Exhibit 10.3

 

INCOME TAX RECEIVABLE AGREEMENT

 

Dated as of July 20, 2016

 

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Table of Contents

 

 

 

Page

 

 

 

ARTICLE I

 

 

 

 

 

DEFINITIONS

 

 

 

 

 

Section 1.01                 Definitions

 

1

 

 

 

ARTICLE II

 

 

 

 

 

DETERMINATION OF REALIZED TAX BENEFIT

 

 

 

 

 

Section 2.01                 Pre-IPO Tax Assets

 

7

Section 2.02                 Tax Benefit Schedule

 

7

Section 2.03                 Procedures; Amendments

 

7

 

 

 

ARTICLE III

 

 

 

 

 

TAX BENEFIT PAYMENTS

 

 

 

 

 

Section 3.01                 Payments

 

8

Section 3.02                 No Duplicative Payments

 

9

 

 

 

ARTICLE IV

 

 

 

 

 

TERMINATION

 

 

 

 

 

Section 4.01                 Termination, Early Termination and Breach of
Agreement

 

9

Section 4.02                 Early Termination Notice

 

10

Section 4.03                 Payment upon Early Termination

 

11

 

 

 

ARTICLE V

 

 

 

 

 

LATE PAYMENTS AND COMPLIANCE WITH INDEBTEDNESS

 

 

 

 

 

Section 5.01                 Late Payments by the Corporation

 

12

Section 5.02                 Compliance with Indebtedness

 

12

Section 5.03                 Conflicting Agreements.

 

12

 

 

 

ARTICLE VI

 

 

 

 

 

NO DISPUTES; CONSISTENCY; COOPERATION

 

 

 

 

 

Section 6.01                 The Existing Stockholders Representative’s
Participation in the Corporation’s Tax Matters

 

13

 

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Section 6.02                 Consistency

 

13

Section 6.03                 Cooperation

 

13

 

 

 

ARTICLE VII

 

 

 

 

 

MISCELLANEOUS

 

 

 

 

 

Section 7.01                 Notices

 

14

Section 7.02                 Counterparts

 

14

Section 7.03                 Entire Agreement; Third Party Beneficiaries

 

15

Section 7.04                 Governing Law

 

15

Section 7.05                 Severability

 

15

Section 7.06                 Successors; Assignment; Amendments; Waivers

 

15

Section 7.07                 Headings, Titles, and Subtitles

 

16

Section 7.08                 Resolution of Disputes

 

16

Section 7.09                 Reconciliation Procedures

 

17

Section 7.10                 Withholding

 

18

Section 7.11                 Affiliated Corporations; Admission of the
Corporation into a Consolidated Group; Transfers of Corporate Assets

 

18

Section 7.12                 Confidentiality

 

19

Section 7.13                 Existing Stockholders Representative

 

19

Section 7.14                 Drag-Along Rights

 

21

Section 7.15                 Tag-Along Rights

 

21

 

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This INCOME TAX RECEIVABLE AGREEMENT (as amended from time to time, this
“Agreement”), dated as of July 20, 2016, is hereby entered into by and between
AdvancePierre Foods Holdings, Inc., a Delaware corporation (the “Corporation”),
and OCM FIE, LLC, a Delaware limited liability company (the “Existing
Stockholders Representative”).

 

RECITALS

 

WHEREAS, the Existing Stockholders (as defined below), in the aggregate, hold
100% of the capital stock of the Corporation, directly or indirectly;

 

WHEREAS, pursuant to the IPO, the Corporation will become a public company;

 

WHEREAS, after the IPO, the Corporation and its Subsidiaries (as defined below)
(collectively, the “Taxable Entities” and each a “Taxable Entity”) will have,
for applicable Tax purposes, net operating losses (“NOLS”), alternative minimum
tax credit carryforwards (including alternative minimum tax credits that arise
after the IPO as a result of limitations on the use of NOLs under the
alternative minimum tax) and tax basis (including depreciation and amortization
deductions in respect thereof) (collectively, “Tax Assets”) that relate to
periods (or portions thereof) prior to the IPO (the “Pre-IPO Tax Assets”);

 

WHEREAS, the Pre-IPO Tax Assets and ITR Tax Benefits (as defined below) may
reduce the reported liability for Taxes (as defined below) that the Taxable
Entities might otherwise be required to pay; and

 

WHEREAS, the parties to this Agreement desire to make certain arrangements with
respect to the effect of the Pre-IPO Tax Assets and ITR Tax Benefits on the
reported liability for Taxes of the Taxable Entities.

 

NOW, THEREFORE, in consideration of the foregoing and the respective covenants
and agreements set forth herein, and intending to be legally bound hereby, the
parties hereto agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

Section 1.01                             Definitions.  As used in this
Agreement, the terms set forth in this ARTICLE I shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined).

 

“Acquired Tax Assets” means any Tax Asset of any corporation or other entity
acquired by the Corporation or any of its Subsidiaries by purchase, merger, or
otherwise (in each case, from a Person or Persons other than the Corporation and
its Subsidiaries and, in each case, whether or not such corporation or other
entity survives) after the IPO that relate to periods (or portions thereof)
ending on or prior to the date of such acquisition.

 

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“Advisory Firm” means (i) PricewaterhouseCoopers LLP or (ii) any other law or
accounting firm that is (A) nationally recognized as being expert in Tax matters
and (B) that is agreed to by the Corporation and the Existing Stockholders
Representative.

 

“Advisory Firm Letter” means a letter from the Advisory Firm stating, as
applicable, that the relevant Schedule, notice, or other information to be
provided by the Corporation to the Existing Stockholders Representative and all
supporting schedules and work papers were prepared in a manner consistent with
the terms of this Agreement and, to the extent not expressly provided in this
Agreement, on a reasonable basis in light of the facts and applicable law in
existence on the date to which such Schedule, notice or other information
relates.

 

“Affiliate” means, with respect to any Person, any other Person that directly or
indirectly, through one or more intermediaries, Controls, is Controlled by, or
is under common Control with, such first Person.

 

“Agreed Rate” means LIBOR plus 200 basis points.

 

“Agreement” is defined in the preamble of this Agreement.

 

“Amended Schedule” is defined in Section 2.03(b) of this Agreement.

 

“Applicable Percentage” means, with respect to any Existing Stockholder, the
percentage set forth opposite such Existing Stockholder’s name on Schedule A, as
amended from time to time to reflect any Permitted Assignment.

 

“Bankruptcy Code” means Title 11 of the United States Code.

 

“Business Day” means Monday through Friday of each week, except that a legal
holiday recognized as such by the government of the United States of America or
the State of New York shall not be regarded as a Business Day.

 

“Change of Control” means:

 

(i)                                     a merger, reorganization, consolidation
or similar form of business transaction directly involving the Corporation or
indirectly involving the Corporation through one or more intermediaries unless,
immediately following such transaction, more than 50% of the voting power of the
then outstanding voting stock or other equity securities of the Corporation
resulting from consummation of such transaction (including, without limitation,
any parent or ultimate parent corporation of such Person that as a result of
such transaction owns directly or indirectly the Corporation and all or
substantially all of the Corporation’s assets) is held by the existing
equityholders of the Corporation (determined immediately prior to such
transaction and related transactions); or

 

(ii)                                  a transaction in which the Corporation,
directly or indirectly, sells, assigns, conveys, transfers, leases or otherwise
disposes of all or substantially all of its assets to another Person other than
an Affiliate; or

 

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(iii)                               a transaction in which there is an
acquisition of control of the Corporation by a Person or group of Persons (other
than Existing Stockholders and their Affiliates).  For purposes of this
definition, the term “control” shall mean the possession, directly or
indirectly, of the power to either (A) vote more than 50% of the securities
having ordinary voting power for the election of directors (or comparable
positions in the case of partnerships and limited liability companies), or
(B) direct or cause the direction of the management and policies of such Person,
whether by contract or otherwise (for the avoidance of doubt, consent rights do
not constitute “control” for the purpose of this definition); or

 

(iv)                              the liquidation or dissolution of the
Corporation.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Combined Taxation Group” means any consolidated, combined or unitary group or
any profit and/or loss sharing, affiliated group relief, group payment or
similar group or fiscal unity for Tax purposes (by election or otherwise).

 

“Control” means the possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of a Person, whether through
ownership of voting securities, by contract or otherwise.

 

“Corporation” is defined in the preamble of this Agreement.

 

“Default Rate” means LIBOR plus 500 basis points.

 

“Determination” shall (a) have the meaning ascribed to such term in
Section 1313(a) of the Code or similar provision of state, local and foreign Tax
law, as applicable, or (b) mean any other event (including the execution of IRS
Form 870-AD) that finally and conclusively establishes the amount of any
liability for Tax.

 

“Divestiture” means the sale or other divestiture of any Taxable Entity, other
than any such sale that is or is part of a Change of Control.

 

“Divestiture Acceleration Payment” is defined in Section 4.03(c) of this
Agreement.

 

“Early Termination Date” means the date of an Early Termination Notice for
purposes of determining the Early Termination Payment, or, in the event of a
Divestiture, the effective date of such Divestiture.

 

“Early Termination Notice” is defined in Section 4.02 of this Agreement.

 

“Early Termination Payment” is defined in Section 4.03(b) of this Agreement.

 

“Early Termination Rate” means LIBOR plus 100 basis points.

 

“Early Termination Schedule” is defined in Section 4.02 of this Agreement.

 

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“Existing Stockholders” means the stockholders of the Corporation immediately
prior to the IPO as listed on Schedule A (including the Existing Stockholders
Representative in its capacity as an Existing Stockholder) together with any
Permitted Assignees.

 

“Existing Stockholders Representative” is defined in the preamble of this
Agreement.

 

“Expert” is defined in Section 7.09 of this Agreement.

 

“Interest Amount” is defined in Section 3.01(b) of this Agreement.

 

“IPO” means the initial public offering of common stock of the Corporation
pursuant to the registration statement on Form S-1 (File No. 333-210674) of the
Corporation.

 

“ITR Payment” means any Tax Benefit Payment, Divestiture Acceleration Payment or
Early Termination Payment required to be made by the Corporation to the Existing
Stockholders under this Agreement.

 

“ITR Tax Benefit” means (i) any interest required to be imputed under
Section 1272, 1274 or 483 or other provision of the Code and any similar
provision of state, local and foreign Tax law with respect to the Corporation’s
payment obligations under this Agreement and (ii) any other deduction available
to the Corporation attributable to the Corporation’s payment obligations under
this Agreement.

 

“LIBOR” means, during any period, an interest rate per annum equal to the
one-year LIBOR reported, on the date two days prior to the first day of such
period, on the Reuters Screen page “LIBOR01” (or if such screen shall cease to
be publicly available, as reported by any other publicly available source of
such market rate) for London interbank offered rates for U.S. dollar deposits
for such period.

 

“Material Objection Notice” is defined in Section 2.03(a) of this Agreement.

 

“Net Tax Benefit” is defined in Section 3.01(b) of this Agreement.

 

“NOLs” is defined in the recitals of this Agreement.

 

“Non-Tax Asset Tax Liability” means, with respect to any Taxable Year, the
liability for Taxes of any Taxable Entity determined using the same methods,
elections, conventions and similar practices used on the relevant Taxable Entity
Return, but (i) without taking into account the Pre-IPO Tax Assets, if any, and
(ii) excluding any deduction attributable to the ITR Tax Benefits.  If all or
any portion of the liability for Taxes for the Taxable Year arises as a result
of an audit by a Taxing Authority of such Taxable Year, such liability shall not
be included in determining the Non-Tax Asset Tax Liability unless and until
there has been a Determination with respect to such liability.

 

“Other Tax Assets” means any Post-IPO Tax Assets and any Acquired Tax Assets.

 

“Payment Date” means any date on which a payment is required to be made pursuant
to this Agreement.

 

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“Permitted Assignee” means any Person who receives rights under this Agreement
pursuant to a Permitted Assignment.

 

“Permitted Assignment” is defined in Section 7.06(b) of this Agreement.

 

“Person” means any individual, corporation, firm, partnership, joint venture,
limited liability company, estate, trust, business association, organization,
governmental entity or other entity.

 

“Post-IPO Tax Assets” means any Tax Asset arising in a Taxable Year or portion
thereof beginning after the date of the IPO.

 

“Pre-IPO Tax Assets” is defined in the recitals of this Agreement; provided,
however, that in order to determine whether a Tax Asset is a Pre-IPO Tax Asset,
the Taxable Year of the relevant Taxable Entity that includes the effective date
of the IPO shall be deemed to end as of the close of such effective date.

 

“Realized Tax Benefit” means, for a Taxable Year, the excess, if any, of the
Non-Tax Asset Tax Liability over the actual liability for Taxes of the Taxable
Entities for such Taxable Year.  If all or a portion of the actual Tax liability
for Taxes for the Taxable Year arises as a result of an audit by a Taxing
Authority of any Taxable Year, such liability shall not be included in
determining the Realized Tax Benefit unless and until there has been a
Determination with respect to such liability.

 

“Reconciliation Dispute” is defined in Section 7.09 of this Agreement.

 

“Reconciliation Procedures” means those procedures set forth in Section 7.09 of
this Agreement.

 

“Schedule” means, as applicable, any Tax Benefit Schedule and the Early
Termination Schedule.

 

“Subsidiaries” means, with respect to any Person, as of any date of
determination, any other Person as to which such Person owns, directly or
indirectly, or otherwise controls more than 50% of the voting power (or other
similar interests) or the sole general partner interest or managing member or
similar interest of such Person.

 

“Tax Asset” is defined in the recitals of this Agreement.

 

“Tax Benefit Payment” is defined in Section 3.01(b) of this Agreement.

 

“Tax Benefit Schedule” is defined in Section 2.02 of this Agreement.

 

“Tax Return” means any return, declaration, report or similar statement required
to be filed with respect to Taxes (including any attached schedules), including,
without limitation, any information return, claim for refund, amended return and
declaration of estimated Tax.

 

“Taxable Entity” is defined in the recitals of this Agreement.

 

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“Taxable Entity Return” means the federal Tax Return and/or state and/or local
and/or foreign Tax Return, as applicable, of a Taxable Entity filed with respect
to Taxes of any Taxable Year.

 

“Taxable Year” means a taxable year as defined in Section 441(b) of the Code or
comparable section of state, local or foreign Tax law, as applicable (and,
therefore, for the avoidance of doubt, may include a period of less than 12
months for which a Tax Return is made), ending on or after the date hereof.

 

“Tax” and “Taxes” means any and all U.S. federal, state, local and foreign
taxes, assessments or similar charges measured with respect to net income or
profits, and any interest related to such taxes.

 

“Taxing Authority” means any domestic, foreign, federal, national, state, county
or municipal or other local government, any subdivision, agency, commission or
authority thereof, or any quasi-governmental body exercising any taxing
authority or any other authority exercising Tax regulatory authority.

 

“Transferred Tax Assets” means, in the event of a Divestiture, the Pre-IPO Tax
Assets attributable to the Taxable Entity that are sold in such Divestiture to
the extent such Pre-IPO Tax Assets are transferred with such Taxable Entity
under applicable Tax law following the Divestiture (disregarding any limitation
on the use of such Pre-IPO Tax Assets as a result of the Divestiture) and do not
remain under applicable Tax law with the Corporation or any of its Subsidiaries
(other than the Taxable Entity that is sold in such Divestiture).

 

“Treasury Regulations” means the final, temporary and proposed regulations under
the Code promulgated from time to time (including corresponding provisions and
succeeding provisions) as in effect for the relevant taxable period.

 

“Valuation Assumptions” means, as of an Early Termination Date, the assumptions
that (i) in the federal Taxable Years and each other Taxable Year ending on or
after such Early Termination Date, the Taxable Entities will generate an amount
of taxable income sufficient to fully use the Pre-IPO Tax Assets, (ii) the
utilization of the Pre-IPO Tax Assets for such Taxable Year or future Taxable
Years, as applicable, will be determined based on the Tax laws in effect on the
Early Termination Date, and (iii) the federal income Tax rates and state, local
and foreign income Tax rates that will be in effect for each such Taxable Year
will be those specified for each such Taxable Year by the Code and other laws as
in effect on the Early Termination Date (or, with respect to any Taxable Year
for which such federal income Tax rates or state, local and foreign income Tax
rates are not specified by the Code and other law as in effect on the Early
Termination Date, such federal income Tax rates or state, local and foreign
income Tax rates that are in effect on the Early Termination Date).  For the
avoidance of doubt, in the event of a Change of Control or Divestiture, such
assumptions shall not take into account any (i) Tax attributes (including Tax
assets) of any entity other than the relevant Taxable Entity involved in the
Change of Control or Divestiture or (ii) changes in the relevant Taxable
Entities’ stand-alone Tax position that might result from the transaction giving
rise to the Change of Control or Divestiture, including but not limited to
changes pursuant to Section 382 of the Code any analogous provisions of federal,
state, local or foreign Tax law.

 

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ARTICLE II

 

DETERMINATION OF REALIZED TAX BENEFIT

 

Section 2.01                             Pre-IPO Tax Assets.  The Corporation,
on the one hand, and the Existing Stockholders, on the other hand, acknowledge
that the Taxable Entities may utilize the Pre-IPO Tax Assets to reduce the
amount of Taxes that the Taxable Entities would otherwise be required to pay in
the future.

 

Section 2.02                             Tax Benefit Schedule.  Within
forty-five (45) calendar days after the filing of the U.S. federal income Tax
Return of the Corporation for any Taxable Year in which there is a Realized Tax
Benefit (or as soon as practicable thereafter), the Corporation shall provide to
the Existing Stockholders Representative a schedule showing, for the Corporation
and for each other Taxable Entity, in reasonable detail, (i) the calculation of
the Realized Tax Benefit for such Taxable Year, and (ii) the calculation of any
payment to be made to the Existing Stockholders pursuant to ARTICLE III with
respect to such Taxable Year (collectively, a “Tax Benefit Schedule”). 
Concurrently, the Corporation shall also deliver to the Existing Stockholders
Representative all supporting information (including work papers and valuation
reports) reasonably necessary to support the calculation of such payment.  The
Schedule will become final as provided in Section 2.03(a) and may be amended as
provided in Section 2.03(b) (subject to the procedures set forth in
Section 2.03(a)).

 

Section 2.03                             Procedures; Amendments.

 

(a)                                 Procedure.  Each time the Corporation
delivers to the Existing Stockholders Representative an applicable Schedule
under this Agreement, including any Amended Schedule delivered pursuant to
Section 2.03(b), and including any Early Termination Schedule or amended Early
Termination Schedule, the Corporation shall also (x) deliver to the Existing
Stockholders Representative the schedules, valuation reports, if any, and work
papers necessary to provide reasonable detail regarding the preparation of the
Schedule and an Advisory Firm Letter related to such Schedule (the cost and
expense of which shall be paid by the Corporation) and (y) allow the Existing
Stockholders Representative reasonable access at no cost to the appropriate
representatives at each of the Corporation and the Advisory Firm in connection
with a review of such Schedule.  The applicable Schedule shall become final and
binding on all parties unless the Existing Stockholders Representative, within
thirty (30) calendar days after receiving any Schedule or amendment thereto,
provides the Corporation with notice of a material objection to such Schedule (a
“Material Objection Notice”) made in good faith or such earlier date as the
Stockholders Representative provides written notice to the Corporation that it
has no material objection to such Schedule.  If the parties, for any reason, are
unable to successfully resolve the issues raised in any Material Objection
Notice within thirty (30) calendar days of receipt by the Corporation of such
Material Objection Notice, the Corporation and the Existing Stockholders
Representative shall employ the Reconciliation Procedures.

 

(b)                                 Amended Schedule.  The applicable Schedule
for any Taxable Year may be amended from time to time by the Corporation (i) in
connection with a Determination affecting such Schedule, (ii) to correct
material inaccuracies in the Schedule identified as a result of the receipt of
additional factual information relating to a Taxable Year after the date the
Schedule was provided to the

 

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Existing Stockholders Representative, (iii) to comply with the Expert’s
determination under the Reconciliation Procedures, (iv) to reflect a material
change (relative to the amounts in the original Schedule) in the Realized Tax
Benefit for such Taxable Year attributable to a carryback or carryforward of a
loss or other Tax item to such Taxable Year, or (v) to reflect a material change
(relative to the amounts in the original Schedule) in the Realized Tax Benefit
for such Taxable Year attributable to an amended Tax Return filed for such
Taxable Year, in each case with respect to any Taxable Entity (such Schedule, an
“Amended Schedule”); provided, however, that an amendment under clause
(i) attributable to an audit of a Tax Return by an applicable Taxing Authority
shall not be made on an Amended Schedule unless and until there has been a
Determination with respect to such change. The Corporation shall provide any
Amended Schedule to the Existing Stockholders Representative within thirty (30)
calendar days of the occurrence of an event referred to in clauses (i) through
(v) of the preceding sentence, and any such Amended Schedule shall be subject to
approval procedures similar to those described in Section 2.03(a).

 

ARTICLE III

 

TAX BENEFIT PAYMENTS

 

Section 3.01                             Payments.

 

(a)                                 Timing of Payments.  Except as provided in
Section 5.02, within five (5) Business Days of a Tax Benefit Schedule delivered
to the Existing Stockholders Representative becoming final in accordance with
Section 2.03(a), the Corporation (on its own behalf and on behalf of any other
Taxable Entity) shall pay to each Existing Stockholder for such Taxable Year its
share (based on such Existing Stockholder’s Applicable Percentage) of the Tax
Benefit Payment determined pursuant to Section 3.01(b).  Each such Tax Benefit
Payment shall be made by wire transfer of immediately available funds to a bank
account of the applicable Existing Stockholder previously designated by the
Existing Stockholder to the Corporation, or as otherwise agreed by the
Corporation and the Existing Stockholder.  For the avoidance of doubt, no Tax
Benefit Payment shall be made in respect of estimated Tax payments, including,
without limitation, estimated federal income Tax payments.

 

(b)                                 A “Tax Benefit Payment” means an amount, not
less than zero, equal to eighty-five percent (85%) of the sum of the Net Tax
Benefit (as defined below) and the Interest Amount (as defined below).  The “Net
Tax Benefit” shall equal: (i) the Taxable Entities’ Realized Tax Benefit, if
any, for a Taxable Year plus (ii) the amount of the excess (if any) of the
Realized Tax Benefit reflected on an Amended Schedule for a previous Taxable
Year over the Realized Tax Benefit reflected on the Tax Benefit Schedule for
such previous Taxable Year, minus (iii) the excess (if any) of the Realized Tax
Benefit reflected on a Tax Benefit Schedule for a previous Taxable Year over the
Realized Tax Benefit reflected on the Amended Schedule for such previous Taxable
Year; provided, however, that, to the extent of the amounts described in clauses
(ii) and (iii) of this definition were taken into account in determining any Tax
Benefit Payment in a preceding Taxable Year, such amounts shall not be taken
into account in determining a Tax Benefit Payment attributable to any other
Taxable Year; provided, further, for the avoidance of doubt, that the Existing
Stockholders shall not be required to return any portion of any previously made
Tax Benefit Payment.  The “Interest Amount” shall equal the interest on any Net
Tax Benefit calculated at the Agreed Rate from the due date (without extensions)
for filing the Taxable

 

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Entity Return with respect to Taxes for the Taxable Year for which the Net Tax
Benefit is being measured until the Payment Date.

 

Section 3.02                             No Duplicative Payments.  It is
intended that the provisions of this Agreement will not result in duplicative
payment of any amount (including interest) required under this Agreement, and
this Agreement shall be construed and interpreted in accordance with such
intention. Carryovers or carrybacks of any NOL or other Tax item shall be
considered to be subject to the rules of the Code and the Treasury Regulations
or the appropriate provisions of Tax law, as applicable, governing the use,
limitation and expiration of carryovers or carrybacks of the relevant type;
provided, however, that Pre-IPO Tax Assets treated as resulting in a Realized
Tax Benefit for one Taxable Year shall not be treated as resulting in a Realized
Tax Benefit for any other Taxable Year, and, for purposes of determining the
Realized Tax Benefit for any Taxable Year, each Taxable Entity shall be assumed
(a) to utilize any item of loss, deduction or credit arising in such Taxable
Year (and permitted to be utilized in such Taxable Year) before carrying back or
carrying forward to such Taxable Year any NOL or other Tax item that is
permitted to be so carried back or carried forward, (b) to utilize any available
Pre-IPO Tax Asset that is permitted (or, for the absence of doubt, that would be
so permitted but for such Other Tax Asset) to be carried back or carried forward
to such Taxable Year before utilizing any Other Tax Asset, and (c) to utilize
any Pre-IPO Tax Asset in the first Taxable Year in which such Pre-IPO Tax Asset
is permitted to be utilized If a carryover or carryback of any Tax item includes
a portion that is attributable to the Pre-IPO Tax Assets and another portion
that is not, the Corporation shall be assumed to utilize the portion
attributable to the Pre-IPO Tax Assets before utilizing such other portion. The
provisions of this Agreement shall be construed in the appropriate manner so
that such intentions are realized.

 

ARTICLE IV

 

TERMINATION

 

Section 4.01                             Termination, Early Termination and
Breach of Agreement.

 

(a)                                 This Agreement shall terminate at the time
that all Tax Benefit Payments have been made to the Existing Stockholders under
this Agreement.

 

(b)                                 Notwithstanding Section 4.01(a), the
Corporation may terminate this Agreement by paying to the Existing Stockholders
the Early Termination Payment.  Upon payment of the Early Termination Payment by
the Corporation, neither the Corporation nor any Existing Stockholder shall have
any further payment obligations under this Agreement, other than any (i) Tax
Benefit Payment agreed to by the Corporation and the Existing Stockholders as
due and payable but unpaid as of the Early Termination Notice and (ii) Tax
Benefit Payment due for a Taxable Year ending prior to, with or including the
date of the Early Termination Notice (except to the extent that such amount is
included in the Early Termination Payment).

 

(c)                                  In the event that the Corporation breaches
any of its material obligations under this Agreement, whether as a result of
failure to make any payment when due, failure to honor any other material
obligation required hereunder or by operation of law as a result of the
rejection of this

 

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Agreement in a case commenced under the Bankruptcy Code or otherwise, then all
obligations hereunder shall be accelerated, and such obligations shall be
calculated pursuant to this ARTICLE IV as if an Early Termination Notice had
been delivered on the date of such breach and shall include, but not be limited
to, (1) the Early Termination Payment calculated as if an Early Termination
Notice had been delivered on the date of such breach, (2) any Tax Benefit
Payment agreed to by the Corporation and the Existing Stockholders as due and
payable but unpaid as of the Early Termination Notice and (3) any Tax Benefit
Payment due for the Taxable Year ending prior to, with or including the date of
a breach.  Notwithstanding the foregoing, in the event that the Corporation
breaches this Agreement, the Existing Stockholders shall be entitled to elect to
receive the amounts set forth in (1), (2) and (3) above or to seek specific
performance of the terms hereof.  The parties agree that the failure to make any
payment due pursuant to this Agreement within three (3) months of the date such
payment is due shall be deemed to be a breach of a material obligation under
this Agreement for all purposes of this Agreement, and that it will not be
considered to be a breach of a material obligation under this Agreement to make
a payment due pursuant to this Agreement within three (3) months of the date
such payment is due; provided, that, in the event that payment is not made
within three (3) months of the date such payment is due, the Existing
Stockholders (through the Existing Stockholders Representative) shall be
required to give written notice to the Corporation that the Corporation has
breached its material obligations, and so long as such payment is made within
five (5) Business Days of the delivery of such notice to the Corporation, the
Corporation shall no longer be deemed to be in breach of its material
obligations under this Agreement.

 

(d)                                 Change of Control.  In the event of a Change
of Control, all obligations hereunder shall be accelerated, and such obligations
shall be calculated pursuant to this ARTICLE IV as if an Early Termination
Notice had been delivered on the date of the Change of Control and shall
include, but not be limited to, (1) the Early Termination Payment calculated as
if an Early Termination Notice had been delivered on the effective date of the
Change of Control, (2) any Tax Benefit Payment agreed to by the Corporation and
the Existing Stockholders as due and payable but unpaid as of the Early
Termination Notice and (3) any Tax Benefit Payment due for any Taxable Year
ending prior to, with or including the effective date of a Change of Control. 
No later than sixty (60) calendar days prior to such Change of Control (or
promptly upon knowledge of such Change of Control), the Corporation shall
deliver to the Existing Stockholders Representative an Early Termination
Schedule (which, for the avoidance of doubt, shall be deemed to have been
delivered on the date of the Change of Control) and the Existing Stockholders
Representative shall have thirty (30) calendar days after actually receiving the
Early Termination Schedule to provide the Corporation with a Material Objection
Notice in accordance with the procedures set forth in Section 4.02 below.  In
the event of a Change of Control, the Early Termination Payment shall be
calculated utilizing the Valuation Assumptions, substituting in each case the
phrase “closing date of a Change of Control” for the phrase “Early Termination
Date.”

 

(e)                                  Divestiture Acceleration Payment. In the
event of a Divestiture, the Corporation shall pay to the Existing Stockholders
the Divestiture Acceleration Payment in respect of such Divestiture, which shall
be calculated utilizing the Valuation Assumptions.

 

Section 4.02                             Early Termination Notice.  If the
Corporation chooses to exercise its right of early termination under
Section 4.01 above, the Corporation shall deliver to the Existing Stockholders
Representative notice of such intention to exercise such right (an “Early
Termination Notice”) and a schedule (the “Early Termination Schedule”)
specifying the Corporation’s intention to exercise such

 

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right and showing in reasonable detail the information required pursuant to
Section 2.02 and the calculation of the Early Termination Payment.  In the event
of a Divestiture, the Corporation shall deliver to the Existing Stockholders
Representative no later than sixty (60) calendar days prior to such Divestiture
(or promptly upon knowledge of such Divestiture) an Early Termination Schedule
showing in reasonable detail the information required pursuant to Section 2.02
and the calculation of the Divestiture Acceleration Payment.  The Early
Termination Schedule shall become final and binding on all parties unless the
Existing Stockholders Representative, within thirty (30) calendar days after
receiving the Early Termination Schedule, provides the Corporation with a
Material Objection Notice.  If the parties, for any reason, are unable to
successfully resolve the issues raised in such Material Objection Notice within
thirty (30) calendar days after receipt by the Corporation of the Material
Objection Notice, the Corporation and the Existing Stockholders Representative
shall employ the Reconciliation Procedures as described in Section 7.09 of this
Agreement.

 

Section 4.03                             Payment upon Early Termination. 
(a) Within three (3) Business Days after agreement is reached between the
Existing Stockholders Representative and the Corporation concerning the Early
Termination Schedule, the Corporation shall pay to each Existing Stockholder its
share (based on such Existing Stockholder’s Applicable Percentage) of an amount
equal to the Early Termination Payment or Divestiture Acceleration Payment and
any other payment required to be made pursuant to Sections 4.01(b), (c) and
(d).  Such payment shall be made by wire transfer of immediately available funds
to a bank account designated by the applicable Existing Stockholders, or as
otherwise agreed by the Corporation and the Existing Stockholder.

 

(b)                                 The “Early Termination Payment” means, as of
the Early Termination Date, the present value, discounted at the Early
Termination Rate as of such date, of all Tax Benefit Payments that would be
required to be paid by the Corporation to the Existing Stockholders beginning
from the Early Termination Date (other than a payment which is not required to
be paid solely by reason of the application of Section 5.02), assuming the
Valuation Assumptions are applied, provided that in the event of a Change of
Control, the Early Termination Payment shall be calculated without giving effect
to any limitation on the use of the Pre-IPO Tax Assets resulting from the Change
of Control.  For purposes of calculating, pursuant to this Section 4.03(b), the
present value of all Tax Benefit Payments that would be required to be paid, it
shall be assumed that, absent the Early Termination Notice, all Tax Benefit
Payments would be paid on the due date (without extensions) for filing the
relevant Taxable Entity Return with respect to Taxes for each Taxable Year. The
computation of the Early Termination Payment is subject to the Reconciliation
Procedures as described in Section 7.09 of this Agreement.

 

(c)                                  The “Divestiture Acceleration Payment” as
of the date of any Divestiture shall equal with respect to the Existing
Stockholders the present value, discounted at the Early Termination Rate as of
such date, of the Tax Benefit Payments resulting solely from the Transferred Tax
Assets that would be required to be paid by the Corporation to the Existing
Stockholders beginning from the date of such Divestiture assuming the Valuation
Assumptions are applied, provided that the Divestiture Acceleration Payment
shall be calculated without giving effect to any limitation on the use of the
Transferred Tax Assets resulting from the Divesture. For purposes of calculating
the present value pursuant to this Section 4.03(c) of all Tax Benefit Payments
that would be required to be paid, it shall be assumed that, absent the
Divestiture, all Tax Benefit Payments would be paid on the due date (without
extensions) for filing the relevant Taxable Entity Return with respect to Taxes
for each Taxable Year. The

 

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computation of the Divestiture Acceleration Payment is subject to the
Reconciliation Procedures as described in Section 7.09 of this Agreement.

 

ARTICLE V

 

LATE PAYMENTS AND COMPLIANCE WITH INDEBTEDNESS

 

Section 5.01                             Late Payments by the Corporation.  The
amount of all or any portion of any ITR Payment not made to the Existing
Stockholders when due under the terms of this Agreement shall be payable
together with any interest thereon, computed at the Default Rate and commencing
from the date on which such ITR Payment was due and payable.

 

Section 5.02                             Compliance with Indebtedness. 
Notwithstanding anything to the contrary provided herein, if at the time any
amounts become due and payable hereunder the Corporation is not permitted,
pursuant to the terms of the Corporation’s or its direct or indirect
Subsidiaries’ debt documentation, to pay such amounts, or the Corporation’s
direct or indirect Subsidiaries are not permitted, pursuant to the terms of the
Corporation’s or its direct or indirect Subsidiaries’ debt documentation, to
make payments to the Corporation to allow the Corporation to pay such amounts,
then the Corporation shall by notice to the Existing Stockholders Representative
be permitted to defer the payment of such amounts until each condition rendering
the payment of such amounts impermissible as described in this Section 5.02 is
no longer applicable.   At the time such condition is no longer applicable and
no other such condition exist, such amounts (together with accrued and unpaid
interest thereon as described in the immediately following sentence) shall
become due and payable immediately.  If the Corporation defers the payment of
any such amounts pursuant to the first sentence in this Section 5.02, such
amounts shall accrue interest at the Agreed Rate per annum from the date that
such amounts originally became due and owing pursuant to the terms hereof to the
date that such amounts were paid.  For the avoidance of doubt, any payment not
made due to the preceding sentence shall not be deemed a breach under
Section 4.01(c) of this Agreement unless and until such payment remains unpaid
thirty (30) calendar days after the date on which such condition described in
this Section 5.02 is no longer applicable.  The Corporation agrees to take
commercially reasonable actions to cause its direct and indirect Subsidiaries to
pay dividends (including, to the extent commercially reasonable, access any
revolving credit facility or other source of liquidity to facilitate the payment
of such dividends), to the extent consistent with the terms of their outstanding
indebtedness and any applicable law, to the extent necessary to make payments
hereunder.

 

Section 5.03                             Conflicting Agreements.  Without the
consent of the Existing Stockholders Representative, the Corporation shall not,
and shall cause its direct or indirect Subsidiaries to not, enter into any
agreement or indenture or any amendment or other modification to any agreement
or indenture (including, in each case, in connection with any refinancing) that
would, directly or indirectly, materially restrict or otherwise encumber (or in
the case of amendments or other modifications, further restrict or encumber) its
ability to make payments under this Agreement in accordance with its terms,
including any agreement that would, directly or indirectly, restrict or
otherwise encumber (or in the case of amendments or other modifications, further
restrict or encumber) the ability of the Corporation’s direct or indirect
Subsidiaries to upstream cash (by dividend or loan) to the Corporation to fund
amounts payable by the Corporation under this Agreement.

 

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ARTICLE VI

 

NO DISPUTES; CONSISTENCY; COOPERATION

 

Section 6.01                             The Existing Stockholders
Representative’s Participation in the Corporation’s Tax Matters.  Except as
otherwise provided herein, the Corporation shall have full responsibility for,
and sole discretion over, all Tax matters concerning the each Taxable Entity,
including, without limitation, the preparation, filing or amendment of any Tax
Return and the defense, contest, or settlement of any issue pertaining to Taxes,
subject to a requirement that the Corporation act in good faith in connection
with its control of any matter which is reasonably expected to affect any
Existing Stockholder’s rights and obligations under this Agreement. 
Notwithstanding the foregoing, the Corporation shall notify the Existing
Stockholders Representative of, and keep the Existing Stockholders
Representative reasonably informed with respect to, the portion of any audit of
any Taxable Entity by a Taxing Authority the outcome of which is reasonably
expected to affect any Existing Stockholder’s rights and obligations under this
Agreement, and shall give the Existing Stockholders Representative reasonable
opportunity to provide information and participate in the applicable portion of
such audit. Notwithstanding anything herein to the contrary, without the consent
of the Existing Stockholders Representative, which consent the Existing
Stockholders Representative shall not unreasonably withhold, condition or delay,
the Corporation shall not, and shall cause each other Taxable Entity not to,
(i) change any accounting method, or amend or take any position inconsistent
with a previously-filed Taxable Entity Return, in each case if such action could
materially adversely affect the Pre-IPO Tax Assets, (ii) seek any guidance from,
or initiate any communication with, the Internal Revenue Service or any other
Taxing Authority (whether written, verbal or otherwise) at any time concerning
the Pre-IPO Tax Assets, or (iii) settle or otherwise resolve any audit or other
challenge by a Taxing Authority of a material amount relating to Realized Tax
Benefits that are the subject of this Agreement.

 

Section 6.02                             Consistency.  Except upon the written
advice of the Advisory Firm, the Corporation and the Existing Stockholders
Representative agree to report and cause to be reported for all purposes,
including federal, state, local, and foreign Tax purposes and financial
reporting purposes, all Tax-related items (including, without limitation, ITR
Payments) in a manner consistent with that specified by the Corporation in any
Schedule or statement required or permitted to be provided by or on behalf of
the Corporation or any Taxable Entity under this Agreement and agreed by the
Existing Stockholders Representative or under applicable Tax law.  Any dispute
concerning such advice shall be subject to the Reconciliation Procedures;
provided, however, that, only the Existing Stockholders Representative shall
have the right to object to such advice pursuant this Section 6.02.

 

Section 6.03                             Cooperation.  Each of the Corporation
and the Existing Stockholders (through the Existing Stockholders Representative)
shall (a) furnish to the other party in a timely manner such information,
documents and other materials as the other party may reasonably request for
purposes of making or approving any determination or computation necessary or
appropriate under this Agreement, preparing any Tax Return or contesting or
defending any audit, examination or controversy with any Taxing Authority,
(b) make itself available to the other party and its representatives to provide
explanations of documents and materials and such other information as the
requesting party or its representatives may reasonably request in connection
with any of the matters described in clause (a) above, and (c) reasonably
cooperate in connection with any such matter, and the requesting party shall

 

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reimburse the other party for any reasonable third-party costs and expenses
incurred pursuant to this Section 6.03.

 

ARTICLE VII

 

MISCELLANEOUS

 

Section 7.01                             Notices.  All notices, requests,
claims, demands and other communications hereunder shall be in writing and shall
be deemed duly given and received (a) on the date of delivery, if delivered
personally, or by facsimile (upon confirmation of transmission by the sender’s
fax machine if sent on a Business Day (or otherwise on the next Business Day))
or (b) on the first Business Day following the date of dispatch, if delivered by
a recognized next-day courier service. All notices hereunder shall be delivered
as set forth below or pursuant to such other instructions as may be designated
in writing by the party to receive such notice:

 

If to the Corporation, to:

 

AdvancePierre Foods Holdings, Inc.

9987 Carver Road

Blue Ash, Ohio 45242

Tel: 800-969-2747

Attention:  Michael B. Sims

 

with a copy (which shall not constitute notice) to :

 

Skadden, Arps, Slate, Meagher & Flom LLP

300 South Grand Avenue, Suite 3400

Los Angeles, CA 90071

Tel: 213-687-5000

Attention:  Jeffrey H. Cohen and Jonathan Ko

 

If to the Existing Stockholders Representative, to:

 

OCM FIE, LLC

333 South Grand Avenue, 28th Floor

Los Angeles, CA 90071

Tel: 213-830-6300

Attention:  Ted Crockin

 

Any party may change its address or fax number by giving the other party written
notice of its new address or fax number in the manner set forth above.

 

Section 7.02                             Counterparts.  This Agreement may be
executed in one or more counterparts, all of which shall be considered one and
the same agreement and shall become effective when one or more counterparts have
been signed by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.  Delivery of an
executed signature page to this Agreement by facsimile transmission shall be as
effective as delivery of a manually signed counterpart of this Agreement.

 

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Section 7.03                             Entire Agreement; Third Party
Beneficiaries.  This Agreement constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof.  This Agreement shall be
binding upon and inure solely to the benefit of each party hereto and their
respective successors and permitted assigns.  The parties to this Agreement
agree that the Existing Stockholders are expressly made third party
beneficiaries to this Agreement.  Other than as provided in the preceding
sentence, nothing in this Agreement, express or implied, is intended to, or
shall, confer upon any other Person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.

 

Section 7.04                             Governing Law.  This Agreement shall be
governed by, and construed in accordance with, the laws of the State of New
York.

 

Section 7.05                             Severability.  If any term or other
provision of this Agreement is determined to be invalid, illegal or incapable of
being enforced as a result of any law or public policy, all other terms and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party.  Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner, in order that the transactions contemplated
hereby may be consummated as originally contemplated to the greatest extent
possible.

 

Section 7.06                             Successors; Assignment; Amendments;
Waivers.  (a) The Existing Stockholders Representative, in its capacity as the
Existing Stockholders Representative, may assign this Agreement to any Person
without the prior written consent of the Corporation or the Existing
Stockholders, as long as such transferee has executed and delivered, or, in
connection with such transfer, executes and delivers, a joinder to this
Agreement, in form and substance reasonably satisfactory to the Corporation,
agreeing to be bound by all provisions of this Agreement, except as otherwise
provided in such joinder.

 

(b)                                 Except as otherwise provided in this
Agreement, no Existing Stockholder may assign its rights under this Agreement
without the prior written consent of the Existing Stockholders Representative. 
Any assignment of an Existing Stockholder’s rights meeting the requirements of
this paragraph shall be referred to herein as a “Permitted Assignment,” and
Schedule A hereto shall be amended to reflect such Permitted Assignment and the
change in the Applicable Percentage of the assignor and assignee.

 

(c)                                  No provision of this Agreement may be
amended unless such amendment is approved in writing by the Corporation and the
Existing Stockholders (through the Existing Stockholders Representative).  No
provision of this Agreement may be waived unless such waiver is in writing and
signed by the party against whom the waiver is to be effective.

 

(d)                                 All of the terms and provisions of this
Agreement shall be binding upon, shall inure to the benefit of and shall be
enforceable by the parties hereto and their respective successors, assigns,
heirs, executors, administrators and legal representatives, including any
Permitted Assignee pursuant to a Permitted Assignment.  The Corporation shall
require and cause any direct or indirect

 

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successor (whether by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Corporation, by written
agreement, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent that the Corporation would be required to perform
if no such succession had taken place.

 

Section 7.07                             Headings, Titles, and Subtitles.  The
headings, titles, and subtitles of the sections and subsections of this
Agreement are for convenience of reference only and are not to be considered in
construing this Agreement.

 

Section 7.08                             Resolution of Disputes.

 

(a)                                 Other than with respect to any disputes
under Section 2.02, Section 4.02, or Section 6.02 (which are to be resolved
pursuant to Section 7.09), any and all disputes which cannot be settled
amicably, including any ancillary claims of any party, arising out of, relating
to or in connection with the validity, negotiation, execution, interpretation,
performance or non-performance of this Agreement (including the validity, scope
and enforceability of this arbitration provision) shall be finally settled by
arbitration conducted by a single arbitrator in accordance with the then
existing Rules of Arbitration of the International Chamber of Commerce.  The
place of arbitration shall be New York, New York.  The parties shall jointly
select a single arbitrator who shall have the authority to hold hearings and to
render a decision in accordance with the then existing Rules of Arbitration of
the International Chamber of Commerce.  If the parties to the dispute fail to
agree on the selection of an arbitrator within thirty (30) calendar days of the
receipt of the request for arbitration, the arbitrator shall be selected by the
International Chamber of Commerce.  The arbitrator shall be a lawyer.  The
arbitration shall be governed by the Federal Arbitration Act, 9 U.S.C.
Section 1, et seq., and judgment on the award may be entered by any court having
jurisdiction thereof.  Performance under this Agreement shall continue if
reasonably possible during any arbitration proceedings.

 

(b)                                 Notwithstanding the provisions of
Section 7.08(a), either party may bring an action or special proceeding in any
court of competent jurisdiction for the purpose of compelling a party to
arbitrate, seeking temporary or preliminary relief in aid of an arbitration
hereunder, and/or enforcing an arbitration award and, for the purposes of this
Section 7.08(b), each Existing Stockholder (through the Existing Stockholders
Representative) (i) expressly consents to the application of Section 7.08(c) to
any such action or proceeding, and (ii) irrevocably appoints the Corporation as
its agent for service of process in connection with any such action or
proceeding and agrees that service of process upon such agent, who shall
promptly advise the Existing Stockholders Representative of any such service of
process, shall be deemed in every respect effective service of process upon such
Existing Stockholder in any such action or proceeding.

 

(c)                                  (i)                                     THE
CORPORATION AND EACH EXISTING STOCKHOLDER (THROUGH THE EXISTING STOCKHOLDERS
REPRESENTATIVE) HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF COURTS LOCATED
IN NEW YORK AND AGREES THAT ANY JUDICIAL PROCEEDING BROUGHT IN ACCORDANCE WITH
THE PROVISIONS OF Section 7.08(b) SHALL BE BROUGHT AND DETERMINED EXCLUSIVELY IN
THE SUPREME COURT OF THE STATE OF NEW YORK AND ANY STATE APPELLATE COURT
THEREFROM WITHIN THE STATE OF

 

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NEW YORK (OR, IF THE SUPREME COURT OF THE STATE OF NEW YORK REFUSES TO ACCEPT
JURISDICTION OVER A PARTICULAR MATTER, ANY STATE OR FEDERAL COURT WITHIN THE
STATE OF NEW YORK).  The parties acknowledge that the forum designated by this
Section 7.08(c) has a reasonable relation to this Agreement and to the parties’
relationship with one another.

 

(ii)                                  The parties hereby waive, to the fullest
extent permitted by applicable law, any objection which they now or hereafter
may have to personal jurisdiction or to the laying of venue of any such
ancillary suit, action or proceeding brought in any court referred to in
Section 7.08(c)(i) and such parties agree not to plead or claim the same.

 

(iii)                               AS A SPECIFICALLY BARGAINED INDUCEMENT FOR
EACH OF THE PARTIES TO ENTER INTO THIS AGREEMENT (WITH EACH PARTY HAVING HAD
OPPORTUNITY TO CONSULT COUNSEL), EACH OF THE PARTIES EXPRESSLY AND IRREVOCABLY
WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING UNDER THIS
AGREEMENT OR ANY ACTION OR PROCEEDING ARISING OUT OF THE TRANSACTIONS
CONTEMPLATED HEREBY, REGARDLESS OF WHICH PARTY INITIATES SUCH ACTION OR
PROCEEDING, AND ANY ACTION OR PROCEEDING UNDER THIS AGREEMENT OR ANY ACTION OR
PROCEEDING ARISING OUT OF THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE TRIED IN
A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.

 

Section 7.09                             Reconciliation Procedures.  In the
event that the Corporation and the Existing Stockholders Representative are
unable to resolve a disagreement with respect to the matters governed by this
Agreement (a “Reconciliation Dispute”), the Reconciliation Dispute shall be
submitted for determination to a nationally recognized expert in the particular
area of disagreement (the “Expert”) mutually acceptable to both parties.  The
Expert shall be a partner in a nationally recognized accounting firm or a law
firm (other than the Advisory Firm), and the Expert shall not, and the firm that
employs the Expert shall not, have any material relationship with the
Corporation or any of the Existing Stockholders or any other actual or potential
conflict of interest.  If the parties are unable to agree on an Expert within
fifteen (15) days of receipt by the respondent(s) of written notice of a
Reconciliation Dispute, the Expert shall be appointed by the International
Institute for Conflict Prevention and Resolution. The Expert shall resolve any
matter relating to the Early Termination Schedule or an amendment thereto within
thirty (30) calendar days and shall resolve any matter relating to a Tax Benefit
Schedule or an amendment thereto within fifteen (15) calendar days or as soon
thereafter as is reasonably practicable, in each case after the matter has been
submitted to the Expert for resolution. Notwithstanding the preceding sentence,
if the Reconciliation Dispute is not resolved before any payment that is the
subject of the Reconciliation Dispute is due or any Tax Return reflecting the
subject of the Reconciliation Dispute is due, such payment shall be made on the
date prescribed by this Agreement and such Tax Return may be filed as prepared
by the Corporation, subject to adjustment or amendment upon resolution.  The
costs and expenses relating to the engagement of such Expert or the amendment of
any Tax Return shall be borne by the Corporation, except as provided in the next
sentence.  Each of the Corporation and the Existing Stockholders shall bear
their own costs and expenses of such proceeding.  Any dispute as to whether a
dispute is a Reconciliation Dispute, within the meaning of this Section 7.09
shall be decided by the Expert.  The Expert shall finally

 

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determine any Reconciliation Dispute and the determinations of the Expert
pursuant to this Section 7.09 shall be binding on the Corporation and the
Existing Stockholders and may be entered and enforced in any court having
jurisdiction.

 

Section 7.10                             Withholding.  The Corporation shall be
entitled to deduct and withhold from any payment payable pursuant to this
Agreement such amounts as the Corporation is required to deduct and withhold
with respect to the making of such payment under the Code, or any applicable
provision of state, local or foreign Tax law, provided that with respect to the
Existing Stockholders only, the Corporation (i) gives ten (10) days advance
written notice of its intention to make such withholding to the Existing
Stockholders Representative, (ii) identifies the legal basis requiring such
withholding and (iii) gives the Existing Stockholders Representative an
opportunity to establish that such withholding is not legally required. To the
extent that amounts are so withheld and paid over to the appropriate Taxing
Authority by the Corporation, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the Existing Stockholders. The
Corporation shall provide evidence of such payments to the Existing Stockholders
(through the Existing Stockholders Representative) to the extent that such
evidence is available.

 

Section 7.11                             Affiliated Corporations; Admission of
the Corporation into a Consolidated Group; Transfers of Corporate Assets.

 

(a)                                 If the Corporation is or becomes a member of
an affiliated or consolidated group of corporations that files a consolidated
income Tax Return pursuant to Sections 1501 et seq. of the Code, or any
corresponding provisions of state, local or foreign law (other than if the
Corporation becomes a member of such a group as a result of a Change of Control,
in which case the provisions of ARTICLE IV shall control), then: (i) the
provisions of this Agreement shall be applied with respect to the group as a
whole; and (ii) Tax Benefit Payments shall be computed with reference to the
consolidated taxable income of the group as a whole.

 

(b)                                 If any Taxable Entity is or becomes a member
of a Combined Taxation Group for purposes of state or foreign income Taxes
(other than if a Taxable Entity becomes a member of such a group as a result of
a Change of Control or Divestiture, in which cases the provisions of ARTICLE IV
shall control), then: (i) the provisions of this Agreement shall be applied with
respect to the group as a whole; and (ii) Tax Benefit Payments shall be computed
with reference to the combined taxable income of the group as a whole.

 

(c)                                  If any Person the income of which is
included in the income of any Taxable Entity’s Combined Taxation Group transfers
one or more assets to a corporation or any Person treated as such for Tax
purposes with which such Person does not file a consolidated Tax Return pursuant
to Section 1501 of the Code, for purposes of calculating the amount of any Tax
Benefit Payment (e.g., calculating the gross income of the Corporation’s
affiliated or consolidated group and determining the Realized Tax Benefit) due
hereunder, such Person shall be treated as having disposed of such asset in a
fully taxable transaction on the date of such transfer.  The consideration
deemed to be received by such entity shall be equal to the fair market value of
the transferred asset, plus (i) the amount of debt to which such asset is
subject, in the case of a transfer of an encumbered asset, or (ii) the amount of
debt allocated to such asset, in the case of a transfer of a partnership
interest.

 

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Section 7.12                             Confidentiality.  (a)  Each Existing
Stockholder (through the Existing Stockholders Representative) and each of its
assignees acknowledges and agrees that the information of the Corporation is
confidential and, except in the course of performing any duties as necessary for
the Corporation and its Affiliates, as required by law or legal process or to
enforce the terms of this Agreement, shall keep and retain in the strictest
confidence and not to disclose to any Person all confidential matters, acquired
pursuant to this Agreement, of the Corporation or the Existing Stockholders. 
This Section 7.12 shall not apply to (i) any information that has been made
publicly available by the Corporation or any of its Affiliates, becomes public
knowledge (except as a result of an act of an Existing Stockholder in violation
of this Agreement) or is generally known to the business community or (ii) the
disclosure of information to the extent necessary for any Existing Stockholder
to prepare and file its Tax Returns, to respond to any inquiries regarding the
same from any Taxing Authority or to prosecute or defend any action, proceeding
or audit by any Taxing Authority with respect to such returns.  Notwithstanding
anything to the contrary herein, each Existing Stockholder (and each employee,
representative or other agent of such Existing Stockholder) may disclose to any
and all Persons, without limitation of any kind, the Tax treatment and Tax
structure of (x) the Corporation and (y) any of its transactions, and all
materials of any kind (including opinions or other Tax analyses) that are
provided to such Existing Stockholder relating to such Tax treatment and Tax
structure.

 

(b)                                 If the Existing Stockholders Representative
or any of its assignees commits a breach, or threatens to commit a breach, of
any of the provisions of this Section 7.12, the Corporation shall have the right
and remedy to have the provisions of this Section 7.12 specifically enforced by
injunctive relief or otherwise by any court of competent jurisdiction without
the need to post any bond or other security, it being acknowledged and agreed
that any such breach or threatened breach shall cause irreparable injury to the
Corporation or any of its Subsidiaries and the accounts and funds managed by the
Corporation, and that money damages alone shall not provide an adequate remedy
to such Persons.  Such rights and remedies shall be in addition to, and not in
lieu of, any other rights and remedies available at law or in equity.

 

Section 7.13                             Existing Stockholders Representative.

 

(a)                                 Appointment.  Without further action of any
of the Corporation, the Existing Stockholders Representative or any Existing
Stockholder, and as partial consideration of the benefits conferred by this
Agreement, the Existing Stockholders Representative is hereby irrevocably
constituted and appointed to act as the sole representative, agent and
attorney-in-fact for the Existing Stockholders and their successors and assigns
with respect to the taking by the Existing Stockholders Representative of any
and all actions and the making of any decisions required or permitted to be
taken by the Existing Stockholders Representative under this Agreement.  The
power of attorney granted herein is coupled with an interest and is irrevocable
and may be delegated by the Existing Stockholders Representative.  No bond shall
be required of the Existing Stockholders Representative, and the Existing
Stockholders Representative shall receive no compensation for its services.

 

(b)                                 Expenses.  If at any time the Existing
Stockholders Representative shall incur out of pocket expenses in connection
with the exercise of its duties hereunder, upon written notice to the
Corporation from the Existing Stockholders Representative of documented costs
and expenses (including fees and disbursements of counsel and accountants)
incurred by the Existing Stockholders Representative

 

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in connection with the performance of its rights or obligations under this
Agreement and the taking of any and all actions in connection therewith, the
Corporation shall reduce any future payments (if any) due to the Existing
Stockholders hereunder pro rata (based on their respective Applicable
Percentages) by the amount of such expenses which it shall instead remit
directly to the Existing Stockholders Representative.  In connection with the
performance of its rights and obligations under this Agreement and the taking of
any and all actions in connection therewith, the Existing Stockholders
Representative shall not be required to expend any of its own funds (though, for
the avoidance of doubt, it may do so at any time and from time to time in its
sole discretion).

 

(c)                                  Limitation on Liability.  The Existing
Stockholders Representative shall not be liable to any Existing Stockholder for
any act of the Existing Stockholders Representative arising out of or in
connection with the acceptance or administration of its duties under this
Agreement, except to the extent any liability, loss, damage, penalty, fine, cost
or expense is actually incurred by such Existing Stockholder as a proximate
result of the gross negligence, bad faith or willful misconduct of the Existing
Stockholders Representative (it being understood that any act done or omitted
pursuant to the advice of legal counsel shall be conclusive evidence of such
good faith and reasonable judgment).  The Existing Stockholders Representative
shall not be liable for, and shall be indemnified by the Existing Stockholders
(on a several but not joint basis) for, any liability, loss, damage, penalty or
fine incurred by the Existing Stockholders Representative (and any cost or
expense incurred by the Existing Stockholders Representative in connection
therewith and herewith and not previously reimbursed pursuant to subsection
(b) above) arising out of or in connection with the acceptance or administration
of its duties under this Agreement, except to the extent that any such
liability, loss, damage, penalty, fine, cost or expense is the proximate result
of the gross negligence, bad faith or willful misconduct of the Existing
Stockholders Representative (it being understood that any act done or omitted
pursuant to the advice of legal counsel shall be conclusive evidence of such
good faith and reasonable judgment); provided, however, in no event shall any
Existing Stockholder be obligated to indemnify the Existing Stockholders
Representative hereunder for any liability, loss, damage, penalty, fine, cost or
expense to the extent (and only to the extent) that the aggregate amount of all
liabilities, losses, damages, penalties, fines, costs and expenses indemnified
by such Existing Stockholder hereunder is or would be in excess of the aggregate
payments under this Agreement actually remitted to such Existing
Stockholder.  Each Existing Stockholder’s receipt of any and all benefits to
which such Existing Stockholder is entitled under this Agreement, if any, is
conditioned upon and subject to such Existing Stockholder’s acceptance of all
obligations, including the obligations of this Section 7.13(c), applicable to
such Existing Stockholder under this Agreement.

 

(d)                                 Actions of the Existing Stockholders
Representative.  Any decision, act, consent or instruction of the Existing
Stockholders Representative shall constitute a decision of all Existing
Stockholders and shall be final, binding and conclusive upon each Existing
Stockholder, and the Corporation may rely upon any decision, act, consent or
instruction of the Existing Stockholders Representative as being the decision,
act, consent or instruction of each Existing Stockholder.   The Corporation is
hereby relieved from any liability to any person for any acts done by the
Corporation in accordance with any such decision, act, consent or instruction of
the Existing Stockholders Representative.

 

20

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Section 7.14                             Drag-Along Rights.  Each Existing
Stockholder hereby agrees that the Existing Stockholders Representative may, at
any time and in its sole discretion, elect to enter into a transaction which is
likely to result in the assignment, in whole or in part, of this Agreement to a
Person (upon such election, an “Approved Assignment”), and each such Existing
Stockholder will raise no objections against such Approved Assignment,
regardless of the consideration (if any) being paid in such Approved Assignment,
so long as such Approved Assignment does not materially and adversely impact
such Existing Stockholders in a manner materially adverse to the other Existing
Stockholders. Each Existing Stockholder will take all actions requested by the
Existing Stockholders Representative in connection with the consummation of an
Approved Assignment, including the execution of all agreements, documents and
instruments in connection therewith requested by the Existing Stockholders
Representative of such Existing Stockholder. Upon the consummation of the
Approved Assignment, each Existing Stockholder will receive their Applicable
Percentage of such consideration, if any, relating to such Approved Assignment.
Existing Stockholders will bear their Applicable Percentage of the costs of any
Approved Assignment to the extent such costs are incurred for the benefit of all
Existing Stockholders.

 

Section 7.15                             Tag-Along Rights.  Unless the Existing
Stockholders Representative elects to exercise its rights pursuant to
Section 7.14, if the Existing Stockholders Representative (solely in its
capacity as an Existing Stockholder) (in such capacity, the “Transferring
Stockholder”) proposes to assign a portion of its rights under this Agreement to
a third-party (such Person, a “Prospective Purchaser,” and such transaction, a
“Tag-Along Sale”), then, prior to proceeding with such Tag-Along Sale, the
Transferring Stockholder will deliver to the other Existing Stockholders (the
“Other Existing Stockholders”) a written notice stating that the Transferring
Stockholder proposes to assign a portion of its rights under this Agreement and
the consideration to be paid by the Prospective Purchaser.  Each Other  Existing
Stockholder may elect to assign a portion its rights under this Agreement on the
same terms and conditions as the Transferring Stockholder.  Within ten (10) days
after receipt of such written notice, if an Other Existing Stockholder elects to
participate in such Tag-Along Sale, such Other Existing Stockholder will deliver
written notice to the Transferring Stockholder stating the rights to be assigned
by such Other Existing Stockholder.  If the Prospective Purchaser will not
acquire all of the rights of the Transferring Stockholder and the electing Other
Existing Stockholders, then the rights proposed to be assigned by the
Transferring Stockholder and the electing Other Existing Stockholders will be
ratably reduced to that which the Prospective Purchaser is willing to acquire. 
Each electing Other Existing Stockholder will take all actions requested by the
Transferring Stockholder in connection with the consummation of a Tag-Along
Sale, including the execution of all agreements, documents and instruments in
connection therewith requested by the Transferring Stockholder of such Other
Existing Stockholder.  The Transferring Stockholder and the electing Other
Existing Stockholders will bear their Applicable Percentage of the costs of a
Tag-Along Sale.

 

 

[Signatures pages follow]

 

21

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IN WITNESS WHEREOF, the Corporation and the Existing Stockholders Representative
have duly executed this Agreement as of the date first written above.

 

 

AdvancePierre Foods Holdings, Inc.

 

 

 

 

 

By:

/s/ Michael B. Sims

 

 

Name:  Michael B. Sims

 

 

Title:    Chief Financial Officer, Executive Vice President, Treasurer and
Secretary

 

 

 

 

 

OCM FIE, LLC

 

as Existing Stockholders Representative

 

 

 

 

 

By:

/s/ Martin Boskovich

 

 

Name:  Martin Boskovich

 

 

Title:    Authorized Signatory

 

 

 

 

 

 

 

By:

/s/ Jamie Toothman

 

 

Name:  Jamie Toothman

 

 

Title:    Authorized Signatory

 

--------------------------------------------------------------------------------

 

Schedule A

 

Existing Stockholder

 

Applicable
Percentage

 

OCM POF IV Delaware

 

76.8529

%

OCM APFH Holdings, LLC

 

2.9623

%

David L. McLaughlin Revocable Trust

 

0.6565

%

Jean E. McLaughlin Revocable Trust

 

0.6565

%

Gregory S. Allen Revocable Trust

 

1.2299

%

1998 Greg S. Allen Family Trust

 

1.4605

%

1998 Mark S. Allen Family Trust

 

1.0762

%

Allen Family 2009 Trust

 

1.6143

%

David McLaughlin Family 2009 Trust

 

2.0339

%

Jean McLaughlin Family 2009 Trust

 

2.0339

%

Allen-McLaughlin APF Holdings, LLC

 

1.1459

%

Steve Beatty

 

0.2211

%

Scott Benne

 

0.0365

%

Steve Booker

 

0.2921

%

Margaret Canella

 

0.1777

%

Chris Chanski

 

0.0548

%

George Chappelle

 

0.7120

%

Celeste Clark

 

0.0292

%

Jim Clough

 

0.7120

%

April Darre

 

0.0913

%

Tom Ferris

 

0.0365

%

 

--------------------------------------------------------------------------------

 

Bryan Freeman

 

0.0876

%

Ed Frentress

 

0.0365

%

Eddie Gonzalez

 

0.0365

%

Dean Hollis

 

0.6625

%

Mike Leiker

 

0.0548

%

Serge LeHanaff

 

0.0256

%

Marty Madsen

 

0.0913

%

Rob Marlow

 

0.0365

%

Mario Mendez

 

0.0365

%

David Minx

 

0.1314

%

Tim Nangle

 

0.0548

%

Bernie Panchot

 

0.0730

%

Gary Perlin

 

0.0292

%

Michael Reilly

 

0.0219

%

Catherine Reilly

 

0.0219

%

Doug Santschi

 

0.0730

%

Tony Schroder

 

0.5196

%

John Simons, Jr.

 

2.9721

%

Michael Sims

 

0.7668

%

Bill Theis

 

0.0730

%

David Tipton

 

0.1095

%

 

2

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