MERGER PROTOCOL between Campofrío Alimentación, S.A. and Groupe Smithfield Holdings, S.L.

Exhibit 10.5

MERGER PROTOCOL

between

Campofrío Alimentación, S.A.

and

Groupe Smithfield Holdings, S.L.

and others

Confidential

Execution copy

30 June 2008

In Madrid, on 30th June 2008.

BY AND BETWEEN

CAMPOFRÍO ALIMENTACIÓN, S.A. , a company incorporated under the laws of Spain, with its registered office at Avenida de Europa 24, Parque Empresarial La Moraleja, 28109, Alcobendas, Madrid, Spain, with Tax Identification Number A-09000928, registered with the Mercantile Registry of Madrid under Volume 311, Sheet 6204, Page 111, duly represented for the purposes hereof by Mr. Pedro Ballvé Lantero, of legal age, holder of Identity Card number 50407273-J, with professional address at Avenida de Europa 24, Parque Empresarial La Moraleja, 28109, Alcobendas, Madrid, Spain, in his capacity as authorized representative of the company by virtue of the meeting minutes of the Board of Directors of Campofrío Alimentación, S.A. of June 27 ^th , 2008 (hereinafter, “ Campofrío ”);

GROUPE SMITHFIELD HOLDINGS, S.L. , a company incorporated under the laws of Spain, with its registered office at Don Ramón de la Cruz 17 izqda., 28006 Madrid, Spain, with Tax Identification Number B-84732882, registered with the Mercantile Registry of Madrid under Volume 22822, Section, 8, Sheet 222, Page 408552, duly represented for the purposes hereof by Mr. Richard Jasper Poulson, of legal age, holder of U.S.A. Passport number 017090187, with professional address at 499, Park Avenue 6 ^th Floor, New York, NY, U.S.A., in his capacity as authorized representative of the company by virtue of meeting minutes of the Board of Directors of Groupe Smithfield Holdings, S.L. of June 27, 2008 (hereinafter, “ GSH ”);

CARBAL, S.A. , a company incorporated under the laws of Spain, with its registered office at Avenida de Europa 24, Parque Empresarial La Moraleja, 28109, Alcobendas, Madrid, Spain, with Tax Identification Number A-78071396, registered with the Mercantile Registry of Madrid under Volume 7014, Sheet 153, Page 114081, duly represented for the purposes hereof by Mr. Pedro Ballvé Lantero, of legal age, holder of Identity Card number 50407273-J, with professional address at Avenida de Europa 24, Parque Empresarial La Moraleja, 28109, Alcobendas, Madrid, Spain, in his capacity as authorized representative of the company by virtue of power of attorney granted on May 24, 2005 before the Notary of Madrid Mr. María Bescos Badia with number 2005/952 of his records;

BITONCE, S.L. , a company incorporated under the laws of Spain, with its registered office at Avenida de Europa 24, Parque Empresarial La Moraleja, 28109, Alcobendas, Madrid, Spain, with Tax Identification Number B-95041240, registered with the Mercantile Registry of Madrid under Volume 15258, Sheet 162, Page 255566, duly represented for the purposes hereof by Mr. Pedro Ballvé Lantero, of legal age, holder of Identity Card number 50407273-J, with professional address at Avenida de Europa 24, Parque Empresarial La Moraleja, 28109, Alcobendas, Madrid, Spain, in his capacity as authorized representative of the company by virtue of power of attorney granted on October 15, 2003 before the Notary of Madrid Mr. María Bescos Badia with number 2003/1065 of his records;

 

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BETÓNICA 95, S.L. , a company incorporated under the laws of Spain, with its registered office at Avenida de Europa 24, Parque Empresarial La Moraleja, 28109, Alcobendas, Madrid, Spain, with Tax Identification Number A-80019748, registered with the Mercantile Registry of Madrid under Volume 1102, Sheet 219, Page 21014, duly represented for the purposes hereof by Mr. Pedro Ballvé Lantero, of legal age, holder of Identity Card number 50407273-J, with professional address at Avenida de Europa 24, Parque Empresarial La Moraleja, 28109, Alcobendas, Madrid, Spain, in his capacity as authorized representative of the company by virtue of power of attorney granted on March 6, 2008 before the Notary of Madrid Mr. María Bescos Badia with number 2008/260 of his records;

CARTERA NUVALIA, S.L. , a company incorporated under the laws of Spain, with its registered office at Avenida de Europa 24, Parque Empresarial La Moraleja, 28109, Alcobendas, Madrid, Spain, with Tax Identification Number B-83310334, registered with the Mercantile Registry of Madrid under Volume 17652, Sheet 31, Page 303903, duly represented for the purposes hereof by Mr. Luis Serrano Martín, of legal age, holder of Identity Card number 4114433-D, with professional address at Avenida de Europa 24, Parque Empresarial La Moraleja, 28109, Alcobendas, Madrid, Spain, in his capacity as authorized representative of the company by virtue of power of attorney granted on January 20, 2006 before the Notary of Madrid Mr. Francisco Aguilar González with number 2006/188 of his records;

ALINA CORPORATE, S.L. , a company incorporated under the laws of Spain, with its registered office at Avenida de Europa 24, Parque Empresarial La Moraleja, 28109, Alcobendas, Madrid, Spain, with Tax Identification Number A-78891728, registered with the Mercantile Registry of Madrid under Volume 2599, Sheet 211, Page 45224, duly represented for the purposes hereof by Mr. Luis Serrano Martín, of legal age, holder of Identity Card number 4114433-D, with professional address at Avenida de Europa 24, Parque Empresarial La Moraleja, 28109, Alcobendas, Madrid, Spain, in his capacity as authorized representative of the company by virtue of power of attorney granted on May 14, 2008 before the Notary of Madrid Mr. Francisco Aguilar González with number 2008/1323 of his records;

OCM EUROPEAN PRINCIPAL OPPORTUNITIES FUND L.P. , a Cayman Islands exempted limited partnership, with registered offices in the Cayman Islands at c/o Walkers SPV Limited, Walker House, PO Box 908GT, Mary Street, George Town, Grand Cayman, and principal offices in the United States at 333 South Grand Avenue, 28th Floor, Los Angeles, California 90071; with Tax Identification Number 98-0486140 duly represented for the purposes hereof by Ms. Emily Alexander, of legal age, holder of Passport number 057497443, with professional address at 333, South Grand Avenue, Los Angeles, CA 90071-1530, United States, in her capacity as authorized signatory of the company by virtue of the signature resolutions of Oaktree Capital Management, L.P. dated as of March 17, 2008.and by Mr. Caleb Kramer, of legal age, holder of Passport number 039728881, with professional address with professional address at 333, South Grand Avenue, Los Angeles, CA 90071-1530, United States, in his capacity as authorized signatory of the company by virtue of the signature resolutions of Oaktree Capital Management, L.P. dated as of March 17, 2008.

 

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SMITHFIELD FOODS, INC. , a company incorporated under the laws of Virginia (U.S.A.), with registered office at 200, Commerce Street, Smithfield 23430, Virginia, U.S.A. with Tax Identification Number 52-0845861, duly represented for the purposes hereof by Mr. Richard Jasper Poulson, of legal age, holder of U.S.A. Passport number 017090187, with professional address at 499, Park Avenue 6 ^th Floor, New York, NY, U.S.A., in his capacity as authorized representative of the company;

SFDS GLOBAL HOLDINGS B.V. , a company incorporated under the laws of The Netherlands, with registered office at Naritaweg 165, 1043, BW Amsterdam, The Netherlands, duly represented for the purposes hereof by Mr. Richard Jasper Poulson, of legal age, holder of U.S.A. Passport number 017090187, with professional address at 499, Park Avenue 6 ^th Floor, New York, NY, U.S.A., in his capacity as authorized representative of the company;

OCM LUXEMBOURG EPOF MEATS HOLDING SARL , a “ société à responsabilité limitée ” incorporated under the laws of Luxembourg, with registered office at 67, Boulevard Grand-Duchesse Charlotte, L-1331, Luxembourg, with Tax Identification Number 2006 2430 878, registered with the Mercantile Registry of Luxembourg under the reference B 118.699, duly represented for the purposes hereof by Mr. Justin Bickle, of legal age, holder of UK Passport number 302256106, with professional address at 27 Knightsbridge, London, SW1X 7LY, United Kingdom, and Mr. Szymon Dec, of legal age, holder of Polish Passport number AK 6513201, with professional address 53, avenue Pasteur L-2311 Luxembourg, Grand Duchy of Luxembourg in their capacity as directors and authorized representatives of the company by virtue of the articles of association, adopted in form of a notarial deed on July 25, 2006 before the Notary of the city of Mersch Mr. Henri Hellinckx with number 2151/06 of his records, and subsequently amended on December 5, 2006;

OCM LUXEMBOURG OPPS MEATS HOLDING SARL , a “ société à responsabilité limitée ” incorporated under the laws of Luxembourg, with registered office at 67, Boulevard Grand-Duchesse Charlotte, L-1331, Luxembourg, with Tax Identification Number 2006 2427 869, registered with the Mercantile Registry of Luxembourg under the reference B 118.210, duly represented for the purposes hereof by Mr. Christopher Boehringer, of legal age, holder of Canadian Passport number BA304172, with professional address at 27 Knightsbridge, London, SW1X 7LY, United Kingdom, and Mr. Szymon Dec, of legal age, holder of Polish Passport number AK 6513201, with professional address 53, avenue Pasteur L-2311 Luxembourg, Grand Duchy of Luxembourg in their capacity as directors and authorized representatives of the company by virtue of the articles of association, adopted in form of a notarial deed on July 27, 2006 before the Notary of the city of Luxembourg Mr. Jean-Joseph Schwachtgen with number 1138 of his records, and subsequently amended on December 15, 2006.

 

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Campofrío and GSH shall be referred to herein, jointly, as the “ Merging Companies ”.

SFDS GLOBAL HOLDINGS B.V., OCM LUXEMBOURG EPOF MEATS HOLDING SARL and OCM LUXEMBOURG OPPS MEATS HOLDING SARL shall be hereinafter collectively referred to as the “ GSH Shareholders ”

CARBAL S.A., BITONCE S.L., BETÓNICA 95 S.L., CARTERA NUVALIA S.L. and ALINA CORPORATE S.L. shall be hereinafter collectively referred to as the “ Reference Shareholders ”.

The GSH Shareholders and the Reference Shareholders shall be hereinafter collectively referred to as the “ Shareholders ”.

Campofrío, GSH and the Shareholders shall be hereinafter collectively referred to as the “ Parties ” and, individually, as a “ Party ”.

OCM EUROPEAN PRINCIPAL OPPORTUNITIES FUND L.P. is party to this Merger Protocol only for the purposes of section 6.1.3.

The Parties mutually acknowledge their authority to enter into this Merger Protocol (hereinafter the “ Merger Protocol ” or the “ Agreement ”) and to such extent they

STATE

 

I.

Campofrío is a company engaged in the business of production and marketing of meat products (the “ Business ”). Campofrío is the parent company of a group of companies which are also engaged in the Business. The current composition of Campofrío’s group is included in Annex I (the “ Campofrío Group ”).

Campofrío’s share capital is equal to Euro 52,643,724, divided into 52,643,724 shares of 1 Euro each, which are admitted to trading in the Spanish Stock Exchanges of Madrid and Barcelona and admitted for trading in the Spanish Stock Exchange Interconnection System ( Sistema de Interconexión Bursátil Español (Mercado Continuo) ).

 

II.	GSH, a holding company, is the parent company of a group of companies also engaged in the Business. The current composition of GSH’ group is included in Annex II (the “ GSH Group ”).

GSH share capital is equal to Euro 38,837,178, divided into 38,837,178 quotas of 1 Euro each, which are owned on a 50-50% basis by (i) SFDS GLOBAL HOLDINGS B.V. (“ SFD ”) and by (ii) OCM LUXEMBOURG EPOF MEATS HOLDING SARL (34.31%) and OCM LUXEMBOURG OPPS MEATS HOLDING SARL (15.69%).

 

III.

SMITHFIELD FOODS, INC., a Virginia (U.S.A.) corporation (“ SF ”) is the parent company of a group of companies engaged in the Business, which includes COLD FIELD INVESTMENTS, LLC, a Delaware (U.S.A.) limited liability company (“ CF ”), SMITHFIELD INSURANCE COMPANY, LTD., a company organized under the laws of Bermuda (“ SI ”), and SFDS GLOBAL HOLDINGS, B.V., (“SFO” ) a company organized under the laws of The Netherlands (the “ SF Group ”).

 

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CF and SI own 21.367% and 2.572% of Campofrío shares, respectively. Therefore, SF is the indirect owner through CF and SI of an aggregate of 23.939% of Campofrío shares.

 

IV.

The Parties entered into negotiations leading to a non-binding Memorandum of Understanding (the “ MOU ”) by virtue of which they set out the basic principles of the proposed integration by Campofrío and GSH, through the merger of GSH into Campofrío and the subsequent integration of the GSH Group under the ownership of Campofrío as well as the Exchange Ratio (as defined below) for the shares and the quotas.

 

V.

Following the execution of the MOU and in accordance with its terms, the Merging Companies have carried out certain actions, including the performance by the Merging Companies, through their respective advisors, of a reciprocal confirmatory due diligence exercise (the “ Confirmatory Due Diligence ”), by means of which the Parties have had access to certain information and documentation of the respective Campofrío and GSH business groups, in order to permit the Parties to confirm the basis, terms and conditions initially agreed for the transaction and for the determination of the Exchange Ratio.

 

VI.	In accordance with the above, the respective Boards of Directors of the Merging Companies have approved the Corporate Documents (as defined below) and the execution of this Merger Protocol.

NOW THEREFORE, the Parties have agreed to enter into this Merger Protocol pursuant to the following

CLAUSES

CLAUSE 1. PURPOSE OF THE AGREEMENT

Subject to the terms and conditions of this Merger Protocol, the Parties agree to execute the merger of GSH into Campofrío, pursuant to section 233.2 and complementary provisions of the Royal Legislative Decree 1564/1989 of 22 December (the “ Spanish Companies Act ”), by means of the extinction of GSH as absorbed company, and the transfer of its assets and liabilities ( patrimonio social ) to Campofrío, as absorbing company, which shall increase its share capital, and issue and deliver to GSH Shareholders new Campofrío shares as determined by the Exchange Ratio, as defined below (the “ Merger ”). As a result of the Merger, the separate corporate existence of GSH shall cease and Campofrío shall continue as the surviving corporation of the Merger.

 

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CLAUSE 2. EXECUTION OF THE MERGER

In addition to those specifically set out in this Merger Protocol, the terms and conditions of the Merger shall be those set out in (i) the merger project (“ Merger Project ”), and (ii) the proposal of amendments to the bylaws and to the corporate governance regulations of Campofrío (all such, the “Governance Amendments ” and collectively with the Merger Project, the “ Corporate Documents ”). The Corporate Documents have been approved by the Board of Directors prior to the execution of this agreement, and shall be submitted to the approval of the general shareholders meetings approving the Merger, pursuant to sections 234 and 238 (f) of the Spanish Companies Act. The Corporate Documents are attached as Annex 2.1 , and shall be considered as an integral part of this Merger Protocol.

Subject to the terms and conditions of this Merger Protocol, the Merging Companies and the Shareholders hereby undertake to take all the necessary or convenient actions to validly execute the Merger in accordance with this Merger Protocol and the Corporate Documents and, to this extent, they shall take all necessary or convenient steps to duly and timely implement the detailed timetable and action plan set out in Annex 2.2 , so that subject to the fulfillment of the Conditions Precedent for the Completion (as defined below), the Merger is submitted to the approval of the General Shareholders Meetings of the Merging Companies prior to 30 October 2008.

The Merging Companies and the Shareholders shall promote the Merger process and abstain from carrying out any acts that could (i) impede the Merger or (ii) render its execution more difficult or under terms and conditions different to those set out in the Corporate Documents and this Merger Protocol. In particular, the Shareholders respectively undertake the following commitments:

 

(a)	The GSH Shareholders, as the owners of all of GSH share capital, shall hold the applicable General Shareholders Meetings of GSH simultaneously with the General Shareholders Meeting of Campofrío referred to below, and vote in favor of the Merger; and

 

(b)

The Reference Shareholders shall attend to the applicable General Shareholders Meetings of Campofrío and vote in favor of the Merger and undertake to make their best efforts so that the shareholders identified in Annex 2.3, attend and vote in favor of the Merger at Campofrío’s General Shareholders Meeting.

CLAUSE 3. BASIC PRINCIPLES OF THE MERGER

 

3.1	Rationale of the Merger and Economic Justification

It is the Parties understanding that the Merger will allow Campofrío to become a leading processed meats company in Europe and will be able to generate significant synergies by combining with GSH. In this sense, the Merging Companies have identified important synergies including sourcing, manufacturing and cross-selling and believe that the Merger affords the best opportunity to achieve these savings.

 

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The execution of the Merger as well as its terms and conditions has been agreed upon by the Parties on the basis of business and industrial rationale and does not intend nor pursue the granting of control over Campofrío. The Corporate Documents have been agreed between the parties to meet this underlying principle.

 

3.2	Exchange Ratio. Capital Increase

The Merger shall be carried out through the issue and delivery of newly issued Campofrío shares to GSH Shareholders, in proportion to their respective stakes, in accordance with the Exchange Ratio.

The Merging Companies have determined an exchange ratio (the “ Exchange Ratio ”) according to which 49,577,099 shares of Campofrío with a par value of 1 euro each shall be delivered in exchange of 38,837,178 quotas of GSH with a par value of 1 euro each.

On the basis of the Exchange Ratio, Campofrío shall increase its share capital in the amount of 49,577,099 euros, issuing 49,577,099 ordinary shares with a par value of 1 euro each, represented by book entries, which will be listed in the Madrid and Barcelona Stock Exchanges as well as admitted for trading in the Spanish Stock Exchange Interconnection System ( S istema de Interconexión Bursátil Español (Mercado Continuo )).

The Exchange Ratio has been agreed by the Boards of Directors on the basis of fair value (“ valor real del patrimonio” ) of the Merging Companies, taking into consideration generally accepted methods and valuation criteria that the Board of Directors have deemed relevant, and the respective Consolidated Financial Statements (as defined below). Additionally, the determination of the Exchange Ratio has been agreed taking into account the distribution of dividends in favour of Campofrio’s shareholders as stated in clause 5 (c) (i).

The Board of Directors of Campofrío has received the opinion of its financial advisor, Goldman Sachs International, dated as of June 27 ^th , 2008, to the effect that, based upon and subject to the assumptions, qualifications, limitations and other matters set forth in such opinion, as of such date, the Exchange Ratio pursuant to this Merger Protocol and the Merger Project is fair from a financial point of view to Campofrío.

 

3.3	Merger balance sheets. Consolidated Financial Statements

Pursuant to the provisions set forth in article 239 of the Spanish Companies Act, Campofrío and GSH have chosen as Merger Balance Sheets, their respective individual balance sheets closed on April 30, 2008. The Merger Balance Sheets shall be reviewed by Ernst & Young, auditor of Campofrío and GSH.

In addition to the above, the Merging Companies have delivered to each other the annual consolidated financial statements as follows (the “Consolidated Financial Statements” ):

 

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•

Campofrío has delivered Consolidated Financial Statements as per December 31, 2007, subject to IFRS and an audit report stating that, in the opinion of the auditor, such Financial Statements provide a faithful and accurate description of the net worth, financial situation and profits of Campofrío and its consolidated group as of the date of reference.

 

•

GSH has delivered Consolidated Financial Statements as per April 30, 2008, subject to IFRS, audit report pending.

GSH undertakes to deliver prior to the calling Campofrío’s general shareholders meeting the audit report on the GSH Consolidated Financial Statements, confirming that, in the opinion of the auditor, such Consolidated Financial Statements provide a faithful and accurate description of the net worth, financial situation and profits of GSH and its consolidated group as of the date of reference (“ GSH Audit Report ”).

CLAUSE 4. CONDITIONS PRECEDENT

The Merger is subject to the conditions precedent set forth in this Clause (the “ Conditions Precedent ”) being entirely fulfilled.

The Merging Companies and the Shareholders shall take all reasonable steps to fulfill all of the Conditions Precedent.

 

4.1	Conditions Precedent to the calling of the Merging Companies’ respective shareholders meetings to approve the Merger

The decision to submit the approval of the Merger to the Merging Companies’ respective shareholders meeting and the Shareholders’ undertakings to vote in favor of the Merger is subject to the following Conditions Precedent:

 

4.1.1

Independent Expert

Prior to the calling of Campofrío and GSH General Shareholders Meetings, the Independent Expert to be appointed by the Mercantile Registry, in accordance with article 236 of Spanish Companies Act and related provisions, in order to assess the Merger Project, shall have issued its report, in which it will include all the requirements indicated in article 236.4 of the Spanish Companies Act.

 

4.1.2

GSH Audit Report

GSH shall have delivered to Campofrío the GSH Audit Report in the terms established in clause 3.3.

 

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4.1.3

Authorizations and waivers

Without prejudice of any other authorizations that may be applicable: (i) obtaining the relevant waivers that may be required in relation with any covenants or provisions set forth in the respective existing financial agreements (the “ Financial Agreements ”), and/or (ii) the prior execution of the relevant facilities that may be needed in order to refinance, if required, the current Financial Agreements.

 

4.2	Conditions Precedent to the effectiveness of the Merger

 

4.2.1

Absence of Material Adverse Change

If a Material Adverse Change (as defined below) affecting one or both Merging Companies between the date of this Merger Protocol and the date of approval of the Merger by their respective shareholders general meeting has occurred, then each Merging Company may serve notice (the “ MAC Notice ”) to the other informing about the Material Adverse Change and the Merging Companies shall negotiate in good faith to amend the terms of this Merger Protocol.

If a Material Adverse Change has occurred and the Merging Companies do not agree to an amendment to this Merger Protocol prior to the earliest of (i) thirty (30) calendar days from the day in which the MAC Notice has been delivered or (ii) the date of the holding of Campofrío´s General Shareholders Meeting that shall resolve on the Merger if the MAC Notice is delivered less than thirty days prior to the date of Campofrío General Shareholders Meeting, each Merging Company will have the right to withdraw from, and terminate, this Merger Protocol, provided that such right of withdrawal (the “ Withdrawal Notice ”) must be exercised by written notice no later than 40 days from delivery of the MAC Notice.

For the avoidance of doubt, if either the MAC Notice or the Withdrawal Notice, as the case maybe, is not delivered timely in accordance with the provisions herein, the right to notify and/or to withdraw and terminate shall be considered irrevocably waived with respect to the events constituting the Material Adverse Change, and the condition precedent shall be considered fulfilled. Should a Merging Company deliver a Withdrawal Notice as a result of which the Merger Agreement is terminated, and the courts find that no Material Adverse Change existed, the Merging Company delivering the Withdrawal Notice shall be fully liable to the other for all damages (“ daños y perjuicios ”) caused.

“Material Adverse Change” means any extraordinary change, circumstance, condition, occurrence or development arising after the execution of this Merger Protocol that (a) has, individually or in the aggregate, a long term material adverse effect ( efecto adverso sustancial ) on the business, financial condition, results of operations, assets or properties of any Merging Company (such Merging Company to include its subsidiaries) taken as a whole or (b) significantly constrains, prohibits or renders illegal, the transactions contemplated by this Merger Protocol, excluding , in either case, any such effect, change, condition, occurrence or development to the extent directly arising from one or more of the following: (i) public or industry knowledge of the Merger, including any cancellations

 

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or delay in customer orders, any reductions in sales or revenues, any disruption in supplier, distributor, partner or similar relations or any early termination of employment by members of the senior management team; (ii) general economic and other conditions affecting the industry in which the Merging Companies compete, including business cycles and changes in the credit and/or capital markets, or any other national economy where either Merging Company or any of their respective subsidiaries has material operations or sales; (iii) any change in accounting requirements or principles or any change in applicable laws, rules or regulations or their interpretation, (iv) any change in the market price or trading volume of Campofrío’s listed securities, (v) any failure to meet internal projections or forecast or published revenue or earnings predictions for any period ending on or after the date of this Merger Protocol; and (vi) any cost or expense reasonably incurred or accrued in connection with the Merger.

 

4.2.2

Additional Conditions Precedent

The Parties acknowledge and agree that the effectiveness of the Merging Companies’ respective shareholders meeting merger resolutions shall be subject to the following Conditions Precedent:

 

(a)	Antitrust clearances

The obtaining of clearance from any relevant antitrust authorities (collectively, the “ Authorization ”), including:

 

•

The Spanish National Competition Commission ( Comisión Nacional de la Competencia );

 

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The Portuguese Competition Authority ( Autoridade da Concorrencia ); and

 

•

The German Federal Cartel Office ( Bundeskartellamt )

The Merging Companies and, when applicable, the Shareholders, hereby undertake to collaborate in good faith to obtain the Authorization as soon as legally feasible and in any event before 30 November 2008 (the “ Expiry Date ”).

To this extent, the Merging Companies undertake to (a) prepare and file with the appropriate anti-trust authorities as soon as practicable following the date of this Merger Protocol such documents, notifications and filings as are required to obtain the Authorisation for the satisfaction of the Condition Precedent established in this Clause, and (b) act diligently and to comply with all the requirements needed to obtain the Authorization from the antitrust authorities as soon as practicable following the date of this Merger Protocol.

If the antitrust authorities declare the Authorization subject to conditions that entail making changes to this Merger Protocol or to the structure of the transactions described herein, and one of the Parties reasonably considers that such changes significantly affect the economic balance of the obligations of the Parties, they shall, during a period of two (2) months (not to exceed, in any case, the Expiry Date), negotiate in good faith to reach a solution which re-establishes such balance. Should the Expiry Date arrive without the Parties having reached a mutually satisfactory solution, this Condition Precedent shall not have been satisfied.

 

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Should the relevant antitrust authorities deny their Authorisation to the Merger or if such Authorisation is not obtained before the Expiry Date, this Condition Precedent shall not have been satisfied.

 

(b)	Granting of the exemption of article 8.g) of the Royal Decree 1066/2007

The CNMV granting, without any condition, to SF and the SF Group the exemption set forth in article 8.g) of Royal Decree 1066/2007 (the “ Exemption ”) or SF obtaining comfort at its own discretion that the Exemption will be granted.

If the CNMV subjects the granting of the Exemption to any condition, SF will have the right, not later than ten (10) Business Days after such granting, to either accept such condition or not to proceed with the Merger. In the latter case, Campofrío and its shareholders will not have any right to be compensated for any damages or costs caused or incurred in connection with the proposed Merger. “ Business Day ” means a day that is not a Saturday, Sunday or a bank holiday in the city of Madrid.

If, before the Expiry Date, (i) the CNMV denies the granting of the Exemption, or (ii) if such Exemption is not granted or (iii) is subject to any condition that is not accepted before Expiry Date by SF, this Condition Precedent shall not have been satisfied.

CLAUSE 5. INTERIM PERIOD

The Parties acknowledge and represent that from 1 January 2008 the Merging Companies have conducted and will conduct their businesses in their ordinary and usual course until the registration of the Merger with the Mercantile Registry (the “ Effective Date ”). The period from 1 January 2008 to the Effective Date shall be hereinafter referred to as the “ Interim Period ”.

From the date of this Merger Protocol the Merging Companies shall not, without the consent of the other Merging Company, and unless otherwise results from this Merger Protocol:

 

(a)	Issue of any share or convertible instruments, options or warrants or any other instrument which grant any right to the acquisition of shares, other than any issued in relation to the Merger or any of the agreement terms in this Agreement;

 

(b)	Any amendment of the by-laws, other than the by-laws amendments reflected in the Governance Amendments;

 

(c)

Any declaration, distribution or payment of dividends or any other payment to the shareholders, including by way of warrant, notes or other similar instruments (other than (i) Campofrío’s dividends as approved by Campofrío’s ordinary General Shareholders Meeting held on 17 June 2008, which includes a dividend in cash for an amount of 12 million Euros which shall be paid on July 8 th , 2008 and a dividend in kind by delivery of 1,698,185 Campofrio treasury shares which shall be paid on

 

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July 16 th , 2008 or (ii) any amounts to be paid to GSH Shareholders or Campofrío’s shareholders based on the results of any on-going transaction which might be executed prior to the Merger, as referred to in (f) below.

 

(d)	Any repurchase, redemption or acquisition, directly or indirectly, of any shares of their share capital other than the ordinary acquisition of treasury shares (“ autocartera ”) acquired within the limits of the general shareholders authorization in force.

 

(e)	Engage in any material capital expenditure (except as provided for in the annual budget or business plan); and

 

(f)

Any negotiation with any third party regarding any transfer of any material part of their industrial or commercial activities, or the entering into any acquisition, merger, contribution, hive down, alliance or collaboration agreement or other arrangement with respect to any material part of their industrial or commercial activities, other than any on-going negotiations already under way by either Merging Company and as agreed with the other Merging Company.

Any request for a Merging Company’s consent to a proposed transaction under this Clause shall be deemed accepted by that Merging Company if it fails to issue any decision in this regard within the term of ten (10) calendar days from the date in which it receives the consent request.

CLAUSE 6. CORPORATE GOVERNANCE AND OTHER SPECIFIC PROVISIONS

The Parties and their Shareholders acknowledge that they have agreed to the execution of the Merger, inter alia, on the basis of the following corporate governance provisions which each of the Parties agree to comply with and ensure, to the extent legally possible, compliance with:

 

6.1	General provisions concerning Campofrío’s administration and management

 

6.1.1

Campofrío and its group companies’ corporate identity

Campofrío will maintain its current corporate name and distinctive signs. The corporate names and the distinctive signs of GSH subsidiaries which will be integrated in Campofrío’s group pursuant to the Merger will be adapted as applicable to the Campofrío’s group own distinctive signs. In particular, these registered names and corporate signs shall delete any reference to Smithfield that could result on confusion with the names and corporate signs of SF Group.

 

6.1.2

Headquarters

Campofrío’s main office will be located in Madrid.

 

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6.1.3

Board of Directors

After the execution of the Merger, the Board of Directors of Campofrío shall, in both composition and practice, reflect the company’s status as a leading pan-European company, and will follow the best practices in modern corporate governance. The Parties and the Shareholders shall take all necessary measures to ensure that the Shareholders General Meeting of Campofrío approving the Merger appoints, pursuant to section 238.1.h) of the Spanish Corporations Act and subject to the effectiveness of the Merger, a new Board of Directors of nine Directors, the composition of which, will be as follows.

 

Mr. Caleb Samuel Kramer and Mr. Karim Michael Khairallah will be designated by OCM European Principal Opportunities Fund L.P. and proposed on behalf of OCM Luxembourg EPOF Meats Holding SARL and OCM Luxembourg OPPS Meats Holding SARL. The Parties acknowledge and accept that Mr. Juan José Guibelalde Iñurritegui will meet all the terms of the Independent Director definition established in the Código Unificado de buen gobierno de las sociedades cotizadas on 1 January 2009.

 

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Mr. Pedro Ballvé Lantero will remain as Chairman of Campofrío for a period of five (5) years after the execution of the Merger. The Board of Directors will continue to have a Vice-President, who shall be appointed by the Board of Directors.

The initial term of the Directors referred to above will be of five (5) years after the execution of the Merger. The Parties agree that each Shareholder or Shareholders will continuously have the right to designate the number of members to the Board indicated above upon the expiration of the term, removal, resignation or death of its designee, for consecutive five (5) year-terms, unless the relevant Party has reduced the participation resulting from the Merger and its holding is below the percentage that proportionally is required to hold the right to appoint such number of Directors pursuant to section 137 of the Spanish Companies Act, in which case it or they may appoint only the number of Directors in proportion to the percentage as results from such section 137. The Parties agree that any Director proposed by OCM Luxembourg EPOF Meats Holding SARL and OCM Luxembourg OPPS Meats Holding SARL will have to be designated by OCM European Principal Opportunities Fund L.P.

The composition of any Committee within the Board of Directors of Campofrío shall be consistent with the above distribution and the applicable law and regulations. In any event, future appointments of the Independent Directors will be carried out by a proposal of the Nominations and Remunerations Committee ( Comité de Nombramientos y Retribuciones ), among the persons included in a list to be proposed by specialized advisors.

 

6.1.4

Management provisions

The Parties agree that after the Merger has been completed the management of Campofrío will be as follows:

 

(a)

CEO: Mr. Robert Alair Sharpe II

 

(b)

Senior Management Team

After the Merger has been completed, the new Board of Directors shall appoint a new Nominations and Remuneration Committee, which shall be determined following the same criteria than those applicable to the composition of the Board of Directors and in accordance with the internal corporate governance regulations. The Nominations and Remuneration Committee shall review and propose to the Board of Directors within the following 9 months after execution of the Merger a slate of candidates for the senior management team of the company.

 

(c)

Senior Management Team Incentives

The Board of Directors, following the proposal of the Nominations and Remuneration Committee, shall also approve an incentive plan for the senior management team for the three (3) years after the Merger.

 

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Any existing GSH management incentives will be cancelled, at the GSH Shareholders’ cost, prior to the Merger.

 

6.1.5

Business Plan

Following the execution of the Merger Campofrío will run its businesses in accordance with the management business plan for Campofrío that has been approved by the respective Board of Directors of Campofrío and GSH.

 

6.1.6

Dividend policy

The Merging Companies and the Shareholders recognize the importance that Campofrío, as listed company, has a defined dividend policy which shall be based on the performance of the company and the available capital.

In this regard, the Parties intent is that the dividend of Campofrío should be not less than 50% of its net profits subject to the following priorities having been fulfilled, as resolved by the Board of Campofrío or as results from the budget approved by the latter: (i) it has funded its requirements at that time of CAPEX for maintenance and growth (such CAPEX expenditures to be not less than depreciation), (ii) it has funded its current and future investment requirements (provided these have already been approved by the Board and assuming in any event the existence of a reasonable level of financial leveraging) and (iii) it fulfils any restriction under the existing financial agreements.

 

6.2	Campofrío’s By-laws and Corporate Governance regulation

 

6.2.1

Campofrío as listed company

Campofrío will remain listed on the Spanish Stock Exchanges. The Parties and the Shareholders shall take all necessary measures to ensure that the new shares of Campofrío issued to execute the Merger are listed as soon as practicable.

 

6.2.2

Amendment of Campofrío’s By-laws and Corporate Governance regulations

The Parties agree

 

(a)	to comply with and ensure compliance with Campofrío’s by-laws as they will be amended by the General Shareholders Meeting approving the Merger as detailed in Annex 2.1 and the Shareholders General Meeting regulation ( Reglamento de la Junta General de Accionistas );

 

(b)

to ensure that the Board of Directors meeting of Campofrío approving the calling of the General Shareholders Meeting approve the amendments to the Board of Directors internal regulation ( Reglamento del Consejo de Administración ) annexed hereto as Annex 2.1 and the Parties agree to comply with and ensure compliance with such internal regulation.

 

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The Parties acknowledge and agree that the amendments mentioned above are an essential part to this Merger Protocol and reflect the Parties’ will on Campofrío’s by-laws and corporate governance regulations to be implemented in the context of the Merger. Consequently, the Parties further undertake to take such steps as may be necessary to register the amendments to the by-laws detailed in Annex 2.1 as soon as possible after the Merger. If the Mercantile Registry does not consider such amendments fit to be registered in their entirety, they will seek their partial registration, and the Parties will review in good faith possible amendments as long as they do not alter the undertakings of the Parties under this Merger Protocol. Notwithstanding the forgoing, matters agreed which are not incorporated in the by-laws shall remain binding among the Parties. In the event of any inconsistency between the by-laws of the Company and this Agreement, the latter shall prevail.

 

6.3	Commitments and obligations specifically assumed by the GSH Shareholders

The Parties agree that it has been an essential condition to enter into this Merger Protocol and to determine its terms and conditions, that the GSH Shareholders undertake the following:

 

6.3.1

Additional Disposition to Campofrío’s By-laws

SF, in its capacity as the parent company of the SF Group and therefore ultimate holder of the SF Group’s shareholding in Campofrío, hereby expressly acknowledges and agrees to the additional disposition of Campofrío’s by-laws established in Annex 2.1., which will be submitted for approval of Campofrío’s General Shareholders Meeting that will resolve on the Merger (the “ Additional Disposition ”).

SF hereby assumes and undertakes to comply with, and ensure compliance by, SFD, CF, and SI (as direct shareholders of Campofrío after the Merger, hereinafter the “ SF Shareholders”), or any successor or assignee, with the Additional Disposition, regardless of whether or not it is entirely or partially registered with the Mercantile Registry, and assumes as “ obligado solidario ” the fulfillment of the obligations derived for the SF Shareholders from the Additional Disposition. To this extent, the Additional Disposition shall be binding upon SF (with the same effect and extent as if SF were a direct shareholder) and the SF Shareholders vis-à-vis Campofrío as it reflects the Parties’ will to enter into this Merger Protocol.

The Parties acknowledge and agree that the last paragraph of section 6.2.2 above includes and applies fully to the Additional Disposition as an amendment to the by-laws included in Annex 2.1.

 

6.3.2

Business Opportunities

In the event that SF or a company controlled by SF becomes aware of a business opportunity to acquire, finance or otherwise invest in any business in the processed meats sector within the current member states of the European Union (EU 27) (excluding Poland and

 

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Romania) (the “ Business Opportunity ”), SF shall, as long as permitted under applicable law, provide notice of such Business Opportunity to Campofrío. SF will be authorized to pursue the Business Opportunity upon the earlier of: (i) the Board of Directors of Campofrío has declined the Business Opportunity; or (ii) the passage of 21 calendar days after the date the notice is received by Campofrío and the Board of Directors has not expressed its agreement on pursuing this Business Opportunity.

There shall be no restrictions on the business activities of SF or a company controlled by SF except as provided above and unless otherwise prohibited by applicable law.

 

6.3.3

Termination of GSH Shareholders’ prior shareholders agreements

The GSH Shareholders expressly agree to terminate before the Effective Date all prior shareholders’ agreements existing among them.

CLAUSE 7. REPRESENTATIONS

 

7.1	Representations of Campofrío

Campofrío hereby represents to GSH that, as of the date hereof and as of the closing date of the Merger:

 

7.1.1

Organization and Authority of Campofrío and the Campofrío Group

Campofrío is a sociedad anónima duly incorporated, validly existing and in good standing under the laws of Spain and has full corporate power and authority to enter into this Merger Protocol and to perform its obligations hereunder.

Each of the entities in the Campofrío Group is a corporation, limited liability company or partnership duly incorporated or organized, validly existing and in good standing under the laws of its state or country of incorporation or organization. Each of Campofrío and the entities in the Campofrío Group is duly qualified or registered as a foreign corporation or other entity where required, and is in good standing, in each jurisdiction where the failure to do so would have a material adverse effect.

 

7.1.2

Authorization; Enforceability

The execution, delivery and performance by Campofrío of this Merger Protocol, and all of the documents and instruments required hereby from Campofrío, are within the corporate power of Campofrío and have been duly authorized by all necessary corporate action of Campofrío. This Merger Protocol is, and the other documents and instruments required hereby to which Campofrío is a party will be, when duly executed and delivered by the Parties hereto or thereto, the legal, valid and binding obligation of Campofrío, enforceable against Campofrío in accordance with their respective terms.

 

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7.1.3

No Violation or Conflict

The execution, delivery and performance of this Merger Protocol, and the other documents and instruments required hereby to which Campofrío is a party (except for the Financial Agreements as per and in the terms set forth in section 4.1.3 above), by Campofrío do not and will not conflict with or violate any law, judgment, order or decree binding on Campofrío or the charter or by-laws of Campofrío. Except for compliance with applicable antitrust laws and securities laws, no notice to, filing or registration with, or authorization, consent or approval of, any governmental, regulatory or self-regulatory agency is necessary or is required to be made or obtained by Campofrío in connection with the execution and delivery of this Merger Protocol, and the other documents and instruments require