, Executive's Termination is
and will be treated solely as a termination by the Company Without Cause.

     (b)  Employment Agreement.  Effective on the Termination Date, the
          --------------------
Employment Period shall expire and, pursuant to Section 7(f)(i) of the
Employment Agreement and in consideration of the Executive's execution of this
Agreement and the General Release of All Claims attached hereto as Exhibit A
(the "Release"), the Company shall pay to the Executive (i) continued payment,
                                                         -
following the Termination Date, of installments of the Base Salary for the
period commencing on the Termination Date and ending on the first anniversary of
the Termination Date, such continued payments to be made in accordance with the
Company's regular payroll practices, (ii) a lump sum payment of Two Hundred
Thousand and 00/100 Dollars ($200,000.00), payable on the eighth day after the
Termination Date, (iii) at the time annual bonuses for services rendered in
                   ---
calendar year 2001 are paid to senior executives of the Company, payment of an
amount equal to the product of (x) the annual incentive compensation bonus that
                                -
would have been payable to Executive pursuant to the terms of the Employment
Agreement if (A) Executive's employment with the Company had continued until
              -
December 31, 2001 and (B) the Executive had achieved (but not exceeded) the
                       -
target performance objectives applicable under the Employment Agreement for
calendar year 2001, multiplied by (y) a fraction, the numerator of which is
                                   -
equal to the number of days in the period from January 1, 2001 to the
Termination Date and the denominator of which is 365, and (iv) payment of any
                                                           --
benefits payable to Executive under any applicable employee benefit plan, policy
or practice of the Company in which Executive was a participant on or prior to
the Termination Date, such payments to be made in accordance with the generally
applicable provisions of such plans, policies and practices.  Notwithstanding
the foregoing, Executive acknowledges that in lieu of offsetting the amounts
payable pursuant to this paragraph, Executive waives any rights he may have
under any plan, policy or practice providing for severance or termination
benefits or annual incentive compensation.

                                       2
<PAGE>

     Executive understands and agrees that his receipt of the payments set forth
in this Section 3(b) are conditioned on Executive's execution and delivery of
the Release, and performance of all of his duties hereunder and in the event of
his material breach of any of his duties and obligations, his failure to execute
and deliver the Release by the end of the 21/st/ day after the execution and
delivery of this Agreement or his revocation of the Release, the Company shall
have the right to cease any further payments under this Section 3(b).

     Effective as of the Termination Date, the Employment Agreement will
terminate in its entirety without any further liability or obligation on the
part of the Company or any of its subsidiaries or affiliates or Executive
thereunder, except that the provisions of Sections 8, 9, 10, 11, 12, 13, 14 and
17, all of which provisions are incorporated herein by reference, shall survive
Executive's Termination and thereafter shall remain in full force and effect.
Notwithstanding the foregoing, the provisions of Section 19(h) of the Employment
Agreement relating to the survival of Section 7(f) of the Employment Agreement
will terminate effective as of the Termination Date and will not be incorporated
herein by reference.

     (c)  Options.  Holding, the Company and Executive each hereby acknowledges
          -------
and agrees that as of the Termination Date, (i) Executive holds an aggregate of
3,860 Options, (ii) 3,155 Options are vested or exercisable (the "Vested
Options"), and (iii) 705 Options are not and will not become vested or
                ---
exercisable (the "Unvested Options").  Pursuant to the terms of the Option
Agreements, all of the Unvested Options will be canceled and forfeited on and as
of the Termination Date without the payment of any consideration or amount in
respect thereof.  Holding, the Company and Executive agree that, notwithstanding
any provisions of the Option Agreements to the contrary, the Vested Options will
be canceled and forfeited on and as of the Termination Date.

     (d)  Purchase of Deferred Shares.  Pursuant to the terms of the Deferred
          ---------------------------
Share Agreements, Executive is entitled to one share of common stock of Holding
in settlement of each share of Deferred Shares that he holds as of the
Termination Date.  Holding, the Company and Executive each hereby acknowledges
and agrees that as of the Termination Date, Executive is entitled to 2,046
shares of common stock of Holding in settlement of each share of Deferred Shares
that he holds.  The parties agree that, in lieu of shares of common stock of
Holding, Holding will pay to Executive $180 for each Deferred Share that
Executive holds as of the Termination Date.  Contemporaneously with the
execution and delivery of this Agreement, Executive and Holding agree to execute
a Deferred Share Repurchase and Option Cancellation Agreement with respect to
the purchase of the Deferred Shares.

     4.  Executive's Release of Claims.  In consideration of the payments
         -----------------------------
provided for in Section 3(b) above and in accordance with Section 7(f) of the
Employment Agreement, Executive hereby agrees to execute and deliver to the
Company on the Termination Date the Release.

                                       3
<PAGE>

     5.  Entire Agreement; Related Documents.  This Agreement (including Exhibit
         -----------------------------------
A hereto) together with the Deferred Share Repurchase and Option Cancellation
Agreement constitute the entire agreement among the parties hereto with respect
to the subject matter hereof.  All prior correspondence and proposals (including
summaries of proposed terms) and all prior promises, representations,
understandings, arrangements and agreements relating to such subject matter
(including, but not limited to, the Employment Agreement, the Option Agreements,
the Deferred Share Agreements and any other agreements made to or with Executive
by any other person or entity) are merged herein and superseded hereby.

     6.  Miscellaneous.
         -------------

     (a)  Binding Effect; Assignment.  This Agreement shall be binding on and
          --------------------------
inure to the benefit of Holding, the Company and their respective successors and
permitted assigns.  This Agreement shall also be binding on and inure to the
benefit of Executive and his heirs, executors, administrators and legal
representatives.  This Agreement shall not be assignable by any party hereto
without the prior written consent of the other parties hereto.  Each of Holding
and the Company may effect such an assignment without prior written approval of
Executive upon the transfer of all or substantially all of its business and/or
assets (whether by purchase, merger, consolidation or otherwise).

     (b)  Governing Law.  This Agreement shall be governed by and construed in
          -------------
accordance with the internal laws of the State of Delaware.

     (c)  Taxes.  The Company may withhold from any payments made under this
          -----
Agreement all federal, state, city or other applicable taxes as shall be
required by law.

     (d)  Amendments.  No provision of this Agreement may be modified, waived or
          ----------
discharged unless such modification, waiver or discharge is approved by the
Board of Directors of the Company and is agreed to in writing by Executive.  No
waiver by any party hereto at any time of any breach by any other party hereto
of, or compliance with, any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.  No
waiver of any provision of this Agreement shall be implied from any course of
dealing between or among the parties hereto or from any failure by any party
hereto to assert its rights hereunder on any occasion or series of occasions.

     (e)  Severability.  In the event that any one or more of the provisions of
          ------------
this Agreement 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.

     (f)  Notices.  Any notice or other communication required or permitted to
          -------
be delivered under this Agreement shall be (i) in writing, (ii) delivered
                                            -               --
personally, by courier service or by certified or registered mail, first-class
postage prepaid and return

                                       4
<PAGE>

receipt requested, (iii) deemed to have been received on the date of delivery or
                    ---
on the third business day after the mailing thereof, provided that the party
                                                     --------
giving such notice or communication shall have attempted to telephone the party
or parties to which notice is being given during regular business hours on or
before the day such notice or communication is being sent, to advise such party
or parties that such notice is being sent, and (iv) addressed as follows (or to
                                                --
such other address as the party entitled to notice shall hereafter designate in
accordance with the terms hereof):

          (A)  if to the Company, to it at:

               c/o Remington Arms Company, Inc.
               Post Office Box 700
               Madison, North Carolina 27025
               Attention:  General Counsel

          (B)  if to Holding, to it at:

               RACI Holding, Inc.
               C/o Remington Arms Company, Inc.
               870 Remington Drive
               Madison, North Carolina 27025

(B)            if to Executive, to him at the address set forth on the signature
               page hereof.

Copies of any notices or other communications given under this Agreement shall
also be given to:

               Clayton, Dubilier & Rice, Inc.
               375 Park Avenue
               New York, New York  10152
               Attention:  Mr. Donald J. Gogel
               ---------

                         and

               Debevoise & Plimpton
               875 Third Avenue
               New York, New York  10022
               Attention:  Franci J. Blassberg, Esq.
               ---------

     (g)  Counterparts.  This Agreement may be executed in counterparts, each of
          ------------
which shall be deemed an original and all of which together shall constitute one
and the same instrument.

                                       5
<PAGE>

     (h)  Headings.  The section and other headings contained in this Agreement
          --------
are for the convenience of the parties only and are not intended to be a part
hereof or to affect the meaning or interpretation hereof.

     IN WITNESS WHEREOF, the Company and Holding have duly executed this
Agreement by their authorized representatives and Executive has hereunto set his
hand, in each case effective as of the date first above written.

                              REMINGTON ARMS COMPANY, INC.

                              By:
                                Name:__________________________
                                Title:

                              RACI HOLDING, INC.

                              By:
                                Name:___________________________
                                Title:

                              __________________________________
                              Arthur W. Wheaton
                              Address:

                                       6
<PAGE>

     The undersigned hereby consents to the terms of Section 3(c) above.

                              CLAYTON & DUBILIER PRIVATE
                              EQUITY FUND IV LIMITED
                              PARTNERSHIP

                              By Clayton & Dubilier Associates IV Limited
                              Partnership, its General Partner

                              By:  ______________________________
                                   Michael Babiarz
                                   Title:_________________________

                                       7
<PAGE>

                                   EXHIBIT A
                                   ---------
                         GENERAL RELEASE OF ALL CLAIMS
                         -----------------------------

     WHEREAS, I, Arthur Wheaton, was terminated from my employment with
Remington Arms Company, Inc. and each and every subsidiary and affiliate thereof
(hereinafter the "Company" as defined below) on July 31, 2001; and

     WHEREAS, Company has agreed to provide me with certain post-employment
benefits to which I would not have otherwise been entitled; and

     WHEREAS, I, Arthur Wheaton, acknowledge that I have been provided all
monies owed through the date I sign this Agreement and that the Company has
satisfied all obligations to me arising out of or relating to my employment with
the Company or separation from such employment through the date I sign this
Agreement; and

     NOW, THEREFORE, in consideration of the promises set forth herein, I,
Arthur Wheaton, on behalf of myself, my agents, representatives, administrators,
receivers, trustees, executives, successors, heirs, designees, legal
representatives, assignees and attorneys hereby irrevocably and forever release
and discharge Company (defined herein to include Remington Arms Company, Inc.,
and all affiliated or related companies, parents, divisions, or subsidiaries,
whether said entities are incorporated, unincorporated associations or
partnerships and their owners, shareholders, officers, directors, agents,
attorneys, partners, employees, successors and assigns) from any and all claims,
demands, actions or causes of action, of any kind or nature, past or present,
known or unknown, arising out of, or in any way connected with, my employment or
my separation from employment, including but not limited to any claims or
demands for the following:  wrongful discharge; breach of an implied or
expressed employment contract; negligent or intentional infliction of emotional
stress; defamation; fraud; discrimination and/or harassment based on age, sex,
race, religion, national origin, sexual orientation, physical or mental
disability, or medical condition; violation of any section of the AIDS
Confidentiality Act, the Equal Employment for Persons with Disabilities Code,
the Age Discrimination Act, Title VII of the Civil Rights Act of 1964, the
federal Age Discrimination in Employment Act, the Employee Retirement Income
Security Act of 1974, or any other federal, state or local laws or regulations;
unpaid wages, salary, overtime compensation, bonuses, commissions, or other
compensation of any sort; for damages of any nature, including compensatory,
general, special or punitive; or for costs, fees or other expenses, including
attorneys' fees, incurred regarding these matters.

     FURTHER, in consideration of said promises and as a further consideration
for this Separation Agreement, I, Arthur Wheaton, understand, agree, represent
and warrant as follows:

                                       8
<PAGE>

     1.   That this is a full and final release applying to all unknown and
unanticipated injuries, claims, or damages arising out of said employment, as
well as to those now known or disclosed and that I, Arthur Wheaton, voluntarily
waive all rights or benefits which I now have, with the express intention of
releasing and extinguishing unknown or unsuspected obligations, and I warrant
that I am currently unaware of any claim(s), rights(s), demands(s), or debt(s),
actions(s), obligations(s), liability or causes(s) of action whatsoever against
the Company which I have not released pursuant to this Agreement.

     2.   That I, Arthur Wheaton, recognize that the Company asserts that it
shall suffer great embarrassment and substantial economic damage from any
publicity or any oral or written publication whatsoever relating to the
circumstances of my termination of employment and this settlement, including but
not limited to: (a) the fact of this Agreement; (b) the specific amount or
general range of the consideration set forth in the Agreement; (c) the
negotiations for this Agreement; (d) any terms of this Agreement; and (e) any
facts regarding the period of employment with Company, except dates and
compensation, (hereinafter collectively referred to as the "Confidential
Information"). Accordingly, I, Arthur Wheaton, warrant and represent that
neither I nor anyone acting on my behalf (including without limitation my tax or
financial advisors) has initiated or caused to be initiated any publicity or any
oral or written communication whatsoever, whether initiated or responsive,
concerning the Confidential Information; and shall forever hold confidential and
                                             -----------------------------------
not make public to anyone, whether by oral or written communications or
-------------------------
otherwise said Confidential Information except only:  (i) to the extent as may
be absolutely necessary to accomplish the filing of my income tax returns; (ii)
to the extent as may be absolutely necessary to enforce the terms of this
Agreement; or (iii) to the extent as may be specifically compelled by judicial
process.

     3.   That, I, Arthur Wheaton, have had the opportunity to consult with a
representative of my own choosing with respect to this Release; that I have read
this Release; that I am fully aware of its contents and of its legal effect; and
I freely and voluntarily entered into it.

     4.   That, I, Arthur Wheaton, will not file or bring any claims, charges,
complaints, or other actions against Company arising out of or based upon the
circumstances of my employment or my separation from employment, except as
otherwise permitted by law.

     5.   That, I, Arthur Wheaton, warrant that except as expressly set forth
herein, no representations of any kind or character have been made to me by the
Company or any of the Company's agents, representatives, employees or attorneys
(or anyone else purporting to act in any such capacities) to induce me to
execute this Separation Agreement and General Release of All Claims.

                                       9
<PAGE>

     6.   That, I, Arthur Wheaton, acknowledge and agree that this Separation
Agreement and General Release of All Claims and the consideration given
hereunder is not to be construed as an admission by the Company or as an
admission of any act or fact whatsoever.

     7.   The consideration set forth in the Agreement exceeds any amount and/or
consideration to which I would otherwise be entitled under the Company's
standard operating policies, practices, or as required by law.  All amounts to
which I would be entitled under the Company's policies, practices and/or as
required by law have been tendered to me and are hereby acknowledged. Therefore,
said consideration is not paid as wages or other compensation due, but is paid
solely in consideration of this Release and the Confidentiality provisions set
forth herein.

     8.   Compliance With Older Workers Benefit Protection Act.

     In compliance with the Older Workers Benefit Protection Act (P.L. 101-433),
the Company and Arthur Wheaton do hereby acknowledge as follows:

     (a) That, I, Arthur Wheaton, acknowledge that this Agreement specifically
applies to any rights or claims I may have against the Company or any party
released herein under the federal Age Discrimination in Employment Act of 1967,
as amended;

     (b) The Agreement does not purport to waive rights or claims that may arise
from acts or events occurring after the date that this Agreement is executed by
the parties;

     (c) That, I, Arthur Wheaton, acknowledge that the consideration provided
for in this Agreement and the provisions of this paragraph are in addition to
that to which I am already entitled;

     (d) That, I, Arthur Wheaton, understand that this Agreement shall be
revocable for a seven (7) day period following execution of this Agreement by
me. Accordingly, this Agreement shall not become effective or enforceable until
the expiration of this seven (7) day revocation period.

     (e) That, I, Arthur Wheaton, acknowledge that I have been advised of my
right to consult with an attorney, and have in fact consulted with an attorney,
prior to signing this Agreement and have been given a period of twenty-one (21)
days within which to consider whether to sign this Agreement.

     9.   This release is made in the State of New York and shall be interpreted
under the laws of said State. Its language shall be construed as a whole,
according to its fair meaning and not strictly for or against either party.

                                       10
<PAGE>

     10.  In the event that it shall be necessary for any party hereto to
institute legal action to enforce any of the terms and conditions or provisions
contained herein, or for any breach thereof, the prevailing party in such action
shall be entitled to costs and reasonable attorneys' fees.

     PLEASE READ CAREFULLY, THIS RELEASE INCLUDES A WAIVER AND A SETTLEMENT OF
ALL KNOWN AND UNKNOWN CLAIMS.

    DATED:____________, 2001             ARTHUR WHEATON

                                         __________________________________
                                         Address:__________________________
                                                 __________________________

    DATED:____________, 2001             REMINGTON ARMS COMPANY, INC.

                                         By:_______________________________
                                         Title:____________________________

                                       11<PAGE>

                                                                 Exhibit 10.2

                      DEFERRED SHARE REPURCHASE AND OPTION
                             CANCELLATION AGREEMENT
                             ----------------------

     REPURCHASE AND OPTION CANCELLATION AGREEMENT, dated as of July 31, 2001,
between RACI Holding, Inc., a Delaware corporation (the "Company"), and Arthur
Wheaton (the "Shareholder").

     WHEREAS, effective as of July 31, 2001 (the "Termination Date"), the
Shareholder has resigned from his employment with the Company's wholly owned
subsidiary, Remington Arms Company, Inc. ("Remington");

     WHEREAS, in connection with the Shareholder's termination of employment,
the Shareholder, Remington and the Company have entered into a separation
agreement dated July 31, 2001 ("Separation Agreement");

     WHEREAS, the Company and the Shareholder are parties to several Stock
Purchase Right Deferred Share Award Agreements and Matching Deferred Share Award
Agreements (collectively, the "Deferred Share Agreements"), pursuant to which
the Shareholder acquired an aggregate of 2,046 deferred shares (the "Deferred
Shares") of the Common Stock, par value $.01 per share, of the Company (the
"Common Stock");

     WHEREAS, pursuant to the terms of the Deferred Stock Agreements, the
Shareholder is entitled to receive one share of Common Stock in settlement of
the Deferred Shares that he holds and the Shareholder is required to grant the
Company and Clayton, Dubilier & Rice Private Equity Fund IV Limited Partnership
(the "CDR Fund") successive rights to repurchase the Deferred Shares following
any termination of the Shareholder's employment with the Company or any
subsidiary thereof that employs the Shareholder as a condition to receipt of the
shares of Common Stock in respect of the Deferred Shares;

     WHEREAS, in lieu of providing Shareholder with a share in settlement of
each Deferred Share and exercising its right to repurchase the Deferred Shares
(which right the Company desires to exercise), the Company and the Shareholder
agree that the Company shall pay the Shareholder $180 for each such Deferred
Share;

     WHEREAS, the Company and the Shareholder are also parties to several
Management Stock Option Agreements - Service Option and Management Stock Option
Agreements - Performance Option (the "Option Agreements") pursuant to which the
Company granted to the Shareholder options (the "Options" ) to purchase 3,860
shares of Common Stock (the "Option Shares"), at exercise prices between $100 to
$230 per share;

     WHEREAS, pursuant to the terms of the Option Agreements, in the event of
any termination of the Shareholders employment with the Company or any
subsidiary thereof that employs the Shareholder, the portion, if any, of the
Options that have not become

                                       1
<PAGE>

vested on or prior to the date of such termination automatically terminates and
is forfeited effective immediately upon such termination;

     WHEREAS, pursuant to the terms of the Option Agreements, the Company and
the CDR Fund have successive rights to repurchase the Vested Options following
any termination of the Shareholder's employment with the Company or any
subsidiary thereof that employs the Shareholder;

     WHEREAS, as of the Termination Date, the Shareholder has earned a vested
right to options to purchase 3,155 Option Shares(collectively, the "Vested
Options") and the Shareholder agrees that the Vested Options shall be terminated
and forfeited; and

     WHEREAS, as of the Termination Date, the Shareholder has not earned a
vested right to any of the remaining options to purchase 705 Option Shares (the
"Unvested Options") and, accordingly, pursuant to the terms of the Option
Agreements, such Unvested Options will be automatically terminated and forfeited
as of such date.

     NOW, THEREFORE, in consideration of the promises and mutual covenants
contained herein and in the Separation Agreement and for other good and valuable
consideration, the Company and the Shareholder hereby agree as follows:

     1.   Payment for the Deferred Shares.  Simultaneously with the execution of
          -------------------------------
the Separation Agreement or such other date as the parties shall mutually agree
in writing (the "Closing Date"), the Company shall pay the Shareholder for the
Deferred Shares, at the purchase price set forth in Section 2 below, payable as
provided in Section 5 below.

     2.   Purchase Price.  The Company and the Shareholder agree that the
          --------------
purchase price for the Deferred Shares is $180 per Share and that the aggregate
purchase price for the Deferred Shares is $368,280 (the "Deferred Share Purchase
Price").  The Company and the Shareholder acknowledge and agree that the
Deferred Share Purchase Price is equal to the aggregate fair market value of the
Deferred Shares as of the Termination Date.

     3.   Payment of Purchase Price.  (a) On the Closing Date, the Company shall
          -------------------------
deliver to the Shareholder a check, payable to the order of the Shareholder, for
the Deferred Share Purchase Price, subject to reduction for any applicable tax
and other withholding.

          (b) The Shareholder shall execute a receipt, in the form attached as
Exhibit A hereto, acknowledging receipt of the Purchase Price.

     4.   Cancellation of Options.  Effective as of the Termination Date and as
          -----------------------
a result of the Shareholder's termination of employment with Remington, the
Shareholder hereby acknowledges and agrees that all of the Unvested Options have
been automatically canceled and terminated and the rights of the Shareholder in
respect of such Unvested Options have been automatically forfeited, in each
case, in accordance with the terms of the Option Agreements and without any
liability or obligation on the part of Company in respect thereof.  Effective as
of the Termination Date, the Company

                                       2
<PAGE>

and the Shareholder agree that, notwithstanding any provisions of the Option
Agreements, the Deferred Share Agreements or any other agreement to the
contrary, all of the Vested Options shall be canceled and terminated and the
rights of the Shareholder in respect thereof have been forfeited, without any
liability or obligation on the part of Company.

     5.   Shareholder's Release; Deferred Share and Option Agreements and
          ---------------------------------------------------------------
Related Documents.  The Shareholder hereby waives any and all rights that he may
-----------------
have or that otherwise may exist or may have arisen with respect to any of the
Deferred Shares, the Options, the Option Shares or the Common Shares under any
of the Deferred Share Agreements, the Option Agreements, or otherwise in
connection with the offering or sale by the Company or the acquisition by the
Shareholder of the Shares, the grant of the Options by the Company or the
issuance of any Deferred Shares, Common Shares or Option Shares in respect
thereof to the Shareholder, in each case, pursuant to the Confidential Offering
Memorandum, dated as of May 14, 1999, as supplemented (the "Confidential
Offering Memorandum, and ,collectively with any other agreement or document
executed or to be executed in connection therewith, the "Other Transaction
Documents").  The Shareholder and the Company hereby each acknowledges and
agrees that all of their respective rights and obligations under the Deferred
Share Agreements, the Option Agreements and the Other Transaction Documents with
respect to the Deferred Shares, the Options, the Option Shares and the Common
Shares are hereby terminated, and the Shareholder hereby releases and forever
discharges the Company, CDR Fund, and each of their respective subsidiaries,
affiliates, successors and assigns and each of their respective employees,
directors, officers, agents and other representatives from any and all claims,
obligations and liabilities arising under or in connection with any of the
Deferred Share Agreements, the Option Agreements or the Other Transaction
Documents or otherwise in respect of the Deferred Shares, the Options, the
Option Shares or the Common Shares and acknowledges to be fully satisfied all of
his rights under the Deferred Share Agreements, the Option Agreements and the
Other Transaction Documents and otherwise in respect of the Deferred Shares, the
Options, the Option Shares and the Common Shares.

     6.   Entire Agreement; Applicable Law.  This Agreement, including the
          --------------------------------
attached Exhibit A, together with the Separation Agreement, constitutes the
entire agreement between the parties with respect to the subject matter hereof.
All prior correspondence and proposals (including summaries of proposed terms)
and all prior promises, representations, understandings, arrangements and
agreements relating to such subject matter (including, but not limited to, those
made to or with Shareholder by any other person or entity) are merged herein and
superseded hereby.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE, REGARDLESS OF THE LAW THAT
MIGHT BE APPLIED UNDER PRINCIPLES OF CONFLICT OF LAWS.

     7.   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.

                                       3
<PAGE>

     IN WITNESS WHEREOF, the Company and the Shareholder have executed this
Repurchase and Option Cancellation Agreement as of the date first above written.

                              RACI HOLDING, INC.

                              By:___________________________
                                Name:
                                Title:

                              ______________________________
                              Arthur Wheaton

                                       4
<PAGE>

                                                                       EXHIBIT A
                                                                       ---------

                              RECEIPT RELATING TO
                  THE TERMS OF THE (insert date of Agreement)
                                   --------------------------
                              REPURCHASE AGREEMENT

     I, Arthur Wheaton, hereby acknowledge receipt from RACI HOLDING, INC. (the
"Company") of a check in the amount of $_______, which amount is in full payment
of the purchase price for the 2,046 Deferred Shares of the Company's Common
Stock, par value $.01 per share that the Company is repurchasing from me.

Dated :  ____________________________

______________________
Arthur Wheaton

                                       5

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