Exhibit 10.1
January 2, 1998
Xxxxxx Foods, Inc.
0000 Xxxxxx Xxxx
Xxxxxx, Xxxxxxxx 00000
Xx. Xxxxx X. Xxxxxx
00 Xxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxx 00000
Ladies and Gentlemen:
Reference is hereby made to (i) the Agreement and Plan of Merger dated
as of September 4, 1997 (the "Merger Agreement") among Tyson Foods, Inc.
("Tyson"), HFI Acquisition Sub Inc. ("Merger Sub") and Xxxxxx Foods, Inc.
("Xxxxxx") and (ii) the Consulting Agreement dated as of September 4, 1997 (the
"Consulting Agreement") between Tyson and you. All capitalized terms used but
not otherwise defined herein shall have the respective meanings ascribed to
such terms in the Merger Agreement. References in this letter agreement to
"you" shall mean Xxxxx X. Xxxxxx, individually. References in this letter
agreement to "Xxxxxx" shall mean, when in reference to a time prior to the
Effective Time, Xxxxxx, and when in reference to any time thereafter, the
Surviving Corporation.
Whereas we have discussed at length the potential liabilities of Xxxxxx
associated with the Russian Operations (as defined below) and we have expressed
our concern about our ability to consummate the Merger in light of those
potential liabilities, we have agreed, in the interest of consummating the
Merger on January 9, 1998 in accordance with the terms of the Merger
Agreement, to enter into this letter agreement.
In consideration of the mutual covenants and agreements set forth below,
the parties hereto agree as follows:
Tyson, for itself and on behalf of Merger Sub, irrevocably waives its
conditions to the consummation of the Merger set forth in Sections 7.2(a), (c)
and (f) of the Merger Agreement. Such waiver is without prejudice to any
other rights Tyson and Merger Sub may have under the Merger Agreement, and all
other provisions of the Merger Agreement remain unchanged and unaffected by
this letter agreement.
You agree that from the Closing Date through the end of Tyson's 1998
fiscal year or such earlier date on which the liquidation of the Russian
Operations shall have been completed (the "Term"), in addition to any other
activities pursuant to the Consulting Agreement, you shall be responsible for
the Russian Operations (except as otherwise set forth herein) and you shall
seek to wind down the Russian Operations during the Term. These operations
include, without limitation, Xxxxxx'x operations in Russia and other CIS
countries relating to Vesta, Xxxxxx Zao ("Zao"), NASL, Riga/Tallin, Xxxxxx'x
Russian representative office and Newco (as defined below), and the
inventories and receivables relating thereto (which are collectively referred
to as the "Russian Operations"). As of December 12, 1997, Xxxxxx'x account
receivables related to the Russian Operations (the "Receivables"), and its
inventories held for sale to the Russian market and as identified on Schedule
A hereto (the "Inventories"), amounted to an aggregate of $30,610,962 (net of
reserves). The respective amounts of the Receivables and the Inventories are
set forth on Schedule A hereto. The sum of the Receivables and the
Inventories, together with the Defined Costs (as defined below), is referred
to herein as the "Russian Investment."
For the purposes of this letter agreement, the term "Defined Costs"
means all costs, expenses and other obligations paid, incurred or accrued,
following the Merger, by Tyson or any of its subsidiaries or affiliates, by or
in connection with the Russian Operations; provided, however, that Defined
Costs shall not include (i) salaries (at current levels) of Xxxxxxx Xxxxx,
Xxxxx Xxxxxx and other employees currently performing administrative functions
in the United States with respect to Xxxxxx'x international operations, (ii)
other administrative expenses paid, incurred or accrued in the United States
(other than payments or accruals made in the United States relating to
activities in Russia) with respect to Xxxxxx'x international operations, (iii)
any tax payable in respect of the Russian Operations up to a maximum of
$500,000, and (iv) the arbitration costs and expenses to be borne by Tyson
referred to below (the costs and expenses referred to in items (i), (ii),
(iii) and (iv) hereinabove are hereinafter referred to as the "Tyson
Expenses"). Furthermore, any out-of-pocket expenses incurred with respect to
the Russian Operations shall be included in Defined Costs.
If you at any time during the Term so request, Tyson will take all
actions reasonably necessary to effect one or more of the following:
incorporate a new subsidiary of Xxxxxx, organized under the laws of the State
of Delaware ("Newco"); elect you as the sole director and officer of Newco;
ensure that you will continue to be the sole director and officer of Newco
during the Term; ensure that you will have sole control of the operations of
Newco and the Russian Operations; contribute, transfer and assign to Newco
those Receivables and Inventories not currently held by Zao, together with all
liabilities of the Russian Operations (whether known or unknown, fixed,
contingent or otherwise); and/or cause Zao to assign to Newco all of its
rights to collection of those Receivables, and its rights to dispose of those
Inventories, in each case, currently held by Zao.
Within thirty (30) days following the end of the Term (the "Settlement
Date"), Tyson shall provide to you a final accounting (prepared in accordance
herewith) setting forth the respective amounts of (i) the Russian Investment
(separately itemizing the Defined Costs) as of the end of the Term and (ii)
the aggregate amount paid to Xxxxxx or its subsidiaries at any time from
and after December 12, 1997 or Tyson or any of its subsidiaries or
affiliates during the Term in respect of the Russian Operations including
any amounts paid in respect of collected Receivables and liquidated
Inventories and the sale of all or any portion of the Russian Operations
(the "Collected Amount"). You shall notify Tyson within five (5) business
days after receipt of such accounting if you do not agree with the amount
of the Russian Investment or Collected Amount, as set forth therein,
setting forth in reasonable detail the nature and amount of the
disagreement. If you do not give such notice within such five (5) business
day period, the respective amounts of the Russian Investment and the
Collected Amount, as set forth in such accounting, shall be final, binding
and conclusive on the parties hereto. If you give such notice of
disagreement within such five (5) business day period, (i) any amount, as
set forth in such accounting, that is not the subject of such disagreement
shall be final, binding and conclusive on the parties hereto and (ii) any
amount that is the subject of such disagreement shall be submitted to
binding arbitration pursuant to the Commercial Arbitration Rules of the
American Arbitration Association (the "Commercial Rules"). In the event
that any such disagreement is submitted to arbitration pursuant to the
Commercial Rules, the arbitration tribunal shall be comprised of three
arbitrators (one arbitrator selected by each of Tyson and you with the
third selected by the other two arbitrators) and the venue of the
arbitration shall be Little Rock, Arkansas. The decision, judgment and
order of the arbitration tribunal shall be final, binding and conclusive on
the parties hereto, and may be entered in a court of competent
jurisdiction. Other than the fees and expenses of the arbitrators, which
shall be shared equally by Tyson and you, each party hereto shall bear its
own costs and expenses (including, without limitation, attorney's fees and
expenses) relating to the arbitration.
Within five (5) business days after the Settlement Date or, in the
event that any disagreement is submitted to arbitration, the date on which the
arbitrators shall have rendered their decision, either (i) you shall pay to
Tyson, provided Tyson has complied with all of its obligations hereunder, by
wire transfer of immediately available funds the amount, if any, by which (A)
the Russian Investment as of the end of the Term exceeds (B) the sum of the
Collected Amount and $7,500,000; or (ii) Tyson shall pay to you, provided you
have complied with all of your obligations hereunder, by wire transfer of
immediately available funds the amount, if any, by which (A) the Russian
Investment as of the end of the Term is less than (B) the sum of the Collected
Amount and $7,500,000 and, in either case, Tyson shall transfer to you (or any
entity designated by you and reasonably acceptable to Tyson), and you (or such
designated entity) shall accept the transfer of, all of its right, title and
interest in and to all the assets and liabilities (whether known or unknown,
fixed, contingent or otherwise) of the Russian Operations. In the event any
additional amounts not included in the Collected Amount shall thereafter be
submitted to Tyson or Xxxxxx in payment of the Receivables or Inventories,
such amounts shall be promptly paid to you. In no event shall Tyson's
liabilities arising out of or relating to the Russian Operations exceed
$7,500,000 plus the Tyson Expenses.
During the Term, Tyson will cooperate and assist you and Newco in your
efforts hereunder, including the collection and liquidation of the Receivables
and Inventories, and shall provide all services you may reasonably request. We
acknowledge that all decisions with respect to the Russian Operations, its
budgets, business plans and expenditures (which shall not exceed current
levels) will be made by you in your sole discretion. In assisting you, Tyson
will use its reasonable best efforts to maximize the collection of the
Receivables and the sales receipts derived from the Inventories and act in all
respects as if such Receivables were being collected and Inventories sold for
its account. Xx. Xxxxxxx Xxxxx shall be an employee of Tyson or the Surviving
Corporation during the Term, with salary and benefits at least as favorable to
Xx. Xxxxx as his present salary and benefits, the cost of which shall be borne
by Tyson. Xx. Xxxxxxx Xxxxx shall report exclusively to you and shall be
responsible, subject to your control, for the day-to-day operations of this
project.
At any reasonable time and from time to time prior to the Settlement
Date, Tyson shall provide you, at your request, reasonable access during normal
business hours to its books and records, and its properties, plants and
personnel and shall keep you informed of the status of the Russian Investment,
including the amounts paid to Newco, Xxxxxx or Tyson in respect of the
Receivables and the Inventories.
Subject only to the specific limitations set forth in this letter
agreement, the manner, means, details or methods by which you perform your
obligations hereunder shall be solely within your discretion. Nothing herein
contained shall be construed to constitute you as the partner or joint
venturer or as the agent of, or employer or employee of Tyson or, from and
after the Effective Time, Xxxxxx. By virtue of the relationship described
herein, your relationship during the Term to Tyson and, from and after the
Effective Time, Xxxxxx, shall only be that of an independent contractor and
you shall perform all services pursuant to the agreement set forth herein as
an independent contractor. Notwithstanding the foregoing, except with respect
to any claim, action or arbitration brought by any party hereto against any
other party hereto or the defense of any such claim, action or arbitration,
Tyson will afford you, through and until the sixth anniversary of the last day
of the Term, the rights and benefits of directors' and officers' insurance in
connection with any claim, action or arbitration which may be made or brought
against you arising out of or relating to this letter agreement or the
performance during the Term of your obligations hereunder to the same extent
such rights and benefits are currently available to officers and directors of
Tyson; provided, however, that you will reimburse Tyson for the amount of any
deductible payable by Tyson, and the excess of the amount of any claim, action
or arbitration judgment or award over the insured amount, under any such
directors' and officers' insurance policy.
At any time during the Term, you shall have the option to acquire from
Tyson (i)(A) Xxxxxx'x Polish distribution network, as presently constituted
(the "Polish Business"), and (B) Xxxxxx'x equity interest in Cedrob (the
"Cedrob Interest"), together, or (ii) the Cedrob Interest alone. For the
Polish Business, the option price shall be comprised of cash in an amount
equal to the book value of the assets thereof plus the assumption of all
operating liabilities and obligations incurred in the ordinary course
associated therewith (including employee obligations) at the time of exercise
of said option. For the Cedrob Interest, the option price shall be a cash
payment equal to $4,025,000 plus the amount of any further capital
contribution made after the date hereof and prior to the time of exercise of
said option, if any. In the event you wish to exercise either of said
options, you will give written notice during the Term of your desire to do so
to Tyson, and Tyson shall, as promptly as practicable upon receipt of such
notice, transfer to you, or any other person designated by you and reasonably
acceptable to Tyson, in exchange for payment and delivery of the applicable
consideration, all of its rights, title and interest in and to the assets,
liabilities and obligations which constitute the Polish Business and/or the
Cedrob Interest, as applicable.
The agreement set forth herein shall terminate upon the earlier to
occur of (i) the termination of the Merger Agreement prior to the Effective
Time in accordance with its terms and (ii) 11:59 p.m. Wilmington, Delaware
time on January 9, 1998, unless the Merger shall have been consummated prior
to such time. The agreement set forth herein sets forth the entire agreement
between you and Tyson, and merges and supersedes all prior discussions,
agreements and understandings of every kind and nature between us with respect
to its subject matter, and neither party shall be bound by any term or
condition other than as expressly set forth or provided for in this letter
agreement, other than the Consulting Agreement and the Stock Voting Agreement
dated as of September 4, 1997 between Tyson and you. The execution, delivery
and performance by you of this letter agreement, including any exercise of
said options, and operation following such exercise of the Polish Business
and/or Cedrob, shall not be deemed a violation of any of the terms of the
Consulting Agreement. This letter agreement may not be changed or modified
except by an agreement in writing, signed, prior to the Closing, by the
parties hereto, and following the Closing, by Tyson and you. This letter
agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective heirs, personal representatives, successors and assigns;
provided, however, that no provision of this letter agreement shall be
assignable without the prior written of the other parties hereto. The
agreement set forth herein shall be governed by and construed in accordance
with the laws of the State of Delaware without regard to conflict of law
principles, and may be executed in counterparts, each of which shall be deemed
an original for all purposes but which, together, shall constitute one and the
same instrument.
[SIGNATURE PAGE FOLLOWS]
Provided the foregoing sets forth our agreement, please sign in the
space provided below and return this agreement to the undersigned at the
address set forth above.
TYSON FOODS, INC.
By: /s/ Xxxxxx X. Xxxxxxx
---------------------
Xxxxxx X. Xxxxxxx
Chairman and Chief
Executive Officer
ACKNOWLEDGED AND AGREED:
/s/ Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx
XXXXXX FOODS, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxxxxx
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Name: Xxxxxxx X. Xxxxxxxxxxxx
Title: Chief Financial Officer
