Exhibit 2.3
Xxxxxxx'x Food Markets, Inc.
0000 Xxxxxxxxx
Xxxxxxx, Xxxxx 00000
June 18, 1997
RFM Acquisition LLC
x/x Xxxxxxxx Xxxxxx Xxxxxxx & Co. L.P.
0 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxx
Dear Sirs:
Reference is made to the Subscription Agreement dated as of the date
hereof among RFM Acquisition LLC ("BUYER"), Xxxxxxx'x Food Markets, Inc.
("SELLER") and Xxxxxx X. Xxxxxxx (the "SUBSCRIPTION AGREEMENT"). Capitalized
terms used but not defined herein shall have the meanings set forth in the
Subscription Agreement.
In addition to the indemnification obligations of Seller and Xxxxxx X.
Xxxxxxx under the Subscription Agreement and under the Letter Agreement dated as
of April 1, 1997 between the parties hereto, and without in any way limiting
such obligations, Seller hereby agrees to defend, indemnify and hold harmless
Buyer and its Affiliates (including KKR), each director, officer and employee of
Buyer and such Affiliates, and Buyer's representatives and advisors against any
loss, damage, claim, liability, judgment or settlement of any nature or kind,
including all costs and expenses relating thereto, including interest and
penalties and including Legal Fees, in each case whether incurred prior to or
after the date hereof and whether incurred by Seller, any Subsidiary or any
indemnitee hereunder (collectively "DAMAGES"), arising out of or resulting from
any current or future litigation, disputes or claims relating to the Xxxxxx
Companies Management Security Plan, including in connection with XXX XXXXXXXX,
XX. V. XXX THUMB FOOD & DRUGS, INC. (the "MSP LITIGATION"), PROVIDED, HOWEVER,
that Damages shall not include Legal Fees incurred by Seller unless the
aggregate amount of such Legal Fees exceeds $2,000,000 (and then only to the
extent of such excess). For purposes of this Letter Agreement, the term "Legal
Fees" shall mean attorneys' fees and expenses, the fees and expenses of expert
witnesses and litigation consultants and court costs. Amounts reserved as a
liability on the financial statements of Seller shall in no way reduce Seller's
indemnification obligations pursuant to this Letter Agreement.
The amount of any Damages shall be reduced (i) first, to the extent of
funds, if any, actually received by Seller in respect of such Damages from any
insurance carrier or third party
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indemnitor or contributor with respect to the subject matter of the indemnity
described in this Letter Agreement ("THIRD PARTY PROCEEDS") but only if, and
only to the extent that, such Third Party Proceeds exceed the lesser of Legal
Fees or $2,000,000 and (ii) second, after giving effect to clause (i) above, by
the amount of any federal or state income tax benefit actually received by
Seller relating to any Damages calculated in accordance with the preceding
paragraph.
To the extent any amount is payable by Seller pursuant to this Letter
Agreement, such obligation shall be satisfied by Seller's issuance of additional
shares ("ADDITIONAL SHARES") of Seller's common stock to Buyer or its designee
calculated as set forth below. Any issuance of Additional Shares pursuant to
this Letter Agreement shall be deemed to be an adjustment to the number of
shares of Common Stock purchased under the Subscription Agreement.
The number of Additional Shares to be issued pursuant to this Letter
Agreement from time to time shall equal (1) a fraction (A) the numerator of
which shall equal the number of shares of Common Stock outstanding as of the
date such Additional Shares are to be issued minus the number of shares of
Common Stock then held by Buyer and its Affiliates, and (B) the denominator of
which shall equal 1 minus a fraction, (i) the numerator of which shall equal the
number of shares of Common Stock then held by Buyer and its Affiliates
multiplied by the Fair Market Value of one share of Common Stock as of such
date, and (ii) the denominator of which shall equal (a) the number of shares of
Common Stock then outstanding multiplied by the Fair Market Value of one share
of Common Stock as of such date minus (b) the amount of Damages incurred by the
Indemnitee minus (2) the number of shares of Common Stock then outstanding.
Additional Shares shall be issued pursuant to this Letter Agreement at
the Closing and from time to time thereafter as Damages are incurred, provided
that (i) no Additional Shares shall be issued if the Closing shall not occur and
(ii) for purposes of the calculation contained in the preceding paragraph, any
Additional Shares issued at the Closing shall be deemed to be issued immediately
after the consummation of the Purchase pursuant to the Subscription Agreement
and after giving effect to consummation of the Tender Offer.
The term "Damages" as used in this Letter Agreement is not limited to
matters asserted by third parties against any party entitled to be indemnified
under this Letter Agreement, but includes Damages incurred or sustained by any
such party in the absence of third party claims.
In addition, if there are any members of the Board of Directors of
Seller who are not partners, executives or employees of KKR, the parties agree
that the MSP Litigation shall not be
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settled by Seller without the approval of a majority of such members.
The provisions of Article IX of the Subscription Agreement (other than
Section 9.01) are deemed to be incorporated in this Letter Agreement as if
explicitly stated herein.
If you are in agreement with the foregoing, please sign the enclosed
copy of this Letter Agreement and return it to the undersigned.
Very truly yours,
XXXXXXX'X FOOD MARKETS, INC.
/s/ R. XXXXXXX XXXXXXX, XX.
------------------------------------
Name: R. Xxxxxxx Xxxxxxx, Xx.
Title: Chief Executive Officer
AGREED:
RFM ACQUISITION LLC
/s/ XXXX X. XXXXXXX
-------------------------------
Name: Xxxx X. Xxxxxxx
Title: Chief Executive Officer
