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 any of 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
-------------------
Xxxxx X. Xxxxxx
XXXXXX FOODS, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxxxxx
---------------------------
Name: Xxxxxxx X. Xxxxxxxxxxxx
Title: Chief Financial Officer
