UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of The Securities Exchange Act of 1934

 

Date of report (Date of earliest event reported): July 9, 2018

 

Keurig Dr Pepper Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware

(State or Other Jurisdiction of Incorporation)

 

001-33829

 

98-0517725

(Commission
File Number)

 

(IRS Employer
Identification No.)

 

53 South Avenue, Burlington, Massachusetts 01803

(Address of Principal Executive Offices) (Zip Code)

 

(Registrant’s Telephone Number, Including Area Code)  781-418-7000

 

(Former Name or Former Address, if Changed Since Last Report)

Dr Pepper Snapple Group, Inc.

5301 Legacy Drive, Plano, Texas 75024

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see  General Instruction A.2. below):

 

o        Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o        Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o        Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o        Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company  o

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   o

 

 

 



 

INTRODUCTORY NOTE

 

On July 9, 2018, Maple Parent Holdings Corp., a Delaware corporation and the direct parent company of Keurig Green Mountain, Inc. (“ Maple ”), which is an affiliate of JAB Holdings B.V., a Dutch Besloten Vennootschap met beperkte aansprakelijkheid (private company with limited liability) (“ JAB ”), completed its merger (the “ Merger ”) with Salt Merger Sub, Inc., a Delaware corporation (“ Merger Sub ”) and wholly owned special purpose merger subsidiary of Keurig Dr Pepper Inc., a Delaware corporation formerly known as Dr Pepper Snapple Group, Inc. (the “ Company ”). The Merger was effected pursuant to an Agreement and Plan of Merger, dated as of January 29, 2018, by and among Maple, the Company and Merger Sub (the “ Merger Agreement ”).

 

At the 2018 annual meeting of the Company’s stockholders held on June 29, 2018 (the “ Annual Meeting ”), the Company’s stockholders approved an issuance of shares of the Company’s common stock as merger consideration pursuant to the terms of the Merger Agreement and approved an amendment to the Company’s Certificate of Incorporation (the “ Charter Amendment ”) for (i) an increase in authorized shares to permit the issuance of a sufficient number of shares as merger consideration and (ii) a change of the Company’s name to “Keurig Dr Pepper Inc.” The Charter Amendment became effective on July 9, 2018 pursuant to and upon the filing of the Certificate of Amendment to the Company’s Certificate of Incorporation (the “ Charter Amendment Effective Time ”) with the Secretary of State of the State of Delaware. Immediately following the Charter Amendment Effective Time, the Merger became effective pursuant to and upon the filing of the Certificate of Merger (the “ Effective Time ”) with the Secretary of State of the State of Delaware. At the Effective Time, Merger Sub merged with and into Maple with Maple surviving the Merger as a wholly owned subsidiary of the Company.

 

In connection with the Merger, on June 29, 2018, the board of directors of the Company (the “ Board ”) declared a special cash dividend (the “ Special Cash Dividend ”), payable on July 10, 2018, in an amount equal to $103.75 in respect of each share of the Company’s common stock held by a holder of record as of the close of business on July 6, 2018.

 

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Item 1.01. Entry into a Material Definitive Agreement.

 

Investor Rights Agreement

 

The Company also entered into an investor rights agreement, dated as of July 9, 2018 (the “ Investor Rights Agreement ”), with Maple Holdings B.V. and Mondelēz International Holdings LLC (“ Mondelēz LLC ” and, together with Maple Holdings B.V., the “ Holders ”) that will, among other things, (i) provide the Holders with certain registration rights with respect to their shares of common stock in the Company (including the shares received in connection with the Merger) following the standstill period described below, (ii) govern how each of the Holders will vote the shares of the Company’s common stock held by it with respect to supporting certain directors that are designated by Mondelēz LLC, (iii) require certain matters to be approved by the Board and (iv) provide Mondelēz LLC with certain information rights for so long as Mondelēz International, Inc. (“ Mondelēz ”) accounts for its investment in the Company under the equity method of accounting under accounting principles generally accepted in the United States. Pursuant to the terms of the Investor Rights Agreement, each Holder has agreed that during the period beginning on the closing date of the Merger and ending on the first business day following the date that is the six month anniversary of the closing of the Merger (the “ standstill period ”), each Holder shall not, directly or indirectly, and shall cause its representatives (to the extent acting on behalf of the Holder) and any person or affiliate directly or indirectly controlled by that person not to, directly or indirectly, without the prior written consent of, or waiver by, the Company, (i) sell or offer to sell any common stock in the Company or other equity interests (including any voting securities) or derivative securities, or direct or indirect rights to acquire any Company common stock or equity interests (including any voting securities) or derivative securities, or any securities or indebtedness convertible or exchangeable for any such securities, (ii) cause to be filed or submitted a registration statement, prospectus or prospectus supplement (or amendment or supplement thereto) with respect to any such registration, or (iii) publicly announce any intention to do any of the foregoing. A description of the material terms of the Investor Rights Agreement has been previously disclosed under the caption “Other Related Agreements” to the Company’s definitive proxy statement on Schedule 14A, filed with the United States Securities and Exchange Commission (the “ Commission ”) on May 29, 2018 and is incorporated herein by reference.

 

As a result of the Merger, the equity interest holders of Maple as of immediately prior to the Effective Time, including the Holders, collectively owned approximately 87% of the outstanding shares of the common stock of the Company, on a fully diluted basis. The description of the Investor Rights Agreement is qualified in its entirety by reference to the terms of the Investor Rights Agreement, a copy of which is filed as Exhibit 4.1 to this Current Report and is incorporated by reference herein.

 

Item 2.01. Completion of Acquisition or Disposition of Assets.

 

The information set forth in the Introductory Note and under Item 5.01 of this Current Report on Form 8-K is incorporated into this Item 2.01 by reference.

 

Item 3.02. Unregistered Sales of Equity Securities.

 

The information set forth below under Item 5.01 of this Current Report on Form 8-K relating to the issuance of the shares of the Company’s common stock to the equity interest holders of Maple is incorporated into this Item 3.02 by reference. The Company is relying on the exemption from the registration requirements of the Securities Act of 1933, as amended (the “ Securities Act ”), afforded by Section 4(a)(2) thereof and the rules and regulations of the Commission promulgated thereunder.

 

Item 5.01. Changes in Control of Registrant.

 

The information set forth in the Introductory Note is incorporated into this Item 5.01 by reference. Under the Merger Agreement, each share of Maple common stock, issued and outstanding immediately prior to the Effective Time, was converted into the right to receive a number of fully paid and nonassessable shares of common stock of the Company equal to the exchange ratio, which was approximately 96.40, resulting in the issuance of 1,206,245,016 shares of the Company’s common stock to the equity interest holders of Maple.

 

As of the Effective Time, the holders of the Company’s common stock as of immediately prior to the Effective Time collectively owned approximately 13% of the outstanding shares of common stock of the Company, on a fully diluted basis, and the equity interest holders of Maple as of immediately prior to the Effective Time

 

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collectively owned approximately 87% of the outstanding shares of common stock of the Company, on a fully diluted basis.

 

The foregoing summary of the Merger Agreement and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Merger Agreement, incorporated herein by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the Commission on January 31, 2018.

 

Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Agreements of Certain Officers.

 

(b)

 

Executive Officers

 

In connection with the consummation of the Merger and as previously disclosed on the Company’s Current Report on Form 8-K filed with the Commission on June 25, 2018, each of Larry D. Young, Martin M. Ellen and James J. Johnston, each a Named Executive Officer of the Company, resigned from employment effective as of the Effective Time.  As previously disclosed under the caption “Tables of Potential Payments and Assumptions” to the Company’s definitive proxy statement on Schedule 14A, filed with the Commission on May 29, 2018, and incorporated herein by reference, each of the foregoing Named Executive Officers is entitled to severance in connection with their separations from employment.

 

Board of Directors

 

In connection with the consummation of the Merger, the following members resigned from the Company’s Board of Directors as of the Effective Time:  Wayne R. Sanders, David E. Alexander, Antonio Carrillo, José Gutiérrez, Ronald G. Rogers, Dunia Shive and M. Anne Szostak.  No such resignation was due to a disagreement on any matter relating to the Company’s operations, policies or practices.

 

(c)

 

Keurig Green Mountain, Inc. (“ Keurig ”) previously entered into an amended and restated employment agreement with Robert J. Gamgort and an employment agreement with Ozan Dokmecioglu, both of which will remain in effect following the consummation of the Merger. The following description of the employment agreements is a summary of certain of their terms only and is qualified in its entirety by the full text of the employment agreements which will be filed with the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ending September 30, 2018.

 

Robert J. Gamgort

 

Under the terms of Mr. Gamgort’s amended and restated employment agreement, he will serve in the position of Chief Executive Officer and unpaid member of the Board until 2021, which will be automatically extended for successive one year periods absent either party’s election to the contrary. During the period of his employment, Mr. Gamgort is entitled to the following compensation and benefits: (i) an annual base salary of $1,500,000, (ii) an annual bonus opportunity with a target equal to 125% of his base salary and a maximum payout equal to 3.1 times his target bonus in accordance with the annual incentive plan as in effect from time to time, (iii) participation in the employee benefit plans generally made available to senior officers of the Company and (iv) annual restricted stock unit (“ RSU ”) grants with a grant date fair market value equal to his base salary multiplied by 3-2/3.

 

Upon Mr. Gamgort’s separation from service due to death or disability, he (or his estate) will remain entitled to receive a pro-rated annual bonus based on the amount he would have received under the performance plan in respect of the year in which his separation occurs. Upon Mr. Gamgort’s separation from service by the Company without cause or by him with good reason, he will receive the pro-rated bonus described above, plus a severance benefit equal to the sum of his base salary and target bonus for the year of separation times 2 and paid over 24 months (or, in the event of his separation within 6 months prior to or 24 months following a change in control, times 3 and paid in a lump sum), plus COBRA continuation benefits for up to 24 months. Mr. Gamgort is

 

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subject to a 24-month post-termination non-competition restriction, a 24-month post-termination non-solicitation restriction, and a perpetual confidentiality obligation. There are no family relationships between Mr. Gamgort and the Company or any member of the Board.

 

Ozan Dokmecioglu

 

Under the terms of Mr. Dokmecioglu’s employment agreement, he will serve in the position of Chief Financial Officer. During the period of his employment, Mr. Dokmecioglu is entitled to the following compensation and benefits: (i) an annual base salary of $800,000, (ii) an annual bonus opportunity with a target equal to 80% of his base salary and a maximum payout equal to 2.5 times his target bonus in accordance with the annual incentive plan as in effect from time to time, (iii) participation in the employee benefit plans generally made available to senior officers of the Company and (iv) annual RSU grants with a grant date fair value equal to 325% of his base salary.

 

Upon Mr. Dokmecioglu’s separation from service due to death or disability, he (or his estate) will remain entitled to receive a pro-rated annual bonus based on the amount he would have received under the performance plan in respect of the year in which his separation occurs. Upon Mr. Dokmecioglu’s separation from service by the Company without cause or by him with good reason, he will receive the pro-rated bonus described above, plus a severance benefit equal to the sum of his base salary and target bonus for the year of separation times 2 and paid over 24 months (or, in the event of his separation within 6 months prior to or 24 months following a change in control, times 3 and paid in a lump sum), plus COBRA continuation benefits for up to 24 months. Mr. Dokmecioglu is subject to a 24-month post-termination non-competition restriction, a 24-month post-termination non-solicitation restriction, and a perpetual confidentiality obligation. There are no family relationships between Mr. Dokmecioglu and the Company or any member of the Board.

 

(d)

 

Following the consummation of the Merger, the Board became comprised of twelve members, eight of whom were appointed by Maple (including Bart Becht of JAB, Bob Gamgort of Keurig, four additional directors appointed by JAB and two directors appointed by Mondelēz LLC, who are initially Dirk Van de Put, the Chairman and Chief Executive Officer of Mondelēz and Gerhard Pleuhs, the Executive Vice President and General Counsel of Mondelēz), two of whom were appointed by the Company (including Larry D. Young, prior President and Chief Executive Officer of the Company and Pamela Patsley, current Company director) and two of whom were mutually agreed upon by Maple and the Company as “independent” directors under the NYSE rules and Rule 10A-3 promulgated under the Exchange Act. The Board list is as follows:

 

Name

 

Board of Directors

 

Audit and Finance
Committee

 

Remuneration and
Nomination Committee

Lambertus (Bart) Becht

 

Chair

 

 

 

Member

Robert (Bob) Gamgort

 

Executive Director

 

 

 

 

Olivier Goudet

 

Member

 

 

 

 

Peter Harf

 

Member

 

 

 

Chair

Genevieve Hovde

 

Member

 

Member

 

 

Anna-Lena Kamenetzky

 

Member

 

 

 

 

Paul S. Michaels

 

Member

 

 

 

Member

Pamela (Pam) Patsley

 

Member

 

Member

 

 

Gerhard (Gerd) Pleuhs

 

Member

 

 

 

 

Robert (Bob) Singer

 

Member

 

Chair

 

 

Dirk Van de Put

 

Member

 

 

 

Member

Larry D. Young

 

Member

 

 

 

 

 

Each newly appointed director will serve for an initial term to expire at the Company’s 2019 annual meeting of stockholders, or until his or her earlier death, resignation or removal. Following the consummation of the Merger, the Company intends to institute the following non-employee director compensation program: each director will receive (i) an annual cash retainer of $100,000 and (ii) an annual grant of RSUs with a grant date fair market value equal to $160,000 for non-employee directors other than the chair of the Board and $300,000 for the chair of the Board. In addition, the chair of the Board will receive an additional cash retainer of $300,000, and the chair of the Audit and Finance Committee

 

5



 

and the chair of the Remuneration and Nomination Committee will each receive an additional cash retainer of $30,000.

 

(e)

 

In connection with the Merger, the Company granted Rodger Collins, President Direct Store Delivery, a cash retention award equal to 1.0 times his annual base salary, payable on the one-year anniversary of the closing date.  Mr. Collins will forfeit the right to receive such award in the event prior to such date he voluntarily terminates his employment or the Company terminates his employment for cause.  The Company also agreed that in lieu of any future severance considerations it would pay Mr. Collins upon Closing the change in control payment he would be entitled to upon termination under the terms of the Change in Control Plan as disclosed in the Company’s definitive proxy statement filed with the Commission on May 29, 2018.

 

In connection with the Merger, the Company assumed the Keurig Green Mountain, Inc. Long-Term Incentive Plan and the Keurig Green Mountain, Inc. Executive Ownership Plan, in each case effective August 11, 2016 (collectively, the “ Plans ”), and the RSUs outstanding thereunder and the authorized but unissued share pool with respect thereto (as adjusted pursuant to the “ Exchange Ratio ”, as defined in the Merger Agreement).  The Company may administer the Plans, in combination with the Company’s existing long-term incentive program, for the purpose of (i) attracting and retaining exceptional executive personnel and other key employees of the Company and its affiliates, (ii) motivating such employees by means of performance-related incentives to achieve long-range performance goals and (iii) enabling such employees to participate in the long-term growth and financial success of the Company.

 

Item 5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

 

Pursuant to the Merger Agreement, at the Charter Amendment Effective Time, the Amended and Restated Certificate of Incorporation of the Company was amended by the Certificate of Third Amendment in substantially the form attached as Exhibit C to the Merger Agreement to provide for (i) an increase in authorized shares to permit the issuance of a sufficient number of shares as merger consideration and (ii) a change of the Company’s name to “Keurig Dr Pepper Inc.” The Certificate of Third Amendment to the Amended and Restated Certificate of Incorporation of the Company is attached as Exhibit 3.1 hereto and incorporated herein by reference.

 

On July 9, 2018, upon the consummation of the Merger, as a result of the Merger being accounted for as a reverse merger with Maple as the accounting acquirer, the Company’s fiscal year was changed automatically, and without further action by the Board, to the fiscal year of Maple as of the consummation of the Merger, which ended on the last Saturday in September of each year.  On July 9, 2018, the Board approved a change in the Company’s fiscal year end from the last Saturday in September to December 31, which was the Company’s fiscal year end prior to the consummation of the Merger, and changed Maple’s fiscal year end from the last Saturday in September to the last Saturday in December to closely align Maple’s fiscal year with that of the Company’s.

 

On and effective as of July 9, 2018, the Board amended and restated the Amended and Restated By-Laws of the Company (the “ Bylaw Amendment ”). The Bylaw Amendment (i) amends references to the Company’s name, (ii) removes language applicable only prior to the year 2013 regarding director classes and terms and (iii) amends the Company’s current forum selection clause. The foregoing description is qualified in its entirety by reference to the full text of the Bylaw Amendment, a copy of which is attached hereto as Exhibit 3.2.

 

Item 5.05. Amendments to Registrant’s Code of Conduct.

 

On July 9, 2018, the Board approved and adopted an updated Code of Conduct. The Code of Conduct was updated to reflect the Merger and provide guidance to employees on which underlying corporate policies to follow until such time as such policies will be integrated after the Merger. The updated Code of Conduct will be made available on the Company’s website at www.keurigdrpepper.com as soon as practicable.

 

The foregoing description of the updates to the Code of Conduct does not purport to be complete and is qualified in its entirety by reference to the Code of Conduct attached as Exhibit 14.1 hereto and incorporated herein by reference.

 

Item 8.01. Other Events.

 

Press Release

 

On July 9, 2018, the Company issued a press release in connection with the completion of the Merger. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated by reference herein.

 

Certain Information with respect to Maple Parent Holdings Corp.

 

In connection with the consummation of the Merger, the Company is providing certain information relating to the Company and Maple. This information is attached hereto as Exhibit 99.2 and incorporated by reference herein.

 

Waiver of Corporate Opportunity Doctrine

 

On and effective as of July 9, 2018, the Board passed a resolution waiving any claims under Delaware state law based on the corporate opportunities doctrine with respect to each non-executive member of the Board.  Accordingly, each member of the Board, with the exception of Mr. Gamgort, does not have a duty to present business opportunities to the Company and may choose to withhold any identified opportunities from the Company for themselves or other business entities.

 

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Item 9.01. Financial Statements and Exhibits.

 

(a)  Historical Financial Information.

 

The consolidated financial statements (and notes thereto) of Maple, who conducts substantially all of its business through Keurig, a wholly owned subsidiary, for the fiscal year ended 2015 and for the period from September 27, 2015 to March 2, 2016, (the “ predecessor period ”) and for Maple for the fiscal year ended 2017, for the period from December 4, 2015 to September 24, 2016 (the “ successor period ”), and the periods from October 1, 2017 to March 31, 2018 (unaudited) and September 25, 2016 to March 25, 2017 (unaudited) are incorporated herein by reference from the Consolidated Financial Statements of Maple in the Company’s definitive proxy statement filed with the Commission on May 29, 2018.

 

(b)  Pro Forma Financial Information .

 

The pro forma financial information for the Company, giving effect to the Merger and the other transactions described therein, for the twelve months ended December 31, 2017 and as of and for the three months ended March 31, 2018, are incorporated herein by reference from the Unaudited Pro Forma Combined Financial Information in the Company’s definitive proxy statement filed with the Commission on May 29, 2018.

 

(d)  Exhibits .

 

The exhibits listed in the following Exhibit Index are filed as part of this Report.

 

EXHIBIT INDEX

 

Exhibit No.

 

Description

 

 

 

2.1

 

Agreement and Plan of Merger, dated as of January 29, 2018, by and among Keurig Dr Pepper Inc., Salt Merger Sub, Inc., Maple Parent Holdings Corp.*

 

 

 

3.1

 

Certificate of Third Amendment to the Amended and Restated Certificate of Incorporation of Keurig Dr Pepper Inc.

 

 

 

3.2

 

Amended and Restated Bylaws of Keurig Dr Pepper Inc.

 

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4.1

 

Investor Rights Agreement, dated as of July 9, 2018, among Keurig Dr Pepper Inc., as the issuer, and Maple Holdings B.V. and Mondelēz International Holdings LLC, as the Holders.

 

 

 

14.1

 

Keurig Dr Pepper Inc. Code of Conduct.

 

 

 

23.1

 

Consent of Deloitte & Touche LLP, independent auditor for Maple Parent Holdings Corp.

 

 

 

23.2

 

Consent of PricewaterhouseCoopers LLP, independent registered public accounting firm for Maple Parent Holdings Corp.

 

 

 

99.1

 

Press Release, dated July 9, 2018.

 

 

 

99.2

 

Certain Information with respect to Maple Parent Holdings Corp.

 

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*Incorporated herein by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on January 31, 2018.

 

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SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

KEURIG DR PEPPER INC.

Dated: July 9, 2018

 

 

 

 

By:

/s/ James L. Baldwin

 

 

James L. Baldwin

 

 

Chief Legal Officer and General Counsel

 

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Exhibit 3.1

 

CERTIFICATE OF THIRD AMENDMENT

TO THE

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

OF

DR PEPPER SNAPPLE GROUP, INC.

 


 

Pursuant to Section 242 of the General

Corporation Law of the State of Delaware

 


 

DR PEPPER SNAPPLE GROUP, INC., a Delaware corporation (hereinafter referred to as the “ Corporation ”), does hereby certify as follows:

 

First:  that ARTICLE FIRST of the Corporation’s Amended and Restated Certificate of Incorporation is hereby amended to read in its entirety as set forth below:

 

FIRST: Name . The name of this corporation is Keurig Dr Pepper Inc. (the “ Corporation ”).

 

Second: that ARTICLE FOURTH of the Corporation’s Amended and Restated Certificate of Incorporation is hereby amended to read in its entirety as set forth below:

 

FOURTH. Shares, Classes and Series Authorized . The total number of shares of all classes of stock which the Corporation shall have authority to issue is 2,015,000,000 shares, consisting of 15,000,000 shares of Preferred Stock, par value $0.01 per share, as more fully described in Article Fifth, Section A below (the “ Preferred Stock ”), and 2,000,000,000 shares of Common Stock, par value $0.01 per share, as more fully described in Article Fifth, Section B below (the “ Common Stock ”).

 

Third:  that the foregoing amendments were duly adopted in accordance with Section 242 of the General Corporation Law of the State of Delaware.

 



 

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be duly executed in its corporate name this 9th day of July, 2018.

 

 

DR PEPPER SNAPPLE GROUP, INC.

 

 

 

 

 

By:

/s/ James L. Baldwin

 

Name:

James L. Baldwin

 

Title:

Executive Vice President, General Counsel

 


Exhibit 3.2

 

AMENDED AND RESTATED
BY-LAWS
OF
KEURIG DR PEPPER INC.

 

As of July 9, 2018

 

ARTICLE I

 

OFFICES

 

Section 1.                                            Registered Office .  The registered office of Keurig Dr Pepper Inc. (the “ Corporation ”) shall be in the City of Wilmington, County of New Castle, State of Delaware.

 

Section 2.                                            Other Offices .  The Corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors of the Corporation (the “ Board ”) may from time to time determine or the business of the Corporation may require.

 

ARTICLE II

 

MEETINGS OF STOCKHOLDERS

 

Section 1.                                            Annual Meeting .  The annual meeting of the stockholders of the Corporation shall be held for the purpose of electing directors and conducting such other business as may properly come before the meeting in accordance with Article II, Section 6. The date, time and place, within or outside the State of Delaware, or no place, solely by means of remote communication, of the annual meeting shall be determined by the Board and stated in the notice of the meeting or in a waiver of notice of such annual meeting.

 

Section 2.                                            Special Meetings .  Special meetings of stockholders may be held at such date, time and place, within or without the State of Delaware, as shall be stated in the notice of the meeting or in a waiver of notice thereof. Special meetings of the stockholders may be called only by the Chairman of the Board, the Chief Executive Officer or by resolution duly adopted by the affirmative vote of the majority of the members of the Board, and may not be called by any other person or persons. Any such resolution shall be sent to the Chairman of the Board or the Chief Executive Officer and the Secretary or Assistant Secretary and shall state the purpose or purposes of the proposed meeting. Business transacted at any special meeting is limited to the purposes stated in the notice.

 

Section 3.                                            Notice .  (a)  Except as otherwise provided by applicable law, notice of each meeting of stockholders, whether annual or special, shall be given not less than 10 nor more than 60 days before the date of the meeting to each stockholder entitled to vote at such meeting. Without limiting the manner by which notice otherwise may be given to stockholders, any notice shall be effective if given by a form of electronic transmission consented to (in a manner consistent with the General Corporation Law of the State of Delaware as it now exists and may hereinafter be amended (the “ DGCL ”)) by the stockholder to whom the notice is given. The

 



 

notices of all meetings shall state the place, date and time of the meeting and the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such meeting. The notice of a special meeting shall state, in addition, the purpose or purposes for which the meeting is called.

 

(b)                                  When a meeting is adjourned to another place, date or time, written notice need not be given of the adjourned meeting if the place, date and time thereof are announced at the meeting at which the adjournment is taken; provided , however , that if the adjournment is for more than 30 days, or if after the adjournment, a new record date is fixed for the adjourned meeting, written notice of the new place, date and time of the adjourned meeting shall be given in conformity herewith.

 

(c)                                   If notice is given by mail, such notice shall be deemed given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder’s address as it appears on the records of the Corporation. If notice is given by electronic transmission, such notice shall be deemed given at the time specified in Section 232 of the DGCL.

 

Section 4.                                            Stockholders List . The officer having charge of the stock ledger of the Corporation shall make available, at least 10 days before every meeting of the stockholders, a complete list of the stockholders entitled to vote at such meeting arranged in alphabetical order, specifying the address of and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least 10 days prior to the meeting, at the principal place of business of the Corporation. The list shall also be produced and kept open at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.

 

Section 5.                                            Quorum . The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders, except as otherwise provided by law or by the Certificate of Incorporation of the Corporation, as amended and restated to date (the “ Certificate of Incorporation ”). If a quorum is not present, the holders of the shares present in person or represented by proxy at the meeting, and entitled to vote thereat, shall have the power, by the affirmative vote of the holders of a majority of such shares, to adjourn the meeting to another time and/or place, without notice, other than as required in Section 3(b) above and other than announcement at the meeting at which the adjournment was taken, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified.

 

Section 6.                                            Advance Notice Provisions for Business (other than Nominations for Election of Directors) to be Transacted at Annual Meeting . (a) No business (other than Nominations (as defined below)) (“ Business ”) may be transacted at an annual meeting of stockholders, other than Business that is either (A) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board (or any duly authorized committee thereof), (B) otherwise properly brought before the annual meeting by or at the direction of the

 

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Board (or any duly authorized committee thereof) or (C) otherwise properly brought before the annual meeting by any stockholder of the Corporation who (1) is a stockholder of record on both (x) the date of the giving of the notice provided for in this Section 6 and (y) the record date for the determination of stockholders entitled to vote at such annual meeting and (2) complies with the notice procedures set forth in this Section 6.

 

(b)                                  In addition to any other applicable requirements, for Business to be properly brought before an annual meeting by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary and the Business must constitute a proper matter under Delaware law for stockholder action.

 

(c)                                   To be timely, a stockholder’s notice regarding any proposed Business shall be delivered to the Secretary at the principal executive offices of the Corporation and received not less than 90 days nor more than 120 days prior to the first anniversary of the date of the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from the anniversary of the preceding year’s annual meeting, notice by the stockholder to be timely must be delivered not earlier than the 120th day prior to such annual meeting and not later than the close of business on the later of (i) the 90th day prior to such annual meeting or (ii) the 10th day following the day on which notice of such annual meeting was mailed or public announcement of the date of such meeting is first made, whichever first occurs.

 

(d)                                  To be in proper written form, a stockholder’s notice to the Secretary must set forth as to the Business such stockholder proposes to bring before the annual meeting (1) a brief description of such Business desired to be brought before the annual meeting, including the complete text of any resolutions to be presented at the annual meeting, and the reasons for proposing such Business at the annual meeting, (2) the name and record address of such stockholder, and beneficial owner, if any, on whose behalf the Business is proposed (for purposes of this Section 6, “beneficial owner”), (3) the class or series and number of shares of capital stock of the Corporation which are owned beneficially and of record by such stockholder or beneficial owner as of the date of notice, and the stockholder’s agreement to notify the Corporation in writing within five business days after the record date for such meeting of the class or series and number of shares of capital stock of the Corporation which are owned beneficially and of record by such stockholder or beneficial owner as of such record date, (4) a description of all arrangements or understandings between such stockholder or beneficial owner and any other person or persons (including their names) in connection with the proposal of such Business by such stockholder or beneficial owner, including without limitation any agreements that would be required to be disclosed pursuant to Item 5 or Item 6 of Schedule 13D of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”) (regardless of whether the requirement to file a Schedule 13D is applicable to the stockholder or beneficial owner), any material interest of such stockholder or beneficial owner in such Business, and the stockholder’s agreement to notify the Corporation in writing within five business days after the record date for the annual meeting of any such arrangement or understanding in effect, and any such material interest, as of such record date, (5) a description of all arrangements or understandings (including any derivative or short positions, profit interests, options, hedging transactions and borrowed or loaned shares) that have been entered into as of the date of the stockholder’s notice by, or on behalf of, the stockholder or beneficial owner, the effect or intent of which is to mitigate loss,

 

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manage risk or benefit from changes in the share price of any class or series of capital stock of the Corporation, or increase or decrease the voting power of the stockholder or beneficial owner with respect to shares of capital stock of the Corporation, and the stockholder’s agreement to notify the Corporation in writing within five business days after the record date for the annual meeting of any such arrangement or understanding in effect as of such record date, (6) a representation that such stockholder (or a qualified representative of such stockholder) intends to appear in person or by proxy at the annual meeting to bring such Business before the meeting and (7) a representation whether the stockholder or the beneficial owner, intends or is part of a group which intends (x) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation’s outstanding capital stock required to approve or adopt the proposed Business and/or (y) otherwise to solicit proxies from stockholders in support of such proposed Business. For purposes of this Section 6 and Section 7 below, a person or entity is the “ beneficial owner ” of all shares which such person is deemed to beneficially own pursuant to Rules 13d-3 and 13d-5 under the Exchange Act.

 

(e)                                   If the presiding officer of an annual meeting determines that any Business was not properly brought before the annual meeting in accordance with the foregoing procedures, the presiding officer shall declare to the meeting that such Business was not properly brought before the meeting and such Business shall not be transacted.

 

(f)                                    Notwithstanding the provisions of this Section 6, in order to include information with respect to a stockholder proposal in the Corporation’s proxy statement and form of proxy for an annual meeting, stockholders must provide notice as required by the regulations promulgated under the Exchange Act, and the foregoing notice requirements of this Section 6 will not apply to stockholders who have notified the Corporation of their intention to present a stockholder proposal only pursuant to and in compliance with such regulations.

 

(g)                                   Adjournment . In no event shall the adjournment of an annual meeting of the stockholders, or any announcement thereof, commence a new period for the giving of notice under this Section 6.

 

Section 7.                                            Advance Notice Provisions for Nominations for Election of Directors . (a) For a nomination for election of a director of the Corporation (each, a “ Nomination ”) to be made by a stockholder of the Corporation at an annual or special meeting of stockholders at which one or more directors are to be elected pursuant to the Corporation’s notice of meeting, such stockholder must (A) be a stockholder of record on both (1) the date of the giving of the notice provided for in this Section 7 and (2) the record date for the determination of stockholders entitled to vote at such annual or special meeting and (B) comply with the notice procedures set forth in this Section 7. If a stockholder is entitled to vote only for a specific class or category of directors at an annual or special meeting of the stockholders, such stockholder’s right to make a Nomination pursuant to this Section 7 shall be limited to such class or category of directors.

 

(b)                                  To be timely in connection with the annual meeting of the stockholders, a stockholder’s notice regarding a Nomination shall be delivered to the Secretary at the principal executive offices of the Corporation and received not less than 90 days nor more than 120 days prior to the first anniversary of the preceding year’s annual meeting; provided , however , that in the event that the date of the annual meeting is advanced by more than 30 days or delayed by

 

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more than 60 days from the anniversary of the preceding year’s annual meeting, notice by the stockholder to be timely must be delivered not earlier than the 120th day prior to such annual meeting and not later than the close of business on the later of (i) the 90th day prior to such annual meeting or (ii) the 10th day following the day on which notice of such annual meeting was mailed or public announcement of the date of such meeting is first made, whichever first occurs. In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board, any stockholder entitled to vote for the election of such director(s) at such meeting and otherwise satisfying the requirements specified in Section 7(a) may make a Nomination to such position(s) as are specified in the Corporation’s notice of such meeting, but only if the stockholder’s notice regarding a Nomination shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the 120th day prior to such special meeting and not later than the close of business on the later of (x) the 90th day prior to such special meeting or (y) the 10th day following the day on which notice of the date of such special meeting was mailed or public disclosure of the date of such special meeting was made, whichever first occurs.

 

(c)                                   To be in proper written form, a stockholder’s notice to the Secretary must be set forth (A) as to each person whom the stockholder proposes to be subject to such stockholder’s Nomination, (for purposes of this Section 7, each a “nominee”), (1) the name, age, business address and residence address of the nominee, (2) the principal occupation or employment of the nominee, (3) the class or series and number of shares of capital stock of the Corporation, if any, which are owned beneficially and of record by the nominee as of the date of notice, and the stockholder’s agreement to notify the Corporation in writing within five business days after the record date for the annual or special meeting of the class or series and number of shares of capital stock of the Corporation, if any, which are owned beneficially and of record by such nominee as of such record date, (4) a written statement executed by such nominee acknowledging that, as a director of the Corporation, such person will owe a fiduciary duty, under the DGCL, exclusively to the Corporation and its stockholders and (5) any other information relating to the nominee that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder; and (B) as to both the stockholder giving notice and the beneficial owner, if any, on whose behalf the Nomination is made (for the purpose of this Section 7, a “ beneficial owner ”), (1) the name and record address of such stockholder and beneficial owner, (2) the class or series and number of shares of capital stock of the Corporation which are owned beneficially and of record by such stockholder or beneficial owner as of the date of notice, and the stockholder’s agreement to notify the Corporation in writing within five business days after the record date for the annual or special meeting of the class or series and number of shares of capital stock of the Corporation which are owned beneficially and of record by such stockholder or beneficial owner as of such record date, (3) a description of all arrangements or understandings between such stockholder or beneficial owner and each nominee and any other person or persons (including their names) pursuant to which the Nomination(s) are to be made by such stockholder, including without limitation any agreements that would be required to be disclosed pursuant to Item 5 or Item 6 of Schedule 13D of the Exchange Act (regardless of whether the requirement to file a Schedule 13D is applicable to the stockholder or beneficial owner), and the stockholder’s agreement to notify the Corporation in writing within five business days after the record date for the annual or special meeting of any such arrangement or understanding in effect as of such

 

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record date, (4) a description of all arrangements or understandings (including any derivative or short positions, profit interests, options, hedging transactions and borrowed or loaned shares) that have been entered into as of the date of the stockholder’s notice by, or on behalf of, the stockholder or beneficial owner, the effect or intent of which is to mitigate loss, manage risk or benefit from changes in the share price of any class or series of capital stock of the Corporation, or increase or decrease the voting power of the stockholder or beneficial owner with respect to shares of capital stock of the Corporation, and the stockholder’s agreement to notify the Corporation in writing within five business days after the record date for the annual or special meeting of any such arrangement or understanding in effect as of such record date, (5) a representation that such stockholder (or a qualified representative of such stockholder) intends to appear in person or by proxy at the annual or special meeting to make the Nomination of the nominee(s) named in its notice and (6) any other information relating to such stockholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. Such notice must be accompanied by a written consent of each nominee to being named as a nominee and to serve as a director if elected.

 

(d)                                  If the presiding officer of an annual or special meeting determines that such a stockholder Nomination was not made in accordance with the foregoing procedures, the presiding officer shall declare to the meeting that the Nomination was defective and such defective Nomination and such nominee shall be disregarded.

 

(e)                                   Adjournment. In no event shall the adjournment of an annual or special meeting of the stockholders, or any announcement thereof, commence a new period for the giving of notice under this Section 7.

 

(f)                                    Definition of Publicly Announced . For purposes of Section 6 above and this Section 7, a matter shall be deemed to have been “publicly announced” if such matter is disclosed in a press release reported by the Dow Jones News Service, the Associated Press or a comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission and a “public announcement” shall be deemed to have been made on such date.

 

Section 8.                                            Inspectors . The Board shall appoint inspectors of election to act as judges of the voting and to determine those entitled to vote at any meeting of stockholders, or any adjournment thereof, in advance of such meeting, but if the Board fails to make such appointments or if an appointee fails to serve, the presiding officer of the meeting of stockholders may appoint substitute inspectors.

 

Section 9.                                            Voting . (a) Except as otherwise provided by applicable law or in the Certificate of Incorporation, each stockholder entitled to vote at any meeting of stockholders shall be entitled to one vote for each share of stock held by such stockholder on the record date for the meeting. The ability of the stockholders to engage in cumulative voting is specifically denied. If the Certificate of Incorporation provides for more or less than one vote for any share on any matter, every reference in these By-Laws to a majority or other proportion of shares of stock shall refer to such majority or other proportion of the votes of such shares of stock. Each

 

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stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for such stockholder by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. Such proxy shall be filed with the Secretary before the vote at such meeting of stockholders. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power, regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the Corporation generally. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or another duly executed proxy bearing a later date with the Secretary. Except as set forth below in this Section 9 or as required by applicable law, when a quorum is present at any meeting, the vote of the holders of a majority of the stock which has voting power present in person or represented by proxy and which has actually voted shall decide any question properly brought before such meeting. Voting at meetings of stockholders need not be by written ballot unless so directed by the presiding officer of the meeting or the Board.

 

(b)                                  For purposes of non-contested elections of incumbent directors, a vote of the holders of a majority of stock which was actually voted means that the number of shares voted “for” an incumbent director’s election must exceed the number of votes cast “against” that director’s election, with “abstentions” and “broker nonvotes” not counted as votes cast either “for” or “against” that director’s election. Notwithstanding the foregoing, in the event of a contested election of directors, directors shall be elected by the vote of a plurality of the votes present in person or represented by proxy at any meeting for the election of directors at which a quorum is present. An election of directors shall be considered contested if the number of nominees standing for election at any meeting of stockholders exceeds the number of directors to be elected, with the determination that an election is “contested” to be made by the Secretary within 30 days following the close of the applicable notice of Nomination period set forth in Section 7 of this Article II, based on whether one or more notices of Nomination were timely filed in accordance with said Section 7 (provided that the determination that an election is a “contested election” shall be determinative only as to the timeliness of a notice of Nomination and not otherwise as to its validity). If, prior to the time the Corporation mails its initial proxy statement in connection with such election of directors, one or more notices of Nomination are withdrawn such that the number of candidates for election as director no longer exceeds the number of directors to be elected, the election shall not be considered a contested election.

 

(c)                                   If an incumbent director does not receive a majority of the votes cast in an election that is not a contested election, the director shall promptly tender his or her irrevocable resignation to the Chairman of the Board following certification of the vote. Thereafter, the Board shall decide, through a process managed by the Corporate Governance and Nominating Committee (excluding the nominee in question from all Board and Committee deliberations), whether to accept such resignation within 90 days of the date of such resignation. The Board in making its decision may consider any factors and other information that it considers appropriate or relevant. The Board’s explanation of its decision shall be disclosed promptly in a Current Report on Form 8-K filed with the Securities and Exchange Commission or in a press release that is widely disseminated. If such incumbent director’s resignation is accepted by the Board, then such director shall immediately cease to be a member of the Board upon the date of action taken by the Board to accept such resignation. If such incumbent director’s resignation is not

 

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accepted by the Board, such director will continue to serve until the next annual meeting or until his or her subsequent resignation or removal.

 

(d)                                  If the Board accepts a director’s resignation pursuant to this Section 9, or if a nominee for director is not elected and such nominee is not an incumbent director, then the Board may fill the resulting vacancy in accordance with Section 10 of Article III or may decrease the size of the Board pursuant to Section 2 of Article III.

 

Section 10.                                     Order of Business . (a) Unless otherwise determined by the Board prior to the meeting, the presiding officer of the meeting of stockholders shall determine the order of business and shall have the authority in his or her discretion to regulate the conduct of any such meeting, including, without limitation, by imposing restrictions on the persons (other than stockholders of the Corporation or their duly appointed proxies) who may attend any such meeting of stockholders, by ascertaining whether any stockholder or his or her proxy may be excluded from any meeting of stockholders based upon any determination by the presiding officer, in his or her sole discretion, that any such person has unduly disrupted or is likely to disrupt the proceedings thereat, and by determining the circumstances in which any person may make a statement or ask questions at any meeting of stockholders.

 

(b)                                  Meetings of stockholders shall be presided over by the Chairman of the Board or, in the Chairman’s absence, by the Chief Executive Officer, or in the Chief Executive Officer’s absence, by an officer of the Corporation designated by the Board, or in the absence of such designation by a Chairman chosen by vote of the stockholders at the meeting. The Secretary or Assistant Secretary shall act as secretary of the meeting, but in the Secretary’s or Assistant Secretary’s absence, the Chairman of the meeting may appoint any person to act as secretary of the meeting.

 

Section 11.                                     Action without a Meeting . No action shall be taken by the stockholders except at an annual or special meeting of stockholders called in accordance with these By-Laws, and no action shall be taken by the stockholders by written consent.

 

Section 12.                                     Waiver of Notice .  Whenever notice is required to be given by law, by the Certificate of Incorporation or by these By-Laws, a written waiver signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before, at or after the time stated in such notice, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.

 

ARTICLE III

 

BOARD OF DIRECTORS

 

Section 1.                                            Powers . The business and affairs of the Corporation shall be managed by the Board, which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by law, the Certificate of Incorporation or these By-Laws directed or required to be exercised or done by stockholders.

 

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Section 2.                                            Number, Election and Qualification . Subject to the rights of the holders of any series of Preferred Stock then outstanding to elect directors, the number of directors of the Corporation shall be established by resolution of the Board. Except as otherwise provided by the Certificate of Incorporation or these By-Laws, the election of directors need not be by written ballot. Directors need not be stockholders of the Corporation.

 

Section 3.                                            Terms of Office . Each director shall be elected for a term of one (1) year. Each director shall hold office for the term for which he or she was elected and until his or her successor is elected and qualified or until his or her earlier death, resignation, retirement or removal.

 

Section 4.                                            Quorum and Manner of Acting . Unless otherwise provided by law or the Certificate of Incorporation, the presence of a majority of the members of the Board shall be necessary to constitute a quorum for the transaction of business. In the absence of a quorum, a majority of the directors present may adjourn the meeting from time to time until the quorum shall be present. Notice of any adjourned meeting need not be given. At all meetings of the Board at which a quorum is present, all matters shall be decided by the affirmative vote of the majority of directors present, except as otherwise required by law. The Board may hold its meetings at such place or places within or without the State of Delaware as the Board may from time to time determine or as shall be specified in the respective notices, or waivers of notice, thereof.

 

Section 5.                                            Annual Board Meeting . In connection with each annual meeting of stockholders for the election of directors, the Board shall meet at the place of the annual meeting of the stockholders for the purpose of organization, the election of officers and the transaction of other business. Notice of such meeting need not be given. If such meeting is held at any other time or place, notice thereof must be given as hereinafter provided for special meetings of the Board, subject to the execution of a waiver of the notice thereof signed by, or the attendance at such meeting of, all directors who may not have received such notice.

 

Section 6.                                            Regular Meetings . Regular meetings of the Board may be held, without notice, at such time and place, within or without the State of Delaware, as shall from time to time be determined by resolution of the Board. At such meetings, the Board may transact such business as may be brought before the meeting.

 

Section 7.                                            Special Meetings . Special meetings of the Board shall be held whenever called by the Chairman of the Board, the Chief Executive Officer or the President or by a majority of the directors. Notice of each such meeting shall be given orally or in writing, by telephone, including a voice messaging system or other system or technology designed to record and communicate messages, facsimile, telegraph or telex, or by electronic mail or other electronic means, at least 24 hours before the date and time of the meeting, or sent in writing to each director either by first class mail, charges prepaid, at least three days before the date of the meeting or by a reputable overnight delivery service, at least two days before the date of the meeting. Each such notice shall state the time and place of the meeting and need not state the purpose or purposes thereof. Notice of any meeting of the Board need not be given to any director if he or she shall sign a written waiver thereof either before or after the time stated therein for such meeting, or if he or she shall be present at the meeting. Unless limited by law,

 

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the Certificate of Incorporation, these By-Laws or terms of the notice thereof, any and all business may be transacted at any meeting even though no notice shall have been given.

 

Section 8.                                            Removal . Subject to the rights of the holders of any series of Preferred Stock then outstanding, any director or the entire board of directors may be removed, with or without cause by the affirmative vote of the holders of a majority of the votes which all the stockholders would be entitled to cast in any annual election of directors or class of directors at a special meeting of stockholders called in accordance with the Certificate of Incorporation and these By-Laws expressly for that purpose; provided that, any director may be removed from office by the affirmative vote of a majority of the Board, at any time prior to the expiration of their term of office, as provided by applicable law, in the event a director is in breach of any agreement between such director and the Corporation relating to such director’s service as a director or employee of the Corporation.

 

Section 9.                                            Resignations . Any director may resign at any time by giving notice to the Chairman of the Board, the President, the Secretary or any committee to which the Board has delegated the authority to accept resignations. Subject to Section 9(c) of Article II, the resignation of any director shall take effect upon receipt of notice thereof or at such later time, including without limitation, upon the happening of a specified event, as shall be specified in such notice, and acceptance of such resignation shall not be necessary to make it effective.

 

Section 10.                                     Vacancies . Subject to the rights of the holders of any series of Preferred Stock then outstanding, any vacancy or newly created directorships in the Board, however occurring, shall be filled only by vote of a majority of the directors then in office, although less than a quorum, or by a sole remaining director and shall not be filled by the stockholders. A director elected to fill a vacancy shall have the same remaining term as that of his or her predecessor, subject to the election and qualification of a successor and to such director’s earlier death, resignation, retirement or removal.

 

Section 11.                                     Compensation . Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, directors shall be entitled to such compensation for their services, in the form of cash or equity of the Corporation or other compensation, or a combination thereof, as may be approved by the Board from time to time, including, if so approved, reasonable annual fees and reasonable fees for attending meetings of the Board and meetings of any committee of the Board. Directors may also be reimbursed by the Corporation for all reasonable expenses incurred in traveling to and from any such meetings. Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity as an officer, agent, employee, or otherwise and receiving compensation therefor.

 

Section 12.                                     Action without a Meeting . Any action required or permitted to be taken at any meeting of the Board (including any committee) may be taken without a meeting if written consent thereto is signed or transmitted electronically by all members of the Board (or all members of such committee), and such written consent is filed with the minutes or proceedings of the Board or committee, as applicable.

 

Section 13.                                     Telephonic Participation in Meetings . Any member of the Board, or any committee thereof, may participate in a meeting of the Board or any committee thereof by means

 

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of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation shall constitute presence in person at such meetings.

 

ARTICLE IV

 

COMMITTEES OF DIRECTORS

 

Section 1.                                            Designation of Committees . The Board may, by resolution passed thereby, designate one or more committees, each committee to consist of one or more of the directors. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Except as otherwise provided in the Certificate of Incorporation, these By-Laws or the resolution of the Board designating the committee, a committee may create one or more subcommittees, each subcommittee to consist of one or more members of the committee, and delegate to a subcommittee any or all of the powers and authority of the committee.

 

Section 2.                                            Vacancies . In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or she or they constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member.

 

Section 3.                                            Powers . Any such committee, to the extent provided in the resolution of the Board, shall have and may exercise all the powers and authority of the Board to the extent provided by Section 141(c) of the DGCL as it exists now or may hereafter be amended.

 

Section 4.                                            Minutes . Each committee of the Board shall keep regular minutes of its meetings and report the same to the Board when required.

 

ARTICLE V

 

OFFICERS

 

Section 1.                                            Principal Officers . The Board shall elect, if and when designated by the Board, a Chairman of the Board, a Chief Executive Officer, a President, a Secretary and a Treasurer, and may in addition elect one or more Executive Vice Presidents, Senior Vice Presidents, Vice Presidents or one or more Assistant Secretaries and Assistant Treasurers and such other officers as it deems fit; the Chairman of the Board, the Chief Executive Officer, the President, the Secretary, the Treasurer, the Executive Vice President(s), if any, being the principal officers of the Corporation. No officer need be a stockholder and one person may hold, and perform the duties of, any two or more of the said offices.

 

Section 2.                                            Election and Term of Office . The principal officers of the Corporation shall be elected annually by the Board at the meeting thereof held in connection with the annual meeting of stockholders. Each such officer shall hold office until his or her successor shall have been elected and shall qualify, or until his or her earlier death, resignation, retirement or removal.

 

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Section 3.                                            Other Officers . In addition, the Board may elect, or the Chairman of the Board or Chief Executive Officer may appoint, such other officers as they deem fit. Any such other officers chosen by the Board shall be subordinate officers and shall hold office for such period, have such authority and perform such duties as the Board, the Chairman of the Board or the Chief Executive Officer may from time to time determine.

 

Section 4.                                            Removal and Resignation . Any officer may be removed, either with or without cause, at any time, by resolution adopted by the Board at any regular meeting of the Board, or at any special meeting of the Board called for that purpose, at which a quorum is present. Any officer may resign at any time by giving written notice to the Chairman of the Board, the Chief Executive Officer, the President, the Secretary or the Board. Any such resignation shall take effect upon receipt of such notice or at any later time specified therein, and the acceptance of such resignation shall not be necessary to make it effective. Except as the Board may otherwise determine, no officer who resigns or is removed shall have any right to any compensation as an officer for any period following such officer’s resignation or removal, or any right to damages on account of such removal, whether such officer’s compensation be by the month or by the year or otherwise, unless such compensation is expressly provided for in a duly authorized written agreement with the Corporation.

 

Section 5.                                            Vacancies . A vacancy in any office may be filled for the unexpired portion of the term in the manner prescribed in these By-Laws for election or appointment to such office for such term.

 

Section 6.                                            Chairman of the Board . The Chairman of the Board shall have general powers and duties of supervision and management usually vested in the office of the Chairman of the Board of a corporation. The Chairman of the Board shall preside, if present, at all meetings of the Board and at all meetings of the stockholders. He or she shall have and perform such other duties as from time to time may be assigned to him by the Board.

 

Section 7.                                            Chief Executive Officer . The Chief Executive Officer shall be the chief executive officer of the Corporation and shall have general supervision, direction and control of the business of the Corporation. He or she shall, in the absence of the Chairman, preside at all meetings of the stockholders and the Board. The Chief Executive Officer shall have such other powers and be subject to such other duties as the Board or the Chairman of the Board may from time to time assign and as may be provided by applicable law.

 

Section 8.                                            President . Unless some other officer has been elected Chief Executive Officer, the President shall be the chief executive officer of the Corporation with the powers and duties set forth in Section 7 of this Article V. If a Chief Executive Officer has been elected, the President shall have such powers and shall perform such duties as shall be assigned to him or her by the Board, the Chairman of the Board or the Chief Executive Officer and as may be provided by applicable law.

 

Section 9.                                            Vice President(s) . Each Executive Vice President, Senior Vice President and Vice President shall have such powers and shall perform such duties as shall be assigned to him or her by the Board, the Chairman of the Board, the Chief Executive Officer or the President.

 

12



 

Section 10.                                     Treasurer and Assistant Treasurers . (a) The Treasurer shall have charge and custody of, and be responsible for, all funds and securities of the Corporation and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation. He or she shall exhibit at all reasonable times his or her books of account and records to any of the directors upon application during business hours at the office of the Corporation where such books and records shall be kept; when requested by the Board, he or she shall render a statement of the condition of the finances of the Corporation at any meeting of the Board or at the annual meeting of stockholders; he or she shall receive, and give receipt for, moneys due and payable to the Corporation from any source whatsoever; in general, he or she shall perform all the duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him or her by the Board, the Chairman of the Board, the Chief Executive Officer or the President. The Treasurer shall give such bond, if any, for the faithful discharge of his or her duties as the Board may require.

 

(b)                                  The Assistant Treasurers shall perform such duties and possess such powers as the Board, the Chief Executive Officer, the President or the Treasurer may from time to time prescribe. In the event of the absence, inability or refusal to act of the Treasurer, the Assistant Treasurer (or if there shall be more than one, the Assistant Treasurers in the order determined by the Board or, if there be no such determination, in the order of their election) shall perform the duties and exercise the powers of the Treasurer.

 

Section 11.                                     Secretary and Assistant Secretaries . (a) The Secretary, if present, shall act as secretary at all meetings of the Board and of the stockholders and keep the minutes thereof in a book or books to be provided for that purpose; he or she shall see that all notices required to be given by the Corporation are duly given and served; he or she shall have charge of the stock records of the Corporation; he or she shall see that all reports, statements and other documents required by law are properly kept and filed; and in general he or she shall perform all the duties incident to the office of Secretary and such other duties as from time to time may be assigned to him or her by the Board, the Chairman of the Board, the Chief Executive Officer or the President.

 

(b)                                  The Assistant Secretaries shall perform such duties and possess such powers as the Board, the Chief Executive Officer, the President or the Secretary may from time to time prescribe. In the event of the absence, inability or refusal to act of the Secretary, the Assistant Secretary (or if there shall be more than one, the Assistant Secretaries in the order determined by the Board or, if there be no such determination, in the order of their election) shall perform the duties and exercise the powers of the Secretary.

 

(c)                                   In the absence of the Secretary or any Assistant Secretary at any meeting of stockholders or directors, the Chairman of the meeting shall designate a temporary secretary to keep a record of the meeting.

 

13



 

ARTICLE VI

 

TRANSFERS OF STOCK

 

Section 1.                                            General . Unless otherwise provided by resolution of the Board, each class or series of the shares of capital stock in the Corporation shall be issued in certificated form. Shares that are uncertificated shall be transferable only on the books of the Corporation by the holder thereof in person or by attorney or legal representative upon presentment of proper evidence of succession, assignation or authority to transfer in accordance with the customary procedures for transferring shares in uncertificated form.

 

Section 2.                                            Record Date . In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof or entitled to receive payment of any dividend or other distribution, or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix, in advance, a record date, which, unless otherwise required by law, shall not be more than 60 nor less than 10 days before the date of such meetings, nor more than 60 days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided , however , that the Board may fix a new record date for the adjourned meeting.

 

Section 3.                                            Registered Stockholders . The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by law.

 

Section 4.                                            Lost, Stolen or Destroyed Certificates . In the event the Corporation issues certificated shares, the Board may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen or destroyed upon the making of an affidavit of that fact by the person claiming the certificate to be lost, stolen or destroyed. When authorizing such issuance of a new certificate or certificates, the Board, in its discretion and as a condition precedent to the issuance thereof, may require the owner of such lost, stolen or destroyed certificate or certificates, or his or her legal representative, to present reasonable evidence of such loss, theft or destruction in such manner as it shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed or the issuance of such new certificate.

 

ARTICLE VII

 

MISCELLANEOUS

 

Section 1.                                            Corporate Seal . The Board shall provide a corporate seal, which shall be in the form of a circle and shall bear the name of the Corporation and words and figures showing

 

14



 

that it was incorporated in the State of Delaware. The Secretary shall be the custodian of the seal. The Board may authorize a duplicate seal to be kept and used by any other officer.

 

Section 2.                                            Voting of Stock Owned by the Corporation . The Board may authorize any person on behalf of the Corporation to attend, vote and grant proxies to be used at any meeting of stockholders of any corporation (except the Corporation) in which the Corporation may hold stock.

 

Section 3.                                            Dividends . Subject to applicable law and the provisions of the Certificate of Incorporation, the Board may, out of funds legally available therefor, at any regular or special meeting, declare dividends upon the capital stock of the Corporation as and when they deem expedient. Before declaring any dividend, there may be set apart out of any funds of the Corporation available for dividends such sum or sums as the directors from time to time in their discretion deem proper for working capital or as a reserve fund to meet contingencies or for equalizing dividends or for such other purposes as the Board shall deem conducive to the interests of the Corporation.

 

Section 4.                                            Fiscal Year . Except as from time to time otherwise designated by the Board, the fiscal year of the Corporation shall begin on the first day of January of each year and end on the last day of December in each year.

 

Section 5.                                            Certificate of Incorporation . All references in these By-Laws to the Certificate of Incorporation shall be deemed to refer to the Certificate of Incorporation of the Corporation, as amended and in effect from time to time.

 

Section 6.                                            Severability . If any provision of these By-Laws is illegal or unenforceable as such, such illegality or unenforceability shall not affect any other provision of these By-Laws and such other provisions shall continue in full force and effect.

 

Section 7.                                            Exclusive Forum : Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for (1) any derivative action or proceeding brought on behalf of the Corporation, (2) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporation’s stockholders, (3) any action arising pursuant to any provision of the Delaware General Corporation Law, or (4) any action asserting a claim governed by the internal affairs doctrine; provided, however, that, in the event that the Court of Chancery of the State of Delaware lacks subject matter jurisdiction over any such action or proceeding, the sole and exclusive forum for such action or proceeding shall be another state or federal court located within the State of Delaware, in each such case, unless the Court of Chancery (or such other state or federal court located within the State of Delaware, as applicable) has dismissed a prior action by the same plaintiff asserting the same claims because such court lacked personal jurisdiction over an indispensable party named as a defendant therein. Any person or entity owning, purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Section 7.

 

15



 

ARTICLE VIII

 

AMENDMENTS

 

Section 1.                                            General . The Board shall have the power to adopt, amend or repeal these By-Laws at any valid meeting by the affirmative vote of a majority of the whole Board. These By-Laws may also be altered, amended or repealed at any annual meeting of stockholders, or at any special meeting of holders of shares of stock entitled to vote thereon called for that purpose, by the affirmative vote of not less than a majority of the voting power of all outstanding shares of capital stock of the Corporation entitled to vote thereon; provided however , that with respect to Sections 2, 6, 7 and 11 of Article II, Sections 2, 3, 7, and 10 of Article III and this Article VIII, such provisions may only be altered, amended or repealed at any annual meeting of stockholders, or at any special meeting called for that purpose of holders of shares of stock entitled to vote thereon, by an affirmative vote of not less than two-thirds of the voting power of all outstanding shares of capital stock of the Corporation entitled to vote thereon.

 

16


Exhibit 4.1

 

INVESTOR RIGHTS AGREEMENT

 

by and among

 

KEURIG DR PEPPER INC.

 

and

 

THE HOLDERS LISTED ON SCHEDULE A HERETO

 

Dated as of July 9, 2018

 



 

TABLE OF CONTENTS

 

 

 

Page

 

 

 

1.

Definitions and Interpretation

2

2.

Demand Registration

9

3.

Shelf Registration

12

4.

Piggyback Registration

16

5.

Standstill; Lock-up Agreements

18

6.

Other Registration Rights

19

7.

Registration Procedures

19

8.

Indemnification by the Company

23

9.

Indemnification by Participating Shareholders

24

10.

Conduct of Indemnification Proceedings

24

11.

Survival

25

12.

Contribution

25

13.

Participation in Public Offering

26

14.

Compliance with Rule 144 and Rule 144A

26

15.

Selling Expenses

27

16.

Prohibition on Requests; Holders’ Obligations

27

17.

Corporate Governance

27

18.

Information Rights

29

19.

Miscellaneous

31

 



 

This INVESTOR RIGHTS AGREEMENT (this “ Agreement ”) is made and entered into as of July 9, 2018, by and among Keurig Dr Pepper Inc., a Delaware corporation (the “ Company ”), and the persons listed on Schedule A hereto (such persons, in their capacity as holders of Registrable Securities, including any permitted transferees hereunder, the “ Holders ” and each a “ Holder ” and, the Holders together with the Company, the “ Parties ”).

 

RECITALS

 

WHEREAS, Maple Parent Holdings Corp., a Delaware corporation (“ Maple Parent ”), the Company and Salt Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of Sea Salt (“ Merger Sub ”), have entered into an Agreement and Plan of Merger, dated as of January 29, 2018 (as the same may be amended or supplemented from time to time, the “ Merger Agreement ”), pursuant to which, on the date of the Closing, subject to certain terms and conditions, Merger Sub shall be merged with and into Maple Parent, with Maple Parent surviving the merger as a wholly-owned subsidiary of the Company (the “ Merger ”);

 

WHEREAS, in connection with the Merger, the Holders will have the right to receive shares of Common Stock representing the Merger Consideration in accordance with Section 3.01 of the Merger Agreement; and

 

WHEREAS, the Company desires to enter into this Agreement with the Holders in order to provide the Holders the investor rights described herein.

 

NOW, THEREFORE, in consideration of the foregoing Recitals and the representations, warranties, covenants and agreements set forth in this Agreement, and intending to be legally bound by this Agreement, the Parties agree as follows:

 

1.                                       Definitions and Interpretation.

 

(a)                                  Definitions . As used in this Agreement, each of the following capitalized terms has the meaning specified in this Section 1(a) .

 

Adverse Disclosure ” means public disclosure of material non-public information that, in the Board’s good faith judgment, after consultation with outside counsel to the Company, (i) would be required to be made in any Registration Statement filed with the SEC by the Company so that such Registration Statement would not be materially misleading; (ii) would not be required to be made at such time but for the filing of such Registration Statement and (iii) the Company has a bona fide business purpose for not disclosing publicly.

 

Affiliate ” means, with respect to any Person, any other Person that directly or indirectly Controls, is Controlled by, or is under common Control with, such Person; provided , that no shareholder of the Company shall be deemed an Affiliate of any other shareholder solely by reason of any investment in the Company; provided , further , that “ Affiliate ” shall not include the portfolio companies of any of the Holders or any Affiliate of such portfolio companies (other than the Company and its Subsidiaries).

 

Board ” means the board of directors of the Company.

 

2



 

Business Day ” means any day except a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized by Law to close.

 

Closing ” has the meaning set forth in the Merger Agreement.

 

Closing Date ” has the meaning set forth in the Merger Agreement.

 

Common Stock ” means the common stock, par value $0.01 per share, of the Company and any securities issued in respect thereof, or in substitution therefor, in connection with any share split, dividend or combination, or any reclassification, recapitalization, amalgamation, merger, consolidation, scheme of arrangement, exchange or other similar reorganization.

 

Company Securities ” means (i) the Common Stock and any other stock or other equity interests or equity-linked interests of the Company or any Subsidiary and (ii) Equity Rights that are directly or indirectly convertible into or exercisable exchangeable for Common Stock or other stock or other equity of the Company or any Subsidiary.

 

Company Shares ” means the issued and outstanding shares of Common Stock.

 

Control ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise, and “ Controls ” and “ Controlled ” each has a correlative meaning.

 

Derivative Instrument ” means any and all derivative securities (as defined under Rule 16a-1 under the Exchange Act) that increases or decreases in value as the value of any Company Securities increases or decreases, as the case may be, including a long convertible security, a long call option and a short put option position, in each case, regardless of whether (a) such derivative security conveys any voting rights in any Company Security, (b) such derivative security is required to be, or is capable of being, settled through delivery of any Company Security or (c) other transactions hedge the value of such derivative security.

 

Equity Right ” means, with respect to any Person, any security (including any debt security or hybrid debt-equity security) or obligation convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire, or any options, calls, warrants, restricted shares, restricted share units, deferred share awards, share units, “phantom” awards, dividend equivalents, participations, interests, rights or commitments relating to, or any share appreciation right or other instrument the value of which is determined in whole or in part by reference to the market price or value of, shares of capital stock or earnings of such Person.

 

FINRA ” means the Financial Industry Regulatory Authority, Inc., and any successor regulator performing comparable functions.

 

Exchange Act ” means the Securities Exchange Act of 1934, as amended, or any successor federal statute, and the rules and regulations of the SEC thereunder, as the same shall be in effect from time to time.

 

3



 

Governmental Entity ” means any foreign, United States federal or state, regional or local legislative, executive or judicial body or agency, any court of competent jurisdiction, any department, commission, political subdivision or other governmental entity or instrumentality, or any arbitral authority, in each case, whether domestic or foreign.

 

Group Member ” means, with respect to any specified Person, any Affiliate of the specified Person that is, directly or indirectly, Controlled by the specified Person and includes any Person with respect to which the specified Person is a direct or indirect Subsidiary.

 

JAB ” means Maple Holdings B.V.

 

Judgments ” means any judgments, injunctions, orders, stays, decrees, writs, rulings, or awards of any court or other judicial authority or any other Governmental Entity.

 

Law ” means all laws (including common law), statutes, ordinances, rules, regulations, orders, decrees or legally-binding guidance of any Governmental Entity, or Judgments.

 

MDLZ ” means Mondelēz International Holdings LLC.

 

Material Adverse Change ” means (i) any general suspension of trading in, or limitation on prices for, securities on any national securities exchange or in the over-the-counter market in the United States (other than ordinary course limitations on hours or number of days of trading); (ii) a material outbreak or escalation of armed hostilities or other international or national calamity involving the United States or the declaration by the United States of a national emergency or war or a material adverse change in national or international financial, political or economic conditions; or (iii) any event, change, circumstance or effect that is or is reasonably likely to be materially adverse to the business, properties, assets, liabilities, condition (financial or otherwise), operations or results of operations of the Company and its Subsidiaries, taken as a whole.

 

Merger Consideration ” has the meaning set forth in the Merger Agreement.

 

Mondelēz International ” means Mondelēz International, Inc.

 

Notice, Agreement and Questionnaire ” means a written notice, agreement and questionnaire substantially in the form of Annex A hereto.

 

NYSE ” means the New York Stock Exchange.

 

Participating Shareholder ” means, with respect to any registration, any Holder of Registrable Securities covered by the applicable Registration Statement

 

Person ” means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, governmental entity or any other entity.

 

4



 

Public Offering ” means any public offering and sale of equity securities of the Company or its successor for cash pursuant to an effective registration statement (other than on Form S-4, S-8 or a comparable form) under the Securities Act.

 

Qualified Shareholder ” means any Holder that, together with its Affiliates, beneficially owns at least 3% of the Company Shares.

 

Registrable Securities ” means, at any time, any Company Shares and any securities issued or issuable in respect of such Company Shares or by way of conversion, amalgamation, exchange, share dividend, split or combination, recapitalization, merger, consolidation, other reorganization or otherwise until the earliest to occur of (i) a Registration Statement covering such Company Shares has been declared effective by the SEC and such Shares have been sold or otherwise disposed of pursuant to such effective Registration Statement, (ii) such Company Shares are otherwise transferred (other than by a Qualified Shareholder to an Affiliate thereof), the Company has delivered a new certificate or other evidence of ownership for such Company Shares not bearing any restricted legend and such Company Shares may be resold without subsequent registration under the Securities Act, (iii) such Company Shares are repurchased by the Company or a Subsidiary of the Company or cease to be outstanding or (iv) such Company Shares may be resold pursuant to Rule 144, without regard to volume or manner of sale limitations, whether or not any such sale has occurred, unless such Registrable Securities are held by a Qualified Shareholder.

 

Registration Expenses ” means any and all expenses incident to the performance of or compliance with any registration or marketing of securities, including all (i) registration and filing fees, and all other fees and expenses payable in connection with the listing of securities on any securities exchange or automated interdealer quotation system, (ii) fees and expenses of compliance with any securities or “blue sky” Laws (including fees and disbursements of counsel in connection with “blue sky” qualifications of the securities registered), (iii) expenses in connection with the preparation, printing, mailing and delivery of any Registration Statements, prospectuses and other documents in connection therewith and any amendments or supplements thereto, (iv) security engraving and printing expenses, (v) internal expenses of the Company (including all salaries and expenses of its officers and employees performing legal or accounting duties), (vi) fees and disbursements of counsel for the Company and customary fees and expenses for independent certified public accountants retained by the Company (including the expenses relating to any required audits of the financial statements of the Company or any comfort letters or costs associated with the delivery by independent certified public accountants of any comfort letters requested pursuant to Section 7(l) ), (vii) fees and expenses of any special experts retained by the Company in connection with such registration, (viii) reasonable fees and expenses of one (1) counsel for all Holders participating in the offering, selected by the Holders holding the majority of the Registrable Securities to be sold for the account of all Holders in the offering and reasonable fees and expenses of each additional counsel retained by any Holder for the purpose of rendering a legal opinion on behalf of such Holder in connection with any underwritten Public Offering, (ix) fees and expenses in connection with any review by FINRA of the underwriting arrangements or other terms of the offering, and all fees and expenses of any “qualified independent underwriter,” including the fees and expenses of any counsel thereto, but excluding any underwriting fees, discounts and commissions attributable to the sale of Registrable Securities, (x) transfer agents’ and registrars’ fees and expenses and the fees and

 

5



 

expenses of any other agent or trustee appointed in connection with such offering, (xi) expenses relating to any analyst or investor presentations or any “road shows” undertaken in connection with the registration, marketing or selling of the Registrable Securities, provided that the Company shall not be responsible for any plane chartering fees, (xii) fees and expenses payable in connection with any ratings of the Registrable Securities, including expenses relating to any presentations to rating agencies and (xiii) all out-of-pocket costs and expenses incurred by the Company or its appropriate officers in connection with their compliance with Section 7(r) . For the avoidance of doubt, “Registration Expenses” shall include expenses of the type described in clauses (i) - (xiii) to the extent incurred in connection with the “take down” of Company Shares pursuant to a Registration Statement previously declared effective. Except as set forth in clause (viii) above, Registration Expenses shall not include any out-of-pocket expenses of any Holders (or the agents who manage their accounts) or any Selling Expenses.

 

Registration Statement ” means any registration statement of the Company that covers Registrable Securities pursuant hereto filed with, or to be filed with, the SEC under the rules and regulations promulgated under the Securities Act, including the related prospectus, pre- and post-effective amendments and supplements to such registration statement and all exhibits and all material incorporated by reference in such registration statement.

 

Representatives ” means, with respect to any Person, (i) any of such Person’s partners, stockholders, shareholders, members, directors, officers, employees, agents, counsel, accountants, trustees, equity financing partners, investment advisors or representatives, Affiliates and investment vehicles managed or advised by such Person, (ii) the partners, stockholders, shareholders, members, directors, officers, employees, agents, counsel, accountants, trustees, equity financing partners, investment advisors or representatives of such Persons listed in clause (i), and (iii) any other Person acting on behalf of such Person with respect to the Company and any of its Subsidiaries.

 

Rule 144 ” means Rule 144 (or any successor provisions) under the Securities Act.

 

Rule 144A ” means Rule 144A (or any successor provisions) under the Securities Act.

 

Rule 415 ” means Rule 415 (or any successor provisions) under the Securities Act.

 

SEC ” means the United States Securities and Exchange Commission and any successor agency performing comparable functions.

 

Securities Act ” means the Securities Act of 1933, as amended from time to time, and the rules and regulations promulgated thereunder.

 

Selling Expenses ” means all underwriting discounts, selling commissions and stock or share transfer taxes applicable to the sale of Registrable Securities, and fees and disbursements of counsel for any holder of Registrable Securities, except for the reasonable fees and disbursements of one counsel for the holders of Registrable Securities set forth in clause (viii) of the definition of Registration Expenses.

 

Shelf Registration Statement ” means a Registration Statement of the Company filed with the SEC on either (i) Form S-3 (or any successor form or other appropriate form under the

 

6



 

Securities Act) or a prospectus supplement to an existing Form S-3, or (ii) if the Company is not permitted to file a Registration Statement on Form S-3, an evergreen Registration Statement on Form S-1 (or any successor form or other appropriate form under the Securities Act), in each case for an offering to be made on a continuous basis pursuant to Rule 415 under the Securities Act (or any similar rule that may be adopted by the SEC) covering all of the Registrable Securities, as applicable, and which may also cover any other securities of the Company.

 

Standstill Period ” means the period beginning on the date of this Agreement and ending on the first Business Day following the date that is the six (6) month anniversary of the date of the Closing.

 

Subsidiary ” means, as to a Person, any corporation, partnership, limited liability company or other organization, whether incorporated or unincorporated, of which at least a majority of the securities or other interests having by their terms voting power to elect a majority of the board of directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly beneficially owned or controlled by such Person.

 

Underwritten Offering ” means a registration in which Company Securities are sold to an underwriter or underwriters on a firm commitment basis.

 

Voting Securities ” means the Company Shares and any other securities of the Company entitled to vote at any meeting of stockholders of the Company.

 

(b)                                  Other Definitions . In addition to the defined terms set forth in Section 1(a) , as used in this Agreement, each of the following capitalized terms has the meaning specified in the Section set forth opposite such term below.

 

Term

 

Section

Agreement

 

Preamble

Company

 

Preamble

Company Group

 

18(a)

Company’s Auditors

 

18(a)

Damages

 

8(a)

Demand Notice

 

2(a)(i)

Demand Period

 

2(e)

Demand Registration

 

2(a)(i)

Demand Suspension

 

2(h)

Director

 

17(a)

Holder

 

Preamble

Holder Information

 

16(b)

Indemnified Party

 

10

Indemnifying Party

 

10

Inspectors

 

7(k)

 

7



 

Long-Form Registration

 

2(a)(i)

Maple Parent

 

Recitals

Maximum Offering Size

 

2(g)

MDLZ Designee

 

17(a)

Merger

 

Recitals

Merger Agreement

 

Recitals

Merger Sub

 

Recitals

Mondelēz Public Filings

 

18(a)

Parties

 

Preamble

Piggyback Registration

 

4(a)

Records

 

7(k)

Requesting Shareholder

 

2(a)(i)

Shelf Offering Request

 

3(a)

Shelf Period

 

3(b)

Shelf Suspension

 

3(d)

Short-Form Registration

 

2(a)(i)

Underwritten Shelf Takedown

 

3(e)(i)

Underwritten Shelf Takedown Notice

 

3(e)(i)

Underwritten Shelf Takedown Request

 

3(e)(i)

 

(d)                                  Interpretation .

 

(i)                                      When calculating the period of time before which, within which or following which any act is to be done or step taken pursuant to this Agreement, (A) the date that is the reference date in calculating such period shall be excluded and (B) if the last day of such period is a not a Business Day, the period in question shall end on the next succeeding Business Day.

 

(ii)                                   When a reference is made herein to a Section, such reference shall be to a Section of this Agreement unless otherwise indicated. The table of contents and headings contained herein are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

 

(iii)                                Whenever the words “include,” “includes” or “including” are used herein, they shall be deemed to be followed by the words “without limitation.”

 

(iv)                               The words “hereof,” “hereto,” “hereby,” “herein” and “hereunder” and words of similar import when used herein shall refer to this Agreement as a whole and not to any particular provision of this Agreement.

 

(v)                                  The word “extent” in the phrase “to the extent” means the degree to which a subject or other thing extends, and such phrase shall not mean simply “if.”

 

8



 

(vi)                               Any law or regulation defined or referred to herein means such law or regulation as from time to time amended, modified or supplemented, unless otherwise specifically indicated.

 

(vii)                            References to a person are also to its successors and permitted assigns.

 

(viii)                         The Annexes to this Agreement are incorporated and made a part hereof and are an integral part of this Agreement. Any capitalized term used in any Annex but not otherwise defined therein shall have the meaning given to such term herein.

 

2.                                       Demand Registration.

 

(a)                                  Demand by Holders .

 

(i)                                      If, at any time beginning 90 days prior to the expiration of the Standstill Period, the Company does not otherwise have an effective registration statement on Form S-3 covering a Holder’s Registrable Securities on file with the SEC and the Company shall have received a request, subject to Section 16 , from any Qualified Shareholder (the “ Requesting Shareholder ”) that the Company effect the registration under the Securities Act of all or any portion of such Requesting Shareholder’s Registrable Securities (x) on Form S-1 or any similar long-form Registration Statement (a “ Long-Form Registration ”) or (y) on Form S-3 or any similar short-form Registration Statement, which shall include a prospectus supplement to an existing Form S-3 (a “ Short-Form Registration ”) if the Company qualifies to use such short form Registration Statement (any such requested Long-Form Registration or Short-Form Registration, a “ Demand Registration ”), and specifying the kind and aggregate amount of Registrable Securities to be registered and the intended method of disposition thereof, then the Company shall promptly, but in no event later than ten (10) Business Days prior to the effective date of the Registration Statement relating to such Demand Registration, give notice of such request (a “ Demand Notice ”) to the other Holders, specifying the number of Registrable Securities for which the Requesting Shareholder has requested registration under this Section 2(a) . During the ten (10) Business Days after receipt of a Demand Notice, all Holders (other than the Requesting Shareholder) may provide a written request to the Company, specifying the aggregate amount of Registrable Securities held by such Holders requested to be registered as part of such Demand Registration and the intended method of distribution thereof; provided that, if, on the date of any request by a Qualified Shareholder, the Company qualifies as a well-known seasoned issuer as defined in Rule 405 under the Securities Act) eligible to file an automatic shelf registration statement on Form S-3 pursuant to Section 3 of this Agreement, the provisions of this Section 2 shall not apply, and the provisions of Section 3 shall apply instead.

 

(ii)                                   The Company shall file such Registration Statement with the SEC within ninety (90) days of such request, in the case of a Long-Form Registration, and thirty (30) days of such request, in the case of a Short-Form Registration; provided , however , that in no event shall the Company be obligated to file such Registration Statement prior to the first Business Day after the expiration of the Standstill Period, and shall use its reasonable best efforts to cause such Registration Statement to be declared effective under the Securities Act and the “blue sky” Laws of such jurisdictions as any Participating Shareholder or any underwriter, if any, reasonably

 

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requests, as expeditiously as possible, all to the extent necessary to permit the disposition (in accordance with the intended methods thereof) of the Registrable Securities so to be registered.

 

(iii)                                Notwithstanding anything to the contrary in this Section 2(a) , (A) the Company shall not be obligated to effect more than two (2) Long-Form Registrations over any three (3) year period at the request of any Holder, (B) from and after the time the Company becomes eligible for a Short-Form Registration, the Holders shall be entitled to effect three (3) Short-Form Registrations per calendar year in the aggregate in addition to the Long-Form Registrations to which they are entitled (which Long-Form Registrations, at the election of the Requesting Shareholder, may be effected as Short-Form Registrations, in which case they will count as Long-Form Registrations for purposes of the preceding clause (A)) and (C) the Company shall not be obligated to effect a Demand Registration unless the aggregate proceeds expected to be received from the sale of the Registrable Securities requested to be included in such Demand Registration equals or exceeds five hundred million dollars ($500,000,000) if pursuant to a Long-Form Registration, or three hundred million dollars ($300,000,000) if pursuant to a Short-Form Registration.

 

(b)                                  Demand Withdrawal . A Participating Shareholder may withdraw its Registrable Securities from a Demand Registration at any time prior to the effectiveness of the applicable Registration Statement. Upon receipt of a notice from all of the Participating Shareholders to such effect, the Company shall cease all efforts to secure effectiveness of the applicable Registration Statement, and such registration shall nonetheless be deemed a Demand Registration for purposes of Section 2(a)  unless (i) the withdrawing Participating Shareholders shall have paid or reimbursed the Company for their pro rata share of all reasonable and documented out-of-pocket fees and expenses incurred by the Company in connection with the registration of the withdrawing Participating Shareholders’ withdrawn Registrable Securities (based on the number of Registrable Securities such withdrawing Participating Shareholders sought to register, as compared to the total number of Company Securities included on such Registration Statement), (ii) the withdrawal is made following the occurrence of a Material Adverse Change, because the registration would require the Company to make an Adverse Disclosure or because the Company otherwise requests withdrawal or (iii) the withdrawal arose out of the fault of the Company (in each such case the Company shall be obligated to pay all Registration Expenses in connection with such revoked request except to the extent otherwise paid pursuant to clause (i)).

 

(c)                                   Company Notifications . Within ten (10) Business Days after the receipt by the Participating Shareholders of the Demand Notice, the Company will notify all Participating Shareholders of the identities of the other Participating Shareholders and the number of Registrable Securities requested to be included therein.

 

(d)                                  Registration Expenses . The Company shall be liable for and pay all Registration Expenses in connection with any Demand Registration, regardless of whether such registration is effected, subject to reimbursement pursuant to Section 2(b)(i) , if applicable.

 

(e)                                   Effective Registration . A Demand Registration shall be deemed to have occurred if the Registration Statement relating thereto (i) has become effective under the Securities Act and (ii) has remained effective for a period of at least 180 calendar days (or such shorter period

 

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in which all Registrable Securities of the Participating Shareholders included in such registration have actually been sold thereunder or withdrawn) or, if such Registration Statement relates to an Underwritten Offering, such longer period as, in the opinion of counsel for the underwriter or underwriters, a prospectus is required by Law to be delivered in connection with sales of Registrable Securities by an underwriter or dealer (the applicable period, the “ Demand Period ”); provided , that a Demand Registration shall not be deemed to have occurred if, (A) during the Demand Period, such Registration Statement is interfered with by any stop order, injunction or other order or requirement of the SEC or other Governmental Entity or court, (B) the conditions to closing specified in the underwriting agreement, if any, entered into in connection with such registration are not satisfied other than by reason of a wrongful act, misrepresentation or breach of such applicable underwriting agreement by any Participating Shareholder or (C) the Maximum Offering Size (as defined below) is reduced in accordance with Section 2(g)  such that less than seventy-five percent (75%) of the Registrable Securities that the Requesting Shareholder sought to be included in such registration are included.

 

(f)                                    Underwritten Offerings . If any Participating Shareholder that is a Qualified Shareholder so requests, an offering of Registrable Securities pursuant to a Demand Registration shall be in the form of an Underwritten Offering.

 

(g)                                   Priority of Securities Registered Pursuant to Demand Registrations . If the managing underwriter or underwriters of a proposed Underwritten Offering advise the Board (or, in the case of a Demand Registration not being underwritten, the Board determines in its reasonable discretion) that, in its view, the number of Registrable Securities requested to be included in such registration (including any securities that the Company proposes to be included that are not Registrable Securities) exceeds the largest number of shares that can be sold without being likely to have an adverse effect on the price, timing or distribution of the shares offered in such offering (the “ Maximum Offering Size ”), the Company shall include in such registration, in the priority listed below, up to the Maximum Offering Size:

 

(i)                                      (1) if the Requesting Shareholder is JAB, first , all Registrable Securities requested to be registered by JAB and all other Participating Shareholders (allocated, if necessary for the offering not to exceed the Maximum Offering Size, pro rata among JAB and such other Participating Shareholders on the basis of the relative number of Registrable Securities owned by JAB and the other Participating Shareholders; provided , that any securities thereby allocated to JAB or another Participating Shareholder that exceed such Holder’s request shall be reallocated among the remaining Participating Shareholders in like manner), or

 

(2) if the Requesting Shareholder is MDLZ, (A)  first , all Registrable Securities requested to be included in such registration by MDLZ, and (B)  second , and only if all the securities referred to in clause 2(A) have been included, all Registrable Securities requested to be registered by the other Participating Shareholders (allocated, if necessary for the offering not to exceed the Maximum Offering Size, pro rata among such Participating Shareholders on the basis of the relative number of Registrable Securities owned by the Participating Shareholders; provided , that any securities thereby allocated to a Participating Shareholder that exceed such Participating Shareholder’s request shall be reallocated among the remaining Participating Shareholders in like manner), and

 

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(ii)                                   thereafter, and only if all the securities referred to in clause (i)(1) or (2), as applicable, have been included, any securities proposed to be registered by the Company or any securities proposed to be registered for the account of any other Persons (including the Company), with such priorities among them as the Company shall determine.

 

(h)                                  Delay in Filing; Suspension of Registration . If, upon the determination of a majority of the disinterested members of the Board, the filing, initial effectiveness or continued use of a Registration Statement in respect of a Demand Registration at any time would require the Company to make an Adverse Disclosure, the Company may, upon giving prompt written notice of such action to the Participating Shareholders, delay the filing or initial effectiveness of, or suspend use of, such Registration Statement (a “ Demand Suspension ”); provided , that (x) the Company shall not be permitted to exercise a Demand Suspension (i) more than three (3) times during any 12-month period or (ii) for more than one hundred (100) days in aggregate during any 12-month period and (y) such Demand Suspension shall terminate at such time as the Company would no longer be required to make any Adverse Disclosure; and provided , further , that in the event of a Demand Suspension, if a Participating Shareholder has not sold any Company Securities under such Registration Statement, it shall be entitled to withdraw Registrable Securities from such Demand Registration and, if all Participating Shareholders so withdraw, such Demand Registration shall not be counted for purposes of the limit on Long-Form Registrations requested by such Participating Shareholders in Section 2(a) . In the case of a Demand Suspension, the Participating Shareholders agree to suspend use of the applicable prospectus and any issuer free writing prospectuses in connection with any sale or purchase of, or offer to sell or purchase, Registrable Securities, upon receipt of the notice referred to above. The Company shall immediately notify the Participating Shareholders upon the termination of any Demand Suspension, amend or supplement the prospectus and any issuer free writing prospectus, if necessary, so it does not contain any untrue statement or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and furnish to the Participating Shareholders such numbers of copies of the prospectus and any issuer free writing prospectus as so amended or supplemented as the Participating Shareholders may reasonably request. The Company agrees, if necessary, to supplement or make amendments to the applicable Registration Statement if required by the registration form used by the Company for the applicable Demand Registration or by the instructions applicable to such registration form or by the Securities Act or the rules or regulations promulgated thereunder, or as may reasonably be requested by the Participating Shareholder.  Notwithstanding anything in this Agreement to the contrary, the Company shall not be permitted to file a registration statement to register for sale, or to conduct any registered securities offerings (including any “take-downs” off of an effective shelf registration statement) of, any of its securities either for its own account or the account of any security holder or holders during any Demand Suspension.

 

3.                                       Shelf Registration .

 

(a)                                  Filing . If, at any time beginning 90 days prior to the expiration of the Standstill Period, the Company shall have received a request, subject to Section 16 , by a Qualified Shareholder (a “ Shelf Offering Request ”), for the filing of a Shelf Registration Statement pursuant to this Section 3 , and at such time the Company is eligible to file a registration statement on Form S-3, the Company shall, within sixty (60) days of such Shelf Offering Request, but in no event prior to the first Business Day after the expiration of the Standstill

 

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Period, file with the SEC a Shelf Registration Statement relating to the offer and sale of all Registrable Securities by the Holders from time to time in accordance with the methods of distribution elected by such Holders and set forth in the Shelf Registration Statement and, as promptly as practicable thereafter, the Company shall use its reasonable best efforts to cause such Shelf Registration Statement to be declared effective under the Securities Act (or if the Company qualifies to do so, it shall file an automatic Shelf Registration Statement in response to any such request). If, on the date of any such Shelf Offering Request, the Company does not qualify to file a Shelf Registration Statement under the Securities Act, the provisions of this Section 3 shall not apply, and the provisions of Section 2 shall apply instead.

 

(b)                                  Continued Effectiveness . The Company shall use its reasonable best efforts to keep such Shelf Registration Statement continuously effective under the Securities Act (including, if necessary, by renewing or refiling a Shelf Registration Statement prior to expiration of the existing Shelf Registration Statement or by filing with the SEC a post-effective amendment or a supplement to the Shelf Registration Statement or any document incorporated therein by reference or by filing any other required document or otherwise supplementing or amending the Shelf Registration Statement, if required by the rules, regulations or instructions applicable to the registration form used by the Company for such Shelf Registration Statement or by the Securities Act, the Exchange Act, any state securities or blue sky Laws, or any rules and regulations thereunder) in order to permit the prospectus forming a part thereof to be usable by Holders until the earlier of (i) the date as of which all Registrable Securities have been sold pursuant to the Shelf Registration Statement or another Registration Statement filed under the Securities Act (but in no event prior to the applicable period referred to in Section 4(a)(3) of the Securities Act and Rule 174 thereunder) and (ii) the date as of which each of the Holders is permitted to sell its Registrable Securities without Registration pursuant to Rule 144 under the Securities Act without volume limitation or other restrictions on transfer thereunder (such period of effectiveness, the “ Shelf Period ”). Subject to Section 3(d) , the Company shall not be deemed to have used its reasonable best efforts to keep the Shelf Registration Statement effective during the Shelf Period if the Company voluntarily takes any action or omits to take any action that would result in Holders of Registrable Securities covered thereby not being able to offer and sell any Registrable Securities pursuant to such Shelf Registration Statement during the Shelf Period, unless such action or omission is required by applicable Law or is in connection with a Shelf Suspension.

 

(c)                                   Shelf Notice . Promptly upon receipt of any request to file a Shelf Registration Statement pursuant to Section 3(a)  (but in no event more than five (5) Business Days thereafter), the Company shall deliver a written notice of any such request to all other Holders.

 

(d)                                  Suspension of Registration . If, upon the determination of a majority of the disinterested members of the Board, the continued use of such Shelf Registration Statement at any time would require the Company to make an Adverse Disclosure, the Company may, upon giving at least 10 calendar days’ prior written notice of such action to the Holders, suspend use of the Shelf Registration Statement (a “ Shelf Suspension ”); provided , that (x) the Company shall not be permitted to exercise a Shelf Suspension (i) more than three (3) times during any 12-month period, or (ii) for more than one hundred (100) days in aggregate during any 12-month period and (y) such Shelf Registration shall terminate at such time as the Company would no longer be required to make any Adverse Disclosure. In the case of a Shelf Suspension, the

 

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Holders agree to suspend use of the applicable prospectus and any issuer free writing prospectus in connection with any sale or purchase of, or offer to sell or purchase, Registrable Securities, upon receipt of the notice referred to above. The Company shall immediately notify the Holders upon the termination of any Shelf Suspension, amend or supplement the prospectus and any issuer free writing prospectus, if necessary, so it does not contain any untrue statement or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and furnish to the Holders such numbers of copies of the prospectus and any issuer free writing prospectus as so amended or supplemented as the Holders may reasonably request. The Company agrees, if necessary, to supplement or make amendments to the Shelf Registration Statement, if required by the registration form used by the Company for the Shelf Registration or by the instructions applicable to such registration form or by the Securities Act or the rules or regulations promulgated thereunder or as may reasonably be requested by the Holders.  Notwithstanding anything in this Agreement to the contrary, the Company shall not be permitted to file a registration statement to register for sale, or to conduct any registered securities offerings (including any “take-downs” off of an effective shelf registration statement) of, any of its securities either for its own account or the account of any security holder or holders during any Shelf Suspension.

 

(e)                                   Underwritten Shelf Takedown .

 

(i)                                      For any offering of Registrable Securities pursuant to the Shelf Registration Statement for which the value of Registrable Securities proposed to be offered is at least three hundred million dollars ($300,000,000), if any Participating Shareholder that is a Qualified Shareholder so elects, such offering shall be in the form of an Underwritten Offering, and the Company shall amend or supplement the Shelf Registration Statement for such purpose. Subject to the immediately preceding sentence, if at any time during which the Shelf Registration Statement is in effect a Participating Shareholder elects to offer Registrable Securities pursuant to the Shelf Registration Statement in the form of an Underwritten Offering, then such Participating Shareholder shall give written notice (which notice may be given by email) to the Company of such intention at least two (2) Business Days prior to the date on which such Underwritten Offering is anticipated to launch, specifying the number of Registrable Securities for which the Participating Shareholder is requesting registration under this Section 3(e)  and the other material terms of such Underwritten Offering to the extent known (such request, an “ Underwritten Shelf Takedown Request ,” and any Underwritten Offering conducted pursuant thereto, an “ Underwritten Shelf Takedown ”), and the Company shall promptly, but in no event later than the Business Day following the receipt of such Underwritten Shelf Takedown Request, give written notice (which notice may be given by email to the email address for each other Holder on file with the Company from time to time) of such Underwritten Shelf Takedown Request (such notice, an “ Underwritten Shelf Takedown Notice ”) to the other Holders and such Underwritten Shelf Takedown Notice shall offer the other Holders the opportunity to register as part of such Underwritten Shelf Takedown such number of Registrable Securities as each such other Holder may request in writing (which request may be made by email to the Company). Subject to Section 3(e)(ii)  and Section 3(e)(iii) , the Company and the Participating Shareholder(s) making the Underwritten Shelf Takedown Request shall cause the underwriter(s) to include as part of the Underwritten Shelf Takedown all Registrable Securities that are requested to be included therein by any of the other Holders within twenty-four (24) hours after the receipt by such other Holders of any such notice, all to the extent necessary to permit the

 

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disposition of the Registrable Securities to be so sold; provided , that all such other Holders requesting to participate in the Underwritten Shelf Takedown must sell their Registrable Securities to the underwriters selected on the same terms and conditions as apply to the Participating Shareholder(s) requesting the Underwritten Shelf Takedown; provided , further , that, if at any time after making an Underwritten Shelf Takedown Request and prior to the launch of the Underwritten Shelf Takedown, the Participating Shareholder(s) requesting the Underwritten Shelf Takedown shall determine for any reason not to proceed with or to delay such Underwritten Shelf Takedown, the Participating Shareholder(s) shall give written notice to the Company of such determination and the Company shall give written notice of the same to each other Holder and, thereupon, (A) in the case of a determination not to proceed, the Company and such Participating Shareholder(s) shall be relieved of their respective obligations to cause the underwriter(s) to include any Registrable Securities of the other Holders as part of such Underwritten Shelf Takedown (but the Company shall not be relieved from its obligation to pay the Registration Expenses in connection therewith), without prejudice, however, to the other registration rights contained herein, and (B) in the case of a determination to delay such Underwritten Shelf Takedown, the Company and such Participating Shareholder(s) shall be relieved of their respective obligations to cause the underwriter(s) to include any Registrable Securities of the other Holders as part of such Underwritten Shelf Takedown for the same period as the Participating Shareholder(s) determine(s) to delay such Underwritten Shelf Takedown.

 

(ii)                                   If the managing underwriter of an Underwritten Shelf Takedown advises the Company or the Participating Shareholder(s) requesting the Underwritten Shelf Takedown that, in its view, the number of Company Shares that the Participating Shareholder(s) and such other Holders intend to include in such registration exceeds the Maximum Offering Size, the Company and the Participating Shareholder(s) making the Underwritten Shelf Takedown Request shall cause the underwriter(s) to include in such Underwritten Shelf Takedown, in the following priority, up to the Maximum Offering Size:

 

(A)        (1) if the Participating Shareholder requesting the Underwritten Shelf Takedown is JAB, first to JAB and all other Holders who requested to include Registrable Securities in such registration pursuant to Section 3(e)(i)  (allocated, if necessary for the offering not to exceed the Maximum Offering Size, pro rata among JAB and such other Holders on the basis of the relative number of Registrable Securities owned by JAB and such other Holders; provided , that any securities thereby allocated to a Holder that exceed such Holder’s request shall be reallocated among the remaining Holders in like manner), or

 

(2) if the Participating Shareholder requesting the Underwritten Shelf Takedown is MDLZ, (x)  first , all Registrable Securities requested to be included in such registration by MDLZ, and (y) second, and only if all of the securities referred to in clause 2(x) have been included, all Registrable Securities requested to be included in such registration by any other Holders pursuant to Section 3(e)(i)  (allocated, if necessary for the offering not to exceed the Maximum Offering Size, pro rata among such Holders on the basis of the relative number of Registrable Securities owned by such Holders; provided , that any securities thereby allocated to a Holder that exceed such Holder’s request shall be reallocated among the remaining Holders in like manner), and

 

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(B)        thereafter, and only if all of the securities referred to in clause (A)(1) or (2), as applicable, have been included, any securities proposed to be registered for the account of the Company any other Persons with such priorities among them as the Participating Shareholder(s) requesting the Underwritten Shelf Takedown shall determine.

 

(iii)                                Each Holder shall be permitted to withdraw all or part of its Registrable Securities from an Underwritten Shelf Takedown at any time prior to 7:00 a.m., New York City time, on the date on which the Underwritten Shelf Takedown is anticipated to launch.

 

(f)                                    Payment of Expenses for Shelf Registrations . The Company shall be liable for and pay all Registration Expenses in connection with any Shelf Registration, regardless of whether such registration is effected.

 

4.                                       Piggyback Registration .

 

(a)                                  Participation . If, following the expiration of the Standstill Period, the Company at any time proposes to sell in an underwritten Public Offering (including, for the avoidance of doubt, a “take-down” pursuant to a prospectus supplement to an effective shelf registration statement) or file a Registration Statement with respect to any offering of its Common Stock for its own account or for the account of any other Persons (other than (i) a Registration Statement under Section 2 or 3 (it being understood that this clause (i) does not limit the rights of Holders to make written requests pursuant to Section 2(a) ), (ii) a Registration Statement on Form S-4 or Form S-8 or any successor form to such forms, (iii) a registration of Common Stock solely relating to an offering and sale to employees or directors of the Company pursuant to any employee share plan or other employee benefit plan arrangement, or (iv) a registration in connection with a direct or indirect acquisition by the Company or one of its Subsidiaries of another Person or a similar business combination transaction, however structured) then, as soon as practicable (but in no event less than ten (10) calendar days prior to the proposed date of the launch of the underwritten Public Offering or the filing of such Registration Statement, as applicable), the Company shall give written notice of such proposed offering or filing to the Holders, and such notice shall offer the Holders the opportunity to register under such Registration Statement or include in such underwritten Public Offering such number of Registrable Securities as each such Holder may request in writing (a “ Piggyback Registration ”). Subject to Section 4(b)  and Section 4(c) , the Company shall include in such Registration Statement or underwritten Public Offering all such Registrable Securities that are requested to be included therein within five (5) calendar days after the receipt by such Holders of any such notice; provided , that if at any time after giving written notice of its intention to sell any Common Stock in an underwritten Public Offering and prior to the launch date, or to register any Common Stock and prior to the effective date of the Registration Statement filed in connection with such registration, the Company shall determine for any reason not to sell or register or to delay such sale or registration, the Company shall give written notice of such determination to each Holder and, thereupon, (A) in the case of a determination not to sell or register, shall be relieved of its obligation to register any Registrable Securities in connection with such sale or registration (but not from its obligation to pay the Registration Expenses in connection therewith), without prejudice, however, to the rights of the Holders to request that such registration be effected as a Demand Registration (subject to the provisions governing

 

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withdrawal set forth in Section 2(b) ) or, if applicable, a Shelf Offering Request and any Underwritten Shelf Takedown related thereto (subject to the provisions governing withdrawal set forth in Section 3(e)(i) ), and (B) in the case of a determination to delay selling or registering, in the absence of a request for a Demand Registration, Shelf Offering Request or Underwritten Shelf Takedown, shall be permitted to delay selling or registering any Registrable Securities, for the same period as the delay in registering such other Common Stock; provided , that if such registration or sale involves an underwritten Public Offering, all such Holders requesting to be included in the Company’s registration or sale must sell their Registrable Securities to the underwriters selected as provided in Section 7(j)  on the same terms and conditions as apply to the Company or the other Person requesting such registration or sale, as applicable, with, in the case of a combined primary and secondary offering, such differences, including any with respect to representations and warranties and indemnification, as may be customary or appropriate in combined primary and secondary offerings, and the Company shall make arrangements with the managing underwriter so that each such Holder may participate in such Underwritten Offering.

 

(b)                                  Priority of Registrations Pursuant to a Piggyback Registration . If a Piggyback Registration involves an underwritten Public Offering (other than any Demand Registration or Underwritten Shelf Takedown, in which case the provisions with respect to priority of inclusion in such offering set forth in Section 2(g)  or Section 3(e)(ii) , respectively, shall apply) and the managing underwriter advises the Board in writing (a copy of which shall be provided to each Holder) that, in its view, the number of Company Shares that the Company and such Holders intend to include in such registration exceeds the Maximum Offering Size, the Company shall include in such registration, in the following priority, up to the Maximum Offering Size:

 

(i)                                      first, so much of the Company Securities proposed to be registered for the account of the Company (or for the account of such other initiating Person) as would not cause the offering to exceed the Maximum Offering Size;

 

(ii)                                   second, and only if all of the securities referred to in clause (i) have been included, all Registrable Securities requested to be included in such registration by any Holders pursuant to this Section 4 (allocated, if necessary for the offering not to exceed the Maximum Offering Size, pro rata among such Holders and such other holders of Registrable Securities on the basis of the relative number of Registrable Securities owned by such Holders and such other holders; provided , that any securities thereby allocated to a Holder that exceed such Holder’s request shall be reallocated among the remaining Holders and other holders in like manner); and

 

(iii)                                third, and only if all of the securities referred to in clauses (i) and (ii) have been included, any securities proposed to be registered for the account of any other Persons with such priorities among them as the Company shall determine.

 

(c)                                   Piggyback Withdrawal . Each Holder shall be permitted to withdraw all or part of its Registrable Securities from a Piggyback Registration at any time prior to the effectiveness of such Registration Statement or at any time prior to 7:00 a.m., New York City time, on the date on which the underwritten Public Offering is anticipated to launch, as the case may be. Subject to Section 16 , no registration effected under this Section 4 shall relieve the Company of its obligations to effect a Demand Registration to the extent required by Section 2 or a Shelf Offering Request or Underwritten Shelf Takedown to the extent required by Section 3 .

 

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(d)                                  Payment of Expenses for Piggyback Registrations . The Company shall pay all Registration Expenses in connection with each Piggyback Registration, regardless of whether such registration is effected.

 

5.                                       Standstill; Lock-up Agreements .

 

(a)                                  Standstill .  During the Standstill Period, each Holder shall not, directly or indirectly, and shall cause its Representatives (to the extent acting on behalf of the Holder) and Group Members directly or indirectly not to, without the prior written consent of, or waiver by, the Company, (i) sell or offer to sell any Company Securities (including any Voting Securities, ) or Derivative Instruments, or direct or indirect rights to acquire any Company Securities (including any Voting Securities) or Derivative Instruments, or any securities or indebtedness convertible or exchangeable for any such securities, (ii) cause to be filed or submitted a registration statement, prospectus or prospectus supplement (or amendment or supplement thereto) with respect to any such registration, or (iii) publicly announce any intention to do any of the foregoing.

 

(b)                                  Lock-up Agreements .

 

(i)                                      To the extent requested by the lead underwriter in connection with each Underwritten Offering, the Company and each Participating Holder shall agree not to effect any public sale or distribution of any Company Securities or other security of the Company (except as part of such Underwritten Offering) during the period beginning on the date that is estimated by the Company, in good faith and provided in writing to such Holder, to be the seventh (7th) calendar day prior to the effective date of the applicable Registration Statement (or the anticipated launch date in the case of a “take-down” off of an already effective Shelf Registration Statement) until the earlier of (i) such time as the Company and the lead managing underwriter shall agree and (ii) sixty (60) calendar days after the effective date of the applicable Registration Statement (or the pricing date in the case of a “take-down” off of an already effective Shelf Registration Statement); provided , that the Company shall cause all directors and executive officers of the Company, and all other Persons with registration rights with respect to the Company’s securities (whether or not pursuant to this Agreement) to enter into agreements similar to those contained in this Section 5(b)(i)  (without regard to this proviso), subject to exceptions for gifts, sales pursuant to pre-existing 105-1 plans and other customary exclusions agreed to by such managing underwriter; provided further , that the lead managing underwriter may extend such period as necessary to comply with applicable FINRA rules.

 

(ii)                                   Notwithstanding the foregoing, the Company may effect a public sale or distribution of securities of the type described above and during the periods described above if such sale or distribution is made pursuant to registrations on Form S-4 or Form S-8 or any successor form to such forms or as part of any registration of securities for offering and sale to employees or directors of the Company pursuant to any employee share plan or other employee benefit plan arrangement. The Company agrees to use its commercially reasonable efforts to obtain from each holder of restricted securities of the Company which securities are the same as or similar to the Registrable Securities being registered, or any restricted securities convertible into or exchangeable or exercisable for any of such securities, an agreement not to effect any

 

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public sale or distribution of such securities during any such period referred to in this Section 5 , except as part of any such registration, if permitted.

 

6.                                       Other Registration Rights . The Company represents and warrants that it is not a party to, or otherwise subject to, any agreement (other than as provided herein) granting registration rights to any other Person with respect to any equity securities of the Company. The Company shall not grant to any Person the right, other than as set forth herein, and except to employees of the Company with respect to registrations on Form S-8, to request the Company to register any Company Securities except such rights as are not more favorable than or inconsistent with the rights granted to the Holders and that do not violate the rights or adversely affect the priorities of the Holders set forth herein.

 

7.                                       Registration Procedures . In connection with any registration pursuant to Section 2 , Section 3 or Section 4 , subject to the provisions of such Sections:

 

(a)                                  Prior to filing a Registration Statement covering Registrable Securities or prospectus or any amendment or supplement thereto, the Company shall furnish to each Participating Shareholder and each underwriter, if any, of the Registrable Securities covered by such Registration Statement copies of such Registration Statement as proposed to be filed, and thereafter the Company shall furnish to such Participating Shareholder and underwriter, if any, without charge such number of copies of such Registration Statement, each amendment and supplement thereto (in each case including all exhibits thereto and documents incorporated by reference therein), the prospectus included in such Registration Statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 or Rule 430A under the Securities Act and such other documents as such Participating Shareholder or underwriter may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Participating Shareholder. Each Participating Shareholder shall have the right to request that the Company modify any information contained in such Registration Statement, amendment and supplement thereto pertaining to such Participating Shareholder and the Company shall use all reasonable efforts to comply with such request; provided , that the Company shall not have any obligation to so modify any information if the Company reasonably expects that so doing would cause the prospectus to contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading.

 

(b)                                  In connection with any filing of any Registration Statement or prospectus or amendment or supplement thereto, the Company shall cause such document (i) to comply in all material respects with the requirements of the Securities Act and the rules and regulations of the SEC thereunder and (ii) with respect to information supplied by or on behalf of the Company for inclusion in the Registration Statement, to not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading.

 

(c)                                   The Company shall promptly notify each Holder of such Registrable Securities and the underwriter(s) and, if requested by such Holder or the underwriter(s), confirm in writing, when a Registration Statement has become effective and when any post-effective amendments and supplements thereto become effective.

 

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(d)                                  The Company shall furnish counsel for each underwriter, if any, and for the Holders of such Registrable Securities with copies of any written comments from the SEC or any state securities authority or any written request by the SEC or any state securities authority for amendments or supplements to a Registration Statement or prospectus or for additional information generally.

 

(e)                                   After the filing of the Registration Statement, the Company shall (i) cause the related prospectus to be supplemented by any required prospectus supplement, and, as so supplemented, to be filed pursuant to Rule 424 under the Securities Act, (ii) comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by such Registration Statement during the applicable period in accordance with the intended methods of disposition by the Participating Shareholders set forth in such Registration Statement or supplement to such prospectus and (iii) promptly notify each Participating Shareholder holding Registrable Securities covered by such Registration Statement of any stop order issued or threatened by the SEC or any state securities commission and use commercially reasonable best efforts to prevent the entry of such stop order or to remove it if entered.

 

(f)                                    The Company shall use all reasonable best efforts to (i) register or qualify the Registrable Securities covered by such Registration Statement under such securities or “blue sky” Laws of such jurisdictions in the United States as any Participating Shareholder holding such Registrable Securities reasonably (in light of such Participating Shareholder’s intended plan of distribution) requests and (ii) cause such Registrable Securities to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company and do any and all other acts and things that may be reasonably necessary or advisable to enable such Participating Shareholder to consummate the disposition of the Registrable Securities owned by such Participating Shareholder, provided , that the Company shall not be required to (A) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 7(f) , (B) subject itself to taxation in any such jurisdiction or (C) consent to general service of process in any such jurisdiction.

 

(g)                                   The Company shall use reasonable best efforts to list such Registrable Securities on the principal securities exchange on which the Company’s common stock is then listed and provide a transfer agent, registrar and CUSIP number for all such Registrable Securities not later than the effective date of such Registration Statement.

 

(h)                                  The Company shall use reasonable best efforts to cooperate with each Holder and the underwriter or managing underwriter, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any restrictive legends; and enable such Registrable Securities to be in such denominations (consistent with the provisions of the governing documents thereof) and registered in such names as each Holder or the underwriter or managing underwriter, if any, may reasonably request at least two (2) Business Days prior to any sale of Registrable Securities.

 

(i)                                      The Company shall immediately notify each Participating Shareholder holding such Registrable Securities covered by such Registration Statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the occurrence

 

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of an event requiring the preparation of a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading and promptly prepare and make available to each such Participating Shareholder and file with the SEC any such supplement or amendment subject to any suspension rights contained herein.

 

(j)                                     (1) The requesting Holder(s) shall have the right to select an underwriter or underwriters in connection with any underwritten Public Offering resulting from the exercise of a Demand Registration or Underwritten Shelf Takedown upon consultation with the Company and (2) the Company shall have the right to select an underwriter or underwriters in connection with any other underwritten Public Offering. In connection with any Public Offering, the Company shall enter into customary agreements (including an underwriting agreement in customary form) and take all other actions as are reasonably required and customary in order to expedite or facilitate the disposition of such Registrable Securities in any such Public Offering, including the engagement of a “qualified independent underwriter” in connection with the qualification of the underwriting arrangements with FINRA.

 

(k)                                  Upon execution of confidentiality agreements in form and substance reasonably satisfactory to the Company, the Company shall make available during regular business hours for inspection by any Participating Shareholder and any underwriter participating in any disposition pursuant to a Registration Statement being filed by the Company pursuant to this Section 7 and any attorney, accountant or other professional retained by any such Participating Shareholder or underwriter (collectively, the “ Inspectors ”), all financial and other records, pertinent corporate documents and properties of the Company (collectively, the “ Records ”) as shall be reasonably necessary or desirable to enable them to exercise their due diligence responsibility, and cause the Company’s officers, directors and employees to supply all information reasonably requested by any Inspectors in connection with such Registration Statement (including by participation in a reasonable number of diligence calls). Records that the Company determines, in good faith, to be confidential and that it notifies the Inspectors are confidential shall not be disclosed by the Inspectors unless (i) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in such Registration Statement or (ii) the release of such Records is required pursuant to applicable Law or regulation or judicial process. Each Participating Shareholder agrees that information obtained by it as a result of such inspections shall be deemed confidential and shall not be used by it or its Affiliates as the basis for any market transactions in the Company Securities unless and until such information is made generally available to the public. Each Participating Shareholder further agrees that, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, it shall give notice to the Company and allow the Company, at its expense, to undertake appropriate action to prevent disclosure of the Records deemed confidential.

 

(l)                                      The Company shall furnish to each Participating Shareholder and to each such underwriter, if any, a signed counterpart, addressed to such Participating Shareholder or underwriter, of (i) an opinion or opinions of counsel to the Company and (ii) a comfort letter or comfort letters from the Company’s independent certified public accountants, each in customary form and covering such matters of the kind customarily covered by opinions or comfort letters, as the case may be, as the managing underwriter therefor reasonably requests.

 

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(m)                              The Company shall take all commercially reasonable actions to ensure that any free-writing prospectus utilized in connection with any Demand Registration, Underwritten Shelf Takedown or other offering off of a Shelf Registration Statement or Piggyback Registration hereunder complies in all material respects with the Securities Act, is filed in accordance with the Securities Act to the extent required thereby, is retained in accordance with the Securities Act to the extent required thereby and, when taken together with the related prospectus, shall not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

 

(n)                                  The Company shall otherwise use all commercially reasonable efforts to comply with all applicable rules and regulations of the SEC, and make available to its security holders, as soon as reasonably practicable, an earnings statement or such other document that shall satisfy the provisions of Section 11(a)  of the Securities Act and Rule 158 thereunder.

 

(o)                                  The Company may require each such Participating Shareholder promptly to furnish in writing to the Company the Notice, Agreement and Questionnaire and such other information regarding the distribution of the Registrable Securities as the Company may from time to time reasonably request and such other information as may be legally required or the Company may deem reasonably advisable in connection with such registration and shall not have any obligation to include a Participating Shareholder on any Registration Statement if the Notice, Agreement and Questionnaire or such other information is not promptly provided; provided , that, prior to excluding such Participating Shareholder on the basis of its failure to provide the Notice, Agreement and Questionnaire or such other information, the Company must furnish in writing a reminder to such Participating Shareholder requesting the Notice, Agreement and Questionnaire and such other information at least three (3) days prior to filing the applicable Registration Statement.

 

(p)                                  Each such Participating Shareholder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 7(i) , such Participating Shareholder shall forthwith discontinue disposition of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities until such Participating Shareholder’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 7(i) , and, if so directed by the Company, such Participating Shareholder shall deliver to the Company all copies, other than any permanent file copies then in such Participating Shareholder’s possession, of the most recent prospectus covering such Registrable Securities at the time of receipt of such notice. If the Company shall give such notice, the Company shall extend the period during which such Registration Statement shall be maintained effective by the number of days during the period from and including the date of the giving of notice pursuant to Section 7(i)  to the date when the Company shall make available to such Participating Shareholder a prospectus supplemented or amended to conform with the requirements of Section 7(i) .

 

(q)                                  The Company shall use its commercially reasonable efforts to list all Registrable Securities covered by such Registration Statement on any securities exchange or quotation system on which any of the Registrable Securities are then listed or traded.

 

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(r)                                     The Company shall have appropriate officers of the Company (i) prepare and make presentations at any “road shows” and before analysts and rating agencies, as the case may be, (ii) otherwise use their commercially reasonable efforts to cooperate as reasonably requested by the underwriters in the offering, marketing or selling of the Registrable Securities, including, by executing customary underwriting agreements and (iii) otherwise use their commercially reasonable efforts to cooperate as reasonably requested by the Holders in the marketing of the Registrable Securities.

 

8.                                       Indemnification by the Company .

 

(a)                                  The Company agrees to indemnify and hold harmless each Participating Shareholder holding Registrable Securities covered by a Registration Statement, each member, trustee, limited or general partner thereof, each member, trustee, limited or general partner of each such member, limited or general partner, each of their respective Affiliates, officers, directors, stockholders, shareholders, employees, advisors and agents, each Person, if any, who controls such Person within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act and each of their Representatives from and against any and all losses, claims, damages, liabilities and expenses (including reasonable expenses of investigation and reasonable attorneys’ fees and expenses) (“ Damages ”) caused by or relating to (i) any untrue statement or alleged untrue statement of a material fact contained in (A) any Registration Statement or prospectus relating to the Registrable Securities (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto), any preliminary prospectus or any “issuer free writing prospectus” (as defined in Rule 433 of the Securities Act) or (B) any application or other document or communication executed by or on behalf of the Company or based upon written information furnished by or on behalf of the Company filed in any jurisdiction in order to qualify any securities covered by such registration under the securities Laws thereof, (ii) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act or any other similar federal or state securities Laws or any rule or regulation promulgated thereunder applicable to the Company and relating to action or inaction required of the Company in connection with any such registration, qualification or compliance, except in all cases insofar as such Damages are caused by or related to any such untrue statement or omission or alleged untrue statement or omission so made based upon or contained in any information furnished in writing to the Company by such Participating Shareholder expressly for use therein or by such Participating Shareholder’s failure to deliver a copy of the prospectus, the issuer free writing prospectus or any amendments or supplements thereto after the Company has furnished such Participating Shareholder with a sufficient number of copies of the same.

 

(b)                                  The Company also agrees to indemnify any underwriters of the Registrable Securities, their officers and directors and each Person who controls such underwriters within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act on substantially the same basis as that of the indemnification of the Participating Shareholders provided in this Section 8 or otherwise on commercially reasonable terms negotiated on an aim’s length basis with such underwriters.

 

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9.                                       Indemnification by Participating Shareholders . Each Participating Shareholder holding Registrable Securities included in any Registration Statement agrees, severally but not jointly, to indemnify and hold harmless the Company, its officers, directors and agents and each Person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the indemnity from the Company contained in Section 8(a)(i)  and Section 8(a)(ii)  to such Participating Shareholder, but only with respect to information furnished in writing by such Participating Shareholder or on such Participating Shareholder’s behalf expressly for use in any Registration Statement or prospectus relating to the Registrable Securities, or any amendment or supplement thereto, any preliminary prospectus or any “issuer free writing prospectus.” Each such Participating Shareholder also agrees to indemnify and hold harmless any underwriters of the Registrable Securities, their officers and directors and each Person who controls such underwriters within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act on substantially the same basis as that of the indemnification of the Company provided in this Section 9 . As a condition to including Registrable Securities in any Registration Statement filed in accordance herewith, the Company may require that it shall have received an undertaking reasonably satisfactory to it from any underwriter to indemnify and hold it harmless to the extent customarily provided by underwriters with respect to similar securities. No Participating Shareholder shall be liable under this Section 9 for any Damages in excess of the gross proceeds realized by such Participating Shareholder in the sale of Registrable Securities of such Participating Shareholder to which such Damages relate.

 

10.                                Conduct of Indemnification Proceedings . If any proceeding (including any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to Section 8 or Section 9 , such Person (an “ Indemnified Party ”) shall promptly notify the Person against whom such indemnity may be sought (the “ Indemnifying Party ”) in writing and the Indemnifying Party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to such Indemnified Party, and shall assume the payment of all fees and expenses; provided , that the failure of any Indemnified Party to so notify the Indemnifying Party shall not relieve the Indemnifying Party of its obligations hereunder except to the extent and only to the extent that the Indemnifying Party is materially prejudiced by such failure to notify. In any such proceeding, any Indemnified Party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (i) the Indemnifying Party and the Indemnified Party shall have mutually agreed in writing to the retention of such counsel, (ii) the Indemnifying Party shall have failed to assume the defense of such claim or to employ counsel reasonably satisfactory to the Indemnified Party, or (iii) in the reasonable judgment of such Indemnified Party representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that, in connection with any proceeding or related proceedings in the same jurisdiction, the Indemnifying Party shall not be liable for the reasonable fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) at any time for all such Indemnified Parties, and that all such fees and expenses shall be reimbursed as they are incurred. In the case of any such separate firm for the Indemnified Parties, such firm shall be designated in writing by the Indemnified Parties. The Indemnifying Party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent, or if there be a final judgment for the plaintiff, the Indemnifying Party shall indemnify and hold harmless such Indemnified Parties from and against any loss or liability

 

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(to the extent stated above) by reason of such settlement or judgment. Without the prior written consent of the Indemnified Party (which consent shall not be unreasonably withheld or delayed), no Indemnifying Party shall effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such Indemnified Party from all liability arising out of such proceeding.

 

11.                                Survival . Subject to a Holder delivering a properly completed (as solely determined by the Company), executed and acknowledged Notice, Agreement and Questionnaire to the Company, Section 8 , Section 9 , Section 10 and Section 12 hereto will remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Party or any officer, director or controlling Person of such Indemnified Party and will survive the transfer of securities.

 

12.                                Contribution .

 

(a)                                  If the indemnification provided for herein is unavailable to the Indemnified Parties in respect of any Damages, then each such Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Damages (i) as between the Company and the Participating Shareholders holding Registrable Securities covered by a Registration Statement on the one hand and the underwriters on the other, in such proportion as is appropriate to reflect the relative benefits received by the Company and such Participating Shareholders on the one hand and the underwriters on the other, from the offering of the Registrable Securities, or if such allocation is not permitted by applicable Law, in such proportion as is appropriate to reflect not only the relative benefits but also the relative fault of the Company and such Participating Shareholders on the one hand and of such underwriters on the other in connection with the statements or omissions that resulted in such Damages, as well as any other relevant equitable considerations, and (ii) as between the Company on the one hand and each Participating Shareholder on the other, in such proportion as is appropriate to reflect the relative fault of the Company and of each Participating Shareholder in connection with such statements or omissions, as well as any other relevant equitable considerations. The relative benefits received by the Company and Participating Shareholders on the one hand and such underwriters on the other shall be deemed to be in the same proportion as the total proceeds from the offering (net of underwriting discounts and commissions but before deducting expenses) received by the Company and Participating Shareholders bear to the total underwriting discounts and commissions received by such underwriters, in each case as set forth in the table on the cover page of the applicable prospectus. The relative fault of the Company and Participating Shareholders on the one hand and of such underwriters on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company and Participating Shareholders or by such underwriters. The relative fault of the Company on the one hand and of each Participating Shareholder on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by such party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

 

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(b)                                  The Company and the Participating Shareholders agree that it would not be just and equitable if contribution pursuant to this Section 12 were determined by pro rata allocation (even if the underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an Indemnified Party as a result of the Damages referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 12 , no Participating Shareholder shall be required to contribute any amount for Damages in excess of the gross proceeds realized by Participating Shareholder in the sale of Registrable Securities of Participating Shareholder to which such Damages relate. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f)  of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. Each Participating Shareholder’s obligation to contribute pursuant to this Section 12 is several in the proportion that the net proceeds of the offering received by Participating Shareholder bears to the total net proceeds of the offering received by all such Participating Shareholders and not joint.

 

13.                                Participation in Public Offering .

 

(a)                                  No Person may participate in any Public Offering hereunder unless such Person (i) agrees to sell such Person’s securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements ( provided , that no Holder of Registrable Securities will be required to sell more than the number of Registrable Securities that such Holder has requested the Company include in any Registration Statement) and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements and the provisions set forth herein in respect of registration rights.

 

(b)                                  Each Person that is participating in any registration hereunder agrees that, upon receipt of any notice from the Company of the occurrence of any event of the kind described in Section 7(i)  above, such Person shall immediately discontinue the disposition of its Registrable Securities pursuant to the Registration Statement until such Person’s receipt of the copies of a supplemented or amended prospectus as contemplated by Section 7(i) . In the event the Company has given any such notice, the applicable time period during which a Registration Statement is to remain effective shall be extended ( provided , that the Company shall not cause any Registration Statement to remain effective beyond the latest date allowed by applicable Law) by the number of days during the period from and including the date of the giving of such notice pursuant to this paragraph to and including the date when each Holder of Registrable Securities covered by such Registration Statement shall have received the copies of the supplemented or amended prospectus contemplated by Section 7(i) .

 

14.                                Compliance with Rule 144 and Rule 144A . At the request of any Holder who proposes to sell securities in compliance with Rule 144 of the Securities Act, the Company shall (i) cooperate, to the extent commercially reasonable, with such Holder, (ii) forthwith furnish to such Holder a written statement of compliance with the filing requirements of the SEC as set forth in Rule 144, as such rule may be amended from time to time, (iii) make available to the public and

 

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such Holders such information, and take such action as is reasonably necessary, to enable the Holders of Registrable Securities to make sales pursuant to Rule 144, and (iv) use its reasonable best efforts to list such Holder’s Company Shares on the NYSE. Unless the Company is subject to Section 13 or 15(d) of the Exchange Act, the Company will provide to the holder of Registrable Securities and to any prospective purchaser of Registrable Securities under Rule 144A of the Securities Act, the information described in Rule 144A(d)(4) of the Securities Act.

 

15.                                Selling Expenses . All Selling Expenses relating to the offer and sale of Registrable Securities registered under the Securities Act pursuant to this Agreement shall be borne and paid by the Holders of such Registrable Securities, in proportion to the number of Registrable Securities included in such registration for each such Holder.

 

16.                                Prohibition on Requests; Holders’ Obligations .

 

(a)                                  No Holder shall, without the Company’s consent, be entitled to deliver a request for a Demand Registration or a Shelf Offering Request or Underwritten Shelf Takedown if less than 90 calendar days have elapsed since (A) the effective date of a prior Registration Statement in connection with a Demand Registration, Shelf Registration or Piggyback Registration, (B) the date of withdrawal by the Participating Shareholders of a Demand Registration or Underwritten Shelf Takedown or (C) the pricing date of any Underwritten Offering effected by the Company; provided , in each case, that such Holder has been provided with an opportunity to participate in the prior offering and either (i) has refused or not promptly accepted such opportunity or (ii) has not been cut back to less than 50% of the Registrable Securities requested to be included by such Holder.

 

(b)                                  No Holder of Registrable Securities shall be entitled to sell any of such Registrable Securities pursuant to this Agreement, unless such Holder has timely furnished the Company with all information required to be disclosed in order to make the information previously furnished to the Company by such Holder not misleading and any other information regarding such Holder and the distribution of such Registrable Securities as the Company may from time to time reasonably request pursuant to Section 7(o) . Any sale of any Registrable Securities by any Holder shall constitute a representation and warranty by such Holder that the information of such Holder furnished in writing by or on behalf of such Holder, including in such Holder’s Notice, Agreement and Questionnaire (all such information, “ Holder Information ”), to the Company does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements in such Holder Information, in the light of the circumstances under which they were made, not misleading. Furthermore, if the Company is required to file a subsequent Registration Statement upon expiration of effectiveness of the Registration Statement naming a Holder, the Company shall be under no obligation to include such Holder as a selling securityholder if such Holder does not timely deliver an updated properly completed (as solely determined by the Company), executed and acknowledged Notice, Agreement and Questionnaire and other information upon request by the Company therefore pursuant to Section 7(o) .

 

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17.                                Corporate Governance .

 

(a)                                  Composition of the Board .

 

(i)                                      Subject to Section 17(a)(iv)  below, two directors of the Board (each, a “ Director ”) shall be individuals designated in writing to the Company by MDLZ (each, a “MDLZ Designee”), which individuals shall at all times be executive officers of Mondelēz International and shall initially be the Chairman and Chief Executive Officer and the Executive Vice President and General Counsel of Mondelēz International.

 

(ii)                                   Upon the resignation, retirement or other removal of any MDLZ Designee, MDLZ shall be entitled, subject to Section 17(a)(iv)  below, promptly to designate a replacement MDLZ Designee to become a Director.

 

(iii)                                Each of the Company and the Holders shall use its reasonable best efforts to give effect to Section 17(a)(i) ; in particular, (A) each Holder shall procure that the directors of the Board nominated by it shall vote in favor of appointing each MDLZ Designee and against the removal of any MDLZ Designee at each relevant meeting of the Board or of any committee of the Board, (B) the Company shall ensure that each MDLZ Designee is proposed to serve as a Director at each annual or special meeting of the Company at which directors are to be elected,  (C) each Holder shall procure that the directors of the Board nominated by it  shall recommend that the Company’s stockholders vote in favor of appointing each MDLZ Designee and against the removal of any MDLZ Designee, (D) each Holder shall vote all the stock that it holds or controls (and shall procure that each of its Affiliates votes all stock that it holds or controls) in favor of appointing each MDLZ Designee as a Director and against the removal of any MDLZ Designee as a Director, and (E) no Holder (other than MDLZ) shall take any action to remove, or oppose the appointment of, a MDLZ Designee as a Director.

 

(iv)                               If MDLZ and its Affiliates beneficially own less than 8% of the Company Shares, then MDLZ shall promptly cause one of such MDLZ Designees to resign and the number of MDLZ Designees permissible hereunder shall be permanently reduced to one.  If MDLZ and its Affiliates beneficially own less than 5% of the Company Shares, then MDLZ shall promptly cause a second MDLZ Designee to resign and the number of MDLZ Designees permissible hereunder shall be permanently reduced to zero.

 

(b)                                  Committees .  For so long as MDLZ is permitted to appoint at least one (1) MDLZ Designee pursuant to Section  17(a) , to the extent permitted by applicable Laws (including any requirements under the Exchange Act or the rules of the New York Stock Exchange or any other applicable securities exchange on which the Common Stock is then listed), each committee of the Board shall include at least one MDLZ Designee.

 

(c)                                   Board Authority Matters .  For so long as MDLZ is permitted to appoint at least one (1) MDLZ Designee pursuant to Section 17(a) , the Company shall not enter into or effectuate any of the following without the prior approval of the Board:

 

(i)                                      any issuance of shares of the Company or securities convertible or exchangeable for such shares, including options or other equity awards exercisable for such shares (other than options or other equity awards granted to officers or directors of the Company that have been authorized by the Board’s Compensation Committee or Special Award Committee),

 

28



 

(ii)                                   the declaration or payment of any dividend or other distribution with regard to any security of the Company,

 

(iii)                                a key transaction having material financial implications for the Company Group (as defined below), including material mergers and acquisitions,

 

(iv)                               the making of a material change in the nature of the Company’s business,

 

(v)                                  the adoption or amendment of any strategic business plan and annual budget,

 

(vi)                               the appointment or removal of the Company’s Auditors (as defined below),

 

(vii)                            the approval of the Company’s quarterly and annual consolidated financial statements,

 

(viii)                         the approval of a material decision relating to a material portion of the Company Group’s workforce (other than any decision that has been authorized by the Board’s Compensation Committee, Special Award Committee or Corporate Governance and Nominating Committee), or

 

(ix)                               the approval of a decision which may have a material implication for the reputation of the Company Group.

 

(d)                                  Certificate of Incorporation and Bylaws to be Consistent .  Each of the Company and each Holder shall use its reasonable best efforts to take or cause to be taken all lawful action necessary or appropriate to ensure that at all times the Certificate of Incorporation and the Bylaws of the Company contain provisions consistent with the terms of this Agreement (including without limitation this Section 17 ) and none of the Certificate of Incorporation or the Bylaws of the Company or any of the corresponding constituent documents of the Company’s Subsidiaries contain any provisions inconsistent therewith or which would in any way nullify or impair the terms of this Agreement or the rights of the Company or any Holder hereunder.

 

(e)                                   Amendment of Related Party Transaction Policy .  For so long as MDLZ is permitted to appoint at least one (1) MDLZ Designee pursuant to Section 17(a) , the Company shall not amend or terminate its related party transaction policy adopted on the Closing Date, unless such amendments are required by applicable Law (including any requirements under the rules of the New York Stock Exchange or any other applicable securities exchange on which the Common Stock is then listed), without the prior written consent of MDLZ.

 

18.                                Information Rights .

 

(a)                                  For so long as Mondelēz International accounts for its investment in the Company under the equity method of accounting (determined in accordance with the generally accepted accounting principles as applicable to Mondelēz International from time to time), the Company agrees that:

 

29



 

(i)                                      The Company shall provide MDLZ (A) within 60 days after the end of each fiscal year, with the consolidated financial results for of the Company’s consolidated group (the “ Company Group ”) for such fiscal year (including a profit and loss account, balance sheet, cash flow and statement of other comprehensive income), (B) promptly upon availability, the annual accounts for each member of the Company Group (except where such accounts or audits are not legally required), (C) within 30 days after the end of each fiscal quarter, unaudited consolidated condensed financial results of the Company Group for such fiscal quarter (including a profit and loss account, balance sheet, cash flow and statement of other comprehensive income) and (D) with such financial information or documents in the possession of the Company and any of its Subsidiaries as MDLZ may reasonably request in writing in connection with the preparation of Mondelēz International’s public earnings releases or other press releases, Current Reports on Form 8-K, Annual Reports to Shareholders, Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and any other proxy, information and registration statements, reports, notices, prospectuses and any other filings made by Mondelēz International with the SEC or any other Governmental Authority, including Mondelēz International’s unaudited quarterly financial statements and annual audited financial statements (collectively, the “ Mondelēz International Public Filings ”);

 

(ii)                                   The Company shall cooperate, and use its reasonable best efforts to cause the Company’s independent certified public accounts (the “ Company’s Auditors ”) to cooperate, with MDLZ to the extent reasonably requested in writing by MDLZ in the preparation of the Mondelēz International Public Filings. The Company agrees to use its reasonable best efforts to provide to MDLZ all information that MDLZ reasonably requests in writing in connection with any Mondelēz International Public Filings that, in the reasonable judgment of MDLZ upon consultation with its legal counsel, is required to be disclosed or incorporated by reference therein under any applicable Law. The Company shall use its reasonable best efforts to provide such information to enable Mondelēz International to prepare and release all Mondelēz International Public Filings on a timely basis. To the extent required in such filing, the Company shall use its reasonable best efforts to cause the Company’s Auditors to consent to any reference to them as experts in any Mondelēz International Public Filings required under applicable Law;

 

(iii)                                The Company and MDLZ shall share with each other (subject to any agreed protocols) aggregate security position information, within 60 days after the end of each fiscal quarter, for use in their respective compliance programs and shall coordinate share ownership reporting for such purpose; and

 

(iv)                               The Company will, within 25 days after the end of each fiscal quarter, make the Company’s controller available for a discussion with MDLZ with regards to updates to the Company’s business and financial results with respect to such fiscal quarter.

 

(b)                                  With respect to any information provided by the Company:

 

(i)                                      Subject to the requirements of law and to except the extent required to be included in Mondelēz International Public Filings, MDLZ shall keep confidential, and shall cause its Representatives (including Mondelēz International) to keep confidential, all information and documents obtained pursuant to this Section 18 unless such information (A) is or becomes publicly available other than as a result of a breach of this Section 18(b)  by it or its

 

30



 

Representatives; (B) was within its possession prior to being furnished to it by or on behalf of the Company, provided that the source of such information was not known by it to be bound by a confidentiality agreement with, or other contractual or legal obligation of confidentiality to, the Company with respect to such information; (C) is or becomes available to it or any of its Representatives on a non-confidential basis from a source other than the Company or any of its Representatives; provided that such source was not known to it to be bound by a confidentiality agreement with, or other contractual or legal obligation of confidentiality to, the Company with respect to such information; or (D) is independently developed by or on its behalf without violating any of its obligations under this Section 18(b) .

 

(ii)                                   In the event MDLZ believes, upon consultation with its legal counsel, that it is legally required to disclose any information or documents contemplated by Section 18(b)(i)  (but not including any information required to be included in Mondelēz International Public Filings), it shall to the extent possible under the circumstances provide reasonable prior written notice to the Company so that the Company may, at its own expense, seek a protective order or otherwise take reasonable steps to protect the confidentiality of such information.

 

(iii)                                The rights of MDLZ and the obligations of the Company pursuant to this Section 18(b)  shall be subject to applicable Laws relating to the exchange of information and other applicable Laws.

 

19.                                Miscellaneous .

 

(a)                                  Remedies; Specific Performance .

 

(i)                                      Except as otherwise provided herein, any and all remedies herein expressly conferred upon a Party shall be deemed cumulative with and not exclusive of any other remedy conferred by this Agreement, or by law or equity upon such Party, and the exercise by a Party of any one remedy shall not preclude the exercise of any other remedy.

 

(ii)                                   The Parties acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached and that monetary damages, even if available, would not be an adequate remedy therefor. It is accordingly agreed that, at any time prior to the termination of this Agreement pursuant to Section 8(j) , the Parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the performance of terms and provisions of this Agreement in any court referred to in Section 8(g) , without proof of actual damages (and each Party waives any requirement for the securing or posting of any bond in connection with such remedy), this being in addition to any other remedy to which they are entitled at law or in equity. The Parties further agree not to assert that a remedy of specific enforcement is unenforceable, invalid, contrary to law or inequitable for any reason, nor to assert that a remedy of monetary damages would provide an adequate remedy for any such breach.

 

(b)                                  Amendments and Waivers . The provisions of this Agreement (other than Sections 17 and 18 ), including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be

 

31



 

given, without the written consent of the Company and each Holder of outstanding Registrable Securities. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders of Registrable Securities whose securities are being sold pursuant to a Shelf Registration Statement and that does not directly or indirectly affect the rights of other Holders of Registrable Securities may be given by each Holder of the Registrable Securities being sold by such Holders pursuant to such Shelf Registration Statement; provided , however , that the provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the immediately preceding sentence. Each Holder of Registrable Securities outstanding at the time of any such amendment, modification, supplement, waiver or consent or thereafter shall be bound by any such amendment, modification, supplement, waiver or consent effected pursuant to this Section 8(b) , whether or not any notice, writing or marking indicating such amendment, modification, supplement, waiver or consent appears on the Registrable Securities or is delivered to such Holder.  The provisions of Sections 17 and 18 (and the provisions of this sentence) may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, without the written consent of the Company and MDLZ.

 

(c)                                   Notices . Any notice, request, instruction or other document to be given hereunder by any Party to the others shall be in writing and delivered personally or sent by registered or certified mail, postage prepaid, by facsimile or electronic mail or overnight courier:

 

(i)                                      if to the Company, to:

 

Keurig Dr Pepper Inc.
5301 Legacy Drive

P.O. Box 869077

Plano, Texas 75024

Attn:                     Chief Financial Officer

 

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

 

Keurig Dr Pepper Inc.

5301 Legacy Drive

P.O. Box 869077

Plano, Texas 75024

Attn:                     General Counsel

 

(ii)                                   if to a Holder, at the most current address given by such Holder to the Company in a Notice, Agreement and Questionnaire or any amendment thereto or, at the Company’s option, pursuant to the Legal Notice System on DTC, or successor system thereto;

 

or to such other address as such Person may have furnished to the other Persons identified in this Section 8(c)  in writing in accordance herewith.

 

(d)                                  Majority of Registrable Securities . For purposes of determining what constitutes Holders of a majority of Registrable Securities, as referred to in this Agreement, a majority shall constitute a majority of the shares of Common Stock that constitute Registrable Securities.

 

32



 

(e)                                   Assignability; Third-Party Rights . Neither this Agreement nor any of the rights, interests or obligations under this Agreement may be assigned or delegated, in whole or in part, by operation of law or otherwise, by any Party, and any such assignment shall be null and void. This Agreement shall be binding upon, and shall be enforceable by and inure to the benefit of, the Parties and their respective successors and assigns. Nothing in this Agreement is intended to or shall confer upon any Person (other than the Parties) any right, benefit or remedy of any nature whatsoever.

 

(f)                                    Counterparts. This Agreement may be executed in counterparts (each of which shall be deemed to be an original but all of which taken together shall constitute one and the same agreement) and shall become effective when one or more counterparts have been signed by each of the Parties and delivered (by electronic communication, facsimile or otherwise ) to the other Parties.

 

(g)                                   Governing Law and Venue; Jurisdiction; WAIVER OF JURY TRIAL .

 

(i)                                      THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES, WHETHER OF THE STATE OF DELAWARE OR ANY OTHER JURISDICTION.  Each of the Parties hereby irrevocably and unconditionally consents and submits, for itself and with respect to its property, to the exclusive jurisdiction of the Court of Chancery of the State of Delaware and the appropriate respective appellate courts therefrom (or only if the Court of Chancery of the State of Delaware declines to accept or does not have jurisdiction over a particular matter, any federal or other state court located in the State of Delaware and the appropriate respective appellate courts therefrom) solely in respect of the interpretation and enforcement of the provisions of this Agreement and of the documents referred to in this Agreement, and hereby waives, and agrees not to assert, as a defense in any action, suit or proceeding for the interpretation or enforcement hereof or of any such document, that it is not subject to jurisdiction thereto or that such action, suit or proceeding may not be brought or is not maintainable in said courts or that the venue thereof may not be appropriate or that this Agreement or any such document may not be enforced in or by such courts, and the Parties hereto irrevocably agree that all claims with respect to such action or proceeding shall be heard and determined in the Court of Chancery of the State of Delaware (or only if the Court of Chancery of the State of Delaware declines to accept or does not have jurisdiction over a particular matter, any federal or other state court located in the State of Delaware).  The Parties hereby consent to and grant any such court jurisdiction over the person of such Parties and, to the extent permitted by Law, over the subject matter of such dispute and agree that mailing of process or other papers in connection with any such action or proceeding in the manner provided in Section 7(c)  or in such other manner as may be permitted by Law shall be valid and sufficient service thereof.

 

(ii)                                   EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY AND ALL RIGHT IT MAY

 

33



 

HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY OR TO THE ACTIONS OF THE PARTIES HERETO IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.  EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8(g) .

 

(h)                                  Severability . Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction.

 

(i)                                      Entire Agreement . This Agreement is intended by the Parties as a final expression of their agreement and is intended to be a complete and exclusive statement of the agreement and understanding of the Parties in respect of the subject matter contained herein and the investor rights granted by the Company with respect to the Registrable Securities. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein, with respect to the investor rights granted by the Company with respect to the Registrable Securities. This Agreement supersedes all prior agreements and undertakings among the Parties with respect to such investor rights. No Party shall have any rights, duties or obligations other than those specifically set forth in this Agreement.

 

(j)                                     Termination . This Agreement and the obligations of the Parties hereunder shall terminate upon such time as there are no Registrable Securities, except for the provisions of Sections 2(d) , 3(f) , 4(d) , 8 , 9 , 10 , 11 , 12 , 15 , 17 , 18 , 19(g)  and this 19(j) , which shall survive such termination.

 

[SIGNATURE PAGE FOLLOWS]

 

34



 

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first written above.

 

 

 

 

COMPANY:

 

 

 

KEURIG DR PEPPER INC.

 

 

 

By:

/s/ Ozan Dokmecioglu

 

 

Name:

Ozan Dokmecioglu

 

 

Title:

Chief Financial Officer

 

[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]

 



 

 

HOLDER:

 

 

 

MAPLE HOLDINGS B.V.

 

 

 

By:

/s/ Leo Burgers

 

 

Name:

Leo Burgers

 

 

Title:

Director

 

 

 

 

 

 

 

By:

/s/ Merel M. Broers

 

 

Name:

Merel M. Broers

 

 

Title:

Director

 

[SIGNATURE PAGE TO INVESTOR RIGHTS AGREEMENT]

 



 

 

HOLDER:

 

 

 

MONDELĒZ INTERNATIONAL HOLDINGS LLC

 

 

 

By:

/s/ Geraldine Llewellyn

 

 

Name:

Geraldine Llewellyn

 

 

Title:

Assistant Secretary

 

[SIGNATURE PAGE TO INVESTOR RIGHTS AGREEMENT]

 

 



 

SCHEDULE A

HOLDERS OF REGISTRABLE SECURITIES

 

Maple Holdings B.V.

Mondelēz International Holdings LLC

 



 

ANNEX A

 

FORM OF SELLING SECURITYHOLDER NOTICE, AGREEMENT AND QUESTIONNAIRE

 

The undersigned (the “ Selling Securityholder ”) beneficial owner of common stock, par value $0.01 (the “ Common Stock ”), of Keurig Dr Pepper Inc. (the “ Company ”) understands that the Company intends to file with the Securities and Exchange Commission (the “ SEC ”) a registration statement on Form S-3 or a prospectus supplement to an existing shelf registration statement (as applicable, the “ Shelf Registration Statement ”) for the registration and resale under Rule 415 of the Securities Act of 1933, as amended (the “ Securities Act ”), of certain Registrable Securities in accordance with the terms of the Investor Rights Agreement, dated on or about July 9, 2018 (the “ Investor Rights Agreement ”), by and among the Company and the persons listed on Schedule A hereto . Each capitalized term not otherwise defined herein has the meaning given to it in the Investor Rights Agreement.

 

In order to sell or otherwise dispose of any Registrable Securities pursuant to the Shelf Registration Statement, the Selling Securityholder must be named as a selling securityholder in the related prospectus and deliver a prospectus to the purchasers of Registrable Securities. To facilitate naming of the Selling Securityholder as a selling securityholder in the Shelf Registration Statement, the Selling Securityholder must complete, execute, acknowledge and deliver this Notice, Agreement and Questionnaire prior to filing of the prospectus supplement to the Shelf Registration Statement.

 

Certain legal consequences arise from being named as Selling Securityholders in the Shelf Registration Statement and the related prospectus. Accordingly, the Selling Securityholder is advised to consult its own legal counsel regarding the consequences of being named or not being named as a Selling Securityholder in the Shelf Registration Statement and the related prospectus.

 

(a)                                  The Selling Securityholder hereby gives notice to the Company of its intention to sell or otherwise dispose of Registrable Securities beneficially owned by it and listed below in Item 3(b) pursuant to the Shelf Registration Statement. The Selling Securityholder, by signing and returning this Notice, Agreement and Questionnaire, understands that it shall be bound by the terms and conditions of this Notice, Agreement and Questionnaire.

 

(b)                                  The Selling Securityholder hereby provides the following information to the Company and represents and warrants that such information is accurate and complete:

 

Questionnaire

 

1.                                       (a)                                  Full Legal Name of Selling Securityholder:

 

 

(b)                                  Full Legal Name of Registered Holder (if not the same as (a) above) through which Registrable Securities listed in Item (3) below are held:

 

 



 

(c)                                   Full Legal Name of DTC Participant (if applicable and if not the same as (b) above) through which Registrable Securities listed in Item (3) below are held:

 

 

2.                                       Address for Notices to Selling Securityholder:

 

 

Telephone:

Fax:

Email address:

Contact Person:

 

3.                                       Beneficial Ownership of Registrable Securities:

 

This Item (3) covers beneficial ownership of the Company’s securities. Please consult Appendix A to this Notice, Agreement and Questionnaire for information as to the meaning of “beneficial ownership.” Except as set forth below in this Item (3), the Selling Securityholder does not beneficially own any Registrable Securities.

 

(a)                                  Number of shares of Registrable Securities beneficially owned:

 

(b)                                  Number of shares of the Registrable Securities which the Selling Securityholder  wishes to be included in the Shelf Registration Statement:

 

4.                                       Beneficial Ownership of other securities of the Company owned by the Selling Securityholder.

 

Except as set forth below in this Item (4), the Selling Securityholder is not the beneficial or registered owner of any securities of the Company other than the Registrable Securities listed above in Item (3).

 

(a)                                  Type and amount of other securities beneficially owned by the Selling Securityholder:

 

 

(b)                                  CUSIP No(s). of other securities beneficially owned by the Selling Securityholder:

 

 

5.                                       Relationship with the Company:

 

(a)                                  Have you or any of your affiliates, officers, directors or principal equity holders (owners of 5% or more of the equity securities of the Selling Securityholder) held

 



 

any position or office or have you had any other material relationship with the Company (or its predecessors or affiliates) within the past three years?

 

o                                     Yes

 

o                                     No

 

(b)                                  If so, please state the nature and duration of your relationship with the Company:

 

 

6.                                       Broker-Dealer Status:

 

(a)                                  Is the Selling Securityholder a broker-dealer registered pursuant to Section 15 of the Exchange Act?

 

o                                     Yes

 

o                                     No

 

Note that the Company shall be required to identify any registered broker-dealer as an underwriter in the prospectus.

 

If so, please answer the remaining questions in this section.

 

If the Selling Securityholder is a registered broker-dealer, please indicate whether the Selling Securityholder acquired its Registrable Securities for investment or acquired them as transaction-based compensation for investment banking or similar services.

 

 

If the Selling Securityholder is a registered broker-dealer and received its Registrable Securities other than as transaction-based compensation, the Company is required to identify you as an underwriter in the Shelf Registration Statement and related prospectus.

 

 

(b)                                  Affiliation with Broker-Dealers:

 

Is the Selling Securityholder an affiliate of a registered broker-dealer? For purposes of this Item 6(b), an “ affiliate ” of a specified person or entity means a person or entity that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the person or entity specified.

 

o                                     Yes

 



 

o                                     No

 

If so, please answer the remaining questions in this section:

 

(i)                                      Please describe the affiliation between the Selling Securityholder and any registered broker-dealers:

 

 

(ii)                                   If the Selling Securityholder, at the time of its acquisition of the Registrable Securities, had any agreements or understandings, directly or indirectly, with any person to distribute the Registrable Securities, please describe such agreements or understandings:

 

 

Note that if the Selling Securityholder is an affiliate of a broker-dealer and at the time of the acquisition of the Registrable Securities had any agreements or understandings, directly or indirectly, to distribute the securities, the Company must identify the Selling Securityholder as an underwriter in the prospectus.

 

7.                                       Nature of Beneficial Holding. The purpose of this question is to identify the ultimate natural person(s) or publicly held entity that exercise(s) sole or shared voting or dispositive power over the Registrable Securities.

 

(a)                                  Is the Selling Securityholder required to file, or is it a wholly-owned subsidiary of a company that is required to file, periodic and other reports (for example, Forms 10-K, 10-Q and 8-K) with the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act?

 

o                                     Yes

 

o                                     No

 

(b)                                  State whether the Selling Securityholder is an investment company, or a subsidiary of an investment company, registered under the Investment Company Act of 1940, as amended:

 

o                                     Yes

 

o                                     No

 

(c)                                   If a subsidiary, please identify the publicly held parent entity:

 

 



 

If you answered “ No ” to questions (a) and (b) above, please identify the controlling person(s) of the Selling Securityholder (the “ Controlling Entity ”). If the Controlling Entity is not a natural person or a publicly held entity, please identify each controlling person(s) of such Controlling Entity. This process should be repeated until you reach natural persons or a publicly held entity that exercise sole or shared voting or dispositive power over the Registrable Securities:

 

 

***PLEASE NOTE THAT THE SEC REQUIRES THAT THESE NATURAL PERSONS BE NAMED IN THE PROSPECTUS***

 

If you need more space for this response, please attach additional sheets of paper. Please be sure to indicate your name and the number of the item being responded to on each such additional sheet of paper, and to sign each such additional sheet of paper before attaching it to this Notice, Agreement and Questionnaire. Please note that you may be asked to answer additional questions depending on your responses to the above questions.

 

8.                                       Plan of Distribution:

 

Except as set forth below, the Selling Securityholder (including its donees or pledgees) intends to distribute the Registrable Securities listed above in Item (3) pursuant to the Shelf Registration Statement only as follows (if at all): such Registrable Securities may be sold from time to time directly by the Selling Securityholder or alternatively through underwriters, broker-dealers or agents. If the Registrable Securities are sold through underwriters, broker-dealers or agents, the Selling Securityholder shall be responsible for underwriting discounts or commissions or agent’s commissions. Such Registrable Securities may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of sale, at varying prices determined at the time of sale or at negotiated prices. Such sales may be effected in transactions (which may involve crosses or block transactions) (i) on any national securities exchange or quotation service on which the Registrable Securities may be listed or quoted at the time of sale, (ii) in the over-the-counter market, (iii) in transactions otherwise than on such exchanges or services or in the over-the-counter market or (iv) through the writing of options. The Selling Securityholder may pledge or grant a security interest in some or all of the Registrable Securities owned by it and, if it defaults in the performance of its secured obligations, the pledgees or secured parties may offer and sell the Registrable Securities from time to time pursuant to the prospectus. The Selling Securityholder also may transfer and donate shares in other circumstances in which certain cases the transferees, donees, pledgees or other successors in interest shall be the selling Securityholder for purposes of the prospectus.

 

State any exceptions here:

 

 



 

Note : In no event may such method(s) of distribution take the form of an underwritten offering of the Registrable Securities without the prior agreement of the Company.

 

(i)                                      The Selling Securityholder acknowledges that it understands its obligation to comply with the provisions of the Exchange Act and the rules thereunder relating to stock manipulation, particularly Regulation M thereunder (or any successor rules or regulations), in connection with any offering of Registrable Securities pursuant to the Shelf Registration Statement. The Selling Securityholder agrees that neither it nor any person acting on its behalf shall engage in any transaction in violation of such provisions.

 

(j)                                     In accordance with the Selling Securityholder’s obligation under the Investor Rights Agreement to provide such information as may be required by law for inclusion in the Shelf Registration Statement, the Selling Securityholder agrees to provide any additional information the Company may reasonably request and to promptly notify the Company of any inaccuracies or changes in the information provided that may occur at any time while the Shelf Registration Statement remains effective. All notices hereunder and pursuant to the Investor Rights Agreement shall be made in writing by hand-delivery, first-class mail, or air courier guaranteeing overnight delivery as follows:

 

To the Company :

 

Keurig Dr Pepper Inc.
5301 Legacy Drive

P.O. Box 869077

Plano, Texas 75024

Attn:    Chief Financial Officer

 

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

 

Keurig Dr Pepper Inc.

5301 Legacy Drive

P.O. Box 869077

Plano, Texas 75024

Attn:    General Counsel

 

(k)                                  In the event any Selling Securityholder transfers all or any portion of the Registrable Securities listed in Item (3) above after the date on which such information is provided to the Company, the Selling Securityholder shall notify the transferee(s) at the time of transfer of its rights and obligations under this Notice, Agreement and Questionnaire and the Investor Rights Agreement.

 

(l)                                      By signing this Notice, Agreement and Questionnaire, the Selling Securityholder consents to the disclosure of the information contained herein in its answers to Items (1) through (8) above and the inclusion of such information in the Shelf Registration Statement, the related prospectus and any state securities or Blue Sky applications. The Selling Securityholder understands that such information shall be relied upon by the Company without independent

 



 

investigation or inquiry in connection with the preparation or amendment of the Shelf Registration Statement, the related prospectus and any state securities or Blue Sky applications.

 

(m)                              Once this Notice, Agreement and Questionnaire is executed by the Selling Securityholder and received and acknowledged by the Company, the terms of this Notice, Agreement and Questionnaire and the representations, warranties and indemnification contained herein shall be binding on, shall inure to the benefit of, and shall be enforceable by the respective successors, heirs, personal representatives and assigns of the Company and the Selling Securityholder with respect to the Registrable Securities beneficially owned by such Selling Securityholder and listed in Item (3) above. This Notice, Agreement and Questionnaire shall be governed by, and construed in accordance with, the laws of the State of Delaware without regard to the conflicts-of-laws provisions thereof.

 

[SIGNATURE PAGE FOLLOWS]

 



 

IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused this Notice, Agreement and Questionnaire to be executed and delivered either in person or by its authorized agent.

 

Dated:

 

 

 

 

Selling Securityholder:

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

Please return the completed and executed Notice, Agreement and Questionnaire to:

 

Keurig Dr Pepper Inc.

5301 Legacy Drive

P.O. Box 869077

Plano, Texas 75024

Attn: Chief Financial Officer

 

The Company hereby acknowledges that it has received and read and understands this Notice, Agreement and Questionnaire and agrees to be bound by the obligations and terms contained herein.

 

 

Keurig Dr Pepper Inc.:

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

[SIGNATURE PAGE TO SELLING SECURITYHOLDER NOTICE, AGREEMENT AND QUESTIONNAIRE]

 



 

Appendix A

 

DEFINITION OF “BENEFICIAL OWNERSHIP”

 

1.                                       A “Beneficial Owner” of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise has or shares:

 

(a) Voting power which includes the power to vote, or to direct the voting of, such security; and/or

 

(b) Investment power which includes the power to dispose, or direct the disposition of, such security.

 

Please note that either voting power or investment power, or both, is sufficient for you to be considered the beneficial owner of shares.

 

2.                                       Any person who, directly or indirectly, creates or uses a trust, proxy, power of attorney, pooling arrangement or any other contract, arrangement or device with the purpose or effect of divesting such person of beneficial ownership of a security or preventing the vesting of such beneficial ownership as part of a plan or scheme to evade the reporting requirements of the federal securities acts shall be deemed to be the beneficial owner of such security.

 

3.                                       Notwithstanding the provisions of paragraph (1), a person is deemed to be the “beneficial owner” of a security if that person has the right to acquire beneficial ownership of such security within 60 days, including but not limited to any right to acquire: (a) through the exercise of any option, warrant or right; (b) through the conversion of a security; (c) pursuant to the power to revoke a trust, discretionary account or similar arrangement; or (d) pursuant to the automatic termination of a trust, discretionary account or similar arrangement; provided , however , any person who acquires a security or power specified in (a), (b) or (c) above, with the purpose or effect of changing or influencing the control of the issuer, or in connection with or as a participant in any transaction having such purpose or effect, immediately upon such acquisition shall be deemed to be the beneficial owner of the securities which may be acquired through the exercise or conversion of such security or power.

 


Exhibit 14.1

OUR CODE OF CONDUCT

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TABLE OF CONTENTS A Message From Robert J. Gamgort, CEO Our Commitments Your Personal Responsibility Compliance Roadmap for Making Ethical Decisions Speaking Up! Reporting Investigation Confidentiality Retaliation/Obstruction Key Questions Our Workplace Diversity DPS Equal Opportunity and Non-Harassment Policy, Human Rights Policy; KGM Respectful Workplace and Anti-Harassment Policy Safety Conflicts of Interest in Working Relationships Our Customers, Suppliers & Competitors Bribery DPS Bribery & Foreign Corrupt Practices Policy; KGM Anti-Corruption Compliance Policy Competition and Antitrust Laws Antitrust Policy Conflicts of Interest Outside Investments and Business Gifts and Entertainment DPS Authority and Expense Policies; KGM Travel & Entertainment Policy 3 4 5 5 5 6 6 6 6 6 7 8 8 Our Investors Accounting and Financial Reporting Use of Company Resources DPS Authority and Expense Policies; KGM Delegation of Authority and Signature 13 13 13 Authorization Policy; KGM Travel & Entertainment Policy; DPS IT User Policy; KGM Acceptable Use of Assets Policy Fraud and Loss Confidential Information Disclosure to Investors Disclosure Policy Insider Trading Insider Trading Policy Political Contributions Political Contributions Policy Prohibited Transactions Related Persons Transaction Policy Our Consumers Product Quality Marketing DPS Marketing to Children Policy Our Communities Environment Ethical Sourcing DPS Ethical Sourcing Code of Conduct, Human Rights Policy; KGM Responsible Sourcing Supplier Guidelines Giving Back 14 14 14 15 15 15 16 16 16 8 9 10 10 17 17 17 10 11 11 11 17 2

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A MESSAGE FROM ROBERT J. GAMGORT President & CEO KDP Team: At Keurig Dr Pepper, we believe in doing business with a purpose. How do we do this? We deeply embed our values, ethics and integrity into all that we do. Instead of choosing what is easy or expedient, we fix our eyes on the future, and we consider the long-term effects of our decisions. Importantly, we consider the impact of our decisions on our Company’s performance, our communities and the environment. Our Code of Conduct explains how to integrate our purpose, mission, and values into your daily decisions. It demonstrates our Company’s commitment to our stakeholders, including you, our employees, to be responsible corporate citizens and good business partners. It is a common reference that we can all learn from and live by in our journey to excellence, by embracing the understanding that our personal decisions can have far-reaching consequences for all of our stakeholders. Together with individual responsibility and good judgment, our Code guides us in making the right decisions about how we work and what we do. Thank you for your dedication to KDP and your commitment to upholding the standards set forth in our Code of Conduct. Join us as we go forth with excellence, to use the power of a thriving, innovative, well-run business to make the world a better place. Best Regards, Bob 3

 


OUR COMMITMENTS Our Code of Conduct outlines the commitments we’ve made to our stakeholders and those with whom we do business and our expectations of our company and personnel to act in a professional, ethical and legal manner in all their dealings. OUR CODE OF CONDUCT OUR WORKPLACE We are committed to creating a positive and diverse workplace that is free from discrimination and harassment. OUR INVESTORS We are committed to the utmost integrity in our accounting and financial reporting and the manner in which we engage with the investment community, while maintaining a steadfast focus on upholding good stewardship of company resources. OUR CUSTOMERS, SUPPLIERS AND COMPETITORS We value and respect our customers, suppliers, competitors and government authorities. In our dealings with them, we always act in an ethical and legal manner while striving to compete and win in our business. OUR CONSUMERS We are committed to ensuring that our products are made to high standards of quality and safety and that they are appropriately marketed to our consumers. OUR COMMUNITIES We are committed to ensuring that our actions leave a positive impact on our hometowns, workforce, shareholders, customers, consumers and natural resources. UNDERLYING OUR CODE IS YOUR ACCOUNTABILITY FOR REPORTING ANY VIOLATIONS OF THE CODE. 4

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YOUR PERSONAL RESPONSIBILITY Our Code is about doing the right thing at all times. AT THE HEART OF EVERY SUCCESSFUL TEAM IS THE BELIEF THAT WE CAN COUNT ON EACH OTHER TO OPERATE IN A RESPONSIBLE MANNER, ACT IN THE BEST INTEREST OF THE TEAM AND MAKE APPROPRIATE DECISIONS FOR OURSELVES AND ON BEHALF OF THE COMPANY. COMPLIANCE Compliance starts with you, and you are responsible for: ROADMAP FOR MAKING ETHICAL DECISIONS We expect you to use good judgment and common sense to comply with the letter and spirit of our Code and our other policies and avoid even the appearance of improper behavior. When an issue is not directly addressed, you should use the Code as a roadmap for making ethical decisions. In all cases, ask yourself: • Understanding and complying with our Code and related policies. Familiarizing yourself with and following the laws and regulations that apply to our business and your job. Acting with the highest standards of ethics and integrity. Reporting violations and misconduct. • • • Failure to comply may lead to disciplinary action, including termination for cause. In places, there are references in this Code to policies of both Dr Pepper Snapple Group (DPS) and Keurig Green Mountain, Inc. (KGM). Until certain systems and processes have been integrated, you should comply with the guidance or policy most appropriately related to your function, physical location or work site. For example, if you are a legacy KGM employee or work in a legacy KGM location, such as Vermont, and both a DPS and a KGM policy are referenced, you should comply with the KGM policy. If you are unsure which policy applies to your situation, please contact your manager or human resources. The board of directors should comply with the DPS policies. • Is this compliant with our policies and/or well within the spirit of our policies? What might the impact of my action be? Could it hurt the company’s reputation or my professional reputation? Would I be comfortable telling my manager about my decision, or seeing my decision reported in the news media? • Thank you for your efforts to ensure Keurig Dr Pepper continues to be recognized by our employees, consumers, customers, vendors and shareholders as an ethical company with great brands and great people. • If there is still any doubt, see Key Questions for whom to ask. 5

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A “GOOD FAITH” REPORT MEANS THAT YOU HAVE PROVIDED ALL OF THE INFORMATION YOU HAVE AND BELIEVE IT TO BE TRUE. WE PROHIBIT RETALIATION AGAINST ANYONE WHO MAKES A REPORT IN GOOD FAITH. SPEAKING UP! We value openness and honesty. REPORTING If you have concerns about any matter or if you are aware of a potential breach of this Code or its related policies, you have a duty to report it. To assist us in investigating, you are encouraged to provide all of the information you are comfortable with providing. Our policy, outlined below, provides a way for you to report anonymously, if you choose, and without concern for retaliation. You may: Write to KDP at either of the following addresses: Keurig Dr Pepper Inc. INVESTIGATION We will review and investigate reports promptly, thoroughly and fairly, taking appropriate action whenever necessary. You are expected to participate in an investigation when asked. Investigations are conducted without regard to a suspected wrongdoer’s length of service, position/title or relationship to the company. If you are not satisfied with our actions taken in response, you may report the matter to the chairman of the audit committee of the board of directors at the company addresses provided. 5301 Legacy Drive Plano, TX 75024 Attn: General Counsel 53 South Avenue Burlington, MA 01803 Attention: General Counsel CONFIDENTIALITY Every reasonable effort will be made to maintain the confidentiality of information reported. An investigation will not be disclosed or discussed other than with those with a legitimate need to know. We reserve the right in our sole discretion to disclose any information obtained during an investigation to any third party, including any federal or state agency. Call either reporting hotline any time 24 hours a day, 365 days a year: Legacy DPS Employee/Facilities: U.S. and Canada: 1.800.349.4248 Mexico: 001.888.243.8076 Legacy KGM Employee/Facilities: 1.800.398.1496 RETALIATION/OBSTRUCTION We will not tolerate retaliation in any form against any person for reports made in good faith. Any retaliation or attempt to deter or obstruct an employee from providing such information or participating in an investigation will be treated as a serious disciplinary offense. Submit on the web at: Legacy DPS Employee/Facilities: https://www.integrity-helpline.com/dps.jsp Legacy KGM Employee/Facilities: www.lighthouse-services.com/keurig You may make such reports anonymously if you choose. 6

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KEY QUESTIONS TO WHOM DOES THE CODE APPLY? Unless otherwise noted, our Code applies to all employees, officers and directors (“you”) of Keurig Dr Pepper Inc. and its subsidiaries (“company” or “we”) in the U.S. and other countries we operate. We also expect our consultants, vendors, contractors and other third parties with whom we do business to abide by the portions of our Code that are applicable to our relationship. Note that in certain cases, the policies may apply to you, your family members and persons with whom you live. WHO DO I ASK IF I HAVE A QUESTION? If you have questions about how to interpret this Code, or whether areas of the Code may be waived in relation to your activities, you may ask through our hotline reporting channels. Please note that compliance responsibility ultimately rests with you. WHO REVIEWS AND APPROVES THE CODE? The board of directors reviews and approves our Code of Conduct. Other policies may be reviewed and approved by the board and/or other senior management. The audit committee of the board of directors and the general counsel’s office monitor compliance with this Code and take appropriate actions to promote accountability and address misconduct. Please note that we reserve the right to amend or modify this Code or other referenced policies at any time. DOES THIS CODE COVER ALL OF MY OBLIGATIONS? In this Code, we provide guidance, but cannot list all activities or behaviors that may be inappropriate. This guidance is not intended to cover all potential situations, and the examples provided here do not limit the generality of the Code or other policies. WHO MUST APPROVE A WAIVER? If circumstances are unclear and you believe that a waiver of any provision of this Code is warranted, you must disclose all relevant facts and make such request through the general counsel’s office. Waivers for employees, other than executive officers and the principal accounting officer or controller, may only be made by the General Counsel. Waivers for executive officers and the principal accounting officer or controller shall only be made by either the audit committee of the board of directors or the board of directors. Waivers for a board member shall be made only by the board of directors. DO OTHER POLICIES APPLY? Yes. Our Code is a starting point for understanding your obligations. Other policies apply, some of which are referenced in this Code. These other related policies may be provided to you or are available to you online. As mentioned previously, when both a DPS and KGM policy are referenced, you must comply with the appropriate policy. 7

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IF YOU ENCOUNTER OR BECOME AWARE OF ANY ACT OF DISCRIMINATION OR HARASSMENT, YOU ARE ACCOUNTABLE FOR REPORTING IT THROUGH YOUR SUPERVISOR, A MEMBER OF THE HUMAN RESOURCES TEAM OR OUR HOTLINE. OUR WORKPLACE We are committed to creating a positive and diverse workplace that is free from discrimination RESPECT & PROMOTE DIVERSITY Just as each of our beverages brings its own flavor to our product portfolio, each KDP employee brings his or her own unique set of experiences, perspectives and backgrounds to our business. When we take action at KDP, we do so without regard to sex, race, color, national origin, ancestry, religion, creed, age, marital status, gender, gender identity or expression, disability, medical condition, covered veteran or military status, sexual orientation, genetic information, or any other status protected under federal, state or local law. Accordingly, unwelcome conduct based on any of these protected characteristics is forbidden. We’re committed to diversity and equal opportunity and prohibit discrimination as well as unwelcome and discriminatory behavior. This includes conduct that creates an intimidating, offensive or hostile environment. This conduct can take many forms, including physical actions, spoken or written comments, and multimedia. Regardless of the form it takes, harassment negatively impacts individual work performance and our workplace as a whole, and will not be tolerated. See the DPS Equal Opportunity and Non-Harassment Policy and Human Rights Policy; or the KGM Respectful Workplace and Anti-Harassment Policy. ENSURE A SAFE WORKPLACE Safety is everyone’s responsibility at KDP. We all are accountable for providing a safe working environment, which means that you should immediately report any unsafe conditions or activities through your supervisor, a member of the human resources team or our hotline. This includes violations of safety laws, local safety rules or security procedures; threats or acts of violence against company property, employees or customers; vandalism; and the presence of weapons or prohibited substances on company premises. 8

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AVOID CONFLICTS OF INTEREST IN WORKING RELATIONSHIPS Given the potential for conflicts of interest and the inherent risks such relationships could pose to effective working relationships, a person may not supervise a family member, and a person must not enter into a romantic or similarly close relationship with any person he or she supervises. Moreover, a family member of an officer or director may not be hired, regardless of position, without approval from both human resources and the general counsel’s office. For these purposes, you are considered “supervising” a person if: • You have supervisory responsibility or effective control over any aspect of his or her job, You audit, review or oversee any aspect of his or her job, or He or she reports to you, directly or indirectly, within our organizational structure. • • A “family member” includes a spouse, parent, child, grandchild, sibling, step-parent/child/grandchild/sibling and in-laws, whether or not living at the same residence, and persons with whom you live. Please notify human resources if you become aware of a potential hiring that may result in a conflict with this provision. If two formerly unrelated employees become family members, or previously were not in a supervisory relationship but due to promotion, transfer, or the like now are, both should disclose the relationship to human resources. 9

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OUR CUSTOMERS, SUPPLIERS & COMPETITORS We value and respect our customers, suppliers, competitors and government authorities. In our dealings with them, we always act in an ethical and legal manner while striving to compete and win in our business. PROHIBIT BRIBERY We conduct our business with integrity and strictly prohibit any sort of bribery, including by any person acting directly or indirectly on our behalf and whether for our domestic or foreign subsidiaries. You should also be mindful of the appearance of impropriety and our policies on gifts and entertainment as explained below in Conflicts of Interest. In any dealing with government officials, additional laws and policies apply. Various national and local laws make it a crime to bribe government officials. In addition, under U.S. law, it is illegal to give anything of value to a foreign official, whether by our own employee or persons acting on our behalf and whether by our domestic or foreign operations. Violations can result in criminal and civil liability for you and the company. Even an offer, promise or authorization of a bribe or a nominal payment or gift may violate law. See the DPS Bribery and Foreign Corrupt Practices Policy or the KGM Anti-Corruption Compliance Policy for further explanation of the substantial legal requirements and our strict rules, including on gifts and entertainment, with which you must comply in dealing with government and foreign officials. COMPLY WITH COMPETITION & ANTITRUST LAWS We strive to compete fairly and are committed to complying with applicable laws, including antitrust laws covering the pricing, promotion, distribution, purchase and sale of our products, as well as our relationships between manufacturers, suppliers, distributors, retailers, customers and competitors. Violations of these laws may result in fines and imprisonment. Some activities may be illegal and should be avoided, such as agreements between competitors to set prices or allocate territories or customers. In order to avoid the appearance of impropriety, you should also generally avoid any discussion of prices, terms, distribution, production, customers or territories with a competitor. Antitrust and competition laws may also restrict the tying of the purchase of one product with another, certain exclusive dealing arrangements, setting of resale prices and other activities. 10

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OUR CUSTOMERS, SUPPLIERS & COMPETITORS (continued) The laws and their application to individual circumstances are complex. Moreover, because some of our bottlers are owned by brand owners, we must be aware of those relationships and ensure that our discussions and any confidential information we share are appropriate. If you have responsibility for the sale or marketing of our products, you should familiarize yourself with these laws and our Antitrust Policy and always consult with the legal department when you have questions. See our Antitrust Policy for further guidance on antitrust laws and additional discussion of improper and proper behavior in dealing with competitors. arise if you take company business opportunities for yourself or direct those opportunities to third parties (unless the company has turned the opportunity down and it clearly does not conflict with the company’s business interests). If you desire to become a director, officer, employee, owner, consultant or enter into any other business relationship with a competitor or any other entity with whom the company conducts business or is seeking to conduct business, then you should consult your supervisor and the general counsel to determine if that relationship constitutes a conflict. However, a conflict of interest would not be created where: You have entered into the relationship with another entity that is doing business with or is seeking to do business with the company at the direction of the board or an executive officer for the benefit of the company. Such relationship could include serving as an advisor to an allied brand or serving on the board of an allied brand. The general counsel determines, after a full disclosure of the facts about the relationship, that it is not a conflict or is immaterial to (a) the company, (b) to the competitor or other entity and (c) to you. AVOID CONFLICTS OF INTEREST We are accountable for ensuring that our personal interests do not impact our ability to make sound business decisions. Conflicts may arise when your personal or family interests may interfere with the company’s in any way or may affect your objectivity and effectiveness, or when you receive improper personal benefits. You may not engage in any activity that creates a conflict of interest, or the appearance of one, between you and the company. Moreover, you may not use our property, position or information for personal gain and you may not compete with us. The following are examples and guidelines: Outside Investments and Business. A conflict of interest may arise as a result of your relationship (including any financial investment or loan) with a competitor or with another entity with whom the company is doing or is seeking to do business or where a relationship interferes with or may interfere with your responsibilities to the company. A conflict of interest may also • Gifts & Entertainment. You may not accept gifts or meals, trips, tickets, events and other forms of entertainment that may appear or tend to influence business decisions, compromise independent judgment or create the impression or expectation (perceived or otherwise) that the giver will be rewarded in some way. You must also be sensitive to our customers’ and suppliers’ own rules on gifts and entertainment. 11

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OUR CUSTOMERS, SUPPLIERS & COMPETITORS (continued) Regardless of the motive or actual influence on independent judgment, you may not accept or provide “significant” gifts or entertainment, whether from or to a customer, supplier or anyone attempting to develop a business relationship with us. Modest gifts and reasonable entertainment are acceptable, but should not create an expectation or appearance of special treatment, and should be appropriate and consistent with our other policies. We expect you to use good judgment and common sense and avoid even the appearance of improper behavior. In all cases, any sort of bribery is strictly prohibited. And, in any dealing with government officials, other strict laws and policies apply as explained above and in the DPS Bribery and Foreign Corrupt Practices Policy; or the KGMAnti-Corruption Compliance Policy. Examples of modest and reasonable gifts and entertainment may include: • • T-shirts, inexpensive pens, mugs, cups, calendars and the like. Gifts of our regular products or promotional items made by sales or marketing to generate goodwill. Event tickets that are generally available to the public, such as local sporting, concert and theatre events. Entertainment that is a part of a company sponsored program, such as a sales incentive or a customer marketing promotion. • • Examples of significant and prohibited gifts and entertainment may include: • • Any gift more than $300 in value. Most “elite” or “premiere” event tickets (such as the Olympics, World Cup, Super Bowl, World Series, Wimbledon, Masters, U.S. Open, PGA Championship, Oscars or Grammys) that are not realistically accessible to the general public or available only at a very high premium over face value. Cash or cash equivalents of any value (such as a pre-loaded debit card or gift certificates). • Q: A: WHAT ARE “SIGNIFICANT” If you have any doubt on the proper course of action regarding gifts and entertainment, obtain the prior approval of your manager. See the DPS Authority and Expense Policies or the KGM Travel & Entertainment Policy for further guidance and requirements regarding proper expenses, approvals and documentation for gifts and entertainment. GIFT S AND ENTERTAINMENT? Significant gifts are those over $300 in value, and significant entertainment is that which is over and above what could be considered reasonable and customary under the circumstances of the relationship. 12

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OUR INVESTORS We are committed to the utmost integrity in our accounting and financial reporting and the manner in which we engage with the investment community, while maintaining a steadfast focus on upholding good stewardship of company resources. ENSURE SOUND ACCOUNTING AND FINANCIAL REPORTING We are committed to providing full, fair, accurate, timely and understandable disclosure of relevant information to investors and the Securities and Exchange Commission. We have clear legal obligations, and it’s important to remember that fraudulent or misleading reporting or improper transactions can result in civil or criminal penalties to the individuals involved and the company. All transactions must be properly approved and accurately reflected on our books and records, accounting and financial reporting. Estimates and guidance on future performance, though subject to many uncertainties and risks, should be based on good faith views at the time made. You should also report any error, deficiency or noncompliance with internal accounting controls. SAFEGUARD OUR COMPANY RESOURCES We should be good stewards of company resources. Your use of company resources, such as spending company dollars and using company assets and IT systems, should always have proper business purposes and required approvals and be backed with proper documentation. The DPS Authority and Expense Policy and KGM Delegation of Authority and Signature Authorization Policy, explain the appropriate types and amounts of spending, contracts, commitments and other actions, as well as who must approve certain actions, the documentation you must have and how you must submit it. Likewise, the DPS IT User Policy; or KGM Acceptable Use of Assets Policy outlines requirements when using company IT resources including information on inappropriate conduct and monitoring of activities. See our DPS Authority and Expense Policies; KGM Travel & Entertainment Policy, KGM Delegation of Authority Policy and our DPS IT User Policy; KGM Acceptable Use of Assets and Information Security Policies for further guidance. 13

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OUR INVESTORS (continued) GUARD AGAINST FRAUD AND LOSS We must work to prevent fraud and loss to our business. The following actions are strictly prohibited: ENSURE FAIR DISCLOSURE TO INVESTORS In particular, we must ensure fair disclosure to investors. Applicable laws govern how and when we disclose material information to the public market, and you must strictly comply with our obligations under law and our Disclosure Policy. Only the CEO, CFO and designated investor relations representatives are authorized to speak with members of the financial community. Internally, material non-public information should be controlled on a need-to-know basis. Formally approved news releases and SEC filings are the primary means disclosing such information. If you believe such information has been inappropriately disclosed, notify the general counsel’s office immediately. See our Disclosure Policy for further information. • Forgery, alteration or falsification of documents, records or transactions, including expense reports. Off-the-record trading, accounts or transactions. Fraud, regardless of amount, including deceptive or manipulative conduct or violation of corporate loyalty, trust or confidence, whether intentional or reckless. Attempt to mislead, deceive, manipulate, misstate or engage in deliberate error, including any false or misleading representation or concealment of a material fact. Reporting of false or misleading information in internal or external financial reports. Theft, destruction, removal or inappropriate use of corporate property or information. Receiving property, loans or gifts from the company, except under company service, award or benefit plans. • • • • • • ONLY THE CEO, CFO AND DESIGNATED INVESTOR RELATIONS REPRESENTATIVES ARE AUTHORIZED TO SPEAK WITH MEMBERS OF THE FINANCIAL COMMUNITY. PROTECT CONFIDENTIAL INFORMATION In your role, you may become aware of confidential information about KDP and our finances, sales, products, employees or third parties with which we do business. Unauthorized or inappropriate disclosure or use of confidential information is prohibited. You may not use such information for personal gain and should take reasonable steps to protect it. You should not provide it to other parties, except for proper business purposes with proper confidentiality agreements. These confidentiality obligations continue after your relationship with us ends. 14

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OUR INVESTORS (continued) OBEY INSIDER TRADING LAWS You must not trade illegally in securities or provide insider tips to others. Insider trading laws are vigorously enforced and penalties can be severe, including million-dollar fines and multi-year jail terms. If you are aware of material nonpublic information relating to KDP or its securities, you may not, directly or indirectly through family or others: • Buy or sell KDP securities or otherwise take an action to take personal advantage, or • Provide the information to any outside party, including family and friends. In addition, certain employees, officers and directors may only trade during designated trading windows, and must never trade when aware of material non-public information or when any other trading blackout is imposed. See our Insider Trading Policy for further guidance, including examples of material non-public information, how transactions under stock plans are treated, additional prohibitions on speculating, short-selling and trading in companies with which we may do business, obligations if you leave the company, and additional trading and reporting obligations for directors and executive officers. COMPLY WITH POLITICAL CONTRIBUTIONS LAWS KDP encourages voluntary personal participation with the political process on your own time and in a manner that is consistent with relevant laws and company guidelines. However, you should speak as an individual and avoid the appearance that you are speaking as our representative, unless authorized. Personal political donations will not be reimbursed, whether through an expense account, bonus or other-wise. You may not use company funds, facilities and other assets (including nominal contributions of our products) to support, directly or indirectly, any political candidates without advance written approval from the government affairs team and the general counsel’s office. All company and political action committee contributions and matters of public policy are managed by our government affairs team. In certain states, KDP may make political contributions within specific limits and reporting requirements, such as through a state beverage association. However, the company may not make direct contributions or gifts of any kind, whether money, property, goods or services, to any political candidate, campaign committee or other organization in connection with any federal election. See the DPS Political Contributions Policy for further information. AVOID PROHIBITED TRANSACTIONS We are accountable for ensuring that our personal interests do not impact our ability to make sound business decisions. In addition to the conflicts of interest issues applicable to all of our personnel in Our Customers, Suppliers and Competitors and Our Workforce sections, our Related Persons Transaction Policy outlines additional prohibitions on loans and other transactions between the company and “related persons,” including directors, officers and material shareholders. 15

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OUR CONSUMERS We are committed to ensuring that our products are made to high standards of quality and safety and that they are appropriately marketed to our consumers. PRODUCE PRODUCTS OUR CONSUMERS CAN TRUST At KDP, quality and safety are integral to our values and we’re committed to producing products that our consumers can trust. To that end, we employ a rigorous quality management process to ensure we produce high-quality products that meet our specifications and comply with regulatory requirements. Our process includes the review and monitoring not only of our own plants and production, but also the quality and safety of our suppliers, co-packers and bottlers. We also actively listen and regularly respond to the quality expectations of our consumers. MARKET OUR PRODUCTS RESPONSIBLY As a leader in hot and cold beverages, our products have been enjoyed by families for generations. We respect our consumers and appreciate the trust they have in our company and our products. To garner that trust, we market and advertise our products in a truthful manner in compliance with all applicable laws. We also market our products in a manner appropriate for the intended audience. Our soft drinks, juices and juice drinks are loved by all ages, and can be consumed as part of a balanced and active lifestyle. We encourage families to make the right choices for themselves by providing clear calorie labels on the front of our products, smaller portion sizes, numerous regular, low and no calorie options and our nutrition and ingredient website. When it comes to children, we believe that parental involvement is the key to choosing how and where we promote our family of products, and have developed a policy to help guide you about how and where we market our brands. See our Marketing to Children Policy for further information. WE EXPECT ALL OF OUR PERSONNEL TO BE ACCOUNTABLE TO APPLY RIGOROUS QUALITY STANDARDS THROUGHOUT OUR SUPPLY CHAIN AND BUSINESS AND REPORT ANY PRODUCT SAFETY CONCERNS IMMEDIATELY. 16

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our commitments to: OUR COMMUNITIES We are committed to having a positive impact on our community and environment. PROTECT THE ENVIRONMENT Our commitment to delivering high quality products goes hand in hand with our efforts to preserve and protect the natural resources we use to create them. We strive to use environmentally sound practices and meet or exceed the requirements of environmental laws, rules and regulations governing our business. We actively pursue operational and product improvements designed to reduce our environmental impact. If you know of a practice that does not comply with environmental laws or our policies, you have a duty to report it. GIVE BACK TO OUR COMMUNITIES We’re passionate about strengthening the places we work and live. Strong families and ecosystems build strong communities. We empower our employees to contribute to their communities and create positive change in the places where we do business around the world. Through sponsorship, product donations, partnerships and volunteerism, we aim to foster healthy, engaged and sustainable communities where our employees, customers and consumers live and work. We have established strong partnerships with nonprofit organizations that share our commitments and encourage participation in these partnerships among our employees. See the DPS sustainability report at dpsgsustainability.com or the KGM sustainability report at http://www.brewabetterworld.com for additional information. SOURCE RESPONSIBLY AND RESPECT HUMAN RIGHTS We recognize that we are part of a global community, and we respect human rights both at home and in our supply chains. In keeping with this commitment, we ensure that our products are grown or manufactured under conditions that comply to our responsible sourcing standards and demonstrate respect for the people who make them. We also respect the rights of people living in communities around our facilities and our supplier communities who could be affected by our operations. See the DPS Ethical Sourcing Code of Conduct and Human Rights Policy or the KGM Responsible Sourcing Supplier Guidelines for further information. 17

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Exhibit 23.1

 

CONSENT OF INDEPENDENT AUDITORS

 

We consent to the incorporation by reference in Registration Statement Nos. 333-153506, 333-153505, and 333-163651 on Form S-8 and Registration Statement Nos. 333-208328, and 333-213477 on Form S-3  of our report  dated March 7, 2018 relating to the consolidated financial statements of Maple Parent Holdings Corp. and its subsidiaries, as of September 30, 2017 (Successor) and September 24, 2016 (Successor), and for the period September 25, 2016 to September 30, 2017 (Successor), the period December 4, 2015 to September 24, 2016 (Successor), and the period September 27, 2015 to March 2, 2016 (Predecessor) (which report expresses an unqualified opinion and includes an emphasis of matter paragraph relating to the acquisition of Keurig Green Mountain, Inc. on March 3, 2016 by Maple Parent Holdings Corp. and its subsidiaries), appearing on Schedule 14A in the definitive proxy of Dr Pepper Snapple Group Inc. dated May 29, 2018 and incorporated by reference in this current report on Form 8-K of Keurig Dr Pepper Inc. dated July 9, 2018.

 

 

/s/ Deloitte & Touche LLP

 

 

 

Boston, MA

 

July 9, 2018

 

 


Exhibit 23.2

 

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 333-208328, and 333-213477) and Form S-8 (Nos. 333-153506, 333-153505, and 333-163651) of Keurig Dr Pepper Inc. of our report dated November 18, 2015 relating to the financial statements of Maple Parent Holdings Corp. (formerly known as Keurig Green Mountain, Inc.) and its subsidiaries (Predecessor), which appears in Dr Pepper Snapple Group, Inc.’s Proxy Statement on Schedule 14A dated May 29, 2018.

 

 

/s/ PricewaterhouseCoopers LLP

 

Boston, Massachusetts

 

July 9, 2018

 

 


Exhibit 99.1

 

GRAPHIC

Contacts:

 

Media:

 

Keurig Dr Pepper

Katie Gilroy

T: 781-418-3345/ katie.gilroy@keurig.com

Chris Barnes

T: 972-673-5539/ chris.barnes@dpsg.com

 

Investors:

Keurig Dr Pepper

Maria Sceppaguercio

T: 781-418-8136/ maria.sceppaguercio@keurig.com

Steve Alexander

T: 972-673-6769/ steve.alexander@dpsg.com

 

Keurig Dr Pepper Announces Successful Completion of the Merger between Keurig Green Mountain and Dr Pepper Snapple Group

 

Combination Creates a New Challenger in the Beverage Industry

 

BURLINGTON, MA, and PLANO, TX (July 9, 2018) — Keurig Dr Pepper (NYSE: KDP) today announced the successful completion of the merger between Keurig Green Mountain and Dr Pepper Snapple Group.

 

The transaction creates the seventh-largest company in the U.S. food and beverage sector and third-largest beverage company in North America, with annual revenues of approximately $11 billion.

 

Commenting on the announcement, Keurig Dr Pepper CEO Bob Gamgort stated, “The combination of these two great companies creates the scale, portfolio and selling and distribution capabilities to compete differently in the beverage industry.   With a large stable of iconic brands and the leading single-serve coffee brewing system on the market, KDP has the ability to satisfy any beverage need or consumption occasion—hot or cold, at work or at play, at home or on the go—and the capability to get our brands to consumers virtually anytime and anywhere they purchase beverages.  I am honored to lead this great team and excited that together we will challenge this industry in a new way.”

 

Shares in Keurig Dr Pepper will begin trading on the New York Stock Exchange tomorrow, July 10, 2018, under the ticker symbol KDP.

 

As previously announced, under the terms of the merger agreement, Dr Pepper Snapple shareholders will receive a special cash dividend of $103.75 per share, payable in U.S. dollars, on July 10, 2018, to shareholders of record on the July 6, 2018 record date, the trading day immediately prior to the closing date.  Through July 9, 2018, the shares have traded with “due-bills,” representing an assignment of the right to receive the special cash dividend.  On July 10, 2018, the shares will begin trading ex-dividend.

 

KDP will maintain dual headquarters in Burlington, MA, and Plano, TX.

 

###

 



 

ABOUT KEURIG DR PEPPER

 

Keurig Dr Pepper (KDP) is a leading coffee and beverage company in North America, with annual revenue in excess of $11 billion. KDP holds leadership positions in soft drinks, specialty coffee and tea, water, juice and juice drinks and mixers, and markets the #1 single serve coffee brewing system in the U.S. The Company maintains an unrivaled distribution system that enables its portfolio of more than 125 owned, licensed and partner brands to be available nearly everywhere people shop and consume beverages. With a wide range of hot and cold beverages that meet virtually any consumer need, KDP key brands include Keurig ® , Dr Pepper ® , Green Mountain Coffee Roasters ® , Canada Dry ® , Snapple ® , Bai ® , Mott’s ®  and The Original Donut Shop ® . The Company employs more than 25,000 employees and operates more than 120 offices, manufacturing plants, warehouses and distribution centers across North America.

 

FORWARD LOOKING STATEMENTS

 

Certain statements contained herein are “forward-looking statements” within the meaning of applicable securities laws and regulations. These forward-looking statements can generally be identified by the use of words such as “anticipate,” “expect,” “believe,” “could,” “estimate,” “feel,” “forecast,” “intend,” “may,” “plan,” “potential,” “project,” “should,” “will,” “would,” and similar words, phrases or expressions and variations or negatives of these words, although not all forward-looking statements contain these identifying words. Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements regarding the estimated or anticipated future results of the combined company following the combination of Keurig Green Mountain, Inc. (“KGM”) and Dr Pepper Snapple Group, Inc. (“DPSG” and such combination, the “transaction”), the anticipated benefits of the transaction, including estimated synergies and cost savings, and other statements that are not historical facts. These statements are based on the current expectations of our management and are not predictions of actual performance.

 

These forward-looking statements are subject to a number of risks and uncertainties regarding the combined company’s business and the combination and actual results may differ materially. These risks and uncertainties include, but are not limited to: (i) the impact the significant additional debt incurred in connection with the transaction may have on our ability to operate our combined business, (ii) risks relating to the integration of the KGM and DPS operations, products and employees into the combined company and assumption of certain potential liabilities of KGM and the possibility that the anticipated synergies and other benefits of the combination, including cost savings, will not be realized or will not be realized within the expected timeframe, (iii) our status as a “controlled company” within the meanings of the New York Stock Exchange, including our reliance on exemptions from certain corporate governance standards and the significantly less influence that our pre- transaction holders now have on our company, and (iv) risks relating to the combined businesses and the industries in which our combined company operates. These risks and uncertainties, as well as other risks and uncertainties, are more fully discussed in our definitive proxy statement filed with the SEC on May 29, 2018, our Current Report on Form 8-K filed with the SEC on July 9, 2018, and our subsequent filings with the SEC. While the lists of risk factors presented here and in our public filings are considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties. Any forward-looking statement made herein speaks only as of the date of this document. We are under no obligation to, and expressly disclaim any obligation to, update or alter any forward-looking statements, whether as a result of new information, subsequent events or otherwise, except as required by applicable laws or regulations.

 


Exhibit 99. 2

 

Certain Information with respect to Maple Parent Holdings Corp.

 

Risk factors

 

Risks relating to the combined company following the merger

 

Combining the two companies may be more difficult, costly or time-consuming than expected and the anticipated benefits and cost savings of the merger may not be realized.

 

Dr Pepper Snapple Group, Inc., a Delaware corporation (“DPSG”), and Keurig Green Mountain, Inc., a Delaware corporation (“Keurig”), have operated and, until the completion of the merger, will continue to operate independently. The success of the merger, including anticipated benefits and cost savings, will depend, in part, on DPSG’s ability to successfully combine and integrate its business with the business of Keurig.

 

The merger will involve the integration of Keurig’s business with DPSG’s existing business, which is a complex, costly and time-consuming process. It is possible that the pendency of the merger and/or the integration process could result in material challenges, including, without limitation:

 

·                   the diversion of management’s attention from ongoing business concerns and performance shortfalls at one or both of the companies as a result of the devotion of management’s attention to the merger;

 

·                   managing a larger combined company;

 

·                   the transition of management of the combined company from DPSG’s executive management team to Keurig’s executive management team, who has limited experience with operating a liquid refreshment beverage (“LRB”) business;

 

·                   maintaining employee morale and retaining key management and other employees;

 

·                   the possibility of faulty assumptions underlying expectations regarding the integration process;

 

·                   retaining existing business and operational relationships and attracting new business and operational relationships;

 

·                   consolidating corporate and administrative infrastructures and eliminating duplicative operations and inconsistencies in standards, controls, procedures and policies;

 

·                   integrating the companies’ financial reporting and internal control systems, including compliance by the combined company with Section 404 of the Sarbanes-Oxley Act of 2002, as amended, and the rules promulgated thereunder by the SEC;

 

·                   coordinating geographically separate organizations;

 

·                   maintaining and protecting the competitive advantages of each of DPSG and Keurig, including the trade secrets, know-how and intellectual property related to its production processes;

 

·                   unanticipated issues in integrating information technology, communications and other systems; and

 

·                   unforeseen expenses or delays associated with the merger.

 

Many of these factors will be outside of the combined company’s control, and any one of them could result in delays, increased costs, decreases in revenues and diversion of management’s time and energy, which could materially affect the combined company’s financial position, results of operations and cash flows.

 



 

If DPSG or Keurig experience difficulties with the integration process, the anticipated benefits of the merger may not be realized fully or at all, or may take longer to realize than expected. These integration matters could have an adverse effect on the combined company for an undetermined period after completion of the merger. In addition, the actual cost savings of the merger could be less than anticipated.

 

The future results of the combined company may be adversely impacted if the combined company does not effectively manage its expanded operations following the completion of the merger.

 

Following the completion of the merger, the size of the combined company’s business will be significantly larger than the current size of either DPSG or Keurig’s respective businesses. The combined company’s ability to successfully manage this expanded business will depend, in part, upon management’s ability to design and implement strategic initiatives that address not only the integration of two discrete companies, but also the increased scale and scope of the combined business with its associated increased costs and complexity. There can be no assurances that the combined company will be successful or that it will realize the expected operating efficiencies, cost savings and other benefits currently anticipated from the merger.

 

The combined company is expected to incur substantial expenses related to the completion of the merger and the integration of DPSG and Keurig.

 

DPSG and Keurig have incurred, and expect to continue to incur, a number of nonrecurring costs associated with the merger and combining the operations of the two companies. The substantial majority of nonrecurring expenses will be comprised of transaction and regulatory costs related to the merger. The combined company also will incur transaction fees and costs related to formulating and implementing integration plans, including facilities and systems consolidation costs and employment-related costs. DPSG and Keurig continue to assess the magnitude of these costs, and additional unanticipated costs may be incurred in the merger and the integration of the two companies’ businesses.

 

The unaudited pro forma combined financial statements incorporated into the Current Report on Form 8-K to which this Exhibit is attached (this “Current Report”) by reference to the Unaudited Pro Forma Combined Financial Information in DPSG’s definitive proxy statement filed with the Securities and Exchange Commission on May 29, 2018 (the “Proxy Statement”)  are presented for illustrative purposes only and the actual financial condition and results of operations of the combined company following the merger may differ materially.

 

The unaudited pro forma combined financial statements incorporated herein by reference to the Proxy Statement are presented for illustrative purposes only; are based on various adjustments, assumptions and preliminary estimates; and may not be an indication of financial condition or results of operations of the combined company following the merger for several reasons. The actual financial condition and results of operations of the combined company following the merger may not be consistent with, or evident from, these unaudited pro forma combined financial statements. In addition, the assumptions used in preparing the unaudited pro forma combined financial statements may not be realized, and other factors may affect the combined company’s financial condition or results of operations following the merger. For example, the allocation of the aggregate merger consideration is based on preliminary fair value estimates and discussions between Maple Parent Holdings Corp., a Delaware corporation and the direct parent company of Keurig Green Mountain, Inc. (“Maple”), and DPSG management, and the final determination of the allocation of the aggregate merger consideration will be based on the actual tangible and intangible assets and the liabilities of DPSG at the effective time of the merger. In addition, the determination of indebtedness in the pro forma presentation is not indicative of the level of indebtedness that will be outstanding at closing, given that the special cash dividend will be financed in part by cash on hand of the combined company at the time of the merger, which does not reflect the effect of additional cash currently expected to be received and retained by DPSG and Keurig during the period from March 31, 2018 to closing of the merger based on their historical trends that will result in reduced total debt at closing of the merger. Furthermore, following the merger, the combined company will conduct a review of accounting policies of DPSG in an effort to determine if differences in accounting policies require restatement or reclassification of results of operations or reclassification of assets or liabilities to conform to Maple’s accounting policies and classifications. As a result of that review, the combined company may identify differences among the accounting policies of the companies that, when conformed, could have a material impact on the unaudited pro forma combined financial statements incorporated herein by reference to the Proxy Statement . Any potential decline in the combined company’s financial condition or results of

 



 

operations may cause significant variations in the pro forma financial statements and the stock price of the combined company following the closing of the merger.

 

Following the merger, the composition of the combined company board of directors will be different than the composition of the current Board.

 

Upon consummation of the merger, the composition of the board of directors of the combined company will be different than the current Board. The Board currently consists of nine directors. Upon the consummation of the merger, the board of directors of the combined company will consist of twelve members:

 

·                   eight directors will be appointed by Maple’s stockholders, with four appointed by JAB Holdings B.V., a Dutch Besloten Vennootschap met beperkte aansprakelijkheid (private company with limited liability) (“JAB”), and two appointed by Mondelēz International Holdings LLC, minority investor of Maple (“Mondelēz LLC”), and the remaining two comprising the current chief executive officer of Keurig and the current Chairman of Maple’s board of directors;

 

·                   two directors will be appointed by DPSG, including its current President and Chief Executive Officer; and

 

·                   two independent directors mutually agreed upon by Maple and DPSG.

 

This new composition of the board of directors of the combined company may affect the future decisions of the combined company.

 

The combined company will meet the requirements to be a “controlled company” within the meaning of the rules of the NYSE and, as a result, will qualify for, and intends to rely on, exemptions from certain corporate governance standards, which limit the presence of independent directors on its board of directors or board committees.

 

Following the merger, approximately 87% of the outstanding shares of the common stock of the combined company will be held by holders of the equity interests of Maple, on a fully diluted basis, and approximately 13% will be held by the holders of the common stock of DPSG, on a fully diluted basis. JAB and JAB affiliates, which do not include Mondelēz LLC, will own approximately 73% of the fully diluted shares of the common stock of the combined company.

 

As a result, the combined company will be a “controlled company” for purposes of Section 303A of the NYSE Listed Company Manual and will be exempt from certain governance requirements otherwise required by the NYSE. Under Section 303A, a company of which more than 50% of the voting power is held by an individual, a group or another company is a “controlled company” and is exempt from certain corporate governance requirements, including requirements that (1) a majority of the board of directors consist of independent directors, (2) compensation of officers be determined or recommended to the board of directors by a majority of its independent directors or by a compensation committee that is composed entirely of independent directors and (3) director nominees be selected or recommended for selection by a majority of the independent directors or by a nominating/corporate governance committee composed solely of independent directors. Following the consummation of the merger, the combined company will continue to have an Audit Committee that is composed entirely of independent directors.

 

As a result, the procedures for approving significant corporate decisions could be determined by directors who have a direct or indirect interest in such decisions, and the combined company’s stockholders will not have the same protections afforded to stockholders of other companies that are required to comply with the independence rules of the NYSE.

 

In connection with the merger, the combined company will incur significant additional indebtedness, which could adversely affect it, including by decreasing its business flexibility and increasing its interest expense.

 

In connection with the merger, the combined company expects to incur significant additional indebtedness

 



 

(including the Notes offered hereby as defined below), which could adversely affect it, including by decreasing its business flexibility and increasing its interest expense. Pursuant to the merger agreement, at closing, the amount of indebtedness of the combined company, after giving effect to the merger and related Transactions, will not exceed $16,900,000 in the aggregate. The combined company’s pro forma indebtedness (excluding capital leases) as of March 31, 2018, after giving effect to the merger, the offering of the Notes and the borrowings under Term Loan Facility (as defined below) and Revolving Credit Facilities (as defined below), would have been approximately $17.1 billion on a consolidated basis, which does not reflect the effect of additional cash currently expected to be received and retained by DPSG and Keurig during the period from March 31, 2018 to closing of the merger based on their historical trends that will result in reduced total debt at closing of the merger. For a more complete description of the financial impact of the combined company’s indebtedness (excluding capital leases), see the unaudited pro forma financial information incorporated herein by reference to the Proxy Statement.

 

The amount of cash required to pay interest on the combined company’s increased indebtedness levels following completion of the merger, and thus the demands on the combined company’s cash resources, is expected to be greater than the amount of cash flows required to service DPSG’s and Maple’s indebtedness prior to the merger. The increased levels of indebtedness following completion of the merger could also reduce funds available for working capital, capital expenditures, acquisitions, the repayment or refinancing of the combined company’s indebtedness (including the Notes offered hereby) as it becomes due and other general corporate purposes and may create competitive disadvantages for the combined company relative to other companies with lower debt levels. If the combined company does not achieve the expected benefits and cost savings from the merger, or if the financial performance of the combined company does not meet current expectations, then its ability to service its indebtedness may be adversely impacted.

 

In addition, in assessing the combined company’s credit strength, credit rating agencies consider the combined company’s capital structure and financial policies as well as the combined company’s results of operations and financial position at the time. If the combined company’s credit ratings were to be downgraded as a result of changes in the combined company’s capital structure, changes in the credit rating agencies’ methodology in assessing the combined company’s credit strength, the credit agencies’ perception of the impact of credit market conditions on the combined company’s current or future results of operations and financial position or for any other reason, the combined company’s cost of borrowing could increase. On May 11, 2018, DPSG’s long-term credit ratings were downgraded by Moody’s Investors Service, Inc. (“Moody’s”), but still maintained an investment grade rating.

 

Moreover, in the future the combined company may be required to raise substantial additional financing to fund working capital, capital expenditures, the repayment or refinancing of its indebtedness, acquisitions or other general corporate requirements. The combined company’s ability to arrange additional financing or refinancing will depend on, among other factors, its financial position and performance, as well as prevailing market conditions and other factors beyond its control. There can be no assurance that the combined company will be able to obtain additional financing or refinancing on terms acceptable to it or at all.

 

The agreements that will govern the indebtedness to be incurred in connection with the merger will contain various covenants that impose restrictions on the combined company and certain of its subsidiaries that may affect its ability to operate its businesses.

 

The agreements that will govern the indebtedness to be incurred in connection with the merger, including the indenture governing the $8.0 billion aggregate principal amount of senior notes issued by a wholly owned subsidiary of Maple and assumed by the combined company upon consummation of the merger (the “Notes”) and the credit agreement governing the $2.7 billion term loan facility (the “Term Loan Facility”) and the $2.4 billion in revolving credit facilities (the  “Revolving Credit Facilities”), will contain various affirmative and negative covenants that may, subject to certain significant exceptions, restrict the ability of the combined company and certain of its subsidiaries to incur debt and the ability of the combined company and certain of its subsidiaries to, among other things, have liens on their property, and/or merge or consolidate with any other person or sell or convey certain of their assets to any one person, and engage in certain sale and leaseback transactions. The ability of the combined company and its subsidiaries to comply with these provisions may be affected by events beyond their control. Failure to comply with these covenants could result in an event of default, which, if not cured or waived, could accelerate its repayment obligations and could result in a default and acceleration under other agreements containing cross-default provisions. Under these circumstances, the combined company might not have sufficient

 



 

funds or other resources to satisfy all of its obligations.

 

Following the consummation of the merger, the combined company will assume certain potential liabilities relating to Keurig.

 

Following the consummation of the merger, the combined company will have assumed certain potential liabilities relating to Keurig, including its outstanding legal proceedings. Keurig does not maintain or has limited remaining insurance coverage for certain of these claims and the combined company may not be able to obtain additional insurance on acceptable terms or at all that will provide adequate protection against potential liabilities related to these claims. In addition, any reserves established by Keurig or the combined company for estimated losses, including with respect to these claims, do not represent an exact calculation of actual liability but instead represent estimates of the probable loss at the time the reserve is established. Due to the inherent uncertainty underlying loss reserve estimates, additional reserves may be established from time to time, and actual losses may be materially higher or lower than the related reserve. Any of the foregoing could have a material adverse effect on the combined company’s business, financial condition or results of operations. For a detailed summary of the legal proceedings relating to Maple and Keurig, see Note 19 to the notes to Maple’s consolidated financial statements incorporated herein by reference to the Proxy Statement.

 

Following the completion of the merger, JAB, through its affiliate, Sponsor, will be the combined company’s largest stockholder, owning approximately 73% of the fully diluted shares of the combined company’s common stock, and will have the ability to exercise significant influence over decisions requiring the combined company stockholders’ approval.

 

The combined company will be controlled by JAB following the completion of the merger, through its affiliate, Sponsor, which will own approximately 73% of the fully diluted shares of the combined company’s common stock. As a result, JAB will have the ability to exercise significant influence over decisions requiring approval of the combined company’s stockholders including the election of directors, amendments to the combined company’s certificate of incorporation and approval of significant corporate transactions, such as a merger or other sale of the combined company or its assets.

 

This concentration of ownership may have the effect of delaying, preventing or deterring a change in control of the combined company and may negatively affect the market price of the combined company’s common stock. Also, JAB and its affiliates are in the business of making investments in companies and may from time to time acquire and hold interests in businesses that compete with the combined company. JAB or its affiliates may also pursue acquisition opportunities that are complementary to the combined company’s business and, as a result, those acquisition opportunities may not be available to the combined company.

 

Risks relating to the combined company’s businesses

 

The combined company will operate in intensely competitive categories.

 

The industries in which the combined company will operate are highly competitive and continue to evolve in response to changing consumer preferences. Competition is generally based upon brand recognition and perception, taste, quality, price, availability, product selection, performance and convenience. Brand recognition and perception may be impacted by the effectiveness of the combined company’s advertising campaigns and marketing programs, as well as the combined company’s use of social media and online ratings and reviews of its products, including Keurig’s appliances. In addition, the combined company’s success in maintaining, extending and expanding its brand images will depend on its ability to adapt to a rapidly changing media environment, including an increasing reliance on social media and online dissemination of advertising campaigns and marketing programs. Within the LRB category, the combined company will compete with multinational corporations with significant financial resources.

 

The combined company’s two largest competitors in the LRB category will be The Coca-Cola Company (“Coca-Cola”) and PepsiCo, Inc. (“PepsiCo”) each of which has a significantly higher share of the U.S. LRB category than DPSG and Keurig have currently, or the combined company will have following the merger. The combined company will also compete in the LRB category against other large companies, including Nestle S.A., Campbell Soup Company and The Kraft Heinz Company (“Kraft Heinz”). These competitors can use their resources

 



 

and scale to rapidly respond to competitive pressures and changes in consumer preferences by introducing new products, changing their route to market, reducing prices or increasing promotional activities. Within the LRB category, the combined company will also compete with a number of smaller brands and a variety of smaller, regional and private label manufacturers, such as Refresco Group. Smaller companies may be more innovative, better able to bring new products to market and better able to quickly exploit and serve niche markets. The combined company will also compete for contract manufacturing with other bottlers and manufacturers. In Canada, Mexico and the Caribbean, the combined company will compete with many of these same international companies as well as a number of regional competitors.

 

Following the merger, within the hot beverage and small appliance categories, the combined company will compete with major international beverage and appliance companies that operate in multiple geographic areas, as well as numerous companies that are primarily local in operation. The combined company’s hot beverages will also compete against local or regional brands as well as against private label brands developed by retailers. The combined company’s ability to gain or maintain share of sales in the countries in which it operates or in various local marketplaces or maintain or enhance its relationships with its partners and customers may be limited as a result of actions by competitors, including as a result of increased consolidation in the food and beverage industry and a significant increase in the number of competitive pod contract manufacturers, several of whom offer what they market as more environmentally friendly pods than the current pods manufactured by Keurig.

 

If the combined company is unable to compete effectively, its sales, volume, growth and overall financial results could be negatively affected.

 

The combined company, may not effectively respond to changing consumer preferences, trends, health concerns and other factors, which could impact its financial results.

 

Consumers’ preferences can change due to a variety of factors, including the age and ethnic demographics of the population, social trends, changes in consumer lifestyles, negative publicity, competitive product and pricing pressures, economic downturn or other factors.

 

For example, in the LRB industry, consumers are increasingly concerned about health and wellness, focusing on the caloric intake associated with regular CSDs, the use of artificial sweeteners in diet CSDs and the use of natural, organic or simple ingredients in LRB products. As such, the demand for CSDs has decreased as consumers have shifted towards NCBs, such as water, ready-to-drink teas and sports drinks.

 

Following the merger, a key component of the combined company’s growth strategy will be developing products to cater to the next wave of coffee preferences, such as the growing cold brew and ready-to-drink coffee-based beverage categories.

 

If the combined company does not effectively anticipate these trends and changing consumer preferences and quickly develop new products or partner with a current or new brand partner in that category in response, its sales could suffer. Developing and launching new products can be risky and expensive. The combined company may not be successful in responding to changing markets and consumer preferences, and some of its competitors may be better able to respond to these changes, either of which could negatively affect the business and financial performance of the combined company.

 

The combined company will depend on a small number of large retailers for a significant portion of its sales.

 

Food and beverage retailers in the U.S. have been consolidating, resulting in large, sophisticated retailers with increased buying power. They are in a better position to resist the combined company’s price increases and demand lower prices and more favorable trade terms. To the extent the combined company provides concessions or trade terms that are favorable to retailers, its respective margins would be reduced. Retailers also have leverage to require the combined company to provide increased marketing and promotional expenditures, including larger, more tailored promotional and product delivery programs. If the combined company and its partners, including bottlers, distributors and licensees, do not successfully provide appropriate marketing, product, packaging, pricing and service to these retailers, its product availability, sales and margins could suffer. In addition, certain retailers make

 



 

up a significant percentage of the combined company’s products’ retail volume, including volume sold by its bottlers and distributors. Some retailers also offer their own private label products that compete with some of the combined company’s brands. Accordingly, the success of the combined company’s business depends in part on its ability to maintain good relationships with key retail customers, including key ecommerce retailers such as Amazon.com, and grocery customers.

 

If the combined company is unable to offer terms that are acceptable to its significant customers, or such customers determine that they need fewer inventories to service consumers, these customers could reduce purchases of the combined company’s products or may increase purchases of products from competitors, which would harm the sales and profitability of the combined company. Furthermore, the loss of sales from a major retailer could have a material adverse effect on the business and financial performance of the combined company.

 

Product safety and quality concerns could negatively affect the business of the combined company following the merger.

 

The success of the business of the combined company following the merger will depend in part on its ability to maintain consumer confidence in the safety and quality of all of its products. The combined company will have various quality, environmental, health and safety standards. However, its products may not meet these standards. A failure or perceived failure to meet the combined company’s quality or safety standards or allegations of mislabeling, whether actual or perceived could occur in its operations or those of its bottlers, manufacturers, distributors or suppliers. This could result in time-consuming and expensive production interruptions, recalls, market withdrawals, product liability claims and negative publicity. Moreover, negative publicity also could be generated from false, unfounded or nominal liability claims or limited recalls.

 

As a combined company, these issues extend not only to DPSG’s and Keurig’s beverage products but also to Keurig brewing systems. The terms of Keurig’s warranty coverage vary by product and channel. In addition, such issues could result in the destruction of product inventory, lost sales due to the unavailability of product for a period of time and higher-than-anticipated rates of warranty returns and other returns of goods.

 

Any or all of these events may lead to a loss of consumer confidence and trust, could damage the goodwill associated with the combined company’s brands and may cause consumers to choose other products and could negatively affect the business and financial performance of the combined company.

 

Costs and supply for commodities, such as raw materials and energy, may change substantially and shortages may occur.

 

Price increases for the combined company’s raw materials could exert pressure on its costs and the combined company may not be able to effectively hedge or pass along any such increases to its customers or consumers. Furthermore, any price increases passed along to the combined company’s customers or consumers could reduce demand for its products. Such increases could negatively affect the business and financial performance of the combined company. Furthermore, price decreases in commodities that the combined company has effectively hedged could also increase its cost of goods sold for mark-to-market changes in the derivative instruments.

 

The principal raw materials the combined company will use are aluminum cans and ends, glass bottles, polyethylene terephthalate (“PET”) bottles and caps, paperboard packaging, sweeteners, juice, fruit, water and other ingredients. The raw materials are sourced from industries characterized by a limited supply base and their cost can fluctuate substantially. Under many of DPSG’s and Keurig’s supply arrangements, the price they pay for raw materials fluctuates along with certain changes in underlying commodities costs, such as aluminum in the case of cans, natural gas in the case of glass bottles, resin in the case of PET bottles and caps, corn in the case of sweeteners and pulp in the case of paperboard packaging.

 

The combined company’s principal raw materials will also include coffee beans and pod raw materials, including cups, filter paper and other ingredients, used in the manufacturing of pods. Keurig purchases, roasts and sells high-quality whole bean Arabica coffee and related coffee products. The Arabica coffee of the quality Keurig seeks tends to trade on a negotiated basis at a premium above the “C” price of coffee. This premium depends upon

 



 

the supply and demand at the time of purchase, and the amount of the premium can vary significantly. Increases in the “C” coffee commodity price do increase the price of high-quality Arabica coffee and also impact Keurig’s ability to enter into fixed-price purchase commitments. Keurig frequently enters into supply contracts whereby the quality, quantity, delivery period and other negotiated terms are agreed upon, but the date, and therefore price, at which the base “C” coffee commodity price component will be fixed has not yet been established. These are known as price-to-be-fixed contracts. The supply and price of coffee Keurig purchases can also be affected by multiple factors in the producing countries, including weather, natural disasters, crop disease (such as coffee rust), general increase in farm inputs and costs of production, inventory levels and political and economic conditions, as well as the actions of certain organizations and associations that have historically attempted to influence prices of green coffee through agreements establishing export quotas or by restricting coffee supplies. Speculative trading in coffee commodities can also influence coffee prices. If the combined company is unable to purchase sufficient quantities of green coffee due to any of the factors described herein or a worldwide or regional shortage, the combined company may not be able to fulfill the demand for its coffee, which could have an adverse impact on the combined company’s business and financial results.

 

Keurig also has a limited number of suppliers for certain strategic raw materials critical for the manufacture of pods and the processing of certain key ingredients in its pods, particularly for cups and filter paper. In addition, in order to ensure a continuous supply of high-quality raw materials some of Keurig’s inventory purchase obligations include long-term purchase commitments for certain strategic raw materials critical for the manufacture of pods and appliances. The timing of these may not always coincide with the period in which Keurig needs the supplies to fulfill customer demand. This could lead to higher and more variable inventory levels and/or higher raw material costs for the combined company.

 

If the combined company’s suppliers are unable or unwilling to meet the combined company’s requirements, the combined company could suffer shortages or substantial cost increases. Changing suppliers can require long lead times. The failure of the combined company’s suppliers to meet its needs could occur for many reasons, including fires, natural disasters, weather, manufacturing problems, disease, crop failure, strikes, transportation interruption, government regulation, political instability, cybersecurity attacks and terrorism. A failure of supply could also occur due to suppliers’ financial difficulties, including bankruptcy. Some of these risks may be more acute where the supplier or its plant is located in riskier or less-developed countries or regions. Any significant interruption to supply or cost increase could substantially harm the combined company’s business and financial performance.

 

In addition, the combined company will use a significant amount of energy in its businesses, and therefore may be significantly impacted by changes in fuel costs due to the large truck fleet the combined company operates in its distribution businesses and its use of third-party carriers. Additionally, conversion of raw materials into its products for sale uses electricity and natural gas.

 

If the combined company does not successfully manage its investments in new business strategies or integrate and manage its acquired businesses or brands, its operating results may adversely be affected.

 

The combined company expects to acquire, businesses or brands to expand its product portfolio and distribution rights and may invest in new business strategies and/or joint ventures. In evaluating such endeavors, the combined company will be required to make difficult judgments regarding the value of business strategies, opportunities, technologies and other assets, and the risks and cost of potential liabilities. Furthermore, the combined company may incur unforeseen liabilities and obligations in connection with any of its completed acquisitions and any future acquisitions, including in connection with the integration or management of the acquired businesses or brands and may encounter unexpected difficulties and costs in integrating them into the combined company’s operating and internal control structures. The combined company may also experience delays in extending its respective internal control over financial reporting to newly acquired businesses, which may increase the risk of failure to prevent misstatements in its financial records and in its consolidated financial statements. Additionally, new ventures and investments are inherently risky and may not be successful, and the combined company may face challenges in achieving strategic objectives and other benefits expected from such investments or ventures. Any acquisitions, investments or ventures may also result in the diversion of management attention and resources from other initiatives and operations. The combined company’s financial performance will depend in large part on how well it can manage and improve the performance of acquired businesses or brands and the success of its other

 



 

investments and ventures. The combined company may not achieve its strategic and financial objectives for such transactions. If the combined company is unable to achieve such objectives, its consolidated results could be negatively affected.

 

The combined company could lose key personnel or may be unable to recruit qualified personnel.

 

The combined company’s future success depends upon the continued contributions of senior management and other key personnel and the ability to retain and motivate them. If the combined company is unable to retain and motivate the senior management team and other key personnel sufficiently to support the projected growth and initiatives of the combined business, its business and financial performance may be adversely affected.

 

The combined company will continue to depend on third-party bottling and distribution companies for a significant portion of its business.

 

Net sales from DPSG and Keurig beverage concentrates segment represent sales of beverage concentrates to third-party bottling companies that DPSG and Keurig do not own. The beverage concentrates segment’s operations generate a significant portion of DPSG’s and Keurig’s overall segment operating profit. Some of these bottlers, such as PepsiCo, are also the combined company’s competitors, or also bottle and distribute a competitor’s products, such as PepsiCo and Coca-Cola affiliated bottlers. The majority of these bottlers’ business comes from selling either their own products or the combined company’s competitors’ products. In addition, some of the products DPSG and Keurig manufacture are distributed by third parties. As independent companies, these bottlers and distributors make their own business decisions. They may have the right to determine whether, and to what extent, they produce and distribute the combined company’s products, the combined company’s competitors’ products and their own products. They may devote more resources to other products or take other actions detrimental to the combined company’s brands. In most cases, they are able to terminate their bottling and distribution arrangements with DPSG and Keurig without cause. The combined company may need to increase support for its brands in their territories and may not be able to pass price increases through to them. Their financial condition could also be adversely affected by conditions beyond their control, and their business could suffer as a result. Deteriorating economic conditions could negatively impact the financial viability of third-party bottlers.

 

The combined company will continue to rely on the performance of a limited number of suppliers, manufacturers and order fulfilment companies.

 

A small number of companies manufacture the vast majority of Keurig’s brewing systems, with a majority of the brewing systems it sells being procured from one third-party brewing system manufacturer. If these manufacturers are not able to scale their manufacturing operations to match increasing consumer demand for Keurig’s brewing systems at competitive costs, the combined company’s overall results will be negatively affected. In addition, Keurig relies on a limited number of key suppliers and distribution and fulfilment partners for material aspects of its business. As a result, the combined company may have limited negotiation leverage with regards to these suppliers, which could negatively affect the business and financial performance of the business of the combined company following the merger.

 

Substantial disruption to production at the combined company’s manufacturing and distribution facilities could occur.

 

A disruption in production at DPSG’s beverage concentrates manufacturing facility, which manufactures almost all of DPSG’s concentrates, or at Keurig’s facilities, could have a material adverse effect on the business of the combined company. In addition, a disruption could occur at any of the combined company’s other facilities or those of the combined company’s suppliers, bottlers, contract manufacturers or distributors. The disruption could occur for many reasons, including fire, natural disasters, weather, water scarcity, manufacturing problems, disease, strikes, transportation or supply interruption, contractual dispute, government regulation, cybersecurity attacks or terrorism. Moreover, if demand increases more than the combined company forecasts, it will need to either expand its capabilities internally or acquire additional capacity. Alternative facilities with sufficient capacity or capabilities may not be available, may cost substantially more than existing facilities or may take a significant time to start production, each of which could negatively affect the business and financial performance of the business of the combined company.

 



 

Fluctuations in the combined company’s effective tax rate may result in volatility in the combined company’s operating results.

 

The combined company will be subject to income taxes and non-income-based taxes in many U.S. and certain foreign jurisdictions. Income tax expense includes a provision for uncertain tax positions. At any one time, many tax years are subject to audit by various taxing jurisdictions. As these audits and negotiations progress, events may occur that change the combined company’s expectation about how the audit will ultimately be resolved. As a result, there could be ongoing variability in the combined company’s quarterly and/or annual tax rates as events occur that cause a change in the combined company’s provision for uncertain tax positions. In addition, the combined company’s effective tax rate in any given financial statement period may be significantly impacted by changes in the mix and level of earnings or by changes to existing accounting rules, tax regulations or interpretations of existing law. In addition, tax legislation may be enacted in the future, domestically or abroad, that impacts the combined company’s effective tax rate. Among other things, a number of countries are considering changes to their tax laws applicable to multinational corporate groups, such as the recently enacted U.S. tax reform legislation commonly referred to as the Tax Cuts and Jobs Act of 2017 (the “TCJA”). Some foreign governments may enact tax laws in response to the TCJA that could result in further changes to global taxation and materially affect the combined company’s financial position and operating results. Moreover, many of the new provisions of the TCJA will need to be implemented through U.S. Department of Treasury regulations and other guidance that could impact the interpretation and effect of these provisions. Changes in tax laws, regulations, related interpretations, and tax accounting standards in the U.S. and various foreign jurisdictions in which the combined company will operate may adversely affect its financial results.

 

U.S. and international laws and regulations could adversely affect the combined company’s businesses.

 

The combined company’s products will be subject to a variety of federal, state and local laws and regulations in the U.S., Canada, Mexico and other countries in which the combined company will do business. These laws and regulations apply to many aspects of the combined company’s businesses including the manufacture, safety, sourcing, labeling, storing, transportation, marketing, advertising, distribution and sale of its products. Other laws and regulations that may impact the combined company’s businesses relate to the environment, relations with distributors and retailers, employment, privacy, health and trade practices. The combined company’s expanding international business will also expose its business to economic factors, regulatory requirements, increasing competition and other risks associated with doing business in foreign countries. The combined company’s international businesses will be also subject to U.S. laws, regulations and policies, including anti-corruption and export laws and regulations.

 

Violations of these laws or regulations in the manufacture, safety, sourcing, labeling, storing, transportation, advertising, distribution and sale of the combined company’s products could damage the combined company’s reputation and/or result in criminal, civil or administrative actions with substantial financial penalties and operational limitations. In addition, any significant change in such laws or regulations or their interpretation, or the introduction of higher standards or more stringent laws or regulations, could result in increased compliance costs or capital expenditures or significant challenges to the combined company’s ability to continue to produce and sell products that generate a significant portion of the combined company’s sales and profits. For example, changes in recycling and bottle deposit laws or special taxes on soft drinks or ingredients could increase the combined company’s costs. In addition, changes in legislation imposing tariffs on or restricting the importation of the combined company’s products or raw materials required to make the combined company’s products, restricting the sale of pods, requiring compostability of pods, limiting the ability of consumers to put pods into municipal waste or recycling streams or requiring manufacturers of pods to pay so-called responsible producer or other fees to local or other governmental entities in connection with the collection, recycling or disposition of pods could increase costs for the combined company or, at least for some period of time, cut off a significant source of sales and profits of the combined company following the merger. Regulatory focus on the health, safety and marketing of food products is increasing. Certain federal or state regulations or laws affecting the labeling of the combined company’s products, such as California’s “Prop 65,” which requires warnings on any product with substances that the state lists as potentially causing cancer or birth defects, are or could become applicable to the combined company’s products.

 



 

Fluctuations in foreign currency exchange rates in Mexico and Canada may adversely affect the combined company’s operating results.

 

While the combined company’s operations will be predominately in the U.S., the combined company will be exposed to foreign currency exchange rate risk with respect to its sales, expenses, profits, assets and liabilities denominated in the Mexican peso, the Canadian dollar as well as other foreign currencies in which the combined company transacts business. The combined company may continue to hedge a small portion of its exposure to foreign currency fluctuations by utilizing derivative instruments for certain transactions. However, the combined company will not be protected against most foreign currency fluctuations.

 

As a result, the financial performance of the combined company may be affected by changes in foreign currency exchange rates. Moreover, any favorable or unfavorable impacts to gross profit, gross margin and income from operations from fluctuations in foreign currency exchange rates are likely to be inconsistent year over year.

 

Following the merger, the combined company will continue to be exposed to foreign currency exchange rate risk that it may not be able to manage through derivative instruments and it may incur material losses from such transactions utilizing derivative instruments.

 

The combined company will continue to depend on key information systems and third-party service providers.

 

The combined company will continue to depend on key information systems to accurately and efficiently transact its businesses, provide information to management and prepare financial reports. The combined company will rely on third-party providers for a number of key information systems and business processing services, including hosting, collecting, storing and transmitting its primary data center and processing various benefit-related accounting and transactional services. The combined company’s information systems will contain proprietary and other confidential information related to the combined company’s businesses. These systems and services are vulnerable to interruptions or other failures resulting from, among other things, natural disasters, terrorist attacks, software, equipment or telecommunications failures, processing errors, computer viruses, other security issues or supplier defaults. Security, backup and disaster recovery measures may not be adequate or implemented properly to avoid such disruptions or failures. Any disruption or failure of these systems or services could cause substantial errors, processing inefficiencies, security breaches, inability to use the systems or process transactions, loss of customers or other business disruptions, all of which could negatively affect the combined company’s business and financial performance.

 

In addition, because Maple accepts debit and credit cards for payment, Maple is subject to the Payment Card Industry Data Security Standard (the “PCI Standard”), issued by the Payment Card Industry Security Standards Council. The PCI Standard contains compliance guidelines with regard to Maple’s security surrounding the physical and electronic storage, processing and transmission of cardholder data. Maple is not fully compliant with the PCI Standard and there can be no assurance that in the future Maple will be able to operate its facilities and its customer service and sales operations in accordance with PCI or other industry recommended or contractually required practices. Maple is in the process to be in compliance with the PCI Standard, however, complying with the PCI Standard and implementing related procedures, technology and information security measures requires significant resources and ongoing attention. Costs and potential problems and interruptions associated with the implementation of new or upgraded systems and technology such as those necessary to achieve compliance with the PCI Standard or with maintenance or adequate support of existing systems could also disrupt or reduce the efficiency of Maple’s operations. Even if Maple is compliant with PCI Standard, Maple still may not be able to prevent security breaches. Any material interruptions or failures in Maple’s payment-related systems could negatively affect the combined company’s business and financial performance.

 

In addition, some of the combined company’s commercial partners may receive or store information provided by the combined company or its users through their websites, including information entrusted to them by customers. If it or these third-party commercial partners fail to adopt or adhere to adequate information security practices, or fail to comply with their respective online policies, or in the event of a breach of the combined company’s networks, its users’ data and customer information may be improperly accessed, used or disclosed.

 

As cybersecurity attacks continue to evolve and increase, the combined company’s information systems

 



 

could also be penetrated or compromised by internal and external parties intent on extracting confidential information, disrupting business processes or corrupting information. These risks could arise from external parties or from acts or omissions of internal or service provider personnel. Such unauthorized access could disrupt the combined company’s business and could result in the loss of assets, litigation, regulatory actions or investigations, remediation costs, damage to the combined company’s reputation and failure to retain or attract customers following such an event, which could adversely affect the combined company’s business.

 

The combined company’s intellectual property rights could be infringed or the combined company could infringe the intellectual property rights of others, and adverse events regarding licensed intellectual property, including termination of distribution rights, could harm the combined company’s business.

 

The combined company will possess intellectual property that is important to the combined company’s business. This intellectual property includes ingredient formulas, trademarks, copyrights, patents, business processes and other trade secrets. The combined company and third parties, including competitors, could come into conflict over intellectual property rights. Litigation could disrupt the combined company’s business, divert management attention and cost a substantial amount to protect the combined company’s rights or defend against claims. The combined company cannot be certain that the steps it takes to protect its rights will be sufficient or that others will not infringe or misappropriate its rights. If the combined company is unable to protect its intellectual property rights, the combined company’s brands, products and business could be harmed.

 

The combined company will continue to license various trademarks from third parties and license their trademarks to third parties. In some countries, third parties own a particular trademark or other intellectual property that the combined company will own in the U.S., Canada or Mexico. For example, the Dr Pepper trademark and formula is owned by Coca-Cola outside North America. Adverse events affecting those third parties or their products could negatively impact the combined company’s brands.

 

In some cases, the combined company will license rights to distribute third-party products. The licensor may be able to terminate the license arrangement upon an agreed period of notice, in some cases without payment to the combined company of any termination fee. The termination of any material license arrangement could adversely affect the combined company’s business and financial performance.

 

Litigation or legal proceedings could expose the combined company to significant liabilities and damage the combined company’s reputation.

 

The combined company will be party to various litigation claims and legal proceedings that may include employment, tort, real estate, antitrust, environmental, intellectual property, commercial, securities, false advertising, product labeling, consumer protection and other claims. From time to time the combined company may be a defendant in class action litigation, including litigation regarding employment practices, product labeling, including under California’s “Proposition 65,” public statements and disclosures under securities laws, antitrust, advertising, consumer protection and wage and hour laws. Plaintiffs in class action litigation may seek to recover amounts that are large and may be indeterminable for some period of time. In connection with the Transactions, purported DPSG stockholders have also filed five lawsuits against DPSG and each member of the Board in federal court and one putative class action lawsuit in the Delaware Court seeking to enjoin the merger and other relief. The combined company will evaluate litigation claims and legal proceedings to assess the likelihood of unfavorable outcomes and estimate, if possible, the amount of potential losses. The combined company will establish a reserve as appropriate based upon assessments and estimates in accordance with the combined company’s accounting policies. The combined company will base its assessments, estimates and disclosures on the information available to it at the time and rely on legal and management judgment. Actual outcomes or losses may differ materially from assessments and estimates. Costs to defend litigation claims and legal proceedings and the cost and any required actions arising out of actual settlements, judgments or resolutions of these claims and legal proceedings may negatively affect the combined company’s business and financial performance. Any adverse publicity resulting from allegations made in litigation claims or legal proceedings may also adversely affect the combined company’s reputation, which in turn could adversely affect the combined company’s results of operations.

 



 

The combined company’s financial results may be negatively impacted by recession, financial and credit market disruptions and other economic conditions.

 

Changes in economic and financial conditions in the U.S., Canada, Mexico, the Caribbean or other geographies where the combined company will do business may negatively impact consumer confidence and consumer spending, which could result in a reduction in the combined company’s sales volume and/or switching to lower price offerings. After the merger, the combined company will continue to be impacted by consumer price sensitivity associated with many of the combined company’s products. Similarly, disruptions in financial and credit markets worldwide may impact the combined company’s ability to manage normal commercial relationships with customers, suppliers and creditors. These disruptions could have a negative impact on the ability of the combined company’s customers to timely pay their obligations, thus reducing the combined company’s cash flow, or the ability of the combined company’s vendors to timely supply materials. Additionally, these disruptions could have a negative effect on the combined company’s ability to raise capital through the issuance of unsecured commercial paper or senior notes.

 

The combined company could also face increased counterparty risk for its cash investments and hedging arrangements. Declines in the securities and credit markets could also affect the combined company’s marketable securities and pension fund, which in turn could increase funding requirements.

 

Weather, natural disasters, climate change legislation and the availability of water could adversely affect the business of the combined company.

 

Unseasonable or unusual weather, natural disasters or long-term climate changes may negatively impact the price or availability of raw materials, energy and fuel, the combined company’s ability to produce and demand for the products of the combined company following the merger. Unusually cool weather during the summer months or unusually warm weather during the winter months may result in reduced demand for the combined company’s products and have a negative effect on the combined company’s business and financial performance.

 

There is growing political and scientific sentiment that increased concentrations of carbon dioxide and other greenhouse gases in the atmosphere are influencing global weather patterns (“global warming”). Concern over climate change, including global warming, has led to legislative and regulatory initiatives directed at limiting greenhouse gas (“GHG”) emissions. For example, proposals that would impose mandatory requirements on GHG emissions continue to be considered by policy makers in the countries in which the combined company will operate. Laws enacted that directly or indirectly affect the combined company’s production, distribution, packaging (including pods and the disposal of pods), cost of raw materials, fuel, ingredients and water could all negatively impact the combined company’s business and financial results.

 

The combined company also may be faced with water availability risks. Water is the main ingredient in substantially all of DPSG’s and Keurig’s products. Climate change may cause water scarcity and a deterioration of water quality in areas where the combined company maintain operations. The competition for water among domestic, agricultural and manufacturing users is increasing in the countries where the combined company operates, and as water becomes scarcer or the quality of the water deteriorates, the combined company may incur increased production costs or face manufacturing constraints which could negatively affect the combined company’s business and financial performance. Even where water is widely available, water purification and waste treatment infrastructure limitations could increase costs or constrain the combined company’s operations.

 

The combined company will also be faced with the impact of decreased or shifting agricultural productivity in certain regions of the world as a result of changing weather patterns which may limit availability or increase the cost of key agricultural commodities, such as coffee and tea, which are important sources of ingredients for Keurig’s products.

 

Increases in the combined company’s cost of benefits in the future could reduce the combined company’s profitability.

 

The combined company’s profitability is substantially affected by costs for employee health care, pension

 



 

and other retirement programs and other benefits. In recent years, these costs have increased significantly due to factors such as increases in health care costs, declines in investment returns on pension assets and changes in discount rates used to calculate pension and related liabilities. These factors plus the enactment of the Patient Protection and Affordable Care Act in March 2010 will continue to put pressure on the combined company’s business and financial performance. Although the combined company will actively seek to control increases in costs, there can be no assurance that it will succeed in limiting future cost increases, and continued upward cost pressure could have a material adverse effect on the combined company’s business and financial performance.

 

The combined company may not be able to renew collective bargaining agreements on satisfactory terms, or the combined company could experience union activity including labor disputes or work stoppages.

 

Following the merger, approximately 7,900 of the employees of the combined company will be covered by collective bargaining agreements. These agreements typically expire every three to four years at various dates. The combined company may not be able to renew its collective bargaining agreements on satisfactory terms or at all. This could result in labor disputes, strikes or work stoppages, which could impair the combined company’s ability to manufacture and distribute the combined company’s products and result in a substantial loss of sales. The terms of existing, renewed or expanded agreements could also significantly increase the combined company’s costs or negatively affect the combined company’s ability to increase operational efficiency.

 

The combined company’s facilities and operations may require substantial investment and upgrading.

 

The combined company will have programs of investment and upgrading in the combined company’s manufacturing, distribution and other facilities. The combined company may continue to incur significant costs to upgrade or keep up-to-date various facilities and equipment or restructure its operations, including closing existing facilities or opening new ones. If the combined company’s investment and restructuring costs are higher than anticipated or the combined company’s business does not develop as anticipated to appropriately utilize new or upgraded facilities, the combined company’s costs and financial performance could be negatively affected.

 

Due to the seasonality of many of Keurig’s products and DPSG’s business and other factors such as adverse weather conditions, the combined company’s operating results will be subject to fluctuations.

 

Historically, Keurig has experienced increased sales of the Keurig ®  brewing systems in Keurig’s first fiscal quarter (generally October through December) due to the holiday season. If sales of Keurig ®  brewing systems during the holiday season do not meet expectations, sales of Keurig’s pods throughout the remainder of the fiscal year will be negatively impacted. The impact on sales volume and operating results due to the timing and extent of these factors can significantly impact Keurig’s business. In addition, DPSG’s and Keurig’s operating results can be impacted by seasonal fluctuation. As a result, the combined company’s quarterly operating results will be subject to these same seasonality factors.

 

Failure to comply with applicable transfer pricing and similar regulations could harm the combined company’s businesses and financial results.

 

In many countries, including the U.S., the combined company will be subject to transfer pricing and other tax regulations designed to ensure that appropriate levels of income are reported as earned and are taxed accordingly.

 

Although DPSG and Keurig believe that they are in substantial compliance with all applicable regulations and restrictions, the combined company will be subject to the risk that governmental authorities could audit DPSG’s, Keurig’s or the combined company’s transfer pricing and related practices and assert that additional taxes are owed.

 

In the event that the audits or assessments are concluded adversely to the positions of the combined company, it may or may not be able to offset or mitigate the consolidated effect of foreign income tax assessments through the use of U.S. foreign tax credits. Because the laws and regulations governing U.S. foreign tax credits are complex and subject to periodic legislative amendment, the combined company cannot be sure that it will in fact be able to take advantage of any foreign tax credits in the future.

 



 

The combined company’s financial performance will be highly dependent upon the sales of Keurig ®  brewing systems and pods.

 

A significant percentage of the combined company’s financial performance will be attributable to sales of pods for use with Keurig ®  brewing systems. For Keurig’s fiscal year ended September 30, 2017, revenue from pods represented approximately 80% of Keurig’s consolidated net revenue. Revenue from pods would have represented approximately 31% of the combined company’s pro forma consolidated revenue for the three months ended March 31, 2018. Continued acceptance of Keurig ®  brewing systems and sales of pods to an increasing installed base will be significant factors in the combined company’s growth plans. Any substantial or sustained decline in the sale of Keurig ®  brewing systems, failure to continue to reduce the cost of Keurig ®  brewers, or substantial or sustained decline in the sales of pods would materially adversely affect the combined company’s business. Keurig ®  brewing systems compete against all sellers and types of coffeemakers. If the combined company does not succeed in continuing to reduce the costs of manufacturing Keurig ®  brewing systems or differentiating Keurig ®  brewing systems from the combined company’s competitors in the coffeemaker category, based on technology, quality of products, desired brands or otherwise, or the combined company’s competitors adopt their respective strategies, the combined company’s competitive position may be weakened and its sales of Keurig ®  brewing systems and pods, and accordingly, the combined company’s business and financial performance may be materially adversely affected.

 

Failure to maintain strategic relationships with well-recognized brands/brand owners and private label brands could adversely impact the combined company’s future growth and business.

 

Keurig has entered into strategic relationships for the manufacturing, distribution, and sale of pods with well-regarded beverage companies such as Dunkin’ Brands Group, Inc., The J.M. Smucker Company, Newman’s Own ®  Organics, Kraft Heinz, Peet’s Coffee & Tea, and Starbucks Corporation, as well as with retailers such as Costco Wholesale Corporation, The Kroger Co. and WalMart for their private label brands. As independent companies, Keurig’s strategic partners make their own business decisions which may not align with its or, following the merger, the combined company’s interests. If the combined company is unable to provide an appropriate mix of incentives to its strategic partners through a combination of premium performance and service, pricing, and marketing and advertising support, or if these strategic partners are not satisfied with the combined company’s brand innovation and technological or other development efforts, they may take actions, including entering into agreements with competing pod contract manufacturers or vertically integrating to manufacture their own pods. Increasing competition among pod manufacturers and the move to vertical integration may result in price compression, which could have an adverse effect on the gross margins of the combined company. The loss of strategic partners could also adversely impact the combined company’s future profitability and growth, awareness of Keurig ®  brewing systems, the combined company’s ability to attract additional branded or private label parties to do business with it or its ability to attract new consumers to buy Keurig ®  brewing systems.

 

Obsolete inventory may result in reduced prices or write-downs.

 

In order to be successful, the combined company must manage brewing system inventory effectively. As the combined company innovates and introduces new brewing systems to the marketplace, existing brewing systems are at an increased risk of inventory obsolescence. If it is determined that the combined company has excess brewing systems, it may be necessary to reduce prices and write-down inventory which could have an adverse effect on the combined company’s business, financial condition, and results of operations. As the combined company launches new beverage platforms, risk of excess inventory also exists if the combined company is unable to accurately forecast demand for these new products. If the combined company is unable to accurately forecast demand for its respective products, and inventory expires or becomes unusable prior to its use, its respective businesses, financial conditions and results of operations could be adversely affected.

 

Conversely, if new brewing systems’ launches are delayed, the combined company may have insufficient existing brewing system inventory to meet customer demand which could result in lost revenue opportunities and have an adverse impact on financial results.

 



 

The combined company will rely on independent certification for a number of products. Loss of certification within the combined company’s supply chain or as related to manufacturing processes could harm the combined company’s businesses.

 

The combined company will rely on independent certification, such as certifications of products as “organic” or “Fair Trade,” to differentiate some products from others. The combined company must comply with the requirements of independent organizations or certification authorities in order to label its products as certified. The loss of any independent certifications could adversely affect the combined company’s marketplace position, which could harm its businesses.

 



 

Management’s discussion and analysis of financial condition and results of operations of Maple

 

Unless otherwise specified or the context otherwise requires, all references in this section to “Maple,” “the company,” “we,” “us” or “our” refer, collectively, to Maple Parent Holdings Corp. and its subsidiaries, including Keurig Green Mountain, Inc. or “Keurig.”

 

The following discussion and analysis of our historical consolidated financial statements covers periods before and after the Keurig Acquisition (as defined below) and should be read in conjunction with the consolidated financial statements of Maple and related notes which are incorporated into this Current Report by reference to the Consolidated Financial Statements of Maple and related Notes filed with the Proxy Statement. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section entitled “Risk Factors—Risks Relating to the Combined Company’s Businesses” included elsewhere in this Exhibit 99.1.

 

Uncertainties and trends affecting Maple’s business

 

Maple’s business activities are subject to some trends and uncertainties such as:

 

Increased competition

 

Maple competes with major international beverage and appliance companies. Maple’s ability to gain or maintain share of sales in the global marketplace or in various local marketplaces or maintain or enhance its relationships with its partners and customers may be impacted by actions of competitors, including increased consolidation in the food and beverage industry and an increase in the number of competitive pod contract manufacturers.

 

Changing beverage environment and retail landscape

 

Maple is impacted by evolution in the beverage environment as a result of changes in consumer preferences, shifting consumer tastes and needs, changes in consumer lifestyles, and competitive product and pricing pressures.

 

Product innovation

 

Maple’s financial results and its ability to maintain or improve its competitive position will depend on its ability to effectively gauge the direction of its key marketplaces and successfully identify, develop, manufacture, market and sell new or improved products in these changing marketplaces.

 

Strategic relationships

 

Maple has entered into strategic relationships for the manufacturing, distribution, and sale of pods with well-regarded beverage companies. If Maple is unable to provide an appropriate mix of incentives to its strategic partners or if its strategic partners are not satisfied with its brand innovation and technological or other development efforts, they may enter into agreements with competing pod contract manufacturers or vertically integrate to manufacture their own pods.

 

Fluctuations in foreign exchange rates

 

Maple is exposed to foreign currency risks associated with its Canada business. Maple uses instruments such as U.S. dollar denominated coffee hedging arrangements and foreign currency forward contracts to mitigate its foreign currency exchange risk.

 



 

Factors affecting quarterly performance

 

Historically, Maple has experienced variations in sales and earnings from quarter to quarter due to the holiday season and a variety of other factors, including, but not limited to, the cost of green coffee, competitor initiatives, marketing programs, weather and special or unusual events. Because of the seasonality of its business, results for any quarter are not necessarily indicative of the results that may be achieved for any other quarter or the full fiscal year.

 

Periods presented

 

Maple, which is beneficially owned by a group of investors led by JAB and Mondelēz LLC, completed the acquisition of Keurig on March 3, 2016 (the “Keurig Acquisition”). As a result of the Keurig Acquisition, Maple is the “successor” to Keurig and established a new basis of accounting on March 3, 2016. The accompanying consolidated financial statements and the discussion and analysis herein presented for periods prior to March 3, 2016 represent the operations of the predecessor, Keurig (the “Predecessor”) and periods on or after March 3, 2016, represent the operations of the successor, Maple (the “Successor”). The Successor period began on December 4, 2015, the incorporation date of the merger sub in the Keurig Acquisition and includes the Keurig Acquisition as of March 3, 2016. The fiscal year ended September 24, 2016 includes the Predecessor period from September 27, 2015 through March 2, 2016 (the “Fiscal 2016 Predecessor Period”) and the Successor period from December 4, 2015 through September 24, 2016 (the “Fiscal 2016 Successor Period”).

 

Maple is a holding company that does not have any operations or material assets other than its indirect equity interests in Keurig. All of the operations of Maple and its intermediate subsidiary, Maple Subsidiary, are conducted through Keurig and its subsidiaries. Maple Subsidiary, which was incorporated on December 4, 2015, is also a holding company which did not conduct any business operations prior to the Keurig Acquisition other than incurring transaction costs relating to that acquisition.

 

General

 

Maple’s fiscal year ends on the last Saturday in September. Consequently, every fifth fiscal year includes 53 weeks rather than 52 weeks. Maple’s fiscal year 2017 included 53 weeks, resulting in one additional operating week in the fiscal fourth quarter. The inclusion of the 53rd week in fiscal 2017 contributed an additional approximately $91 million to our net sales and an estimated additional approximately $19 million to our operating income.

 

Maple’s fiscal years 2017 and 2015 represent the years ended September 30, 2017 and September 26, 2015, respectively. For 2016, Maple’s fiscal periods consisted of the Fiscal 2016 Predecessor Period and the Fiscal 2016 Successor Period as described above. Unless otherwise noted, any reference in this section to a year preceded by the word “fiscal” refers to the fiscal year ended on the last Saturday in September of that year. For example, references to “fiscal 2017” refer to the fiscal year ended September 30, 2017. Any reference to a year not preceded by “fiscal” refers to a calendar year. Following the consummation of the Merger Transactions, the combined company is expected to adopt a calendar fiscal year.

 

Basis of presentation

 

Included in this presentation are discussions and reconciliations of operating income and net income in accordance with GAAP and operating income and net income excluding certain expenses and losses. Maple refers to these performance measures as non-GAAP operating income and non-GAAP net income. These non-GAAP measures exclude legal and accounting expenses related to antitrust litigation, the completed SEC inquiry as it relates to prior periods, non-cash related items such as amortization of identifiable intangibles, losses on fixed asset impairment, abandonment write-downs and certain stock compensation expense, as well as acquisition and integration expenses related to the Keurig Acquisition and restructuring expenses, each of which include adjustments to show the tax impact of excluding these items. Each of these adjustments was selected because management uses these non-GAAP measures in discussing and analyzing its results of operations. Maple believes that providing investors with the same information that is used by management ensures that investors have the same data to make comparisons to our historical operating results, identify trends in our underlying operating results and

 



 

gain additional insight and transparency on how we evaluate our business.

 

Maple uses the non-GAAP measures to establish and monitor budgets and operational goals, to evaluate the performance of the company and as the basis for incentive compensation. These non-GAAP measures are not in accordance with, or an alternative to, GAAP and should be considered in addition to, and not as a substitute or superior to, the other measures of financial performance prepared in accordance with GAAP. Using only the non-GAAP financial measures to analyze its performance would have material limitations because their calculation is based on the subjective determination of management regarding the nature and classification of events and circumstances that investors may find significant, therefore, Maple presents both the GAAP and non-GAAP measures of its results. Although other companies report non-GAAP operating income and non-GAAP net income, numerous methods may exist for calculating a company’s non-GAAP operating income and non-GAAP net income. As a result, the method used by Maple’s management to calculate non-GAAP measures may differ from the methods used by other companies to calculate their non-GAAP measures, and similarly named measures may not be comparable.

 

The reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are shown in the tables below in “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Maple—Net Income, Non-GAAP Operating Income and Non-GAAP Net Income.”

 

Summary financial data of Maple

 

The following table presents certain financial data of Maple for the periods denoted below:

 

 

 

Successor

 

Predecessor

 

(in millions)

 

October 1,
2017 to
March 31,
2018

 

September 25,
2016 to
March 25,
2017

 

September 25,
2016 to
September 30,
2017

 

December 4,
2015 to
September 24,
2016

 

September 27,
2015 to
March 2,
2016

 

September 27,
2014 to
September 26,
2015

 

 

 

(Unaudited)

 

(Unaudited)

 

 

 

 

 

 

 

 

 

Net sales

 

$

2,119

 

$

2,182

 

$

4,269

 

$

2,293

 

$

2,025

 

$

4,520

 

Cost of sales

 

1,132

 

1,153

 

2,239

 

1,220

 

1,354

 

2,913

 

Gross profit

 

987

 

1,029

 

2,030

 

1,073

 

671

 

1,607

 

Selling, general and administrative expenses

 

402

 

405

 

836

 

439

 

334

 

827

 

Transportation and warehouse costs

 

122

 

137

 

250

 

135

 

 

 

Transaction costs

 

36

 

 

 

102

 

187

 

 

Restructuring expenses

 

13

 

2

 

45

 

4

 

3

 

15

 

Operating income

 

414

 

485

 

899

 

393

 

147

 

765

 

Other income (loss), net

 

(11

)

1

 

(1

)

2

 

2

 

1

 

Gain (loss) on financial instruments, net

 

47

 

39

 

14

 

(14

)

1

 

8

 

Gain (loss) on foreign currency, net

 

(18

)

43

 

32

 

5

 

(2

)

(22

)

Loss on extinguishment of debt

 

(7

)

(83

)

(85

)

(5

)

(6

)

 

Interest expense—related party

 

(50

)

(50

)

(100

)

(59

)

 

 

Interest expense

 

(53

)

(120

)

(192

)

(158

)

(3

)

(2

)

Income before income taxes

 

322

 

315

 

567

 

164

 

139

 

750

 

Income tax benefit (expense)

 

386

 

(110

)

(184

)

(55

)

(39

)

(252

)

Net Income

 

$

708

 

$

205

 

$

383

 

$

109

 

$

100

 

$

498

 

Net income attributable to noncontrolling interests

 

$

8

 

$

3

 

$

5

 

$

 

$

 

$

 

Net income attributable to Maple Parent Holdings Corp

 

$

700

 

$

202

 

$

378

 

$

109

 

$

100

 

$

498

 

 



 

As our financial information prior to the Keurig Acquisition is not comparable to the financial information subsequent to the Keurig Acquisition, the following discussion presents our results for the six months ended March 31, 2018 and March 25, 2017 on a comparative basis and for fiscal 2017, Fiscal 2016 Successor Period, Fiscal 2016 Predecessor Period and fiscal 2015 separately without reference to comparative periods. We expect to continue to report periods subsequent to the Keurig Acquisition on a comparative basis.

 

Six months ended March, 31, 2018 compared to six months ended March 25, 2017

 

Sales volumes

 

Brewer sales volumes increased 4%, driven primarily by new brewer models, while pod sales volumes increased by 7%, as a result of growth in the pod category.

 

Net sales

 

Net sales for the six months ended March 31, 2018 decreased by $63 million, or 3%, to $2,119 million as compared to $2,182 million reported in the same fiscal period in 2017. The primary drivers of the change in net sales included:

 

·                   Increased sales volume, which increased net sales by 6% primarily due to household penetration growth of Keurig ®  single-serve system.

 

·                   Unfavorable rate, primarily driven by increased trade spend with our pod business partners, which decreased net sales by 6%.

 

·                   Unfavorable product mix, which lowered net sales by 3%.

 



 

Gross profit

 

Gross profit for the six months ended March 31, 2018 was $987 million, or 46.6% of net sales (gross margin), a decrease of 0.6% as compared to $1,029 million, or 47.2% of net sales (gross margin), in the same fiscal period in 2017. The following drivers impacted the 60 basis point gross margin decrease in the six months ended March 31, 2018:

 

·                   Unfavorable pod net price realization which reduced gross margin by approximately 330 basis points.

 

·                   Approximately 310 basis points improvement driven primarily by ongoing pod and brewer productivity improvements.

 

·                   A decrease of approximately 120 basis points due to an increase in other manufacturing costs.

 

·                   An increase of approximately 90 basis points due to mix improvement, driven by brewers.

 

Selling, general and administrative (“SG&A”) expenses

 

SG&A expenses decreased 0.7% to $402 million in the six months ended March 31, 2018 from $405 million in the same fiscal period in 2017. As a percentage of net sales, SG&A expenses increased to 19.0% in the six months ended March 31, 2018 compared to 18.6% in the same fiscal period in 2017. The 0.4% increase in the six months ended March 31, 2018 over the same fiscal period in 2017 was primarily attributed to a 38.0%, or $23 million, increase in advertising and promotional spending primarily associated with television media campaigns aimed at driving household penetration of the Keurig single-serve system.

 

Transportation and warehouse costs

 

Transportation and Warehouse Costs decreased 10.9% to $122 million in the six months ended March 31, 2018 from $137 million in the same fiscal period in 2017. The decrease in Transportation and Warehouse costs was primarily attributed to ongoing productivity initiatives in logistics.

 

Transaction costs

 

Maple transaction costs increased $36 million in the six month period ended March 31, 2018 as compared to the prior year period due to DPS merger transactions.

 

Operating income

 

Operating income in the six months ended March 31, 2018 was $414 million, a decrease of $71 million as compared to $485 million in the same fiscal period in 2017.

 

Gain (loss) on financial instruments, net

 

Maple realized $47 million in net gains on financial instruments not designated as hedges for accounting purposes during the six months ended March 31, 2018, as compared to $39 million in net gains during the same fiscal period in 2017. The net gains were primarily attributable to interest rate swaps that hedge interest rate exposure on our term loan A and revolving credit facility.

 

Gain (loss) on foreign currency, net

 

Maple has certain assets and liabilities that are denominated in foreign currencies. During the six months ended March 31, 2018, Maple realized a net foreign currency loss of $18 million as compared to a net gain of $43 million during the same fiscal period in 2017. The net foreign currency exchange losses were primarily attributable to the change in the exchange rate of the U.S. dollar to the Canadian dollar.

 



 

Loss on extinguishment of debt

 

Maple realized $7 million in losses related to the extinguishment of debt from voluntary prepayments of our long term debt in the six months ended March 31, 2018 as compared to $83 million in losses related to the extinguishment of debt in the same fiscal period in 2017.

 

Interest expense and interest expense-related party

 

Interest expense was $103 million in the six months ended March 31, 2018, as compared to $170 million in the same fiscal period in 2017. The decrease in interest expense was primarily due to refinancing $1,200 million in term loan B debt in March 2017 and the $804 million reduction of term loan A and revolving debt. Related party interest on the Sponsor and Mondelēz term loans was $50 million in the six months ended March 31, 2018 representing 48.6% of the total interest expense incurred within the period. Related party interest continues to represent an increasing percentage of Maple’s overall interest expense due to the reduction in Maple’s outstanding third party long-term debt.

 

Income tax

 

Maple’s effective income tax rate was (119.9%) for the six months ended March 31, 2018 as compared to a 35.0% effective tax rate for the same fiscal period in 2017. The effective tax rate for March 31, 2018 was primarily impacted by a 24.5% blended (as defined in the Internal Revenue Code) U.S. Federal statutory rate as well as the net tax benefits related to a U.S. deferred tax rate change of $481 million as a result of the enactment of the TCJA, and Section 199 deduction, which is partially offset by a repatriation tax as a result of the enactment of the TCJA and state taxes. The effective tax rate for the six months ended March 25, 2017 was primarily impacted by a 35% U.S. Federal statutory rate, and net tax benefits related to foreign tax rate differential and Section 199 deductions, which was partially offset by state taxes.

 

Net income

 

Net income in the six months ended March 31, 2018 was $708 million, an increase of $503 million, or 245.4%, as compared to $205 million in the same fiscal period in 2017.

 

Fiscal 2017

 

Net sales

 

Net sales for fiscal 2017 were $4,269 million. Fiscal 2017 included a 53rd week which added approximately $91 million or 2% to fiscal 2017 net sales growth. Our net sales were positively impacted by improved volume, but such improvements were offset by negative mix and increased trade spend.

 

Gross profit

 

Gross profit for fiscal 2017 was $2,030 million, or 47.6% of net sales. Our gross profit was positively impacted by ongoing pod and brewer productivity programs, the discontinuation of the Keurig ®  Kold TM  product line, product mix primarily associated with selling fewer Keurig K2.0 brewing systems versus Keurig 1.0 brewing systems and negatively impacted by an increase in other manufacturing costs.

 

SG&A expenses

 

SG&A expenses for fiscal 2017 were $836 million, or 19.6% of net sales. Our SG&A expenses were primarily attributable to increased expenses related to amortization of intangible assets of $96 million and stock compensation of $54 million.

 



 

Transportation and warehouse costs

 

Transportation and Warehouse Costs for fiscal 2017 were $250 million, or 5.9% of net sales. There was a change in our accounting policy following the Keurig Acquisition. In periods following the Keurig Acquisition, including the Fiscal 2016 Successor Period, logistics costs were recorded in Transportation and Warehouse costs whereas in all periods prior to the Keurig Acquisition, including the Fiscal 2016 Predecessor Period, Transportation and Warehouse costs were recorded in gross profit and not reported separately in the income statement.

 

Restructuring expenses

 

For fiscal 2017, Maple reorganized some activities that resulted in expenses of $45 million. For a detailed discussion of Maple’s restructuring programs, see “—Restructuring Programs”.

 

Operating income

 

For fiscal 2017, total operating costs were $1,131 million resulting in an operating income of $899 million, or 21.1% of net sales.

 

Gain (loss) on financial instruments, net

 

For fiscal 2017, Maple realized a net gain of $14 million on its financial instruments. The gain was primarily attributable to interest rate swaps that hedge interest rate exposure on our term loan A and revolving credit facility.

 

Gain (loss) on foreign currency, net

 

For fiscal 2017, Maple realized a net gain of $32 million due to some of its assets and liabilities being denominated in foreign currency. The net gain was primarily attributable to the extinguishment of the euro denominated debt.

 

Loss on extinguishment of debt

 

For fiscal 2017, Maple realized a net loss of $85 million from voluntary prepayments of its long term debt.

 

Interest expense and interest expense—related party

 

For fiscal 2017, third party interest expense was $192 million and related party interest expense was $100 million for a total interest expense of $292 million. The interest expenses was primarily attributable to incurring a full year of interest expense on the outstanding debt obtained in March 2016 in connection with the Keurig Acquisition, as well as the outstanding term loans with two related parties, the Sponsor and Mondelēz, with a combined principal balance of approximately $1,815 million which bears an interest rate of 5.5% and mature in 2023.

 

Income tax

 

For fiscal 2017, income tax expense was $184 million, or 32.5% of income before income tax. The effective tax rate for fiscal 2017 was primarily impacted by a 35% U.S. Federal statutory rate, and the net tax benefits of tax credits generated from current year foreign earnings recognized in the U.S., Section 199 deductions, foreign tax rate differential, partially offset by U.S. taxation of foreign earnings, state taxes, valuation allowance for deferred tax assets, and ASC 740-10 uncertain tax positions.

 

Net income

 

For fiscal 2017, net income was $383 million, or 9.0% of net sales.

 



 

Fiscal 2016 successor period

 

Net sales

 

Net sales for the Fiscal 2016 Successor Period were $2,293 million. Our net sales were negatively impacted by a decrease in hot pod sales, a decrease in hot brewers and accessories sales and a decrease in other product sales.

 

Gross profit

 

Gross profit for the Fiscal 2016 Successor Period was $1,073 million, or 46.8% of net sales. Our gross profit was positively impacted by ongoing pod and brewer productivity initiatives and other manufacturing costs improvements, lower obsolescence expense and the accounting treatment of logistics costs following the Keurig Acquisition.

 

SG&A expenses

 

SG&A expenses for the Fiscal 2016 Successor Period were $439 million, or 19.1% of net sales. Our SG&A expenses benefited from lower R&D costs and advertising and promotional spending.

 

Transportation and warehouse costs

 

Transportation and Warehouse Costs for the Fiscal 2016 Successor Period were $135 million, or 5.9% of net sales. In periods following the Keurig Acquisition, including the Fiscal 2016 Successor Period, logistics costs were recorded in Transportation and Warehouse costs whereas in all periods prior to the Keurig Acquisition, including the Fiscal 2016 Predecessor Period, Transportation and Warehouse costs were recorded in gross profit and not reported separately in the income statement.

 

Transaction costs

 

For the Fiscal 2016 Successor Period, Maple recognized Keurig Acquisition transaction costs of $102 million. Transaction costs generally included personnel-related costs associated with the change in control, cash settlements of previously unvested stock-based awards and other acquisition-related charges.

 

Restructuring expenses

 

For the Fiscal 2016 Successor Period, Maple reorganized some activities that resulted in expenses of $4 million. For a detailed discussion of Maple’s restructuring programs, see “—Restructuring Programs” at the end of this section.

 

Operating income

 

For the Fiscal 2016 Successor Period, total operating costs were $680 million resulting in an operating income of $393 million, or 17.1% of net sales.

 

Gain (loss) on financial instruments, net

 

For the Fiscal 2016 Successor Period, Maple realized a net loss of $14 million on its financial instruments. The net loss was primarily attributable to the fair value adjustment of our cross currency swap, which hedges the risk in currency movements on term loan debt denominated in euros.

 

Foreign currency exchange gain (loss), net

 

For the Fiscal 2016 Successor Period, Maple realized a net gain of $5 million due to some of its assets and liabilities being denominated in foreign currency.

 



 

Loss on extinguishment of debt

 

For the Fiscal 2016 Successor Period, Maple realized a net loss of $5 million from voluntary prepayments of its long term debt.

 

Interest expense

 

For the Fiscal 2016 Successor Period, third party interest expense was $158 million and related party interest expense was $59 million for a total interest expense of $217 million. Our interest expense was primarily attributable to an increase in our outstanding debt balance associated with the Keurig Acquisition and an increase in related party interest.

 

Income tax

 

For the Fiscal 2016 Successor Period, income tax expense was $55 million, or 33.5% of income before income tax. The effective tax rate for the Fiscal 2016 Successor Period was primarily impacted by a 35% U.S. Federal statutory rate, and the net tax benefits related to foreign tax rate differential, transaction cost deductions, deferred state rate change, and Section 199 deductions, partially offset by ASC 740-10 uncertain tax positions and U.S. state taxes.

 

Net income

 

For the Fiscal 2016 Successor Period, net income was $109 million, or 4.8% of net sales.

 

Fiscal 2016 predecessor period

 

Net sales

 

Net sales for the Fiscal 2016 Predecessor Period were $2,025 million. Our net sales were negatively impacted by a decrease in hot pod sales, decrease in hot brewers and accessories sales and a decrease in other product sales.

 

Gross profit

 

Gross profit for the Fiscal 2016 Predecessor Period was $671 million, or 33.1% of net sales. Our gross profit was positively impacted by ongoing pod and brewer productivity initiatives and other manufacturing costs improvements, lower obsolescence expense and the accounting treatment of logistics costs following the Keurig Acquisition.

 

SG&A expenses

 

SG&A expenses for the Fiscal 2016 Predecessor Period were $334 million, or 16.5% of net sales. Our SG&A expenses benefited from the discontinuation of the Keurig ®  Kold TM  product line, which lowered recurring costs.

 

Transaction costs

 

For the Fiscal 2016 Predecessor Period, Maple recognized Keurig Acquisition transaction costs of $187 million. Transaction costs generally included personnel-related costs associated with the change in control, cash settlements of previously unvested stock-based awards and other acquisition-related charges.

 

Restructuring expenses

 

For the Fiscal 2016 Predecessor Period, Maple reorganized some activities that resulted in expenses of $3 million. For a detailed discussion of Maple’s restructuring programs, see “—Restructuring Programs” at the end

 



 

of this section.

 

Operating income

 

For the Fiscal 2016 Predecessor Period, total operating costs were $524 million resulting in an operating income of $147 million, or 7.3% of net sales.

 

Gain (loss) on financial instruments, net

 

For the Fiscal 2016 Predecessor Period, Maple realized a net gain of $1 million on its financial instruments. The net gain was primarily attributable to gains recognized on financial instruments to cover currency risk on the Canadian dollar and the Euro.

 

Gain (loss) on foreign currency, net

 

For the Fiscal 2016 Predecessor Period, Maple realized a net loss of $2 million due to some of its assets and liabilities being denominated in foreign currency. The net loss was primarily attributable to the change in the exchange rate of the U.S. dollar to the Canadian dollar.

 

Loss on extinguishment of debt

 

For the Fiscal 2016 Predecessor Period, Maple realized a net loss of $6 million from voluntary prepayments of its long term debt.

 

Interest expense and interest expense—related party

 

For the Fiscal 2016 Predecessor Period, interest expense was $3 million. Our interest expense was primarily attributable to borrowings under the Company’s revolver and an increase in related party interest.

 

Income tax

 

For the Fiscal 2016 Predecessor Period, income tax expense was $39 million, or 28.1% of income before income tax. The effective tax rate for the Fiscal 2016 Predecessor Period was primarily impacted by a 35% U.S. Federal statutory rate, and the net tax benefits related to state refunds, R&D credits, foreign tax rate differential, Section 199 deductions, which was partially offset by tax expenses related to ASC 740-10 uncertain tax positions, capitalization of transaction costs, and U.S. state taxes.

 

Net income

 

For the Fiscal 2016 Predecessor Period, net income was $100 million, or 4.9% of net sales.

 

Fiscal 2015

 

Net sales

 

Net sales for fiscal 2015 were $4,520 million. Our net sales were negatively impacted by lower brewer volume.

 

Gross profit

 

Gross profit for fiscal 2015 was $1,607 million, or 35.6% of net sales. Our gross profit was positively impacted by stronger pod volumes, offset negatively by coffee commodity prices and obsolescence in the period.

 



 

SG&A expenses

 

SG&A expenses for fiscal 2015 were $827 million, or 18.3% of net sales. Our SG&A expense was primarily attributable to costs related to the development of the Keurig ®  Kold TM  product line.

 

Transportation and warehouse costs

 

Transportation and Warehouse costs were recorded in gross profit in fiscal 2015 and were not reported separately in the income statement.

 

Restructuring expenses

 

A pretax restructuring charge of $15 million was recorded in the fourth quarter of fiscal 2015, the first fiscal quarter of the program, of which approximately $12 million represents employee severance related costs that will be settled in cash. For a detailed discussion of Maple’s restructuring programs, see “—Restructuring Programs” at the end of this section.

 

Operating income

 

For fiscal 2015, total operating costs were $842 million resulting in an operating income of $765 million, or 16.9% of net sales.

 

Gain (loss) on financial instruments, net

 

For fiscal 2015, Maple realized a net gain of $8 million on its financial instruments. The net gain was primarily attributable to gains recognized on financial instruments to cover currency risk on the Canadian dollar.

 

Gain (loss) on foreign currency, net

 

For fiscal 2015 Predecessor Period, Maple realized a net loss of $22 million. The net loss was primarily attributable to the change in the exchange rate of the U.S. dollar to the Canadian dollar.

 

Income tax

 

For fiscal 2015, income tax expense was $252 million, or 33.6% of income before income tax.

 

Net income

 

For fiscal 2015, net income was $498 million, or 11.0% of net sales.

 

Restructuring programs

 

Six months ended March 31, 2018 and fiscal 2017

 

Castroville closure

 

In May 2017, Maple looked at its capacity across the Keurig manufacturing network and determined that, geographically, it could improve matching capacity to its customer base. As a result, in May 2017, Keurig announced it was closing the Castroville, California manufacturing site on May 18, 2017. As a result of the decision Keurig had a reduction in workforce of 183 employees. This restructuring program resulted in cumulative pre-tax restructuring charges of approximately $22 million in fiscal 2017, primarily related to costs associated with employee terminations and asset related costs. Cash paid during the six months ended March 31, 2018 totaled approximately $1 million.

 



 

2017 business realignment

 

In June 2017, Maple determined that its strategic priorities had shifted and as a result has redesigned its organizational structure. Approximately 500 employees were affected by changing roles, responsibilities or reporting lines, and 140 of those employees were notified that their roles were being eliminated. This restructuring program resulted in cumulative pre-tax restructuring charges of approximately $12 million in fiscal 2017, primarily related to costs associated with severance and employee terminations. Cash paid during the six months ended March 31, 2018 totaled approximately $5 million.

 

2017 Keurig 2.0 Brewing system exit

 

In August 2017, Maple determined due to shifting demand and strategic priorities that it would stop producing and selling its K2.0 brewing system models. Costs associated with this restructuring event include accelerated depreciation on all K2.0 brewing system molds and tooling equipment as well as costs associated with excess and obsolete inventory on hand totaling $10 million as of September 30, 2017. Additional accelerated depreciation of $11 million was recognized in the six months ended March 31, 2018.

 

Fiscal 2016 successor period and fiscal 2016 predecessor period

 

Kold restructuring

 

In June 2016, Keurig announced it was discontinuing its first generation Kold platform. In connection with this announcement Keurig notified employees in its Kold manufacturing and related support teams that it was implementing a restructuring program that would include a reduction in force. Additionally, Keurig also notified select other employees that their roles would be eliminated in an effort to adjust the workforce to eliminate redundancy and improve efficiency. In connection with this restructuring program 123 roles were eliminated. This program was completed in fiscal 2017.

 

Canadian business unit restructuring

 

In October 2015, Keurig’s Canadian operations initiated a multi-year productivity program intended to reduce structural costs and streamline organization structures to drive efficiency. In connection with the program the Canadian operations undertook a review of its Van Houtte Coffee Services business and consolidated its third-party logistics activities in Ontario into one location. This program was completed in fiscal 2017.

 

Fiscal 2015

 

2015 Productivity plan

 

On July 31, 2015, Keurig’s Board of Directors approved a productivity program intended to reduce structural costs and streamline organization structures to drive efficiency. A pretax restructuring charge of $15 million was recorded in the fourth quarter of fiscal 2015, the first fiscal quarter of the program, of which approximately $12 million represents employee severance related costs that will be settled in cash.

 

Non-GAAP operating income and non-GAAP net income

 

Non-GAAP net income for the six months ended March 31, 2018, increased 7.7% to $294 million from $273 million non-GAAP net income in the comparable prior fiscal period. Non-GAAP net income for fiscal 2017 was $575 million in fiscal 2017, $246 million in the Fiscal 2016 Successor Period, $272 million in the Fiscal 2016 Predecessor Period, and $563 million in fiscal 2015.

 

The following tables show a reconciliation of operating income and net income to non-GAAP operating income and non-GAAP net income for the six months ended March 31, 2018 and March 25, 2017, fiscal 2017, the Fiscal 2016 Successor Period, the Fiscal 2016 Predecessor Period and fiscal 2015 (in thousands):

 



 

 

 

Successor

 

Predecessor

 

 

 

 

 

 

 

 

 

Fiscal

 

 

 

 

 

 

 

Six months ended

 

 

 

2016

 

Fiscal 2016

 

 

 

(in millions)

 

March 31,
2018

 

March 25,
2017

 

Fiscal
2017(1)

 

successor
period

 

predecessor
period

 

Fiscal
2015

 

Operating income

 

$

414

 

$

485

 

$

899

 

$

393

 

$

147

 

$

765

 

Expenses related to SEC inquiry and pending litigation

 

 

 

 

 

 

2

 

Expenses related to antitrust litigation

 

 

1

 

3

 

1

 

 

6

 

Amortization of identifiable intangibles

 

59

 

48

 

96

 

55

 

21

 

48

 

Restructuring expenses

 

13

 

2

 

45

 

4

 

3

 

15

 

Acquisition and integration expenses

 

46

 

44

 

77

 

142

 

224

 

25

 

Stock compensation(2)

 

17

 

22

 

38

 

5

 

 

 

Non-GAAP operating income

 

$

549

 

$

602

 

$

1,158

 

$

600

 

$

395

 

$

861

 

 


(1)          Fiscal 2017 included a 53 rd  week which added approximately $19 million to operating income.

(2)          Stock Compensation includes expense attributable to matching awards made to management employees who made an initial investment in the Keurig Green Mountain, Inc. Executive Ownership Plan. It does not include the expense related to recurring annual equity grants issued by the Company.

 

 

 

Successor

 

Predecessor

 

 

 

 

 

 

 

 

 

Fiscal

 

 

 

 

 

 

 

Six months ended

 

 

 

2016

 

Fiscal 2016

 

 

 

(in millions)

 

March 31,
2018

 

March 25,
2017

 

Fiscal
2017(1)

 

successor
period

 

predecessor
period

 

Fiscal
2015

 

Net income attributable to Maple Parent Holdings Corp

 

$

700

 

$

202

 

$

378

 

$

109

 

$

100

 

$

498

 

Expenses related to SEC inquiry and pending litigation

 

 

 

 

 

 

2

 

Expenses related to antitrust litigation

 

 

1

 

3

 

1

 

 

6

 

Amortization of identifiable intangibles

 

59

 

48

 

96

 

55

 

21

 

48

 

Restructuring expenses

 

13

 

2

 

45

 

4

 

3

 

15

 

Acquisition and integration expenses

 

50

 

44

 

77

 

142

 

224

 

25

 

Deferred financing fees

 

7

 

12

 

20

 

17

 

1

 

 

Mark to market(2)

 

(51

)

(107

)

(89

)

4

 

23

 

(5

)

Stock compensation(3)

 

17

 

22

 

38

 

5

 

 

 

Loss on extinguishment of debt

 

7

 

83

 

85

 

5

 

7

 

 

Tax reform

 

(481

)

 

 

 

 

 

Income tax

 

(27

)

(34

)

(78

)

(96

)

(107

)

(26

)

Non-GAAP net income attributable to Maple Parent Holdings Corp

 

$

294

 

$

273

 

$

575

 

$

246

 

$

272

 

$

563

 

 


(1)          Fiscal 2017 included a 53 rd  week which added approximately $13 million to net income.

(2)          Mark to market includes unrealized gains on interest rate and commodity hedges that the Company did not designate to qualify for hedge accounting.

 



 

(3)          Stock Compensation includes expense attributable to matching awards made to management employees who made an initial investment in the Keurig Green Mountain, Inc. Executive Ownership Plan. It does not include the expense related to recurring annual equity grants issued by the Company.

 

Liquidity and capital resources

 

Maple has principally funded its operations, working capital needs, capital expenditures and cash dividends from operations, equity offerings and borrowings under its credit facilities. At March 31, 2018, Maple had $3,088 million in outstanding third-party debt, $1,815 million in outstanding related party debt, $102 million in capital lease and financing obligations, $122 million in cash and cash equivalents and negative working capital (including cash) of $1,051 million. At March 25, 2017, Maple had $4,508 million in outstanding debt, $1,815 million in outstanding related party debt, $108 million in capital lease and financing obligations, $181 million in cash and cash equivalents and negative working capital (including cash) of $229 million.

 

Maple’s cash and cash equivalents totaled $122 million and $181 million as of March 31, 2018 and March 25, 2017, respectively. Maple actively manages its cash and cash equivalents in order to internally fund its operating needs, make scheduled interest and principal payments on its borrowings, invest in its innovation pipeline and business growth opportunities, and return cash to stockholders through cash dividend payments.

 

As of March 31, 2018, Maple had $131 million (for which taxes have been provided) of undistributed foreign earnings. As of March 31, 2018, Maple had $56 million of cash and cash equivalents held in international jurisdictions which will be used to fund capital and other cash requirements of international operations.

 

Operating activities

 

Net cash provided by operating activities is principally comprised of net income and is primarily affected by change in working capital and non-cash items relating to depreciation and amortization.

 

Net cash provided by operating activities was $651 million for the six months ended March 31, 2018 compared to $863 million for the same period in fiscal 2017. Maple generated $708 million in net income in the six months ended March 31, 2018 as compared to $205 million the same fiscal period in 2017. Significant non-cash items primarily consisted of (i) $124 million in depreciation and amortization, (ii) $30 million in the provision for sales returns and (iii) $48 million gain related to mark to market of financial instruments. Other significant changes in assets and liabilities affecting net cash provided by operating activities were (i) a decrease in inventories of $82 million, primarily attributable to decreases in brewer and pod inventories , (ii) an increase in accounts payable and accrued expense of $125 million, primarily attributable to increases in accounts payable and (iii) an increase in income tax payable of $16 million and(iv) decrease in accounts receivable of $42 million.

 

Net cash provided by operating activities was $1,748 million in fiscal 2017 driven primarily by the $871 million increase in accounts payable as a result of the accounts payable program as discussed below. During fiscal 2017, we generated $383 million in net income. Significant non-cash items, net, were accretive to net income and primarily consisted of (i) $239 million in depreciation and amortization expense, (ii) $85 million in accelerated amortization of deferred financing fees due to the early retirement of term loan debt, (iii) $66 million in charges related to our provision for sales returns, (iv) $58 million in stock compensation expense primarily related to our long term incentive equity plan and (v) a $41 million gain primarily related to fair valuing of our euro-denominated term loan B debt, partially offset by a $4 million loss on financial instruments. Net cash was also impacted by other changes in working capital during the period as decreases in brewer and pod inventories related to inventory planning and management were partially offset by other unfavorable working capital changes.

 

Net cash provided by operating activities was $280 million in the Fiscal 2016 Successor Period and $831 million in the Fiscal 2016 Predecessor Period. Maple generated $109 million in net income in the Fiscal 2016 Successor Period and $100 million in the Fiscal 2016 Predecessor Period. Significant non-cash items in fiscal 2016 primarily consisted of (i) $125 million and $124 million in depreciation and amortization expense in the Fiscal 2016 Successor Period and 2016 Fiscal Predecessor Period related to fixed assets and intangibles, (ii) $6 million and $141 million in deferred compensation and stock compensation in the Fiscal 2016 Successor Period and 2016 Fiscal Predecessor Period and (iii) $47 million and $55 million in charges related to our provision for sales returns in the

 



 

2016 Successor Period and 2016 Fiscal Predecessor Period. Net cash provided by operating activities was impacted in the 2016 Fiscal Successor Period by improved payment terms on accounts payable and in the 2016 Fiscal Predecessor by reduction of inventories and accounts receivable, as well as improved payment terms on accounts payable.

 

Net cash provided by operating activities was $755 million for fiscal 2015. Maple generated $498 million in net income in fiscal 2015. Significant non-cash items for Fiscal 2015 primarily consisted of $266 million in depreciation and amortization and $114 million in the provision for sales returns.

 

Investing activities

 

Net cash used in investing activities is principally comprised of capital expenditures and acquisition related events, offset by proceeds from sale of business.

 

Capital expenditures were $66 million, $33 million, $79 million, $411 million and $30 million in fiscal 2017, the Fiscal 2016 Successor Period, the Fiscal 2016 Predecessor Period, fiscal 2015 and in the six months ended March 31, 2018, respectively.

 

Net cash used in investing activities for the six months ended March 31, 2018 included $30 million of capital expenditures primarily related to portion pack manufacturing and information technology infrastructure. Investing activities for the comparable prior fiscal period included $250 million of proceeds which were recovered from the sale of Keurig ®  Kold TM  assets and $37 million in capital expenditures primarily related to portion pack manufacturing and information technology infrastructure.

 

Investing activities in fiscal 2017 included $66 million of capital expenditures in addition to $250 million of proceeds which were recovered from the sale of Keurig ®  Kold TM  assets. The $66 million of capital expenditures incurred on an accrual basis during fiscal 2017 consisted primarily of $37 million related to information technology infrastructure and systems and $16 million towards portion pack manufacturing.

 

Investing activities in fiscal 2016 included $13,717 million in the Fiscal 2016 Successor Period for the Keurig Acquisition and $33 million and $79 million in the Fiscal 2016 Successor Period and 2016 Fiscal Predecessor Period in capital expenditures. Capital expenditures on an accrual basis related to portion pack manufacturing, information technology infrastructure and transportation assets.

 

Investing activities of $498 million in fiscal 2015 included $411 million of capital expenditures incurred on an accrual basis which consisted primarily of $251 million in new product platforms primarily related to Kold, $35 million related to facilities and related infrastructure, $38 million related to information technology and systems, $19 million related to coffee processing and other equipment, and $25 million related to increasing packaging capabilities.

 

Financing activities

 

Net cash used in financing activities is principally comprised of repayment of long-term debt, dividend payments and proceeds from the issuance of shares.

 

Cash used in financing activities for the six months ended March 31, 2018, the six months ended March 25, 2017, fiscal 2017, the Fiscal 2016 Successor Period, the Fiscal 2016 Predecessor Period and fiscal 2015 totaled $834 million, $1,323 million, $2,026 million, $(13,937) million, $642 million and $972 million, respectively.

 

Net cash used in financing activities for the six months ended March 31, 2018 included $805 million of repayment of revolving line of credit and long-term debt and $23 million in dividend payments. In the same fiscal period of 2017, net cash used in financing activities included $2,879 million in repayment of long-term debt, offset by $450 million in revolving line of credit increase, $1,200 million of proceeds from issuance of debt and $18 million of dividend payments.

 



 

Cash used in (provided by) financing activities for fiscal 2017 included $1,968 million of debt repayment, including refinancing of the Term B Facility (defined below) loans in March 2017. In fiscal 2017, $100 million was drawn against our revolving credit facility, of which a portion was used to fund repayments of our long-term debt. In addition, Maple paid $55 million in dividends.

 

Cash provided by financing activities for the Fiscal 2016 Successor Period included $(13,937) million, related mostly to the acquisition of Keurig Green Mountain

 

Cash used in financing activities for the Fiscal 2016 Predecessor Period totaled $642 million, related mostly to the Company’s share repurchase and the net change in the Company’s revolving line of credit.

 

Cash used in financing activities for fiscal 2015 totaled $972 million, related mostly to the Company’s share repurchase program, the net change in the Company’s revolving line of credit, dividends paid, and repayment of long term debt.

 

Accounts payable program

 

Maple entered into an agreement with a third party to allow participating suppliers to track payment obligations from Maple, and if elected, sell payment obligations from Maple to financial institutions. Suppliers can sell one or more of Maple’s payment obligations at their sole discretion and the rights and obligations of Maple to its suppliers are not impacted. Maple has no economic interest in a supplier’s decision to enter into these agreements and no direct financial relationship with the financial institutions. Maple’s obligations to its suppliers, including amounts due and scheduled payment terms, are not impacted. As of March 31, 2018, September 30, 2017 and September 24, 2016, $1.5 billion, $1.2 billion, and $0, respectively, of Maple’s outstanding payment obligations is payable to suppliers who utilize these third party services.

 

Long term debt

 

On March 3, 2016, Keurig and its parent, Maple Subsidiary, entered into a Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent and as collateral agent (the “Administrative Agent”), and the lenders party thereto from time to time (the “Credit Agreement”). Under the Credit Agreement, inclusive of the incremental amendments noted below, the Company maintains secured credit facilities consisting of (i) a $700 million revolving credit facility (the “Revolving Facility”), and (ii) a Term A loan facility in the original principal amount of $4.275 billion (the “Term A Facility”). The Term B loan facility, consisting of a U.S. dollar denominated tranche of $1.875 billion and a euro denominated tranche in the principal amount of €842 million, was extinguished on March 13, 2017 (the “Term B Facility”). The initial proceeds of the Term A Facility and Term B Facility were used by Keurig for several purposes, including refinancing all outstanding indebtedness of Keurig under Keurig’s former Credit Agreement, dated June 29, 2015, with Bank of America, N.A., as administrative agent, funding a portion of the consideration for the Keurig Acquisition and paying fees, costs, and expenses related to the transactions in the Keurig Acquisition, including the equity contributions. At March 31, 2018, there is $700 million available under the Revolving Facility. Maple has $1,815 million in related party debt which matures in 2023 and has a fixed interest rate of 5.5%.

 

On March 24, 2016, Keurig, Maple Subsidiary, the Guarantors named therein, the Administrative Agent and Bank of China (Luxembourg) S.A. (“Bank of China”) entered into an amendment to the Credit Agreement, whereby Bank of China provided the Company with a $100 million incremental Term A loan, which was structured as an increase in the aggregate principal amount of the Term A Facility, having identical terms and conditions as the existing Term A Facility. In conjunction with the amendment, the Company notified its lenders that it would use the proceeds from the incremental Term A Facility to prepay its U.S. dollar Term B Facility borrowings in the principal amount of $100 million on March 24, 2016.

 

On March 13, 2017, Keurig, Maple Subsidiary, the Guarantors named therein, the Administrative Agent and multiple banks (Citibank N.A., Bank of America, N.A., Royal Bank of Canada and Wells Fargo Bank, N.A.) entered into an amendment to the Credit Agreement, whereby borrowings under the Term B Facility (both USD and EUR) were extinguished and an incremental $1,200 million principal amount was borrowed under the Term A

 



 

Facility (“Second Amendment Term A Loan Commitment”). An additional $200 million revolving facility was also committed (“Second Amendment Revolving Loans”) as a result of this transaction. The terms of the additional borrowings are identical to the original borrowing under the existing Term A Facility. As a result of the 2017 refinancing, the Company recognized a loss on extinguishment of debt in March 2017 of $43 million which was primarily related to deferred financing fees and original issue discount on borrowings under the Term B Facility. This was recorded within Other income (loss), net in the consolidated statements of operations.

 

The Credit Agreement permits Keurig to request incremental borrowings to the Revolving Facility, and/or the establishment of one or more new term loan commitments, in an aggregate amount not to exceed $600 million. The lenders under the Revolving Facility will not be under any obligation to provide any such increases or new term loan commitments, and the availability of such additional increases and/or establishment of new term loan commitments is subject to customary terms and conditions. At March 31, 2018, Keurig had $0 million outstanding under the Revolving Facility and $6 million in letters of credit with $700 million available for borrowing.

 

Keurig’s average effective interest rate as of March 31, 2018 and March 25, 2017 was 3.18% and 2.66%, respectively, excluding amortization of deferred financing charges and the effect of interest rate swap agreements, which do not meet the criteria for hedge accounting. Keurig also pays a commitment fee on the average daily unused portion of the revolving credit facilities, ranging from 0.25% to 0.30% of the dollar amount of the unused portion of our revolving credit facilities.

 

The Credit Agreement contains customary representations and warranties, and affirmative and negative covenants. Further, the Credit Agreement contains a financial covenant, which applies solely with respect to the Revolving Facility and Term A Facility, requiring that Keurig not exceed the then applicable maximum total net leverage ratio, which is tested at the end of each calendar quarter. At March 31, 2018, Keurig was in compliance with these covenants. In addition, the Credit Agreement contains certain mandatory prepayment requirements and customary events of default. The Credit Agreement will be prepaid and terminated at the closing of the merger.

 

Interest rate swaps and foreign currency instruments

 

Maple is exposed to interest rate risk associated with USD variable rate debt. On March 3, 2016, Maple entered into $2.85 billion in interest rate swaps where Maple receives a variable rate and pays a fixed rate on these swaps with terms ranging from two to seven years. In fiscal years 2018-2020, $150 million of the total notional will mature each year, $2.1 billion in 2021 and $300 million in 2023. These swaps are not amortized. Maple also occasionally enters into certain foreign currency forward contracts to hedge certain exposures that are not designated as hedging instruments for accounting purposes. At March 31, 2018, Maple had open foreign currency forward contracts with a total notional of $386 million. In fiscal year 2018, $91 million of the total notional will mature, $10 million will mature in fiscal year 2019 and with the remaining $285 million in 2024. These contracts are recorded at fair value, with the changes in fair value recognized in the consolidated statements of operations.

 

Maple does not hold or use derivative financial instruments for trading or speculative purposes.

 

Maple is exposed to credit loss in the event of nonperformance by the counterparties to these financial instruments, however, nonperformance is not anticipated.

 

Maple believes that its cash flows from operating activities, existing cash and its credit facilities will provide sufficient liquidity through the next 12 months to pay all liabilities in the normal course of business, fund anticipated capital expenditures, service debt requirements and pay dividends. Maple continually evaluates its capital requirements and access to capital. Maple may choose to raise additional capital through equity and/or debt financing to provide flexibility to assist with managing several risks and uncertainties inherent in a growing business including potential future acquisitions or increased capital expenditure requirements.

 

A summary of future cash requirements related to its outstanding long-term debt, minimum lease payments and purchase commitments as of September 30, 2017 is as follows (in millions):

 



 

in millions

 

Long-term
debt

 

Interest
expense

 

Operating
lease
obligations

 

Capital
lease
obligations

 

Financing
obligations

 

Purchase
obligations

 

Total

 

FY 2018

 

$

219

 

$

196

 

$

12

 

$

3

 

$

12

 

$

768

 

$

1,210

 

FY 2019 - FY 2020

 

438

 

391

 

20

 

8

 

23

 

161

 

1,041

 

FY 2020 - FY 2021

 

3,277

 

322

 

16

 

8

 

23

 

 

3,646

 

Thereafter

 

1,815

 

50

 

10

 

17

 

84

 

 

1,976

 

Total

 

$

5,749

 

$

959

 

$

58

 

$

36

 

$

142

 

$

929

 

$

7,873

 

 

Critical accounting estimates

 

Use of estimates

 

The preparation of financial statements in conformity with GAAP requires Maple to make estimates and assumptions that affect amounts reported in the accompanying consolidated financial statements. Significant estimates and assumptions by management affect Maple’s inventory, deferred tax assets and liabilities, allowance for sales returns, warranty reserves, accrued restructuring and other certain accrued expenses, goodwill, intangible and long-lived assets and stock-based compensation.

 

Although Maple regularly assesses these estimates, actual results could differ from these estimates. Changes in estimates are recorded in the period they become known. Maple bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances.

 

Business combinations

 

Maple uses the acquisition method of accounting for business combinations and recognizes assets acquired and liabilities assumed measured at their fair values on the date acquired. Goodwill represents the excess of the purchase price over the fair value of the net assets. The fair values of the assets and liabilities acquired are determined based upon Maple’s valuation. The valuation involves making significant estimates and assumptions, which are based on detailed financial models, including the projection of future cash flows, the weighted average cost of capital and any cost savings that are expected to be derived in the future.

 

Goodwill and intangibles

 

Goodwill is tested for impairment annually. Goodwill is assigned to reporting units for purposes of impairment testing. A reporting unit is the same as an operating segment or one level below an operating segment. Maple may assess qualitative factors to determine if it is more likely than not (i.e., a likelihood of more than 50%) that the fair value of a reporting unit is less than its carrying amount, including goodwill. If Maple determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, no further testing is necessary. If, however, Maple determines that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, Maple performs the first step of a two-step goodwill impairment test. The assessment of qualitative factors is optional and at Maple’s discretion. Maple may bypass the qualitative assessment for any reporting unit in any period and perform the first step of the quantitative goodwill impairment test. Maple may resume performing the qualitative assessment in any subsequent period. The first step is a comparison of each reporting unit’s fair value to its carrying value. Maple estimates fair value based on the income approach, using discounted cash flows, with consideration given to the market approach, using the guideline company method and comparable transaction method. The reporting unit’s discounted cash flows require significant management judgment with respect to sales forecasts, gross margin percentages, SG&A expenses, capital expenditures and the selection and use of an appropriate discount rate. The projected sales, gross margin and SG&A expense rate assumptions and capital expenditures are based on Maple’s annual business plan or other forecasted results. Discount rates reflect market-based estimates of the risks associated with the projected cash flows directly resulting from the use of those assets in operations. The market approach uses observable market data such as comparable companies in similar lines of business that are publicly traded or which are part of a public or private transaction (to the extent available). The estimates of fair value of reporting units are based on the best information available as of the date of the assessment. If the carrying value of a reporting unit exceeds its estimated fair value in the first step, a

 



 

second step is performed, which requires Maple to allocate the fair value of the reporting unit derived in the first step to the fair value of the reporting unit’s net assets, with any fair value in excess of amounts allocated to such net assets representing the implied fair value of goodwill for that reporting unit. If the implied fair value of the goodwill is less than the book value, goodwill is impaired and is written down to the implied fair value amount.

 

In fiscal 2017, Maple changed its annual impairment testing date from the end of the fiscal year to July 1st to better align to when forecast data is shared with its stockholders. In addition, Maple has early adopted ASU 2017-04 Intangibles—Goodwill and Other . Under the new standard, if the carrying value of the reporting unit exceeds its fair value an impairment charge will be recorded in current earnings for the difference up to the carrying value of the goodwill recorded. All other aspects of Maple’s annual goodwill impairment test remain the same.

 

Revenue recognition

 

Revenue from sales of brewing systems, coffee and other specialty beverages in pods, and coffee in more traditional packaging including whole bean and ground coffee selections in bags and ground coffee in fractional packs is recognized when title and risk of loss passes to the customer, which generally occurs upon shipment or delivery of the product to the customer as defined by the contractual shipping terms. Shipping charges billed to customers are also recognized as revenue, and the related shipping costs are included in cost of sales. Cash received in advance of product delivery is recorded in deferred revenue, which is included in other current liabilities on the accompanying consolidated balance sheet, until earned.

 

The majority of Maple’s distribution to major retailers is processed by fulfillment entities. The fulfillment entities receive and fulfill sales orders and invoice certain retailers. All products shipped by Maple to the fulfillment entities are owned by the Company and included in inventories on the accompanying consolidated balance sheet. Maple recognizes revenue when delivery of the product from the fulfillment entity to the retailer has occurred based on the contractual shipping terms and when all other revenue recognition criteria are met.

 

Sales of brewing systems, pods and other products are recognized net of any discounts, returns, allowances and sales incentives, including coupon redemptions and rebates. Maple estimates the allowance for returns using an average return rate based on historical experience and an evaluation of contractual rights or obligations. Maple routinely participates in trade promotion programs with customers, including customers whose sales are processed by the fulfillment entities, whereby customers can receive certain incentives and allowances which are recorded as a reduction to sales when the sales incentive is offered and committed to or, if the incentive relates to specific sales, at the later of when that revenue is recognized or the date at which the sales incentive is offered. These incentives include, but are not limited to, cash discounts. Allowances to customers that are directly attributable to and supportable by customer promotional activities are recorded as selling expenses at the time the promotional activity occurs.

 

Roasters licensed by Maple to manufacture and sell pods, both to Maple for resale and to their other coffee customers, are obligated to pay a royalty to Maple upon shipment to their customer. Maple records royalty revenue upon shipment of pods by licensed roasters to third-party customers as set forth under the terms and conditions of various licensing agreements. For shipments of pods to Maple for resale, this royalty payment is recorded as a reduction to the carrying value of the related pods in inventory and as a reduction to cost of sales when sold through to third-party customers by Maple.

 

Off-Balance sheet arrangements

 

Maple does not have any off-balance sheet arrangements. Maple does not have, nor does it engage in, transactions with any special purpose entities.

 

Quantitative and qualitative disclosures about market risk

 

Market risks relating to our operations result primarily from changes in interest rates, foreign exchange and the commodity “C” price of coffee (the price per pound quoted by the Intercontinental Exchange). To address these risks, we enter into hedging transactions as described below. We do not engage in speculative transactions, nor do

 



 

we hold derivative instruments for trading purposes.

 

For purposes of specific risk analysis, we use sensitivity analysis to determine the impacts that market risk exposures may have on our financial position or earnings.

 

Interest rate risks

 

The table below provides information about our debt obligations, some of which are sensitive to changes in interest rates. The table presents principal cash flows and weighted average interest rates by fiscal year:

 

 

 

2018

 

2019

 

2020

 

2021

 

2022

 

Thereafter

 

Total debt
outstanding
and average
effective
interest rate
at
March 31,
2018

 

Variable rate (in thousands)

 

$

109,375

 

$

218,750

 

$

218,750

 

$

2,582,119

 

$

 

$

 

$

3,128,994

 

Average interest rate(1)

 

3.18

%

3.18

%

3.18

%

3.18

%

%

%

3.18

%

Fixed rate (in thousands)

 

$

140

 

$

176

 

$

 

$

 

$

 

$

1,815,000

 

$

1,815,316

 

Average interest rate

 

4.91

%

4.91

%

%

%

%

5.5

%

 

 


(1)          Based on variable rates in effect as of March 31, 2018.

 

At March 31, 2018, we had $3,129 million of outstanding debt obligations subject to variable interest rates. Should all our variable interest rates increase by 100 basis points, we would incur additional interest expense of $31 million over the life of the debt on March 31, 2018 balances. As discussed further under the heading “Liquidity and Capital Resources” the Company has historically entered into interest rate swap agreements. As of March 31, 2018, there were $2,700 million in interest rate swap agreements in effect.

 

Commodity price risks

 

The “C” price of coffee is subject to substantial price fluctuations caused by multiple factors, including, but not limited to, weather and political and economic conditions in coffee-producing countries. Our gross profit margins can be significantly impacted by changes in the “C” price of coffee. We enter into coffee purchase commitments in an attempt to secure an adequate supply of coffee. These agreements are tied to specific market prices (defined by both the origin of the coffee and the time of delivery) but we have significant flexibility in selecting the date of the market price to be used in each contract. At September 30, 2017, the Company had approximately $228 million in green coffee purchase commitments, of which approximately 82% had a fixed price. At September 24, 2016, the Company had approximately $199 million in green coffee purchase commitments, of which approximately 83% had a fixed price. At March 31, 2018, Maple had approximately $203 million in green coffee purchase commitments, of which approximately 99% had a fixed price.

 

Commodity price risks at March 31, 2018 are as follows (in thousands, except average “C” price):

 

Purchase commitments

 

Total cost(1)

 

Pounds

 

Average “C” price

 

Fixed(2)

 

$

145,936

 

96,410

 

$

1.28

 

Variable(3)

 

$

1,719

 

1,048

 

$

1.23

 

 

 

$

147,655

 

97,458

 

 

 

 


(1)          Total coffee costs typically include a premium or “differential” in addition to the “C” price.

 



 

(2)          Excludes $55 million in price-fixed coffee purchase commitments (28.4 million pounds) that are not determined by the “C” price.

(3)          Price-to-be-established green coffee purchase commitments.

 

We regularly use commodity-based financial instruments to hedge price-to-be-established coffee purchase commitments with the objective of minimizing cost risk due to market fluctuations. These financial instruments are recorded at fair value and are not designated as hedging instruments for accounting purposes. At September 30, 2017, we held outstanding financial instruments on coffee covering 32.4 million pounds of coffee with a fair market value of $0.4 million, gross of tax. At September 24, 2016, we held outstanding financial instruments on coffee covering 9.4 million pounds of coffee with a fair market value of $1 million, gross of tax. At March 31, 2018, we held outstanding financial instruments on coffee covering 16.8 million pounds of coffee with a fair market value of $(2) million, gross of tax. These outstanding financial instruments economically hedge our price-to-be-established green coffee purchase commitments.

 

At September 30, 2017, we are exposed to approximately $40 million in price-to-be-established green coffee purchase commitments that do not have a fixed price as compared to $35 million in price-to-be-established green coffee purchase commitments that did not have a fixed price at September 24, 2016. At March 31, 2018, we are exposed to approximately $2 million in price-to-be-established green coffee purchase commitments that do not have a fixed price. A hypothetical 10% movement in the “C” price would increase or decrease our financial commitment for these purchase commitments outstanding at March 31, 2018 by approximately $0.2 million.

 

We are also subject to commodity price risk as our manufacturing and transportation costs are affected by various market factors including the availability of supplies of particular forms of energy and energy prices, as well as price risk for utilities and various manufacturing inputs which are used in our manufacturing operations. Derivative instruments have not been used to manage these risks.

 

Foreign currency exchange rate risk

 

Presently, our foreign operations are primarily related to our Canada segment, which is subject to risks, including, but not limited to, unique economic conditions, changes in political climate, differing tax structures, other regulations and restrictions, and foreign exchange rate volatility. Accordingly, our future results could be materially adversely affected by changes in these or other factors. We also source our green coffee, certain production equipment, and components of our brewers and manufacturing of our brewers from countries outside the U.S., which are subject to the same risks described for Canada above; however, most of our green coffee and brewer purchases are transacted in the U.S. dollar.

 

The majority of the transactions conducted by our Canada segment are in the Canadian dollar. As a result, our revenues are adversely affected when the U.S. dollar strengthens against the Canadian dollar and are positively affected when the U.S. dollar weakens against the Canadian dollar. Conversely, our expenses are positively affected when the U.S. dollar strengthens against the Canadian dollar and adversely affected when the U.S. dollar weakens against the Canadian dollar.

 

We occasionally use foreign currency forward contracts to hedge certain capital purchase liabilities for production equipment with the objective of minimizing cost risk due to market fluctuations. We designate these contracts as fair value hedges and measure the effectiveness of these derivative instruments at each balance sheet date. The changes in the fair value of these instruments along with the changes in the fair value of the hedged liabilities are recognized in net gains or losses on foreign currency on the consolidated statements of operations. We had no outstanding foreign currency forward contracts designated as fair value hedges at March 31, 2018.

 

In addition, we use foreign currency forward contracts to hedge the purchase and payment of certain purchases denominated in USD. These contracts are recorded at fair value and are not designated as hedging instruments for accounting purposes. As a result, the changes in fair value are recognized in the Gain (loss) on financial instruments, net line in the consolidated statements of operations. For this exposure, we had outstanding foreign currency forward contracts with a notional value of $101 million at March 31, 2018. In fiscal year 2018, $91 million of the total notional will mature.

 



 

Our Canadian Business Unit holds an intercompany note denominated in USD. The balance of the note at March 31, 2018 was $285 million. This foreign currency exposure is currently hedged with forward contracts, for a notional of $285 million maturing in 2024. These contracts are recorded at fair value and are not designated as hedging instruments for accounting purposes. As a result, the changes in fair value are recognized in the Gain (loss) on financial instruments, net line in the consolidated statements of operations.

 

The market risk associated with the foreign currency exchange rate movements on foreign exchange contracts is expected to mitigate the market risk of the underlying obligation being hedged. A hypothetical 10% movement in the CAD:USD rate would increase or decrease our financial commitment for these foreign exchange contract forwards outstanding at March 31, 2018 by approximately $0.2 million.

 

Changes in and disagreements with accountants on accounting and financial disclosure

 

None.

 



 

Business

 

Overview

 

Maple is a holding company that conducts substantially all of its business through Keurig. Keurig is a leading producer of innovative single-serve brewing systems and specialty coffee in the U.S. and Canada. Keurig’s multi-brand brewing system is aimed at changing the way consumers prepare and enjoy coffee and other beverages both at home and away from home in places such as offices, restaurants, cafeterias, convenience stores and hotels. Keurig develops and sells a variety of Keurig ®  brewers and, in addition to specialty coffee, produces and sells a variety of other specialty beverages in pods (including hot and iced teas, hot cocoa and other beverages) for use with Keurig ®  brewing systems. Keurig also offers traditional whole bean and ground coffee in other package types, including bags, fractional packages and cans. Keurig markets and sells its products to retailers, including supermarkets, mass merchandisers, club stores, pure-play ecommerce retailers, and office super stores; to restaurants, hotel chains, office product and coffee distributors, and partner brand owners; and directly to consumers through its websites. Keurig has differentiated its company and its Keurig ®  brand through its ability to create and sustain partnerships with other leading coffee, tea and other beverage brand companies, as well as leading private label brands, through multi-year agreements that best suit Keurig and each brand’s interests and strengths. As a result, Keurig and its partners are able to bring consumers high-quality coffee and other beverage experiences from the brands they love, all through the one-touch simplicity and convenience of Keurig ®  brewing systems. Keurig currently offers more than 600 beverage varieties from over 75 owned, licensed, partner and private label brands, including the top ten best-selling coffee brands in the U.S. according to IRI, as part of the Keurig ®  brewing system.

 

Keurig’s focus is to increase household penetration for brewers in homes and away from home locations through brewer and beverage innovation and consumer marketing. Approximately 73% of U.S. households prepare coffee at home, and the primary source of Keurig’s growth within the at home channel has been, and it believes will continue to be, conversion of consumers from batch/drip coffee preparation to single-serve. Keurig believes that trends such as smaller household size, significant expansion in coffee varieties and increased preference for fresh, quality coffee make single-serve an attractive, on-trend consumer offering. As evidence of Keurig’s ability to deploy its strategy in line with these trends, Keurig estimates that as of the end of 2017, it had achieved penetration of approximately 20% of households in the U.S.. Further, based on proprietary research it recently conducted, as well as reference to penetration statistics applicable to other countries where single-serve brewing is more mature, Keurig believes that there is substantial potential to expand household adoption beyond its current level in the U.S. and Canada. For the last four years, Keurig has had ten of the top 15 best-selling home coffeemakers by dollar volume in the U.S. according to NPD Group; and for the 2017 calendar year, Keurig had the top seven best-selling home coffeemakers by dollar volume in the U.S. according to NPD Group. Keurig was also named #15 on the 2017 list of “America’s Most Relevant Brands”, a brand relevance study conducted by Prophet, Inc.

 

In recent years, growth in the coffee industry has come primarily from the specialty coffee category throughout the U.S. and Canada, and single-serve has been the fastest growing segment of the specialty coffee category. Concurrently, consumers have been more frequently seeking to enjoy premium experiences within the comfort and convenience of their own homes, including the consumption of specialty coffee. Through the Keurig ®  brewing system, Keurig and its leading specialty coffee, tea and other beverage partners are able to address this consumer trend and drive significant change in the way consumers prepare and enjoy coffee and other hot beverages at home.

 

Keurig’s business has been driven predominantly by an increase in adoption of Keurig ®  brewing systems, which include the brewer, related pods and accessories. In both fiscal 2017 and the first quarter of fiscal 2018, approximately 95% of Keurig’s consolidated net sales were attributed to the combination of pods and Keurig ®  brewing systems and related accessories, with approximately 30% of all coffee sales during those periods coming from brands owned by or exclusively licensed to Keurig.

 

Keurig’s business strategy involves using its consumer insights to develop innovative new brewing systems and beverages; continually improving and refining its current systems and beverages; and developing and managing marketing programs to drive Keurig ®  brewing system adoption in order to generate ongoing demand for pods. Keurig currently targets opportunities primarily in U.S. and Canadian households, offices, restaurants, cafeterias, convenience stores and hotels. Keurig also recently launched the Keurig ®  brewing system in Mexico to expand its

 



 

addressable opportunities more broadly.

 

The products

 

Pods

 

Keurig offers pods primarily in the K-Cup ®  single-serve pod format. Keurig also offers single-serve Vue ® , K-Mug TM , and Rivo ®  pod formats, as well as multi-serve K-Carafe TM  pods. Keurig offers high-quality Arabica bean coffee including single-origin, organic, flavored, limited edition and proprietary blends. Keurig also procures Robusta bean coffee for use in certain blends. Keurig carefully selects its coffee beans and appropriately roasts the coffees to optimize their taste and flavor differences. Keurig manufactures and sells pods of its own brands, such as Green Mountain Coffee Roasters ® , The Original Donut Shop ® , Van Houtte ®  and Laughing Man ® , as well as participating brands through licensing and manufacturing agreements, including brands such as Caribou Coffee ® , Dunkin’ Donuts TM , Eight O’Clock ® , Folgers ® , Maxwell House ® , Newman’s Own ®  Organics, Peet’s Coffee ®  and Starbucks ® . Keurig also has licensing agreements for manufacturing, distributing, and selling tea under brands such as Celestial Seasonings ® , Lipton ® , Snapple ® , and Tazo ® . In addition to coffee and tea, Keurig also produces and sells pods for cocoa, including through a licensing agreement for the Swiss Miss ®  brand, and hot apple cider.

 

Expanded or new brand offerings in fiscal 2017 for the Keurig ®  brewing system included the introduction of the REVV ®  No Surrender TM , Afterburner TM , and Turbocharger TM  K-Cup ®  pods, three intense brews offering a series of rich and balanced, dark-roasted strong coffee.

 

Brewers and accessories

 

Keurig has developed a robust brewer innovation pipeline, launching its first new brewers in several years in the summer of 2017 with plans to launch additional new brewers every six months over the course of the next few years, described in more detail under the section titled “ —Corporate Objective and Philosophy ” below.

 

Keurig offers a variety of accessories for Keurig ®  brewing systems, including pod storage racks, baskets, and brewer carrying cases. Keurig also sells other coffee-related equipment and accessories.

 

Other products and royalties

 

Keurig sells coffee in other package types in addition to pods, such as bagged coffee and cans (for the grocery and mass channels) and fractional packages and ancillary products (for the office coffee and food service channels). Keurig also earns royalties from licensees under licensing agreements described in more detail under the section titled “ —Business Relationships ” below.

 

Business relationships

 

Keurig’s business relationships with participating brands are generally established through licensing or manufacturing arrangements.

 

Under licensing arrangements, Keurig licenses the right to manufacture, distribute and sell pods through Keurig’s distribution channels using the brand owners’ marks. In these instances, the brand owner pays Keurig a royalty based on pods shipped by or for the brand owner.

 

Under manufacturing arrangements, Keurig manufactures finished beverage products using raw materials sourced by it or provided by the brand owner. In both instances, once the manufacturing process is complete, Keurig sells the finished product either to the brand owner or to its customers or, depending on the relationship, directly to consumers. Under certain manufacturing arrangements, in addition to manufacturing the beverage for sale to the brand owner, Keurig has the right to sell the beverages using the brand owner’s marks in certain of Keurig’s channels through a licensing arrangement. In such cases, Keurig pays a royalty to the brand owner based on its sales of finished products that include the brand owner’s mark.

 



 

Keurig’s strengths

 

Keurig believes its innovative system approach provides it with a unique competitive advantage in the marketplace, as Keurig designs all aspects of the brewing system, including the beverages, the pods, the pod manufacturing lines, the appliances and their components. Keurig believes that the consumer benefits delivered by the Keurig ®  brewing system will preserve Keurig’s leadership position in the marketplace and give it the opportunity to continue to grow its coffee business and expand into other beverage categories such as the liquid refreshment beverage (“LRB”) market upon consummation of the merger. Keurig also believes that it has differentiated its company and its Keurig ®  brand through its ability to create and sustain partnerships with other leading coffee, tea and other beverage brand companies, as well as leading private label brands, through multi-year agreements that best suit Keurig and each brand’s interests and strengths. As a result, Keurig and its partners are able to bring consumers high-quality coffee and other beverage experiences from the brands they love, all through the one-touch simplicity and convenience of Keurig ®  brewing systems. Keurig continues to invest to ensure innovation in its current brewing systems brings the right products to consumers at the right value and within the appropriate cost framework for Keurig. Along those lines, Keurig is redesigning its supply chain to ensure that Keurig will be a low-cost leader in pod manufacturing and brewer sourcing. Keurig has and will continue to reinvest a portion of these efficiencies in price reductions to its partners, which Keurig expects will result in lower cost pods for consumers, as well as in increased marketing and innovation, all with the goal of driving increased household penetration.

 

Keurig believes the primary consumer benefits delivered by Keurig ®  brewing systems are as follows:

 

1.     Quality—expectations of the quality of beverages consumers drink have increased over the last several years and, Keurig believes, with Keurig ®  brewing systems, consumers can be assured they will get a high-quality, consistently produced beverage every time.

 

2.     Convenience—Keurig ®  brewing systems prepare beverages at the touch of a button with no mess, no fuss.

 

3.     Choice—Keurig offers more than 600 individual beverage varieties within the Keurig ®  brewing system, allowing consumers to enjoy and explore a wide range of taste profiles. In addition to a variety of brands of coffee and tea, Keurig also produces and sells iced teas, hot and iced fruit brews, hot cocoa and other dairy-based beverages in pods.

 

Keurig sees these benefits as being its competitive advantage and believes it is the combination of these attributes that makes Keurig ®  brewing systems appealing to consumers.

 

Corporate objective and philosophy

 

Keurig’s objective is to be a leader in the beverage business by selling high-quality, premium beverages and innovative beverage systems that consistently provide a superior beverage experience.

 

Essential elements of Keurig’s philosophy and approach include:

 

High-quality beverages.   Keurig is passionate about providing high-quality beverages, including roasting great coffees from some of the highest-quality Arabica beans available from the world’s coffee-producing regions and using a roasting process designed to optimize each coffee’s individual taste and aroma. Keurig is also passionate about providing other high-quality beverages such as teas, sourced from premium tea growing regions.

 

Increasing adoption of Keurig® brewing systems in the U.S. and Canada.  While Keurig is positioned as a leader in the hot beverage marketplace, with more than 25 million Keurig ®  brewers installed in North American homes, offices and other venues outside of the home, Keurig believes there are opportunities in the U.S. and Canada to increase brand awareness and penetration of Keurig ®  brewing systems. In 2017, Keurig:

 

·                   Launched a highly integrated marketing campaign to drive brand awareness and demand featuring television, film and theater star James Corden, who challenged America to Brew the Love TM  and ditch their drip coffeemaker for a Keurig brewer; and

 



 

·                   Deployed new marketing tactics with highly engaging content focused on key consumer targets. A Direct Response Television (DRTV) campaign was launched targeting drip coffee drinkers with multiple messages designed to overcome system trial barriers, while new digital partnerships expanded messaging reach to a younger demographic.

 

Expanding beverage choice through its owned, licensed and partner brand offerings.  Keurig’s relationships with other leading coffee and other hot beverage brands are established with careful consideration of potential economics. Keurig expects to continue to enter into these mutually beneficial relationships in its efforts to expand choice and diversify its portfolio of brands with the expectation that these relationships will lead to increased Keurig ®  beverage system awareness and household adoption, in part through the participating brands’ advertising and merchandising activities. In 2017, Keurig renewed and extended key partner contracts, including leading national and retailer brands, to offer market-leading coffee variety for its consumers. In addition, in 2017 Keurig also increased investment behind some of its key owned coffee brands, including Green Mountain Coffee Roasters ® , the second largest brand in single-serve coffee, and The Original Donut Shop ® , America’s #1 selling K-Cup ®  pod.

 

Launching new, innovative brewing system technologies and platforms.  Keurig has refocused on innovation for its brewing system and developed a robust brewer innovation pipeline that is leveraging insights Keurig uncovered through extensive consumer research to launch brewers with features and benefits designed to overcome barriers to single-cup system adoption.

 

Keurig introduced its first new brewers in several years in the summer of 2017 and now has a multi-year innovation pipeline of new brewers, with new innovation planned to launch every six months over the course of the next few years. Some highlights of recent activity include:

 

·                   Keurig’s ®  K-Compact™ coffeemaker—an exclusive brewer partnership with WalMart, which launched in June 2017—is Keurig’s most slender, space saving, and affordable single-serve coffeemaker. Through February 16, 2018, the K-Compact is averaging a 4.3 star review rating on Walmart.com.

 

·                   Keurig’s ®  K-Select™ coffeemaker launched across all retail channels in September 2017 at a mainline price point and includes two of the most highly valued brewer features—a Strong Brew setting for bolder coffee and a large 12 oz. brew size. Through February 16, 2018, the K-Select is averaging a 4.1 star review rating on Amazon.com.

 

·                   Keurig’s ®  K-Elite TM  coffeemaker is the newest Keurig ®  single-serve brewer, which began shipping in early February 2018. The K-Elite blends a premium design with a full range of personalization features for the ultimate in beverage customization. Key features include a Strong Brew setting for bolder coffee and an Iced button, which makes it easy to brew hot over ice and deliver a refreshing, full-flavored iced coffee.

 

·                   During the course of 2017 Keurig launched a private research panel with more than 15,000 consumers, utilizing WiFi connected brewers to deliver the first-ever point-of-consumption data in consumer packaged goods. The data provides Keurig and its partners insight into consumer preferences as Keurig and its partners look to improve Keurig’s brewers and Keurig’s and all of its partners’ beverage products to better meet consumer needs and create value for all brands and partners within the Keurig system.

 

Keurig’s brewing system has been designed and optimized for producing consistent, high-quality coffee. In addition, Keurig has expanded its brewing system selection to include other beverages such as hot apple cider, hot cocoa, and brew-over-ice teas and coffees. Keurig holds U.S. and international patents covering a range of its pod and brewing technology innovations, with additional patent applications in process. Keurig believes its focus on innovation and quality, all directed to delivering a consistently superior cup of coffee, while at the same time transforming its operations toward the goal of becoming a low-cost leader in pod manufacturing and brewer sourcing, differentiate it among competitors in the coffee and coffeemaker industries.

 

Product distribution.  Keurig seeks to create consumers for life. Keurig believes that coffee and other beverages are convenience purchases, and Keurig utilizes its multi-channel distribution network of distributors, traditional retailers, pure-play ecommerce retailers, and its own websites to make its products widely and easily available to consumers.

 



 

Sustainable business practices.  Keurig focuses its efforts in three key practice areas: Coffee, Earth and Community and is on a journey to achieve the following goals by the end of 2020 (progress through 2017 or to date noted in parentheses below in each goal):

 

·                   100% of K-Cup ®  pods will be recyclable (Recyclable K-Cup ®  pods are in production and all K-Cup ®  pods manufactured in Canada will be recyclable by the end of 2018, with 100% conversion in the U.S. on target for completion by 2020).

 

·                   Zero waste-to-landfill at Keurig’s owned and operated manufacturing and distribution facilities (98% manufacturing waste diversion rate).

 

·                   25% reduction in lifecycle greenhouse gas emissions of brewed beverages vs. 2012 baseline (100% achieved).

 

·                   Balance the water in Keurig’s 2020 brewed beverage volume of all Keurig beverages, ounce for ounce (100% balance of water used in fiscal 2017).

 

·                   Engage one million people in Keurig’s supply chain to significantly improve their lives (Over 485,000 people engaged toward goal).

 

·                   Source 100% of primary agricultural and manufactured products according to established Keurig responsible sourcing guidelines (In fiscal 2017, approximately 85% of coffee traceable back to the exporter, mill, group or farm and 31% sustainably certified).

 

·                   Engage 100% of employees to understand Keurig’s vision and values and present opportunities that allow them to contribute to Keurig’s targets (78% of employees engaged in a sustainability program or education initiative).

 

Corporate culture.  Keurig believes in doing business with a purpose. Since its beginning in 1981, Keurig has operated to benefit its consumers, customers, employees, and communities by deeply embedding its values, ethics and integrity into all that Keurig does. The way Keurig thinks, acts, leads, partners, and executes is guided by its values. Keurig’s Code of Conduct is posted on its corporate website and explains how Keurig integrates its purpose, mission, and values into its daily decisions. It demonstrates Keurig’s commitment to its stakeholders to be a responsible corporate citizen and a good business partner, and Keurig expects to continue this commitment following consummation of the merger.

 

Customers

 

Keurig’s customers include its partner brand owners; retailers, including supermarkets, mass merchandisers, club stores, pure-play ecommerce retailers, and office super stores; away from home channel participants, including restaurants, hotel chains, office product and coffee distributors; and end-use consumers.

 

Supply chain

 

Keurig operates production and distribution facilities in North America in Knoxville, Tennessee; Essex, Waterbury and Williston, Vermont; Windsor, Virginia; Sumner, Washington; and Montreal, Quebec. Keurig’s production facilities include specially designed proprietary high-speed packaging lines that manufacture pods using freshly roasted and ground coffee as well as tea, cocoa and other products.

 

Keurig utilizes third-party contract manufacturers located primarily in China and Malaysia for beverage appliance manufacturing. In order to ensure the quality and consistency of its products manufactured by third-party manufacturers in Asia, Keurig has an Asia-based research and development and quality control function that provides manufacturing oversight, project management, and quality support.

 



 

Green coffee cost and supply

 

Keurig purchased approximately 204 million pounds of coffee in fiscal 2017. Keurig utilizes a combination of outside brokers and direct relationships with farms, estates, cooperatives and cooperative groups for its supply of green coffee. Outside brokers provide the largest supply of Keurig’s green coffee.

 

In fiscal 2017, approximately 31% of Keurig’s purchases were from responsible sources. In fiscal 2017, approximately 85% of Keurig’s purchases were traceable back to the exporter, mill, group or farm. However, traceable does not necessarily equal responsibly sourced. As a result, we are partnering with certification and verification organizations to reach our 2020 target and ensure a rich supply of responsibly sourced coffee.

 

The supply and price of coffee are subject to high volatility. Supply and price of all coffee grades are affected by multiple factors, such as weather, pest damage, politics, competitive pressures, the relative value of the U.S. currency and economics in the producing countries.

 

Marketing and distribution

 

Since becoming a private company following its acquisition by a JAB-led investor group in March 2016, Keurig has renewed its marketing investment, which has contributed to improved top-line volume growth, increasing U.S. household penetration for Keurig ®  brewers to 20% from 17%, based on internally conducted national surveys. To support customer growth in the U.S. and Canada, Keurig utilizes separate selling organizations and different selling strategies for each of its multiple channels of distribution.

 

In the at home channel, Keurig targets batch/drip coffee drinkers who can benefit from high-quality coffee and other beverage experiences from the brands they love, all through the one-touch simplicity and convenience of Keurig ®  brewing systems. Keurig promotes its home brewing systems primarily through retailers, including supermarkets, mass merchandisers, club stores, pure-play ecommerce retailers, and directly to consumers through its websites. Keurig also uses regionally targeted and national television advertising to promote its home brewing systems. In the at home channel, Keurig’s personnel work closely with key retail channel entities on product plans, marketing programs and other product sales support. Initiatives could include online promotional campaigns, circular advertising, in-store demos, mobile marketing, merchandising features and display, and local and national advertising.

 

In the away from home channel, Keurig primarily targets the office coffee, food service and hospitality channels with a broad offering of brewing platforms that Keurig believes significantly upgrade the quality of the coffee served in the workplace, as well as the food service and hospitality industries. Keurig promotes its away from home brewing systems through a selective, but non-exclusive, network of distributors ranging in size from local to national. Keurig ®  brewers and pods are also available at retail in office superstore locations and directly to small offices through Keurig’s ecommerce platform.

 

Keurig has also focused on building a substantial ecommerce business, not only through its websites and within social media channels that present its brands to consumers, but also through Amazon, Jet and a wide variety of retailer websites. This expanded ecommerce channel provides the opportunity for Keurig to further develop relationships with its consumers.

 

Competition

 

Currently Keurig competes primarily in the coffee and coffeemaker marketplaces.

 

The coffee marketplace is highly competitive and fragmented. Keurig’s coffee, tea and other beverages compete directly against coffees and teas sold through supermarkets, club stores, mass merchants, specialty retailers and food service accounts, and indirectly against all other coffees. Keurig’s competitors in the coffee marketplace include large national and international companies, some of which have greater resources, including marketing and operating resources, and numerous local and regional companies. Keurig competes for limited retailer shelf space for its products, and some of those retailers also market competitive products under their own private labels, some of

 



 

which are manufactured by Keurig. Keurig also competes with the conventional products of larger companies. Products are distinguished based on quality, price, brand recognition and loyalty, innovation, promotions, nutritional value, and further by Keurig’s ability to identify and satisfy consumer preferences.

 

Similar to the coffee marketplace, the coffeemaker marketplace is also highly competitive, and Keurig competes against larger companies that possess greater marketing and operating resources than Keurig. The primary methods of competition are essentially the same as in the coffee marketplace: price, quality, product performance and brand differentiation. In coffeemakers, Keurig competes against all sellers of coffeemakers including companies that produce traditional pot-brewed coffeemakers and other single-serve manufacturers, which include, but are not limited to the following:

 

·                   Bunn-O-Matic Corporation

 

·                   Mars, Inc. (through its FLAVIA ®  unit)

 

·                   Conair, Inc.

 

·                   Hamilton Beach / Proctor-Silex, Inc.

 

·                   Sunbeam Products, Inc. (through its Mr. Coffee ®  brand coffeemakers)

 

·                   Newell Brands

 

·                   Nestle S.A. (including its Dolce-Gusto ®  and Nespresso ®  brewing systems)

 

·                   Bosch (including, particularly in Canada, its TASSIMO ®  brewing systems)

 

·                   Remington Designs, LLC (including its iCoffee ®  brewing system)

 

·                   SharkNinja Operating LLC (including its Ninja Coffee Bar TM )

 

·                   Starbucks Corporation (including its Verismo ®  brewing system)

 

·                   Whirlpool Corporation

 

Keurig expects competition in coffee and coffeemakers to remain intense, both within its existing customer base and as Keurig expands into new regions. In both coffee and coffeemakers, Keurig competes primarily by providing a wide variety of high-quality coffee, including flavored, responsibly sourced coffees, as well as other beverages, coffeemakers, easy access to Keurig’s products, superior customer service and a comprehensive approach to customer relationship management. Keurig believes that its ability to provide a convenient and broad network of outlets from which to purchase its products is an important factor in its ability to compete. Through its multi-channel distribution network of wholesale, retail and consumer-direct operations Keurig believes it differentiates itself from many of its larger competitors, who specialize in only one primary channel of distribution. Keurig also competes to manufacture pods for branded coffee companies and retail stores that offer private label coffee for sale to consumers. Competition from other manufacturers of pods has increased significantly in recent years, and several other pod manufacturers have been successful in winning business from branded and private label customers. Keurig believes its focus on innovation and quality, all directed to delivering a consistently superior cup of coffee, while at the same time transforming its operations toward the goal of becoming a low-cost leader in pod manufacturing and brewer sourcing, differentiate it among competitors in the coffee and coffeemaker industries. Keurig also seeks to differentiate itself through its socially and environmentally responsible business practices. While Keurig believes it currently competes favorably with respect to all of these factors, there can be no assurance that Keurig will be able to compete successfully in the future.

 

Keurig competes not only with other widely advertised branded products, but also with private label or generic products that are generally sold at lower prices.

 



 

Research and development

 

Keurig’s research and development team includes scientists and engineers who are focused on developing beverage and appliance technology platforms that have broad appeal to consumers and consistently deliver on the key attributes of quality, convenience and choice. Research and development (“R&D”) costs amounted to $62.4 million, $67.4 million, $85.3 million and $28.5 million for fiscal years 2017, 2016, 2015 and the first six months of fiscal 2018, respectively.

 

Intellectual property

 

Keurig owns a number of U.S. trademarks and service marks that have been registered with the U.S. Patent and Trademark Office. Keurig anticipates maintaining its trademark and service mark registrations with the U.S. Patent and Trademark Office. Keurig also owns other trademarks and service marks for which it has applications for U.S. registration. Keurig has further registered or applied for registration of certain of its trademarks and service marks in the United Kingdom, the European Union, Canada, Japan, the People’s Republic of China, South Korea, Taiwan and other foreign countries. Keurig has licenses to use other marks, all subject to the terms of the agreements under which such licenses are granted. Keurig believes, as it continues to build brands, most notably today in the U.S. and Canada, its trademarks are valuable assets. Although the laws vary by jurisdiction, trademarks generally are valid as long as they are in use and/or their registrations are properly maintained and have not been found to have become generic. Trademark registrations generally can be renewed indefinitely as long as the trademarks are in use. Keurig believes that its core brands are covered by trademark registrations in the countries where Keurig does business and/or may do business in the near future. Keurig has an active program designed to ensure that its marks and other intellectual property rights are registered, renewed, protected and maintained. In addition, Keurig owns numerous copyrights, registered and unregistered, and proprietary trade secrets, technology, know-how processes and other proprietary rights that are not registered.

 

Keurig holds U.S. and international patents related to Keurig ®  brewing and pod technology. Of these, a majority are utility patents and the remainder are design patents. Keurig views these patents as very valuable but does not view any single patent as critical to Keurig’s success. Keurig also has pending patent applications associated with Keurig ®  brewing and pod technology. Keurig’s pending patent applications may not issue, or if they issue, they may not be enforceable, may be challenged, invalidated or circumvented by others. Further, Keurig continues to invest in further innovation in beverage pods and appliance technology that it believes will enhance its patent position and that may lead to new patents. Keurig takes steps it believes are appropriate to protect all such innovation.

 

Keurig has diligently protected its intellectual property through the use of domestic and international patents and trademark registrations and through enforcement efforts in litigation. Keurig regularly monitors commercial activity in the countries where Keurig does business and/or may do business and evaluates potential infringement.

 

Seasonality

 

Keurig’s business is subject to seasonal fluctuations, including fluctuations resulting from the holiday season. As a result, total inventory, and specifically brewers and accessories finished goods inventory, is typically higher during the last fiscal quarter (July through September) than other quarters during the fiscal year, as Keurig prepares for the holiday season. Due to the typical shift in product mix toward brewers and accessories in the first quarter of Keurig’s fiscal year, gross margin, as a percentage of net sales, is typically lower in the first fiscal quarter than in the remainder of the fiscal year. Historically, in addition to variations resulting from the holiday season, Keurig has experienced variations in sales from quarter-to-quarter due to a variety of other factors including, but not limited to, the cost of green coffee, competitor initiatives, marketing programs and weather. Because of the seasonality of its business, results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year.

 



 

Working capital

 

Strong working capital management, including payables, inventory and receivables, has recently been a source of cash flow for operations. Working capital is expected to continue to be a source of cash in the near term. For a description of Keurig’s liquidity and capital resources, see the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operation of Maple—Liquidity and Capital Resources” included elsewhere in this Exhibit 99.1 and Maple’s consolidated financial statements and notes thereto incorporated herein by reference to the Proxy Statement.

 

Employees

 

As of December 30, 2017, Keurig had approximately 5,100 full-time, part-time, and seasonal employees. Keurig believes its current relations with its employees are good. The number of employees covered by collective bargaining agreements is not significant. Keurig supplements its workforce with temporary workers from time to time, especially in the first quarter of each fiscal year to service increased customer and consumer demand during the peak November-December holiday season and January-March post-holiday season.

 

Recent Developments

 

Settlement of putative class action lawsuit

 

On June 18, 2018, Keurig agreed to pay $36.5 million to settle the putative securities fraud class action, captioned Louisiana Municipal Police Employees’ Retirement System v. Green Mountain Coffee Roasters, Inc., et al., Civ. No. 2:11-cv-00289, which was filed in the United States District Court for the District of Vermont before the Honorable William K. Sessions, III. Plaintiffs’ amended complaint alleged violations of the federal securities laws in connection with Keurig’s disclosures relating to its revenues and its inventory accounting practices. For additional information, see Note 19 to Maple’s historical financial statements incorporated herein by reference to the Proxy Statement.