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Exhibit
10.2
MASTER TERMS AND CONDITIONS
FOR CONVERTIBLE BOND HEDGING TRANSACTIONS
BETWEEN GOLDMAN,
SACHS & CO. AND SMITHFIELD FOODS, INC.
The purpose of this Master
Terms and Conditions for Convertible Bond Hedging Transactions
(this “ Master Confirmation ”), dated as of
July 1, 2008, is to set forth certain terms and conditions for
convertible bond hedging transactions to be entered into between
Goldman, Sachs & Co. (“Bank”) and Smithfield
Foods, Inc. (“ Counterparty ”). Each such
transaction (a “ Transaction ”) entered into
between Bank and Counterparty that is to be subject to this Master
Confirmation shall be evidenced by a written confirmation
substantially in the form of Exhibit A hereto, with such
modifications thereto as to which Counterparty and Bank mutually
agree (a “ Confirmation ”). This Master
Confirmation and each Confirmation together constitute a
“Confirmation” as referred to in the Agreement
specified below.
This Master Confirmation and
a Confirmation evidence a complete binding agreement between you
and us as to the terms of the Transaction to which this Master
Confirmation and such Confirmation relate. This Master Confirmation
and each Confirmation hereunder shall supplement, form a part of,
and be subject to an agreement in the form of the 1992 ISDA Master
Agreement (Multicurrency-Cross Border) as if we had executed an
agreement in such form on the Trade Date of the first such
Transaction (but without any Schedule except for the election of
United States dollars as the Termination Currency) between Bank and
Counterparty, and such agreement shall be considered the “
Agreement ” hereunder.
The definitions and
provisions contained in the 2002 ISDA Equity Derivatives
Definitions (the “ Definitions ”) as published
by ISDA are incorporated into this Master Confirmation. For the
purposes of the Definitions, each reference herein or in any
Confirmation hereunder to a Unit shall be deemed to be a reference
to a Call Option or an Option, as context requires.
THE AGREEMENT, THIS MASTER
CONFIRMATION AND EACH CONFIRMATION WILL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REFERENCE TO CHOICE OF LAW DOCTRINE (OTHER THAN TITLE 14 OF
THE NEW YORK GENERAL OBLIGATIONS LAW). THE PARTIES HERETO
IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF
THE STATE OF NEW YORK AND THE UNITED STATES COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK IN CONNECTION WITH ALL MATTERS RELATING HERETO
AND WAIVE ANY OBJECTION TO THE LAYING OF VENUE IN, AND ANY CLAIM OF
INCONVENIENT FORUM WITH RESPECT TO, THESE COURTS.
The Transactions under this
Master Confirmation shall be the sole Transactions under the
Agreement. If there exists any ISDA Master Agreement between Bank
and Counterparty or any confirmation or other agreement between
Bank and Counterparty pursuant to which an ISDA Master Agreement is
deemed to exist between Bank and Counterparty, then notwithstanding
anything to the contrary in such ISDA Master Agreement, such
confirmation or agreement or any other agreement to which Bank and
Counterparty are parties, the Transactions under this Master
Confirmation and the Agreement shall not be considered Transactions
under, or otherwise governed by, such existing or deemed ISDA
Master Agreement.
1. In the event of any
inconsistency between this Master Confirmation, on the one hand,
and the Definitions or the Agreement, on the other hand, this
Master Confirmation will control for the purpose of the Transaction
to which a Confirmation relates. In the event of any inconsistency
between the Definitions, the Agreement and this Master
Confirmation, on the one hand, and a Confirmation, on the other
hand, the Confirmation will govern. With respect to a Transaction,
capitalized terms used herein that are not otherwise defined shall
have the meaning assigned to them in the Confirmation relating to
such Transaction.
2. Each party will make each
payment specified in this Master Confirmation or a Confirmation as
being payable by such party, not later than the due date for value
on that date in the place of the account specified below or
otherwise specified in writing, in freely transferable funds and in
a manner customary for payments in the required
currency.
3. Confirmations and
General Terms :
This Master Confirmation and
the Agreement, together with the Confirmation relating to a
Transaction, shall constitute the written agreement between
Counterparty and Bank with respect to such Transaction.
Each Transaction to which a
Confirmation relates is a Convertible Bond Hedging Transaction,
which shall be considered a Share Option Transaction for purposes
of the Definitions (and references herein to “Units”
shall be deemed to be references to “Options” for
purposes of the Definitions), and shall have the following
terms:
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Trade Date:
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As set
forth in the Confirmation for such Transaction |
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| Effective
Date: |
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As set
forth in the Confirmation for such Transaction |
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| Option
Type: |
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Call |
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| Option
Style: |
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Modified
American (as described below) |
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| Seller: |
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Bank |
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| Buyer: |
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Counterparty |
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| Shares: |
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The
Common Stock of Counterparty, par value USD 0.50 per share (Ticker
Symbol: “SFD”). |
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| Convertible
Notes: |
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As set
forth in the Confirmation for such Transaction |
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| Indenture: |
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As set
forth in the Confirmation for such Transaction |
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| Number of
Units: |
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As set
forth in the Confirmation for such Transaction. |
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| Unit
Entitlement: |
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As set
forth in the Confirmation for such Transaction |
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| Strike
Price: |
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As set
forth in the Confirmation for such Transaction |
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| Applicable
Percentage: |
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As set
forth in the Confirmation for such Transaction |
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| Number of
Shares: |
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As set
forth in the Confirmation for such Transaction |
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| Premium: |
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As set
forth in the Confirmation for such Transaction |
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| Premium
Payment Date: |
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As set
forth in the Confirmation for such Transaction |
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| Exchange: |
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New York
Stock Exchange |
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| Related
Exchange: |
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All
Exchanges |
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| Calculation
Agent: |
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Bank. The
Calculation Agent shall, upon reasonable written request by either
party, provide a written explanation of any calculation or
adjustment made by it including, where applicable, a description of
the methodology and data applied, it being understood that the
Calculation Agent shall not be obligated to disclose any
proprietary models used by it for such calculation. |
4. Procedure for
Exercise :
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Exercise Dates:
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Each
Conversion Date. |
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Conversion Date:
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Each
“Conversion Date”, as defined in the Indenture, of
Convertible Notes. |
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| Required
Exercise on Conversion Dates: |
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On each
Conversion Date, a number of Units equal to the number of
Convertible Notes in denominations of USD1,000 principal amount
satisfying all of the requirements for conversion on such
Conversion Date in accordance with the terms of the Indenture shall
be automatically exercised, subject to “Notice of
Exercise” below. |
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| Expiration
Date: |
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As set
forth in the Confirmation for such Transaction |
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| Automatic
Exercise: |
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As
provided above under “Required Exercise on Conversion
Dates”. |
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| Notice of
Exercise: |
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Notwithstanding anything to the contrary in the Definitions, in
order to exercise any Units, (x) in connection with any Exercise
Date occurring prior to April 1, 2013, Counterparty must notify
Seller in writing prior to 12:00 PM, New York City time, on the
“Scheduled Trading Day” (as defined in the Indenture)
immediately preceding the first Exchange Business Day of the
“Observation Period”, as defined in the Indenture,
relating to the Convertible Notes converted on the Conversion Date
relating to the relevant Exercise Date of (i) the number of Units
being exercised on such Exercise Date and (ii) the scheduled
settlement date and the scheduled commencement date of the
“Observation Period” under the Indenture for the
Convertible Notes converted on the Conversion Date corresponding to
such Exercise Date, and (y) in connection with any Exercise Date
occurring on or after April 1, 2013, Counterparty must notify
Seller in writing prior to 12:00 PM, New York City time, on the
second “Scheduled Trading Day” (as defined in the
Indenture) immediately preceding the Expiration Date, of the
aggregate number of Units being exercised on such Exercise
Date(s). |
5. Settlement Terms
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| Settlement
Date: |
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In
respect of an Exercise Date occurring on a Conversion Date, the
settlement date for the Shares to be delivered under the
Convertible Notes converted on such Conversion Date under the terms
of the Indenture; provided that the Settlement Date will not be
prior to the later of (i) the date one Settlement Cycle following
the final day of the “Observation Period”, as defined
in the Indenture, or (ii) the Exchange Business Day immediately
following the date on which Counterparty gives notice to Seller of
such Settlement Date prior to 12:00 PM, New York City
time. |
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| Net Share
Settlement: |
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In lieu
of the obligations set forth in Sections 8.1 and 9.1 of the
Definitions, and subject to “Notice of Exercise” above,
in respect of an Exercise Date occurring on a Conversion Date,
Seller will deliver to Counterparty, on the related Settlement
Date, the product of the Applicable Percentage and a number of
Shares equal to the aggregate number of Shares that Counterparty is
obligated to deliver to the holder(s) of the Convertible Notes
converted on such Conversion Date pursuant to the Net Share
Provision of the Indenture (except that such number of Shares shall
be determined without taking into consideration any rounding
pursuant to the Rounding |
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Provision
of the Indenture and such product shall be rounded down to the
nearest whole number) and cash in lieu of fractional shares, if
any, resulting from rounding such product (the “
Convertible Obligation ”); provided that such
obligation shall be determined excluding any Shares (or cash) that
Counterparty is obligated to deliver to holder(s) of the
Convertible Notes as a result of any adjustments to the Conversion
Rate pursuant to the Excluded Provisions of the Indenture. For the
avoidance of doubt, if the “Daily Conversion Value”, as
defined in the Indenture, is less than or equal to USD25 for any
“trading day” (as defined in the Indenture) during the
Observation Period, Seller will have no delivery obligation
hereunder in respect of such trading day. |
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| Net Share
Provision: |
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As set
forth in the Confirmation for such Transaction. |
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| Excluded
Provisions: |
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As set
forth in the Confirmation for such Transaction. |
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| Notice of
Delivery Obligation: |
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No later
than the Scheduled Trading Day immediately following the last day
of any “Observation Period”, as defined in the
Indenture, Counterparty shall give Seller notice of the final
number of Shares and cash in lieu of fractional Shares, if any,
comprising the Convertible Obligation (it being understood, for the
avoidance of doubt, that the requirement of Counterparty to deliver
such notice shall not limit Counterparty’s obligation to
deliver notices as required under Notice of Exercise, as set forth
above, in any way). |
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| Other
Applicable Provisions: |
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To the
extent Seller is obligated to deliver Shares hereunder, the
provisions of Sections 9.1(c), 9.8, 9.9, 9.10, 9.11 and 9.12 of the
Definitions will be applicable as if Physical Settlement were
applicable to the Transaction; provided that the
Representation and Agreement contained in Section 9.11 of the
Definitions shall be modified by excluding any representations
therein relating to restrictions, obligations, limitations or
requirements under applicable securities laws arising as a result
of the fact that Buyer is the issuer of the Shares. In addition,
notwithstanding anything to the contrary in the Definitions, Seller
may, in whole or in part, deliver Shares in certificated form
representing the Convertible Obligation to Counterparty in lieu of
delivery through the Clearance System. |
6. Adjustments
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| Method of
Adjustment: |
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Notwithstanding Section 11.2 of the Definitions, upon the
occurrence of any event or condition set forth in the Dilution
Provision of the Indenture, the Calculation Agent shall make the
corresponding adjustment in respect of any one or more of the
Strike Price, Number of Units, the Unit Entitlement and any other
variable relevant to the exercise, settlement or payment of such
Transaction, to the extent an analogous adjustment is made under
the Indenture. For the avoidance of doubt, in no event shall there
be any adjustment hereunder as a result of an adjustment to the
“Conversion Rate” (as defined in the Indenture)
pursuant to the Excluded Provisions of the Indenture. |
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7. Extraordinary
Events :
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| Merger
Events: |
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Notwithstanding Section 12.1(b) of the Definitions, a
“Merger Event” means the occurrence of any event or
condition set forth in the Merger Provision of the
Indenture. |
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Promptly
upon the public announcement of any Merger Event or any public
filing with respect to any Merger Event, Counterparty shall notify
the Calculation Agent of such Merger Event; and once the
adjustments to be made to the terms of the Indenture and the
Convertible Notes in respect of such Merger Event have been
determined, Counterparty shall promptly notify the Calculation
Agent in writing of the details of such adjustments. |
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| Notice of
Merger Consideration: |
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Upon the
occurrence of a Merger Event that causes the Shares to be converted
into or exchanged for more than a single type of consideration
(determined based in part upon any form of election of the holders
of Shares), Counterparty shall promptly (but in any event prior to
the effective date of the Merger Event) notify the Calculation
Agent of the weighted average of the types and amounts of
consideration received by the holders of Shares in any Merger Event
who affirmatively make such an election. ! |
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| Consequences
of Merger Events: |
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Notwithstanding Sections 12.2 of the Definitions, upon the
occurrence of a Merger Event, the Calculation Agent shall make a
corresponding adjustment in respect of any adjustment under the
Indenture to any one or more of the nature of the Shares, the
Strike Price, the Number of Units, the Unit Entitlement and any
other variable relevant to the exercise, settlement or payment of
such Transaction, to the extent an analogous adjustment is made
under the Indenture; provided that (i) such adjustment shall
be made without regard to any adjustment to the Conversion Rate for
the issuance of additional shares as set forth in the Excluded
Provisions of the Indenture; and (ii) if such adjustment would (but
for this clause (ii)) result in Counterparty following the Merger
Event not being the issuer of the Shares, then the Calculation
Agent may elect not to make any such adjustment and may elect
Cancellation and Payment to apply to such Transaction. |
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| Dilution
Provision: |
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As set
forth in the Confirmation for such Transaction. |
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| Merger
Provision: |
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As set
forth in the Confirmation for such Transaction. |
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| Nationalization, Insolvency or Delisting: |
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Cancellation and Payment (Calculation Agent Determination). In
addition to the provisions of Section 12.6(a)(iii) of the
Definitions, it will also constitute a Delisting if the Exchange is
located in the United States and the Shares are not immediately
re-listed or re-traded on any of the New York Stock Exchange, The
NASDAQ Global Select Market or The NASDAQ Global Market (or their
respective successors); if the Shares are immediately re-listed or
re-traded on any such exchange, such exchange shall thereafter be
deemed to be the Exchange and the Calculation Agent shall make any
adjustments it deems necessary to the terms of the Transaction, as
if Modified Calculation Agent Adjustment were applicable to such
event. |
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8. Additional
Disruption Events :
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| Change in
Law: |
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Applicable; provided that Section 12.9(a)(ii) of the
Definitions is hereby amended by (i) replacing the phrase
“the interpretation” in the third line thereof with the
phrase “the formal or informal interpretation” and (ii)
immediately following the word “Transaction” in clause
(X) thereof, adding the phrase “in the manner contemplated by
the Hedging Party on the Trade Date”. |
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| Failure to
Deliver: |
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Applicable. |
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| Insolvency
Filing: |
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Applicable. |
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| Hedging
Disruption: |
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Applicable, but only if the Hedging Party determines in its
good faith commercially reasonable discretion that such a Hedging
Disruption could reasonably be expected to have a material adverse
effect on Hedging Party’s expected benefits under any
Transaction; provided that it shall not be a Hedging Disruption if
the Hedging Party’s inability as set forth in Section
12.9(a)(v) is solely due to the deterioration of its
creditworthiness. |
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| Increased
Cost of Hedging: |
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Applicable. |
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| Determining
Party: |
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For all
applicable Additional Disruption Events, Bank. |
9. Acknowledgements
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| Non-Reliance: |
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Applicable |
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| Agreements
and Acknowledgments Regarding Hedging Activities: |
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Applicable |
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| Additional
Acknowledgments: |
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Applicable |
10. Representations,
Warranties and Agreements :
(a) In connection with this
Master Confirmation, each Confirmation, each Transaction to which a
Confirmation relates and any other documentation relating to the
Agreement, each party to this Master Confirmation represents and
warrants to, and agrees with, the other party that:
(i) it is an
“accredited investor” as defined in
Section 2(a)(15)(ii) of the Securities Act of 1933, as amended
(the “ Securities Act ”); and
(ii) it is an “eligible
contract participant” as defined in Section 1(a)(12) of
the Commodity Exchange Act, as amended (the “ CEA
”), and this Master Confirmation and each Transaction
hereunder have been subject to individual negotiation by the
parties and have not been executed or traded on a “trading
facility” as defined in Section 1a(33) of the
CEA.
(b) Counterparty hereby
repeats the representations and warranties of Counterparty set
forth in Section 1 of the Underwriting Agreement (the “
Underwriting Agreement ”) dated as of July 1,
2008 between Counterparty and Citigroup Global Markets Inc.,
Goldman, Sachs & Co. and J.P. Morgan Securities Inc. as
representatives of the Underwriters (as defined in the Underwriting
Agreement), and, in addition, represents and warrants to, and
agrees with, Bank on the Trade Date of each Transaction
that:
(i) its financial condition
is such that it has no need for liquidity with respect to its
investment in such Transaction and no need to dispose of any
portion thereof to satisfy any existing or contemplated undertaking
or indebtedness;
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(ii) its investments in and
liabilities in respect of such Transaction, which it understands
are not readily marketable, are not disproportionate to its net
worth, and it is able to bear any loss in connection with such
Transaction, including the loss of its entire investment in such
Transaction;
(iii) it understands that
Bank has no obligation or intention to register such Transaction
under the Securities Act or any state securities law or other
applicable federal securities law;
(iv) it understands that no
obligations of Bank to it hereunder will be entitled to the benefit
of deposit insurance and that such obligations will not be
guaranteed by any Affiliate of Bank or any governmental
agency;
(v) IT UNDERSTANDS THAT SUCH
TRANSACTION IS SUBJECT TO COMPLEX RISKS THAT MAY ARISE WITHOUT
WARNING AND MAY AT TIMES BE VOLATILE AND THAT LOSSES MAY OCCUR
QUICKLY AND IN UNANTICIPATED MAGNITUDE AND IS WILLING TO ACCEPT
SUCH TERMS AND CONDITIONS AND ASSUME (FINANCIALLY AND OTHERWISE)
SUCH RISKS;
(vi) on the Trade Date of
such Transaction, (A) none of Counterparty and its executive
officers (as defined in Rule 3b-7 under the Securities Exchange Act
of 1934, as amended (the “ Exchange Act ”)) and
directors is aware of any material non-public information regarding
Counterparty or the Shares and (B) each of its filings under
the Securities Act, the Exchange Act, or other applicable
securities laws that are required to be filed have been filed and
that, as of the respective dates thereof and as of the date of this
representation, there is no misstatement of material fact contained
therein or omission of a material fact required to be stated
therein or necessary to make the statements made therein, in the
light of the circumstances under which they were made, not
misleading;
(vii) it is not entering into
any Transaction to create and is not engaging in any other
securities or derivative transactions to create, actual or apparent
trading activity in the Shares (or any security convertible into or
exchangeable for Shares) or to raise or depress or to manipulate
the price of the Shares (or any security convertible into or
exchangeable for Shares) in either case in violation of
Section 9 of the Exchange Act;
(viii) it has not and will
not directly or indirectly violate in any material respect any
applicable law (including, without limitation, the Securities Act
and the Exchange Act) in connection with any Transaction under this
Master Confirmation;
(ix) on the Trade Date and
the Premium Payment Date of such Transaction Counterparty is not
“insolvent” (as such term is defined under
Section 101(32) of the U.S. Bankruptcy Code (Title 11 of the
United States Code) (the “Bankruptcy Code”)) and
Counterparty would be able to purchase the Shares hereunder in
compliance with the laws of the jurisdiction of
Counterparty’s incorporation;
(x) such Transaction and any
repurchase of the Shares by Counterparty in connection with such
Transaction has been approved by its board of directors and any
such repurchase has been or will when so required be publicly
disclosed in its periodic filings under the Exchange Act and its
financial statements and notes thereto, and prior to the Trade Date
of such Transaction, Counterparty shall deliver to Bank a
resolution of Counterparty’s board of directors authorizing
such Transaction and such other certificate or certificates as Bank
shall reasonably request;
(xi) it is not, and after
giving effect to the transactions contemplated hereby will not be,
required to register as an “investment company” as such
term is defined in the Investment Company Act of 1940, as
amended;
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(xii) without limiting the
generality of Section 13.1 of the Definitions, Counterparty
acknowledges that neither Bank nor any of its affiliates is making
any representations or warranties or taking a position or
expressing any view with respect to the treatment of the
Transaction under any accounting standards, including without
limitation FASB Statements 128, 133, as amended, 149 or 150, EITF
Issue No. 00-19, Issue No. 01-6, Issue No. 03-6 (or any
successor issue statements) or Issue No. 07-5 or under the
FASB’s Liabilities & Equity Project; and
(xiii) without limiting the
generality of Section 3(a)(iii) of the Agreement, the
Transaction will not violate Rule 13e-1 or Rule 13e-4 under the
Exchange Act.
(xiv) Counterparty shall
deliver to Bank (A) an incumbency certificate, dated as of the
Effective Date of such Transaction, of Counterparty in customary
form and (B) an opinion of counsel, dated as of the Effective
Date of such Transaction and reasonably acceptable to Bank in form
and substance, with respect to the matters set forth in
Section 3(a) of the Agreement.
(xv) Counterparty is not on
the Trade Date of any Transaction engaged in and will not,
duri
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