Fixed Dollar Accelerated Share Repurchase Transaction
Exhibit
10.1
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XXXXXX
XXXXXXX & CO. INCORPORATED
0000
XXXXXXXX
XXX
XXXX, XX 00000-0000
(212)
761-4000
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September 14, 2007
International
Flavors & Fragrances Inc.
000
Xxxx 00xx
Xxxxxx
Xxx
Xxxx, XX 00000
Dear
Sir/Madam:
The
purpose of this letter agreement (this “Confirmation”) is to confirm the terms
and conditions of the Transaction entered into between Xxxxxx Xxxxxxx & Co.
Incorporated (“MSCO”) and International Flavors & Fragrances Inc. (the
“Issuer”) on the Trade Date specified below (the “Transaction”). This
confirmation constitutes a “Confirmation” as referred to in the ISDA Master
Agreement specified below.
The
definitions and provisions contained in the 2002 ISDA Equity Derivatives
Definitions (as published by the International Swaps and Derivatives
Association, Inc. (“ISDA”)) (the “Equity Definitions”) are incorporated into
this Confirmation. In the event of any inconsistency between the
Equity Definitions and this Confirmation, this Confirmation will
govern. Any reference to a currency shall have the meaning contained
in Annex A to the 1998 ISDA FX and Currency Option Definitions, as published
by
ISDA. “Other ASR Transaction” shall mean the Fixed
Dollar Collared Accelerated Share Repurchase with Acceleration Rights
Transaction dated September 14, 2007 between the Issuer and MSCO.
1. This
Confirmation evidences a complete and binding agreement between MSCO and Issuer
as to the terms of the Transaction to which this Confirmation
relates. This Confirmation shall be subject to an agreement (the
“Agreement”) in the form of the 2002 ISDA Master Agreement (the
“ISDA Form”) as if MSCO and Issuer had executed an
agreement in
such form without any Schedule. For the avoidance of doubt, the
Transaction and the Other ASR Transaction shall be the only transactions under
the Agreement, and all references herein to the "Agreement" shall be deemed
to
include the Other ASR Transaction.
2. The
terms of the particular Transaction to which this Confirmation relates are
as
follows:
GENERAL
TERMS:
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Trade
Date:
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September
14, 2007
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Buyer:
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Issuer
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Seller:
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MSCO
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Shares:
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Common
Stock of Issuer (Ticker: IFF)
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Number
of Shares:
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The
number of Shares delivered in accordance with Physical Settlement
below.
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Page
2
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Forward
Price:
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A
price per Share (as determined by the Calculation Agent) equal to
(i) the
sum of the 10b-18 VWAP for each Trading Day during the Calculation
Period
dividedby (ii) the number of Trading Days in the Calculation Period
minus
(iii) the Discount (as specified in Schedule
I)
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10b-18
VWAP:
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For
each Trading Day during the Calculation Period, a price per share
(as
determined by the Calculation Agent) equal to the volume-weighted
average
price of the Rule 10b-18 eligible trades in the Shares for the entirety
of
such Trading Day as determined by reference to the screen entitled
“IFF.N
AQR SEC” or any successor page as reported by Bloomberg L.P. (without
regard to pre-open or after hours trading outside of any regular
trading
session for such Trading Day or block trades (as defined in Rule
10b-18(b)(5) of the Securities Exchange Act of 1934 as amended (the
“Exchange Act”)) on such Trading
Day).
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Calculation
Period:
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The
period from and including the first Trading Day that occurs after
the
Initial Hedge Period Completion Date as defined in the Other ASR
Transaction to but excluding the Valuation
Date.
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Trading
Day:
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Any
Exchange Business Day that is not a Disrupted Day or an Excluded
Day (as
defined below)
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Initial
Shares:
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90%
of (i) the Prepayment Amount divided by (ii) the official closing
price of
the Shares on the Exchange on September 27,
2007
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Initial
Share Delivery Date:
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September
28, 2007. On the Initial Share Delivery Date, Seller shall
deliver a number of Shares equal to the Initial Shares to Buyer in
accordance with Section 9.4 of the Equity Definitions, with the Initial
Share Delivery Date deemed to be a “Settlement Date” for purposes of such
Section 9.4.
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Prepayment:
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Applicable
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Prepayment
Amount:
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USD337,500,000
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Commission
Amount:
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As
specified in Schedule I
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Adjustment
Amount:
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As
specified in Schedule I
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Structuring
Fee:
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As
specified in Schedule I
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Prepayment
Date:
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September
28, 2007. On the Prepayment Date, Buyer shall pay to Seller the
Prepayment Amount, the Commission Amount, the Adjustment Amount and
the
Structuring Fee.
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Exchange:
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NYSE
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Related
Exchange:
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The
primary exchange on which options or futures on the relevant Shares
are
traded.
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3
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Market
Disruption Event:
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The
definition of “Market Disruption Event” in Section 6.3(a) of the Equity
Definitions is hereby amended by inserting the words “at any time on any
Scheduled Trading Day during the Calculation Period or” after the word
“material,” in the third line thereof.
Notwithstanding
anything to the contrary in the Equity Definitions, if any Scheduled
Trading Day in the Calculation Period is a Disrupted Day, the Calculation
Agent shall have the option in its sole discretion either (i) to
determine
the weighting of each Rule 10b-18 eligible transaction in the Shares
on
the relevant Disrupted Day using its commercially reasonable judgment
for
purposes of calculating the Forward Price, as applicable, (ii) to
elect to
extend the Calculation Period by a number of Scheduled Trading Days
equal
to the number of Disrupted Days during the Calculation Period or
(iii) to
suspend the Calculation Period, as appropriate, until the circumstances
giving rise to such suspension have ceased. For the avoidance
of doubt, if Calculation Agent elects the option described in clause
(i)
above, then such Disrupted Day shall be deemed to be a Trading Day
for
purposes of calculating the Forward Price.
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Excluded
Day
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November
23, 2007; and December 24 and 31,
2007
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VALUATION:
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Valuation
Time:
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The
Scheduled Closing Time on the relevant
Exchange
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Valuation
Date:
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The
Scheduled Valuation Date (as specified in Schedule I), subject to
extension in accordance with “Market Disruption Event” above or Section 9,
Section 10 or Section 11(c) below. On the Valuation Date,
Calculation Agent shall calculate the Settlement
Amount.
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SETTLEMENT
TERMS:
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Physical
Settlement:
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Applicable.
On
the Settlement Date, Seller shall deliver to Buyer a number of Shares
equal to (a) (i) the Prepayment Amount divided by (ii)
the Forward Price as determined on the Valuation Date, minus (b)
the Initial Shares (such number of Shares, the “Settlement Amount”),
rounded to the nearest whole number of Shares; provided, however,
that if
the Settlement Amount is less than zero, then Buyer shall deliver
to
Seller a number of Shares equal to 105% of the absolute value of
the
Settlement Amount (such number of Shares, the “Payment
Shares”).
Notwithstanding
the proviso above, if the Settlement Amount is less than zero, Buyer
may
cash settle its obligation to deliver the Payment Shares by delivering
to
Seller a notice by
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Page
4
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no
later than the Valuation Date electing to cash settle its obligation
to
deliver the Payment Shares. Any such cash settlement shall be
effected in accordance with “Cash Settlement of Payment Shares”
below.
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For
the avoidance of doubt, upon the date that (i) Buyer satisfies its
obligation to deliver the Payment Shares to Seller in accordance
with the
terms of this paragraph or (ii) the Settlement Balance (as defined
below)
is reduced to zero in connection with cash settlement of Buyer’s
obligation to deliver Payment Shares (as described under “Cash Settlement
of Payment Shares” below), then Buyer shall have no further delivery or
payment obligations under the terms of this Transaction and this
Transaction shall be deemed to have been settled as of such
date.
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Settlement
Currency:
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USD
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Settlement
Date:
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Three
Exchange Business Days after the Valuation Date, or if such date
is not a
Clearance System Business Day or if there is a Settlement Disruption
Event
on such day, the immediately succeeding Clearance System Business
Day on
which there is no Settlement Disruption
Event.
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Cash
Settlement of Payment Shares
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If
Buyer elects to cash settle its obligation to deliver Payment Shares,
then
on the Valuation Date a balance (the “Settlement Balance”) shall be
created with an initial balance equal to the absolute value of the
Settlement Amount. On the Settlement Date, Buyer shall deliver
to Seller a U.S. dollar amount equal to the Payment Shares multiplied
by a
price per Share as reasonably determined by the Calculation Agent
(such
cash amount, the “Initial Cash Settlement Amount”). On the
Exchange Business Day immediately following the delivery of the Initial
Cash Settlement Amount, Seller shall begin purchasing Shares in a
commercially reasonable manner (all such Shares purchased, “Cash
Settlement Shares”). At the end of each Exchange Business Day
on which Seller purchases Cash Settlement Shares, Seller shall reduce
(i)
the Settlement Balance by the number of Cash Settlement Shares purchased
on such Exchange Business Day and (ii) the Initial Cash Settlement
Amount
by the aggregate purchase price (including commissions) of the Cash
Settlement Shares on such Exchange Business Day. If, on any Exchange
Business Day, the Initial Cash Settlement Amount is reduced to or
below
zero but the Settlement Balance is above zero, the Buyer shall
(i) deliver to Seller or as directed by Seller on the next Exchange
Business Day after such Exchange Business Day an additional U.S.
dollar
amount (an “Additional Cash Settlement Amount”) equal to the
Settlement Balance as of such Exchange Business Day multiplied
by a price per Share as reasonably determined by the
Calculation Agent. This provision shall be applied successively
until the Settlement Balance is reduced to zero. On the
Exchange Business Day that the Settlement Balance is reduced to zero,
Seller shall
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5
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return
to Buyer any unused portion of the Initial Cash Settlement Amount
or the
Additional Cash Settlement Amount, as the case may be. For the
avoidance of doubt, any purchases of Cash Settlement Shares contemplated
by this paragraph shall be subject to Seller’s covenants in Section
11(b).
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Share
Adjustments:
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Potential
Adjustment Event:
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Notwithstanding
anything to the contrary in Section 11.2(e) of the Equity Definitions,
an
Extraordinary Dividend shall not constitute a Potential Adjustment
Event
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Extraordinary
Dividend:
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For
any fiscal quarter occurring (in whole or in part) during the period
from
and including the first day of the Hedge Period to and including
the
Termination Date, any dividend or distribution on the Shares with
an
ex-dividend date occurring during such fiscal quarter (other than
any
dividend or distribution of the type described in Section 11.2(e)(i)
or
Section 11.2(e)(ii)(A) or (B) of the Equity Definitions) (a
“Dividend”) that is either (i) a non-regularly scheduled
Divided or (ii) the amount or value of which (as determined by the
Calculation Agent exceeds the Ordinary Dividend Amount.
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Ordinary
Dividend Amount:
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For
any calendar quarter, USD 0.23
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Method
of Adjustment:
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Calculation
Agent Adjustment; provided that if Seller suspends trading in the
Shares
for all or any portion of a Trading Day within the Calculation Period,
the
suspension shall be treated as a Potential Adjustment Event subject
to
Calculation Agent Adjustment. In the case of a suspension
pursuant to Section 10, the Calculation Agent shall make such adjustments
prior to the period of suspension, if it is practical to do
so. Otherwise, and in all cases of a suspension as contemplated
under “Market Disruption Event” above, the Calculation Agent shall make
such adjustments promptly following the period of
suspension.
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EXTRAORDINARY
EVENTS:
Consequences
of Merger Events:
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Share-for-Share:
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Modified
Calculation Agent Adjustment
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Share-for-Other:
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Cancellation
and Payment on that portion of the Other Consideration that consists
of
cash; Modified Calculation Agent Adjustment on the remainder of the
Other
Consideration
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Page
6
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Share-for-Combined:
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Component
Adjustment
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Tender
Offer:
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Applicable
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Consequences
of Tender Offers:
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Share-for-Share:
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Modified
Calculation Agent Adjustment
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Share-for-Other:
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Modified
Calculation Agent Adjustment
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Share-for-Combined:
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Modified
Calculation Agent Adjustment
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For
purposes of this Transaction, the definition of Merger Date in Section 12.1(c)
shall be amended to read, “Merger Date shall mean the Announcement
Date.” For purposes of this Transaction, the definition of Tender
Offer Date in Section 12.1(e) shall be amended to read, “Tender Offer Date shall
mean the Announcement Date.”
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Composition
of Combined Consideration:
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Applicable
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Nationalization,
Insolvency or Delisting:
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Cancellation
and Payment
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Additional
Disruption Events:
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Change
in Law:
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Applicable
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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
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Increased
Cost of Hedging:
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Applicable
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Loss
of Stock Borrow:
Maximum
Stock Loan Rate:
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Applicable
100bps
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Increased
Cost of Stock Borrow:
Initial
Stock Loan Rate:
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Applicable
25bps
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Determining
Party:
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For
all Extraordinary Events, MSCO
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Hedging
Party:
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For
all Additional Disruption Events,
MSCO
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Non-Reliance:
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Applicable
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AGREEMENTS
AND ACKNOWLEDGMENTS:
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Regarding
Hedging Activities:
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Applicable
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Additional
Acknowledgments:
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Applicable
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3. Calculation
Agent:
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MSCO
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Page
7
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4. Account
Details:
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To
be provided
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5. (a)
Nationalization or Insolvency. The words “the Transaction will be
cancelled,” in the first line of Section 12.6(c)(ii) are replaced with the words
“MSCO will have the right to cancel this Transaction,”.
(b) Additional
Termination
Event. The declaration of any Extraordinary Dividend by Issuer during
the period from and including the Trade Date to but excluding the Valuation
Date
shall constitute an Additional Termination Event with this Transaction as the
only “Affected Transaction” and Issuer as the sole “Affected
Party”.
(c)
For the avoidance of doubt, this
Transaction shall be deemed to be a “Forward Transaction” for purposes of the
Equity Definitions; provided, however, that in Section 9.2(a)(iii)
of the Equity Definitions the words “the Excess Dividend Amount, if any, and”
shall be deleted.
6. Certain
Payments and Deliveries by MSCO. Notwithstanding anything to the
contrary herein, or in the Equity Definitions, if at any time (i) an Early
Termination Date occurs and MSCO would be required to make a payment pursuant
to
Sections 6(d) and 6(e) of the Agreement, (ii) a Tender Offer occurs and MSCO
would be required to make a payment pursuant to Sections 12.3 and 12.7 of the
Equity Definitions, (iii) a Merger Event occurs and MSCO would be required
to
make a payment pursuant to Sections 12.2 and 12.7 of the Equity Definitions
or
(iv) an Additional Disruption Event occurs and MSCO would be required to make
a
payment pursuant to Sections 12.8 and 12.9 of the Equity Definitions, then
Issuer shall have the option to require MSCO to make such payment in cash or
to
settle such payment amount in Shares (any such payment described in Sections
6(i), (ii), (iii), or (iv) above, an “MSCO Payment
Amount”). If Issuer elects for MSCO to settle an MSCO
Payment Amount in Shares, then on the date such MSCO Payment Amount is due,
a
Settlement Balance shall be established with an initial balance equal to the
MSCO Payment Amount. On such date, MSCO shall commence purchasing Shares for
delivery to Issuer. At the end of each Trading Day on which MSCO
purchases Shares pursuant to this Section 6, MSCO shall reduce the Settlement
Balance by the amount paid by MSCO to purchase the Shares purchased on such
Trading Day. MSCO shall deliver any Shares purchased on a Trading Day
to Issuer on the third Exchange Business Day following the relevant Trading
Day. MSCO shall continue purchasing Shares until the Settlement
Balance has been reduced to zero.
7. Certain
Payments and Deliveries by Issuer. Notwithstanding anything to the
contrary herein, or in the Equity Definitions, if at any time (i) an Early
Termination Date occurs and Issuer would be required to make a payment pursuant
to Sections 6(d) and 6(e) of the Agreement, (ii) a Tender Offer occurs and
Issuer would be required to make a payment pursuant to Sections 12.3 and 12.7
of
the Equity Definitions, (iii) a Merger Event occurs and Issuer would be required
to make a payment pursuant to Sections 12.2 and 12.7 of the Equity Definitions
or (iv) an Additional Disruption Event occurs and Issuer would be required
to
make a payment pursuant to Sections 12.8 and 12.9 of the Equity Definitions
(any
such payment described in Sections 7(i), (ii), (iii), or (iv) above, an
“Early Settlement Payment”), then Issuer shall have the option,
in lieu of making such cash payment, to settle its payment obligations under
Sections 7(i), (ii), (iii), or (iv) above in Shares (such Shares, the
“Early Settlement Shares”). In order to elect to
deliver Early Settlement Shares, (i) Issuer must notify MSCO of its election
by
no later than 4 p.m. EST on the date that is three Exchange Business Days before
the date that the Early Settlement Payment is due, (ii) must specify whether
such Early Settlement Shares are to be sold by means of a registered offering
or
by means of a private placement and (iii) the conditions described in Section
8
below must be satisfied on each day Early Settlement Shares are to be sold
by
Seller in connection with Buyer’s election to deliver Early Settlement Shares in
connection with the settlement of an Early Settlement Payment.
8. Conditions
to Delivery of Early Settlement Shares.
(a) If
Issuer timely elects
to deliver Early Settlement Shares and Make-Whole Shares by means of a
registered offering, the following provisions shall apply:
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8
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(i)
On the later of (A) the Trading Day following the Issuer’s election to deliver
Early Settlement Shares and any Make-Whole Shares by means of a registered
offering (the “Registration Notice Date”), and (B) the date on
which the Registration Statement is declared effective by the SEC or becomes
effective (the “Registered Share Delivery Date”), the Issuer
shall deliver to MSCO a number of Early Settlement Shares equal to the quotient
of (I) the relevant Early Settlement Payment dividedby (II) a
price per Share as reasonably determined by the Calculation Agent.
(ii)
Promptly following the Registration Notice Date, the Issuer shall file with
the
SEC a registration statement (“Registration Statement”)
covering the public resale by MSCO of the Early Settlement Shares and any
Make-Whole Shares (collectively, the “Registered Securities”)
on a continuous or delayed basis pursuant to Rule 415 (or any similar or
successor rule), if available, under the Securities Act; provided that
no such filing shall be required pursuant to this paragraph (ii) if the Issuer
shall have filed a similar registration statement with unused capacity at least
equal to the relevant Settlement Amount and such registration statement has
become effective or been declared effective by the SEC on or prior to the
Registration Notice Date and no stop order is in effect with respect to such
registration statement as of the Registration Notice Date. The Issuer
shall use its best efforts to file an automatic shelf registration statement
or
have the Registration Statement declared effective by the SEC as promptly as
possible.
(iii)
Promptly following the Registration Notice Date, the Issuer shall afford MSCO
a
reasonable opportunity to conduct a due diligence investigation with respect
to
the Issuer customary in scope for underwritten offerings of equity securities
(including, without limitation, the availability of senior management to respond
to questions regarding the business and financial condition of the Issuer and
the right to have made available to MSCO for inspection all financial and other
records, pertinent corporate documents and other information reasonably
requested by MSCO), and MSCO shall be satisfied in all material respects with
the results of such due diligence investigation of the Issuer. For
the avoidance of doubt, the Issuer shall not have the right to deliver Shares
pursuant to this Section 8(a) (and the conditions to delivery of Early
Settlement Shares specified in this Section 8(a) shall not be satisfied) until
MSCO is satisfied in all material respects with the results of such due
diligence investigation of the Issuer.
(iv)
From the effectiveness of the Registration Statement until all Registered
Securities have been sold by MSCO, the Issuer shall, at the request of MSCO,
make available to MSCO a printed prospectus relating to the Registered
Securities in form and substance (including, without limitation, any sections
describing the plan of distribution) satisfactory to MSCO (a
“Prospectus”, which term shall include any prospectus
supplement thereto), in such quantities as Xxxxxx shall reasonably
request.
(v)
The Issuer shall use its best efforts to prevent the issuance of any stop order
suspending the effectiveness of the Registration Statement or of any order
preventing or suspending the use of any Prospectus and, if any such order is
issued, to obtain the lifting thereof as soon thereafter as is possible.
If the Registration Statement, the Prospectus or any document incorporated
therein by reference contains a misstatement of a material fact or omits to
state a material fact required to be stated therein or necessary to make any
statement therein not misleading, the Issuer shall as promptly as practicable
file any required document and prepare and furnish to MSCO a reasonable number
of copies of such supplement or amendment thereto as may be necessary so that
the Prospectus, as thereafter delivered to the purchasers of the Registered
Securities will not contain a misstatement of a material fact or omit to state
a
material fact required to be stated therein or necessary to make any statement
therein not misleading.
(vi)
On or prior to the Registered Share Delivery Date, the Issuer shall enter into
an agreement (a “Transfer Agreement”) with MSCO (or any
affiliate of MSCO designated by MSCO) in connection with the public resale
of
the Registered Securities, substantially similar to underwriting
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9
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agreements
customary for underwritten offerings of equity securities, in form and substance
reasonably satisfactory to MSCO (or such affiliate), which Transfer Agreement
shall (without limitation of the foregoing):
(A)
contain provisions substantially similar to those contained in such underwriting
agreements relating to the indemnification of, and contribution in connection
with the liability of, MSCO and its affiliates,
(B)
provide for delivery to MSCO (or such affiliate) of customary opinions
(including, without limitation, accounting comfort letters, opinions relating
to
the due authorization, valid issuance and fully paid and non-assessable nature
of the Registered Securities and the lack of material misstatements and
omissions in the Registration Statement, the Prospectus and the Issuer’s filings
under the Exchange Act of 1934, as amended and modified (the “Exchange
Act”)); and
(C)
provide for the payment by the Issuer of all fees and expenses in connection
with such resale, including all registration costs and all fees and expenses
of
counsel for MSCO (or such affiliate).
(vii)
On the Registered Share Delivery Date, a balance (the “Settlement
Balance”) shall be established with an initial balance equal to the
applicable amount of the relevant Early Settlement Payment. Following the
delivery of Early Settlement Shares or any Make-Whole Shares, Seller shall
sell
all such Early Settlement Shares or Make-Whole Shares in a commercially
reasonable manner.
(viii)
At the end of each day upon which sales have been made, the Settlement Balance
shall be (A) reduced by an amount equal to the aggregate proceeds received
by
MSCO upon settlement of the sale of such Share, and (B) increased by an amount
(as reasonably determined by the Calculation Agent) equal to MSCO’s funding cost
with respect to the then-current Settlement Balance as of the close of business
on such day.
(ix)
If, on any date, the Settlement Balance has been reduced to zero but not all
of
the Early Settlement Shares have been sold, no additional Early Settlement
Shares shall be sold and MSCO shall promptly deliver to the Issuer (A) any
remaining Early Settlement Shares and (B) if the Settlement Balance has been
reduced to an amount less than zero, an amount in cash equal to the absolute
value of the then-current Settlement Balance.
(x)
If, on any date, all of the Early Settlement Shares have been sold and the
Settlement Balance has not been reduced to zero, the Issuer shall promptly
deliver to MSCO an additional number of Shares (“Make-Whole Shares”) equal to
(A) the Settlement Balance as of such date divided by (B) the price per Share
as
reasonably determined by the Calculation Agent. This clause (x) shall
be applied successively until the Settlement Balance is reduced to
zero.
(xi) If
at any time the number of Shares covered by the Registration Statement is less
than the number of Registered Securities required to be delivered pursuant
to
this Section 8(a), the Issuer shall, at the request of MSCO, file additional
registration statement(s) to register the sale of all Registered Securities
required to be delivered to MSCO.
(xii)
The Issuer shall cooperate with MSCO and use its reasonable best efforts to
take
any other action necessary to effect the intent of the provisions set forth
in
this Section 8(a).
(b) If
Issuer timely elects to deliver Early Settlement Shares and Make-Whole Shares
by
means of a private placement, the following provisions shall
apply:
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10
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(i) all
Early Settlement Shares
and Make-Whole Shares shall be delivered to the Seller (or any affiliate of
the
Seller designated by the Seller) pursuant to the exemption from the registration
requirements of the Securities Act provided by
Section 4(2) thereof;
(ii) Seller
and any
potential purchaser of any such Shares from the Seller (or any affiliate of
the
Seller designated by the Seller) identified by Seller shall have been afforded
a
commercially reasonable opportunity to conduct a due diligence investigation
with respect to Issuer customary in scope for private placements of equity
securities (including, without limitation, the right to have made available
to
them for inspection all financial and other records, pertinent corporate
documents and other information reasonably requested by them) and Buyer shall
not disclose material non-public information in connection with such due
diligence investigation; provided, however, if Seller is not reasonably
satisfied with such due diligence investigation or no such investigation is
afforded to Seller due to circumstances at Buyer that make such investigation
impractical, then such dissatisfaction or the failure by Issuer to afford Seller
with such opportunity to conduct a due diligence investigation shall not provide
a basis for Seller to refuse to accept the Early Settlement Shares and
Make-Whole Shares by means of a private placement; provided, further,
for the avoidance of doubt, that Seller’s dissatisfaction with the due diligence
investigation or the failure by Issuer to afford Seller with such opportunity
to
conduct a due diligence investigation may be used as a factor by MSCO in
determining the per share value of the Early Settlement Shares pursuant to
Section 8(b)(v) below; and
(iii) an
agreement (a “Private Placement Agreement”) shall have been
entered into between Issuer and the Seller (or any affiliate of the Seller
designated by the Seller) in connection with the private placement of such
Shares by Issuer to the Seller (or any such affiliate) and the private resale
of
such Shares by the Seller (or any such affiliate), substantially similar to
private placement purchase agreements customary for private placements of equity
securities, in form and substance commercially reasonably satisfactory to the
Seller and the Issuer, which Private Placement Agreement shall include, without
limitation, provisions substantially similar to those contained in such private
placement purchase agreements relating to the indemnification of, and
contribution in connection with the liability of, the Seller and its affiliates,
and shall provide for the payment by Issuer of all fees and expenses in
connection with such resale, including all reasonable fees and expenses of
one
counsel for the Seller but not including any underwriter or broker discounts
and
commissions, and shall contain representations, warranties and agreements of
Issuer and Seller reasonably necessary or advisable to establish and maintain
the availability of an exemption from the registration requirements of the
Securities Act for such resales.
(iv) If
Issuer elects to deliver Early Settlement Shares to satisfy its payment
obligation of an Early Settlement Payment, neither Issuer nor Seller shall
take
or cause to be taken any action that would make unavailable either (i) the
exemption set forth in Section 4(2) of the Securities Act for the sale
of any Early Settlement Shares or Make-Whole Shares by Issuer to the Seller
or
(ii) an exemption from the registration requirements of the Securities Act
reasonably acceptable to the Seller for resales of Early Settlement Shares
and
Make-Whole Shares by the Seller.
(v)
On the date requested by MSCO, (A) Issuer shall deliver a number of Early
Settlement Shares equal to the quotient of (I) the relevant Early Settlement
Payment divided by (II) a per share value, determined by MSCO in a commercially
reasonable manner and which may be based on indicative bids from institutional
“accredited investors” (as defined in Rule 501 under the Securities Act of 1933,
as amended (the “Securities Act”)) and (B) the provisions of Sections 8(a)(vii)
–(x) shall apply to the Early Settlement Shares delivered pursuant to this
Section 8(b)(v). For purposes of applying the foregoing, the
Registered Share Delivery Date referred to in 8(a)(vii) shall be the date on
which Issuer delivers the Early Settlement Shares.
(vi)
For the avoidance of doubt nothing in this Section 8(b) shall be read as
requiring the Buyer to deliver cash in respect of the settlement of the
transactions contemplated by the Agreement.
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(c) The
provisions of Section 8(b) shall apply to any then-current Settlement Balance
if
(i) on any given day, Issuer cannot satisfy any of the conditions of Section
8(a) or (ii) for a period of at least ten (10) consecutive Exchange Business
Days, MSCO has determined that it is inadvisable to effect sales of Registered
Securities.
(d) If
Issuer elects to deliver Early Settlement Shares to satisfy its payment
obligation of an Early Settlement Payment, then, if necessary, Issuer shall
use
its best efforts to cause the number of authorized but unissued Shares of Common
Stock to be increased to an amount sufficient to permit Issuer to fulfill its
obligations to satisfy its payment obligation of a Early Settlement Payment
by
delivering Early Settlement Shares.
9. Special
Provisions for Merger Events. Notwithstanding anything to the
contrary herein or in the Equity Definitions, to the extent that an Announcement
Date for a potential Merger Transaction occurs during the term of this
Transaction and such Announcement Date does not cause this Transaction to
terminate in whole under the provisions of “Extraordinary Event” in paragraph 2
above:
(a) As
soon as practicable following the public announcement of such potential Merger
Transaction, Issuer shall provide MSCO with written notice of such
announcement;
(b) Promptly
after request from MSCO, Issuer shall provide MSCO with written notice
specifying (i) Issuer's average daily Rule 10b-18 Purchases (as defined in
Rule
10b-18) during the three full calendar months immediately preceding the
Announcement Date that were not effected through MSCO or its affiliates and
(ii)
the number of Shares purchased pursuant to the block purchase proviso in Rule
10b-18(b)(4) under the Exchange Act for the three full calendar months preceding
the Announcement Date. Such written notice shall be deemed to be a
certification by Issuer to MSCO that such information is true and
correct. Issuer understands that MSCO will use this information in
calculating the trading volume for purposes of Rule 10b-18; and
(c) MSCO
in its sole discretion may extend the Calculation Period to account for any
reduction in the number of Shares that could be purchased on each day during
the
Calculation Period in compliance with Rule 10b-18 following the Announcement
Date.
"Merger
Transaction" means any merger, acquisition or similar transaction
involving a recapitalization of Issuer as contemplated by Rule 10b-18(a)(13)(iv)
under the Exchange Act.
10. Seller
Adjustments. In the event that Seller reasonably determines that it
is appropriate with regard to any legal, regulatory or self-regulatory
requirements or related policies and procedures (whether or not such
requirements, policies or procedures are imposed by law or have been voluntarily
adopted by Seller, and including, without limitation, Rule 10b-18, Rule 10b-5,
Regulation 13D-G and Regulation 14E, “Requirements”), for
Seller to refrain from purchasing Shares or to purchase fewer than the number
of
Shares Seller would otherwise purchase on any Trading Day during the duration
of
this Transaction, then Seller may, in its discretion, elect that the Initial
Hedge Period or the Calculation Period, as the case may be, be suspended and,
if
appropriate, extended with regard to any Requirements. Seller shall notify
the
Issuer upon the exercise of Seller’s rights pursuant to this Section 10 and
shall subsequently notify the Issuer on the day Seller believes that the
circumstances giving rise to such exercise have changed. If the
Initial Hedge Period or the Calculation Period is suspended pursuant to this
Section 10, at the end of such suspension Seller shall determine the number
of
Trading Days remaining in the Calculation Period, as appropriate, and the terms
of this Transaction shall be adjusted as set forth above under “Physical
Settlement.”
11. Covenants.
(a) The
Buyer covenants and agrees:
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(i)(a)
that it will not treat this
Transaction, any portion hereof, or any obligation hereunder as giving rise
to
any interest income or other inclusions of ordinary income; (b) it will not
treat the delivery of any portion of the Shares or cash to be delivered pursuant
to this Transaction as the payment of interest or ordinary income; (c) it will
treat this Transaction in its entirety as a forward contract for the delivery
of
such Shares or cash; and (d) it will not take any action (including filing
any
tax return or form or taking any position in any tax proceeding) that is
inconsistent with the obligations contained in (a) through
(c). Notwithstanding the preceding sentence, Buyer may take any
action or position required by law, provided that Buyer delivers to Seller
an
unqualified opinion of counsel, nationally recognized as expert in Federal
tax
matters and acceptable to Buyer, to the effect that such action or position
is
required by a statutory change or a Treasury regulation or applicable court
decision published after the Trade Date;
(ii) that
during the term of
this Agreement, neither it nor any of its affiliates shall directly or
indirectly (which shall be deemed to include the writing or purchase of any
cash-settled derivative instrument) purchase Shares (or any security convertible
into or exchangeable for Shares) without the prior written approval of Seller
or
take any other action that would cause the purchase by Seller of any Shares
in
connection with this Agreement not to comply with Rule 10b-18 under the Exchange
Act (assuming for the purposes of this paragraph that such Rule were otherwise
applicable to such purchases);
(iii)
to comply with all laws, rules
and regulations applicable to it (including, without limitation, the Securities
Act of 1933, as amended (the “Securities Act”) and the Exchange Act) in
connection with the transactions contemplated by this Confirmation;
(iv) that
it is not relying,
and has not relied, upon Seller or any of its representatives or advisors with
respect to the legal, accounting, tax or other implications of this Agreement
and that it has conducted its own analyses of the legal, accounting, tax and
other implications of this Agreement, and that Seller and its affiliates may
from time to time effect transactions for their own account or the account
of
customers and hold positions in securities or options on securities of the
Buyer
and that Seller and its affiliates may continue to conduct such transactions
during the term of this Agreement; and
(v) that
neither it nor any
affiliates shall take any action that would cause Regulation M under the
Exchange Act (“Regulation M”), to be applicable to any purchases of Shares, or
any security for which Shares is a reference security (as defined in Regulation
M), by Buyer or any affiliated purchasers (as defined in Regulation M) during
the Calculation Period unless it shall have provided notice thereof to Seller
pursuant to Section 11(c) below.
(b) Seller
covenants and agrees that with respect to the purchase of any Shares in
connection with this Agreement (except for any purchases made by Seller during
the Calculation Period in connection with dynamic hedge adjustments of the
Seller’s exposure to the Transaction as a result of any equity optionality
contained in such Transaction), Seller shall make any such purchase in a manner
that Seller reasonably believes, based on the representations and warranties
set
forth herein and any other information provided to Seller by Buyer, would meet
the requirements of the safe harbor under the provisions of Rule 10b-18 as
if
such purchases were made by Buyer; provided, however, that it is
understood and agreed that Seller will not be obligated to comply with this
paragraph upon the occurrence of a Valuation Date other than the Scheduled
Valuation Date or if an Event of Default, Additional Disruption Event,
Extraordinary Event or Additional Termination Event occurs provided,
further, that Seller shall take into account Shares purchased in
connection with the Other ASR Transaction in making its determinations as to
whether such purchases would meet such requirements if they had been made by
Buyer pursuant to this Section 11(b).
(c) If
Buyer concludes that it will be engaged in a distribution of the Shares for
purposes of Regulation M, Buyer agrees that it will, on one Trading Day's
written notice, direct MSCO not to purchase Shares in connection with hedging
the Transaction during the "restricted period" (as defined in Regulation
M). If on any Trading Day Buyer delivers written notice (and confirms
by telephone) by 9:00 a.m. New York City Time (the "Notification Time"), then
such notice shall be effective to suspend the Calculation Period as of such
Notification Time. In the event that Buyer delivers notice and/or
confirms by telephone after the Notification
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Time,
then the Calculation Period shall be suspended effective as of 9:00 a.m. New
York City time on the following Trading Day or as otherwise required by law
or
agreed between Buyer and Seller. If the Calculation Period is
suspended pursuant to this Section 11(c), at the end of such suspension Seller
shall determine the number of Trading Days remaining in the Calculation Period,
as appropriate, and the terms of this Transaction shall be adjusted as set
forth
above under “Physical Settlement”.
12. Representations,
Warranties and Acknowledgments.
(a)
The Buyer hereby represents and warrants to Seller that:
(i) as
of the date hereof,
the Buyer (A) is not in possession of any material, non-public information
with
respect to the Buyer or any of its securities, and is entering into this
Agreement in good faith and not as part of a plan or scheme to evade the
prohibitions of Rule 10b5-1 of the Exchange Act and (B) agrees not to alter
or
deviate from the terms of this Agreement or enter into or alter a corresponding
or hedging transaction or position with respect to the Shares (including,
without limitation, with respect to any securities convertible or exchangeable
into the Shares) (other than, for the avoidance of doubt, the Other ASR
Transaction) during the term of this Agreement;
(ii) the
transactions
contemplated by this Confirmation have been authorized under Buyer’s publicly
announced program to repurchase Shares;
(iii) the
Buyer is not
entering into this Agreement to facilitate a distribution of the Shares (or
any
security convertible into or exchangeable for Shares) or in connection with
a
future issuance of securities except pursuant to the Buyer’s employee benefit
plans and dividend reinvestment plan or other publicly disclosed
transaction;
(iv) the
Buyer is not
entering into this Agreement to create actual or apparent trading activity
in
the Shares (or any security convertible into or exchangeable for Shares) or
to
raise or depress the price of the Shares (or any security convertible into
or
exchangeable for Shares); and
(v) the
Buyer is as of the
date hereof, and after giving effect to the transactions contemplated hereby
will be, Solvent. As used in this paragraph, the term “Solvent”
means, with respect to a particular date, that on such date (A) the present
fair
market value (or present fair saleable value) of the assets of the Buyer is
not
less than the total amount required to pay the liabilities of the Buyer on
its
total existing debts and liabilities (including contingent liabilities) as
they
become absolute and matured, (B) the Buyer is able to realize upon its
assets and pay its debts and other liabilities, contingent obligations and
commitments as they mature and become due in the normal course of business,
(C) assuming consummation of the transactions as contemplated by this
Agreement, the Buyer is not incurring debts or liabilities beyond its ability
to
pay as such debts and liabilities mature, (D) the Buyer is not engaged in
any business or transaction, and does not propose to engage in any business
or
transaction, for which its property would constitute unreasonably small capital
after giving due consideration to the prevailing practice in the industry in
which the Buyer is engaged and (E) the Buyer is not a defendant in any civil
action that could reasonably be expected to result in a judgment that the Buyer
is or would become unable to satisfy.
(b) Seller
and the Buyer each hereby acknowledges that any transactions by Seller in the
Shares will be undertaken by Seller, as the case may be, as principal for its
own account. All of the actions to be taken by Seller in connection
with this Agreement, shall be taken by Seller independently and without any
advance or subsequent consultation with the Buyer.
(c) It
is the intent of the parties that this Confirmation and this Transaction comply
with the requirements of Rule 10b5-1(c)(1)(i) (A) and (B) of the Exchange
Act. The parties agree that the Agreement shall be interpreted to
comply with the requirements of Rule 10b5-1(c).
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13. Acknowledgements
of Buyer Regarding Hedging and Market Activity. Buyer agrees,
understands and acknowledges that:
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(a)
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during
the period from (and including) the first Trading Day that occurs
after
the Trade Date to (and including) the Settlement Date, Seller and
its
affiliates may buy or sell Shares or other securities or buy or sell
options or futures contracts or enter into swaps or other derivative
securities in order to adjust its hedge position with respect to
the
transactions contemplated by this
Transaction;
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(b)
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Seller
and its affiliates also may be active in the market for the Shares
other
than in connection with hedging activities in relation to the transactions
contemplated by this
Transaction;
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(c)
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Seller
shall make its own determination as to whether, when and in what
manner
any hedging or market activities in the Issuer’s securities shall be
conducted and shall do so in a manner that it deems appropriate to
hedge
its price and market risk with respect to 10b-18 VWAP;
and
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(d)
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any
market activities of Seller and its affiliates with respect to the
Shares
may affect the market price and volatility of the Shares, as well
as the
10b-18 VWAP, each in a manner that may be adverse to
Buyer.
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14. Indemnification.
(a) In
the event that Seller becomes involved in any capacity in any action, proceeding
or investigation brought by or against any person in connection with any matter
referred to in this Agreement, the Buyer will reimburse Seller for its
reasonable legal and other expenses (including the cost of any investigation
and
preparation) incurred in connection therewith. The Buyer also will
indemnify and hold Seller harmless against any losses, claims, damages or
liabilities to which it may become subject in connection with any matter
referred to in this Agreement, except to the extent that any such loss, claim,
damage or liability results from the gross negligence or bad faith of Seller
in
effecting the transactions which are the subject of this Agreement;
provided, however, that if it is determined by a court of competent
jurisdiction in a final judgment that Seller is not entitled to be indemnified
hereunder in connection with such matter, then Seller shall reimburse the Buyer
for any expenses paid pursuant to the first sentence of this Section
14. If for any reason the foregoing indemnification is unavailable to
Seller or insufficient to hold it harmless, then the Buyer shall contribute
to
the amount paid or payable by Seller as a result of such loss, claim, damage
or
liability in such proportion as is appropriate to reflect the relative fault
of
the Buyer on one hand and Seller on the other hand with respect to such loss,
claim, damage, or liability and any other relevant equitable
considerations. The reimbursement, indemnity and contribution
obligations of the Buyer under this Section 14 shall be in addition to any
liability which the Buyer may otherwise have, shall extend upon the same terms
and conditions to any affiliate of Seller and the partners, directors, officers,
agents, employees and controlling persons (if any), as the case may be, of
Seller and any such affiliate and shall be binding upon and inure to the benefit
of any successors, assigns, heirs and personal representatives of the Buyer,
Seller, any such affiliate and any such person. The Buyer also agrees
that neither Seller nor any of such affiliates, partners, directors, officers,
agents, employees or controlling persons shall have any liability to the Buyer
for or in connection with any matter referred to in this Agreement except to
the
extent that any losses, claims, damages, liabilities or expenses incurred by
the
Buyer result from the gross negligence or bad faith of Seller in effecting
the
transactions that are the subject of this Agreement. The foregoing
provisions shall survive any termination or completion of this Agreement. For
the purposes of this Section 14, the term “Seller” shall include MSCO and its
affiliates.
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(b) Subject
to Section 14(c), the reimbursement, indemnity and contribution obligations
of
the Buyer under Section 14(a) (each, an “Obligation”) shall be
paid promptly in cash.
(c) In
connection with any Obligation under Section 14(b) above, the Buyer, in lieu
of
making any cash payment as contemplated by that section, may elect to satisfy
such Obligation by delivering Shares to Seller (such Shares, the
“Indemnity Shares”) by notifying Seller of such election within
one Trading Day of being informed by Seller that such Obligation is due and
payable. The provisions of “Certain Payments and Deliveries by
Issuer” in Section 7 above shall apply to such a share settlement of an
Obligation as if the relevant Obligation was the “Early Settlement Payment” and
the Indemnity Shares were “Early Settlement Shares”. In order to
elect to deliver Indemnity Shares, Issuer must (i) specify whether such
Indemnity Shares are to be sold by means of a registered offering or by means
of
a private placement and (ii) the conditions described in Section 8 above must
be
satisfied as if the Indemnity Shares were “Early Settlement Shares” and any
additional Shares Issuer delivers to reduce the settlement balance to zero
in
connection with this Section 14 were “Make-Whole Shares”.
15. The
parties hereto agree and acknowledge that Seller is a
“financial participant” within the meaning of Section 101(22) of Title 11 of the
United States Code (the “Bankruptcy Code”). The
parties hereto further agree and acknowledge that this Transaction is either
(i)
a “securities contract” as such term is defined in Section 741(7) of the
Bankruptcy Code, in which case each payment and delivery made pursuant to this
Transaction is a “settlement payment”, as such term is defined in Section 741(8)
of the Bankruptcy Code, and that Seller is entitled to the protections afforded
by, among other sections, Sections 362(b)(6), 546(e) and 555 of the Bankruptcy
Code, or (ii) a “swap agreement”, as such term is defined in Section 101(53B) of
the Bankruptcy Code, in which case each party is a “swap participant”, as such
term is defined in Section 101(53C) of the Bankruptcy Code, and that Seller
is
entitled to the protections afforded by, among other sections, Sections
362(b)(17), 546(g) and 560 of the Bankruptcy Code.
16. Seller
and Issuer hereby agree and acknowledge that Seller has authorized the Issuer
to
disclose this Transaction to any and all persons, and there are no express
or
implied agreements, arrangements or understandings to the contrary, and
authorizes the Issuer to use any information that the Issuer receives or has
received with respect to this Transaction in any manner.
17. Treatment
in Bankruptcy; No Setoff; No Collateral.
(a) In
the event the Buyer becomes the subject of proceedings (“Bankruptcy
Proceedings”) under the U.S. Bankruptcy Code or any other applicable
bankruptcy or insolvency statute from time to time in effect, any rights or
claims of Seller hereunder in respect of this transaction shall rank for all
purposes no higher than, but on a parity with, the rights or claims of holders
of Shares, and Seller hereby agrees that its rights and claims hereunder shall
be subordinated to those of all parties with claims or rights against the Buyer
(other than common stockholders) to the extent necessary to assure such ranking.
Without limiting the generality of the foregoing, after the commencement of
Bankruptcy Proceedings, the claims of Seller hereunder shall for all purposes
have rights equivalent to the rights of a holder of a percentage of the Shares
equal to the aggregate amount of such claims (the “Claim
Amount”) taken as a percentage of the sum of (i) the Claim Amount and
(ii) the aggregate fair market value of all outstanding Shares on the record
date for distributions made to the holders of such Shares in the related
Bankruptcy Proceedings. Notwithstanding any right it might otherwise
have to assert a higher priority claim in any such Bankruptcy Proceedings,
Seller shall be entitled to receive a distribution solely to the extent and
only
in the form that a holder of such percentage of the Shares would be entitled
to
receive in such Bankruptcy Proceedings, and, from and after the commencement
of
such Bankruptcy Proceedings, Seller expressly waives (i) any other rights or
distributions to which it might otherwise be entitled in such Bankruptcy
Proceedings in respect of its rights and claims hereunder and (ii) any rights
of
setoff it might otherwise be entitled to assert in respect of such rights and
claims.
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(b) Notwithstanding
any provision of this Agreement or any other agreement between the parties
to
the contrary, neither the obligations of the Buyer nor the obligations of Seller
hereunder are secured by any collateral, security interest, pledge or
lien.
18. Share
Cap. Notwithstanding any other provision of this Agreement to the
contrary, in no event shall the Buyer be required to deliver to Seller a number
of Shares that exceeds the Share Cap (as specified in Schedule I), subject
to
reduction by the number of Shares delivered hereunder by the Buyer on any prior
date.
19. Account
Details:
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Account
for Payments to MSCO:
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To
be provided by Seller
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Account
for Payments to Issuer:
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To
be provided by Issuer
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20.
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Governing
law: The laws of the State of New
York.
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EACH
PARTY HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHTS TO TRIAL BY JURY WITH RESPECT
TO ANY LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS CONFIRMATION OR
ANY
TRANSACTION CONTEMPLATED HEREBY.
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Please
confirm that the foregoing correctly sets forth the terms of our agreement
by
executing this Confirmation and returning it to us by facsimile to
the number provided on the attached facsimile cover page.
Confirmed
as of the date first written above:
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INTERNATIONAL
FLAVORS & FRAGRANCES INC.
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XXXXXX
XXXXXXX & CO. INCORPORATED
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|||||||
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By:
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/s/
Xxxxxxx Xxxxxxx
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By:
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/s/
Xxxxx Xxxxxxxx
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|||||
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Name:
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Xxxxxxx
Xxxxxxx
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Name:
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Xxxxx
Xxxxxxxx
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|||||
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Title:
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SVP
& CFO
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Title:
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Managing
Director
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