Tyson Foods 2001 Annual Report Download - page 55

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TYSON FOODS, INC. 2001 ANNUAL REPORT
On or about June 6, 2001, IBP was advised the SEC has
commenced a formal investigation of IBP related to the restate-
ment of earnings made by IBP in March 2001. The investigation
appears to relate primarily to certain improprieties in the finan-
cial statements of its DFG subsidiary which resulted in this
restatement.
IBP Stockholder and Merger Agreement Related Litigation
Between October 2 and November 1, 2000, 14 class actions were
filed in the Delaware Court of Chancery (the Delaware Court)
against IBP, inc. (IBP) and the members of the IBP Board of
Directors. On November 13, 2000, these actions were consoli-
dated as In re IBP, inc. Shareholders Litigation, C.A. No. 18373
(the Consolidated Action).
On March 29, 2001, the Company filed an action in the
Chancery Court of Washington County, Arkansas, entitled Tyson
Foods, Inc. et al. v. IBP, inc., Case No. E 2001-749-4 (the Arkansas
Lawsuit), alleging that the Company had been inappropriately
induced to enter into the Merger Agreement dated January 1,
2001, (the Merger Agreement) and that IBP was in breach of
various representations and warranties made in the Merger
Agreement.
On March 30, 2001, IBP filed an answer to the amended
consolidated complaint and a cross-claim (amended on April 2,
2001) against the Company in the Consolidated Action. As
amended, IBP’s cross-claim sought a declaration that the Company
could not rescind or terminate the Merger Agreement, specific
enforcement of the Merger Agreement and damages for breach
of a Confidentiality Agreement.
Following expedited discovery, the Delaware Court
conducted a nine day trial, beginning on May 14, 2001, on IBP’s
and the plaintiffs’ claims for specific performance with respect to
the Terminated Cash Tender Offer and the Merger Agreement
and the Company’s counterclaims. On June 15, 2001, following
expedited post-trial briefing, the Delaware Court issued a memo-
randum opinion, which was issued in revised form on June 18,
2001 (the Post-Trial Opinion), in which the Delaware Court
concluded, among other things, that (1) the Merger Agreement
is a valid and enforceable contract that was not induced by any
material misrepresentation or omission, (2) the Company did not
breach the Merger Agreement or any duty to IBP’s stockholders
by failing to close the Terminated Cash Tender Offer, (3) the
Company did not have a basis to terminate the Merger
Agreement under its terms, and (4) specific performance of the
Merger Agreement was the only method by which to adequately
redress the harm threatened to IBP and its stockholders.
After negotiations and in accordance with the Post-Trial
Opinion, the Company and IBP presented an Order, Judgment
and Decree to the Delaware Court, entered on June 27, 2001,
requiring the Company and its affiliates to specifically perform
the Merger Agreement as modified by, and subject to the
conditions contained in, the Stipulation, including making this
Offer and effecting the Merger.
On August 3, 2001, the Delaware Court entered an order
approving the settlement of the Consolidated Action and extin-
guished all claims that were or could have been asserted in the
Consolidated Action in exchange for, among other things, the
acceleration of the closing of a new Cash Tender Offer to
August 3, 2001.
On June 19, 2001, a purported Company stockholder
commenced a derivative action in the Delaware Court entitled
Alan Shapiro v. Barbara R. Allen, et al., C.A. No. 18967-NC seek-
ing monetary damages on behalf of the Company, a nominal
defendant, from the members of the Company’s Board of
Directors. The complaint alleges that the directors violated their
fiduciary duties by attempting to terminate the Merger Agreement.
The defendants intend to vigorously defend these claims and, on
July 17, 2001, moved to dismiss the complaint. A briefing sched-
ule for that motion has not yet been set.
Between June 22 and July 20, 2001, various plaintiffs
commenced actions against the Company, Don Tyson, John
Tyson and Les Baledge in the U.S. District Court for the District
of Delaware, seeking monetary damages on behalf of a purported
class of those who sold IBP stock or traded in certain IBP options
from March 29, 2001, when the Company announced its inten-
tion to terminate the Merger Agreement with IBP, and June 15,
2001, when the Delaware Court rendered its Post-Trial Opinion
in the Consolidated Action. The actions, entitled Meyer v. Tyson
Foods, Inc., et al., C.A. No. 01-425 SLR; Banyan Equity Mgt. v.
Tyson Foods, Inc. et al., C.A. No. 01-426 GMS; Steiner v. Tyson
Foods, Inc., et al., C.A. No. 01-462 GMS; Aetos Corp. et al.