M-FOODS INVESTORS, LLC
December 21, 2000
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
c/o ▇▇▇▇▇▇▇ Foods, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Dear ▇▇. ▇▇▇▇▇▇▇:
1. Pursuant to the terms of the Agreement and Plan of Merger dated
as of the date hereof (the "Merger Agreement") among M-Foods Holdings, Inc., a
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Delaware corporation ("Holdings"), Protein Acquisition Corp., a Minnesota
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corporation and a wholly owned subsidiary of Holdings ("Merger Sub"), and
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▇▇▇▇▇▇▇ Foods, Inc., a Minnesota corporation (the "Company"), Merger Sub will be
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merged with and into the Company (the "Merger"). Terms not otherwise defined in
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this letter agreement shall have the meanings set forth in the Merger Agreement.
2. You hereby acknowledge that you are the record and beneficial
owner of 12,566 shares of the Company's Common Stock, par value $0.01 per share
(the "Common Stock"), and that you hold options exercisable for 137,800 shares
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of Common Stock (the "Options") (your owned shares of Common Stock (as such
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owned shares may be adjusted by any stock dividend, stock split,
recapitalization, combination or other similar transaction) are referred to
herein as the "Owned Shares" and, your Owned Shares together with any other
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shares of capital stock of the Company acquired or otherwise obtained by you
after the date hereof (including shares of Common Stock issued upon exercise of
the Options (as the same may be adjusted as aforesaid)) are referred to herein
as the "Subject Shares"). The Owned Shares and the number of shares of Common
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Stock issued upon exercise of the Options in the amounts set forth in this
Section 2 constitute all of the shares of capital stock of the Company either
owned by you or for which you have a right to obtain upon exercise of the
Options as of the date hereof. You hereby agree to promptly notify M-Foods
Investors, LLC, a Delaware limited liability company ("Investors"), of the
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number of any additional shares of (or rights to acquire additional shares of)
the Company's capital stock acquired or otherwise obtained in any manner by you,
if any, after the date hereof.
3. By executing this letter agreement, you hereby agree that:
(a) at any meeting (whether annual or special and whether or not
an adjourned or postponed meeting) of the holders of capital stock of the
Company, however called, or in connection with any written consent of the
holders of capital stock of the Company solicited by the Company Board, you
will appear at the meeting or otherwise cause the Subject Shares to be
counted as present at such meeting for purposes of establishing a quorum
and vote or consent (or cause to be voted or consented) such Subject Shares
(i) in favor of the Merger Agreement and transactions contemplated thereby
(including the Merger), (ii) against any merger, consolidation,
combination, sale of substantial assets,
reorganization, recapitalization, dissolution, liquidation or winding up of
or by the Company or any other Acquisition Proposal (other than the Merger
Agreement and transactions contemplated thereby (including the Merger)) and
(iii) against any amendment of the Company's articles of incorporation or
bylaws, or other proposal or transaction involving the Company or any of
its subsidiaries, which amendment or other proposal or transaction would in
any manner impede, frustrate, delay, prevent or nullify the Merger
Agreement or transactions contemplated thereby (including the Merger);
(b) you will not, except as contemplated by the terms of this
Agreement or the Merger Agreement, (i) sell, transfer (with or without
consideration), pledge or otherwise encumber, assign or otherwise dispose
of, or enter into any contract, agreement, option or other arrangement or
understanding with respect to the sale, transfer (with or without
consideration), pledge, assignment or other disposition of, the Subject
Shares or Options to any person other than Investors or its designee, (ii)
enter into any voting arrangement, whether by proxy, voting agreement,
voting trust, power-of-attorney or otherwise, with respect to the Subject
Shares, (iii) exercise any of your Options or (iv) take any other action
that would in any way restrict, limit, hinder or interfere with the
performance by you of your obligations hereunder or the transactions
contemplated hereby, or in any way restrict, limit, hinder or interfere
with consummation of the transactions contemplated by the Merger Agreement
(including the Merger); and
(c) you hereby grant an irrevocable proxy during the term of
this letter agreement to Investors, and hereby constitute and appoint
Investors as your attorney-in-fact and proxy, with full power of
substitution, for and in your name, place and ▇▇▇▇▇, to vote (by written
consent or otherwise) the Subject Shares which you are entitled to vote at
any meeting of shareholders of the Company (whether annual or special and
whether or not an adjourned or postponed meeting), on the matters and in
the manner specified herein. THIS PROXY IS IRREVOCABLE AND COUPLED WITH AN
INTEREST. You hereby revoke all previous proxies granted with respect to
the Subject Shares, and no subsequent proxy shall be given (and if given or
executed, shall not be effective) by you with respect thereto. All
authority herein conferred or agreed to be conferred shall survive your
death or incapacity.
4. You hereby represent and warrant to Investors that:
(a) you are competent to and have sufficient capacity to execute
and deliver this letter agreement and to perform your obligations hereunder
and this letter agreement has been duly executed and delivered by you;
(b) assuming the due execution and delivery of this letter
agreement by Investors, this letter agreement constitutes your valid and
binding obligation, enforceable against you in accordance with its terms;
(c) the execution, delivery and performance of this letter
agreement by you will not (i) conflict with or violate any law, rule,
regulation, ordinance, writ, injunction, judgment or decree applicable to
you or by which any of your assets may be bound or affected
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or (ii) result in any breach of any terms or conditions of, or constitute a
default under, any contract, agreement or instrument to which you are a
party or by which you are bound;
(d) the Owned Shares and the certificates representing the Owned
Shares are now, and at all times during the term hereof will be, held by
you, or by a nominee or custodian for your benefit, and you have good and
marketable title to the Owned Shares free and clear of all liens, except
for any such liens arising hereunder; and
(e) you understand and acknowledge that Merger Sub is entering
into the Merger Agreement in reliance upon your execution and delivery of
this letter agreement.
5. You further agree that in connection with the consummation of the
transactions contemplated by the Merger Agreement (including the Merger), you
will execute and deliver to Investors and its subsidiaries that are party
thereto (and Investors shall, and shall cause its subsidiaries that are party
thereto to, execute and deliver to you) each of the following agreements:
(a) an Employment Agreement substantially in the form attached
hereto as Exhibit 1;
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(b) a Management Stock Purchase and Unit Subscription Agreement
(the "Management Subscription Agreement"), substantially in the form
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attached hereto as Exhibit 2;
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(c) a Securityholders Agreement substantially in the form
attached hereto as Exhibit 3;
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(d) an Option Cancellation Agreement substantially in the form
attached hereto as Exhibit 4;
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(e) an Amended and Restated Limited Liability Company Agreement
of Investors containing terms consistent with the provisions of the term
sheet attached hereto as Exhibit 5 and such other provisions as are
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reasonable and customary in a limited liability company agreement of such
nature.
In addition, Investors shall cause Holdings to (i) adopt an option plan
containing terms consistent with the provisions of the term sheet attached
hereto as Exhibit 6, and (ii) issue to you options to acquire a number of shares
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of Holding's common stock as determined by the Compensation
3
Committee of Holding's Board of Directors/1/ pursuant to an option grant
agreement consistent with terms reflected on Exhibit 6.
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6. You hereby waive any rights of appraisal or any dissenter's
rights with respect to the Merger that you may have under applicable law.
7. At the request of Investors, you agree that a legend
substantially in the following form may be stamped, printed or typed on your
certificates evidencing the Subject Shares:
"THE VOTING, SALE, ASSIGNMENT, TRANSFER, GIFT, PLEDGE,
HYPOTHECATION, ENCUMBRANCE OR DISPOSITION OF THE SHARES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO A VOTING
AGREEMENT DATED AS OF DECEMBER 21, 2000, BY AND BETWEEN
M-FOODS INVESTORS, LLC AND THE RECORD OWNER HEREOF, COPIES
OF WHICH ARE ON FILE AT THE OFFICES OF ▇▇▇▇▇▇▇ FOODS, INC."
8. You hereby represent that you have carefully reviewed this
agreement and the Exhibits hereto, including, without limitation, Sections 4.1
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and 4.2 of the Management Subscription Agreement. You also represent and
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warrant that (as of the date hereof and at the Effective Time):
(a) your financial situation is such that you can afford to bear
the economic risk of holding securities of Investors for an indefinite
period of time, have adequate means for providing for your current needs
and personal contingencies, and can afford to suffer a complete loss of
your proposed investment in Investors;
(b) your knowledge and experience in financial and business
matters are such that you are capable of evaluating the merits and risks of
your proposed investment in Investors;
(c) you understand that your proposed investment in Investors is
a speculative investment which involves a high degree of risk of loss,
there are substantial restrictions on the transferability of the securities
of Investors and, on the Closing Date (as defined in form of Subscription
Agreement) and for an indefinite period following the Closing (as defined
in the form of Subscription Agreement), there will be no public market for
the
_________________
/1/ The Compensation Committee will be authorized to issue options to acquire
5% of the fully-diluted outstanding capital stock of Holdings as of the Closing
before giving effect to issuances of warrants to Holding's and its subsidiaries'
financing sources. 50% of such options (i.e., options to acquire 2.5% of the
fully-diluted outstanding capital stock of the Company as of the Closing before
giving effect to issuances of warrants to the Company's and its subsidiaries'
financing sources) will be issued to certain executives at Closing with an
exercise price equal to $30.10 per share. The Compensation Committee will
determine the number of options you will be granted.
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securities of Investors and, accordingly, it may not be possible for you to
liquidate your proposed investment in case of emergency, if at all;
(d) if you cease to be an employee of Investors or its
subsidiaries, your proposed investment may be repurchased at a price which
may be less than the fair market value thereof;
(e) you understand and take cognizance of all the risk factors
related to your proposed investment and no representations or warranties
have been made to you or your representatives concerning (i) your proposed
investment, (ii) Investors and its subsidiaries, (iii) the prospects of any
thereof or (iv) other matters;
(f) you have been given the opportunity to examine all documents
and to ask questions of, and to receive answers from, Investors and its
representatives concerning Investors and its subsidiaries, the transactions
contemplated by the Merger Agreement (including the Merger) and this letter
agreement and the Exhibits hereto and to obtain any additional information
that you deem necessary;
(g) all information which you have provided to Investors and its
representatives concerning you and your financial position is complete and
correct as of the date hereof; and
(h) you are an "accredited investor" within the meaning of Rule
501(a) under the Securities Act of 1933, as amended.
9. You agree after the date hereof to cooperate with Investors in
taking action reasonably necessary to consummate the transactions contemplated
by this letter agreement and the Exhibits hereto, including the execution and
delivery of ancillary agreements reasonably necessary to effectuate the
aforesaid transactions, and to consent to modifications to the Exhibits hereto
that do not adversely affect you.
10. The provisions of this letter agreement shall be binding upon and
accrue to the benefit of the parties hereto and their respective heirs, legal
representatives, successors and assigns.
11. This letter agreement may be amended only by a written instrument
signed by the parties hereto. No waiver by any party hereto of any of the
provisions hereof shall be effective unless set forth in a writing executed by
the party so waiving.
12. This letter agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed therein.
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13. Any suit, action or proceeding with respect to this letter
agreement, or any judgment entered by any court in respect of any thereof, shall
be brought in any court of competent jurisdiction in the State of Delaware, and
the parties hereto hereby submit to the exclusive jurisdiction of such courts
for the purpose of any such suit, action, proceeding or judgment. The parties
hereto hereby irrevocably waive (i) any objections which any of them may now or
hereafter have to the laying of the venue of any suit, action or proceeding
arising out of or relating to this letter agreement brought in any court of
competent jurisdiction in the State of Delaware, (ii) any claim that any such
suit, action or proceeding brought in any such court has been brought in any
inconvenient forum and (iii) any right to a jury trial.
14. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given when personally delivered,
telecopied (with confirmation of receipt), one day after deposit with a
reputable overnight delivery service (charges prepaid) and three days after
deposit in the U.S. Mail (postage prepaid and return receipt requested) to the
address set forth below or such other address as the recipient party has
previously delivered notice to the sending party.
(a) If to Investors:
M-Foods Investors, LLC
c/o Vestar Capital Partners IV, L.P.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
and
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c/o Goldner ▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Incorporated
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
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Vestar Capital Partners IV, L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇/▇▇/ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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and
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▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
and
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Faegre & ▇▇▇▇▇▇
2200 ▇▇▇▇▇ Fargo Center
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to you, to the address shown beneath your name on the
signature page attached hereto with copies to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
15. This letter agreement and the Exhibits hereto contain the entire
understanding of the parties with respect to the subject matter hereof and
thereof. There are no restrictions, agreements, promises, representations,
warranties, covenants or undertakings with respect to the subject matter hereof
other than those expressly set forth herein and therein. This letter agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
16. This letter agreement may be executed in separate counterparts
(including by means of telecopied signature pages), and by different parties on
separate counterparts each of which shall be deemed an original, but all of
which shall constitute one and the same instrument.
17. You acknowledge and agree that a violation of any of the terms of
this letter agreement will cause Investors and its subsidiaries irreparable
injury for which adequate remedy at law is not available. Accordingly, it is
agreed that Investors shall be entitled to an injunction, restraining order or
other equitable relief to prevent breaches of the provisions of this letter
agreement and to enforce specifically the terms and provisions hereof in any
court of competent jurisdiction in the United States or any state thereof, in
addition to any other remedy to which it may be entitled at law or equity.
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18. Your rights and remedies and the rights and remedies of Investors
and its subsidiaries under this letter agreement shall be cumulative and not
exclusive of any rights or remedies which any of them would otherwise have
hereunder or at law or in equity or by statute, and no failure or delay by any
party in exercising any right or remedy shall impair any such right or remedy or
operate as a waiver of such right or remedy, nor shall any single or partial
exercise of any power or right preclude such party's other or further exercise
or the exercise of any other power or right. The waiver by any party hereto of
a breach of any provision of this letter 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 at any subsequent time or
times hereunder.
19. You acknowledge and agree that if Holdings receives an Expense
Payment (as defined in the Merger Agreement) in connection with a termination of
the Merger Agreement in accordance with its terms, Investors agrees that it
shall cause Holdings to reimburse the Executive Group (as defined below) for all
Management Transaction Expenses (as defined below); provided, however, that in
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no event shall Holdings be obligated to reimburse the Executive Group for
Management Transaction Expenses to the extent that Expense Payments received by
Holdings do not fully reimburse Holdings and its affiliates for all Buyer
Transaction Expenses (as defined below). For purposes of clarity and by way of
example, if Holdings incurs $5 million of Buyer Transaction Expenses, and if
Holdings receives Expense Payments pursuant to the Merger Agreement totaling $2
million, Holdings shall only be obligated to reimburse the Executive Group for
40% ($2 million / $5 million) of all Management Transaction Expenses. The term
"Executive Group" shall mean you and the other executives executing similar
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letter agreements as of the date hereof. The term "Management Transaction
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Expenses" shall mean fees and expenses payable to Skadden, Arps, Slate, ▇▇▇▇▇▇▇
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& ▇▇▇▇ for legal fees incurred by the Executive Group in connection with the
execution and negotiation of this letter and the transactions contemplated
hereby. The term "Buyer Transaction Expenses" shall mean the out-of-pocket
--------------------------
expenses and fees incurred by Holdings and its affiliates in connection with the
transactions contemplated by the Merger Agreement, including but not limited to,
fees payable to banks, investment banking firms and other financial
institutions, and their respective agents and counsel, and fees of counsel,
accountants, financial printers, advisors, experts and consultants to Holdings
and its affiliates. Investors agrees that it shall cause Holdings or its
subsidiaries to reimburse the Executive Group for Management Transaction
Expenses if the transactions contemplated by the Merger Agreement are
consummated.
20. This letter agreement shall terminate, and be of no further force
or effect, automatically without any further action on the part of any parties
hereto, upon the earlier to occur of (i) a termination of the Merger Agreement
in accordance with its terms for any reason, (ii) the execution of an amendment
to the Merger Agreement that (A) materially and adversely affects your economic
interest in the transactions contemplated hereby, and (B) was not approved by
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and (iii) July 31, 2001. Nothing herein shall relieve any party
from liability for any breach of this letter agreement occurring prior to such
termination.
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Very truly yours,
M-FOODS INVESTORS, LLC
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Secretary
Agreed and accepted as of the
date first written above:
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇
c/o ▇▇▇▇▇▇▇ Foods, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
CONSENT OF SPOUSE
I, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, hereby acknowledge that I have read the foregoing
letter agreement (the "Agreement") and that I understand its contents. I agree
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that my spouse's interest in the common stock of ▇▇▇▇▇▇▇ Foods, Inc. is subject
to the Agreement and any interest I may have in such common stock shall also be
irrevocably bound by the Agreement and, further, that my community property
interest in such common stock, if any, shall be similarly bound by the
Agreement.
I am aware that the legal, financial and other matters contained in
the Agreement are complex and that I am encouraged to seek advice with respect
thereto from independent legal counsel and/or financial advisors. I have either
sought such advice or determined after carefully reviewing the Agreement that I
hereby waive such right.
Acknowledged and agreed this 21/st/ day of
December, 2000.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
/s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Witness
EXHIBIT 1
EXHIBIT 2
EXHIBIT 3
EXHIBIT 4
EXHIBIT 5
[K&E Draft 12/21/00]
OPTION CANCELLATION AGREEMENT
This Option Cancellation Agreement (the "Agreement") is made as of
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_________ ___, 2001, by and between ▇▇▇▇▇▇▇ Foods, Inc., a Minnesota corporation
(the "Company"), and the individual whose name appears on the signature page
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hereto (the "Optionee").
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PRELIMINARY STATEMENTS:
Pursuant to that certain Agreement and Plan of Merger (the "Merger
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Agreement"), dated as of December 21, 2000, by and among the Company, M-Foods
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Holdings, Inc., a Delaware corporation ("Holdings"), and Protein Acquisition
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Corp., a Minnesota corporation and a wholly owned subsidiary of Holdings
("Merger Sub"), Merger Sub shall be merged with and into the Company (the
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"Merger") at the Effective Time, and, by virtue of such Merger, each issued and
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outstanding share of the Company's common stock, par value $0.01 per share (the
"Company Common Stock"), issued and outstanding at the Effective Time (other
--------------------
than shares owned by Merger Sub or the Company, or Dissenting Shares) will be
converted into the right to receive the Price Per Share. Capitalized terms used
herein and not otherwise defined herein shall have the meanings given to such
terms in the Merger Agreement.
Pursuant to the Company's 1987 Non-Qualified Stock Option Plan, as
amended and 1997 Stock Incentive Plan, as amended (collectively, the "Option
------
Plan"), the Company has heretofore granted to the Optionee options (the
----
"Options") to purchase that number of shares of Company Common Stock set forth
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on the signature page hereto opposite the caption "Number of Shares Subject to
Options."
In connection with the consummation of the transactions contemplated
under the Merger Agreement, the Company has offered, and the Optionee desires to
accept, the consideration described below in exchange for the Optionee's consent
to allow the Company to cancel all of the Optionee's Options (the "Cancelled
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Options"), such Options having the per share exercise price(s) set forth on the
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signature page hereto opposite the caption "Exercise Price Per Share of the
Cancelled Options" (the "Exercise Price").
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In consideration for such cancellations, with respect to the Cancelled
Options, the Company desires to pay to the Optionee an aggregate amount (in the
forms described below) equal to the sum of the products of (i) the excess, if
any, of the Price Per Share over the Exercise Price of such Cancelled Options
multiplied by (ii) the number of shares of Company Common Stock for which such
particular Cancelled Options relate that have not theretofore been exercised,
without interest (the "Cancellation Payment"), such amount set forth on the
--------------------
signature page hereto opposite the caption "Cancellation Payment." Such
Cancellation Payment will be paid in the form of (i) cash, if any, in such
amount as set forth on the signature page hereto opposite the caption "Cash
Payment" (the "Cash") and (ii) those certain deferred compensation rights, in
----
such amount as set forth on the signature page hereto opposite the caption
"Deferred Amount," contained in Optionee's Employment Agreement or Severance and
Deferred Compensation Agreement, as the case may be, the "Deferred
--------
Amount." Notwithstanding the foregoing, the Company shall be entitled to
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withhold from Optionee the amount of any withholding or other tax due in
connection with such Cancellation Payment.
AGREEMENT:
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Cancellation. The Optionee hereby agrees to cancel and surrender
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all of the Optionee's rights under the Cancelled Options effective on the date
of the consummation of the Merger, and the Company hereby agrees to pay to the
Optionee on the date of the consummation of the Merger, the Cancellation Payment
in the form of the Cash and the Deferred Amount. Notwithstanding the foregoing,
the Company shall be entitled to withhold from the Optionee the amount of any
withholding tax due in connection with such Cancellation Payment.
2. Optionee's Representation, Warranties, and Covenants. As a
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material inducement to the Company to enter into this Agreement and make the
Cancellation Payment, the Optionee hereby represents, warrants, and covenants to
the Company that:
(a) Capital Stock and Related Matters. Other than pursuant to the
---------------------------------
Options, the Optionee has no right, title or interest in any other securities
convertible or exchangeable for any shares of the Company's capital stock, and
the Optionee does not have any right, title or interest in any rights or options
to subscribe for or to purchase the Company's capital stock or any stock or
securities convertible into or exchangeable for the Company's capital stock. The
Optionee owns the Options, free and clear of all pledges, security interests,
liens, claims, encumbrances, agreements, rights of first refusal and options of
any kind whatsoever, other than such restrictions arising under the Securities
Act of 1933, as amended, state securities laws or any of the documents and other
agreements executed as of the date hereof in connection with the consummation of
the Merger.
(b) Authorization; No Breach. This Agreement has been duly executed
------------------------
and delivered by the Optionee. This Agreement constitutes a valid and binding
obligation of the Optionee, enforceable in accordance with its terms. To the
best of the Optionee's knowledge, the execution and delivery by the Optionee of
this Agreement and compliance with the terms hereof by the Optionee, do not and
shall not (i) conflict with or result in a breach of the terms, conditions or
provisions of, (ii) constitute a default under, (iii) result in a violation of,
or (iv) require any authorization, consent, approval, exemption or other action
by or notice to any court or administrative or governmental body pursuant to,
any law, statute, rule or regulation to which the Optionee is subject, or any
agreement, instrument, order, judgment or decree to which the Optionee is a
party or by which it is bound. If the Optionee is married and the Cancelled
Options of such Optionee constitute community property or otherwise need spousal
or other approval to be legal, valid and binding, this Agreement has been duly
authorized, executed and delivered by such Optionee's spouse, enforceable
against such spouse in accordance with its terms.
3. Indemnification. The Optionee shall indemnify, defend and hold
---------------
harmless the Company from and against any and all claims, losses, liabilities,
costs, expenses, obligations and damages incurred or paid by the Company that
would not have been sustained, incurred or paid if all
-2-
of the representations and warranties set forth in Section 2 hereof had been
true and correct; provided, however, that the Optionee shall not be obligated to
-------- -------
indemnify the Company for any amounts in excess of the Cancellation Payment.
4. Release and Waiver. The Optionee does hereby forever release,
------------------
discharge and acquit the Company from all claims, demands, obligations and
liabilities, whensoever arising out of, connected with or relating to, the
Cancelled Options and the cancellation thereof; provided, however, that such
-----------------
release and waiver does not extend to claims, demands, obligations and
liabilities arising out of this Agreement.
5. General Provisions.
------------------
(a) Severability. Whenever possible, each provision of this Agreement
------------
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
(b) Complete Agreement. This Agreement, those documents expressly
------------------
referred to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
(c) Counterparts. This Agreement may be executed in separate
------------
counterparts (including by means of telecopied signature pages), each of which
is deemed to be an original and all of which taken together constitute one and
the same agreement.
(d) Successors and Assigns. Except as otherwise provided herein, this
----------------------
Agreement shall bind and inure to the benefit of and be enforceable by the
Optionee, the Company and their respective successors and assigns; provided that
the rights and obligations of the Optionee under this Agreement shall not be
assignable without the prior written consent of the Company.
(e) Choice of Law. The corporate law of the State of Delaware will
-------------
govern all questions concerning the relative rights of the Company and the
Optionee. All other questions concerning the construction, validity and
interpretation of this Agreement will be governed by and construed in accordance
with the internal laws of the State of New York, without giving effect to any
choice of law or conflict of law provision or rule (whether of the State of New
York or any other jurisdiction) that would cause the application of the laws of
any jurisdiction other than the State of New York.
(f) Remedies. Each of the parties to this Agreement will be entitled
--------
to enforce its rights under this Agreement specifically, to recover damages and
costs (including attorneys' fees) caused by any breach of any provision of this
Agreement and to exercise all other rights existing in its favor. The parties
hereto agree and acknowledge that money damages may not be an adequate
-3-
remedy for any breach of the provisions of this Agreement and that any party may
in its sole discretion apply to any court of law or equity of competent
jurisdiction (without posting any bond or other security) for specific
performance and/or other injunctive relief in order to enforce or prevent any
violations of the provisions of this Agreement.
(g) Amendment and Waiver. The provisions of this Agreement may be
--------------------
amended and waived only with the prior written consent of the Company and the
Optionee.
*****
-4-
IN WITNESS WHEREOF, the parties hereto have executed this Option
Cancellation Agreement on the date first written above.
▇▇▇▇▇▇▇ FOODS, INC.
By_____________________________________
Its____________________________________
OPTIONEE
_______________________________________
Signature of Optionee
▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------
Name of Optionee
OPTIONEE'S SPOUSE
_______________________________________
Signature of Optionee's Spouse
_______________________________________
Name of Optionee's Spouse
Number of Shares Subject to Options:
(identified by applicable grant date(s) and Option Plan(s))
Option Date Plan/Type Outstanding
----------- --------- -----------
4/1/1993 1987/NQ 15,000.00
1/3/1995 1987/NQ 20,000.00
1/2/1996 1987/NQ 15,000.00
2/20/1996 1987/NQ 3,000.00
1/2/1997 1987/NQ 15,000.00
3/3/1998 1997/NQ 24,000.00
2/25/1999 1997/NQ 6,000.00
2/25/1999 1997/NQ 6,800.00
2/22/2000 1997/NQ 3,000.00
2/24/2000 1997/NQ 20,000.00
7/27/2000 1997/NQ 10,000.00
Number of Options to be Cancelled: 137,800.00
----------
Exercise Price Per Share of the Cancelled Options:
(identified by applicable grant date(s) and Option Plan(s))
Option Date Plan/Type Price
----------- --------- -----
4/1/1993 1987/NQ $ 8.000
1/3/1995 1987/NQ $10.000
1/2/1996 1987/NQ $11.875
2/20/1996 1987/NQ $11.125
1/2/1997 1987/NQ $12.625
3/3/1998 1997/NQ $25.000
2/25/1999 1997/NQ $18.625
2/25/1999 1997/NQ $22.688
2/22/2000 1997/NQ $21.438
2/24/2000 1997/NQ $21.438
7/27/2000 1997/NQ $23.375
Cancellation Payment: $1,834,118
Cash Payment: $ 394,118
Deferred Amount: $1,440,000
Exhibit 1
EMPLOYMENT AGREEMENT
THIS AGREEMENT made and entered into as of the __ day of ___________, 2001,
by and among ▇▇▇▇▇▇▇ FOODS, INC., a Minnesota corporation (the "Company") ▇▇▇▇
▇. ▇▇▇▇▇▇▇ (the "Executive") and for the purposes of Section 8 hereof, M-Foods
Holdings, Inc., a Delaware corporation and controlling entity of the Company
("Holdings").
WHEREAS, Executive has served as President of an operating company
subsidiary of ▇▇▇▇▇▇▇ Foods, Inc.; and
WHEREAS, Company and Executive have agreed to enter into this Agreement
effective as of the date hereof.
NOW, THEREFORE, in consideration of the covenants and agreements herein
contained, the parties hereto agree as follows:
1. Employment and Duties. Company shall employ Executive to serve as
President of ▇.▇. ▇▇▇▇▇▇▇▇ Company and in such capacity Executive shall perform
such duties as the bylaws provide and as the CEO of the Company may from time to
time determine.
2. Term. This Agreement shall be effective as of the date hereof (the
"Effective Date") and shall continue until the second anniversary of a Change in
Control (as defined below), unless earlier terminated as provided herein (the
"Employment Period"). The Employment Period may be extended thereafter upon the
written agreement of the parties hereto.
3. Annual Base Salary. For all services by Executive, the Company agrees
to pay to Executive an annual base salary of at least $230,000 (the "Annual Base
Salary").
4. Additional Benefits and Working Facilities.
a. Annual Bonus. During the Employment Period, the Executive shall
participate in such bonus arrangements as may be approved by the
Compensation Committee of the Board (the "Compensation Committee") (the
aggregate of all payments made under such bonus arrangements being herein
referred to as the "Annual Bonus"). Executive's aggregate bonus
opportunity will be no less than 100% of Annual Base Salary and the "Target
Bonus" will be no less than 62.5% of Annual Base Salary or greater as
determined by the Compensation Committee. The Annual Bonus shall be paid
within two and one-half months of the end of the fiscal year of the Company
to which it relates.
b. Other Benefits. Executive shall be entitled to participate in all
compensation, incentive, employee benefit, welfare and other plans,
practices, policies and programs and fringe benefits, including vacation
policy (collectively, "Employee Benefit Plans") on a basis
no less favorable than that provided to any other executive officer of the
Company.
c. Expenses. The Company shall reimburse Executive for all reasonable
expenses incurred by Executive in connection with the Company's business,
including but not limited to, expenses of travel and entertainment, upon
presentation of itemized statements therefor.
5. Termination of Employment.
a. Death or Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment Period. If
the Company determines in good faith that the Disability of the Executive
has occurred during the Employment Period (pursuant to the definition of
Disability set forth below), it may give to the Executive written notice in
accordance with Section 12 of this Agreement of its intention to terminate
the Executive's employment. In such event, the Executive's employment with
the Company shall terminate effective on the 30th day after receipt of such
notice by the Executive (the "Disability Effective Date"), provided that,
within the 30 days after such receipt, the Executive shall not have
returned to full-time performance of the Executive's duties. For purposes
of this Agreement, "Disability" shall mean a determination by the Company
in its sole discretion that Executive is unable to perform his job
responsibilities as a result of chronic illness, physical, mental or any
other disability for a period of six months or more.
b. With or Without Cause. The Company may terminate the Executive's
employment during the Employment Period with or without Cause. For purposes
of this Agreement, "Cause" shall mean:
(i) the continued failure of the Executive to perform
substantially the Executive's duties with the Company or one of its
affiliates (other than any such failure resulting from incapacity due
to physical or mental illness), after a written demand for substantial
performance is delivered to the Executive by the Board which
specifically identifies the manner in which the Board believes that
the Executive has not substantially performed the Executive's duties,
or
(ii) the willful engaging by the Executive in illegal conduct or
gross misconduct which is materially and demonstrably injurious to the
Company, or
(iii) conviction of a felony or guilty or nolo contendere plea by
the Executive with respect thereto.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company.
-2-
Any act, or failure to act, based upon authority given pursuant to a resolution
duly adopted by the Board or upon the instructions of the Chief Executive
Officer (while the Executive does not serve as such) or based upon the advice of
counsel for the Company shall be conclusively presumed to be done, or omitted to
be done, by the Executive in good faith and in the best interests of the
Company. The cessation of employment of the Executive shall not be deemed to be
for Cause unless and until there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of not less than 75%of
the entire membership of the Board (excluding the Executive) at a meeting of the
Board called and held for such purpose (after reasonable notice is provided to
the Executive and the Executive is given an opportunity, together with counsel,
to be heard before the Board) finding that, in the good faith opinion of the
Board, the Executive is guilty of the conduct described in subparagraph (i),
(ii) or (iii) above, and specifying the particulars thereof in detail.
c. Good Reason. The Executive's employment may be terminated by the
Executive for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean in the absence of a written consent of the Executive:
(i) upon, or in anticipation of, a Change in Control, the
assignment to the Executive of any duties inconsistent with the
Executive's title and position (including status, offices and
reporting requirements), authority, duties or responsibilities as
contemplated by Section 1 of this Agreement, or any other action by
the Company which results in a diminution in such position, authority,
duties or responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and which
is remedied by the Company promptly after receipt of notice thereof
given by the Executive; provided that after a Change in Control the
Company shall have the flexibility to appoint the Executive to a
reporting relationship different from that which existed prior to the
Change in Control, to make an immaterial change in Executive's duties,
or to change the Executive's title provided that Executive shall not
have a stature less than that of an operating company President, and
it is understood that equivalent positions may have different titles;
(ii) any failure by the Company to comply with any of the
provisions of Section 3 of this Agreement or the failure by the
Company to increase such Annual Base Salary each year after a Change
in Control by an amount which at least equals on a percentage basis,
the mean average percentage increase in base salary for all employees
similarly situated during the two full calendar years immediately
preceding a Change in Control, other than an isolated, insubstantial
and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given
by the Executive;
(iii) the failure of the Company upon a Change in Control to (A)
continue in effect any employee benefit plan, compensation plan,
welfare benefit plan or material fringe benefit plan in which
Executive is participating immediately prior to
-3-
such Change in Control or the taking of any action by the Company
which would adversely affect Executive's participation in or reduce
Executive's benefits under any such plan, unless Executive is
permitted to participate in other plans providing Executive with
substantially equivalent benefits, or (B) provide Executive with paid
vacation in accordance with the most favorable past practice of the
Company as in effect for Executive immediately prior to such Change in
Control;
(iv) after, or in anticipation of, a Change in Control, any
purported termination by the Company of the Executive's employment
otherwise than as expressly permitted by this Agreement for Cause,
death or Disability;
(v) any failure by the Company to comply with and satisfy
Section 11(c) of this Agreement; or
(vi) after, or in anticipation of, a Change in Control, any
requirement that the Executive (A) be based anywhere more than 50
miles from the office where the Executive is currently located or (B)
travel on Company business to an extent substantially greater than the
Executive's current travel obligations.
d. Notice of Termination. Any termination by the Company or by the
Executive shall be communicated by Notice of Termination to the other party
hereto given in accordance with Section 12(b) of this Agreement. For
purposes of this Agreement, a "Notice of Termination" means a written
notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to provide a basis
for termination of the Executive's employment under the provisions so
indicated and (iii) if the Date of Termination (as defined below) is other
than the date of receipt of such notice, specifies the termination date
(which date shall be not more than 30 days after the giving of such
notice). The failure by the Executive or the Company to set forth in the
Notice of Termination any fact or circumstance which contributes to a
showing of Good Reason or Cause shall not waive any right of the Executive
or the Company, respectively, hereunder or preclude the Executive or the
Company, respectively, from asserting such fact or circumstance in
enforcing the Executive's or the Company's rights hereunder.
e. Date of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company other than for
Disability, the date of receipt of the Notice of Termination or any later
date specified therein within 30 days of such notice, (ii) if the
Executive's employment is terminated by reason of death or Disability, the
date of death of the Executive or the Disability Effective Date, as the
case may be, and (iii) if the Executive's employment is terminated by the
Executive, 30 days after the giving of such notice by the Executive
provided that the Company may elect to place the Executive on paid leave
for all or any part of such 30-day period.
-4-
f. Change in Control. "Change in Control" means the consummation of a
transaction, whether in a single transaction or in a series of related
transactions that are consummated contemporaneously (or consummated
pursuant to contemporaneous agreements), with any other party or parties on
an arm's-length basis, pursuant to which (a) such party or parties,
directly or indirectly, acquire (whether by merger, stock purchase,
recapitalization, reorganization, redemption, issuance of capital stock or
otherwise) more than 50% of the voting stock of the Company, (b) such party
or parties, directly or indirectly, acquire assets constituting all or
substantially all of the assets of the Company and its subsidiaries on a
consolidated basis, or (c) prior to an initial public offering of the
Company Common Stock pursuant to an offering registered under the 1933 Act,
Vestar Capital Partners IV, L.P. a Delaware limited partnership and its
affiliates cease to have the ability to elect, directly or indirectly, a
majority of the Board of Directors of the Company.
6. Obligations of the Company upon Termination.
a. Death or Disability. If, during the Employment Period the
Executive's employment shall terminate on account of death or Disability:
(i) the Company shall pay to the Executive or his estate or
beneficiaries in a lump sum in cash within 30 days after the Date of
Termination the sum of (x) the Executive's Annual Base Salary through
the Date of Termination to the extent not theretofore paid, and (y)
the product of (1) the Target Bonus and (2) a fraction, the numerator
of which is the number of whole and partial months in the fiscal year
in which the Date of Termination occurs through the Date of
Termination and the denominator of which is 12, to the extent not
theretofore paid (the sum of the amounts described in clauses (x) and
(y) shall be hereinafter referred to as the "Accrued Obligations");
(ii) to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive or his estate or
beneficiaries any other amounts or benefits required to be paid or
provided or which the Executive is eligible to receive under any plan,
program, policy or practice of or contract or agreement with the
Company and its affiliated companies through the Date of Termination
(such other amounts and benefits shall be hereinafter referred to as
the "Other Benefits"); and
(iii) the Company shall pay to the Executive or his estate or
beneficiaries in a lump sum in cash within 30 days after the Date of
Termination an amount equal to the Executive's current Annual Base
Salary.
b. By the Company for Cause; By the Executive Other than for Good
Reason. If the Executive's employment is terminated for Cause or the
Executive terminates his
-5-
employment without Good Reason during the Employment Period, this Agreement
shall terminate without further obligations to the Executive other than the
obligation to pay to the Executive (i) his Annual Base Salary through the
Date of Termination to the extent theretofore unpaid and (ii) the Other
Benefits.
c. By the Company Other than for Cause, Death or Disability; By the
Executive for Good Reason. If, during the Employment Period, but prior to
a Change in Control, the Executive's employment is terminated by the
Executive for Good Reason or by the Company other than for Cause, and other
than on account of death or Disability:
(i) the Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the sum of:
(A) the amount of Executive's Annual Base Salary through
the Date of Termination to the extent not theretofore paid; and
(B) an amount equal to the Executive's current Annual Base
Salary; and
(ii) the Company shall provide the Executive with the Other
Benefits.
d. After, or in Anticipation of a Change in Control By the Company
Other than for Cause or By the Executive for Good Reason. If the
Executive's employment shall be terminated by the Company other than for
Cause or the Executive terminates his employment for Good Reason in
anticipation of or within two years following a Change in Control:
(i) the Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the sum of:
(A) the Accrued Obligations; and
(B) an amount equal to the product of (x) two and (y)
Executive's current Annual Base Salary; and
(ii) the Company shall provide the Executive with the Other
Benefits.
7. Noncompetition and Nonsolicitation. Executive acknowledges that in
----------------------------------
the course of his employment with the Company he will become familiar with the
Company's and its subsidiaries' trade secrets and other confidential information
concerning the Company and such subsidiaries and that his services will be of
special, unique and extraordinary value to the Company and its subsidiaries.
Therefore, Executive agrees that:
a. Noncompetition. During the period commencing on the Effective
--------------
Date and
-6-
ending on the second anniversary of the date Executive's employment with
the Company terminates (such period the "Restricted Period"), Executive
shall not, for himself or on behalf of any other person, firm, partnership,
corporation, or other entity, engage, directly or indirectly, as an
executive, agent, representative, consultant, partner, shareholder or
holder of any other financial interest, in any business that competes with
the Company in the business of the production, distribution or sales of
eggs or egg products (a "Competing Business"), it being understood and
agreed that Executive shall not be in violation of this restriction where
Executive is employed by a person, firm, partnership, corporation, or other
entity engaged in a variety of activities, including the Competing
Business, so long as Executive is not engaged in or responsible for the
Competing Business of such entity. Nothing herein shall prohibit Executive
from being a passive owner of not more than 2% of the outstanding publicly
traded stock of any class of a Competing Business so long as Executive has
no active participation in the business of such entity, except to the
extent permitted above. Executive acknowledges that this Agreement, and
specifically, this Section 7, does not preclude Executive from earning a
livelihood, nor does it unreasonably impose limitations on Executive's
ability to earn a living. In addition, Executive agrees and acknowledges
that the potential harm to the Company of its non-enforcement outweighs any
harm to Executive of its enforcement by injunction or otherwise.
b. Nonsolicitation. During the Restricted Period, Executive shall
---------------
not directly or indirectly through another entity (i) induce or attempt to
induce any employee of the Company or its subsidiaries to leave the employ
of the Company or its subsidiaries, or in any way interfere with the
relationship between the Company or any of its subsidiaries and any
employee thereof, (ii) knowingly hire any person who was an employee of the
Company or any of its subsidiaries within 180 days prior to the time such
employee was hired by Executive, (iii) induce or attempt to induce any
customer, supplier, licensee or other business relation of the Company or
any of its subsidiaries to cease doing business with the Company or its
subsidiaries or in any way interfere with the relationship between any such
customer, supplier, licensee or business relation and the Company or any
subsidiary or (iv) directly or indirectly acquire or attempt to acquire an
interest in any business relating to the business of the Company or any of
its subsidiaries and with which the Company or any of its subsidiaries has
entertained discussions or has requested and received information relating
to the acquisition of such business by the Company or its subsidiaries in
the one-year period immediately preceding Executive's termination of
employment with the Company.
c. Enforcement. The parties to this Agreement hereby agree and
-----------
stipulate that (i) the restrictions contained in this Agreement are
reasonable and necessary in order to protect the Company's and its
subsidiaries' legitimate business interests and (ii) in the event of any
breach or violation of this Agreement or of any provision hereof by
Executive, the Company and its subsidiaries will have no adequate remedy at
law and will suffer irreparable loss and damage thereby. The parties
hereby further agree and stipulate that in the event of any such breach or
violation, either threatened or actual, the Company's and its subsidiaries'
rights shall include, in addition to any and all other rights available to
the Company and its
-7-
subsidiaries at law or in equity, the right to seek and obtain any and all
injunctive relief or restraining orders available to it in courts of proper
jurisdiction, so as to prohibit, bar, and restrain any and all such
breaches or violations by Executive. The prevailing party to any legal
action, arbitration or other proceeding commenced in connection with
enforcing any provision of this Section 7, including without limitation,
obtaining the injunctive relief provided by this Section 7 shall be
entitled to recover all court costs, reasonable attorneys' fees, and
related expenses incurred by such party. Executive further agrees that no
bond need be filed in connection with any request by the Company and its
subsidiaries for a temporary restraining order or for temporary or
preliminary injunctive relief .
d. Additional Acknowledgments. Executive acknowledges that the
--------------------------
provisions of this Section 7 are in consideration of: (i) employment with
the Company, (ii) the issuance by M-Foods Investors, LLC, a Delaware
corporation and affiliate of the Company ("Investors"), to Executive of
Investors' Class B Units (the "Class B Units") and Investors' Class C Units
pursuant to the terms of that certain Management Stock Purchase Agreement
and Unit Subscription Agreement, dated as of the date hereof, by and
between Investors and Executive (the "Management Stock Purchase Agreement
and Unit Subscription Agreement"), and (iii) additional good and valuable
consideration as set forth in this Agreement. In addition, Executive
acknowledges (i) that the business of the Company and its subsidiaries is
national in scope and without geographical limitation and (ii)
notwithstanding the state of incorporation or principal office of the
Company or any of its subsidiaries, or any of their respective executives
or employees (including the Executive), it is expected that the Company
will have business activities and have valuable business relationships
within its industry throughout the United States. Executive acknowledges
that he has carefully read this Agreement and has given careful
consideration to the restraints imposed upon Executive by this Agreement,
and is in full accord as to their necessity for the reasonable and proper
protection of confidential and proprietary information of the Company and
its subsidiaries now existing or to be developed in the future. Executive
expressly acknowledges and agrees that each and every restraint imposed by
this Agreement is reasonable with respect to subject matter, time period
and geographical area.
8. Deferral of Certain Compensation. In connection with the Executive's
agreement to cancel all of his options to acquire Company Common Stock pursuant
to the terms of that certain Option Cancellation Agreement, dated as of the date
hereof, by and between the Executive and the Company, the Company shall (a) pay
to Executive an amount equal to $394,118 (the "Cancellation Payment") and (b)
rollover an amount equal to $1,440,000 (the "Deferred Amount") to an unfunded,
unsecured nonqualified deferred compensation arrangement established for this
purpose (the "Deferred Account"). Each of the Executive, the Company and
Holdings agrees that Holdings, through an intercompany transfer, shall assume
all obligations associated with the Deferred Amount. The Cancellation Payment
shall be paid by the Company to the Executive on the Effective Date, or as soon
as reasonably practicable thereafter.
With respect to the Deferred Account, the Deferred Amount shall be deemed
to be invested
-8-
(i.e., an actual investment will not be made), as of the Effective Date, in that
number of Class A Units (the "Class A Units") of Investors equal to the quotient
determined by dividing (i) the Deferred Amount by (ii) $100 (the per unit price
of Class A Units). Holdings shall credit Executive's Deferred Account with
certain of the distributions that would be received by the Deferred Account if
such Deferred Account were actually invested in Class A Units, the extent of
such crediting to be based upon the number of Class A Units deemed held by the
Deferred Account in accordance with the calculation set forth in the following
sentences. Holdings shall credit Executive's Deferred Account with any
distributions made in respect of Class A Units pursuant to or in accordance with
Sections 4.4(a)(i) and 4.4(a)(ii) [such sections to correspond with the "First"
and "Second" distributions described in the LLC term sheet under the heading
"Distributions"] of the Investors' Amended and Restated Limited Liability
Company Agreement, dated ________ __, 2001 (the "LLC Agreement"). In the event
Investors distributes non-cash property to holders of Class A Units pursuant to
Sections 4.4(a)(i) or 4.4(a)(ii) of the LLC Agreement, Holdings shall credit
Executive's Deferred Account in an amount equal to the fair market value of such
property, as determined by the Management Committee of Investors. Executive's
Deferred Account shall not be credited with any distributions made in respect of
Class A Units pursuant to or in accordance with any subsections of Section 4.4
of the LLC Agreement other than Sections 4.4(a)(i) and 4.4(a)(ii) thereof. In
the event that Class A Units are sold to a buyer unrelated to the holders of
Class A Units on the date hereof, Holdings shall credit Executive's Deferred
Account with an amount equal to the result of (x) the percentage of outstanding
Class A Units being purchased by an unrelated buyer multiplied by (y) the number
of Class A Units deemed held in the Deferred Account multiplied by (z) the
lesser of (i) the amount of cash or fair market value of any property, as
determined by the Management Committee of Investors, received by holders of
Class A Units in exchange for a Class A Unit and (ii) the sum of the Unreturned
Capital and Unpaid Yield (as such terms are defined in the LLC Agreement) of a
Class A Unit (assuming such Class A Unit was issued on the Closing Date, as such
term is defined in the Management Stock Purchase and Unit Subscription
Agreement); it being understood and agreed that any distribution made pursuant
to this sentence shall, with respect to future distributions, reduce the number
of Class A Units deemed held by the Deferred Account by the percentage described
in subclause (x) of this sentence. All amounts in the Executive's Deferred
Account shall be subject to the claims of the creditors of Holdings.
Executive shall receive from Holdings distributions from his Deferred
Account, in the amount indicated, upon the occurrence of the following events:
(i) upon a Change in Control, Executive shall receive a total distribution of
the amount then deemed held in the Deferred Account; (ii) upon the tenth
anniversary of the date hereof, Executive shall receive a total distribution of
the amount then deemed held in the Deferred Account; and (iii) upon the purchase
by Investors of any of Executive's Class B Units pursuant to Section 7.2 of the
Management Stock Purchase and Unit Subscription Agreement, Executive shall
receive a distribution from the Deferred Account equal to the result of (x) the
percentage of Executive's Class B Units being purchased by Investors multiplied
by (y) the number of Class A Units deemed held in the Deferred Account
multiplied by (z) the lesser of (i) the fair market value of a Class A Unit, as
determined by the Management Committee of Investors and (ii) the sum of the
Unreturned Capital and Unpaid Yield (as such terms are defined in the LLC
Agreement) of a Class A Unit (assuming such Class A Unit was issued on the
Closing Date,
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as such term is defined in the Management Stock Purchase and Unit Subscription
Agreement); it being understood and agreed that any distribution made pursuant
to clause (iii) of this sentence shall, with respect to future distributions,
reduce the number of Class A Units deemed held by the Deferred Account by the
percentage described in subclause (x) of this sentence. The form of payment made
with respect to any of the foregoing distributions shall be a cash payment
except that (A) in the event of a Change in Control in which the consideration
effecting such Change in Control is non-cash consideration, such distribution
may be made in the form of such non-cash consideration, the fair market value of
which shall be determined by the Management Committee of Investors, and (B) in
the event of a distribution of the type described in clause (iii) above, if,
with respect to Holdings, any of the Cash Deferral Conditions (as such term is
defined in the Management Stock Purchase and Unit Subscription Agreement)
exists, the portion of the cash payment so affected may be made by the delivery
of Holdings' unfunded and unsecured promise to pay Executive the portion of the
cash payment so affected in cash, together with interest, at the first date on
which the Cash Deferral Conditions no longer exist. The interest on such delayed
cash payment will accrue annually at the "prime rate" published by The Wall
Street Journal on the date Holdings delivers its unfunded and unsecured
promise.
9. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any plan, program,
policy or practice provided by the Company or any of its affiliated companies
and for which the Executive may qualify, nor shall anything herein limit or
otherwise affect such rights as the Executive may have under any contract or
agreement with the Company or any of its affiliated companies. Amounts which are
vested benefits or which the Executive is otherwise entitled to receive under
any plan, policy, practice or program of or any contract or agreement with the
Company or any of its affiliated companies at or subsequent to the Date of
Termination shall be payable in accordance with such plan, policy, practice,
program, contract or agreement except as explicitly modified by this Agreement;
provided that the Executive shall not be eligible for severance benefits under
any other program or policy of the Company.
10. Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement, and such amounts
shall not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses which the Executive may reasonably incur as a result of
any contest (regardless of the outcome thereof) pursued or defended against in
good faith by the Executive regarding the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee of performance
thereof (including as a result of any contest by the Executive about the amount
of any payment pursuant to this Agreement), plus in each case interest on any
delayed payment at the applicable Federal rate provided for in Section
7872(f)(2)(A) of the Code.
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11. Successors.
a. This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
b. This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
c. The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean
the Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid.
12. Miscellaneous.
a. This Agreement shall be governed by and construed in accordance
with the laws of the State of Minnesota, without reference to principles of
conflict of laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written agreement executed by
the parties hereto or their respective successors and legal
representatives.
b. All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
If to the Company:
▇▇▇▇▇▇▇ Foods, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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Attention: Secretary
with a copy to:
Vestar Capital Partners IV, L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇/▇▇/ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
c. Whenever possible, each provision of this Agreement will be
interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal
or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not
affect any other provision or any other jurisdiction, but this Agreement
will be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been contained
herein.
d. The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required
to be withheld pursuant to any applicable law or regulation.
e. The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert
any right the Executive or the Company may have hereunder, including,
without limitation, the right of the Executive to terminate employment for
Good Reason pursuant to Section 5(c) of this Agreement, shall not be deemed
to be a waiver of such provision or right or any other provision or right
of this Agreement.
f. From and after the Effective Date this Agreement shall supersede
any other employment agreement between the parties with respect to the
subject matter hereof.
g. Subject to the provisions of Section 5(d), there shall be no
limitation on the ability of the Company to terminate the Executive at any
time with or without Cause.
* * * * *
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IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
_______________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ FOODS, INC.
By: ____________________________________
Title:___________________________________
M-FOODS HOLDINGS, INC.
By: ____________________________________
Title: ___________________________________