false2020Q2000163745912-26P3YP3Y388322008800016374592019-12-292020-06-27xbrli:shares00016374592020-07-25iso4217:USD00016374592020-03-292020-06-2700016374592019-03-312019-06-2900016374592018-12-302019-06-29iso4217:USDxbrli:shares00016374592020-06-2700016374592019-12-280001637459us-gaap:CommonStockMember2019-12-280001637459us-gaap:AdditionalPaidInCapitalMember2019-12-280001637459us-gaap:RetainedEarningsMember2019-12-280001637459us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-280001637459us-gaap:TreasuryStockMember2019-12-280001637459us-gaap:NoncontrollingInterestMember2019-12-280001637459us-gaap:RetainedEarningsMember2019-12-292020-03-280001637459us-gaap:NoncontrollingInterestMember2019-12-292020-03-2800016374592019-12-292020-03-280001637459us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-292020-03-280001637459us-gaap:AdditionalPaidInCapitalMember2019-12-292020-03-280001637459us-gaap:TreasuryStockMember2019-12-292020-03-280001637459us-gaap:CommonStockMember2020-03-280001637459us-gaap:AdditionalPaidInCapitalMember2020-03-280001637459us-gaap:RetainedEarningsMember2020-03-280001637459us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-03-280001637459us-gaap:TreasuryStockMember2020-03-280001637459us-gaap:NoncontrollingInterestMember2020-03-2800016374592020-03-280001637459us-gaap:RetainedEarningsMember2020-03-292020-06-270001637459us-gaap:NoncontrollingInterestMember2020-03-292020-06-270001637459us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-03-292020-06-270001637459us-gaap:AdditionalPaidInCapitalMember2020-03-292020-06-270001637459us-gaap:TreasuryStockMember2020-03-292020-06-270001637459us-gaap:CommonStockMember2020-06-270001637459us-gaap:AdditionalPaidInCapitalMember2020-06-270001637459us-gaap:RetainedEarningsMember2020-06-270001637459us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-06-270001637459us-gaap:TreasuryStockMember2020-06-270001637459us-gaap:NoncontrollingInterestMember2020-06-270001637459us-gaap:CommonStockMember2018-12-290001637459us-gaap:AdditionalPaidInCapitalMember2018-12-290001637459us-gaap:RetainedEarningsMember2018-12-290001637459us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-12-290001637459us-gaap:TreasuryStockMember2018-12-290001637459us-gaap:NoncontrollingInterestMember2018-12-2900016374592018-12-290001637459us-gaap:RetainedEarningsMember2018-12-302019-03-3000016374592018-12-302019-03-300001637459us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-12-302019-03-300001637459us-gaap:NoncontrollingInterestMember2018-12-302019-03-300001637459us-gaap:AdditionalPaidInCapitalMember2018-12-302019-03-300001637459srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:RetainedEarningsMember2019-03-300001637459srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:AccumulatedOtherComprehensiveIncomeMember2019-03-300001637459srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2019-03-300001637459us-gaap:TreasuryStockMember2018-12-302019-03-300001637459us-gaap:CommonStockMember2019-03-300001637459us-gaap:AdditionalPaidInCapitalMember2019-03-300001637459us-gaap:RetainedEarningsMember2019-03-300001637459us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-03-300001637459us-gaap:TreasuryStockMember2019-03-300001637459us-gaap:NoncontrollingInterestMember2019-03-3000016374592019-03-300001637459us-gaap:RetainedEarningsMember2019-03-312019-06-290001637459us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-03-312019-06-290001637459us-gaap:AdditionalPaidInCapitalMember2019-03-312019-06-290001637459us-gaap:NoncontrollingInterestMember2019-03-312019-06-290001637459us-gaap:CommonStockMember2019-06-290001637459us-gaap:AdditionalPaidInCapitalMember2019-06-290001637459us-gaap:RetainedEarningsMember2019-06-290001637459us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-06-290001637459us-gaap:TreasuryStockMember2019-06-290001637459us-gaap:NoncontrollingInterestMember2019-06-2900016374592019-06-29khc:segment0001637459srt:MinimumMemberus-gaap:MachineryAndEquipmentMember2019-12-292020-06-270001637459srt:MaximumMemberus-gaap:MachineryAndEquipmentMember2019-12-292020-06-270001637459srt:MaximumMemberus-gaap:BuildingAndBuildingImprovementsMember2019-12-292020-06-270001637459us-gaap:SoftwareAndSoftwareDevelopmentCostsMembersrt:MaximumMember2019-12-292020-06-27xbrli:pure0001637459khc:PrimalNutritionMember2019-01-030001637459khc:PrimalNutritionMember2018-12-302019-09-280001637459khc:PrimalNutritionMember2019-12-280001637459khc:PrimalNutritionMember2018-12-302019-06-290001637459khc:AcquisitionsMember2020-03-292020-06-270001637459khc:AcquisitionsMember2019-12-292020-06-270001637459khc:AcquisitionsMember2019-03-312019-06-290001637459khc:PotentialDispositionMember2019-09-292019-12-280001637459khc:PotentialDisposition1Member2019-12-292020-03-28khc:third-party0001637459khc:HeinzIndiaMember2018-10-012018-10-31iso4217:INR0001637459khc:HeinzIndiaMember2019-01-302019-01-300001637459khc:HeinzIndiaMember2018-12-302019-12-280001637459khc:HeinzIndiaMember2018-12-302019-03-300001637459khc:HeinzIndiaMember2019-06-302019-09-280001637459khc:HeinzIndiaMember2019-12-292020-03-280001637459khc:HeinzIndiaMember2019-01-30iso4217:CAD0001637459khc:CanadaNaturalCheeseMember2018-11-012018-11-300001637459khc:CanadaNaturalCheeseMember2019-07-022019-07-020001637459khc:DivestituresMember2019-03-312019-06-290001637459khc:DivestituresMember2018-12-302019-06-290001637459khc:DivestituresMember2020-03-292020-06-270001637459khc:DivestituresMember2019-12-292020-06-27khc:employee0001637459khc:RestructuringActivitiesMember2019-12-292020-06-270001637459khc:RestructuringActivitiesMemberus-gaap:EmployeeSeveranceMember2019-12-292020-06-270001637459khc:RestructuringActivitiesMemberus-gaap:FacilityClosingMember2019-12-292020-06-270001637459khc:RestructuringActivitiesMemberkhc:OtherImplementationCostsMember2019-12-292020-06-270001637459us-gaap:OtherRestructuringMemberkhc:RestructuringActivitiesMember2019-12-292020-06-270001637459khc:RestructuringActivitiesMember2020-03-292020-06-270001637459khc:RestructuringActivitiesMemberus-gaap:EmployeeSeveranceMember2020-03-292020-06-270001637459khc:RestructuringActivitiesMemberus-gaap:FacilityClosingMember2020-03-292020-06-270001637459khc:RestructuringActivitiesMemberkhc:OtherImplementationCostsMember2020-03-292020-06-270001637459khc:RestructuringActivitiesMember2019-03-312019-06-290001637459khc:RestructuringActivitiesMember2018-12-302019-06-290001637459khc:RestructuringActivitiesMemberus-gaap:EmployeeSeveranceMember2019-12-280001637459us-gaap:OtherRestructuringMemberkhc:RestructuringActivitiesMember2019-12-280001637459khc:RestructuringActivitiesMember2019-12-280001637459khc:RestructuringActivitiesMemberus-gaap:EmployeeSeveranceMember2020-06-270001637459us-gaap:OtherRestructuringMemberkhc:RestructuringActivitiesMember2020-06-270001637459khc:RestructuringActivitiesMember2020-06-270001637459us-gaap:EmployeeSeveranceMemberus-gaap:CostOfSalesMember2020-03-292020-06-270001637459us-gaap:EmployeeSeveranceMemberus-gaap:CostOfSalesMember2019-03-312019-06-290001637459us-gaap:EmployeeSeveranceMemberus-gaap:CostOfSalesMember2019-12-292020-06-270001637459us-gaap:EmployeeSeveranceMemberus-gaap:CostOfSalesMember2018-12-302019-06-290001637459us-gaap:EmployeeSeveranceMemberus-gaap:SellingGeneralAndAdministrativeExpensesMember2020-03-292020-06-270001637459us-gaap:EmployeeSeveranceMemberus-gaap:SellingGeneralAndAdministrativeExpensesMember2019-03-312019-06-290001637459us-gaap:EmployeeSeveranceMemberus-gaap:SellingGeneralAndAdministrativeExpensesMember2019-12-292020-06-270001637459us-gaap:EmployeeSeveranceMemberus-gaap:SellingGeneralAndAdministrativeExpensesMember2018-12-302019-06-290001637459us-gaap:CostOfSalesMemberus-gaap:FacilityClosingMember2020-03-292020-06-270001637459us-gaap:CostOfSalesMemberus-gaap:FacilityClosingMember2019-03-312019-06-290001637459us-gaap:CostOfSalesMemberus-gaap:FacilityClosingMember2019-12-292020-06-270001637459us-gaap:CostOfSalesMemberus-gaap:FacilityClosingMember2018-12-302019-06-290001637459us-gaap:FacilityClosingMemberus-gaap:SellingGeneralAndAdministrativeExpensesMember2020-03-292020-06-270001637459us-gaap:FacilityClosingMemberus-gaap:SellingGeneralAndAdministrativeExpensesMember2019-03-312019-06-290001637459us-gaap:FacilityClosingMemberus-gaap:SellingGeneralAndAdministrativeExpensesMember2019-12-292020-06-270001637459us-gaap:FacilityClosingMemberus-gaap:SellingGeneralAndAdministrativeExpensesMember2018-12-302019-06-290001637459us-gaap:CostOfSalesMemberkhc:OtherCostsMember2020-03-292020-06-270001637459us-gaap:CostOfSalesMemberkhc:OtherCostsMember2019-03-312019-06-290001637459us-gaap:CostOfSalesMemberkhc:OtherCostsMember2019-12-292020-06-270001637459us-gaap:CostOfSalesMemberkhc:OtherCostsMember2018-12-302019-06-290001637459us-gaap:SellingGeneralAndAdministrativeExpensesMemberkhc:OtherCostsMember2020-03-292020-06-270001637459us-gaap:SellingGeneralAndAdministrativeExpensesMemberkhc:OtherCostsMember2019-03-312019-06-290001637459us-gaap:SellingGeneralAndAdministrativeExpensesMemberkhc:OtherCostsMember2019-12-292020-06-270001637459us-gaap:SellingGeneralAndAdministrativeExpensesMemberkhc:OtherCostsMember2018-12-302019-06-290001637459khc:UnitedStatesSegmentMember2020-03-292020-06-270001637459khc:UnitedStatesSegmentMember2019-03-312019-06-290001637459khc:UnitedStatesSegmentMember2019-12-292020-06-270001637459khc:UnitedStatesSegmentMember2018-12-302019-06-290001637459khc:InternationalSegmentMember2020-03-292020-06-270001637459khc:InternationalSegmentMember2019-03-312019-06-290001637459khc:InternationalSegmentMember2019-12-292020-06-270001637459khc:InternationalSegmentMember2018-12-302019-06-290001637459khc:CanadaSegmentMember2020-03-292020-06-270001637459khc:CanadaSegmentMember2019-03-312019-06-290001637459khc:CanadaSegmentMember2019-12-292020-06-270001637459khc:CanadaSegmentMember2018-12-302019-06-290001637459us-gaap:CorporateNonSegmentMember2020-03-292020-06-270001637459us-gaap:CorporateNonSegmentMember2019-03-312019-06-290001637459us-gaap:CorporateNonSegmentMember2019-12-292020-06-270001637459us-gaap:CorporateNonSegmentMember2018-12-302019-06-290001637459khc:UnitedStatesSegmentMember2019-12-280001637459khc:InternationalSegmentMember2019-12-280001637459khc:CanadaSegmentMember2019-12-280001637459khc:UnitedStatesSegmentMember2020-06-270001637459khc:InternationalSegmentMember2020-06-270001637459khc:CanadaSegmentMember2020-06-27khc:goodwill_reporting_unit0001637459khc:NorthernEuropeAndContinentalEuropeMember2019-12-292020-06-270001637459khc:PreReorganizationNumberOfReportingUnitsWithReassignmentOfAssetsAndLiabilitiesThatMaintainedAGoodwillBalanceMember2019-12-292019-12-290001637459khc:LatinAmericaExportsAndNortheastAsiaMember2019-12-282019-12-280001637459khc:RestofWorldSegmentMemberkhc:LatinAmericaExportsMember2019-12-280001637459khc:RestofWorldSegmentMemberkhc:NortheastAsiaMember2019-12-280001637459khc:NorthernEuropeAndBeneluxContinentalEuropeAndGreaterChinaMember2019-12-292019-12-290001637459khc:EMEASegmentMemberkhc:PercentRange2050Memberkhc:NorthernEuropeAndBeneluxMember2019-12-290001637459khc:EMEASegmentMemberkhc:PercentRange2050Membersrt:MinimumMemberkhc:NorthernEuropeAndBeneluxMember2019-12-290001637459khc:EMEASegmentMemberkhc:PercentRange2050Membersrt:MaximumMemberkhc:NorthernEuropeAndBeneluxMember2019-12-290001637459khc:EMEASegmentMemberkhc:PercentRangeinExcessof50Memberkhc:ContinentalEuropeMember2019-12-290001637459khc:RestofWorldSegmentMemberkhc:GreaterChinaMemberkhc:PercentRangeinExcessof50Member2019-12-290001637459khc:PostReorganizationNumberOfReportingUnitsForImpairmentTestMember2019-12-292019-12-290001637459khc:ReportingUnitFairValueBelowCarryingAmountMember2019-12-292020-03-280001637459khc:InternationalSegmentMember2019-12-290001637459khc:InternationalSegmentMemberkhc:AustraliaNewZealandAndJapanMember2019-12-292020-03-280001637459khc:InternationalSegmentMembersrt:LatinAmericaMember2019-12-292020-03-280001637459khc:PercentRange10orlessMemberkhc:UnitedStatesSegmentMembercountry:PR2019-12-290001637459khc:NorthernEuropeMemberkhc:InternationalSegmentMemberkhc:PercentRange2050Member2019-12-290001637459khc:NorthernEuropeMemberkhc:InternationalSegmentMemberkhc:PercentRange2050Membersrt:MinimumMember2019-12-290001637459khc:NorthernEuropeMemberkhc:InternationalSegmentMemberkhc:PercentRange2050Membersrt:MaximumMember2019-12-290001637459khc:InternationalSegmentMemberkhc:PercentRangeinExcessof50Memberkhc:ContinentalEuropeMember2019-12-290001637459srt:AsiaMemberkhc:InternationalSegmentMemberkhc:PercentRangeinExcessof50Member2019-12-290001637459khc:ReportingUnitFairValueBelowCarryingAmountMember2020-03-292020-06-270001637459khc:UnitedStatesInternationalAndCanadaSegmentsMember2020-03-292020-03-290001637459khc:CanadaRetailMemberkhc:CanadaSegmentMember2020-03-292020-06-270001637459khc:CanadaRetailMemberkhc:CanadaSegmentMember2020-03-290001637459khc:USFoodserviceMemberkhc:UnitedStatesSegmentMember2020-03-292020-06-270001637459khc:CanadaSegmentMemberkhc:CanadaFoodserviceMember2020-03-292020-06-270001637459khc:USFoodserviceMemberkhc:UnitedStatesSegmentMember2020-03-290001637459khc:CanadaSegmentMemberkhc:CanadaFoodserviceMember2020-03-290001637459khc:EMEAEastMemberkhc:InternationalSegmentMember2020-03-292020-06-2700016374592020-06-272020-06-270001637459khc:ReportingUnitGoodwillBalanceHeldMember2020-06-272020-06-270001637459khc:ReportingUnitGoodwillBalanceHeldMemberkhc:PercentRange10orlessMember2020-03-292020-03-290001637459khc:PercentRange10orlessMemberkhc:SixReportingUnitsMember2020-03-290001637459khc:ReportingUnitGoodwillBalanceHeldMemberkhc:PercentRange10orlessMember2020-03-290001637459khc:ReportingUnitGoodwillBalanceHeldMemberkhc:PercentRange1020Member2020-03-292020-03-290001637459khc:ReportingUnitSevenMembersrt:MinimumMemberkhc:PercentRange1020Member2020-03-290001637459khc:ReportingUnitSevenMemberkhc:PercentRange1020Membersrt:MaximumMember2020-03-290001637459khc:ReportingUnitGoodwillBalanceHeldMemberkhc:PercentRange1020Member2020-03-290001637459khc:ReportingUnitGoodwillBalanceHeldMemberkhc:PercentRange2050Member2020-03-292020-03-290001637459khc:PercentRange2050Membersrt:MinimumMemberkhc:ReportingUnitEightMember2020-03-290001637459khc:PercentRange2050Memberkhc:ReportingUnitEightMembersrt:MaximumMember2020-03-290001637459khc:ReportingUnitGoodwillBalanceHeldMemberkhc:PercentRange2050Member2020-03-290001637459khc:ReportingUnitGoodwillBalanceHeldMemberkhc:PercentRangeinExcessof50Member2020-03-292020-03-290001637459khc:ReportingUnitNineMemberkhc:PercentRangeinExcessof50Member2020-03-290001637459khc:ReportingUnitGoodwillBalanceHeldMemberkhc:PercentRangeinExcessof50Member2020-03-290001637459khc:ReportingUnitFairValueBelowCarryingAmountMember2019-03-302019-03-300001637459khc:EMEASegmentAndRestOfWorldSegmentMember2018-12-302019-03-300001637459khc:EMEAEastMemberkhc:EMEASegmentMember2018-12-302019-03-300001637459khc:RestofWorldSegmentMembercountry:BR2018-12-302019-03-300001637459khc:RestofWorldSegmentMemberkhc:LatinAmericaExportsMember2018-12-302019-03-300001637459khc:PercentRange10orlessMemberkhc:USFoodserviceAndCanadaFoodserviceMember2020-03-292020-03-290001637459khc:UnitedStatesSegmentAndCanadaSegmentMemberkhc:USFoodserviceAndCanadaFoodserviceMember2020-03-290001637459khc:OscarMayerMaxwellHouseVelveetaCoolWhipPlasmonABCClassicoWattiesAndPlantersMember2020-03-292020-06-270001637459khc:OscarMayerMaxwellHouseVelveetaCoolWhipPlasmonABCClassicoWattiesAndPlantersMember2020-03-292020-03-290001637459khc:OscarMayerMaxwellHouseVelveetaCoolWhipPlasmonABCClassicoWattiesAndPlantersMemberkhc:UnitedStatesSegmentMember2020-03-292020-06-270001637459khc:InternationalSegmentMemberkhc:OscarMayerMaxwellHouseVelveetaCoolWhipPlasmonABCClassicoWattiesAndPlantersMember2020-03-292020-06-270001637459khc:OscarMayerMaxwellHouseVelveetaCoolWhipPlasmonABCClassicoWattiesAndPlantersMemberkhc:CanadaSegmentMember2020-03-292020-06-270001637459khc:OscarMayerMember2020-03-292020-06-270001637459khc:OscarMayerMember2020-03-280001637459khc:OscarMayerMember2020-03-290001637459khc:MaxwellHouseMember2020-03-292020-06-270001637459khc:MaxwellHouseMember2020-03-280001637459khc:MaxwellHouseMember2020-03-290001637459khc:VelveetaCoolWhipPlasmonABCClassicoWattiesAndPlantersMember2020-03-292020-06-270001637459khc:VelveetaCoolWhipPlasmonABCClassicoWattiesAndPlantersMember2020-03-292020-03-290001637459khc:VelveetaCoolWhipPlasmonABCClassicoWattiesAndPlantersMember2020-03-280001637459khc:VelveetaCoolWhipPlasmonABCClassicoWattiesAndPlantersMember2020-03-29khc:reporting_unit0001637459khc:PercentRange10orlessMemberkhc:KraftAndMiracleWhipMember2020-03-292020-03-290001637459khc:PercentRange10orlessMemberkhc:KraftMember2020-03-290001637459khc:PercentRange10orlessMemberkhc:MiracleWhipMember2020-03-290001637459khc:PercentRange10orlessMemberkhc:KraftAndMiracleWhipMember2020-03-290001637459khc:MiracleWhipMemberkhc:PercentageRangeLessThan1Member2020-03-290001637459khc:PercentageRangeLessThan1Memberkhc:KraftMember2020-03-290001637459khc:PercentRange1020Memberkhc:LunchablesA1OreIdaStoveTopJetPuffedAndQueroMember2020-03-292020-03-290001637459srt:MinimumMemberkhc:PercentRange1020Memberkhc:LunchablesA1OreIdaStoveTopJetPuffedAndQueroMember2020-03-290001637459khc:PercentRange1020Membersrt:MaximumMemberkhc:LunchablesA1OreIdaStoveTopJetPuffedAndQueroMember2020-03-290001637459khc:PercentRange1020Memberkhc:LunchablesA1OreIdaStoveTopJetPuffedAndQueroMember2020-03-290001637459khc:PercentRange2050Memberkhc:ImpairedBrandMembersrt:MinimumMember2020-03-290001637459khc:PercentRange2050Memberkhc:ImpairedBrandMembersrt:MaximumMember2020-03-290001637459khc:PercentRange2050Memberkhc:ImpairedBrandMember2020-03-290001637459khc:ImpairedBrandMemberkhc:PercentRangeinExcessof50Member2020-03-290001637459khc:MiracleWhipVelveetaLunchablesMaxwellHousePhiladelphiaAndCoolWhipMember2019-03-312019-06-290001637459khc:MiracleWhipVelveetaLunchablesMaxwellHousePhiladelphiaAndCoolWhipMember2019-03-312019-03-3100016374592019-03-310001637459khc:MiracleWhipVelveetaLunchablesMaxwellHousePhiladelphiaAndCoolWhipMember2019-03-300001637459khc:MiracleWhipVelveetaLunchablesMaxwellHousePhiladelphiaAndCoolWhipMember2019-03-310001637459us-gaap:TrademarksMember2020-06-270001637459us-gaap:TrademarksMember2019-12-280001637459us-gaap:CustomerRelationshipsMember2020-06-270001637459us-gaap:CustomerRelationshipsMember2019-12-280001637459us-gaap:OtherIntangibleAssetsMember2020-06-270001637459us-gaap:OtherIntangibleAssetsMember2019-12-280001637459khc:A2020OmnibusPlanMember2020-05-070001637459khc:A2020OmnibusPlanMember2020-05-072020-05-070001637459srt:MinimumMemberkhc:A2020OmnibusPlanMember2020-05-072020-05-070001637459srt:MaximumMemberkhc:A2020OmnibusPlanMember2020-05-072020-05-070001637459us-gaap:RestrictedStockUnitsRSUMember2019-12-280001637459us-gaap:RestrictedStockUnitsRSUMember2019-12-292020-06-270001637459us-gaap:RestrictedStockUnitsRSUMember2020-06-270001637459khc:PSUsMember2019-12-280001637459khc:PSUsMember2019-12-292020-06-270001637459khc:PSUsMember2020-06-270001637459us-gaap:PensionPlansDefinedBenefitMember2019-12-292020-06-270001637459country:USus-gaap:PensionPlansDefinedBenefitMember2020-03-292020-06-270001637459country:USus-gaap:PensionPlansDefinedBenefitMember2019-03-312019-06-290001637459us-gaap:ForeignPlanMemberus-gaap:PensionPlansDefinedBenefitMember2020-03-292020-06-270001637459us-gaap:ForeignPlanMemberus-gaap:PensionPlansDefinedBenefitMember2019-03-312019-06-290001637459country:USus-gaap:PensionPlansDefinedBenefitMember2019-12-292020-06-270001637459country:USus-gaap:PensionPlansDefinedBenefitMember2018-12-302019-06-290001637459us-gaap:ForeignPlanMemberus-gaap:PensionPlansDefinedBenefitMember2019-12-292020-06-270001637459us-gaap:ForeignPlanMemberus-gaap:PensionPlansDefinedBenefitMember2018-12-302019-06-290001637459us-gaap:ForeignPlanMemberus-gaap:PensionPlansDefinedBenefitMember2020-06-270001637459country:USus-gaap:PensionPlansDefinedBenefitMember2020-06-270001637459us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2019-12-292020-06-270001637459us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2020-03-292020-06-270001637459us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2019-03-312019-06-290001637459us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2018-12-302019-06-290001637459us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2020-06-270001637459us-gaap:CommodityContractMember2020-06-270001637459us-gaap:CommodityContractMember2019-12-280001637459us-gaap:ForeignExchangeContractMember2020-06-270001637459us-gaap:ForeignExchangeContractMember2019-12-280001637459us-gaap:CurrencySwapMember2020-06-270001637459us-gaap:CurrencySwapMember2019-12-280001637459us-gaap:FairValueInputsLevel1Memberus-gaap:ForeignExchangeContractMemberus-gaap:DesignatedAsHedgingInstrumentMember2020-06-270001637459us-gaap:ForeignExchangeContractMemberus-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:FairValueInputsLevel2Member2020-06-270001637459us-gaap:ForeignExchangeContractMemberus-gaap:DesignatedAsHedgingInstrumentMember2020-06-270001637459us-gaap:FairValueInputsLevel1Memberus-gaap:CurrencySwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2020-06-270001637459us-gaap:CurrencySwapMemberus-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:FairValueInputsLevel2Member2020-06-270001637459us-gaap:CurrencySwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2020-06-270001637459us-gaap:CommodityContractMemberus-gaap:NondesignatedMemberus-gaap:FairValueInputsLevel1Member2020-06-270001637459us-gaap:CommodityContractMemberus-gaap:NondesignatedMemberus-gaap:FairValueInputsLevel2Member2020-06-270001637459us-gaap:CommodityContractMemberus-gaap:NondesignatedMember2020-06-270001637459us-gaap:NondesignatedMemberus-gaap:FairValueInputsLevel1Memberus-gaap:ForeignExchangeContractMember2020-06-270001637459us-gaap:NondesignatedMemberus-gaap:ForeignExchangeContractMemberus-gaap:FairValueInputsLevel2Member2020-06-270001637459us-gaap:NondesignatedMemberus-gaap:ForeignExchangeContractMember2020-06-270001637459us-gaap:FairValueInputsLevel1Member2020-06-270001637459us-gaap:FairValueInputsLevel2Member2020-06-270001637459us-gaap:OtherCurrentAssetsMemberus-gaap:ForeignExchangeContractMemberus-gaap:FairValueInputsLevel2Member2020-06-270001637459us-gaap:OtherNoncurrentAssetsMemberus-gaap:ForeignExchangeContractMemberus-gaap:FairValueInputsLevel2Member2020-06-270001637459us-gaap:ForeignExchangeContractMemberus-gaap:OtherCurrentLiabilitiesMemberus-gaap:FairValueInputsLevel2Member2020-06-270001637459us-gaap:OtherNoncurrentLiabilitiesMemberus-gaap:ForeignExchangeContractMemberus-gaap:FairValueInputsLevel2Member2020-06-270001637459us-gaap:CommodityContractMemberus-gaap:OtherCurrentAssetsMemberus-gaap:FairValueInputsLevel1Member2020-06-270001637459us-gaap:CommodityContractMemberus-gaap:OtherNoncurrentAssetsMemberus-gaap:FairValueInputsLevel2Member2020-06-270001637459us-gaap:CommodityContractMemberus-gaap:OtherCurrentLiabilitiesMember2020-06-270001637459us-gaap:CommodityContractMemberus-gaap:OtherNoncurrentLiabilitiesMember2020-06-270001637459us-gaap:FairValueInputsLevel1Memberus-gaap:ForeignExchangeContractMemberus-gaap:DesignatedAsHedgingInstrumentMember2019-12-280001637459us-gaap:ForeignExchangeContractMemberus-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:FairValueInputsLevel2Member2019-12-280001637459us-gaap:ForeignExchangeContractMemberus-gaap:DesignatedAsHedgingInstrumentMember2019-12-280001637459us-gaap:FairValueInputsLevel1Memberus-gaap:CurrencySwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2019-12-280001637459us-gaap:CurrencySwapMemberus-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:FairValueInputsLevel2Member2019-12-280001637459us-gaap:CurrencySwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2019-12-280001637459us-gaap:CommodityContractMemberus-gaap:NondesignatedMemberus-gaap:FairValueInputsLevel1Member2019-12-280001637459us-gaap:CommodityContractMemberus-gaap:NondesignatedMemberus-gaap:FairValueInputsLevel2Member2019-12-280001637459us-gaap:CommodityContractMemberus-gaap:NondesignatedMember2019-12-280001637459us-gaap:NondesignatedMemberus-gaap:FairValueInputsLevel1Memberus-gaap:ForeignExchangeContractMember2019-12-280001637459us-gaap:NondesignatedMemberus-gaap:ForeignExchangeContractMemberus-gaap:FairValueInputsLevel2Member2019-12-280001637459us-gaap:NondesignatedMemberus-gaap:ForeignExchangeContractMember2019-12-280001637459us-gaap:FairValueInputsLevel1Member2019-12-280001637459us-gaap:FairValueInputsLevel2Member2019-12-280001637459us-gaap:OtherCurrentAssetsMemberus-gaap:ForeignExchangeContractMemberus-gaap:FairValueInputsLevel2Member2019-12-280001637459us-gaap:OtherNoncurrentAssetsMemberus-gaap:ForeignExchangeContractMemberus-gaap:FairValueInputsLevel2Member2019-12-28iso4217:EUR0001637459us-gaap:DebtMemberus-gaap:NetInvestmentHedgingMembercurrency:EURus-gaap:DesignatedAsHedgingInstrumentMember2020-06-27iso4217:GBP0001637459us-gaap:DebtMemberus-gaap:NetInvestmentHedgingMembercurrency:GBPus-gaap:DesignatedAsHedgingInstrumentMember2020-06-270001637459us-gaap:NetInvestmentHedgingMembercurrency:GBPus-gaap:CurrencySwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2020-06-270001637459currency:CADus-gaap:NetInvestmentHedgingMemberus-gaap:CurrencySwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2020-06-270001637459us-gaap:NetInvestmentHedgingMembercurrency:EURus-gaap:CurrencySwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2020-06-27iso4217:JPY0001637459us-gaap:NetInvestmentHedgingMembercurrency:JPYus-gaap:CurrencySwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2020-06-270001637459us-gaap:NetInvestmentHedgingMemberus-gaap:ForeignExchangeContractMembercurrency:CNYus-gaap:DesignatedAsHedgingInstrumentMember2020-06-270001637459us-gaap:OtherContractMemberus-gaap:NetInvestmentHedgingMembercurrency:EURus-gaap:DesignatedAsHedgingInstrumentMember2020-06-270001637459us-gaap:ForeignExchangeContractMember2019-12-292020-06-270001637459us-gaap:CurrencySwapMember2019-12-292020-06-270001637459us-gaap:ForeignExchangeContractMemberus-gaap:SalesMemberus-gaap:CashFlowHedgingMember2020-03-292020-06-270001637459us-gaap:ForeignExchangeContractMemberus-gaap:SalesMemberus-gaap:CashFlowHedgingMember2019-03-312019-06-290001637459us-gaap:ForeignExchangeContractMemberus-gaap:SalesMemberus-gaap:CashFlowHedgingMember2019-12-292020-06-270001637459us-gaap:ForeignExchangeContractMemberus-gaap:SalesMemberus-gaap:CashFlowHedgingMember2018-12-302019-06-290001637459us-gaap:CostOfSalesMemberus-gaap:ForeignExchangeContractMemberus-gaap:CashFlowHedgingMember2020-03-292020-06-270001637459us-gaap:CostOfSalesMemberus-gaap:ForeignExchangeContractMemberus-gaap:CashFlowHedgingMember2019-03-312019-06-290001637459us-gaap:CostOfSalesMemberus-gaap:ForeignExchangeContractMemberus-gaap:CashFlowHedgingMember2019-12-292020-06-270001637459us-gaap:CostOfSalesMemberus-gaap:ForeignExchangeContractMemberus-gaap:CashFlowHedgingMember2018-12-302019-06-290001637459us-gaap:ForeignExchangeContractMemberus-gaap:OtherNonoperatingIncomeExpenseMemberus-gaap:CashFlowHedgingMember2020-03-292020-06-270001637459us-gaap:ForeignExchangeContractMemberus-gaap:OtherNonoperatingIncomeExpenseMemberus-gaap:CashFlowHedgingMember2019-03-312019-06-290001637459us-gaap:ForeignExchangeContractMemberus-gaap:OtherNonoperatingIncomeExpenseMemberus-gaap:CashFlowHedgingMember2019-12-292020-06-270001637459us-gaap:ForeignExchangeContractMemberus-gaap:OtherNonoperatingIncomeExpenseMemberus-gaap:CashFlowHedgingMember2018-12-302019-06-290001637459us-gaap:OtherNonoperatingIncomeExpenseMemberus-gaap:CashFlowHedgingMemberus-gaap:CurrencySwapMember2020-03-292020-06-270001637459us-gaap:OtherNonoperatingIncomeExpenseMemberus-gaap:CashFlowHedgingMemberus-gaap:CurrencySwapMember2019-03-312019-06-290001637459us-gaap:OtherNonoperatingIncomeExpenseMemberus-gaap:CashFlowHedgingMemberus-gaap:CurrencySwapMember2019-12-292020-06-270001637459us-gaap:OtherNonoperatingIncomeExpenseMemberus-gaap:CashFlowHedgingMemberus-gaap:CurrencySwapMember2018-12-302019-06-290001637459us-gaap:InterestExpenseMemberus-gaap:CashFlowHedgingMemberus-gaap:CurrencySwapMember2020-03-292020-06-270001637459us-gaap:InterestExpenseMemberus-gaap:CashFlowHedgingMemberus-gaap:CurrencySwapMember2019-03-312019-06-290001637459us-gaap:InterestExpenseMemberus-gaap:CashFlowHedgingMemberus-gaap:CurrencySwapMember2019-12-292020-06-270001637459us-gaap:InterestExpenseMemberus-gaap:CashFlowHedgingMemberus-gaap:CurrencySwapMember2018-12-302019-06-290001637459us-gaap:NetInvestmentHedgingMemberus-gaap:ForeignExchangeContractMemberus-gaap:OtherNonoperatingIncomeExpenseMember2020-03-292020-06-270001637459us-gaap:NetInvestmentHedgingMemberus-gaap:ForeignExchangeContractMemberus-gaap:OtherNonoperatingIncomeExpenseMember2019-03-312019-06-290001637459us-gaap:NetInvestmentHedgingMemberus-gaap:ForeignExchangeContractMemberus-gaap:OtherNonoperatingIncomeExpenseMember2019-12-292020-06-270001637459us-gaap:NetInvestmentHedgingMemberus-gaap:ForeignExchangeContractMemberus-gaap:OtherNonoperatingIncomeExpenseMember2018-12-302019-06-290001637459us-gaap:InterestExpenseMemberus-gaap:NetInvestmentHedgingMemberus-gaap:ForeignExchangeContractMember2020-03-292020-06-270001637459us-gaap:InterestExpenseMemberus-gaap:NetInvestmentHedgingMemberus-gaap:ForeignExchangeContractMember2019-03-312019-06-290001637459us-gaap:InterestExpenseMemberus-gaap:NetInvestmentHedgingMemberus-gaap:ForeignExchangeContractMember2019-12-292020-06-270001637459us-gaap:InterestExpenseMemberus-gaap:NetInvestmentHedgingMemberus-gaap:ForeignExchangeContractMember2018-12-302019-06-290001637459us-gaap:NetInvestmentHedgingMemberus-gaap:OtherNonoperatingIncomeExpenseMemberus-gaap:CurrencySwapMember2020-03-292020-06-270001637459us-gaap:NetInvestmentHedgingMemberus-gaap:OtherNonoperatingIncomeExpenseMemberus-gaap:CurrencySwapMember2019-03-312019-06-290001637459us-gaap:NetInvestmentHedgingMemberus-gaap:OtherNonoperatingIncomeExpenseMemberus-gaap:CurrencySwapMember2019-12-292020-06-270001637459us-gaap:NetInvestmentHedgingMemberus-gaap:OtherNonoperatingIncomeExpenseMemberus-gaap:CurrencySwapMember2018-12-302019-06-290001637459us-gaap:InterestExpenseMemberus-gaap:NetInvestmentHedgingMemberus-gaap:CurrencySwapMember2020-03-292020-06-270001637459us-gaap:InterestExpenseMemberus-gaap:NetInvestmentHedgingMemberus-gaap:CurrencySwapMember2019-03-312019-06-290001637459us-gaap:InterestExpenseMemberus-gaap:NetInvestmentHedgingMemberus-gaap:CurrencySwapMember2019-12-292020-06-270001637459us-gaap:InterestExpenseMemberus-gaap:NetInvestmentHedgingMemberus-gaap:CurrencySwapMember2018-12-302019-06-290001637459us-gaap:CostOfSalesMemberus-gaap:ForeignExchangeContractMemberus-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2020-03-292020-06-270001637459us-gaap:InterestExpenseMemberus-gaap:ForeignExchangeContractMemberus-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2020-03-292020-06-270001637459us-gaap:ForeignExchangeContractMemberus-gaap:OtherNonoperatingIncomeExpenseMemberus-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2020-03-292020-06-270001637459us-gaap:CostOfSalesMemberus-gaap:ForeignExchangeContractMemberus-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2019-03-312019-06-290001637459us-gaap:InterestExpenseMemberus-gaap:ForeignExchangeContractMemberus-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2019-03-312019-06-290001637459us-gaap:ForeignExchangeContractMemberus-gaap:OtherNonoperatingIncomeExpenseMemberus-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2019-03-312019-06-290001637459us-gaap:CostOfSalesMemberus-gaap:InterestRateContractMemberus-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2020-03-292020-06-270001637459us-gaap:InterestExpenseMemberus-gaap:InterestRateContractMemberus-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2020-03-292020-06-270001637459us-gaap:InterestRateContractMemberus-gaap:OtherNonoperatingIncomeExpenseMemberus-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2020-03-292020-06-270001637459us-gaap:CostOfSalesMemberus-gaap:InterestRateContractMemberus-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2019-03-312019-06-290001637459us-gaap:InterestExpenseMemberus-gaap:InterestRateContractMemberus-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2019-03-312019-06-290001637459us-gaap:InterestRateContractMemberus-gaap:OtherNonoperatingIncomeExpenseMemberus-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2019-03-312019-06-290001637459us-gaap:CostOfSalesMemberus-gaap:CashFlowHedgingMemberus-gaap:CurrencySwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2020-03-292020-06-270001637459us-gaap:InterestExpenseMemberus-gaap:CashFlowHedgingMemberus-gaap:CurrencySwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2020-03-292020-06-270001637459us-gaap:OtherNonoperatingIncomeExpenseMemberus-gaap:CashFlowHedgingMemberus-gaap:CurrencySwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2020-03-292020-06-270001637459us-gaap:CostOfSalesMemberus-gaap:CashFlowHedgingMemberus-gaap:CurrencySwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2019-03-312019-06-290001637459us-gaap:InterestExpenseMemberus-gaap:CashFlowHedgingMemberus-gaap:CurrencySwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2019-03-312019-06-290001637459us-gaap:OtherNonoperatingIncomeExpenseMemberus-gaap:CashFlowHedgingMemberus-gaap:CurrencySwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2019-03-312019-06-290001637459us-gaap:CostOfSalesMemberus-gaap:NetInvestmentHedgingMemberus-gaap:ForeignExchangeContractMemberus-gaap:DesignatedAsHedgingInstrumentMember2020-03-292020-06-270001637459us-gaap:InterestExpenseMemberus-gaap:NetInvestmentHedgingMemberus-gaap:ForeignExchangeContractMemberus-gaap:DesignatedAsHedgingInstrumentMember2020-03-292020-06-270001637459us-gaap:NetInvestmentHedgingMemberus-gaap:ForeignExchangeContractMemberus-gaap:OtherNonoperatingIncomeExpenseMemberus-gaap:DesignatedAsHedgingInstrumentMember2020-03-292020-06-270001637459us-gaap:CostOfSalesMemberus-gaap:NetInvestmentHedgingMemberus-gaap:ForeignExchangeContractMemberus-gaap:DesignatedAsHedgingInstrumentMember2019-03-312019-06-290001637459us-gaap:InterestExpenseMemberus-gaap:NetInvestmentHedgingMemberus-gaap:ForeignExchangeContractMemberus-gaap:DesignatedAsHedgingInstrumentMember2019-03-312019-06-290001637459us-gaap:NetInvestmentHedgingMemberus-gaap:ForeignExchangeContractMemberus-gaap:OtherNonoperatingIncomeExpenseMemberus-gaap:DesignatedAsHedgingInstrumentMember2019-03-312019-06-290001637459us-gaap:CostOfSalesMemberus-gaap:NetInvestmentHedgingMemberus-gaap:CurrencySwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2020-03-292020-06-270001637459us-gaap:InterestExpenseMemberus-gaap:NetInvestmentHedgingMemberus-gaap:CurrencySwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2020-03-292020-06-270001637459us-gaap:NetInvestmentHedgingMemberus-gaap:OtherNonoperatingIncomeExpenseMemberus-gaap:CurrencySwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2020-03-292020-06-270001637459us-gaap:CostOfSalesMemberus-gaap:NetInvestmentHedgingMemberus-gaap:CurrencySwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2019-03-312019-06-290001637459us-gaap:InterestExpenseMemberus-gaap:NetInvestmentHedgingMemberus-gaap:CurrencySwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2019-03-312019-06-290001637459us-gaap:NetInvestmentHedgingMemberus-gaap:OtherNonoperatingIncomeExpenseMemberus-gaap:CurrencySwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2019-03-312019-06-290001637459us-gaap:CommodityContractMemberus-gaap:NondesignatedMemberus-gaap:CostOfSalesMember2020-03-292020-06-270001637459us-gaap:CommodityContractMemberus-gaap:NondesignatedMemberus-gaap:InterestExpenseMember2020-03-292020-06-270001637459us-gaap:CommodityContractMemberus-gaap:NondesignatedMemberus-gaap:OtherNonoperatingIncomeExpenseMember2020-03-292020-06-270001637459us-gaap:CommodityContractMemberus-gaap:NondesignatedMemberus-gaap:CostOfSalesMember2019-03-312019-06-290001637459us-gaap:CommodityContractMemberus-gaap:NondesignatedMemberus-gaap:InterestExpenseMember2019-03-312019-06-290001637459us-gaap:CommodityContractMemberus-gaap:NondesignatedMemberus-gaap:OtherNonoperatingIncomeExpenseMember2019-03-312019-06-290001637459us-gaap:NondesignatedMemberus-gaap:CostOfSalesMemberus-gaap:ForeignExchangeContractMember2020-03-292020-06-270001637459us-gaap:NondesignatedMemberus-gaap:InterestExpenseMemberus-gaap:ForeignExchangeContractMember2020-03-292020-06-270001637459us-gaap:NondesignatedMemberus-gaap:ForeignExchangeContractMemberus-gaap:OtherNonoperatingIncomeExpenseMember2020-03-292020-06-270001637459us-gaap:NondesignatedMemberus-gaap:CostOfSalesMemberus-gaap:ForeignExchangeContractMember2019-03-312019-06-290001637459us-gaap:NondesignatedMemberus-gaap:InterestExpenseMemberus-gaap:ForeignExchangeContractMember2019-03-312019-06-290001637459us-gaap:NondesignatedMemberus-gaap:ForeignExchangeContractMemberus-gaap:OtherNonoperatingIncomeExpenseMember2019-03-312019-06-290001637459us-gaap:NondesignatedMemberus-gaap:CostOfSalesMemberus-gaap:CurrencySwapMember2020-03-292020-06-270001637459us-gaap:NondesignatedMemberus-gaap:InterestExpenseMemberus-gaap:CurrencySwapMember2020-03-292020-06-270001637459us-gaap:NondesignatedMemberus-gaap:OtherNonoperatingIncomeExpenseMemberus-gaap:CurrencySwapMember2020-03-292020-06-270001637459us-gaap:NondesignatedMemberus-gaap:CostOfSalesMemberus-gaap:CurrencySwapMember2019-03-312019-06-290001637459us-gaap:NondesignatedMemberus-gaap:InterestExpenseMemberus-gaap:CurrencySwapMember2019-03-312019-06-290001637459us-gaap:NondesignatedMemberus-gaap:OtherNonoperatingIncomeExpenseMemberus-gaap:CurrencySwapMember2019-03-312019-06-290001637459us-gaap:CostOfSalesMember2020-03-292020-06-270001637459us-gaap:InterestExpenseMember2020-03-292020-06-270001637459us-gaap:OtherNonoperatingIncomeExpenseMember2020-03-292020-06-270001637459us-gaap:CostOfSalesMember2019-03-312019-06-290001637459us-gaap:InterestExpenseMember2019-03-312019-06-290001637459us-gaap:OtherNonoperatingIncomeExpenseMember2019-03-312019-06-290001637459us-gaap:CostOfSalesMemberus-gaap:ForeignExchangeContractMemberus-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2019-12-292020-06-270001637459us-gaap:InterestExpenseMemberus-gaap:ForeignExchangeContractMemberus-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2019-12-292020-06-270001637459us-gaap:ForeignExchangeContractMemberus-gaap:OtherNonoperatingIncomeExpenseMemberus-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2019-12-292020-06-270001637459us-gaap:CostOfSalesMemberus-gaap:ForeignExchangeContractMemberus-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2018-12-302019-06-290001637459us-gaap:InterestExpenseMemberus-gaap:ForeignExchangeContractMemberus-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2018-12-302019-06-290001637459us-gaap:ForeignExchangeContractMemberus-gaap:OtherNonoperatingIncomeExpenseMemberus-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2018-12-302019-06-290001637459us-gaap:CostOfSalesMemberus-gaap:InterestRateContractMemberus-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2019-12-292020-06-270001637459us-gaap:InterestExpenseMemberus-gaap:InterestRateContractMemberus-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2019-12-292020-06-270001637459us-gaap:InterestRateContractMemberus-gaap:OtherNonoperatingIncomeExpenseMemberus-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2019-12-292020-06-270001637459us-gaap:CostOfSalesMemberus-gaap:InterestRateContractMemberus-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2018-12-302019-06-290001637459us-gaap:InterestExpenseMemberus-gaap:InterestRateContractMemberus-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2018-12-302019-06-290001637459us-gaap:InterestRateContractMemberus-gaap:OtherNonoperatingIncomeExpenseMemberus-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2018-12-302019-06-290001637459us-gaap:CostOfSalesMemberus-gaap:CashFlowHedgingMemberus-gaap:CurrencySwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2019-12-292020-06-270001637459us-gaap:InterestExpenseMemberus-gaap:CashFlowHedgingMemberus-gaap:CurrencySwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2019-12-292020-06-270001637459us-gaap:OtherNonoperatingIncomeExpenseMemberus-gaap:CashFlowHedgingMemberus-gaap:CurrencySwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2019-12-292020-06-270001637459us-gaap:CostOfSalesMemberus-gaap:CashFlowHedgingMemberus-gaap:CurrencySwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2018-12-302019-06-290001637459us-gaap:InterestExpenseMemberus-gaap:CashFlowHedgingMemberus-gaap:CurrencySwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2018-12-302019-06-290001637459us-gaap:OtherNonoperatingIncomeExpenseMemberus-gaap:CashFlowHedgingMemberus-gaap:CurrencySwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2018-12-302019-06-290001637459us-gaap:CostOfSalesMemberus-gaap:NetInvestmentHedgingMemberus-gaap:ForeignExchangeContractMemberus-gaap:DesignatedAsHedgingInstrumentMember2019-12-292020-06-270001637459us-gaap:InterestExpenseMemberus-gaap:NetInvestmentHedgingMemberus-gaap:ForeignExchangeContractMemberus-gaap:DesignatedAsHedgingInstrumentMember2019-12-292020-06-270001637459us-gaap:NetInvestmentHedgingMemberus-gaap:ForeignExchangeContractMemberus-gaap:OtherNonoperatingIncomeExpenseMemberus-gaap:DesignatedAsHedgingInstrumentMember2019-12-292020-06-270001637459us-gaap:CostOfSalesMemberus-gaap:NetInvestmentHedgingMemberus-gaap:ForeignExchangeContractMemberus-gaap:DesignatedAsHedgingInstrumentMember2018-12-302019-06-290001637459us-gaap:InterestExpenseMemberus-gaap:NetInvestmentHedgingMemberus-gaap:ForeignExchangeContractMemberus-gaap:DesignatedAsHedgingInstrumentMember2018-12-302019-06-290001637459us-gaap:NetInvestmentHedgingMemberus-gaap:ForeignExchangeContractMemberus-gaap:OtherNonoperatingIncomeExpenseMemberus-gaap:DesignatedAsHedgingInstrumentMember2018-12-302019-06-290001637459us-gaap:CostOfSalesMemberus-gaap:NetInvestmentHedgingMemberus-gaap:CurrencySwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2019-12-292020-06-270001637459us-gaap:InterestExpenseMemberus-gaap:NetInvestmentHedgingMemberus-gaap:CurrencySwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2019-12-292020-06-270001637459us-gaap:NetInvestmentHedgingMemberus-gaap:OtherNonoperatingIncomeExpenseMemberus-gaap:CurrencySwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2019-12-292020-06-270001637459us-gaap:CostOfSalesMemberus-gaap:NetInvestmentHedgingMemberus-gaap:CurrencySwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2018-12-302019-06-290001637459us-gaap:InterestExpenseMemberus-gaap:NetInvestmentHedgingMemberus-gaap:CurrencySwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2018-12-302019-06-290001637459us-gaap:NetInvestmentHedgingMemberus-gaap:OtherNonoperatingIncomeExpenseMemberus-gaap:CurrencySwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2018-12-302019-06-290001637459us-gaap:CommodityContractMemberus-gaap:NondesignatedMemberus-gaap:CostOfSalesMember2019-12-292020-06-270001637459us-gaap:CommodityContractMemberus-gaap:NondesignatedMemberus-gaap:InterestExpenseMember2019-12-292020-06-270001637459us-gaap:CommodityContractMemberus-gaap:NondesignatedMemberus-gaap:OtherNonoperatingIncomeExpenseMember2019-12-292020-06-270001637459us-gaap:CommodityContractMemberus-gaap:NondesignatedMemberus-gaap:CostOfSalesMember2018-12-302019-06-290001637459us-gaap:CommodityContractMemberus-gaap:NondesignatedMemberus-gaap:InterestExpenseMember2018-12-302019-06-290001637459us-gaap:CommodityContractMemberus-gaap:NondesignatedMemberus-gaap:OtherNonoperatingIncomeExpenseMember2018-12-302019-06-290001637459us-gaap:NondesignatedMemberus-gaap:CostOfSalesMemberus-gaap:ForeignExchangeContractMember2019-12-292020-06-270001637459us-gaap:NondesignatedMemberus-gaap:InterestExpenseMemberus-gaap:ForeignExchangeContractMember2019-12-292020-06-270001637459us-gaap:NondesignatedMemberus-gaap:ForeignExchangeContractMemberus-gaap:OtherNonoperatingIncomeExpenseMember2019-12-292020-06-270001637459us-gaap:NondesignatedMemberus-gaap:CostOfSalesMemberus-gaap:ForeignExchangeContractMember2018-12-302019-06-290001637459us-gaap:NondesignatedMemberus-gaap:InterestExpenseMemberus-gaap:ForeignExchangeContractMember2018-12-302019-06-290001637459us-gaap:NondesignatedMemberus-gaap:ForeignExchangeContractMemberus-gaap:OtherNonoperatingIncomeExpenseMember2018-12-302019-06-290001637459us-gaap:NondesignatedMemberus-gaap:CostOfSalesMemberus-gaap:CurrencySwapMember2019-12-292020-06-270001637459us-gaap:NondesignatedMemberus-gaap:InterestExpenseMemberus-gaap:CurrencySwapMember2019-12-292020-06-270001637459us-gaap:NondesignatedMemberus-gaap:OtherNonoperatingIncomeExpenseMemberus-gaap:CurrencySwapMember2019-12-292020-06-270001637459us-gaap:NondesignatedMemberus-gaap:CostOfSalesMemberus-gaap:CurrencySwapMember2018-12-302019-06-290001637459us-gaap:NondesignatedMemberus-gaap:InterestExpenseMemberus-gaap:CurrencySwapMember2018-12-302019-06-290001637459us-gaap:NondesignatedMemberus-gaap:OtherNonoperatingIncomeExpenseMemberus-gaap:CurrencySwapMember2018-12-302019-06-290001637459us-gaap:CostOfSalesMember2019-12-292020-06-270001637459us-gaap:InterestExpenseMember2019-12-292020-06-270001637459us-gaap:OtherNonoperatingIncomeExpenseMember2019-12-292020-06-270001637459us-gaap:CostOfSalesMember2018-12-302019-06-290001637459us-gaap:InterestExpenseMember2018-12-302019-06-290001637459us-gaap:OtherNonoperatingIncomeExpenseMember2018-12-302019-06-290001637459us-gaap:DebtMemberus-gaap:NetInvestmentHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2020-03-292020-06-270001637459us-gaap:DebtMemberus-gaap:NetInvestmentHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2019-12-292020-06-270001637459us-gaap:DebtMemberus-gaap:NetInvestmentHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2019-03-312019-06-290001637459us-gaap:DebtMemberus-gaap:NetInvestmentHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMember2018-12-302019-06-290001637459us-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel1Member2020-06-270001637459us-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel1Member2019-12-280001637459us-gaap:OtherNoncurrentAssetsMemberus-gaap:CurrencySwapMemberus-gaap:FairValueInputsLevel2Member2020-06-270001637459us-gaap:OtherNoncurrentLiabilitiesMemberus-gaap:CurrencySwapMemberus-gaap:FairValueInputsLevel2Member2020-06-270001637459us-gaap:OtherNoncurrentAssetsMemberus-gaap:CurrencySwapMemberus-gaap:FairValueInputsLevel2Member2019-12-280001637459us-gaap:OtherNoncurrentLiabilitiesMemberus-gaap:CurrencySwapMemberus-gaap:FairValueInputsLevel2Member2019-12-280001637459us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-292020-06-270001637459us-gaap:AccumulatedTranslationAdjustmentMember2019-12-280001637459us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2019-12-280001637459us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2019-12-280001637459us-gaap:AccumulatedTranslationAdjustmentMember2019-12-292020-06-270001637459khc:AccumulatedGainLossNetNetInvestmentHedgeParentMember2019-12-292020-06-270001637459us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2019-12-292020-06-270001637459us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2019-12-292020-06-270001637459us-gaap:AccumulatedTranslationAdjustmentMember2020-06-270001637459us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2020-06-270001637459us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2020-06-270001637459us-gaap:AccumulatedTranslationAdjustmentMember2020-03-292020-06-270001637459us-gaap:AccumulatedTranslationAdjustmentMember2019-03-312019-06-290001637459khc:AccumulatedGainLossNetNetInvestmentHedgeParentMember2020-03-292020-06-270001637459khc:AccumulatedGainLossNetNetInvestmentHedgeParentMember2019-03-312019-06-290001637459us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2020-03-292020-06-270001637459us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2019-03-312019-06-290001637459us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember2020-03-292020-06-270001637459us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember2019-03-312019-06-290001637459us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2020-03-292020-06-270001637459us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2019-03-312019-06-290001637459us-gaap:AccumulatedTranslationAdjustmentMember2018-12-302019-06-290001637459khc:AccumulatedGainLossNetNetInvestmentHedgeParentMember2018-12-302019-06-290001637459us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2018-12-302019-06-290001637459us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember2019-12-292020-06-270001637459us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember2018-12-302019-06-290001637459us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2018-12-302019-06-290001637459us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:ForeignExchangeContractMemberkhc:AccumulatedGainLossNetNetInvestmentHedgeParentMember2020-03-292020-06-270001637459us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:ForeignExchangeContractMemberkhc:AccumulatedGainLossNetNetInvestmentHedgeParentMember2019-03-312019-06-290001637459us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:ForeignExchangeContractMemberkhc:AccumulatedGainLossNetNetInvestmentHedgeParentMember2019-12-292020-06-270001637459us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:ForeignExchangeContractMemberkhc:AccumulatedGainLossNetNetInvestmentHedgeParentMember2018-12-302019-06-290001637459us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:CurrencySwapMemberkhc:AccumulatedGainLossNetNetInvestmentHedgeParentMember2020-03-292020-06-270001637459us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:CurrencySwapMemberkhc:AccumulatedGainLossNetNetInvestmentHedgeParentMember2019-03-312019-06-290001637459us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:CurrencySwapMemberkhc:AccumulatedGainLossNetNetInvestmentHedgeParentMember2019-12-292020-06-270001637459us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:CurrencySwapMemberkhc:AccumulatedGainLossNetNetInvestmentHedgeParentMember2018-12-302019-06-290001637459us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:ForeignExchangeContractMemberus-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2020-03-292020-06-270001637459us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:ForeignExchangeContractMemberus-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2019-03-312019-06-290001637459us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:ForeignExchangeContractMemberus-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2019-12-292020-06-270001637459us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:ForeignExchangeContractMemberus-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2018-12-302019-06-290001637459us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedGainLossNetCashFlowHedgeParentMemberus-gaap:CurrencySwapMember2020-03-292020-06-270001637459us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedGainLossNetCashFlowHedgeParentMemberus-gaap:CurrencySwapMember2019-03-312019-06-290001637459us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedGainLossNetCashFlowHedgeParentMemberus-gaap:CurrencySwapMember2019-12-292020-06-270001637459us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedGainLossNetCashFlowHedgeParentMemberus-gaap:CurrencySwapMember2018-12-302019-06-290001637459us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:InterestRateContractMemberus-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2020-03-292020-06-270001637459us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:InterestRateContractMemberus-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2019-03-312019-06-290001637459us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:InterestRateContractMemberus-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2019-12-292020-06-270001637459us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:InterestRateContractMemberus-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2018-12-302019-06-290001637459us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberkhc:AccumulatedGainLossNetHedgeParentMember2020-03-292020-06-270001637459us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberkhc:AccumulatedGainLossNetHedgeParentMember2019-03-312019-06-290001637459us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberkhc:AccumulatedGainLossNetHedgeParentMember2019-12-292020-06-270001637459us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberkhc:AccumulatedGainLossNetHedgeParentMember2018-12-302019-06-290001637459us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember2020-03-292020-06-270001637459us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember2019-03-312019-06-290001637459us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember2019-12-292020-06-270001637459us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember2018-12-302019-06-290001637459us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetPriorServiceCostCreditMember2020-03-292020-06-270001637459us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetPriorServiceCostCreditMember2019-03-312019-06-290001637459us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetPriorServiceCostCreditMember2019-12-292020-06-270001637459us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetPriorServiceCostCreditMember2018-12-302019-06-290001637459khc:AccumulatedDefinedBenefitPlansAdjustmentOtherGainLossAttributableToParentMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember2020-03-292020-06-270001637459khc:AccumulatedDefinedBenefitPlansAdjustmentOtherGainLossAttributableToParentMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember2019-03-312019-06-290001637459khc:AccumulatedDefinedBenefitPlansAdjustmentOtherGainLossAttributableToParentMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember2019-12-292020-06-270001637459khc:AccumulatedDefinedBenefitPlansAdjustmentOtherGainLossAttributableToParentMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember2018-12-302019-06-290001637459us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember2020-03-292020-06-270001637459us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember2019-03-312019-06-290001637459us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember2019-12-292020-06-270001637459us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember2018-12-302019-06-29khc:ves_Per_USD0001637459khc:VenezuelanBsSonBancoCentraldeVenezuelaMarketPeriodEndSpotMember2020-06-270001637459khc:VenezuelanBsSonBancoCentraldeVenezuelaMarketPeriodEndSpotMember2019-12-280001637459khc:VenezuelanBsSOnBancoCentralDeVenezuelaMarketQuarterToDateAverageMember2020-03-292020-06-270001637459khc:VenezuelanBsSonBancoCentraldeVenezuelamarketyeartodateaverageMember2019-12-292020-06-270001637459khc:VenezuelanBsSOnBancoCentralDeVenezuelaMarketQuarterToDateAverageMember2019-03-312019-06-290001637459khc:VenezuelanBsSonBancoCentraldeVenezuelamarketyeartodateaverageMember2018-12-302019-06-290001637459us-gaap:RevolvingCreditFacilityMember2020-06-270001637459khc:EuroEquivalentSwinglineFacilityMember2020-06-270001637459khc:LineOfCreditFacilityExtensionAgreementAmountMember2020-06-270001637459us-gaap:RevolvingCreditFacilityMember2019-12-292020-06-270001637459us-gaap:RevolvingCreditFacilityMember2019-12-280001637459us-gaap:RevolvingCreditFacilityMember2018-12-302019-06-290001637459us-gaap:LineOfCreditMember2020-06-270001637459us-gaap:CommercialPaperMember2019-12-292020-06-270001637459us-gaap:CommercialPaperMember2018-12-302019-06-2900016374592020-05-012020-05-310001637459khc:SeniorNotesDueJune2022Memberus-gaap:SeniorNotesMember2020-05-310001637459us-gaap:SeniorNotesMemberkhc:SeniorNotesDueJuly2022Member2020-05-310001637459us-gaap:SeniorNotesMemberkhc:SeniorNotesDueJune2023Member2020-05-310001637459us-gaap:SeniorNotesMemberkhc:SeniorNotesDueJuly2025Member2020-05-310001637459khc:SeniorNotesDueJune2026Memberus-gaap:SeniorNotesMember2020-05-310001637459us-gaap:SeniorNotesMemberkhc:FloatingRateSeniorNotesDueFebruary2021Member2020-04-300001637459us-gaap:SeniorNotesMemberkhc:FloatingRateSeniorNotesDueFebruary2021Member2020-05-012020-05-310001637459us-gaap:SeniorNotesMemberkhc:FloatingRateSeniorNotesDueFebruary2021Member2020-05-310001637459khc:SeniorNotesDueJune2022Memberus-gaap:SeniorNotesMember2020-04-300001637459khc:SeniorNotesDueJune2022Memberus-gaap:SeniorNotesMember2020-05-012020-05-310001637459us-gaap:SeniorNotesMemberkhc:SeniorNotesDueJuly2022Member2020-04-300001637459us-gaap:SeniorNotesMemberkhc:SeniorNotesDueJuly2022Member2020-05-012020-05-310001637459us-gaap:SeniorNotesMemberkhc:FloatingRateSeniorNotesDueAugust2022Member2020-04-300001637459us-gaap:SeniorNotesMemberkhc:FloatingRateSeniorNotesDueAugust2022Member2020-05-012020-05-310001637459us-gaap:SeniorNotesMemberkhc:FloatingRateSeniorNotesDueAugust2022Member2020-05-310001637459us-gaap:SeniorNotesMemberkhc:SeniorNotesDueJune2023Member2020-04-300001637459us-gaap:SeniorNotesMemberkhc:SeniorNotesDueJune2023Member2020-05-012020-05-310001637459us-gaap:SeniorNotesMemberkhc:SeniorNotesDueJuly2025Member2020-04-300001637459us-gaap:SeniorNotesMemberkhc:SeniorNotesDueJuly2025Member2020-05-012020-05-310001637459khc:SeniorNotesDueJune2026Memberus-gaap:SeniorNotesMember2020-04-300001637459khc:SeniorNotesDueJune2026Memberus-gaap:SeniorNotesMember2020-05-012020-05-310001637459khc:TenderOfferSeniorNotesMember2019-12-292020-06-270001637459khc:TenderOfferSeniorNotesMember2020-03-292020-06-270001637459khc:TenderOfferSeniorNotesMember2020-06-270001637459us-gaap:SeniorNotesMemberkhc:SeniorNotesDueJune2021Member2020-06-012020-06-270001637459us-gaap:SeniorNotesMemberkhc:SeniorNotesDueJune2021Member2020-06-010001637459us-gaap:SeniorNotesMemberkhc:SecondLienSeniorNotesDue2025Member2020-06-012020-06-270001637459us-gaap:SeniorNotesMemberkhc:SecondLienSeniorNotesDue2025Member2020-06-010001637459khc:TenderOfferDebtRedemptionMember2020-03-292020-06-270001637459khc:TenderOfferDebtRedemptionMember2019-12-292020-06-270001637459khc:TenderOfferDebtRedemptionMember2020-06-270001637459us-gaap:SeniorNotesMemberkhc:PoundSterlingSeniorNotesDue2030Member2020-06-010001637459us-gaap:SeniorNotesMemberkhc:SeniorNotesDueMay2027Member2020-05-310001637459us-gaap:SeniorNotesMemberkhc:SeniorNotesDueMarch2031Member2020-05-310001637459us-gaap:SeniorNotesMemberkhc:SeniorNotesDueJune2050Member2020-05-310001637459us-gaap:SeniorNotesMember2020-05-310001637459khc:The2020NotesMember2020-05-310001637459us-gaap:SeniorNotesMemberkhc:SeniorNotesDueInFebruary2020Member2020-02-012020-02-290001637459us-gaap:SeniorNotesMemberus-gaap:SubsequentEventMember2020-07-022020-07-020001637459us-gaap:SeniorNotesMemberus-gaap:SubsequentEventMember2020-07-062020-07-060001637459khc:CondimentsandSaucesMember2020-03-292020-06-270001637459khc:CondimentsandSaucesMember2019-03-312019-06-290001637459khc:CondimentsandSaucesMember2019-12-292020-06-270001637459khc:CondimentsandSaucesMember2018-12-302019-06-290001637459khc:CheeseanddairyMember2020-03-292020-06-270001637459khc:CheeseanddairyMember2019-03-312019-06-290001637459khc:CheeseanddairyMember2019-12-292020-06-270001637459khc:CheeseanddairyMember2018-12-302019-06-290001637459khc:AmbientmealsMember2020-03-292020-06-270001637459khc:AmbientmealsMember2019-03-312019-06-290001637459khc:AmbientmealsMember2019-12-292020-06-270001637459khc:AmbientmealsMember2018-12-302019-06-290001637459khc:FrozenandchilledmealsMember2020-03-292020-06-270001637459khc:FrozenandchilledmealsMember2019-03-312019-06-290001637459khc:FrozenandchilledmealsMember2019-12-292020-06-270001637459khc:FrozenandchilledmealsMember2018-12-302019-06-290001637459khc:MeatsandseafoodMember2020-03-292020-06-270001637459khc:MeatsandseafoodMember2019-03-312019-06-290001637459khc:MeatsandseafoodMember2019-12-292020-06-270001637459khc:MeatsandseafoodMember2018-12-302019-06-290001637459khc:RefreshmentbeveragesMember2020-03-292020-06-270001637459khc:RefreshmentbeveragesMember2019-03-312019-06-290001637459khc:RefreshmentbeveragesMember2019-12-292020-06-270001637459khc:RefreshmentbeveragesMember2018-12-302019-06-290001637459khc:CoffeeMember2020-03-292020-06-270001637459khc:CoffeeMember2019-03-312019-06-290001637459khc:CoffeeMember2019-12-292020-06-270001637459khc:CoffeeMember2018-12-302019-06-290001637459khc:InfantandnutritionMember2020-03-292020-06-270001637459khc:InfantandnutritionMember2019-03-312019-06-290001637459khc:InfantandnutritionMember2019-12-292020-06-270001637459khc:InfantandnutritionMember2018-12-302019-06-290001637459khc:DessertstoppingsandbakingMember2020-03-292020-06-270001637459khc:DessertstoppingsandbakingMember2019-03-312019-06-290001637459khc:DessertstoppingsandbakingMember2019-12-292020-06-270001637459khc:DessertstoppingsandbakingMember2018-12-302019-06-290001637459khc:NutsandsaltedsnacksMember2020-03-292020-06-270001637459khc:NutsandsaltedsnacksMember2019-03-312019-06-290001637459khc:NutsandsaltedsnacksMember2019-12-292020-06-270001637459khc:NutsandsaltedsnacksMember2018-12-302019-06-290001637459khc:OtherproductsMember2020-03-292020-06-270001637459khc:OtherproductsMember2019-03-312019-06-290001637459khc:OtherproductsMember2019-12-292020-06-270001637459khc:OtherproductsMember2018-12-302019-06-29
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
|
|
|
|
|
|
|
|
|
☒
|
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the quarterly period ended June 27, 2020
or
|
|
|
|
|
|
|
|
|
☐
|
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the transition period from __________ to __________
Commission File Number 001-37482
The Kraft Heinz Company
(Exact name of registrant as specified in its charter)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Delaware
|
|
|
|
46-2078182
|
(State or other jurisdiction of incorporation or organization)
|
|
|
|
(I.R.S. Employer Identification No.)
|
One PPG Place,
|
Pittsburgh,
|
Pennsylvania
|
|
15222
|
(Address of Principal Executive Offices)
|
|
|
|
(Zip Code)
|
(412) 456-5700
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
|
|
|
|
|
|
|
|
|
Title of each class
|
Trading Symbol
|
Name of exchange on which registered
|
Common stock, $0.01 par value
|
KHC
|
The Nasdaq Stock Market LLC
|
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Large accelerated filer
|
☒
|
|
Accelerated filer
|
☐
|
|
|
|
Non-accelerated filer
|
☐
|
|
Smaller reporting company
|
☐
|
|
Emerging growth company
|
☐
|
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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of July 25, 2020, there were 1,222,578,592 shares of the registrant’s common stock outstanding.
Table of Contents
Unless the context otherwise requires, the terms “we,” “us,” “our,” “Kraft Heinz,” and the “Company” each refer to The Kraft Heinz Company and all of its consolidated subsidiaries.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The Kraft Heinz Company
Condensed Consolidated Statements of Income
(in millions, except per share data)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
|
For the Six Months Ended
|
|
|
|
June 27, 2020
|
|
June 29, 2019
|
|
June 27, 2020
|
|
June 29, 2019
|
Net sales
|
$
|
6,648
|
|
|
$
|
6,406
|
|
|
$
|
12,805
|
|
|
$
|
12,365
|
|
Cost of products sold
|
4,196
|
|
|
4,324
|
|
|
8,495
|
|
|
8,272
|
|
Gross profit
|
2,452
|
|
|
2,082
|
|
|
4,310
|
|
|
4,093
|
|
Selling, general and administrative expenses, excluding impairment losses
|
918
|
|
|
750
|
|
|
1,780
|
|
|
1,579
|
|
Goodwill impairment losses
|
1,817
|
|
|
124
|
|
|
2,043
|
|
|
744
|
|
Intangible asset impairment losses
|
1,056
|
|
|
474
|
|
|
1,056
|
|
|
474
|
|
Selling, general and administrative expenses
|
3,791
|
|
|
1,348
|
|
|
4,879
|
|
|
2,797
|
|
Operating income/(loss)
|
(1,339)
|
|
|
734
|
|
|
(569)
|
|
|
1,296
|
|
Interest expense
|
442
|
|
|
316
|
|
|
752
|
|
|
637
|
|
Other expense/(income)
|
(78)
|
|
|
(133)
|
|
|
(159)
|
|
|
(513)
|
|
Income/(loss) before income taxes
|
(1,703)
|
|
|
551
|
|
|
(1,162)
|
|
|
1,172
|
|
Provision for/(benefit from) income taxes
|
(51)
|
|
|
103
|
|
|
109
|
|
|
320
|
|
Net income/(loss)
|
(1,652)
|
|
|
448
|
|
|
(1,271)
|
|
|
852
|
|
Net income/(loss) attributable to noncontrolling interest
|
(1)
|
|
|
(1)
|
|
|
2
|
|
|
(2)
|
|
Net income/(loss) attributable to common shareholders
|
$
|
(1,651)
|
|
|
$
|
449
|
|
|
$
|
(1,273)
|
|
|
$
|
854
|
|
Per share data applicable to common shareholders:
|
|
|
|
|
|
|
|
Basic earnings/(loss)
|
$
|
(1.35)
|
|
|
$
|
0.37
|
|
|
$
|
(1.04)
|
|
|
$
|
0.70
|
|
Diluted earnings/(loss)
|
(1.35)
|
|
|
0.37
|
|
|
(1.04)
|
|
|
0.70
|
|
See accompanying notes to the condensed consolidated financial statements.
The Kraft Heinz Company
Condensed Consolidated Statements of Comprehensive Income
(in millions)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
|
For the Six Months Ended
|
|
|
|
June 27, 2020
|
|
June 29, 2019
|
|
June 27, 2020
|
|
June 29, 2019
|
Net income/(loss)
|
$
|
(1,652)
|
|
|
$
|
448
|
|
|
$
|
(1,271)
|
|
|
$
|
852
|
|
Other comprehensive income/(loss), net of tax:
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
186
|
|
|
(69)
|
|
|
(604)
|
|
|
150
|
|
Net deferred gains/(losses) on net investment hedges
|
(17)
|
|
|
10
|
|
|
149
|
|
|
(4)
|
|
Amounts excluded from the effectiveness assessment of net investment hedges
|
11
|
|
|
6
|
|
|
16
|
|
|
10
|
|
Net deferred losses/(gains) on net investment hedges reclassified to net income/(loss)
|
(5)
|
|
|
(6)
|
|
|
(11)
|
|
|
(4)
|
|
Net deferred gains/(losses) on cash flow hedges
|
35
|
|
|
(10)
|
|
|
136
|
|
|
(26)
|
|
Amounts excluded from the effectiveness assessment of cash flow hedges
|
7
|
|
|
7
|
|
|
12
|
|
|
13
|
|
Net deferred losses/(gains) on cash flow hedges reclassified to net income/(loss)
|
(51)
|
|
|
3
|
|
|
(61)
|
|
|
(5)
|
|
Net actuarial gains/(losses) arising during the period
|
—
|
|
|
(5)
|
|
|
—
|
|
|
(5)
|
|
Net postemployment benefit losses/(gains) reclassified to net income/(loss)
|
(24)
|
|
|
(59)
|
|
|
(49)
|
|
|
(117)
|
|
Total other comprehensive income/(loss)
|
142
|
|
|
(123)
|
|
|
(412)
|
|
|
12
|
|
Total comprehensive income/(loss)
|
(1,510)
|
|
|
325
|
|
|
(1,683)
|
|
|
864
|
|
Comprehensive income/(loss) attributable to noncontrolling interest
|
11
|
|
|
(1)
|
|
|
—
|
|
|
10
|
|
Comprehensive income/(loss) attributable to common shareholders
|
$
|
(1,521)
|
|
|
$
|
326
|
|
|
$
|
(1,683)
|
|
|
$
|
854
|
|
See accompanying notes to the condensed consolidated financial statements.
The Kraft Heinz Company
Condensed Consolidated Balance Sheets
(in millions, except per share data)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
June 27, 2020
|
|
December 28, 2019
|
ASSETS
|
|
|
|
Cash and cash equivalents
|
$
|
2,812
|
|
|
$
|
2,279
|
|
Trade receivables (net of allowances of $54 at June 27, 2020 and $33 at December 28, 2019)
|
2,045
|
|
|
1,973
|
|
Inventories
|
2,815
|
|
|
2,721
|
|
Prepaid expenses
|
471
|
|
|
384
|
|
Other current assets
|
504
|
|
|
618
|
|
Assets held for sale
|
129
|
|
|
122
|
|
Total current assets
|
8,776
|
|
|
8,097
|
|
Property, plant and equipment, net
|
6,777
|
|
|
7,055
|
|
Goodwill
|
33,310
|
|
|
35,546
|
|
Intangible assets, net
|
47,202
|
|
|
48,652
|
|
Other non-current assets
|
2,241
|
|
|
2,100
|
|
TOTAL ASSETS
|
$
|
98,306
|
|
|
$
|
101,450
|
|
LIABILITIES AND EQUITY
|
|
|
|
Commercial paper and other short-term debt
|
$
|
6
|
|
|
$
|
6
|
|
Current portion of long-term debt
|
757
|
|
|
1,022
|
|
Trade payables
|
3,880
|
|
|
4,003
|
|
Accrued marketing
|
938
|
|
|
647
|
|
Interest payable
|
378
|
|
|
384
|
|
Other current liabilities
|
2,083
|
|
|
1,804
|
|
Liabilities held for sale
|
8
|
|
|
9
|
|
Total current liabilities
|
8,050
|
|
|
7,875
|
|
Long-term debt
|
28,097
|
|
|
28,216
|
|
Deferred income taxes
|
11,374
|
|
|
11,878
|
|
Accrued postemployment costs
|
250
|
|
|
273
|
|
Other non-current liabilities
|
1,370
|
|
|
1,459
|
|
TOTAL LIABILITIES
|
49,141
|
|
|
49,701
|
|
Commitments and Contingencies (Note 16)
|
|
|
|
Redeemable noncontrolling interest
|
(1)
|
|
|
—
|
|
Equity:
|
|
|
|
Common stock, $0.01 par value (5,000 shares authorized; 1,228 shares issued and 1,223 shares outstanding at June 27, 2020; 1,224 shares issued and 1,221 shares outstanding at December 28, 2019)
|
12
|
|
|
12
|
|
Additional paid-in capital
|
55,990
|
|
|
56,828
|
|
Retained earnings/(deficit)
|
(4,336)
|
|
|
(3,060)
|
|
Accumulated other comprehensive income/(losses)
|
(2,296)
|
|
|
(1,886)
|
|
Treasury stock, at cost (5 shares at June 27, 2020 and 3 shares at December 28, 2019)
|
(330)
|
|
|
(271)
|
|
Total shareholders' equity
|
49,040
|
|
|
51,623
|
|
Noncontrolling interest
|
126
|
|
|
126
|
|
TOTAL EQUITY
|
49,166
|
|
|
51,749
|
|
TOTAL LIABILITIES AND EQUITY
|
$
|
98,306
|
|
|
$
|
101,450
|
|
See accompanying notes to the condensed consolidated financial statements.
The Kraft Heinz Company
Condensed Consolidated Statements of Equity
(in millions)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
Additional Paid-in Capital
|
|
Retained Earnings/(Deficit)
|
|
Accumulated Other Comprehensive Income/(Losses)
|
|
Treasury Stock, at Cost
|
|
Noncontrolling Interest
|
|
Total Equity
|
Balance at December 28, 2019
|
$
|
12
|
|
|
$
|
56,828
|
|
|
$
|
(3,060)
|
|
|
$
|
(1,886)
|
|
|
$
|
(271)
|
|
|
$
|
126
|
|
|
$
|
51,749
|
|
Net income/(loss) excluding redeemable noncontrolling interest
|
—
|
|
|
—
|
|
|
378
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
381
|
|
Other comprehensive income/(loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
(540)
|
|
|
—
|
|
|
(14)
|
|
|
(554)
|
|
Dividends declared-common stock ($0.40 per share)
|
—
|
|
|
(492)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(492)
|
|
Exercise of stock options, issuance of other stock awards, and other
|
—
|
|
|
42
|
|
|
(4)
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
40
|
|
Balance at March 28, 2020
|
$
|
12
|
|
|
$
|
56,378
|
|
|
$
|
(2,686)
|
|
|
$
|
(2,426)
|
|
|
$
|
(269)
|
|
|
$
|
115
|
|
|
$
|
51,124
|
|
Net income/(loss) excluding redeemable noncontrolling interest
|
—
|
|
|
—
|
|
|
(1,651)
|
|
|
—
|
|
|
—
|
|
|
(1)
|
|
|
(1,652)
|
|
Other comprehensive income/(loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
130
|
|
|
—
|
|
|
12
|
|
|
142
|
|
Dividends declared-common stock ($0.40 per share)
|
—
|
|
|
(493)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(493)
|
|
Exercise of stock options, issuance of other stock awards, and other
|
—
|
|
|
105
|
|
|
1
|
|
|
—
|
|
|
(61)
|
|
|
—
|
|
|
45
|
|
Balance at June 27, 2020
|
$
|
12
|
|
|
$
|
55,990
|
|
|
$
|
(4,336)
|
|
|
$
|
(2,296)
|
|
|
$
|
(330)
|
|
|
$
|
126
|
|
|
$
|
49,166
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
Additional Paid-in Capital
|
|
Retained Earnings/(Deficit)
|
|
Accumulated Other Comprehensive Income/(Losses)
|
|
Treasury Stock, at Cost
|
|
Noncontrolling Interest
|
|
Total Equity
|
Balance at December 29, 2018
|
$
|
12
|
|
|
$
|
58,723
|
|
|
$
|
(4,853)
|
|
|
$
|
(1,943)
|
|
|
$
|
(282)
|
|
|
$
|
118
|
|
|
$
|
51,775
|
|
Net income/(loss) excluding redeemable noncontrolling interest
|
—
|
|
|
—
|
|
|
405
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
405
|
|
Other comprehensive income/(loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
123
|
|
|
—
|
|
|
12
|
|
|
135
|
|
Dividends declared-common stock ($0.40 per share)
|
—
|
|
|
(488)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(488)
|
|
Cumulative effect of accounting standards adopted in the period
|
—
|
|
|
—
|
|
|
(136)
|
|
|
136
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Exercise of stock options, issuance of other stock awards, and other
|
—
|
|
|
17
|
|
|
(2)
|
|
|
—
|
|
|
(9)
|
|
|
—
|
|
|
6
|
|
Balance at March 30, 2019
|
$
|
12
|
|
|
$
|
58,252
|
|
|
$
|
(4,586)
|
|
|
$
|
(1,684)
|
|
|
$
|
(291)
|
|
|
$
|
130
|
|
|
$
|
51,833
|
|
Net income/(loss) excluding redeemable noncontrolling interest
|
—
|
|
|
—
|
|
|
449
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
449
|
|
Other comprehensive income/(loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
(123)
|
|
|
—
|
|
|
—
|
|
|
(123)
|
|
Dividends declared-common stock ($0.40 per share)
|
—
|
|
|
(488)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(488)
|
|
Exercise of stock options, issuance of other stock awards, and other
|
—
|
|
|
5
|
|
|
(3)
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
4
|
|
Balance at June 29, 2019
|
$
|
12
|
|
|
$
|
57,769
|
|
|
$
|
(4,140)
|
|
|
$
|
(1,807)
|
|
|
$
|
(291)
|
|
|
$
|
132
|
|
|
$
|
51,675
|
|
See accompanying notes to the condensed consolidated financial statements.
The Kraft Heinz Company
Condensed Consolidated Statements of Cash Flows
(in millions)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended
|
|
|
|
June 27, 2020
|
|
June 29, 2019
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
Net income/(loss)
|
$
|
(1,271)
|
|
|
$
|
852
|
|
Adjustments to reconcile net income/(loss) to operating cash flows:
|
|
|
|
Depreciation and amortization
|
490
|
|
|
494
|
|
Amortization of postretirement benefit plans prior service costs/(credits)
|
(61)
|
|
|
(153)
|
|
Equity award compensation expense
|
73
|
|
|
15
|
|
Deferred income tax provision/(benefit)
|
(489)
|
|
|
(40)
|
|
Postemployment benefit plan contributions
|
(15)
|
|
|
(13)
|
|
Goodwill and intangible asset impairment losses
|
3,099
|
|
|
1,218
|
|
Nonmonetary currency devaluation
|
4
|
|
|
6
|
|
Loss/(gain) on sale of business
|
2
|
|
|
(246)
|
|
Other items, net
|
198
|
|
|
(131)
|
|
Changes in current assets and liabilities:
|
|
|
|
Trade receivables
|
(60)
|
|
|
75
|
|
Inventories
|
(197)
|
|
|
(484)
|
|
Accounts payable
|
(54)
|
|
|
63
|
|
Other current assets
|
(137)
|
|
|
5
|
|
Other current liabilities
|
634
|
|
|
(336)
|
|
Net cash provided by/(used for) operating activities
|
2,216
|
|
|
1,325
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
Capital expenditures
|
(258)
|
|
|
(448)
|
|
Payments to acquire business, net of cash acquired
|
—
|
|
|
(200)
|
|
Proceeds from sale of business, net of cash disposed
|
—
|
|
|
640
|
|
Other investing activities, net
|
21
|
|
|
(10)
|
|
Net cash provided by/(used for) investing activities
|
(237)
|
|
|
(18)
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
Repayments of long-term debt
|
(3,824)
|
|
|
(4)
|
|
Proceeds from issuance of long-term debt
|
3,500
|
|
|
18
|
|
Debt prepayment and extinguishment costs
|
(101)
|
|
|
—
|
|
Proceeds from revolving credit facility
|
4,000
|
|
|
—
|
|
Repayments of revolving credit facility
|
(4,000)
|
|
|
—
|
|
Proceeds from issuance of commercial paper
|
—
|
|
|
377
|
|
Repayments of commercial paper
|
—
|
|
|
(377)
|
|
Dividends paid
|
(977)
|
|
|
(976)
|
|
Other financing activities, net
|
(35)
|
|
|
(15)
|
|
Net cash provided by/(used for) financing activities
|
(1,437)
|
|
|
(977)
|
|
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
|
(9)
|
|
|
(8)
|
|
Cash, cash equivalents, and restricted cash
|
|
|
|
Net increase/(decrease)
|
533
|
|
|
322
|
|
Balance at beginning of period
|
2,280
|
|
|
1,136
|
|
Balance at end of period
|
$
|
2,813
|
|
|
$
|
1,458
|
|
See accompanying notes to the condensed consolidated financial statements.
The Kraft Heinz Company
Notes to Condensed Consolidated Financial Statements
Note 1. Basis of Presentation
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been omitted, in accordance with the rules of the Securities and Exchange Commission (the “SEC”). In management’s opinion, these interim financial statements include all adjustments (consisting only of normal recurring adjustments) and accruals necessary to fairly state our results for the periods presented.
We operate on a 52- or 53-week fiscal year ending on the last Saturday in December in each calendar year. Unless the context requires otherwise, references to years and quarters contained herein pertain to our fiscal years and fiscal quarters. Our 2020 fiscal year is scheduled to be a 52-week period ending on December 26, 2020, and the 2019 fiscal year was a 52-week period that ended on December 28, 2019.
The condensed consolidated balance sheet data at December 28, 2019 was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. These statements should be read in conjunction with our audited consolidated financial statements and related notes in our Annual Report on Form 10-K for the year ended December 28, 2019. The results for interim periods are not necessarily indicative of future or annual results.
Principles of Consolidation
The condensed consolidated financial statements include Kraft Heinz and all of our controlled subsidiaries. All intercompany transactions are eliminated.
Reportable Segments
In the first quarter of 2020, our internal reporting and reportable segments changed. We moved our Puerto Rico business from the Latin America zone to the United States zone to consolidate and streamline the management of our product categories and supply chain. We also combined our Europe, Middle East, and Africa (“EMEA”), Latin America, and Asia Pacific (“APAC”) zones to form the International zone as a result of certain previously announced organizational changes.
Therefore, effective in the first quarter of 2020, we manage and report our operating results through three reportable segments defined by geographic region: United States, International, and Canada. We have reflected these changes in all historical periods presented.
Considerations Related to the Novel Coronavirus
In December 2019, an outbreak of illness caused by a novel coronavirus called COVID-19 (“COVID-19”) was identified in Wuhan, China. On January 31, 2020, the United States declared a public health emergency related to the novel coronavirus and on March 11, 2020, the World Health Organization declared that the spread of COVID-19 qualified as a global pandemic. In an attempt to minimize transmission of COVID-19, significant social and economic restrictions have been imposed in the United States and abroad. Though various areas have begun relaxing such precautions, varying levels of restrictions remain in many places and may be increased. These restrictions, while necessary and important for public health, have negative implications for portions of our business and the U.S. and global economy. In the preparation of these financial statements and related disclosures we have assessed the impact that COVID-19 has had on our estimates, assumptions, forecasts, and accounting policies and made additional disclosures, as necessary. As COVID-19 and its impacts are unprecedented and ever evolving, future events and effects related to the pandemic cannot be determined with precision and actual results could significantly differ from estimates or forecasts.
See Note 8, Goodwill and Intangible Assets, Note 11, Postemployment Benefits, and Note 16, Commitments, Contingencies and Debt, for further discussion of COVID-19 considerations.
Use of Estimates
We prepare our condensed consolidated financial statements in accordance with U.S. GAAP, which requires us to make accounting policy elections, estimates, and assumptions that affect the reported amount of assets, liabilities, reserves, and expenses. These accounting policy elections, estimates, and assumptions are based on our best estimates and judgments. We evaluate our policy elections, estimates, and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment. We believe these estimates to be reasonable given the current facts available. We adjust our policy elections, estimates, and assumptions when facts and circumstances dictate. Market volatility, including foreign currency exchange rates, increases the uncertainty inherent in our estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ significantly from estimates. If actual amounts differ from estimates, we include the revisions in our consolidated results of operations in the period the actual amounts become known. Historically, the aggregate differences, if any, between our estimates and actual amounts in any year have not had a material effect on our condensed consolidated financial statements.
Reclassifications
We made reclassifications to certain previously reported financial information to conform to our current period presentation.
Note 2. Significant Accounting Policies
The following significant accounting policies were updated in the first quarter of 2020 to reflect material changes in our cash equivalents holdings as well as to reflect changes upon the adoption of Accounting Standards Update (“ASU”) 2018-15 related to accounting for implementation costs incurred in hosted cloud computing service arrangements. There were no other changes to our accounting policies from those disclosed in our Annual Report on Form 10-K for the year ended December 28, 2019.
Cash and Cash Equivalents:
Cash equivalents include demand deposits with banks, money market funds, and all highly liquid investments with original maturities of three months or less. The fair value of cash equivalents approximates the carrying amount. Cash and cash equivalents that are legally restricted as to withdrawal or usage is classified in other current assets or other non-current assets, as applicable, on the consolidated balance sheets.
Property, Plant and Equipment:
Property, plant and equipment are stated at historical cost and depreciated on the straight-line method over the estimated useful lives of the assets. Machinery and equipment are depreciated over periods ranging from three years to 20 years and buildings and improvements over periods up to 40 years. Capitalized software costs are included in property, plant and equipment if we have the contractual right to take possession of the software at any time and it is feasible for us to either run the software on our own hardware or contract with a third party to host the software. These costs are amortized on a straight-line basis over the estimated useful lives of the software, which do not exceed seven years. We review long-lived assets for impairment when conditions exist that indicate the carrying amount of the assets may not be fully recoverable. Such conditions could include significant adverse changes in the business climate, current-period operating or cash flow losses, significant declines in forecasted operations, or a current expectation that an asset group will be disposed of before the end of its useful life. We perform undiscounted operating cash flow analyses to determine if an impairment exists. When testing for impairment of assets held for use, we group assets at the lowest level for which cash flows are separately identifiable. If an impairment is determined to exist, the loss is calculated based on estimated fair value. Impairment losses on assets to be disposed of, if any, are based on the estimated proceeds to be received, less costs of disposal.
Hosted Cloud Computing Arrangement that is a Service Contract:
Deferred implementation costs for hosted cloud computing service arrangements are stated at historical cost and amortized on the straight-line method over the term of the hosting arrangement which the implementation costs relate to. Deferred implementation costs for these arrangements are included in prepaid expenses and amortized to selling, general and administrative expenses (“SG&A”). The corresponding cash flows related to these arrangements will be reported within operating activities. We review the deferred implementation costs for impairment when we believe the deferred costs may no longer be recoverable. Such conditions could include situations where the arrangement is not expected to provide substantive service potential, a significant change occurs in the manner in which the arrangement is used or expected to be used, including early cancellation or termination of the arrangement, or situations where the arrangement has had, or will have, a significant change made to it. In instances where we have concluded that an impairment exists, we accelerate the deferred costs on the consolidated balance sheet for immediate expense recognition in SG&A.
Note 3. New Accounting Standards
Accounting Standards Adopted in the Current Year
Measurement of Current Expected Credit Losses:
In June 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016-13 to update the methodology used to measure current expected credit losses (“CECL”). This ASU applies to financial assets measured at amortized cost, including loans, held-to-maturity debt securities, net investments in leases, and trade accounts receivable as well as certain off-balance sheet credit exposures, such as loan commitments. This ASU replaces the current incurred loss impairment methodology with a methodology to reflect CECL and requires consideration of a broader range of reasonable and supportable information to explain credit loss estimates. The guidance must be adopted using a modified retrospective transition method through a cumulative-effect adjustment to retained earnings/(deficit) in the period of adoption. This ASU became effective in the first quarter of 2020. We adopted this ASU and guidance on our first day of 2020 and, based on the insignificant impact of this ASU on our financial statements, a cumulative-effect adjustment to retained earnings/(deficit) was not deemed necessary.
Fair Value Measurement Disclosures:
In August 2018, the FASB issued ASU 2018-13 related to fair value measurement disclosures. This ASU removes the requirement to disclose the amount of and reasons for transfers between Levels 1 and 2 of the fair value hierarchy, the policy for determining that a transfer has occurred, and valuation processes for Level 3 fair value measurements. Additionally, this ASU modifies the disclosures related to the measurement uncertainty for recurring Level 3 fair value measurements (by removing the requirement to disclose sensitivity to future changes) and the timing of liquidation of investee assets (by removing the timing requirement in certain instances). The guidance also requires new disclosures for Level 3 financial assets and liabilities, including the amount and location of unrealized gains and losses recognized in other comprehensive income/(loss) and additional information related to significant unobservable inputs used in determining Level 3 fair value measurements. This ASU became effective beginning in the first quarter of 2020. Early adoption of the guidance in whole was permitted. Alternatively, companies could have early adopted the portions of the guidance that removed or modified disclosures and delayed adoption of the additional disclosures until their effective date. Certain of the amendments in this ASU must be applied prospectively upon adoption, while other amendments must be applied retrospectively upon adoption. We elected to early adopt the provisions related to removing disclosures in the fourth quarter of 2018 on a retrospective basis. Accordingly, we removed certain disclosures from Note 12, Postemployment Benefits, and Note 13, Financial Instruments, in our Annual Report on Form 10-K for the year ended December 29, 2018. There was no other impact to our financial statement disclosures as a result of early adopting the provisions related to removing disclosures.
Implementation Costs Incurred in Hosted Cloud Computing Service Arrangements:
In August 2018, the FASB issued ASU 2018-15 related to accounting for implementation costs incurred in hosted cloud computing service arrangements. Under the new guidance, implementation costs incurred in a hosting arrangement that is a service contract should be expensed or deferred based on the nature of the costs and the project stage during which such costs are incurred. If the implementation costs qualify for deferral, they must be amortized over the term of the hosting arrangement and assessed for impairment. Additionally, the ASU requires disclosure of the nature of any hosted cloud computing service arrangement and requires financial statement presentation of the deferred costs be consistent with fees incurred under the hosting arrangement. This ASU became effective in the first quarter of 2020. We adopted this ASU in the first quarter of 2020 using a prospective transition method. The adoption of this ASU did not have a significant impact on our financial statements and related disclosures. See Note 2, Significant Accounting Policies, for our policy on accounting for hosted cloud computing service arrangements.
Accounting Standards Not Yet Adopted
Disclosure Requirements for Certain Employer-Sponsored Benefit Plans:
In August 2018, the FASB issued ASU 2018-14 related to the disclosure requirements for employers that sponsor defined benefit pension and other postretirement benefit plans. The guidance requires sponsors of these plans to provide additional disclosures, including weighted-average interest rates used in the company’s cash balance plans and a narrative description of reasons for any significant gains or losses impacting the benefit obligation for the period. Additionally, this guidance eliminates certain previous disclosure requirements. This ASU will be effective for fiscal years ending after December 15, 2020, and our Annual Report on Form 10-K for the year ended December 26, 2020 will reflect the adoption of this ASU. This guidance must be applied on a retrospective basis to all periods presented.
Simplifying the Accounting for Income Taxes:
In December 2019, the FASB issued ASU 2019-12 to simplify the accounting in Accounting Standards Codification (“ASC”) 740, Income Taxes. This guidance removes certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. This guidance also clarifies and simplifies other areas of ASC 740. This ASU will be effective beginning in the first quarter of 2021. Early adoption is permitted. Certain amendments in this update must be applied on a prospective basis, certain amendments must be applied on a retrospective basis, and certain amendments must be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings/(deficit) in the period of adoption. We are currently evaluating the impact this ASU will have on our financial statements and related disclosures as well as the timing of adoption.
Note 4. Acquisitions and Divestitures
Acquisitions
Primal Acquisition:
On January 3, 2019 (the “Primal Acquisition Date”), we acquired 100% of the outstanding equity interests in Primal Nutrition, LLC (“Primal Nutrition”) (the “Primal Acquisition”), a better-for-you brand primarily focused on condiments, sauces, and dressings, with growing product lines in healthy snacks and other categories. The Primal Kitchen brand holds leading positions in the e-commerce and natural channels. We have not included unaudited pro forma results as it would not yield significantly different results.
The Primal Acquisition was accounted for under the acquisition method of accounting for business combinations. The total cash consideration paid for Primal Nutrition was $201 million. We utilized estimated fair values at the Primal Acquisition Date to allocate the total consideration exchanged to the net tangible and intangible assets acquired and liabilities assumed. Such allocation for the Primal Acquisition was final as of September 28, 2019. The Primal Acquisition resulted in $124 million of tax deductible goodwill, which was allocated to the United States segment.
See Note 4, Acquisitions and Divestitures, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 28, 2019 for the final purchase price allocation, valuation methodology, and other information related to the Primal Acquisition.
Deal Costs:
Related to our acquisitions, we incurred aggregate deal costs of $2 million for the six months ended June 29, 2019. We recognized these deal costs in SG&A. There were no deal costs related to acquisitions for the three months ended June 29, 2019 or the three and six months ended June 27, 2020.
Divestitures
Potential Dispositions:
As of June 27, 2020, we were in negotiations with prospective third-party buyers for the sale of two businesses in our International segment. We expect these potential transactions to close in 2020. Related to the first potential transaction, we recorded an estimated loss of $71 million within other expense/(income) in the fourth quarter of 2019 and classified the related assets and liabilities as held for sale on the condensed consolidated balance sheets at June 27, 2020 and December 28, 2019. Related to the second potential transaction, we recorded an estimated loss of $3 million within other expense/(income) in the first quarter of 2020 and classified the related assets and liabilities as held for sale on the condensed consolidated balance sheet at June 27, 2020.
See Note 4, Acquisitions and Divestitures, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 28, 2019 for additional information related to the first potential transaction.
Heinz India Transaction:
In October 2018, we entered into a definitive agreement with two third-parties, Zydus Wellness Limited and Cadila Healthcare Limited (collectively, the “Buyers”), to sell 100% of our equity interests in Heinz India Private Limited (“Heinz India”) for approximately 46 billion Indian rupees (approximately $655 million at the Heinz India Closing Date (defined below)) (the “Heinz India Transaction”). In connection with the Heinz India Transaction, we transferred to the Buyers, among other assets and operations, our global intellectual property rights to several brands, including Complan, Glucon-D, Nycil, and Sampriti. Our core brands (i.e., Heinz and Kraft) were not transferred. The Heinz India Transaction closed on January 30, 2019 (the “Heinz India Closing Date”). Related to the Heinz India Transaction, we recognized a pre-tax gain in other expense/(income) of $249 million in 2019, including $246 million in the first quarter and $3 million in the third quarter. Additionally, in the first quarter of 2020, we recognized a gain of approximately $1 million related to local India tax recoveries.
In connection with the Heinz India Transaction, we agreed to indemnify the Buyers from and against any tax losses for any taxable period prior to the Heinz India Closing Date, including taxes for which we are liable as a result of any transaction that occurred on or before such date. We recorded tax indemnity liabilities related to the Heinz India Transaction totaling approximately $48 million as of the Heinz India Closing Date. Future changes to the fair value of these tax indemnity liabilities will continue to impact other expense/(income) throughout the life of the exposures as a component of the gain on sale for the Heinz India Transaction.
See Note 4, Acquisitions and Divestitures, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 28, 2019 for additional details related to the gain on sale and tax indemnity associated with the Heinz India Transaction.
Canada Natural Cheese Transaction:
In November 2018, we entered into a definitive agreement with a third-party, Parmalat SpA (“Parmalat”), to sell certain assets in our natural cheese business in Canada for approximately 1.6 billion Canadian dollars (approximately $1.2 billion at July 2, 2019) (the “Canada Natural Cheese Transaction”). In connection with the Canada Natural Cheese Transaction, we transferred certain assets to Parmalat, including the intellectual property rights to Cracker Barrel in Canada and P’Tit Quebec globally. The Canada Natural Cheese Transaction closed on July 2, 2019. See Note 4, Acquisitions and Divestitures, to the consolidated financial statements in our Annual Form on 10-K for the year ended December 28, 2019 for additional information related to the Canada Natural Cheese Transaction.
Deal Costs:
Related to our divestitures, we incurred aggregate deal costs of $5 million for the three months and $11 million for the six months ended June 29, 2019. We recognized these deal costs in SG&A. There were no deal costs related to divestitures for the three and six months ended June 27, 2020.
Held for Sale
Our assets and liabilities held for sale, by major class, were (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
June 27, 2020
|
|
December 28, 2019
|
ASSETS
|
|
|
|
Cash and cash equivalents
|
$
|
30
|
|
|
$
|
27
|
|
Inventories
|
17
|
|
|
21
|
|
Property, plant and equipment, net
|
33
|
|
|
25
|
|
Intangible assets, net
|
25
|
|
|
23
|
|
Other
|
24
|
|
|
26
|
|
Total assets held for sale
|
$
|
129
|
|
|
$
|
122
|
|
LIABILITIES
|
|
|
|
Trade payables
|
$
|
2
|
|
|
$
|
3
|
|
Other
|
6
|
|
|
6
|
|
Total liabilities held for sale
|
$
|
8
|
|
|
$
|
9
|
|
The balances held for sale at June 27, 2020 and December 28, 2019 primarily related to businesses in our International segment, as well as certain manufacturing equipment and land use rights across the globe.
Note 5. Restructuring Activities
As part of our restructuring activities, we incur expenses that qualify as exit and disposal costs under U.S. GAAP. These include severance and employee benefit costs and other exit costs. Severance and employee benefit costs primarily relate to cash severance, non-cash severance, including accelerated equity award compensation expense, and pension and other termination benefits. Other exit costs primarily relate to lease and contract terminations. We also incur expenses that are an integral component of, and directly attributable to, our restructuring activities, which do not qualify as exit and disposal costs under U.S. GAAP. These include asset-related costs and other implementation costs. Asset-related costs primarily relate to accelerated depreciation and asset impairment charges. Other implementation costs primarily relate to start-up costs of new facilities, professional fees, asset relocation costs, costs to exit facilities, and costs associated with restructuring benefit plans.
Employee severance and other termination benefit packages are primarily determined based on established benefit arrangements, local statutory requirements, and historical benefit practices. We recognize the contractual component of these benefits when payment is probable and estimable; additional elements of severance and termination benefits associated with non-recurring benefits are recognized ratably over each employee’s required future service period. Charges for accelerated depreciation are recognized on long-lived assets that will be taken out of service before the end of their normal service, in which case depreciation estimates are revised to reflect the use of the asset over its shortened useful life. Asset impairments establish a new fair value basis for assets held for disposal or sale, and those assets are written down to expected net realizable value if carrying value exceeds fair value. All other costs are recognized as incurred.
Restructuring Activities:
We have restructuring programs globally, which are focused primarily on workforce reduction and factory closure and consolidation. For the six months ended June 27, 2020, we eliminated approximately 180 positions outside of the United States related to these programs. As of June 27, 2020, we expect to eliminate approximately 110 additional positions outside the United States related to these programs primarily due to the formation of the International zone. Total restructuring expenses during the six months ended June 27, 2020 were $4 million and included $6 million of credits in severance and employee benefit costs, $2 million of credits in non-cash asset-related costs, $11 million of other implementation costs, and $1 million of other exit costs. Restructuring expenses during the three months ended June 27, 2020 were $4 million and included $3 million of credits in severance and employee benefit costs, $2 million of credits in non-cash asset-related costs, and $9 million of other implementation costs. Restructuring expenses totaled $14 million for the three months and $41 million for the six months ended June 29, 2019.
Our net liability balance for restructuring project costs that qualify as exit and disposal costs under U.S. GAAP (i.e., severance and employee benefit costs and other exit costs) was (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance and Employee Benefit Costs
|
|
Other Exit Costs
|
|
Total
|
Balance at December 28, 2019
|
$
|
22
|
|
|
$
|
24
|
|
|
$
|
46
|
|
Charges/(credits)
|
(6)
|
|
|
1
|
|
|
(5)
|
|
Cash payments
|
(11)
|
|
|
(2)
|
|
|
(13)
|
|
Balance at June 27, 2020
|
$
|
5
|
|
|
$
|
23
|
|
|
$
|
28
|
|
We expect the majority of the liability for severance and employee benefit costs as of June 27, 2020 to be paid by the end of 2020. The liability for other exit costs primarily relates to lease obligations. The cash impact of these obligations will continue for the duration of the lease terms, which expire between 2020 and 2026.
Total Expenses:
Total expense/(income) related to restructuring activities, by income statement caption, were (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
|
For the Six Months Ended
|
|
|
|
June 27, 2020
|
|
June 29, 2019
|
|
June 27, 2020
|
|
June 29, 2019
|
Severance and employee benefit costs - Cost of products sold
|
$
|
(1)
|
|
|
$
|
(3)
|
|
|
$
|
—
|
|
|
$
|
(3)
|
|
Severance and employee benefit costs - SG&A
|
(2)
|
|
|
(1)
|
|
|
(6)
|
|
|
—
|
|
Asset-related costs - Cost of products sold
|
(2)
|
|
|
1
|
|
|
(2)
|
|
|
3
|
|
Asset-related costs - SG&A
|
—
|
|
|
2
|
|
|
—
|
|
|
9
|
|
Other costs - Cost of products sold
|
1
|
|
|
8
|
|
|
1
|
|
|
15
|
|
Other costs - SG&A
|
8
|
|
|
7
|
|
|
11
|
|
|
17
|
|
|
$
|
4
|
|
|
$
|
14
|
|
|
$
|
4
|
|
|
$
|
41
|
|
We do not include our restructuring activities within Segment Adjusted EBITDA (as defined in Note 18, Segment Reporting). The pre-tax impact of allocating such expenses to our segments would have been (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
|
For the Six Months Ended
|
|
|
|
June 27, 2020
|
|
June 29, 2019
|
|
June 27, 2020
|
|
June 29, 2019
|
United States
|
$
|
2
|
|
|
$
|
7
|
|
|
$
|
2
|
|
|
$
|
26
|
|
International
|
(1)
|
|
|
1
|
|
|
(2)
|
|
|
5
|
|
Canada
|
4
|
|
|
4
|
|
|
5
|
|
|
6
|
|
General corporate expenses
|
(1)
|
|
|
2
|
|
|
(1)
|
|
|
4
|
|
|
$
|
4
|
|
|
$
|
14
|
|
|
$
|
4
|
|
|
$
|
41
|
|
Note 6. Restricted Cash
The following table provides a reconciliation of cash and cash equivalents, as reported on our condensed consolidated balance sheets, to cash, cash equivalents, and restricted cash, as reported on our condensed consolidated statements of cash flows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
June 27, 2020
|
|
December 28, 2019
|
Cash and cash equivalents
|
$
|
2,812
|
|
|
$
|
2,279
|
|
Restricted cash included in other current assets
|
1
|
|
|
1
|
|
Cash, cash equivalents, and restricted cash
|
$
|
2,813
|
|
|
$
|
2,280
|
|
At June 27, 2020 and December 28, 2019, cash and cash equivalents excluded amounts classified as held for sale. See Note 4, Acquisitions and Divestitures, for additional information.
Note 7. Inventories
Inventories consisted of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
June 27, 2020
|
|
December 28, 2019
|
Packaging and ingredients
|
$
|
676
|
|
|
$
|
511
|
|
Work in process
|
328
|
|
|
364
|
|
Finished products
|
1,811
|
|
|
1,846
|
|
Inventories
|
$
|
2,815
|
|
|
$
|
2,721
|
|
At June 27, 2020 and December 28, 2019, inventories excluded amounts classified as held for sale. See Note 4, Acquisitions and Divestitures, for additional information.
Note 8. Goodwill and Intangible Assets
Goodwill:
Changes in the carrying amount of goodwill, by segment, were (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
International
|
|
Canada
|
|
Total
|
Balance at December 28, 2019
|
$
|
29,647
|
|
|
$
|
3,355
|
|
|
$
|
2,544
|
|
|
$
|
35,546
|
|
Impairment losses
|
(655)
|
|
|
(368)
|
|
|
(1,020)
|
|
|
(2,043)
|
|
Translation adjustments and other
|
—
|
|
|
(90)
|
|
|
(103)
|
|
|
(193)
|
|
Balance at June 27, 2020
|
$
|
28,992
|
|
|
$
|
2,897
|
|
|
$
|
1,421
|
|
|
$
|
33,310
|
|
In the first quarter of 2020, our internal reporting and reportable segments changed. We moved our Puerto Rico business from the Latin America zone to the United States zone to consolidate and streamline the management of our product categories and supply chain. We also combined our EMEA, Latin America, and APAC zones to form the International zone as a result of certain previously announced organizational changes.
Therefore, effective in the first quarter of 2020, we manage and report our operating results through three reportable segments defined by geographic region: United States, International, and Canada. We have reflected these changes in all historical periods presented. Accordingly, the segment goodwill balances at December 28, 2019 reflect an increase of $46 million in the United States and a corresponding decrease in International.
The reorganization of our internal reporting and reportable segments changed the composition of certain of our reporting units: (i) Benelux was separated from the historical Northern Europe and Benelux reporting unit and combined with the historical Continental Europe reporting unit, creating two new reporting units, Northern Europe and Continental Europe; (ii) our historical Greater China reporting unit was combined with our historical Southeast Asia and India reporting units, creating the new Asia reporting unit; (iii) our historical Northeast Asia reporting unit was combined with our historical Australia and New Zealand reporting unit to form a single reporting unit called Australia, New Zealand, and Japan ("ANJ"); (iv) our historical Latin America Exports reporting unit (excluding Puerto Rico) was combined with our historical Brazil and Mexico reporting units to form a single reporting unit called Latin America ("LATAM"); and (v) Puerto Rico, which was previously included in our historical Latin America Exports reporting unit, became a standalone reporting unit.
As a result of this reorganization, we reassigned assets and liabilities to the applicable reporting units and allocated goodwill using the relative fair value approach. We performed an interim impairment test (or transition test) on the affected reporting units on both a pre- and post-reorganization basis.
We performed our pre-reorganization impairment test as of December 29, 2019, which was our first day of 2020. There were five reporting units affected by the reassignment of assets and liabilities that maintained a goodwill balance as of our pre-reorganization impairment test date. These reporting units were Latin America Exports, Northeast Asia, Northern Europe and Benelux, Continental Europe, and Greater China. The remaining reporting units affected by the reassignment of assets and liabilities did not maintain a goodwill balance as of our pre-reorganization impairment test date.
Two of the affected reporting units, Latin America Exports and Northeast Asia, were tested for impairment as of December 28, 2019, as part of our fourth quarter 2019 interim impairment test. Following the impairment test, the goodwill carrying amount of our Latin America Exports reporting unit was approximately $195 million and the goodwill carrying amount of our Northeast Asia reporting unit was approximately $83 million as of December 28, 2019. These carrying amounts were determined to equal the carrying amounts on December 29, 2019, the day of our pre-reorganization impairment test, for the Latin America Exports and Northeast Asia reporting units.
Additionally, as part of our pre-reorganization impairment test, we utilized the discounted cash flow method under the income approach to estimate the fair values as of December 29, 2019 of the three reporting units noted above that were not tested as part of our fourth quarter 2019 interim impairment test (Northern Europe and Benelux, Continental Europe, and Greater China) and concluded that no additional impairment charge was required. The goodwill carrying amount of our Northern Europe and Benelux reporting unit was approximately $2.1 billion and its fair value was between 20-50% over carrying amount. The goodwill carrying amount of our Continental Europe reporting unit was approximately $567 million and the goodwill carrying amount of our Greater China reporting unit was approximately $321 million and each had a fair value over carrying amount in excess of 50%.
We performed our post-reorganization impairment test as of December 29, 2019. There were six reporting units in scope for our post-reorganization impairment test: Northern Europe, Continental Europe, Asia, ANJ, LATAM, and Puerto Rico. As a result of our post-reorganization impairment test, we recognized a non-cash impairment loss of $226 million in SG&A in the first quarter of 2020 related to two reporting units contained within our International segment. We determined the factors contributing to the impairment loss were the result of circumstances described below.
We recognized a non-cash impairment loss of $83 million in our ANJ reporting unit within our International segment. This impairment was driven by the reporting unit reorganization discussed above. The combination of Australia and New Zealand, which was fully impaired in the fourth quarter of 2019, with Northeast Asia, created a new reporting unit with a fair value below carrying amount upon transition. The impairment of the ANJ reporting unit represents all of the goodwill of that reporting unit.
We recognized a non-cash impairment loss of $143 million in our LATAM reporting unit within our International segment. This impairment was driven by the reporting unit reorganization discussed above. The combination of Mexico and Brazil, neither of which had a goodwill balance as of the end of 2019, with Latin America Exports, which was partially impaired in 2019, created a new reporting unit with a fair value below carrying amount upon transition. The impairment of the LATAM reporting unit represents all of the goodwill of that reporting unit.
The remaining reporting units tested as part of our post-reorganization impairment test each had excess fair value over carrying amount as of December 29, 2019. The goodwill carrying amount of our Puerto Rico reporting unit was approximately $58 million and its fair value was less than 10% over carrying amount, the goodwill carrying amount of our Northern Europe reporting unit was approximately $1.7 billion and its fair value was between 20-50% over carrying amount, and the goodwill carrying amount of our Continental Europe reporting unit was approximately $920 million and the goodwill carrying amount of our Asia reporting unit was approximately $321 million and each had a fair value over carrying amount that was in excess of 50%.
We test our reporting units for impairment annually as of the first day of our second quarter, which was March 29, 2020, for our 2020 annual impairment test. In performing this test, we incorporated information that was known through the date of filing this Quarterly Report on Form 10-Q. We utilized the discounted cash flow method under the income approach to estimate the fair value of our reporting units. Through the performance of the 2020 annual impairment test, we identified impairments related to the U.S. Foodservice, Canada Retail, Canada Foodservice, and EMEA East reporting units. As a result, we recognized a non-cash impairment loss of $1.8 billion in SG&A in the second quarter of 2020 related to these four reporting units, which are located across our United States, International, and Canada segments. These impairments were primarily due to the completion of our enterprise strategy and five-year operating plan in the second quarter of 2020. Management, in completing the five-year operating plan, developed updated expectations regarding revenue growth and profitability opportunities associated with our reporting units and, as a result, has recalibrated our future investments to align with the opportunities for which we see greater potential for a return on those investments. Current expectations for the impacts of COVID-19 were incorporated into near-term cash flow forecasts as well as the discount rate and long-term growth rate valuation assumptions. Accordingly, in conjunction with these updated expectations, management updated and aligned our valuation assumptions, resulting in increases in fair value estimates for certain reporting units and decreases in fair value estimates for others.
We recognized an $815 million impairment loss in our Canada Retail reporting unit within our Canada segment. Through the completion of our enterprise strategy and five-year operating plan in the second quarter of 2020, we revised downward our outlook for net sales, margin, and cash flows in response to recently observed performance trends for this reporting unit. Additionally, through the 2020 annual impairment test performed in the second quarter, we also lowered our long-term revenue growth rate expectations and reflected declines in forecasted foreign currency exchange rates in Canada. After the impairment, the goodwill carrying amount of the Canada Retail reporting unit is approximately $1.2 billion.
We recognized a $655 million impairment loss in our U.S. Foodservice reporting unit within our United States segment and a $205 million impairment loss in our Canada Foodservice reporting unit within our Canada segment. Through the completion of our enterprise strategy and five-year operating plan in the second quarter of 2020, we established a revised downward outlook for net sales, margin, and cash flows. We also lowered our long-term revenue growth rate expectations for these away-from-home businesses to reflect, in part, consumer shifts from restaurants to at-home consumption, which is expected to have a more sustained impact than previously anticipated due to the continued spread of COVID-19. Our current expectations for the duration and intensity of the COVID-19 impact on away-from-home establishments was incorporated into the cash flow forecasts as well as into the discount rate and long-term growth rate valuation assumptions. However, given the evolving nature of COVID-19 and its impacts, there continues to be a high degree of uncertainty and these reporting units could be subject to additional impairments if there are further sustained changes in purchasing behaviors or government restrictions. After the impairment, the goodwill carrying amount of the U.S. Foodservice reporting unit is approximately $3.2 billion and the goodwill carrying amount of the Canada Foodservice reporting unit is approximately $148 million.
We recognized a $142 million impairment loss in our EMEA East reporting unit within our International segment. Through the completion of our enterprise strategy and five-year operating plan in the second quarter of 2020, we established a revised downward outlook for net sales, margin, and cash flows in response to lower expectations for margin and revenue growth opportunities for this reporting unit. The impairment of the EMEA East reporting unit represents all of the goodwill of that reporting unit.
As of June 27, 2020, we maintain 15 reporting units, nine of which comprise our goodwill balance. These nine reporting units had an aggregate carrying amount of $33.3 billion at June 27, 2020. As of the 2020 annual impairment test date, six reporting units had 10% or less fair value over carrying amount and an aggregate goodwill carrying amount of $30.4 billion, one reporting unit had between 10-20% fair value over carrying amount and a goodwill carrying amount of $1.6 billion, one reporting unit had between 20-50% fair value over carrying amount and a goodwill carrying amount of $931 million, and one reporting unit had over 50% fair value over carrying amount and a goodwill carrying amount of $317 million. We test our reporting units for impairment annually as of the first day of our second quarter, or more frequently if events or circumstances indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount.
In connection with the preparation of our first quarter 2019 financial statements, we concluded that it was more likely than not that the fair values of three of our pre-reorganization reporting units (EMEA East, Brazil, and Latin America Exports) were below their carrying amounts. As such, we performed an interim impairment test on these reporting units as of March 30, 2019. As a result of our interim impairment test, we recognized a non-cash impairment loss of $620 million in SG&A in the first quarter of 2019. We recorded a $286 million impairment loss in our EMEA East reporting unit, a $205 million impairment loss in our Brazil reporting unit, and a $129 million impairment loss in our Latin America Exports reporting unit. The impairment of the Brazil reporting unit represented all of the goodwill of that reporting unit. We determined the factors contributing to the impairment loss were the result of circumstances that arose during the first quarter of 2019. These reporting units are part of our International segment as discussed above.
We performed our 2019 annual impairment test as of March 31, 2019, which was the first day of our second quarter in 2019. We utilized the discounted cash flow method under the income approach to estimate the fair value of our reporting units. Through the performance of the 2019 annual impairment test, we identified an impairment related to the U.S. Refrigerated reporting unit. As a result, we recognized a non-cash impairment loss of $118 million in SG&A in the second quarter of 2019 within our United States segment. This impairment was primarily due to an increase in the discount rate used for fair value estimation.
See Note 9, Goodwill and Intangible Assets, in our Annual Report on Form 10-K for the year ended December 28, 2019 for additional information on these impairment losses.
Accumulated impairment losses to goodwill were $10.2 billion as of June 27, 2020.
Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions, estimates, and market factors. Estimating the fair value of individual reporting units requires us to make assumptions and estimates regarding our future plans, as well as industry, economic, and regulatory conditions. These assumptions and estimates include estimated future annual net cash flows, income tax rates, discount rates, growth rates, and other market factors. If current expectations of future growth rates and margins are not met, if market factors outside of our control, such as discount rates, income tax rates, foreign currency exchange rates, or any factors that could be affected by COVID-19, change, or if management’s expectations or plans otherwise change, including as a result of updates to our global five-year operating plan, then one or more of our reporting units might become impaired in the future. Additionally, any decisions to divest certain non-strategic assets could lead to the impairment of one or more of our reporting units in the future.
During the second quarter of 2020, the COVID-19 pandemic has continued to produce a short-term beneficial financial impact for our consolidated results. Retail sales have increased due to higher than anticipated consumer demand for our products. The foodservice channel, however, has experienced a negative impact from prolonged shelter in place mandates limiting access to away-from-home establishments for a longer period of time than was expected when they were originally put in place. Our U.S. Foodservice and Canada Foodservice reporting units are the most exposed of our reporting units to the long-term impacts to away-from-home establishments. These two reporting units were both impaired during our most recent annual impairment test, reflecting our best estimate at the present time of the future outlook and risks of these businesses, and maintain an aggregate remaining goodwill carrying amount of approximately $3.4 billion. A number of factors could result in further future impairments of our foodservice reporting units, including but not limited to: continued mandates around closures of dining rooms in restaurants, distancing of people within establishments resulting in fewer customers, the total number of restaurant closures, forthcoming changes in consumer preferences or regulatory requirements over product formats (e.g., table top packaging vs. single serve packaging), and consumer trends of dining-in versus dining-out. Given the evolving nature of and uncertainty driven by the COVID-19 pandemic, we will continue to evaluate the impact on our reporting units as adverse changes to these assumptions could result in future impairments.
Our reporting units that were impaired in 2019 and 2020 were written down to their respective fair values resulting in zero excess fair value over carrying amount as of the applicable impairment test dates. Accordingly, these and other individual reporting units that have 20% or less excess fair value over carrying amount as of the 2020 annual impairment test date have a heightened risk of future impairments if any assumptions, estimates, or market factors change in the future. Although the remaining reporting units have more than 20% excess fair value over carrying amount as of the 2020 annual impairment test date, these amounts are also associated with the acquisition of H.J. Heinz Company in 2013 and the merger of Kraft Foods Group, Inc. with and into H.J. Heinz Holding Corporation in 2015 and are recorded on the balance sheet at their estimated acquisition date fair values. Therefore, if any assumptions, estimates, or market factors change in the future, these amounts are also susceptible to impairments.
Indefinite-lived intangible assets:
Changes in the carrying amount of indefinite-lived intangible assets, which primarily consisted of trademarks, were (in millions):
|
|
|
|
|
|
Balance at December 28, 2019
|
$
|
43,400
|
|
Impairment losses
|
(1,056)
|
|
Translation adjustments
|
(233)
|
|
Balance at June 27, 2020
|
$
|
42,111
|
|
At June 27, 2020 and December 28, 2019, indefinite-lived intangible assets excluded amounts classified as held for sale. See Note 4, Acquisitions and Divestitures, for additional information on amounts held for sale.
Our indefinite-lived intangible asset balance primarily consists of a number of individual brands, which had an aggregate carrying amount of $42.1 billion at June 27, 2020. We test our brands for impairment annually as of the first day of our second quarter, or more frequently if events or circumstances indicate it is more likely than not that the fair value of a brand is less than its carrying amount.
We performed our 2020 annual impairment test as of March 29, 2020, which is the first day of our second quarter in 2020. As a result of our 2020 annual impairment test, we recognized a non-cash impairment loss of $1.1 billion in SG&A in the second quarter of 2020 primarily related to nine brands (Oscar Mayer, Maxwell House, Velveeta, Cool Whip, Plasmon, ABC, Classico, Wattie’s, and Planters). We recorded impairment losses of $949 million in our United States segment, $100 million in our International segment, and $7 million in our Canada segment, consistent with the ownership of the trademarks. The impairment for these brands was largely due to the following factors:
•We recognized a $626 million impairment loss related to the Oscar Mayer brand. As the meats business has grown more competitive in the United States, we expect to require additional investments in marketing and packaging to revitalize the brand and drive a higher rate of long-term revenue growth, but at a lower profit margin. As a result, we revised downward our revenue and margin expectations as part of the completion of our enterprise strategy and five-year operating plan in the second quarter of 2020. This brand had a carrying amount of $3.3 billion prior to this impairment and $2.7 billion after impairment.
•We recognized a $140 million impairment loss related to the Maxwell House brand, primarily due to downward revised revenue expectations that were established through the completion of our enterprise strategy and five-year operating plan in the second quarter of 2020 to reflect forecasted declines in the mainstream coffee category and distribution losses. Additionally, the discount rate assumption used for the fair value estimation increased to reflect a market participant’s perceived risk in the brand valuation. This brand had a carrying amount of $823 million prior to this impairment and $683 million after impairment.
•We recognized a $290 million impairment loss primarily related to seven other brands (Velveeta, Cool Whip, Plasmon, ABC, Classico, Wattie’s, and Planters). Through the completion of our enterprise strategy and five-year operating plan in the second quarter of 2020 and the development of valuation assumptions through the 2020 annual impairment test, we established new expectations for revenue growth, margins, long-term growth rates, and discount rates. Due to the low level of fair value over carrying amount for these brands, these changes in future cash flow expectations and valuation assumptions reduced the fair value estimates for these brands. These brands had an aggregate carrying value of $5.1 billion prior to this impairment and $4.8 billion after impairment.
The aggregate carrying amount associated with two additional brands (Kraft and Miracle Whip), which each had excess fair value over its carrying amount of 10% or less, was $13.6 billion as of the impairment test date (in this case, both brands had fair value over carrying amount of less than 1% due to impairments recorded in recent prior years). The aggregate carrying amount of an additional six brands (Lunchables, A1, Ore-Ida, Stove Top, Jet Puffed, and Quero), which each had fair value over its carrying amount of between 10-20%, was $4.1 billion as of the impairment test date. The aggregate carrying amount of brands with fair value over carrying amount between 20-50% was $6.9 billion, and the aggregate carrying amount of brands with fair value over carrying amount in excess of 50% was $9.3 billion as of the impairment test date.
We performed our 2019 annual impairment test as of March 31, 2019, which was the first day of our second quarter in 2019. As a result of our 2019 annual impairment test, we recognized a non-cash impairment loss of $474 million in SG&A in the second quarter of 2019 primarily related to six brands (Miracle Whip, Velveeta, Lunchables, Maxwell House, Philadelphia, and Cool Whip). This impairment loss was recorded in our United States segment, consistent with the ownership of the trademarks. The impairment for these brands was largely due to an increase in the discount rate assumptions used for the fair value estimations. The increase in the discount rate was applied to reflect a market participants’ perceived risk in the valuation implied by the sustained reduction in our stock price and, hence, market capitalization (which decreased approximately 25% from December 29, 2018 to the March 31, 2019 annual impairment test date and sustained this decline through June 29, 2019).
For Miracle Whip and Maxwell House, the reduction in fair value was also driven by lower expectations of near and long-term net sales growth that were adjusted in the second quarter of 2019 due to anticipated trends in consumer preferences. For Lunchables, the reduction in fair value was also due to lower forecasted net sales and royalty rate assumptions associated with lower profit margin expectations driven by pricing actions at certain customers. For Velveeta, Philadelphia, and Cool Whip, no assumption changes other than the discount rate had a meaningful impact on the estimated fair value of brands. These brands had an aggregate carrying value of $13.5 billion prior to this impairment and $13.0 billion after impairment.
Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions, estimates, and market factors. Estimating the fair value of individual brands requires us to make assumptions and estimates regarding our future plans, as well as industry, economic, and regulatory conditions. These assumptions and estimates include estimated future annual net cash flows, income tax considerations, discount rates, growth rates, royalty rates, contributory asset charges, and other market factors. If current expectations of future growth rates and margins are not met, if market factors outside of our control, such as discount rates, income tax rates, foreign currency exchange rates, or any factors that could be affected by COVID-19, change, or if management’s expectations or plans otherwise change, including as a result of updates to our global five-year operating plan, then one or more of our brands might become impaired in the future. Additionally, any decisions to divest certain non-strategic assets could lead to the impairment of one or more of our brands in the future.
As we consider the ongoing impact of the COVID-19 pandemic with regard to our indefinite-lived intangible assets, a number of factors could have a future adverse impact on our brands, including changes in consumer and consumption trends in both the short and long term, the extent of continued government mandates to shelter in place, total number of restaurant closures, economic declines, and reductions in consumer discretionary income. We have seen an increase in our retail business in the short-term that has more than offset declines in our foodservice business over the same period. Our brands are generally common across both the retail and foodservice businesses and the fair value of our brands are subject to a similar mix of positive and negative factors. Given the evolving nature and uncertainty driven by COVID-19 pandemic, we will continue to evaluate the impact on our brands.
Our brands that were impaired in 2020 and 2019 were written down to their respective fair values resulting in zero excess fair value over carrying amount as of the applicable impairment test dates. Accordingly, these and other individual brands that have 20% or less excess fair value over carrying amount as of the 2020 annual impairment test date have a heightened risk of future impairments if any assumptions, estimates, or market factors change in the future. Although the remaining brands have more than 20% excess fair value over carrying amount as of the 2020 annual impairment test date, these amounts are also associated with the acquisition of H.J. Heinz Company in 2013 and the merger of Kraft Foods Group, Inc. with and into H.J. Heinz Holding Corporation in 2015 and are recorded on the balance sheet at their estimated acquisition date fair values. Therefore, if any assumptions, estimates, or market factors change in the future, these amounts are also susceptible to impairments.
Definite-lived intangible assets:
Definite-lived intangible assets were (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 27, 2020
|
|
|
|
|
|
December 28, 2019
|
|
|
|
|
|
Gross
|
|
Accumulated
Amortization
|
|
Net
|
|
Gross
|
|
Accumulated
Amortization
|
|
Net
|
Trademarks
|
$
|
2,433
|
|
|
$
|
(522)
|
|
|
$
|
1,911
|
|
|
$
|
2,443
|
|
|
$
|
(469)
|
|
|
$
|
1,974
|
|
Customer-related assets
|
4,087
|
|
|
(918)
|
|
|
3,169
|
|
|
4,113
|
|
|
(845)
|
|
|
3,268
|
|
Other
|
14
|
|
|
(3)
|
|
|
11
|
|
|
14
|
|
|
(4)
|
|
|
10
|
|
|
$
|
6,534
|
|
|
$
|
(1,443)
|
|
|
$
|
5,091
|
|
|
$
|
6,570
|
|
|
$
|
(1,318)
|
|
|
$
|
5,252
|
|
Amortization expense for definite-lived intangible assets was $68 million for the three months and $136 million for the six months ended June 27, 2020 and $72 million for the three months and $148 million for the six months ended June 29, 2019. Aside from amortization expense, the change in definite-lived intangible assets from December 28, 2019 to June 27, 2020 primarily reflects the impact of foreign currency. At June 27, 2020 and December 28, 2019, definite-lived intangible assets excluded amounts classified as held for sale. See Note 4, Acquisitions and Divestitures, for additional information on amounts held for sale.
We estimate that amortization expense related to definite-lived intangible assets will be approximately $271 million for the next 12 months and approximately $271 million for each of the four years thereafter.
Note 9. Income Taxes
The provision for income taxes consists of provisions for federal, state, and foreign income taxes. We operate in an international environment; accordingly, the consolidated effective tax rate is a composite rate reflecting the earnings in various locations and the applicable tax rates. Additionally, small movements in tax rates due to a change in tax law or a change in tax rates that causes us to revalue our deferred tax balances produces volatility in our effective tax rate. Our quarterly income tax provision is determined based on our estimated full year effective tax rate, adjusted for tax attributable to infrequent or unusual items, which are recognized on a discrete period basis in the income tax provision for the period in which they occur.
Our effective tax rate was a benefit of 3.0% for the three months ended June 27, 2020 on pre-tax losses compared to an expense of 18.8% for the three months ended June 29, 2019 on pre-tax income. The change in our effective tax rate was primarily driven by an increase in unfavorable net discrete items, primarily related to non-deductible goodwill impairments (23.8%), which were partially offset by the favorable impact of establishing certain deferred tax assets for state tax deductions and the revaluation of our deferred tax balances due to changes in international tax laws. Prior year favorable impacts from net discrete items were primarily related to a decrease in uncertain tax position reserves, which were partially offset by the unfavorable impact related to non-deductible goodwill impairments (4.4%).
Our effective tax rate was an expense of 9.4% for the six months ended June 27, 2020 on pre-tax losses compared to an expense of 27.3% for the six months ended June 29, 2019 on pre-tax income. The change in our effective tax rate was primarily driven by an increase in unfavorable net discrete items, primarily related to non-deductible goodwill impairments (39.2%), which were partially offset by the favorable impact of establishing certain deferred tax assets for state tax deductions and the revaluation of our deferred tax balances due to changes in international tax laws. Prior year unfavorable impacts from net discrete items were primarily related to non-deductible goodwill impairments (10.5%), which were partially offset by a decrease in uncertain tax position reserves and the favorable impact of changes in estimates of certain 2018 U.S. income and deductions.
Note 10. Employees’ Stock Incentive Plans
2020 Omnibus Incentive Plan:
On May 7, 2020, our stockholders approved The Kraft Heinz Company 2020 Omnibus Incentive Plan (the “2020 Omnibus Plan”), which was adopted by our Board of Directors on March 2, 2020. The 2020 Omnibus Plan is effective March 2, 2020 (the “Plan Effective Date”) and will expire on the tenth anniversary of the Plan Effective Date. The 2020 Omnibus Plan authorizes the issuance of up to 36 million shares of our common stock for awards to employees, non-employee directors, and other key personnel. The 2020 Omnibus Plan provides for the grant of options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), deferred stock, performance awards, other stock-based awards, and cash-based awards. Equity awards granted under the 2020 Omnibus Plan include awards that vest in full at the end of a three year period as well as awards that vest in annual installments over three or four years beginning on the second anniversary of the original grant date. Non-qualified stock options have a maximum exercise term of 10 years from the date of the grant. As of the Plan Effective Date, awards will no longer be granted under The Kraft Heinz Company 2016 Omnibus Plan, the H. J. Heinz Holding Corporation 2013 Omnibus Incentive Plan, Kraft Foods Group, Inc. 2012 Performance Incentive Plan, or any other equity plans other than the 2020 Omnibus Plan.
Stock Options:
Our stock option activity and related information was:
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Stock Options
|
|
Weighted Average Exercise Price
(per share)
|
Outstanding at December 28, 2019
|
17,638,500
|
|
|
$
|
41.22
|
|
Granted
|
443,794
|
|
|
30.43
|
|
Forfeited
|
(540,299)
|
|
|
61.95
|
|
Exercised
|
(3,160,087)
|
|
|
23.21
|
|
Outstanding at June 27, 2020
|
14,381,908
|
|
|
44.06
|
|
The aggregate intrinsic value of stock options exercised during the period was $20 million for the six months ended June 27, 2020.
Restricted Stock Units:
Our RSU activity and related information was:
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Units
|
|
Weighted Average Grant Date Fair Value
(per share)
|
Outstanding at December 28, 2019
|
9,395,909
|
|
|
$
|
33.51
|
|
Granted
|
5,335,387
|
|
|
29.18
|
|
Forfeited
|
(415,536)
|
|
|
35.58
|
|
Vested
|
(100,212)
|
|
|
71.47
|
|
Outstanding at June 27, 2020
|
14,215,548
|
|
|
31.52
|
|
The aggregate fair value of RSUs that vested during the period was $3 million for the six months ended June 27, 2020.
Performance Share Units:
Our performance share unit (“PSU”) activity and related information was:
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Units
|
|
Weighted Average Grant Date Fair Value
(per share)
|
Outstanding at December 28, 2019
|
6,813,659
|
|
|
$
|
36.03
|
|
Granted
|
191,792
|
|
|
22.56
|
|
Forfeited
|
(408,340)
|
|
|
55.55
|
|
Outstanding at June 27, 2020
|
6,597,111
|
|
|
34.43
|
|
Note 11. Postemployment Benefits
See our consolidated financial statements and related notes in our Annual Report on Form 10-K for the year ended December 28, 2019 for additional information on our postemployment related accounting policies.
Pension Plans
Components of Net Pension Cost/(Benefit):
Net pension cost/(benefit) consisted of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
|
|
|
|
|
For the Six Months Ended
|
|
|
|
|
|
|
|
U.S. Plans
|
|
|
|
Non-U.S. Plans
|
|
|
|
U.S. Plans
|
|
|
|
Non-U.S. Plans
|
|
|
|
June 27, 2020
|
|
June 29, 2019
|
|
June 27, 2020
|
|
June 29, 2019
|
|
June 27, 2020
|
|
June 29, 2019
|
|
June 27, 2020
|
|
June 29, 2019
|
Service cost
|
$
|
1
|
|
|
$
|
2
|
|
|
$
|
4
|
|
|
$
|
4
|
|
|
$
|
3
|
|
|
$
|
4
|
|
|
$
|
8
|
|
|
$
|
8
|
|
Interest cost
|
32
|
|
|
40
|
|
|
10
|
|
|
13
|
|
|
65
|
|
|
81
|
|
|
19
|
|
|
26
|
|
Expected return on plan assets
|
(53)
|
|
|
(57)
|
|
|
(25)
|
|
|
(36)
|
|
|
(105)
|
|
|
(114)
|
|
|
(51)
|
|
|
(73)
|
|
Amortization of unrecognized losses/(gains)
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
Net pension cost/(benefit)
|
$
|
(20)
|
|
|
$
|
(15)
|
|
|
$
|
(10)
|
|
|
$
|
(18)
|
|
|
$
|
(37)
|
|
|
$
|
(29)
|
|
|
$
|
(23)
|
|
|
$
|
(38)
|
|
We present all non-service cost components of net pension cost/(benefit) within other expense/(income) on our condensed consolidated statements of income.
Employer Contributions:
Related to our non-U.S. pension plans, we contributed $8 million during the six months ended June 27, 2020 and plan to make further contributions of approximately $7 million during the remainder of 2020. We did not contribute to our U.S. pension plans during the six months ended June 27, 2020 and do not plan to make contributions during the remainder of 2020. Estimated future contributions take into consideration current economic conditions, including the impacts of COVID-19, which at this time are expected to have minimal impact on expected contributions for the remainder of 2020. Our actual contributions and plans may change due to many factors, including changes in tax, employee benefit, or other laws and regulations, tax deductibility, significant differences between expected and actual pension asset performance or interest rates, or other factors.
Postretirement Plans
Components of Net Postretirement Cost/(Benefit):
Net postretirement cost/(benefit) consisted of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
|
For the Six Months Ended
|
|
|
|
June 27, 2020
|
|
June 29, 2019
|
|
June 27, 2020
|
|
June 29, 2019
|
Service cost
|
$
|
1
|
|
|
$
|
2
|
|
|
$
|
3
|
|
|
$
|
3
|
|
Interest cost
|
9
|
|
|
11
|
|
|
17
|
|
|
23
|
|
Expected return on plan assets
|
(13)
|
|
|
(14)
|
|
|
(25)
|
|
|
(27)
|
|
Amortization of prior service costs/(credits)
|
(30)
|
|
|
(76)
|
|
|
(61)
|
|
|
(153)
|
|
Amortization of unrecognized losses/(gains)
|
(4)
|
|
|
(2)
|
|
|
(7)
|
|
|
(4)
|
|
Net postretirement cost/(benefit)
|
$
|
(37)
|
|
|
$
|
(79)
|
|
|
$
|
(73)
|
|
|
$
|
(158)
|
|
We present all non-service cost components of net postretirement cost/(benefit) within other expense/(income) on our condensed consolidated statements of income.
Employer Contributions:
During the six months ended June 27, 2020, we contributed $7 million to our postretirement benefit plans. We plan to make further contributions of approximately $8 million to our postretirement benefit plans during the remainder of 2020. Estimated future contributions take into consideration current economic conditions, including the impacts of COVID-19, which at this time are expected to have minimal impact on expected contributions for the remainder of 2020. Our actual contributions and plans may change due to many factors, including changes in tax, employee benefit, or other laws and regulations, tax deductibility, significant differences between expected and actual postretirement plan asset performance or interest rates, or other factors.
Note 12. Financial Instruments
See our consolidated financial statements and related notes in our Annual Report on Form 10-K for the year ended December 28, 2019 for additional information on our overall risk management strategies, our use of derivatives, and our related accounting policies.
Derivative Volume:
The notional values of our outstanding derivative instruments were (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional Amount
|
|
|
|
June 27, 2020
|
|
December 28, 2019
|
Commodity contracts
|
$
|
702
|
|
|
$
|
475
|
|
Foreign exchange contracts
|
2,466
|
|
|
3,045
|
|
Cross-currency contracts
|
8,189
|
|
|
4,035
|
|
The increase in our derivative volume for cross-currency contracts was driven by the addition of new euro cross-currency contracts. The new contracts are designated either as cash flow hedges or net investment hedges. The cash flow hedges are being used to mitigate the foreign currency exposure created by non-derivative foreign-denominated debt instruments that are no longer designated as net investment hedges. There was no material change in market risk of the overall cross-currency contract portfolio during the six months ended June 27, 2020.
Fair Value of Derivative Instruments:
The fair values and the levels within the fair value hierarchy of derivative instruments recorded on the condensed consolidated balance sheets were (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 27, 2020
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices in Active Markets for Identical Assets and Liabilities
(Level 1)
|
|
|
|
Significant Other Observable Inputs
(Level 2)
|
|
|
|
Total Fair Value
|
|
|
|
Assets
|
|
Liabilities
|
|
Assets
|
|
Liabilities
|
|
Assets
|
|
Liabilities
|
Derivatives designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts(a)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
31
|
|
|
$
|
6
|
|
|
$
|
31
|
|
|
$
|
6
|
|
Cross-currency contracts(b)
|
—
|
|
|
—
|
|
|
388
|
|
|
32
|
|
|
388
|
|
|
32
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts(c)
|
14
|
|
|
90
|
|
|
2
|
|
|
9
|
|
|
16
|
|
|
99
|
|
Foreign exchange contracts(a)
|
—
|
|
|
—
|
|
|
7
|
|
|
29
|
|
|
7
|
|
|
29
|
|
Total fair value
|
$
|
14
|
|
|
$
|
90
|
|
|
$
|
428
|
|
|
$
|
76
|
|
|
$
|
442
|
|
|
$
|
166
|
|
(a) At June 27, 2020, the fair value of our derivative assets was recorded in other current assets ($32 million) and other non-current assets ($6 million), and the fair value of our derivative liabilities was recorded in other current liabilities ($34 million) and other non-current liabilities ($1 million).
(b) At June 27, 2020, the fair value of our derivative assets was recorded in other non-current assets, and the fair value of our derivative liabilities was recorded within other non-current liabilities.
(c) At June 27, 2020, the fair value of our derivative assets was recorded in other current assets ($14 million) and other non-current assets ($2 million), and the fair value of derivative liabilities was recorded in other current liabilities ($94 million) and other non-current liabilities ($5 million).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 28, 2019
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices in Active Markets for Identical Assets and Liabilities
(Level 1)
|
|
|
|
Significant Other Observable Inputs
(Level 2)
|
|
|
|
Total Fair Value
|
|
|
|
Assets
|
|
Liabilities
|
|
Assets
|
|
Liabilities
|
|
Assets
|
|
Liabilities
|
Derivatives designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts(a)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7
|
|
|
$
|
20
|
|
|
$
|
7
|
|
|
$
|
20
|
|
Cross-currency contracts(b)
|
—
|
|
|
—
|
|
|
200
|
|
|
88
|
|
|
200
|
|
|
88
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts(c)
|
42
|
|
|
6
|
|
|
—
|
|
|
2
|
|
|
42
|
|
|
8
|
|
Foreign exchange contracts(a)
|
—
|
|
|
—
|
|
|
6
|
|
|
3
|
|
|
6
|
|
|
3
|
|
Total fair value
|
$
|
42
|
|
|
$
|
6
|
|
|
$
|
213
|
|
|
$
|
113
|
|
|
$
|
255
|
|
|
$
|
119
|
|
(a) At December 28, 2019, the fair value of derivative assets was recorded in other current assets ($12 million) and other current non-current assets ($1 million), and the fair value of derivative liabilities was recorded in other current liabilities.
(b) At December 28, 2019, the fair value of derivative assets was recorded in other non-current assets, and the fair value of derivative liabilities was recorded within other non-current liabilities.
(c) At December 28, 2019, the fair value of derivative assets was recorded in other current assets, and the fair value of derivative liabilities was recorded within other current liabilities.
Our derivative financial instruments are subject to master netting arrangements that allow for the offset of assets and liabilities in the event of default or early termination of the contract. We elect to record the gross assets and liabilities of our derivative financial instruments on the condensed consolidated balance sheets. If the derivative financial instruments had been netted on the condensed consolidated balance sheets, the asset and liability positions each would have been reduced by $82 million at June 27, 2020 and $108 million at December 28, 2019. At June 27, 2020, we had posted collateral of $76 million related to commodity derivative margin requirements, which was included in prepaid expenses on our condensed consolidated balance sheet. At December 28, 2019, we had collected collateral of $25 million related to commodity derivative margin requirements, which was included in other current liabilities on our condensed consolidated balance sheet.
Level 1 financial assets and liabilities consist of commodity future and options contracts and are valued using quoted prices in active markets for identical assets and liabilities.
Level 2 financial assets and liabilities consist of commodity swaps, foreign exchange forwards, options, and swaps, and cross-currency swaps. Commodity swaps are valued using an income approach based on the observable market commodity index prices less the contract rate multiplied by the notional amount. Foreign exchange forwards and swaps are valued using an income approach based on observable market forward rates less the contract rate multiplied by the notional amount. Foreign exchange options are valued using an income approach based on a Black-Scholes-Merton formula. This formula uses present value techniques and reflects the time value and intrinsic value based on observable market rates. Cross-currency swaps are valued based on observable market spot and swap rates.
We did not have any Level 3 financial assets or liabilities in any period presented.
Our calculation of the fair value of financial instruments takes into consideration the risk of nonperformance, including counterparty credit risk.
Net Investment Hedging:
At June 27, 2020, we had the following items designated as net investment hedges:
•Non-derivative foreign-denominated debt with principal amounts of €650 million and £400 million;
•Cross-currency contracts with notional amounts of £1.0 billion ($1.4 billion), C$2.1 billion ($1.6 billion), €1.9 billion ($2.1 billion), and ¥9.6 billion ($85 million); and
•Foreign exchange contracts denominated in Chinese renminbi with an aggregate notional amount of $161 million.
We periodically use non-derivative instruments such as non-U.S. dollar financing transactions or non-U.S. dollar assets or liabilities, including intercompany loans, to hedge the exposure of changes in underlying foreign currency denominated subsidiary net assets, and they are designated as net investment hedges. At June 27, 2020, we had a euro intercompany loan with an aggregate notional amount of $51 million.
The component of the gains and losses on our net investment in these designated foreign operations, driven by changes in foreign exchange rates, are economically offset by fair value movements on the effective portion of our cross-currency contracts and foreign exchange contracts and remeasurements of our foreign-denominated debt.
Cash Flow Hedge Coverage:
At June 27, 2020, we had entered into foreign exchange contracts designated as cash flow hedges for periods not exceeding the next two years and into cross-currency contracts designated as cash flow hedges for periods not exceeding the next eight years.
Deferred Hedging Gains and Losses on Cash Flow Hedges:
Based on our valuation at June 27, 2020 and assuming market rates remain constant through contract maturities, we expect transfers to net income/(loss) of unrealized gains on foreign currency cash flow hedges during the next 12 months to be approximately $16 million. Additionally, we expect transfers to net income/(loss) of unrealized gains on cross-currency cash flow hedges and unrealized losses on interest rate cash flow hedges during the next 12 months to each be insignificant.
Derivative Impact on the Statements of Comprehensive Income:
The following table presents the pre-tax amounts of derivative gains/(losses) deferred into accumulated other comprehensive income/(losses) and the income statement line item that will be affected when reclassified to net income/(loss) (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other Comprehensive Income/(Losses) Component
|
|
Gains/(Losses) Recognized in Other Comprehensive Income/(Losses) Related to Derivatives Designated as Hedging Instruments
|
|
|
|
|
|
|
|
Location of Gains/(Losses) When Reclassified to Net Income/(Loss)
|
|
|
For the Three Months Ended
|
|
|
|
For the Six Months Ended
|
|
|
|
|
|
|
June 27, 2020
|
|
June 29, 2019
|
|
June 27, 2020
|
|
June 29, 2019
|
|
|
Cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
(1)
|
|
|
Net sales
|
Foreign exchange contracts
|
|
(23)
|
|
|
(8)
|
|
|
49
|
|
|
(27)
|
|
|
Cost of products sold
|
Foreign exchange contracts (excluded component)
|
|
—
|
|
|
1
|
|
|
(1)
|
|
|
—
|
|
|
Cost of products sold
|
Foreign exchange contracts
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(22)
|
|
|
Other expense/(income)
|
Cross-currency contracts
|
|
52
|
|
|
(5)
|
|
|
93
|
|
|
19
|
|
|
Other expense/(income)
|
Cross-currency contracts (excluded component)
|
|
7
|
|
|
7
|
|
|
13
|
|
|
14
|
|
|
Other expense/(income)
|
Cross-currency contracts
|
|
(3)
|
|
|
—
|
|
|
(3)
|
|
|
—
|
|
|
Interest expense
|
Net investment hedges:
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
|
—
|
|
|
4
|
|
|
2
|
|
|
13
|
|
|
Other expense/(income)
|
Foreign exchange contracts (excluded component)
|
|
—
|
|
|
—
|
|
|
(1)
|
|
|
(1)
|
|
|
Interest expense
|
Cross-currency contracts
|
|
(54)
|
|
|
34
|
|
|
132
|
|
|
(38)
|
|
|
Other expense/(income)
|
Cross-currency contracts (excluded component)
|
|
8
|
|
|
7
|
|
|
16
|
|
|
14
|
|
|
Interest expense
|
Total gains/(losses) recognized in statements of comprehensive income
|
|
$
|
(13)
|
|
|
$
|
40
|
|
|
$
|
301
|
|
|
$
|
(29)
|
|
|
|
Derivative Impact on the Statements of Income:
The following tables present the pre-tax amounts of derivative gains/(losses) reclassified from accumulated other comprehensive income/(losses) to net income/(loss) and the affected income statement line items (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
June 27, 2020
|
|
|
|
|
|
June 29, 2019
|
|
|
|
|
|
Cost of products sold
|
|
Interest expense
|
|
Other expense/(income)
|
|
Cost of products sold
|
|
Interest expense
|
|
Other expense/(income)
|
Total amounts presented in the condensed consolidated statements of income in which the following effects were recorded
|
$
|
4,196
|
|
|
$
|
442
|
|
|
$
|
(78)
|
|
|
$
|
4,324
|
|
|
$
|
316
|
|
|
$
|
(133)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains/(losses) related to derivatives designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
$
|
10
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Foreign exchange contracts (excluded component)
|
—
|
|
|
—
|
|
|
—
|
|
|
(1)
|
|
|
—
|
|
|
—
|
|
Interest rate contracts
|
—
|
|
|
(1)
|
|
|
—
|
|
|
—
|
|
|
(1)
|
|
|
—
|
|
Cross-currency contracts
|
—
|
|
|
(3)
|
|
|
38
|
|
|
—
|
|
|
—
|
|
|
(14)
|
|
Cross-currency contracts (excluded component)
|
—
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
—
|
|
|
7
|
|
Net investment hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts (excluded component)
|
—
|
|
|
(1)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Cross-currency contracts (excluded component)
|
—
|
|
|
7
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|
—
|
|
Gains/(losses) related to derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts
|
(14)
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
—
|
|
Foreign exchange contracts
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14)
|
|
Cross-currency contracts
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
Total gains/(losses) recognized in statements of income
|
$
|
(4)
|
|
|
$
|
2
|
|
|
$
|
45
|
|
|
$
|
12
|
|
|
$
|
6
|
|
|
$
|
(18)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
June 27, 2020
|
|
|
|
|
|
June 29, 2019
|
|
|
|
|
|
Cost of products sold
|
|
Interest expense
|
|
Other expense/(income)
|
|
Cost of products sold
|
|
Interest expense
|
|
Other expense/(income)
|
Total amounts presented in the condensed consolidated statements of income in which the following effects were recorded
|
$
|
8,495
|
|
|
$
|
752
|
|
|
$
|
(159)
|
|
|
$
|
8,272
|
|
|
$
|
637
|
|
|
$
|
(513)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains/(losses) related to derivatives designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
$
|
11
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
17
|
|
|
$
|
—
|
|
|
$
|
(22)
|
|
Foreign exchange contracts (excluded component)
|
—
|
|
|
—
|
|
|
—
|
|
|
(2)
|
|
|
—
|
|
|
—
|
|
Interest rate contracts
|
—
|
|
|
(2)
|
|
|
—
|
|
|
—
|
|
|
(2)
|
|
|
—
|
|
Cross-currency contracts
|
—
|
|
|
(3)
|
|
|
41
|
|
|
—
|
|
|
—
|
|
|
6
|
|
Cross-currency contracts (excluded component)
|
—
|
|
|
—
|
|
|
14
|
|
|
—
|
|
|
—
|
|
|
14
|
|
Net investment hedges:
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6)
|
|
Foreign exchange contracts (excluded component)
|
—
|
|
|
(1)
|
|
|
—
|
|
|
—
|
|
|
(1)
|
|
|
—
|
|
Cross-currency contracts (excluded component)
|
—
|
|
|
15
|
|
|
—
|
|
|
—
|
|
|
14
|
|
|
—
|
|
Gains/(losses) related to derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts
|
(164)
|
|
|
—
|
|
|
—
|
|
|
26
|
|
|
—
|
|
|
—
|
|
Foreign exchange contracts
|
—
|
|
|
—
|
|
|
(28)
|
|
|
—
|
|
|
—
|
|
|
(6)
|
|
Cross-currency contracts
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7
|
|
Total gains/(losses) recognized in statements of income
|
$
|
(153)
|
|
|
$
|
9
|
|
|
$
|
27
|
|
|
$
|
41
|
|
|
$
|
11
|
|
|
$
|
(7)
|
|
Non-Derivative Impact on Statements of Comprehensive Income:
Related to our non-derivative foreign-denominated debt instruments designated as net investment hedges, we recognized pre-tax gains of $31 million for the three months and $65 million for the six months ended June 27, 2020 and pre-tax losses of $25 million for the three months and pre-tax gains of $19 million for the six months ended June 29, 2019. These amounts were recognized in other comprehensive income/(loss).
Other Financial Instruments:
The carrying amounts of cash equivalents approximated fair values at June 27, 2020 and December 28, 2019. Money market funds are included in cash and cash equivalents on the condensed consolidated balance sheets. The fair value of money market funds were $120 million at June 27, 2020 and $94 million at December 28, 2019. These are considered Level 1 financial assets and are valued using quoted prices in active markets for identical assets.
Note 13. Accumulated Other Comprehensive Income/(Losses)
The components of, and changes in, accumulated other comprehensive income/(losses), net of tax, were as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency Translation Adjustments
|
|
Net Postemployment Benefit Plan Adjustments
|
|
Net Cash Flow Hedge Adjustments
|
|
Total
|
Balance as of December 28, 2019
|
$
|
(2,230)
|
|
|
$
|
303
|
|
|
$
|
41
|
|
|
$
|
(1,886)
|
|
Foreign currency translation adjustments
|
(602)
|
|
|
—
|
|
|
—
|
|
|
(602)
|
|
Net deferred gains/(losses) on net investment hedges
|
149
|
|
|
—
|
|
|
—
|
|
|
149
|
|
Amounts excluded from the effectiveness assessment of net investment hedges
|
16
|
|
|
—
|
|
|
—
|
|
|
16
|
|
Net deferred losses/(gains) on net investment hedges reclassified to net income/(loss)
|
(11)
|
|
|
—
|
|
|
—
|
|
|
(11)
|
|
Net deferred gains/(losses) on cash flow hedges
|
—
|
|
|
—
|
|
|
136
|
|
|
136
|
|
Amounts excluded from the effectiveness assessment of cash flow hedges
|
—
|
|
|
—
|
|
|
12
|
|
|
12
|
|
Net deferred losses/(gains) on cash flow hedges reclassified to net income/(loss)
|
—
|
|
|
—
|
|
|
(61)
|
|
|
(61)
|
|
Net postemployment benefit losses/(gains) reclassified to net income/(loss)
|
—
|
|
|
(49)
|
|
|
—
|
|
|
(49)
|
|
Total other comprehensive income/(loss)
|
(448)
|
|
|
(49)
|
|
|
87
|
|
|
(410)
|
|
Balance as of June 27, 2020
|
$
|
(2,678)
|
|
|
$
|
254
|
|
|
$
|
128
|
|
|
$
|
(2,296)
|
|
The gross amount and related tax benefit/(expense) recorded in, and associated with, each component of other comprehensive income/(loss) were as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
June 27, 2020
|
|
|
|
|
|
June 29, 2019
|
|
|
|
|
|
Before Tax Amount
|
|
Tax
|
|
Net of Tax Amount
|
|
Before Tax Amount
|
|
Tax
|
|
Net of Tax Amount
|
Foreign currency translation adjustments
|
$
|
174
|
|
|
$
|
—
|
|
|
$
|
174
|
|
|
$
|
(69)
|
|
|
$
|
—
|
|
|
$
|
(69)
|
|
Net deferred gains/(losses) on net investment hedges
|
(23)
|
|
|
6
|
|
|
(17)
|
|
|
13
|
|
|
(3)
|
|
|
10
|
|
Amounts excluded from the effectiveness assessment of net investment hedges
|
8
|
|
|
3
|
|
|
11
|
|
|
7
|
|
|
(1)
|
|
|
6
|
|
Net deferred losses/(gains) on net investment hedges reclassified to net income/(loss)
|
(6)
|
|
|
1
|
|
|
(5)
|
|
|
(7)
|
|
|
1
|
|
|
(6)
|
|
Net deferred gains/(losses) on cash flow hedges
|
26
|
|
|
9
|
|
|
35
|
|
|
(13)
|
|
|
3
|
|
|
(10)
|
|
Amounts excluded from the effectiveness assessment of cash flow hedges
|
7
|
|
|
—
|
|
|
7
|
|
|
8
|
|
|
(1)
|
|
|
7
|
|
Net deferred losses/(gains) on cash flow hedges reclassified to net income/(loss)
|
(51)
|
|
|
—
|
|
|
(51)
|
|
|
1
|
|
|
2
|
|
|
3
|
|
Net actuarial gains/(losses) arising during the period
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5)
|
|
|
(5)
|
|
Net postemployment benefit losses/(gains) reclassified to net income/(loss)
|
(33)
|
|
|
9
|
|
|
(24)
|
|
|
(78)
|
|
|
19
|
|
|
(59)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
June 27, 2020
|
|
|
|
|
|
June 29, 2019
|
|
|
|
|
|
Before Tax Amount
|
|
Tax
|
|
Net of Tax Amount
|
|
Before Tax Amount
|
|
Tax
|
|
Net of Tax Amount
|
Foreign currency translation adjustments
|
$
|
(602)
|
|
|
$
|
—
|
|
|
$
|
(602)
|
|
|
$
|
138
|
|
|
$
|
—
|
|
|
$
|
138
|
|
Net deferred gains/(losses) on net investment hedges
|
199
|
|
|
(50)
|
|
|
149
|
|
|
(6)
|
|
|
2
|
|
|
(4)
|
|
Amounts excluded from the effectiveness assessment of net investment hedges
|
15
|
|
|
1
|
|
|
16
|
|
|
13
|
|
|
(3)
|
|
|
10
|
|
Net deferred losses/(gains) on net investment hedges reclassified to net income/(loss)
|
(14)
|
|
|
3
|
|
|
(11)
|
|
|
(7)
|
|
|
3
|
|
|
(4)
|
|
Net deferred gains/(losses) on cash flow hedges
|
140
|
|
|
(4)
|
|
|
136
|
|
|
(31)
|
|
|
5
|
|
|
(26)
|
|
Amounts excluded from the effectiveness assessment of cash flow hedges
|
12
|
|
|
—
|
|
|
12
|
|
|
14
|
|
|
(1)
|
|
|
13
|
|
Net deferred losses/(gains) on cash flow hedges reclassified to net income/(loss)
|
(61)
|
|
|
—
|
|
|
(61)
|
|
|
(11)
|
|
|
6
|
|
|
(5)
|
|
Net actuarial gains/(losses) arising during the period
|
—
|
|
|
—
|
|
|
—
|
|
|
(1)
|
|
|
(4)
|
|
|
(5)
|
|
Net postemployment benefit losses/(gains) reclassified to net income/(loss)
|
(67)
|
|
|
18
|
|
|
(49)
|
|
|
(156)
|
|
|
39
|
|
|
(117)
|
|
The amounts reclassified from accumulated other comprehensive income/(losses) were as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other Comprehensive Income/(Losses) Component
|
|
Reclassified from Accumulated Other Comprehensive Income/(Losses) to Net Income/(Loss)
|
|
|
|
|
|
|
|
Affected Line Item in the Statements of Income
|
|
|
For the Three Months Ended
|
|
|
|
For the Six Months Ended
|
|
|
|
|
|
|
June 27, 2020
|
|
June 29, 2019
|
|
June 27, 2020
|
|
June 29, 2019
|
|
|
Losses/(gains) on net investment hedges:
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts(a)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6
|
|
|
Other expense/(income)
|
Foreign exchange contracts(b)
|
|
1
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
Interest expense
|
Cross-currency contracts(b)
|
|
(7)
|
|
|
(7)
|
|
|
(15)
|
|
|
(14)
|
|
|
Interest expense
|
Losses/(gains) on cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts(c)
|
|
(10)
|
|
|
(7)
|
|
|
(11)
|
|
|
(15)
|
|
|
Cost of products sold
|
Foreign exchange contracts(c)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
22
|
|
|
Other expense/(income)
|
Cross-currency contracts(c)
|
|
(45)
|
|
|
7
|
|
|
(55)
|
|
|
(20)
|
|
|
Other expense/(income)
|
Cross-currency contracts(c)
|
|
3
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
Interest expense
|
Interest rate contracts(d)
|
|
1
|
|
|
1
|
|
|
2
|
|
|
2
|
|
|
Interest expense
|
Losses/(gains) on hedges before income taxes
|
|
(57)
|
|
|
(6)
|
|
|
(75)
|
|
|
(18)
|
|
|
|
Losses/(gains) on hedges, income taxes
|
|
1
|
|
|
3
|
|
|
3
|
|
|
9
|
|
|
|
Losses/(gains) on hedges
|
|
$
|
(56)
|
|
|
$
|
(3)
|
|
|
$
|
(72)
|
|
|
$
|
(9)
|
|
|
|
Losses/(gains) on postemployment benefits:
|
|
|
|
|
|
|
|
|
|
|
Amortization of unrecognized losses/(gains)(e)
|
|
$
|
(3)
|
|
|
$
|
(2)
|
|
|
$
|
(6)
|
|
|
$
|
(4)
|
|
|
|
Amortization of prior service costs/(credits)(e)
|
|
(30)
|
|
|
(76)
|
|
|
(61)
|
|
|
(153)
|
|
|
|
Other losses/(gains) on postemployment benefits
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
|
Losses/(gains) on postemployment benefits before income taxes
|
|
(33)
|
|
|
(78)
|
|
|
(67)
|
|
|
(156)
|
|
|
|
Losses/(gains) on postemployment benefits, income taxes
|
|
9
|
|
|
19
|
|
|
18
|
|
|
39
|
|
|
|
Losses/(gains) on postemployment benefits
|
|
$
|
(24)
|
|
|
$
|
(59)
|
|
|
$
|
(49)
|
|
|
$
|
(117)
|
|
|
|
(a) Represents the reclassification of hedge losses/(gains) resulting from the complete or substantially complete liquidation of our investment in the underlying foreign operations.
(b) Represents recognition of the excluded component in net income/(loss).
(c) Includes amortization of the excluded component and the effective portion of the related hedges.
(d) Represents amortization of realized hedge losses that were deferred into accumulated other comprehensive income/(losses) through the maturity of the related long-term debt instruments.
(e) These components are included in the computation of net periodic postemployment benefit costs. See Note 11, Postemployment Benefits, for additional information.
In this note we have excluded activity and balances related to noncontrolling interest due to their insignificance. This activity was primarily related to foreign currency translation adjustments.
Note 14. Venezuela - Foreign Currency and Inflation
We have a subsidiary in Venezuela that manufactures and sells a variety of products, primarily in the condiments and sauces and infant and nutrition categories. We apply highly inflationary accounting to the results of our Venezuelan subsidiary and include these results in our condensed consolidated financial statements. Under highly inflationary accounting, the functional currency of our Venezuelan subsidiary is the U.S. dollar (our reporting currency), although the majority of its transactions are in Venezuelan bolivars. As a result, we must revalue the results of our Venezuelan subsidiary to U.S. dollars.
As of June 27, 2020, companies and individuals are allowed to use an auction-based system at private and public banks to obtain foreign currency. This is the only foreign currency exchange mechanism legally available to us for converting Venezuelan bolivars to U.S. dollars. Published daily by the Banco Central de Venezuela, the exchange rate (“BCV Rate”) is calculated as the weighted average rate of participating banking institutions with active exchange operations. We believe the BCV Rate is the most appropriate legally available rate at which to translate the results of our Venezuelan subsidiary. Therefore, we revalue the income statement using the weighted average BCV Rates, and we revalue the bolivar-denominated monetary assets and liabilities at the period-end BCV Rate. The resulting revaluation gains and losses are recorded in current net income/(loss) rather than accumulated other comprehensive income/(losses). These gains and losses are classified within other expense/(income) as nonmonetary currency devaluation on our condensed consolidated statements of income.
The BCV Rate per U.S. dollar was BsS202,331.51 at June 27, 2020 compared to BsS45,874.81 at December 28, 2019. The weighted average rate per U.S. dollar was BsS172,888.97 for the three months and BsS123,149.34 for the six months ended June 27, 2020 and BsS5,397.19 for the three months and BsS4,036.41 for the six months ended June 29, 2019. Remeasurements of the bolivar-denominated monetary assets and liabilities and operating results of our Venezuelan subsidiary at BCV Rates resulted in nonmonetary currency devaluation losses of $3 million for the three months and $4 million for the six months ended June 27, 2020 and $2 million for the three months and $6 million for the six months ended June 29, 2019. These losses were recorded in other expense/(income) in the condensed consolidated statements of income.
Our Venezuelan subsidiary obtains U.S. dollars through private and public bank auctions, customer payments, and royalty payments. These U.S. dollars are primarily used for purchases of tomato paste and spare parts for manufacturing, as well as a limited amount of other operating costs. As of June 27, 2020, our Venezuelan subsidiary had sufficient U.S. dollars to fund these operational needs in the foreseeable future. However, further deterioration of the economic environment or regulation changes could jeopardize our export business.
In addition to the bank auctions described above, there is an unofficial market for obtaining U.S. dollars with Venezuelan bolivars. The exact exchange rate is widely debated but is generally accepted to be substantially higher than the latest published BCV Rate. We have not transacted at any unofficial market rates and have no plans to transact at unofficial market rates in the foreseeable future.
Our results of operations in Venezuela reflect those of a controlled subsidiary. However, the continuing economic uncertainty, strict labor laws, and evolving government controls over imports, prices, currency exchange, and payments present a challenging operating environment. Increased restrictions imposed by the Venezuelan government along with further deterioration of the economic environment could impact our ability to control our Venezuelan operations and could lead us to deconsolidate our Venezuelan subsidiary in the future.
Note 15. Financing Arrangements
We enter into various structured payable and product financing arrangements to facilitate supply from our vendors. Balance sheet classification is based on the nature of the arrangements. For certain arrangements, we have concluded that our obligations to our suppliers, including amounts due and scheduled payment terms, are impacted by their participation in the program and therefore we classify amounts outstanding within other current liabilities on our condensed consolidated balance sheets. We had approximately $171 million at June 27, 2020 and approximately $253 million at December 28, 2019 on our condensed consolidated balance sheets related to these arrangements.
Note 16. Commitments, Contingencies and Debt
Legal Proceedings
We are involved in legal proceedings, claims, and governmental inquiries, inspections, or investigations (“Legal Matters”) arising in the ordinary course of our business. While we cannot predict with certainty the results of Legal Matters in which we are currently involved or may in the future be involved, we do not expect that the ultimate costs to resolve the Legal Matters that are currently pending will have a material adverse effect on our financial condition, results of operations, or cash flows.
Class Actions and Stockholder Derivative Actions:
The Kraft Heinz Company and certain of our current and former officers and directors are currently defendants in a consolidated securities class action lawsuit pending in the United States District Court for the Northern District of Illinois, Union Asset Management Holding AG, et al. v. The Kraft Heinz Company, et al. The consolidated class action complaint, which was filed on January 6, 2020 and also names 3G Capital, Inc. and several of its subsidiaries and affiliates (“3G Entities”) as defendants, asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 10b-5 promulgated thereunder, based on allegedly materially false or misleading statements and omissions in public statements, press releases, investor presentations, earnings calls, and SEC filings regarding the Company’s business, financial results, and internal controls, and further alleges the 3G Entities engaged in insider trading and misappropriated the Company’s material, non-public information. The plaintiffs seek damages in an unspecified amount, attorneys’ fees, and other relief. The City of Hollywood Police Officers’ Retirement System v. The Kraft Heinz Company, et al. lawsuit, filed on March 25, 2020, has been consolidated into this matter.
In addition, our Employee Benefits Administration Board and certain of The Kraft Heinz Company’s current and former officers and employees are currently defendants in an Employee Retirement Income Security Act (“ERISA”) class action lawsuit, Osborne v. Employee Benefits Administration Board of Kraft Heinz, et al., which is pending in the United States District Court for the Northern District of Illinois. Plaintiffs in the lawsuit purport to represent a class of current and former employees who were participants in and beneficiaries of various retirement plans which were co-invested in a commingled investment fund known as the Kraft Foods Savings Plan Master Trust (the “Master Trust”) during the period of May 4, 2017 through February 21, 2019. An amended complaint was filed on June 28, 2019. The amended complaint alleges violations of Section 502 of ERISA based on alleged breaches of obligations as fiduciaries subject to ERISA by allowing the Master Trust to continue investing in our common stock, and alleges additional breaches of fiduciary duties by current and former officers for their purported failure to monitor Master Trust fiduciaries. The plaintiffs seek damages in an unspecified amount, attorneys’ fees, and other relief.
Certain of The Kraft Heinz Company’s current and former officers and directors and the 3G Entities are also named as defendants in a stockholder derivative action, In re Kraft Heinz Shareholder Derivative Litigation, which had been previously consolidated in the United States District Court for the Western District of Pennsylvania, and is now pending in the United States District Court for the Northern District of Illinois. That complaint, which was filed on July 31, 2019, asserts state law claims for alleged breaches of fiduciary duties and unjust enrichment, as well as federal claims for contribution for alleged violations of Sections 10(b) and 21D of the Exchange Act and Rule 10b-5 promulgated thereunder, based on allegedly materially false or misleading statements and omissions in public statements and SEC filings, and for implementing cost cutting measures that allegedly damaged the Company. The plaintiffs seek damages in an unspecific amount, attorneys’ fees, and other relief. The Waters v. Behring, et al., Merritts v. 3G Capital, Inc., et al., and Hill v. Abel, et al. lawsuits, filed on March 9, 2020, March 23, 2020, and April 13, 2020, respectively, have been consolidated into this matter, and after appointment of lead plaintiff, a further consolidated amended complaint is expected.
Certain of The Kraft Heinz Company’s current and former officers and directors and the 3G Entities are also named as defendants in a consolidated stockholder derivative action, In re Kraft Heinz Company Derivative Litigation, which was filed in the Delaware Court of Chancery. The consolidated amended complaint, which was filed on April 27, 2020, alleges state law claims, contending that the 3G Entities were controlling shareholders who owed fiduciary duties to the Company, and that they breached those duties by allegedly engaging in insider trading and misappropriating the Company’s material, non-public information. The complaint further alleges that certain of The Kraft Heinz Company’s current and former officers and directors breached their fiduciary duties to the Company by purportedly making materially misleading statements and omissions regarding the Company’s financial performance and the impairment of its goodwill and intangible assets, and by supposedly approving or allowing the 3G Entities’ alleged insider trading. The complaint seeks relief against the defendants in the form of damages, disgorgement of all profits obtained from the alleged insider trading, contribution and indemnification, and an award of attorneys’ fees and costs.
We intend to vigorously defend against these lawsuits; however, we cannot reasonably estimate the potential range of loss, if any, due to the early stage of these proceedings.
United States Government Investigations:
As previously disclosed on February 21, 2019, we received a subpoena in October 2018 from the SEC related to our procurement area, specifically the accounting policies, procedures, and internal controls related to our procurement function, including, but not limited to, agreements, side agreements, and changes or modifications to agreements with our suppliers. Following the receipt of this subpoena, we, together with external counsel and forensic accountants, and subsequently, under the oversight of the Audit Committee, conducted an internal investigation into our procurement area and related matters. The SEC has issued additional subpoenas seeking information related to our financial reporting, internal controls, disclosures, our assessment of goodwill and intangible asset impairments, our communications with certain shareholders, and other procurement-related information and materials in connection with its investigation. The United States Attorney’s Office for the Northern District of Illinois (“USAO”) is also reviewing this matter. We cannot predict the eventual scope, duration or outcome of any potential SEC legal action or other action or whether it could have a material impact on our financial condition, results of operations, or cash flows. We have been responsive to the ongoing subpoenas and other document requests and will continue to cooperate fully with any governmental or regulatory inquiry or investigation.
Other Commitments and Contingencies
Redeemable Noncontrolling Interest:
We have a joint venture with a minority partner to manufacture, package, market, and distribute food products. We control operations and include this business in our consolidated results. Our minority partner has put options that, if it chooses to exercise, would require us to purchase portions of its equity interest at a future date. The minority partner’s put options are reflected on our condensed consolidated balance sheets as a redeemable noncontrolling interest. We accrete the redeemable noncontrolling interest to its estimated redemption value over the term of the put options. At June 27, 2020, we estimate the redemption value to be insignificant. During the second quarter of 2020, we issued a notice of termination to our minority partner, indicating our intent to dissolve and liquidate the joint venture as provided for within our agreement.
Debt
Borrowing Arrangements:
On July 6, 2015, together with Kraft Heinz Foods Company (“KHFC”), our 100% owned operating subsidiary, we entered into a credit agreement (as amended, the “Credit Agreement”), which provides for a $4.0 billion senior unsecured revolving credit facility (the “Senior Credit Facility”). In June 2018, we entered into an agreement that became effective on July 6, 2018 to extend the maturity date of our Senior Credit Facility from July 6, 2021 to July 6, 2023 and to establish a $400 million euro equivalent swing line facility, which is available under the $4.0 billion revolving credit facility limit for short-term loans denominated in euros on a same-day basis. On March 23, 2020, we entered into an extension letter agreement (the “Extension Agreement”) which extends $3.9 billion of the revolving loans and commitments under the Credit Agreement from July 6, 2023 to July 6, 2024. The revolving loans and commitments of each lender that did not agree to the Extension Agreement shall continue to terminate on the existing maturity date of July 6, 2023.
On March 12, 2020, as a precautionary measure to preserve financial flexibility in light of the uncertainty in the global economy resulting from the COVID-19 pandemic, we provided notice to our lenders to borrow the full available amount under our Senior Credit Facility. As such, a total of $4.0 billion was drawn on our Senior Credit Facility during the first quarter of 2020. We repaid the full $4.0 billion revolver draw during the second quarter of 2020. No amounts were drawn on our Senior Credit Facility at June 27, 2020, at December 28, 2019, or during the six months ended June 29, 2019.
The Senior Credit Facility contains representations, warranties, and covenants that are typical for these types of facilities and could upon the occurrence of certain events of default restrict our ability to access our Senior Credit Facility. Our Senior Credit Facility requires us to maintain a minimum shareholders’ equity (excluding accumulated other comprehensive income/(losses)) of at least $35 billion. We were in compliance with this covenant as of June 27, 2020.
The obligations under the Credit Agreement are guaranteed by KHFC in the case of indebtedness and other liabilities of any subsidiary borrower and by The Kraft Heinz Company in the case of indebtedness and other liabilities of any subsidiary borrower and KHFC.
On March 10, 2020, together with KHFC, we entered into an uncommitted revolving credit line agreement which provides for borrowings up to $300 million. Each borrowing under this uncommitted revolving credit line agreement is due within six months of the disbursement date and the final maturity date of the agreement is June 9, 2021. As of June 27, 2020, no amounts had been drawn on this facility.
We have historically obtained funding through our U.S. and European commercial paper programs. We had no commercial paper outstanding at June 27, 2020, at December 28, 2019, or during the six months ended June 27, 2020. The maximum amount of commercial paper outstanding during the six months ended June 29, 2019 was $200 million.
See Note 18, Debt, to our consolidated financial statements for the year ended December 28, 2019 in our Annual Report on Form 10-K for additional information on our borrowing arrangements.
Tender Offer:
In May 2020, KHFC commenced a tender offer to purchase for cash up to the maximum combined aggregate purchase price of $2.2 billion, excluding accrued and unpaid interest, of its outstanding floating rate senior notes due February 2021, 3.500% senior notes due June 2022, 3.500% senior notes due July 2022, floating rate senior notes due August 2022, 4.000% senior notes due June 2023, 3.950% senior notes due July 2025, and 3.000% senior notes due June 2026 (the “Tender Offer”).
The aggregate principal amounts of senior notes before and after the Tender Offer and the amounts validly tendered pursuant to the Tender Offer were (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate Principal Amount Outstanding Before Tender Offer
|
|
Amount Validly Tendered
|
|
Aggregate Principal Amount Outstanding After Tender Offer
|
Floating rate senior notes due February 2021
|
$
|
650
|
|
|
$
|
539
|
|
|
$
|
111
|
|
3.500% senior notes due June 2022
|
1,119
|
|
|
488
|
|
|
631
|
|
3.500% senior notes due July 2022
|
446
|
|
|
144
|
|
|
302
|
|
Floating rate senior notes due August 2022
|
500
|
|
|
185
|
|
|
315
|
|
4.000% senior notes due June 2023
|
838
|
|
|
391
|
|
|
447
|
|
3.950% senior notes due July 2025
|
2,000
|
|
|
391
|
|
|
1,609
|
|
3.000% senior notes due June 2026
|
2,000
|
|
|
—
|
|
|
2,000
|
|
In connection with the Tender Offer, we recognized a loss on extinguishment of debt of $71 million. This loss primarily reflects the payment of early tender premiums and fees associated with the Tender Offer as well as the write-off of unamortized debt issuance costs, premiums, and discounts. We recognized this loss on extinguishment of debt within interest expense on the condensed consolidated statements of income for the three and six months ended June 27, 2020. The cash payments related to the debt extinguishment are classified as cash outflows from financing activities on the condensed consolidated statement of cash flows. For the six months ended June 27, 2020, debt prepayment and extinguishment costs per the consolidated statement of cash flows related to the Tender Offer were $68 million, which reflect the $71 million loss on extinguishment of debt adjusted for the non-cash write-off of unamortized premiums of $1 million, unamortized debt issuance costs of $3 million, and unamortized discounts of $1 million.
Debt Redemptions:
Concurrently with the commencement of the Tender Offer, we issued a notice of conditional redemption by KHFC of all of its$300 million outstanding aggregate principal amount of 3.375% senior notes due June 2021 and $976 million outstanding aggregate principal amount of 4.875% second lien senior notes due 2025 (the “Debt Redemptions”). The Debt Redemptions were effective and completed in the second quarter of 2020.
In connection with the Debt Redemptions, we recognized a loss on extinguishment of debt of $38 million. This loss primarily reflects the payment of premiums and fees associated with the redemptions as well as the write-off of unamortized debt issuance costs. We recognized this loss on extinguishment of debt within interest expense on the condensed consolidated statements of income for the three and six months ended June 27, 2020. The cash payments related to the debt extinguishment are classified as cash outflows from financing activities on the condensed consolidated statement of cash flows. For the six months ended June 27, 2020, debt prepayment and extinguishment costs per the consolidated statement of cash flows related to the redemptions were $33 million, which reflect the $38 million loss on extinguishment of debt adjusted for the non-cash write-off of unamortized debt issuance costs of $5 million.
Following the redemption of our 4.875% second lien senior secured notes due 2025, our 6.250% Pound Sterling senior notes due 2030 are no longer guaranteed on a secured basis. The 6.250% Pound Sterling senior notes due 2030 now rank pari passu in right of payment with all of our existing and future senior obligations.
Debt Issuances:
In May 2020, KHFC issued $1,350 million aggregate principal amount of 3.875% senior notes due May 2027, $1,350 million aggregate principal amount of 4.250% senior notes due March 2031, and $800 million aggregate principal amount of 5.500% senior notes due June 2050 (collectively, the “2020 Notes”). The 2020 Notes are fully and unconditionally guaranteed by The Kraft Heinz Company as to payment of principal, premium, and interest on a senior unsecured basis. We used the proceeds from the 2020 Notes to fund the Tender Offer and Debt Redemptions and to pay fees and expenses in connection therewith. A tabular summary of the 2020 Notes is included below.
|
|
|
|
|
|
|
Aggregate Principal Amount
|
|
(in millions)
|
3.875% senior notes due May 2027
|
$
|
1,350
|
|
4.250% senior notes due March 2031
|
1,350
|
|
5.500% senior notes due June 2050
|
800
|
|
Total senior notes issued
|
$
|
3,500
|
|
Debt Issuance Costs:
Debt issuance costs related to the 2020 Notes were $31 million.
Debt Repayments:
In February 2020, we repaid $405 million aggregate principal amount of senior notes that matured in the period.
Fair Value of Debt:
At June 27, 2020, the aggregate fair value of our total debt was $30.3 billion as compared with a carrying value of $28.9 billion. At December 28, 2019, the aggregate fair value of our total debt was $31.1 billion as compared with a carrying value of $29.2 billion. Our short-term debt had a carrying value that approximated its fair value at June 27, 2020 and December 28, 2019. We determined the fair value of our long-term debt using Level 2 inputs. Fair values are generally estimated based on quoted market prices for identical or similar instruments.
Subsequent Events:
We repaid aggregate principal amounts of senior notes due of approximately $200 million on July 2, 2020 and approximately 500 million Canadian dollars on July 6, 2020.
Note 17. Earnings Per Share
Our earnings per common share (“EPS”) were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
|
For the Six Months Ended
|
|
|
|
June 27, 2020
|
|
June 29, 2019
|
|
June 27, 2020
|
|
June 29, 2019
|
|
(in millions, except per share data)
|
|
|
|
|
|
|
Basic Earnings Per Common Share:
|
|
|
|
|
|
|
|
Net income/(loss) attributable to common shareholders
|
$
|
(1,651)
|
|
|
$
|
449
|
|
|
$
|
(1,273)
|
|
|
$
|
854
|
|
Weighted average shares of common stock outstanding
|
1,223
|
|
|
1,220
|
|
|
1,222
|
|
|
1,220
|
|
Net earnings/(loss)
|
$
|
(1.35)
|
|
|
$
|
0.37
|
|
|
$
|
(1.04)
|
|
|
$
|
0.70
|
|
Diluted Earnings Per Common Share:
|
|
|
|
|
|
|
|
Net income/(loss) attributable to common shareholders
|
$
|
(1,651)
|
|
|
$
|
449
|
|
|
$
|
(1,273)
|
|
|
$
|
854
|
|
Weighted average shares of common stock outstanding
|
1,223
|
|
|
1,220
|
|
|
1,222
|
|
|
1,220
|
|
Effect of dilutive equity awards
|
—
|
|
|
2
|
|
|
—
|
|
|
3
|
|
Weighted average shares of common stock outstanding, including dilutive effect
|
1,223
|
|
|
1,222
|
|
|
1,222
|
|
|
1,223
|
|
Net earnings/(loss)
|
$
|
(1.35)
|
|
|
$
|
0.37
|
|
|
$
|
(1.04)
|
|
|
$
|
0.70
|
|
We use the treasury stock method to calculate the dilutive effect of outstanding equity awards in the denominator for diluted EPS. We had net losses attributable to common shareholders for the three and six months ended June 27, 2020. Therefore, we have excluded the dilutive effects of equity awards for the three and six months ended June 27, 2020 as their inclusion would have had an anti-dilutive effect on EPS. Anti-dilutive shares were 16 million for the three months and 15 million for the six months ended June 27, 2020 and 12 million for the three months and 11 million for the six months ended June 29, 2019.
Note 18. Segment Reporting
In the first quarter of 2020, our internal reporting and reportable segments changed. We moved our Puerto Rico business from the Latin America zone to the United States zone to consolidate and streamline the management of our product categories and supply chain. We also combined our EMEA, Latin America, and APAC zones to form the International zone as a result of certain previously announced organizational changes.
Therefore, effective in the first quarter of 2020, we manage and report our operating results through three reportable segments defined by geographic region: United States, International, and Canada. We have reflected these changes in all historical periods presented.
Management evaluates segment performance based on several factors, including net sales and Segment Adjusted EBITDA. Segment Adjusted EBITDA is defined as net income/(loss) from continuing operations before interest expense, other expense/(income), provision for/(benefit from) income taxes, and depreciation and amortization (excluding integration and restructuring expenses); in addition to these adjustments, we exclude, when they occur, the impacts of integration and restructuring expenses, deal costs, unrealized gains/(losses) on commodity hedges (the unrealized gains and losses are recorded in general corporate expenses until realized; once realized, the gains and losses are recorded in the applicable segment’s operating results), impairment losses, and equity award compensation expense (excluding integration and restructuring expenses). Segment Adjusted EBITDA is a tool that can assist management and investors in comparing our performance on a consistent basis by removing the impact of certain items that management believes do not directly reflect our underlying operations. Management uses Segment Adjusted EBITDA to evaluate segment performance and allocate resources.
Management does not use assets by segment to evaluate performance or allocate resources. Therefore, we do not disclose assets by segment.
Net sales by segment were (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
|
For the Six Months Ended
|
|
|
|
June 27, 2020
|
|
June 29, 2019
|
|
June 27, 2020
|
|
June 29, 2019
|
Net sales:
|
|
|
|
|
|
|
|
United States
|
$
|
4,917
|
|
|
$
|
4,533
|
|
|
$
|
9,412
|
|
|
$
|
8,757
|
|
International
|
1,305
|
|
|
1,313
|
|
|
2,606
|
|
|
2,598
|
|
Canada
|
426
|
|
|
560
|
|
|
787
|
|
|
1,010
|
|
Total net sales
|
$
|
6,648
|
|
|
$
|
6,406
|
|
|
$
|
12,805
|
|
|
$
|
12,365
|
|
Segment Adjusted EBITDA was (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
|
For the Six Months Ended
|
|
|
|
June 27, 2020
|
|
June 29, 2019
|
|
June 27, 2020
|
|
June 29, 2019
|
Segment Adjusted EBITDA:
|
|
|
|
|
|
|
|
United States
|
$
|
1,478
|
|
|
$
|
1,257
|
|
|
$
|
2,687
|
|
|
$
|
2,396
|
|
International
|
275
|
|
|
267
|
|
|
520
|
|
|
505
|
|
Canada
|
110
|
|
|
143
|
|
|
165
|
|
|
264
|
|
General corporate expenses
|
(64)
|
|
|
(67)
|
|
|
(158)
|
|
|
(134)
|
|
Depreciation and amortization (excluding integration and restructuring expenses)
|
(247)
|
|
|
(253)
|
|
|
(490)
|
|
|
(487)
|
|
Integration and restructuring expenses
|
(4)
|
|
|
(14)
|
|
|
(4)
|
|
|
(41)
|
|
Deal costs
|
—
|
|
|
(5)
|
|
|
—
|
|
|
(13)
|
|
Unrealized gains/(losses) on commodity hedges
|
26
|
|
|
10
|
|
|
(117)
|
|
|
39
|
|
Impairment losses
|
(2,873)
|
|
|
(598)
|
|
|
(3,099)
|
|
|
(1,218)
|
|
Equity award compensation expense (excluding integration and restructuring expenses)
|
(40)
|
|
|
(6)
|
|
|
(73)
|
|
|
(15)
|
|
Operating income/(loss)
|
(1,339)
|
|
|
734
|
|
|
(569)
|
|
|
1,296
|
|
Interest expense
|
442
|
|
|
316
|
|
|
752
|
|
|
637
|
|
Other expense/(income)
|
(78)
|
|
|
(133)
|
|
|
(159)
|
|
|
(513)
|
|
Income/(loss) before income taxes
|
$
|
(1,703)
|
|
|
$
|
551
|
|
|
$
|
(1,162)
|
|
|
$
|
1,172
|
|
Net sales by product category were (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
|
For the Six Months Ended
|
|
|
|
June 27, 2020
|
|
June 29, 2019
|
|
June 27, 2020
|
|
June 29, 2019
|
Condiments and sauces
|
$
|
1,753
|
|
|
$
|
1,726
|
|
|
$
|
3,334
|
|
|
$
|
3,239
|
|
Cheese and dairy
|
1,271
|
|
|
1,254
|
|
|
2,410
|
|
|
2,448
|
|
Ambient foods
|
721
|
|
|
561
|
|
|
1,437
|
|
|
1,159
|
|
Frozen and chilled foods
|
612
|
|
|
599
|
|
|
1,260
|
|
|
1,204
|
|
Meats and seafood
|
644
|
|
|
653
|
|
|
1,234
|
|
|
1,240
|
|
Refreshment beverages
|
454
|
|
|
436
|
|
|
843
|
|
|
793
|
|
Coffee
|
315
|
|
|
328
|
|
|
590
|
|
|
636
|
|
Infant and nutrition
|
112
|
|
|
138
|
|
|
225
|
|
|
267
|
|
Desserts, toppings and baking
|
302
|
|
|
253
|
|
|
506
|
|
|
447
|
|
Nuts and salted snacks
|
254
|
|
|
229
|
|
|
504
|
|
|
454
|
|
Other
|
210
|
|
|
229
|
|
|
462
|
|
|
478
|
|
Total net sales
|
$
|
6,648
|
|
|
$
|
6,406
|
|
|
$
|
12,805
|
|
|
$
|
12,365
|
|
Note 19. Other Financial Data
Condensed Consolidated Statements of Income Information
Other expense/(income) consists of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
|
For the Six Months Ended
|
|
|
|
June 27, 2020
|
|
June 29, 2019
|
|
June 27, 2020
|
|
June 29, 2019
|
Amortization of prior service costs/(credits)
|
$
|
(30)
|
|
|
$
|
(76)
|
|
|
$
|
(61)
|
|
|
$
|
(153)
|
|
Net pension and postretirement non-service cost/(benefit)(a)
|
(43)
|
|
|
(44)
|
|
|
(86)
|
|
|
(87)
|
|
Loss/(gain) on sale of business
|
—
|
|
|
—
|
|
|
2
|
|
|
(246)
|
|
Interest income
|
(8)
|
|
|
(8)
|
|
|
(17)
|
|
|
(14)
|
|
Foreign exchange loss/(gain)
|
41
|
|
|
(21)
|
|
|
24
|
|
|
(17)
|
|
Other miscellaneous expense/(income)
|
(38)
|
|
|
16
|
|
|
(21)
|
|
|
4
|
|
Other expense/(income)
|
$
|
(78)
|
|
|
$
|
(133)
|
|
|
$
|
(159)
|
|
|
$
|
(513)
|
|
(a) Excludes amortization of prior service costs/(credits).
We present all non-service cost components of net pension cost/(benefit) and net postretirement cost/(benefit) within other expense/(income) on our condensed consolidated statements of income. See Note 11, Postemployment Benefits, for additional information on these components as well as information on our prior service credit amortization. See Note 4, Acquisitions and Divestitures, for additional information related to our loss/(gain) on sale of business. See Note 14, Venezuela - Foreign Currency and Inflation, for information related to our nonmonetary currency devaluation losses. See Note 12, Financial Instruments, for information related to our derivative impacts.
Other expense/(income) was $78 million of income for the three months ended June 27, 2020 compared to $133 million of income for the three months ended June 29, 2019. This decrease was primarily driven by a $41 million net foreign exchange loss in the second quarter of 2020 as compared to a $21 million net foreign exchange gain in the second quarter of 2019 and a $46 million decrease in amortization of prior service credits as compared to the prior year period. These impacts were partially offset by a $45 million net gain on derivative activities in the second quarter of 2020 compared to an $18 million net loss on derivative activities in the second quarter of 2019.
Other expense/(income) was $159 million of income for the six months ended June 27, 2020 compared to $513 million of income for the six months ended June 29, 2019. This decrease was primarily driven by a $2 million net loss on sales of businesses in 2020 compared to a $246 million gain on the Heinz India Transaction in 2019, a $92 million decrease in amortization of prior service credits as compared to the prior year period, and a $24 million net foreign exchange loss in 2020 as compared to a $17 million net foreign exchange gain in 2019. These impacts were partially offset by a $27 million net gain on derivative activities in 2020 compared to a $1 million net loss on derivative activities in 2019.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Overview
Description of the Company:
We manufacture and market food and beverage products, including condiments and sauces, cheese and dairy, meals, meats, refreshment beverages, coffee, and other grocery products throughout the world.
In the first quarter of 2020, our internal reporting and reportable segments changed. We moved our Puerto Rico business from the Latin America zone to the United States zone to consolidate and streamline the management of our product categories and supply chain. We also combined our EMEA, Latin America, and APAC zones to form the International zone as a result of certain previously announced organizational changes.
Therefore, effective in the first quarter of 2020, we manage and report our operating results through three reportable segments defined by geographic region: United States, International, and Canada. We have reflected these changes in all historical periods presented.
See Note 18, Segment Reporting, in Item 1, Financial Statements, for our financial information by segment.
Items Affecting Comparability of Financial Results
Impairment Losses:
Our results of operations reflect goodwill impairment losses of $2.0 billion and intangible asset impairment losses of $1.1 billion for the six months ended June 27, 2020 compared to goodwill impairment losses of $744 million and intangible asset impairment losses of $474 million for the six months ended June 29, 2019. See Note 8, Goodwill and Intangible Assets, in Item 1, Financial Statements, for additional information on these impairment losses.
COVID-19 Impacts:
During the first and second quarters of 2020, the COVID-19 pandemic produced a beneficial impact on our consolidated net sales. Increased demand for our retail products more than offset declines in our foodservice business, which resulted in consolidated net sales growth compared to the prior period. This increased demand for our retail products could reverse in the future if consumer purchasing behavior changes. We expect a continued decrease in demand in 2020 for away-from-home establishments, which will negatively impact our foodservice business beyond the second quarter and which also contributed to the impairments recorded in our U.S. Foodservice and Canada Foodservice reporting units in the current period. However, COVID-19 and its impacts are unprecedented and continuously evolving, and the long-term impacts to our financial condition and results of operations are still uncertain.
See Consolidated Results of Operations and Liquidity and Capital Resources for additional information related to the impact of COVID-19 on our overall results. For information related to the impact of COVID-19 on our segment results see Results of Operations by Segment.
Results of Operations
We disclose in this report certain non-GAAP financial measures. These non-GAAP financial measures assist management in comparing our performance on a consistent basis for purposes of business decision-making by removing the impact of certain items that management believes do not directly reflect our underlying operations. For additional information and reconciliations from our condensed consolidated financial statements see Non-GAAP Financial Measures.
Consolidated Results of Operations
Summary of Results:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
|
|
|
For the Six Months Ended
|
|
|
|
|
|
June 27, 2020
|
|
June 29, 2019
|
|
% Change
|
|
June 27, 2020
|
|
June 29, 2019
|
|
% Change
|
|
(in millions, except per share data)
|
|
|
|
|
|
(in millions, except per share data)
|
|
|
|
|
Net sales
|
$
|
6,648
|
|
|
$
|
6,406
|
|
|
3.8
|
%
|
|
$
|
12,805
|
|
|
$
|
12,365
|
|
|
3.6
|
%
|
Operating income/(loss)
|
(1,339)
|
|
|
734
|
|
|
(282.3)
|
%
|
|
(569)
|
|
|
1,296
|
|
|
(143.9)
|
%
|
Net income/(loss) attributable to common shareholders
|
(1,651)
|
|
|
449
|
|
|
(468.4)
|
%
|
|
(1,273)
|
|
|
854
|
|
|
(249.1)
|
%
|
Diluted EPS
|
(1.35)
|
|
|
0.37
|
|
|
(464.9)
|
%
|
|
(1.04)
|
|
|
0.70
|
|
|
(248.6)
|
%
|
Net Sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
|
|
|
For the Six Months Ended
|
|
|
|
|
|
June 27, 2020
|
|
June 29, 2019
|
|
% Change
|
|
June 27, 2020
|
|
June 29, 2019
|
|
% Change
|
|
(in millions)
|
|
|
|
|
|
(in millions)
|
|
|
|
|
Net sales
|
$
|
6,648
|
|
|
$
|
6,406
|
|
|
3.8
|
%
|
|
$
|
12,805
|
|
|
$
|
12,365
|
|
|
3.6
|
%
|
Organic Net Sales(a)
|
6,737
|
|
|
6,272
|
|
|
7.4
|
%
|
|
12,950
|
|
|
12,120
|
|
|
6.9
|
%
|
(a) Organic Net Sales is a non-GAAP financial measure. See the Non-GAAP Financial Measures section at the end of this item.
Three Months Ended June 27, 2020 Compared to the Three Months Ended June 29, 2019:
Net sales increased 3.8% to $6.6 billion for the three months ended June 27, 2020 compared to $6.4 billion for the three months ended June 29, 2019, despite the unfavorable impacts of divestitures (2.1 pp) and foreign currency (1.5 pp). Organic Net Sales increased 7.4% to $6.7 billion for the three months ended June 27, 2020 compared to $6.3 billion for the three months ended June 29, 2019, primarily due to strong retail demand that was supported by consumer reaction to the COVID-19 pandemic. Organic Net Sales growth was driven by favorable volume/mix (5.2 pp) and higher pricing (2.2 pp) across all segments.
Six Months Ended June 27, 2020 Compared to the Six Months Ended June 29, 2019:
Net sales increased 3.6% to $12.8 billion for the six months ended June 27, 2020 compared to $12.4 billion for the six months ended June 29, 2019, despite the unfavorable impacts of divestitures (2.0 pp) and foreign currency (1.3 pp). Organic Net Sales increased 6.9% to $13.0 billion for the six months ended June 27, 2020 compared to $12.1 billion for the six months ended June 29, 2019, primarily due to strong retail demand that was supported by consumer reaction to the COVID-19 pandemic. Organic Net Sales growth was driven by favorable volume/mix (4.9 pp) and higher pricing (2.0 pp). Volume/mix was favorable in all segments, while higher pricing in the United States and International more than offset lower pricing in Canada.
Net Income/(Loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
|
|
|
For the Six Months Ended
|
|
|
|
|
|
June 27, 2020
|
|
June 29, 2019
|
|
% Change
|
|
June 27, 2020
|
|
June 29, 2019
|
|
% Change
|
|
(in millions)
|
|
|
|
|
|
(in millions)
|
|
|
|
|
Operating income/(loss)
|
$
|
(1,339)
|
|
|
$
|
734
|
|
|
(282.3)
|
%
|
|
(569)
|
|
|
1,296
|
|
|
(143.9)
|
%
|
Net income/(loss) attributable to common shareholders
|
(1,651)
|
|
|
449
|
|
|
(468.4)
|
%
|
|
(1,273)
|
|
|
854
|
|
|
(249.1)
|
%
|
Adjusted EBITDA(a)
|
1,799
|
|
|
1,600
|
|
|
12.4
|
%
|
|
3,214
|
|
|
3,031
|
|
|
6.0
|
%
|
(a) Adjusted EBITDA is a non-GAAP financial measure. See the Non-GAAP Financial Measures section at the end of this item.
Three Months Ended June 27, 2020 Compared to the Three Months Ended June 29, 2019:
Operating income/(loss) decreased to a loss of $1.3 billion for the three months ended June 27, 2020 compared to income of $734 million for the three months ended June 29, 2019. This decrease was primarily driven by higher non-cash impairment losses in the current period. Non-cash impairment losses were $2.9 billion for the three months ended June 27, 2020 compared to $598 million for the three months ended June 29, 2019. Excluding the impact of these non-cash impairment losses, operating income/(loss) increased by $201 million primarily due to higher Organic Net Sales, partially offset by increased variable compensation expenses, investments in marketing, higher equity award compensation expense, and the unfavorable impact of divestitures. See Note 8, Goodwill and Intangible Assets, in Item 1, Financial Statements, for additional information on our impairment losses.
Net income/(loss) attributable to common shareholders decreased to a loss of $1.7 billion for the three months ended June 27, 2020 compared to income of $449 million for the three months ended June 29, 2019. This decrease was driven by the operating income/(loss) factors described above (primarily higher non-cash impairment losses in the current period), higher interest expense, and unfavorable changes in other expense/(income), partially offset by a tax benefit for the three months ended June 27, 2020 compared to tax expense for the three months ended June 29, 2019.
•Interest expense was $442 million for the three months ended June 27, 2020 compared to $316 million for the three months ended June 29, 2019. This increase was primarily driven by a $109 million loss on extinguishment of debt recognized in connection with the Tender Offer and Debt Redemptions and $20 million of interest expense related to the $4.0 billion drawn on our Senior Credit Facility in the first quarter of 2020. Though outstanding for a portion of the current period, we repaid the full $4.0 billion revolver draw by the end of the second quarter of 2020.
•Other expense/(income) was $78 million of income for the three months ended June 27, 2020 compared to $133 million of income for the three months ended June 29, 2019. This decrease was primarily driven by a $41 million net foreign exchange loss in the second quarter of 2020 as compared to a $21 million net foreign exchange gain in the second quarter of 2019 and a $46 million decrease in amortization of prior service credits as compared to the prior year period. These impacts were partially offset by a $45 million net gain on derivative activities in the second quarter of 2020 compared to an $18 million net loss on derivative activities in the second quarter of 2019.
•The effective tax rate was a benefit of 3.0% for the three months ended June 27, 2020 on pre-tax losses compared to an expense of 18.8% for the three months ended June 29, 2019 on pre-tax income. The change in our effective tax rate was primarily driven by an increase in unfavorable net discrete items, primarily related to non-deductible goodwill impairments (23.8%), which were partially offset by the favorable impact of establishing certain deferred tax assets for state tax deductions and the revaluation of our deferred tax balances due to changes in international tax laws. Prior year favorable impacts from net discrete items were primarily related to a decrease in uncertain tax position reserves, which were partially offset by the unfavorable impact related to non-deductible goodwill impairments (4.4%).
Adjusted EBITDA increased 12.4% to $1.8 billion for the three months ended June 27, 2020 compared to $1.6 billion for the three months ended June 29, 2019, despite the unfavorable impacts from divestitures (2.3 pp) and foreign currency (1.2 pp). Adjusted EBITDA growth was primarily driven by strong retail demand that was supported by consumer reaction to the COVID-19 pandemic as increases in the United States and International, as well as lower general corporate expenses, more than offset declines in Canada.
Six Months Ended June 27, 2020 Compared to the Six Months Ended June 29, 2019:
Operating income/(loss) decreased to a loss of $569 million for the six months ended June 27, 2020 compared to income of $1.3 billion for the six months ended June 29, 2019. This decrease was primarily driven by higher non-cash impairment losses in the current period. Non-cash impairment losses were $3.1 billion for the six months ended June 27, 2020 compared to $1.2 billion for the six months ended June 29, 2019. Excluding the impact of these non-cash impairment losses, operating income/(loss) increased by $15 million primarily due to higher Organic Net Sales, partially offset by unrealized losses on commodity hedges, higher supply chain costs, increased variable compensation expenses, higher equity award compensation expense, the unfavorable impact of divestitures, unfavorable changes in key commodity costs (which we define as dairy, meat, coffee, and nuts), investments in marketing, and higher general corporate expenses. See Note 8, Goodwill and Intangible Assets, in Item 1, Financial Statements, for additional information on our impairment losses.
Net income/(loss) attributable to common shareholders decreased to a loss of $1.3 billion for the six months ended June 27, 2020 compared to income of $854 million for the six months ended June 29, 2019. This decrease was driven by the operating income/(loss) factors described above (primarily higher non-cash impairment losses in the current period), unfavorable changes in other expense/(income), and higher interest expense, partially offset by lower tax expense in the current period.
•Other expense/(income) was $159 million of income for the six months ended June 27, 2020 compared to $513 million of income for the six months ended June 29, 2019. This decrease was primarily driven by a $2 million net loss on sales of businesses in 2020 compared to a $246 million gain on the Heinz India Transaction in 2019, a $92 million decrease in amortization of prior service credits as compared to the prior year period, and a $24 million net foreign exchange loss in 2020 as compared to a $17 million net foreign exchange gain in 2019. These impacts were partially offset by a $27 million net gain on derivative activities in 2020 compared to a $1 million net loss on derivative activities in 2019.
•Interest expense was $752 million for the six months ended June 27, 2020 compared to $637 million for the six months ended June 29, 2019. This increase was primarily driven by a $109 million loss on extinguishment of debt recognized in connection with the Tender Offer and Debt Redemptions and $22 million of interest expense related to the $4.0 billion drawn on our Senior Credit Facility in the first quarter of 2020 and repaid by the end of the second quarter of 2020. Excluding these items, interest expense decreased as compared to the prior year period as our long-term debt balance was reduced through debt repayments, redemptions, and tender offers.
•The effective tax rate was an expense of 9.4% for the six months ended June 27, 2020 on pre-tax losses compared to an expense of 27.3% for the six months ended June 29, 2019 on pre-tax income. The change in our effective tax rate was primarily driven by an increase in unfavorable net discrete items, primarily related to non-deductible goodwill impairments (39.2%), which were partially offset by the favorable impact of establishing certain deferred tax assets for state tax deductions and the revaluation of our deferred tax balances due to changes in international tax laws. Prior year unfavorable impacts from net discrete items were primarily related to non-deductible goodwill impairments (10.5%), which were partially offset by a decrease in uncertain tax position reserves and the favorable impact of changes in estimates of certain 2018 U.S. income and deductions.
Adjusted EBITDA increased 6.0% to $3.2 billion for the six months ended June 27, 2020 compared to $3.0 billion for the six months ended June 29, 2019, despite the unfavorable impacts from divestitures (2.0 pp) and foreign currency (1.1 pp). Adjusted EBITDA growth was primarily driven by strong retail demand that was supported by consumer reaction to the COVID-19 pandemic as increases in the United States and International more than offset declines in Canada and higher general corporate expenses.
Diluted EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
|
|
|
For the Six Months Ended
|
|
|
|
|
|
June 27, 2020
|
|
June 29, 2019
|
|
% Change
|
|
June 27, 2020
|
|
June 29, 2019
|
|
% Change
|
|
(in millions, except per share data)
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
$
|
(1.35)
|
|
|
$
|
0.37
|
|
|
(464.9)
|
%
|
|
$
|
(1.04)
|
|
|
$
|
0.70
|
|
|
(248.6)
|
%
|
Adjusted EPS(a)
|
0.80
|
|
|
0.78
|
|
|
2.6
|
%
|
|
1.39
|
|
|
1.44
|
|
|
(3.5)
|
%
|
(a) Adjusted EPS is a non-GAAP financial measure. See the Non-GAAP Financial Measures section at the end of this item.
Three Months Ended June 27, 2020 Compared to the Three Months Ended June 29, 2019:
Diluted EPS decreased to a loss of $1.35 for the three months ended June 27, 2020 compared to earnings of $0.37 for the three months ended June 29, 2019 primarily due to the net income/(loss) attributable to common shareholders factors discussed above.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
|
|
|
|
|
June 27, 2020
|
|
June 29, 2019
|
|
$ Change
|
|
% Change
|
Diluted EPS
|
$
|
(1.35)
|
|
|
$
|
0.37
|
|
|
$
|
(1.72)
|
|
|
(464.9)
|
%
|
Integration and restructuring expenses
|
—
|
|
|
0.01
|
|
|
(0.01)
|
|
|
|
Unrealized losses/(gains) on commodity hedges
|
(0.02)
|
|
|
(0.01)
|
|
|
(0.01)
|
|
|
|
Impairment losses
|
2.16
|
|
|
0.41
|
|
|
1.75
|
|
|
|
Debt prepayment and extinguishment costs
|
0.07
|
|
|
—
|
|
|
0.07
|
|
|
|
U.S. Tax Reform discrete income tax expense/(benefit)
|
(0.06)
|
|
|
—
|
|
|
(0.06)
|
|
|
|
Adjusted EPS(a)
|
$
|
0.80
|
|
|
$
|
0.78
|
|
|
$
|
0.02
|
|
|
2.6
|
%
|
|
|
|
|
|
|
|
|
Key drivers of change in Adjusted EPS(a):
|
|
|
|
|
|
|
|
Results of operations
|
|
|
|
|
$
|
0.14
|
|
|
|
Results of divested operations
|
|
|
|
|
(0.03)
|
|
|
|
Interest expense
|
|
|
|
|
(0.01)
|
|
|
|
Other expense/(income)
|
|
|
|
|
(0.04)
|
|
|
|
Effective tax rate
|
|
|
|
|
(0.04)
|
|
|
|
|
|
|
|
|
$
|
0.02
|
|
|
|
(a) Adjusted EPS is a non-GAAP financial measure. See the Non-GAAP Financial Measures section at the end of this item.
Adjusted EPS increased 2.6% to $0.80 for the three months ended June 27, 2020 compared to $0.78 for the three months ended June 29, 2019 primarily due to higher Adjusted EBITDA, which more than offset unfavorable changes in other expense/(income), higher taxes on adjusted earnings in the current period, and higher equity award compensation expense.
Six Months Ended June 27, 2020 Compared to the Six Months Ended June 29, 2019:
Diluted EPS decreased to a loss of $1.04 for the six months ended June 27, 2020 compared to earnings of $0.70 for the six months ended June 29, 2019 primarily due to the net income/(loss) attributable to common shareholders factors discussed above.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended
|
|
|
|
|
|
|
|
June 27, 2020
|
|
June 29, 2019
|
|
$ Change
|
|
% Change
|
Diluted EPS
|
$
|
(1.04)
|
|
|
$
|
0.70
|
|
|
$
|
(1.74)
|
|
|
(248.6)
|
%
|
Integration and restructuring expenses
|
—
|
|
|
0.02
|
|
|
(0.02)
|
|
|
|
Deal costs
|
—
|
|
|
0.01
|
|
|
(0.01)
|
|
|
|
Unrealized losses/(gains) on commodity hedges
|
0.07
|
|
|
(0.02)
|
|
|
0.09
|
|
|
|
Impairment losses
|
2.35
|
|
|
0.89
|
|
|
1.46
|
|
|
|
Losses/(gains) on sale of business
|
—
|
|
|
(0.16)
|
|
|
0.16
|
|
|
|
Debt prepayment and extinguishment costs
|
0.07
|
|
|
—
|
|
|
0.07
|
|
|
|
U.S. Tax Reform discrete income tax expense/(benefit)
|
(0.06)
|
|
|
—
|
|
|
(0.06)
|
|
|
|
Adjusted EPS(a)
|
$
|
1.39
|
|
|
$
|
1.44
|
|
|
$
|
(0.05)
|
|
|
(3.5)
|
%
|
|
|
|
|
|
|
|
|
Key drivers of change in Adjusted EPS(a):
|
|
|
|
|
|
|
|
Results of operations
|
|
|
|
|
$
|
0.12
|
|
|
|
Results of divested operations
|
|
|
|
|
(0.04)
|
|
|
|
Other expense/(income)
|
|
|
|
|
(0.07)
|
|
|
|
Effective tax rate
|
|
|
|
|
(0.06)
|
|
|
|
|
|
|
|
|
$
|
(0.05)
|
|
|
|
(a) Adjusted EPS is a non-GAAP financial measure. See the Non-GAAP Financial Measures section at the end of this item.
Adjusted EPS decreased 3.5% to $1.39 for the six months ended June 27, 2020 compared to $1.44 for the six months ended June 29, 2019 primarily due to unfavorable changes in other expense/(income), higher taxes on adjusted earnings in the current period, and higher equity award compensation expense, which more than offset higher Adjusted EBITDA.
Results of Operations by Segment
Management evaluates segment performance based on several factors, including net sales, Organic Net Sales, and Segment Adjusted EBITDA. Segment Adjusted EBITDA is defined as net income/(loss) from continuing operations before interest expense, other expense/(income), provision for/(benefit from) income taxes, and depreciation and amortization (excluding integration and restructuring expenses); in addition to these adjustments, we exclude, when they occur, the impacts of integration and restructuring expenses, deal costs, unrealized gains/(losses) on commodity hedges (the unrealized gains and losses are recorded in general corporate expenses until realized; once realized, the gains and losses are recorded in the applicable segment’s operating results), impairment losses, and equity award compensation expense (excluding integration and restructuring expenses). Segment Adjusted EBITDA is a tool that can assist management and investors in comparing our performance on a consistent basis by removing the impact of certain items that management believes do not directly reflect our underlying operations.
Under highly inflationary accounting, the financial statements of a subsidiary are remeasured into our reporting currency (U.S. dollars) based on the legally available exchange rate at which we expect to settle the underlying transactions. Exchange gains and losses from the remeasurement of monetary assets and liabilities are reflected in net income/(loss), rather than accumulated other comprehensive income/(losses) on the balance sheet, until such time as the economy is no longer considered highly inflationary. The exchange gains and losses from remeasurement are recorded in current net income and are classified within other expense/(income), as nonmonetary currency devaluation. See Note 14, Venezuela - Foreign Currency and Inflation, in Item 1, Financial Statements, and Note 2, Significant Accounting Policies, in our Annual Report on Form 10-K for the year ended December 28, 2019, for additional information.
Net Sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
|
For the Six Months Ended
|
|
|
|
June 27, 2020
|
|
June 29, 2019
|
|
June 27, 2020
|
|
June 29, 2019
|
|
(in millions)
|
|
|
|
|
|
|
Net sales:
|
|
|
|
|
|
|
|
United States
|
$
|
4,917
|
|
|
$
|
4,533
|
|
|
$
|
9,412
|
|
|
$
|
8,757
|
|
International
|
1,305
|
|
|
1,313
|
|
|
2,606
|
|
|
2,598
|
|
Canada
|
426
|
|
|
560
|
|
|
787
|
|
|
1,010
|
|
Total net sales
|
$
|
6,648
|
|
|
$
|
6,406
|
|
|
$
|
12,805
|
|
|
$
|
12,365
|
|
Organic Net Sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
|
For the Six Months Ended
|
|
|
|
June 27, 2020
|
|
June 29, 2019
|
|
June 27, 2020
|
|
June 29, 2019
|
|
(in millions)
|
|
|
|
|
|
|
Organic Net Sales(a):
|
|
|
|
|
|
|
|
United States
|
$
|
4,917
|
|
|
$
|
4,533
|
|
|
$
|
9,412
|
|
|
$
|
8,757
|
|
International
|
1,379
|
|
|
1,306
|
|
|
2,730
|
|
|
2,571
|
|
Canada
|
441
|
|
|
433
|
|
|
808
|
|
|
792
|
|
Total Organic Net Sales
|
$
|
6,737
|
|
|
$
|
6,272
|
|
|
$
|
12,950
|
|
|
$
|
12,120
|
|
(a) Organic Net Sales is a non-GAAP financial measure. See the Non-GAAP Financial Measures section at the end of this item.
Drivers of the changes in net sales and Organic Net Sales for the three and six months ended June 27, 2020 compared to the three and six months ended June 29, 2019 were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
Currency
|
|
Acquisitions and Divestitures
|
|
Organic Net Sales
|
|
Price
|
|
Volume/Mix
|
For the Three Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
8.5
|
%
|
|
0.0 pp
|
|
0.0 pp
|
|
8.5
|
%
|
|
2.3 pp
|
|
6.2 pp
|
International
|
(0.7)
|
%
|
|
(6.2) pp
|
|
0.0 pp
|
|
5.5
|
%
|
|
2.6 pp
|
|
2.9 pp
|
Canada
|
(23.9)
|
%
|
|
(2.8) pp
|
|
(23.1) pp
|
|
2.0
|
%
|
|
1.3 pp
|
|
0.7 pp
|
Kraft Heinz
|
3.8
|
%
|
|
(1.5) pp
|
|
(2.1) pp
|
|
7.4
|
%
|
|
2.2 pp
|
|
5.2 pp
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
Currency
|
|
Acquisitions and Divestitures
|
|
Organic Net Sales
|
|
Price
|
|
Volume/Mix
|
For the Six Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
7.5
|
%
|
|
0.0 pp
|
|
0.0 pp
|
|
7.5
|
%
|
|
2.3 pp
|
|
5.2 pp
|
International
|
0.3
|
%
|
|
(5.3) pp
|
|
(0.6) pp
|
|
6.2
|
%
|
|
2.2 pp
|
|
4.0 pp
|
Canada
|
(22.1)
|
%
|
|
(2.2) pp
|
|
(21.9) pp
|
|
2.0
|
%
|
|
(2.3) pp
|
|
4.3 pp
|
Kraft Heinz
|
3.6
|
%
|
|
(1.3) pp
|
|
(2.0) pp
|
|
6.9
|
%
|
|
2.0 pp
|
|
4.9 pp
|
Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
|
For the Six Months Ended
|
|
|
|
June 27, 2020
|
|
June 29, 2019
|
|
June 27, 2020
|
|
June 29, 2019
|
|
(in millions)
|
|
|
|
|
|
|
Segment Adjusted EBITDA:
|
|
|
|
|
|
|
|
United States
|
$
|
1,478
|
|
|
$
|
1,257
|
|
|
$
|
2,687
|
|
|
$
|
2,396
|
|
International
|
275
|
|
|
267
|
|
|
520
|
|
|
505
|
|
Canada
|
110
|
|
|
143
|
|
|
165
|
|
|
264
|
|
General corporate expenses
|
(64)
|
|
|
(67)
|
|
|
(158)
|
|
|
(134)
|
|
Depreciation and amortization (excluding integration and restructuring expenses)
|
(247)
|
|
|
(253)
|
|
|
(490)
|
|
|
(487)
|
|
Integration and restructuring expenses
|
(4)
|
|
|
(14)
|
|
|
(4)
|
|
|
(41)
|
|
Deal costs
|
—
|
|
|
(5)
|
|
|
—
|
|
|
(13)
|
|
Unrealized gains/(losses) on commodity hedges
|
26
|
|
|
10
|
|
|
(117)
|
|
|
39
|
|
Impairment losses
|
(2,873)
|
|
|
(598)
|
|
|
(3,099)
|
|
|
(1,218)
|
|
Equity award compensation expense (excluding integration and restructuring expenses)
|
(40)
|
|
|
(6)
|
|
|
(73)
|
|
|
(15)
|
|
Operating income/(loss)
|
(1,339)
|
|
|
734
|
|
|
(569)
|
|
|
1,296
|
|
Interest expense
|
442
|
|
|
316
|
|
|
752
|
|
|
637
|
|
Other expense/(income)
|
(78)
|
|
|
(133)
|
|
|
(159)
|
|
|
(513)
|
|
Income/(loss) before income taxes
|
$
|
(1,703)
|
|
|
$
|
551
|
|
|
$
|
(1,162)
|
|
|
$
|
1,172
|
|
United States:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
|
|
|
For the Six Months Ended
|
|
|
|
|
|
June 27, 2020
|
|
June 29, 2019
|
|
% Change
|
|
June 27, 2020
|
|
June 29, 2019
|
|
% Change
|
|
(in millions)
|
|
|
|
|
|
(in millions)
|
|
|
|
|
Net sales
|
$
|
4,917
|
|
|
$
|
4,533
|
|
|
8.5
|
%
|
|
$
|
9,412
|
|
|
$
|
8,757
|
|
|
7.5
|
%
|
Organic Net Sales(a)
|
4,917
|
|
|
4,533
|
|
|
8.5
|
%
|
|
9,412
|
|
|
8,757
|
|
|
7.5
|
%
|
Segment Adjusted EBITDA
|
1,478
|
|
|
1,257
|
|
|
17.6
|
%
|
|
2,687
|
|
|
2,396
|
|
|
12.2
|
%
|
(a) Organic Net Sales is a non-GAAP financial measure. See the Non-GAAP Financial Measures section at the end of this item.
Three Months Ended June 27, 2020 Compared to the Three Months Ended June 29, 2019:
Net sales and Organic Net Sales both increased 8.5% to $4.9 billion for the three months ended June 27, 2020 compared to $4.5 billion for the three months ended June 29, 2019, due to strong retail demand that was supported by consumer reaction to the COVID-19 pandemic. Organic Net Sales growth was driven by favorable volume/mix (6.2 pp) and higher pricing (2.3 pp). Favorable volume/mix was primarily driven by consumption growth across nearly all retail categories and a partial restoration of retailer inventory levels versus the end of the first quarter of this year. This growth was partially offset by lower foodservice sales and lower shipments for refrigerated meal combinations. Higher pricing was primarily driven by reduced promotional activity versus the prior year, particularly in supply constrained categories.
Segment Adjusted EBITDA increased 17.6% to $1.5 billion for the three months ended June 27, 2020 compared to $1.3 billion for the three months ended June 29, 2019. This increase was primarily driven by strong retail demand that was supported by consumer reaction to the COVID-19 pandemic, as increased volume and favorable product and channel mix, pricing gains, and, to a lesser extent, lower packaging costs versus the year-ago period more than offset increased variable compensation expenses, investments in marketing, and higher operating costs related to COVID-19.
Six Months Ended June 27, 2020 Compared to the Six Months Ended June 29, 2019:
Net sales and Organic Net Sales both increased 7.5% to $9.4 billion for the six months ended June 27, 2020 compared to $8.8 billion for the six months ended June 29, 2019, due to strong retail demand that was supported by consumer reaction to the COVID-19 pandemic. Organic Net Sales growth was driven by favorable volume/mix (5.2 pp) and higher pricing (2.3 pp). Favorable volume/mix was primarily driven by consumption growth across nearly all retail categories, most significantly in condiments and sauces, boxed dinners, and cheese. This growth was partially offset by lower foodservice sales. Higher pricing was primarily driven by reduced promotional activity versus the prior year, higher list prices, and increases to offset unfavorable key commodity costs, primarily in dairy.
Segment Adjusted EBITDA increased 12.2% to $2.7 billion for the six months ended June 27, 2020 compared to $2.4 billion for the six months ended June 29, 2019. This increase was primarily driven by strong retail demand that was supported by consumer reaction to the COVID-19 pandemic, as increased volume and favorable product and channel mix, pricing gains, and, to a lesser extent, lower packaging costs versus the year-ago period more than offset higher supply chain costs, increased variable compensation expenses, investments in marketing, and unfavorable changes in key commodity costs.
International:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
|
|
|
For the Six Months Ended
|
|
|
|
|
|
June 27, 2020
|
|
June 29, 2019
|
|
% Change
|
|
June 27, 2020
|
|
June 29, 2019
|
|
% Change
|
|
(in millions)
|
|
|
|
|
|
(in millions)
|
|
|
|
|
Net sales
|
$
|
1,305
|
|
|
$
|
1,313
|
|
|
(0.7)
|
%
|
|
$
|
2,606
|
|
|
$
|
2,598
|
|
|
0.3
|
%
|
Organic Net Sales(a)
|
1,379
|
|
|
1,306
|
|
|
5.5
|
%
|
|
2,730
|
|
|
2,571
|
|
|
6.2
|
%
|
Segment Adjusted EBITDA
|
275
|
|
|
267
|
|
|
3.2
|
%
|
|
520
|
|
|
505
|
|
|
2.8
|
%
|
(a) Organic Net Sales is a non-GAAP financial measure. See the Non-GAAP Financial Measures section at the end of this item.
Three Months Ended June 27, 2020 Compared to the Three Months Ended June 29, 2019:
Net sales decreased 0.7% to $1.3 billion for the three months ended June 27, 2020 compared to $1.3 billion for the three months ended June 29, 2019, including the unfavorable impact of foreign currency (6.2 pp, including 0.5 pp from the devaluation of the Venezuelan bolivar). Organic Net Sales increased 5.5% to $1.4 billion for the three months ended June 27, 2020 compared to $1.3 billion for the three months ended June 29, 2019, due to strong retail demand that was supported by consumer reaction to the COVID-19 pandemic. Organic Net Sales growth was driven by favorable volume/mix (2.9 pp) and higher pricing (2.6 pp). Favorable volume/mix was primarily driven by consumption-led growth in condiments and sauces and boxed dinners, as well as favorable changes in retail inventory levels. This growth more than offset a significant decline in foodservice-related sales and, to a lesser extent, infant nutrition shipments. Higher pricing was primarily driven by a lower level of promotional activity versus the prior year period, carryover pricing actions in select markets, and higher pricing to offset inflationary input costs in Brazil.
Segment Adjusted EBITDA increased 3.2% to $275 million for the three months ended June 27, 2020 compared to $267 million for the three months ended June 29, 2019. This increase was primarily driven by strong retail demand that was supported by consumer reaction to the COVID-19 pandemic, as Organic Net Sales growth more than offset unfavorable overhead costs, the unfavorable impact of foreign currency (5.7 pp, including 1.2 pp from the devaluation of the Venezuelan bolivar), and higher supply chain costs, including incremental costs to service demand.
Six Months Ended June 27, 2020 Compared to the Six Months Ended June 29, 2019:
Net sales increased 0.3% to $2.6 billion for the six months ended June 27, 2020 compared to $2.6 billion for the six months ended June 29, 2019, despite the unfavorable impacts of foreign currency (5.3 pp, including 0.5 pp from the devaluation of the Venezuelan bolivar) and divestitures (0.6 pp). Organic Net Sales increased 6.2% to $2.7 billion for the six months ended June 27, 2020 compared to $2.6 billion for the six months ended June 29, 2019, due to strong retail demand that was supported by consumer reaction to the COVID-19 pandemic. Organic Net Sales growth was driven by favorable volume/mix (4.0 pp) and higher pricing (2.2 pp). Favorable volume/mix was primarily driven by consumption-led growth in condiments and sauces and boxed dinners, which more than offset a significant decline in foodservice-related sales. Higher pricing was primarily driven by increases in Latin America, the United Kingdom, and Australia.
Segment Adjusted EBITDA increased 2.8% to $520 million for the six months ended June 27, 2020 compared to $505 million for the six months ended June 29, 2019. This increase was primarily driven by strong retail demand that was supported by consumer reaction to the COVID-19 pandemic, as Organic Net Sales growth more than offset higher supply chain costs, including incremental costs to service demand, unfavorable overhead costs, and the unfavorable impact of foreign currency (5.3 pp, including 1.5 pp from the devaluation of the Venezuelan bolivar).
Canada:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
|
|
|
For the Six Months Ended
|
|
|
|
|
|
June 27, 2020
|
|
June 29, 2019
|
|
% Change
|
|
June 27, 2020
|
|
June 29, 2019
|
|
% Change
|
|
(in millions)
|
|
|
|
|
|
(in millions)
|
|
|
|
|
Net sales
|
$
|
426
|
|
|
$
|
560
|
|
|
(23.9)
|
%
|
|
$
|
787
|
|
|
$
|
1,010
|
|
|
(22.1)
|
%
|
Organic Net Sales(a)
|
441
|
|
|
433
|
|
|
2.0
|
%
|
|
808
|
|
|
792
|
|
|
2.0
|
%
|
Segment Adjusted EBITDA
|
110
|
|
|
143
|
|
|
(23.2)
|
%
|
|
165
|
|
|
264
|
|
|
(37.3)
|
%
|
(a) Organic Net Sales is a non-GAAP financial measure. See the Non-GAAP Financial Measures section at the end of this item.
Three Months Ended June 27, 2020 Compared to the Three Months Ended June 29, 2019:
Net sales decreased 23.9% to $426 million for the three months ended June 27, 2020 compared to $560 million for the three months ended June 29, 2019 primarily due to the unfavorable impacts of divestitures (23.1 pp) and foreign currency (2.8 pp). Organic Net Sales increased 2.0% to $441 million for the three months ended June 27, 2020 compared to $433 million for the three months ended June 29, 2019, due to strong retail demand that was supported by consumer reaction to the COVID-19 pandemic. Organic Net Sales growth was driven by higher pricing (1.3 pp) and favorable volume/mix (0.7 pp). Higher pricing was driven by prior year promotional activities that were not repeated, primarily in boxed dinners, and higher list prices. Favorable volume/mix was driven by consumption gains across all retail categories, which more than offset lower foodservice-related sales and the negative impact from exiting the McCafé licensing agreement.
Segment Adjusted EBITDA decreased 23.2% to $110 million for the three months ended June 27, 2020 compared to $143 million for the three months ended June 29, 2019, including the unfavorable impacts of divestitures (22.7 pp) and foreign currency (2.9 pp). Excluding the impact of these factors, Segment Adjusted EBITDA growth was primarily driven by strong retail demand that was supported by consumer reaction to the COVID-19 pandemic, as Organic Net Sales growth more than offset higher supply chain costs.
Six Months Ended June 27, 2020 Compared to the Six Months Ended June 29, 2019:
Net sales decreased 22.1% to $787 million for the six months ended June 27, 2020 compared to $1.0 billion for the six months ended June 29, 2019 primarily due to the unfavorable impacts of divestitures (21.9 pp) and foreign currency (2.2 pp). Organic Net Sales increased 2.0% to $808 million for the six months ended June 27, 2020 compared to $792 million for the six months ended June 29, 2019, due to strong retail demand that was supported by consumer reaction to the COVID-19 pandemic. Organic Net Sales growth was driven by favorable volume/mix (4.3 pp), partially offset by lower pricing (2.3 pp). Favorable volume/mix was primarily driven by consumption gains across all retail categories, which more than offset lower foodservice-related sales and the negative impact from exiting the McCafé licensing agreement. Pricing was lower primarily due to decreased pricing in foodservice and condiments and sauces as well as unfavorable trade expense compared to the prior period.
Segment Adjusted EBITDA decreased 37.3% to $165 million for the six months ended June 27, 2020 compared to $264 million for the six months ended June 29, 2019, including the unfavorable impacts of divestitures (16.6 pp) and foreign currency (2.1 pp). Excluding the impact of these factors, the decrease was primarily due to higher supply chain costs, which more than offset strong retail demand that was supported by consumer reaction to the COVID-19 pandemic.
Liquidity and Capital Resources
In February 2020, Fitch and S&P downgraded our long-term credit rating from BBB- to BB+ with a stable outlook from Fitch and a negative outlook from S&P. These downgrades may adversely affect our ability to access the commercial paper market. In addition, we could experience an increase in interest costs as a result of the downgrades. These downgrades do not constitute a default or event of default under any of our debt instruments. Our ability to borrow under the Senior Credit Facility is not affected by the downgrades.
On March 12, 2020, we provided notice to our lenders to borrow the full available amount under our Senior Credit Facility so that a total of $4.0 billion was outstanding as of March 28, 2020. This action was a precautionary measure to preserve financial flexibility in light of the uncertainty in the global economy resulting from the COVID-19 pandemic. We repaid the full $4.0 billion revolver draw during the second quarter of 2020.
We believe that cash generated from our operating activities and Senior Credit Facility will provide sufficient liquidity to meet our working capital needs, future contractual obligations (including repayments of long-term debt), payment of our anticipated quarterly dividends, planned capital expenditures, restructuring expenditures, and contributions to our postemployment benefit plans for the next 12 months. An additional potential source of liquidity is access to capital markets. We intend to use our cash on hand for daily funding requirements.
Cash Flow Activity For the Six Months Ended June 27, 2020 Compared to the Six Months Ended June 29, 2019:
Net Cash Provided by/Used for Operating Activities:
Net cash provided by operating activities was $2.2 billion for the six months ended June 27, 2020 compared to $1.3 billion for the six months ended June 29, 2019. This increase was primarily driven by favorable changes in Adjusted EBITDA, favorable changes in inventory, primarily due to reduced inventory levels as a result of COVID-19, reduced cash outflows resulting from decreased promotional activity versus the prior year period, the delayed timing of 2020 income tax payments as a result of COVID-19 governmental relief, and lower cash payments for employee bonuses in 2020 as compared to 2019. These impacts were partially offset by higher cash outflows in the current period for collateral postings related to our commodity derivative margin requirements which were driven by market volatility.
Net Cash Provided by/Used for Investing Activities:
Net cash used for investing activities was $237 million for the six months ended June 27, 2020 compared to $18 million for the six months ended June 29, 2019. This change was primarily driven by proceeds from our Heinz India Transaction received in 2019, partially offset by cash paid for the Primal Acquisition in 2019 and lower capital expenditures in 2020 compared to 2019. We expect 2020 capital expenditures to be approximately $750 million as compared to 2019 capital expenditures of $768 million. However, given the COVID-19 outbreak, our estimates of capital expenditures may be subject to change. See Note 4, Acquisitions and Divestitures, in Item 1, Financial Statements, for additional information on the Heinz India Transaction and the Primal Acquisition.
Net Cash Provided by/Used for Financing Activities:
Net cash used for financing activities was $1.4 billion for the six months ended June 27, 2020 compared to $977 million for the six months ended June 29, 2019. This increase was primarily driven by higher repayments of long-term debt and debt prepayment and extinguishment costs, primarily related to the Tender Offer and Debt Redemptions, which were partially offset by higher proceeds from the issuance of long-term debt. See Note 16, Commitments, Contingencies and Debt, in Item 1, Financial Statements, for additional information on the Tender Offer, Debt Redemptions, debt repayments, and long-term debt issuances.
Cash Held by International Subsidiaries:
Of the $2.8 billion cash and cash equivalents on our condensed consolidated balance sheet at June 27, 2020, $1.2 billion was held by international subsidiaries.
Subsequent to January 1, 2018, we consider the unremitted earnings of certain international subsidiaries that impose local country taxes on dividends to be indefinitely reinvested. For those undistributed earnings considered to be indefinitely reinvested, our intent is to reinvest these funds in our international operations, and our current plans do not demonstrate a need to repatriate the accumulated earnings to fund our U.S. cash requirements. The amount of unrecognized deferred tax liabilities for local country withholding taxes that would be owed related to our 2018, 2019, and 2020 accumulated earnings of certain international subsidiaries is approximately $20 million.
Our undistributed historic earnings in foreign subsidiaries through December 30, 2017 are currently not considered to be indefinitely reinvested. As of June 27, 2020 and December 28, 2019, we had recorded a deferred tax liability of approximately $20 million on approximately $300 million of historic earnings related to local withholding taxes that will be owed when this cash is distributed.
Trade Payables Programs:
In order to manage our cash flow and related liquidity, we work with our suppliers to optimize our terms and conditions, which include the extension of payment terms. Our current payment terms with our suppliers, which we deem to be commercially reasonable, generally range from 0 to 200 days. We also maintain agreements with third party administrators that allow participating suppliers to track payment obligations from us, and, at the sole discretion of the supplier, sell one or more of those payment obligations to participating financial institutions. We have no economic interest in a supplier’s decision to enter into these agreements and no direct financial relationship with the financial institutions. Our obligations to our suppliers, including amounts due and scheduled payment terms, are not impacted. Supplier participation in these agreements is voluntary. We estimate that the amounts outstanding under these programs were $605 million at June 27, 2020 and $370 million at December 28, 2019.
Borrowing Arrangements:
We have historically obtained funding through our U.S. and European commercial paper programs. We had no commercial paper outstanding at June 27, 2020, at December 28, 2019, or during the six months ended June 27, 2020. The maximum amount of commercial paper outstanding during the six months ended June 29, 2019 was $200 million.
We maintain our $4.0 billion Senior Credit Facility, and subject to certain conditions, we may increase the amount of revolving commitments and/or add additional tranches of term loans in a combined aggregate amount of up to $1.0 billion. $4.0 billion was drawn on our Senior Credit Facility during the first quarter of 2020. We repaid the full $4.0 billion revolver draw during the second quarter of 2020. No amounts were drawn on our Senior Credit Facility at June 27, 2020, at December 28, 2019, or during the six months ended June 29, 2019.
The Senior Credit Facility contains representations, warranties, and covenants that are typical for these types of facilities and could upon the occurrence of certain events of default restrict our ability to access our Senior Credit Facility. We were in compliance with all financial covenants during the six months ended June 27, 2020.
Long-Term Debt:
Our long-term debt, including the current portion, was $28.9 billion at June 27, 2020 and $29.2 billion at December 28, 2019. This decrease was primarily related to the $2.1 billion aggregate principal amount of certain senior notes that were validly tendered in May 2020 in the Tender Offer, the $1.3 billion aggregate principal amount of senior notes redeemed in June 2020 in the Debt Redemptions, and the $405 million aggregate principal amount of senior notes that were repaid at maturity in February 2020. These decreases to long-term debt were partially offset by the $3.5 billion issuance of the 2020 Notes in May 2020. We used the proceeds from the issuance of the 2020 Notes to fund the Tender Offer and to pay fees and expenses in connection therewith, and to fund the Debt Redemptions.
As a result of the issuance of the 2020 Notes and the settlement of the Tender Offers and the Debt Redemptions in the second quarter of 2020, we extinguished aggregate principal amounts of senior notes of approximately $539 million that were due to mature in February 2021 and approximately $300 million that were due to mature in June 2021.
We repaid aggregate principal amounts of senior notes due of approximately $200 million on July 2, 2020 and approximately 500 million Canadian dollars on July 6, 2020. We have aggregate principal amount of senior notes of approximately $111 million maturing in February 2021. We expect to fund this long-term debt repayment primarily with cash on hand and cash generated from our operating activities.
Our long-term debt contains customary representations, covenants, and events of default. We were in compliance with all financial covenants during the six months ended June 27, 2020.
See Note 16, Commitments, Contingencies and Debt, in Item 1, Financial Statements, for additional information on our long-term debt activity in 2020 and 2019 and Note 18, Debt, to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 28, 2019 for additional information on our borrowing arrangements and long-term debt.
Supplemental Guarantor Information:
In March 2020, the SEC amended Rule 3-10 of Regulation S-X regarding financial disclosure requirements for certain debt securities, with an effective date of January 4, 2021 and early adoption permitted. We have chosen to voluntarily comply with the amended rules effective for the quarterly period ended June 27, 2020.
The Kraft Heinz Company (as the “Parent Guarantor”) fully and unconditionally guarantees all the senior unsecured registered notes (collectively, the “KHFC Senior Notes”) issued by KHFC, our 100% owned operating subsidiary (the “Guarantee”). See Note 16, Commitments, Contingencies and Debt, in Item 1, Financial Statements, and Note 18, Debt, to our consolidated financial statements for the year ended December 28, 2019 in our Annual Report on Form 10-K for additional descriptions of these guarantees.
The payment of the principal, premium, and interest on the KHFC Senior Notes is fully and unconditionally guaranteed on a senior unsecured basis by the Parent Guarantor, pursuant to the terms and conditions of the applicable indenture. None of the Parent Guarantor’s subsidiaries guarantee the KHFC Senior Notes.
The Guarantee is the Parent Guarantor’s senior unsecured obligation and is: (i) pari passu in right of payment with all of the Parent Guarantor’s existing and future senior indebtedness; (ii) senior in right of payment to all of the Parent Guarantor’s future subordinated indebtedness; (iii) effectively subordinated to all of the Parent Guarantor’s existing and future secured indebtedness to the extent of the value of the assets secured by that indebtedness; and (iv) effectively subordinated to all existing and future indebtedness and other liabilities of the Parent Guarantor’s subsidiaries.
The KHFC Senior Notes are obligations exclusively of KHFC and the Parent Guarantor and not of any of the Parent Guarantor’s other subsidiaries. Substantially all of the Parent Guarantor’s operations are conducted through its subsidiaries. The Parent Guarantor’s other subsidiaries are separate legal entities that have no obligation to pay any amounts due under the KHFC Senior Notes or to make any funds available therefor, whether by dividends, loans, or other payments. Except to the extent the Parent Guarantor is a creditor with recognized claims against its subsidiaries, all claims of creditors (including trade creditors) and holders of preferred stock, if any, of its subsidiaries will have priority with respect to the assets of such subsidiaries over its claims (and therefore the claims of its creditors, including holders of the KHFC Senior Notes). Consequently, the KHFC Senior Notes are structurally subordinated to all liabilities of the Parent Guarantor’s subsidiaries and any subsidiaries that it may in the future acquire or establish. The obligations of the Parent Guarantor will terminate and be of no further force or effect in the following circumstances: (i) (a) KHFC’s exercise of its legal defeasance option or, except in the case of a guarantee of any direct or indirect parent of KHFC, covenant defeasance option in accordance with the applicable indenture, or KHFC’s obligations under the applicable indenture have been discharged in accordance with the terms of the applicable indenture or (b) as specified in a supplemental indenture to the applicable indenture; and (ii) the Parent Guarantor has delivered to the trustee an officer’s certificate and an opinion of counsel, each stating that all conditions precedent provided for in the applicable indenture have been complied with. The Guarantee is limited by its terms to an amount not to exceed the maximum amount that can be guaranteed by the Parent Guarantor without rendering the Guarantee voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally.
The following tables present summarized financial information for the Parent Guarantor and KHFC (as subsidiary issuer of the KHFC Senior Notes) (together, the “Obligor Group”), on a combined basis after the elimination of all intercompany balances and transactions between the Parent Guarantor and subsidiary issuer and investments in any subsidiary that is a non-guarantor.
Summarized Statement of Income
|
|
|
|
|
|
|
For the Six Months Ended
|
|
June 27, 2020
|
Net sales
|
$
|
8,889
|
|
Gross profit(a)
|
3,130
|
|
|
|
|
|
Intercompany service fees and other recharges
|
1,926
|
|
Operating income/(loss)
|
711
|
|
Equity in earnings/(losses) of subsidiaries
|
(1,283)
|
|
Net income/(loss)
|
(1,273)
|
|
Net income/(loss) attributable to common shareholders
|
(1,273)
|
|
(a) For the six months ended June 27, 2020, the Obligor Group recorded $206 million of net sales to the non-guarantor subsidiaries and $21 million of purchases from the non-guarantor subsidiaries.
Summarized Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
June 27, 2020
|
|
December 28, 2019
|
ASSETS
|
|
|
|
Current assets
|
$
|
5,327
|
|
|
$
|
5,261
|
|
Current assets due from affiliates(a)
|
2,559
|
|
|
2,032
|
|
Non-current assets
|
5,438
|
|
|
5,270
|
|
Goodwill
|
11,066
|
|
|
11,066
|
|
Intangible assets, net
|
2,792
|
|
|
2,860
|
|
Non-current assets due from affiliates(b)
|
207
|
|
|
207
|
|
LIABILITIES
|
|
|
|
Current liabilities
|
$
|
4,591
|
|
|
$
|
3,963
|
|
Current liabilities due to affiliates(a)
|
5,198
|
|
|
5,438
|
|
Non-current liabilities
|
29,979
|
|
|
30,164
|
|
Non-current liabilities due to affiliates(b)
|
2,000
|
|
|
2,000
|
|
(a) Represents receivables and short-term lending due from and payables and short-term lending due to non-guarantor subsidiaries.
(b) Represents long-term lending due from and long-term borrowings due to non-guarantor subsidiaries.
Commodity Trends
We purchase and use large quantities of commodities, including dairy products, meat products, coffee beans, nuts, tomatoes, potatoes, soybean and vegetable oils, sugar and other sweeteners, corn products, wheat products, and cocoa products, to manufacture our products. In addition, we purchase and use significant quantities of resins, metals, and cardboard to package our products and natural gas to operate our facilities. We continuously monitor worldwide supply and cost trends of these commodities.
We define our key commodities in the United States and Canada as dairy, meat, coffee, and nuts. During the six months ended June 27, 2020, we experienced cost increases for dairy and meat, while costs for nuts and coffee decreased. We manage commodity cost volatility primarily through pricing and risk management strategies. As a result of these risk management strategies, our commodity costs may not immediately correlate with market price trends.
See our Annual Report on Form 10-K for the year ended December 28, 2019 for additional information on how we manage commodity costs.
Off-Balance Sheet Arrangements and Aggregate Contractual Obligations
In the second quarter of 2020, we completed the Tender Offer and the Debt Redemptions which reduced our long-term debt maturing between 2021 and 2025. We also issued the 2020 Notes which mature between 2027 and 2050. See Note 16, Commitments, Contingencies and Debt, in Item 1, Financial Statements, for additional information. There were no other material changes to our off-balance sheet arrangements or aggregate contractual obligations from those disclosed in our Annual Report on Form 10-K for the year ended December 28, 2019.
Equity and Dividends
We paid common stock dividends of $977 million for the six months ended June 27, 2020 and $976 million for the six months ended June 29, 2019. Additionally, on July 30, 2020, our Board of Directors declared a cash dividend of $0.40 per share of common stock, which is payable on September 25, 2020 to shareholders of record on August 28, 2020.
The declaration of dividends is subject to the discretion of our Board of Directors and depends on various factors, including our net income, financial condition, cash requirements, future prospects, and other factors that our Board of Directors deems relevant to its analysis and decision making.
Critical Accounting Estimates
Our significant accounting policies are described in Note 2, Significant Accounting Policies, in Item 8, Financial Statements and Supplementary Data, of our consolidated financial statements for the year ended December 28, 2019 in our Annual Report on Form 10-K. See Note 2, Significant Accounting Policies, in Item 1, Financial Statements, for updates to our significant accounting policies during the six months ended June 27, 2020.
We prepare our condensed consolidated financial statements in conformity with U.S. GAAP. The preparation of these financial statements requires the use of estimates, judgments, and assumptions. Our critical accounting estimates and assumptions related to goodwill and intangible assets are described below. See Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our Annual Report on Form 10-K for the year ended December 28, 2019 for a discussion of our other critical accounting estimates and assumptions.
Goodwill and Intangible Assets:
As of June 27, 2020, we maintain 15 reporting units, 9 of which comprise our goodwill balance. These 9 reporting units had an aggregate carrying amount of $33.3 billion as of June 27, 2020. Our indefinite-lived intangible asset balance primarily consists of a number of individual brands, which had an aggregate carrying amount of $42.1 billion as of June 27, 2020.
We test our reporting units and brands for impairment annually as of the first day of our second quarter, or more frequently if events or circumstances indicate it is more likely than not that the fair value of a reporting unit or brand is less than its carrying amount. Such events and circumstances could include a sustained decrease in our market capitalization, increased competition or unexpected loss of market share, increased input costs beyond projections (for example due to regulatory or industry changes), disposals of significant brands or components of our business, unexpected business disruptions (for example due to a natural disaster or loss of a customer, supplier, or other significant business relationship), unexpected significant declines in operating results, significant adverse changes in the markets in which we operate, or changes in management strategy. We test reporting units for impairment by comparing the estimated fair value of each reporting unit with its carrying amount. We test brands for impairment by comparing the estimated fair value of each brand with its carrying amount. If the carrying amount of a reporting unit or brand exceeds its estimated fair value, we record an impairment loss based on the difference between fair value and carrying amount, in the case of reporting units not to exceed to the associated carrying amount of goodwill.
Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions, estimates, and market factors. Estimating the fair value of individual reporting units and brands requires us to make assumptions and estimates regarding our future plans, as well as industry, economic, and regulatory conditions. These assumptions and estimates include estimated future annual net cash flows, income tax considerations, discount rates, growth rates, royalty rates, contributory asset charges, and other market factors. If current expectations of future growth rates and margins are not met, if market factors outside of our control, such as discount rates, income tax rates, foreign currency exchange rates, or any factors that could be affected by COVID-19, change, or if management’s expectations or plans otherwise change, including as a result of updates to our global five-year operating plan, then one or more of our reporting units or brands might become impaired in the future. Additionally, any decisions to divest certain non-strategic assets could lead to the impairment of one or more of our reporting units or brands in the future.
During the second quarter of 2020, the COVID-19 pandemic has continued to produce a short-term beneficial financial impact for our consolidated results. Retail sales have increased due to higher than anticipated consumer demand for our products. The foodservice channel, however, has experienced a negative impact from prolonged shelter in place mandates limiting access to away-from-home establishments for a longer period of time than was expected when they were originally put in place. Our U.S. Foodservice and Canada Foodservice reporting units are the most exposed of our reporting units to the long-term impacts to away-from-home establishments. These two reporting units were both impaired during our most recent annual impairment test, reflecting our best estimate at the present time of the future outlook and risks of these businesses, and maintain an aggregate remaining goodwill carrying amount of approximately $3.4 billion. A number of factors could result in further future impairments of our foodservice reporting units, including but not limited to: continued mandates around closures of dining rooms in restaurants, distancing of people within establishments resulting in fewer customers, the total number of restaurant closures, forthcoming changes in consumer preferences or regulatory requirements over product formats (e.g., table top packaging vs. single serve packaging), and consumer trends of dining-in versus dining-out. Given the evolving nature of and uncertainty driven by the COVID-19 pandemic, we will continue to evaluate the impact on our reporting units as adverse changes to these assumptions could result in future impairments.
As we consider the ongoing impact of the COVID-19 pandemic with regard to our indefinite-lived intangible assets, a number of factors could have a future adverse impact on our brands, including changes in consumer and consumption trends in both the short and long term, the extent of continued government mandates to shelter in place, total number of restaurant closures, economic declines, and reductions in consumer discretionary income. We have seen an increase in our retail business in the short-term that has more than offset declines in our foodservice business over the same period. Our brands are generally common across both the retail and foodservice businesses and the fair value of our brands are subject to a similar mix of positive and negative factors. Given the evolving nature and uncertainty driven by COVID-19 pandemic, we will continue to evaluate the impact on our brands.
As detailed in Note 8, Goodwill and Intangible Assets, in Item 1, Financial Statements, we recorded impairment losses related to goodwill in the current year and goodwill and indefinite-lived intangible assets in the prior year. Our reporting units and brands that were impaired in 2019 and 2020 were written down to their respective fair values resulting in zero excess fair value over carrying amount as of the applicable impairment test dates. Accordingly, these and other individual reporting units and brands that have 20% or less excess fair value over carrying amount as of the 2020 annual impairment test date have a heightened risk of future impairments if any assumptions, estimates, or market factors change in the future. Reporting units with 10% or less fair value over carrying amount had an aggregate goodwill carrying amount of $30.4 billion as of the 2020 impairment test date and included: U.S. Grocery, U.S. Refrigerated, U.S. Foodservice, Canada Retail, Canada Foodservice, and Puerto Rico. The Northern Europe reporting unit had a fair value over carrying amount between 10-20% and a goodwill carrying amount of $1.6 billion as of the 2020 annual impairment test date. The Continental Europe reporting unit had a fair value over carrying amount between 20-50% and a goodwill carrying amount of $931 million as of the 2020 annual impairment test date. The Asia reporting unit had a fair value over carrying amount in excess of 50% and a goodwill carrying amount of $317 million as of the 2020 annual impairment test date. Brands with 10% or less fair value over carrying amount had an aggregate carrying amount after impairment of $21.8 billion as of the 2020 annual impairment test date and included: Kraft, Oscar Mayer, Velveeta, Miracle Whip, Planters, Maxwell House, Cool Whip, Classico, ABC, Plasmon, and Wattie’s (each of these brands had a fair value over carrying amount of less than 1% due to impairments recorded in the current and recent prior years). Brands with 10-20% fair value over carrying amount had an aggregate carrying amount of $4.1 billion as of the 2020 annual impairment test date and included Lunchables, A1, Ore-Ida, Stove Top, Jet Puffed, and Quero. The aggregate carrying amount of brands with fair value over carrying amount between 20-50% was $6.9 billion as of the 2020 annual impairment test date. Although the remaining brands, with a carrying value of $9.3 billion, have more than 50% excess fair value over carrying amount as of the 2020 annual impairment test date, these amounts are also associated with the acquisition of H.J. Heinz Company in 2013 and the merger of Kraft Foods Group, Inc. with and into H.J. Heinz Holding Corporation in 2015 and are recorded on the balance sheet at their estimated acquisition date fair values. Therefore, if any assumptions, estimates, or market factors change in the future, these amounts are also susceptible to impairments.
We generally utilize the discounted cash flow method under the income approach to estimate the fair value of our reporting units. Some of the more significant assumptions inherent in estimating the fair values include the estimated future annual net cash flows for each reporting unit (including net sales, cost of products sold, SG&A, depreciation and amortization, working capital, and capital expenditures), income tax rates, long-term growth rates, and a discount rate that appropriately reflects the risks inherent in each future cash flow stream. We selected the assumptions used in the financial forecasts using historical data, supplemented by current and anticipated market conditions, estimated product category growth rates, management’s plans, and guideline companies.
We utilize the excess earnings method under the income approach to estimate the fair value of certain of our largest brands. Some of the more significant assumptions inherent in estimating the fair values include the estimated future annual net cash flows for each brand (including net sales, cost of products sold, and SG&A), contributory asset charges, income tax considerations, long-term growth rates, a discount rate that reflects the level of risk associated with the future earnings attributable to the brand, and management’s intent to invest in the brand indefinitely. We selected the assumptions used in the financial forecasts using historical data, supplemented by current and anticipated market conditions, estimated product category growth rates, management plans, and guideline companies.
We utilize the relief from royalty method under the income approach to estimate the fair value of our remaining brands. Some of the more significant assumptions inherent in estimating the fair values include the estimated future annual net sales for each brand, royalty rates (as a percentage of net sales that would hypothetically be charged by a licensor of the brand to an unrelated licensee), income tax considerations, long-term growth rates, a discount rate that reflects the level of risk associated with the future cost savings attributable to the brand, and management’s intent to invest in the brand indefinitely. We selected the assumptions used in the financial forecasts using historical data, supplemented by current and anticipated market conditions, estimated product category growth rates, management’s plans, and guideline companies.
The discount rates, long-term growth rates, and royalty rates used to estimate the fair values of our reporting units and our brands with 10% or less excess fair value over carrying amount, as well as the goodwill or brand carrying amounts, as of the 2020 annual impairment test date for each reporting unit or brand, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill or Brand Carrying Amount
(in billions)
|
|
Discount Rate
|
|
|
|
Long-Term Growth Rate
|
|
|
|
Royalty Rate
|
|
|
|
|
|
Minimum
|
|
Maximum
|
|
Minimum
|
|
Maximum
|
|
Minimum
|
|
Maximum
|
Reporting units
|
$
|
30.4
|
|
|
6.5
|
%
|
|
7.0
|
%
|
|
0.5
|
%
|
|
1.5
|
%
|
|
|
|
|
Brands
(excess earnings method)
|
16.3
|
|
|
7.0
|
%
|
|
7.8
|
%
|
|
0.8
|
%
|
|
1.5
|
%
|
|
|
|
|
Brands
(relief from royalty method)
|
5.5
|
|
|
7.1
|
%
|
|
9.0
|
%
|
|
0.5
|
%
|
|
4.0
|
%
|
|
5.0
|
%
|
|
20.0
|
%
|
The discount rates, long-term growth rates, and royalty rates used to estimate the fair values of our brands with 10-20% excess fair value over carry amount, as well as the brand carrying amounts, as of the 2020 annual impairment test date for each brand, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill or Brand Carrying Amount
(in billions)
|
|
Discount Rate
|
|
|
|
Long-Term Growth Rate
|
|
|
|
Royalty Rate
|
|
|
|
|
|
Minimum
|
|
Maximum
|
|
Minimum
|
|
Maximum
|
|
Minimum
|
|
Maximum
|
Reporting units
|
$
|
1.6
|
|
|
7.0
|
%
|
|
7.0
|
%
|
|
1.5
|
%
|
|
1.5
|
%
|
|
|
|
|
Brands
(excess earnings method)
|
1.4
|
|
|
7.5
|
%
|
|
7.5
|
%
|
|
1.0
|
%
|
|
1.0
|
%
|
|
|
|
|
Brands
(relief from royalty method)
|
2.7
|
|
|
7.0
|
%
|
|
8.0
|
%
|
|
1.5
|
%
|
|
3.0
|
%
|
|
1.0
|
%
|
|
20.0
|
%
|
Assumptions used in impairment testing are made at a point in time and require significant judgment; therefore, they are subject to change based on the facts and circumstances present at each annual and interim impairment test date. Additionally, these assumptions are generally interdependent and do not change in isolation. However, as it is reasonably possible that changes in assumptions could occur, as a sensitivity measure, we have presented the estimated effects of isolated changes in discount rates, long-term growth rates, and royalty rates on the fair values of our reporting units and brands with 10% or less excess fair value over carrying amount and 10-20% excess fair value over carrying amount. Note that these estimated changes in fair value are not necessarily representative of the actual impairment that would be recorded in the event of a fair value decline.
If we had changed the assumptions used to estimate the fair value of our reporting units and brands with 10% or less excess fair value over carrying amount, as of the 2020 annual impairment test date for each of these reporting units and brands, these isolated changes, which are reasonably possible to occur, would have led to the following increase/(decrease) in the aggregate fair value of these reporting units and brands (in billions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount Rate
|
|
|
|
Long-Term Growth Rate
|
|
|
|
Royalty Rate
|
|
|
|
50-Basis-Point
|
|
|
|
25-Basis-Point
|
|
|
|
100-Basis-Point
|
|
|
|
Increase
|
|
Decrease
|
|
Increase
|
|
Decrease
|
|
Increase
|
|
Decrease
|
Reporting units
|
$
|
(5.8)
|
|
|
$
|
7.0
|
|
|
$
|
3.0
|
|
|
$
|
(2.7)
|
|
|
|
|
|
Brands (excess earnings method)
|
(1.1)
|
|
|
1.3
|
|
|
0.5
|
|
|
(0.5)
|
|
|
|
|
|
Brands (relief from royalty method)
|
(0.3)
|
|
|
0.4
|
|
|
0.2
|
|
|
(0.2)
|
|
|
$
|
0.4
|
|
|
$
|
(0.5)
|
|
If we had changed the assumptions used to estimate the fair value of our reporting units and brands with 10-20% excess fair value over carrying amount, as of the 2020 annual impairment test date for each of these brands, these isolated changes, which are reasonably possible to occur, would have led to the following increase/(decrease) in the aggregate fair value of these brands (in billions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount Rate
|
|
|
|
Long-Term Growth Rate
|
|
|
|
Royalty Rate
|
|
|
|
50-Basis-Point
|
|
|
|
|
|
|
|
100-Basis-Point
|
|
|
|
Increase
|
|
Decrease
|
|
Increase
|
|
Decrease
|
|
Increase
|
|
Decrease
|
Reporting units
|
(0.4)
|
|
|
0.5
|
|
|
0.2
|
|
|
(0.2)
|
|
|
|
|
|
Brands (excess earnings method)
|
(0.1)
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
|
|
|
Brands (relief from royalty method)
|
(0.2)
|
|
|
0.3
|
|
|
0.1
|
|
|
(0.1)
|
|
|
$
|
0.3
|
|
|
$
|
(0.3)
|
|
Definite-lived intangible assets are amortized on a straight-line basis over the estimated periods benefited. We review definite-lived intangible assets for impairment when conditions exist that indicate the carrying amount of the assets may not be recoverable. Such conditions could include significant adverse changes in the business climate, current-period operating or cash flow losses, significant declines in forecasted operations, or a current expectation that an asset group will be disposed of before the end of its useful life. We perform undiscounted operating cash flow analyses to determine if an impairment exists. When testing for impairment of definite-lived intangible assets held for use, we group assets at the lowest level for which cash flows are separately identifiable. If an impairment is determined to exist, the loss is calculated based on estimated fair value. Impairment losses on definite-lived intangible assets to be disposed of, if any, are based on the estimated proceeds to be received, less costs of disposal.
See Note 8, Goodwill and Intangible Assets, in Item 1, Financial Statements, for our impairment testing results.
New Accounting Pronouncements
See Note 3, New Accounting Standards, in Item 1, Financial Statements, for a discussion of new accounting pronouncements.
Contingencies
See Note 16, Commitments, Contingencies and Debt, in Item 1, Financial Statements, for a discussion of our contingencies.
Non-GAAP Financial Measures
The non-GAAP financial measures we provide in this report should be viewed in addition to, and not as an alternative for, results prepared in accordance with U.S. GAAP.
To supplement the condensed consolidated financial statements prepared in accordance with U.S. GAAP, we have presented Organic Net Sales, Adjusted EBITDA, and Adjusted EPS, which are considered non-GAAP financial measures. The non-GAAP financial measures presented may differ from similarly titled non-GAAP financial measures presented by other companies, and other companies may not define these non-GAAP financial measures in the same way. These measures are not substitutes for their comparable U.S. GAAP financial measures, such as net sales, net income/(loss), diluted EPS, or other measures prescribed by U.S. GAAP, and there are limitations to using non-GAAP financial measures.
Management uses these non-GAAP financial measures to assist in comparing our performance on a consistent basis for purposes of business decision making by removing the impact of certain items that management believes do not directly reflect our underlying operations. Management believes that presenting our non-GAAP financial measures (i.e., Organic Net Sales, Adjusted EBITDA, and Adjusted EPS) is useful to investors because it (i) provides investors with meaningful supplemental information regarding financial performance by excluding certain items, (ii) permits investors to view performance using the same tools that management uses to budget, make operating and strategic decisions, and evaluate historical performance, and (iii) otherwise provides supplemental information that may be useful to investors in evaluating our results. We believe that the presentation of these non-GAAP financial measures, when considered together with the corresponding U.S. GAAP financial measures and the reconciliations to those measures, provides investors with additional understanding of the factors and trends affecting our business than could be obtained absent these disclosures.
Organic Net Sales is defined as net sales excluding, when they occur, the impact of currency, acquisitions and divestitures, and a 53rd week of shipments. We calculate the impact of currency on net sales by holding exchange rates constant at the previous year’s exchange rate, with the exception of highly inflationary subsidiaries, for which we calculate the previous year’s results using the current year’s exchange rate. Organic Net Sales is a tool that can assist management and investors in comparing our performance on a consistent basis by removing the impact of certain items that management believes do not directly reflect our underlying operations.
Adjusted EBITDA is defined as net income/(loss) from continuing operations before interest expense, other expense/(income), provision for/(benefit from) income taxes, and depreciation and amortization (excluding integration and restructuring expenses); in addition to these adjustments, we exclude, when they occur, the impacts of integration and restructuring expenses, deal costs, unrealized losses/(gains) on commodity hedges, impairment losses, and equity award compensation expense (excluding integration and restructuring expenses). Adjusted EBITDA is a tool that can assist management and investors in comparing our performance on a consistent basis by removing the impact of certain items that management believes do not directly reflect our underlying operations.
Adjusted EPS is defined as diluted earnings per share excluding, when they occur, the impacts of integration and restructuring expenses, deal costs, unrealized losses/(gains) on commodity hedges, impairment losses, losses/(gains) on the sale of a business, other losses/(gains) related to acquisitions and divestitures (e.g., tax and hedging impacts), nonmonetary currency devaluation (e.g., remeasurement gains and losses), debt prepayment and extinguishment costs, and U.S. Tax Reform discrete income tax expense/(benefit), and including, when they occur, adjustments to reflect preferred stock dividend payments on an accrual basis. We believe Adjusted EPS provides important comparability of underlying operating results, allowing investors and management to assess operating performance on a consistent basis.
The Kraft Heinz Company
Reconciliation of Net Sales to Organic Net Sales
(dollars in millions)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
Currency
|
|
Acquisitions and Divestitures
|
|
Organic Net Sales
|
|
Price
|
|
Volume/Mix
|
Three Months Ended June 27, 2020
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
$
|
4,917
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,917
|
|
|
|
|
|
International
|
1,305
|
|
|
(74)
|
|
|
—
|
|
|
1,379
|
|
|
|
|
|
Canada
|
426
|
|
|
(15)
|
|
|
—
|
|
|
441
|
|
|
|
|
|
Kraft Heinz
|
$
|
6,648
|
|
|
$
|
(89)
|
|
|
$
|
—
|
|
|
$
|
6,737
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 29, 2019
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
$
|
4,533
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,533
|
|
|
|
|
|
International
|
1,313
|
|
|
7
|
|
|
—
|
|
|
1,306
|
|
|
|
|
|
Canada
|
560
|
|
|
—
|
|
|
127
|
|
|
433
|
|
|
|
|
|
Kraft Heinz
|
$
|
6,406
|
|
|
$
|
7
|
|
|
$
|
127
|
|
|
$
|
6,272
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year-over-year growth rates
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
8.5
|
%
|
|
0.0 pp
|
|
0.0 pp
|
|
8.5
|
%
|
|
2.3 pp
|
|
6.2 pp
|
International
|
(0.7)
|
%
|
|
(6.2) pp
|
|
0.0 pp
|
|
5.5
|
%
|
|
2.6 pp
|
|
2.9 pp
|
Canada
|
(23.9)
|
%
|
|
(2.8) pp
|
|
(23.1) pp
|
|
2.0
|
%
|
|
1.3 pp
|
|
0.7 pp
|
Kraft Heinz
|
3.8
|
%
|
|
(1.5) pp
|
|
(2.1) pp
|
|
7.4
|
%
|
|
2.2 pp
|
|
5.2 pp
|
The Kraft Heinz Company
Reconciliation of Net Sales to Organic Net Sales
(dollars in millions)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
Currency
|
|
Acquisitions and Divestitures
|
|
Organic Net Sales
|
|
Price
|
|
Volume/Mix
|
Six Months Ended June 27, 2020
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
$
|
9,412
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
9,412
|
|
|
|
|
|
International
|
2,606
|
|
|
(124)
|
|
|
—
|
|
|
2,730
|
|
|
|
|
|
Canada
|
787
|
|
|
(21)
|
|
|
—
|
|
|
808
|
|
|
|
|
|
Kraft Heinz
|
$
|
12,805
|
|
|
$
|
(145)
|
|
|
$
|
—
|
|
|
$
|
12,950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 29, 2019
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
$
|
8,757
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8,757
|
|
|
|
|
|
International
|
2,598
|
|
|
14
|
|
|
13
|
|
|
2,571
|
|
|
|
|
|
Canada
|
1,010
|
|
|
—
|
|
|
218
|
|
|
792
|
|
|
|
|
|
Kraft Heinz
|
$
|
12,365
|
|
|
$
|
14
|
|
|
$
|
231
|
|
|
$
|
12,120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year-over-year growth rates
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
7.5
|
%
|
|
0.0 pp
|
|
0.0 pp
|
|
7.5
|
%
|
|
2.3 pp
|
|
5.2 pp
|
International
|
0.3
|
%
|
|
(5.3) pp
|
|
(0.6) pp
|
|
6.2
|
%
|
|
2.2 pp
|
|
4.0 pp
|
Canada
|
(22.1)
|
%
|
|
(2.2) pp
|
|
(21.9) pp
|
|
2.0
|
%
|
|
(2.3) pp
|
|
4.3 pp
|
Kraft Heinz
|
3.6
|
%
|
|
(1.3) pp
|
|
(2.0) pp
|
|
6.9
|
%
|
|
2.0 pp
|
|
4.9 pp
|
The Kraft Heinz Company
Reconciliation of Net Income/(Loss) to Adjusted EBITDA
(in millions)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
|
For the Six Months Ended
|
|
|
|
June 27, 2020
|
|
June 29, 2019
|
|
June 27, 2020
|
|
June 29, 2019
|
Net income/(loss)
|
$
|
(1,652)
|
|
|
$
|
448
|
|
|
$
|
(1,271)
|
|
|
$
|
852
|
|
Interest expense
|
442
|
|
|
316
|
|
|
752
|
|
|
637
|
|
Other expense/(income)
|
(78)
|
|
|
(133)
|
|
|
(159)
|
|
|
(513)
|
|
Provision for/(benefit from) income taxes
|
(51)
|
|
|
103
|
|
|
109
|
|
|
320
|
|
Operating income/(loss)
|
(1,339)
|
|
|
734
|
|
|
(569)
|
|
|
1,296
|
|
Depreciation and amortization (excluding integration and restructuring expenses)
|
247
|
|
|
253
|
|
|
490
|
|
|
487
|
|
Integration and restructuring expenses
|
4
|
|
|
14
|
|
|
4
|
|
|
41
|
|
Deal costs
|
—
|
|
|
5
|
|
|
—
|
|
|
13
|
|
Unrealized losses/(gains) on commodity hedges
|
(26)
|
|
|
(10)
|
|
|
117
|
|
|
(39)
|
|
Impairment losses
|
2,873
|
|
|
598
|
|
|
3,099
|
|
|
1,218
|
|
Equity award compensation expense (excluding integration and restructuring expenses)
|
40
|
|
|
6
|
|
|
73
|
|
|
15
|
|
Adjusted EBITDA
|
$
|
1,799
|
|
|
$
|
1,600
|
|
|
$
|
3,214
|
|
|
$
|
3,031
|
|
The Kraft Heinz Company
Reconciliation of Diluted EPS to Adjusted EPS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
|
For the Six Months Ended
|
|
|
|
June 27, 2020
|
|
June 29, 2019
|
|
June 27, 2020
|
|
June 29, 2019
|
Diluted EPS
|
$
|
(1.35)
|
|
|
$
|
0.37
|
|
|
$
|
(1.04)
|
|
|
$
|
0.70
|
|
Integration and restructuring expenses(a)
|
—
|
|
|
0.01
|
|
|
—
|
|
|
0.02
|
|
Deal costs(b)
|
—
|
|
|
—
|
|
|
—
|
|
|
0.01
|
|
Unrealized losses/(gains) on commodity hedges(c)
|
(0.02)
|
|
|
(0.01)
|
|
|
0.07
|
|
|
(0.02)
|
|
Impairment losses(d)
|
2.16
|
|
|
0.41
|
|
|
2.35
|
|
|
0.89
|
|
Losses/(gains) on sale of business(e)
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.16)
|
|
Debt prepayment and extinguishment costs(f)
|
0.07
|
|
|
—
|
|
|
0.07
|
|
|
—
|
|
U.S. Tax Reform discrete income tax expense/(benefit)(g)
|
(0.06)
|
|
|
—
|
|
|
(0.06)
|
|
|
—
|
|
Adjusted EPS
|
$
|
0.80
|
|
|
$
|
0.78
|
|
|
$
|
1.39
|
|
|
$
|
1.44
|
|
(a) Gross expenses included in integration and restructuring expenses were $4 million ($3 million after-tax) for the three and six months ended June 27, 2020 and $14 million ($8 million after-tax) for the three months and $41 million ($29 million after-tax) for the six months ended June 29, 2019 and were recorded in the following income statement line items:
•Cost of products sold included income of $2 million for three months and $1 million the six months ended June 27, 2020 and expenses of $6 million for the three months and $15 million for the six months ended June 29, 2019; and
•SG&A included expenses of $6 million for three months and $5 million for the six months ended June 27, 2020 and $8 million for the three months and $26 million for the six months ended June 29, 2019.
(b) Gross expenses included in deal costs were $5 million ($5 million after-tax) for the three months and $13 million ($11 million after-tax) for the six months ended June 29, 2019 and were recorded in SG&A.
(c) Gross expenses/(income) included in unrealized losses/(gains) on commodity hedges were income of $26 million ($19 million after-tax) for the three months and expenses of $117 million ($89 million after-tax) for the six months ended June 27, 2020 and income of $10 million ($8 million after-tax) for the three months and $39 million ($29 million after-tax) for the six months ended June 29, 2019 and were recorded in cost of products sold.
(d) Gross impairment losses, which were recorded in SG&A, included the following:
•Goodwill impairment losses of $1.8 billion ($1.8 billion after-tax) for the three months and $2.0 billion ($2.0 billion after-tax) for the six months ended June 27, 2020 and $124 million ($123 million after-tax) for the three months and $744 million ($717 million after-tax) for the six months ended June 29, 2019; and
•Intangible asset impairment losses of $1.1 billion ($829 million after-tax) for the three and six months ended June 27, 2020 and $474 million ($374 million after-tax) for the three and six months ended June 29, 2019.
(e) Gross expenses/(income) included in losses/(gains) on sale of business were losses of $2 million ($2 million after-tax) for the six months ended June 27, 2020 and were income of $246 million ($190 million after-tax) for the six months ended June 29, 2019 and were recorded in other expense/(income).
(f) Gross expenses included in debt prepayment and extinguishment costs were $109 million ($82 million after-tax) for the three and six months ended June 27, 2020 and were recorded in interest expense.
(g) U.S. Tax Reform discrete income tax expense/(benefit) was a benefit of $81 million ($81 million after-tax) for the three and six months ended June 27, 2020. The benefit primarily relates to the revaluation of our deferred tax balances due to changes in state tax laws following U.S. Tax Reform and subsequent clarification or interpretation of state tax laws.
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains a number of forward-looking statements. Words such as “anticipate,” “reflect,” “invest,” “see,” “make,” “expect,” “give,” “deliver,” “drive,” “believe,” “improve,” “assess,” “reassess,” “remain,” “evaluate,” “grow,” “will,” “plan,” “intend,” and variations of such words and similar future or conditional expressions are intended to identify forward-looking statements. These forward-looking statements include, but are not limited to, statements regarding our plans, impacts of accounting standards and guidance, growth, legal matters, taxes, costs and cost savings, impairments, and dividends. These forward-looking statements are not guarantees of future performance and are subject to a number of risks and uncertainties, many of which are difficult to predict and beyond our control.
Important factors that may affect our business and operations and that may cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, the impact of COVID-19; operating in a highly competitive industry; our ability to correctly predict, identify, and interpret changes in consumer preferences and demand, to offer new products to meet those changes, and to respond to competitive innovation; changes in the retail landscape or the loss of key retail customers; changes in our relationships with significant customers, suppliers, and other business relationships; our ability to maintain, extend, and expand our reputation and brand image; our ability to leverage our brand value to compete against private label products; our ability to drive revenue growth in our key product categories, increase our market share, or add products that are in faster-growing and more profitable categories; product recalls or product liability claims; unanticipated business disruptions; our ability to identify, complete, or realize the benefits from strategic acquisitions, alliances, divestitures, joint ventures, or other investments; our ability to realize the anticipated benefits from prior or future streamlining actions to reduce fixed costs, simplify or improve processes, and improve our competitiveness; our ability to successfully execute our strategic initiatives; the impacts of our international operations; economic and political conditions in the United States and in various other nations where we do business; changes in our management team or other key personnel and our ability to hire or retain key personnel or a highly-skilled and diverse global workforce; risks associated with information technology and systems, including service interruptions, misappropriation of data, or breaches of security; impacts of natural events in the locations in which we or our customers, suppliers, distributors, or regulators operate; our ownership structure; our indebtedness and ability to pay such indebtedness, as well as our ability to comply with covenants under our debt instruments; our liquidity, capital resources, and capital expenditures, as well as our ability to raise capital; additional impairments of the carrying amounts of goodwill or other indefinite-lived intangible assets; foreign exchange rate fluctuations; volatility in commodity, energy, and other input costs; volatility in the market value of all or a portion of the commodity derivatives we use; increased pension, labor and people-related expenses; compliance with laws, regulations, and related interpretations and related legal claims or other regulatory enforcement actions, including additional risks and uncertainties related to any potential actions resulting from the Securities and Exchange Commission’s ongoing investigation, as well as potential additional subpoenas, litigation, and regulatory proceedings; potential future material weaknesses in our internal control over financial reporting or other deficiencies or our failure to maintain an effective system of internal controls; our failure to prepare and timely file our periodic reports; our ability to protect intellectual property rights; tax law changes or interpretations; the impact of future sales of our common stock in the public markets; our ability to continue to pay a regular dividend and the amounts of any such dividends; volatility of capital markets and other macroeconomic factors; a downgrade in our credit rating; and other factors. For additional information on these and other factors that could affect our forward-looking statements, see Item 1A, Risk Factors, in our Annual Report on Form 10-K for the year ended December 28, 2019 and Part II, Item 1A, Risk Factors, of this Quarterly Report on Form 10-Q. We disclaim and do not undertake any obligation to update or revise any forward-looking statement in this report, except as required by applicable law or regulation.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
There have been no material changes to our market risk during the six months ended June 27, 2020. For additional information, refer to Item 7A, Quantitative and Qualitative Disclosures about Market Risk, in our Annual Report on Form 10-K for the year ended December 28, 2019.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 27, 2020. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures, as of June 27, 2020, were effective and provided reasonable assurance that the information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure.
Remediation of Previously Reported Material Weakness
As previously disclosed in our Annual Report on Form 10-K for the period ended December 28, 2019, we identified a material weakness in the risk assessment component of internal control as we did not appropriately design controls in response to the risk of misstatement due to changes in our business environment. This material weakness resulted in misstatements that were corrected in the restatement included in our Annual Report on Form 10-K for the year ended December 29, 2018.
Due to the actions taken by the Company to implement new or enhance existing controls and procedures, management has concluded that this material weakness has been remediated as of June 27, 2020. The actions we took to remediate this material weakness were as follows:
•Performance Targets—We have identified and implemented several performance-based target enhancements as follows: (i) implemented checkpoints to evaluate significant changes in the environment that could adversely impact the attainability of management goals and targets; (ii) reassessed and adjusted the overall balance of performance measures provided to employees to help drive challenging but attainable targets; (iii) enhanced our training and overall communication specific to the enhanced Management by Objective (“MBO”) process, including, but not limited to, a focus on the process to request relief from previously established MBOs, to help ensure all eligible employees are aware of and understand the overall MBO waiver and relief process; and (iv) reassessed certain employees’ key performance indicators.
•Overall Communications—We have reinforced and will continue to reinforce the importance of adherence to internal controls and company policies and procedures through formal communications, town hall meetings, and other employee trainings and will continue to communicate as appropriate.
We also considered the recent rapidly changing external global environment and evaluated the design of our internal controls to ensure we responded appropriately to the changes in our business environment.
We concluded that the new or enhanced controls and procedures implemented above directly address the risk of misstatement due to changes in our business environment.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the three months ended June 27, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
See Note 16, Commitments, Contingencies and Debt, in Item 1, Financial Statements.
Item 1A. Risk Factors.
The following risk factor is in addition to our risk factors included in Part I, Item 1A, Risk Factors to our Annual Report on Form 10-K for the year ended December 28, 2019, that could affect our business, financial condition, and results of operations. This risk factor should be considered in connection with the forward-looking statements included in this Quarterly Report on Form 10-Q because these factors could cause the actual results and conditions to differ materially from those projected in forward-looking statements.
The outbreak of the novel coronavirus COVID-19 could negatively impact our business and results of operations.
In December 2019, an outbreak of illness caused by a novel coronavirus called COVID-19 (“COVID-19”) was identified in Wuhan, China. On January 31, 2020, the United States declared a public health emergency related to the novel coronavirus and on March 11, 2020, the World Health Organization declared that the spread of COVID-19 qualified as a global pandemic. The continued spread of COVID-19 throughout the United States and the international community has had, and could continue to have, a negative impact on financial markets, on economic conditions, and on portions of our business. COVID-19 could negatively impact our business and results of operations in a number of ways, including, but not limited to, the following:
•a shutdown of one or more of our manufacturing facilities due to illness could significantly disrupt our production capabilities;
•a significant portion of our workforce could become unable to work, including as a result of illness or government restrictions;
•a decrease in demand for away-from-home establishments, resulting from government restrictions and social distancing measures, may adversely affect our foodservice operations;
•an impairment in the carrying value of goodwill or intangible assets or a change in the useful life of definite-lived intangible assets has occurred and may again occur if there are sustained changes in consumer purchasing behaviors, government restrictions, or financial results (e.g. there may be a heightened risk of impairment in our foodservice reporting units if there is a sustained decrease in demand in away-from-home establishments);
•an inability to accurately estimate or forecast the financial impact of this pandemic on our actual or future results;
•a change in our five-year operating plan, which could impact the allocation of investments among reporting units, growth expectations and fair value estimates;
•an increase in working capital needs and/or an increase in trade accounts receivable write-offs as a result of increased financial pressures on our suppliers or customers;
•a change in demand resulting from restrictions on social interactions has and could continue to affect customers and consumers plans to purchase our products;
•a change in demand for or availability of our products as a result of retailers, distributors, or carriers modifying their restocking, fulfillment, or shipping practices;
•a shift in consumer spending as a result of the economic downturn could result in consumers moving to private label or lower margin products;
•a change in trade promotion and marketing activities could occur in response to changes in consumer viewing and shopping habits resulting from the cancellation of major events, travel restrictions, and in-store shopping practices;
•a slowdown or stoppage in our supply chain could result from government restrictions or if our suppliers, vendors, distributors, or third-party manufacturers fail to meet their obligations to us or experience disruptions in their ability to do so;
•a strain on our supply chain could result from increased consumer demand at our retail customers, such as grocery stores, club stores, and value stores;
•an increase in commodity and other input costs could result from market volatility;
•a fluctuation in foreign currency exchange rates or interest rates could result from market uncertainties;
•an increase in the cost or the difficulty to obtain debt or equity financing, or to refinance our debt in the future, could affect our financial condition or our ability to fund operations or future investment opportunities; and
•an increase in regulatory restrictions or continued market volatility could hinder our ability to execute strategic business activities including acquisitions and divestitures.
Additionally, COVID-19 could negatively affect our internal controls over financial reporting as a portion of our workforce is required to work from home and therefore new processes, procedures, and controls could be required to respond to changes in our business environment. Further, should any key employees become ill from COVID-19 and unable to work, the attention of the management team and resources could be diverted.
The potential effects of COVID-19 also could heighten the risks we face related to the risk factors disclosed in Part 1, Item 1A, Risk Factors of our Annual Report on Form 10-K for the year ended December 28, 2019, including, but not limited to changes in our relationships with significant customers, suppliers, and other business relationships; our ability to leverage our brand value to compete against private label products; unanticipated business disruptions; the impacts of our international operations; economic and political conditions in the United States and in various other nations where we do business; changes in our management team or other key personnel and our ability to hire or retain key personnel or a highly-skilled and diverse global workforce; risks associated with information technology and systems, including service interruptions, misappropriation of data, or breaches of security; impacts of natural events in the locations in which we or our customers, suppliers, distributors, or regulators operate; our ownership structure; additional impairments of the carrying amounts of goodwill or other indefinite-lived intangible assets; foreign exchange rate fluctuations; volatility in commodity, energy, and other input costs; volatility in the market value of all or a portion of the commodity derivatives we use; increased pension, labor and people-related expenses; an inability to remediate the material weaknesses in our internal control over financial reporting or additional material weaknesses or other deficiencies in the future or the failure to maintain an effective system of internal controls; volatility of capital markets and other macroeconomic factors. As COVID-19 and its impacts are unprecedented and continuously evolving, the potential impacts to our risk factors that are further described in our Annual Report on Form 10-K for the year ended December 28, 2019, remain uncertain. As a result, COVID-19 may also materially adversely affect our operating and financial results in a manner that is not currently known to us or that we do not currently consider to present significant risks to our operations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Our share repurchase activity in the three months ended June 27, 2020 was:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Number
of Shares Purchased(a)
|
|
Average Price
Paid Per Share
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(b)
|
|
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
|
3/29/2020 - 5/2/2020
|
|
144,520
|
|
|
$
|
29.16
|
|
|
—
|
|
|
$
|
—
|
|
5/3/2020 - 5/30/2020
|
|
1,609,590
|
|
|
30.58
|
|
|
—
|
|
|
—
|
|
5/31/2020 - 6/27/2020
|
|
230,309
|
|
|
32.48
|
|
|
—
|
|
|
—
|
|
Total
|
|
1,984,419
|
|
|
|
|
—
|
|
|
|
(a) Composed of the following types of share repurchase activity, when they occur: (1) shares repurchased in connection with the exercise of stock options (including periodic repurchases using option exercise proceeds), (2) shares withheld for tax liabilities associated with the vesting of RSUs, and (3) shares repurchased related to employee benefit programs (including our annual bonus swap program) or to offset the dilutive effect of equity issuances.
(b) We do not have any publicly-announced share repurchase plans or programs.
Item 6. Exhibits.
|
|
|
|
|
|
|
|
|
Exhibit No.
|
|
Descriptions
|
4.1
|
|
Ninth Supplemental Indenture, dated as of May 18, 2020, governing the 3.875% senior notes due 2027, the 4.250% senior notes due 2031 and the 5.500% senior notes due 2050, by and among Kraft Heinz Foods Company, as issuer, The Kraft Heinz Company, as guarantor, and Deutsche Bank Trust Company Americas, as trustee (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K (File No. 1-37482), filed on May 18, 2020).
|
4.2
|
|
|
4.3
|
|
Registration Rights Agreement, dated as of May 18, 2020, by and among Kraft Heinz Foods Company, a Pennsylvania limited liability company, The Kraft Heinz Company, a Delaware corporation, as guarantor, and J.P. Morgan Securities LLC, as representative of the Initial Purchasers (incorporated by reference to Exhibit 4.3 of the Company’s Current Report on Form 8-K (File No. 1-37482), filed on May 18, 2020).
|
10.1
|
|
|
10.2
|
|
|
10.3
|
|
|
10.4
|
|
|
10.5
|
|
|
10.6
|
|
|
22.1
|
|
|
31.1
|
|
|
31.2
|
|
|
32.1
|
|
|
32.2
|
|
|
101.1
|
|
The following materials from The Kraft Heinz Company’s Quarterly Report on Form 10-Q for the period ended June 27, 2020 formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Condensed Consolidated Statements of Income, (ii) the Condensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated Balance Sheets, (iv) the Condensed Consolidated Statements of Equity, (v) the Condensed Consolidated Statements of Cash Flows, (vi) Notes to Condensed Consolidated Financial Statements, and (vii) document and entity information.
|
104.1
|
|
The cover page from The Kraft Heinz Company’s Quarterly Report on Form 10-Q for the quarter ended June 27, 2020, formatted in inline XBRL.
|
SIGNATURES
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, thereunto duly authorized.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Kraft Heinz Company
|
|
Date:
|
July 31, 2020
|
|
|
|
|
By:
|
/s/ Paulo Basilio
|
|
|
|
Paulo Basilio
|
|
|
|
Global Chief Financial Officer
|
|
|
|
(Duly Authorized Officer and Principal Financial Officer)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Kraft Heinz Company
|
|
Date:
|
July 31, 2020
|
|
|
|
|
By:
|
/s/ Vince Garlati
|
|
|
|
Vince Garlati
|
|
|
|
Vice President, Global Controller
|
|
|
|
(Principal Accounting Officer)
|
Exhibit 10.2
THE KRAFT HEINZ COMPANY
OMNIBUS INCENTIVE PLAN
NON-QUALIFIED STOCK OPTION AWARD AGREEMENT
Unless defined in this award agreement (together with all exhibits and appendices attached thereto, this “Award Agreement”), capitalized terms will have the same meanings ascribed to them in The Kraft Heinz Company 2020 Omnibus Incentive Plan (as may be amended from time to time, the “Plan”).
Subject to your acceptance of this Award Agreement, you are hereby being granted a Non-Qualified Stock Option (the “Option”) as of the Grant Date set forth below (the “Grant Date”). The Option entitles you to exercise up to the aggregate number of shares of the Company’s Common Stock set forth below, at the Exercise Price per share set forth below (the “Exercise Price”) on the following terms and subject to the provisions of the Plan, which is incorporated herein by reference. In the event of a conflict between the provisions of the Plan and this Award Agreement, the provisions of the Plan will govern.
|
|
|
|
|
|
Total Number of Shares Underlying Options:
|
______________ Shares
|
Current Grant Value of Shares Underlying Options:
|
$_____ per Share
|
Exercise Price per Share:
|
$_____ per Share
|
Grant Date:
|
______________
|
Expiration Date:
|
10-year anniversary of Grant Date
|
Vesting Date:
|
3-year anniversary of Grant Date (subject to the terms of the Award Agreement)
|
By agreeing to this Award Agreement, you agree that this Option is granted under and governed by the terms and conditions of this Award Agreement (including, without limitation, the terms and conditions set forth on Exhibit A, the Restrictive Covenants Agreement attached as Exhibit B and the terms and conditions set forth on Appendix I) and the Plan.
EXHIBIT A
TERMS AND CONDITIONS OF THE
OPTION AWARD AGREEMENT
Vesting
This Option will vest and become exercisable on the “Vesting Date” set forth in this Award Agreement subject to your continued Service (including, for the avoidance of doubt, service as a board of director member, consultant or advisor) with the Company or one of its Subsidiaries or Affiliates. Any portion of this Option that becomes exercisable in accordance with the foregoing will remain exercisable until the Expiration Date, unless earlier terminated pursuant to the Plan or this Award Agreement (including, without limitation, the section below entitled “Termination”).
Exercisability
Subject to the section below entitled “Termination,” this Option may be exercised only while you are employed by or providing Service to the Company or any of its Subsidiaries or Affiliates. Prior to the exercise of this Option, you will not have any rights of a shareholder with respect to this Option or the Shares subject thereto.
This Option will be exercisable pursuant to procedures approved by the Committee and communicated to you. No Shares will be delivered pursuant to the exercise of this Option unless (i) you have complied with your obligations under this Award Agreement and the Plan, (ii) the exercise of this Option and the delivery of such Shares complies with applicable law and (iii) full payment (or satisfactory provision therefor) of the aggregate exercise price of the Option and any Tax-Related Items (as defined below) have been received by the Company. Until such time as the Shares are delivered to you, you will have no right to vote or receive dividends or any other rights as a shareholder with respect to such Shares, notwithstanding the exercise of this Option.
Unless otherwise determined by the Company or Committee, this Option may only be exercised on a day on which the NASDAQ National Market (the “Exchange”) is open. Accordingly, if the Expiration Date is a day on which the Exchange is closed, the Expiration Date shall be the immediately preceding day on which the Exchange is open.
Termination
Effect of a Termination of Service on Vesting and Exercisability
Other than as set forth below, upon a termination of your Service for any reason prior to the Vesting Date, you will forfeit this Option without any consideration due to you.
If the Company terminates your Service prior to the Vesting Date Without Cause (as defined below), your Option shall be vested in the number of Shares as if 33.33% of the Shares subject to the Option vested on each annual anniversary of the Grant Date. If your Service terminates by reason of your death or Disability (as defined below) your Option shall be fully vested and exercisable. If your Service terminates by reason of your Retirement (as defined below) after the first anniversary of the Grant Date of the award, your Option shall be fully vested and exercisable. You (or, if applicable, such other person who is entitled to exercise this Option) may exercise such portion of the Option that has vested based on the completed numbers of full years from the Vesting Date as set forth in the table below.
To the extent this Option is or becomes exercisable on the date of termination of your Service, then, if you (or, if applicable, such other person who is entitled to exercise this Option) do not exercise this Option on or prior to the expiration of the Option Exercise Period (as set forth below), this Option will terminate; provided that in no event may you exercise this Option after the Expiration Date.
|
|
|
|
|
|
Type of Termination
|
Option Exercise Period
|
Without Cause
|
One year period beginning on the date of termination
|
Resignation*
|
90 days beginning on the date of termination
|
Retirement
|
One year period beginning on the date of termination
|
Disability
|
One year period beginning on the date of termination
|
Death
|
One year period beginning on the date of termination
|
For Cause
|
90 days beginning on the date of termination
|
*except for a resignation that falls within the definition of “Without Cause.”
Applicable Definitions
For purposes of this Award Agreement, the following terms shall have the following meanings:
“Disability” means (i) a physical or mental condition entitling you to benefits under the long-term disability policy of the Company covering you or (ii) in the absence of any such policy, a physical or mental condition rendering you unable to perform your duties for the Company or any of its Subsidiaries or Affiliates for a period of six (6) consecutive months or longer; provided that if you are a party to an Employment Agreement at the time of termination of your Service and such Employment Agreement contains a different definition of “disability” (or any derivation thereof), the definition in such Employment Agreement will control for purposes of this Award Agreement.
“Retirement” means a termination of Service by you on or after either (a) the later of (i) your 60th birthday and (ii) your completion of five years of Service with the Company, its Subsidiaries or its Affiliates; or (b) the later of (i) your 55th birthday and (ii) your completion of ten years of Service with the Company, its Subsidiaries or its Affiliates.
“Without Cause” means (i) a termination of your Service by the Company or its Subsidiaries or Affiliates other than for Cause (as defined in the Plan) and other than due to your death, Disability or Retirement or (ii) (A) if you are a party to an Employment Agreement, (B) such Employment Agreement is in effect upon the date of your termination of Service and (C) such Employment Agreement defines “Good Reason”, then “Without Cause” shall also include resignation of your Service for “Good Reason” in accordance with such Employment Agreement.
Special Termination Provisions
In the event that there is a conflict between the terms of this Award Agreement regarding the effect of a termination of your Service on this Option and the terms of any Employment Agreement, the terms of this Award Agreement will govern.
If you are terminated Without Cause or due to your resignation and, within the twelve (12) month period subsequent to such termination of your Service, the Company determines that your Service could have been terminated for Cause, subject to anything to the contrary that may be contained in your Employment Agreement at the time of termination of your Service, your Service will, at the election of the Company, be deemed to have been terminated for Cause for purposes of this Award Agreement and the Plan, effective as of the date the events giving rise to Cause occurred and any consequences following from a termination for Cause shall be retroactively applied
(including your obligation to repay gains that would not have been realized had your Service been terminated for Cause).
Effect of a Change in Control
The treatment of the Options upon a Change in Control shall be governed by the Plan. In the event that there is a conflict between the terms of this Award Agreement regarding the effect of a Change in Control on this Option and the terms of any Employment Agreement, the terms of this Award Agreement will govern.
Restrictive Covenants
Your Service will provide you with specialized training and unique knowledge and access to confidential information and key business relationships, which, if used in competition with the Company, its Subsidiaries and/or its Affiliates, would cause harm to such entities. As such, in partial consideration of the Option granted under this Award Agreement, you agree to comply with the Company’s Restrictive Covenants Agreement, attached (and incorporated into this Award Agreement) as Exhibit B. The restrictions and obligations contained in the Restrictive Covenants Agreement are in addition to any restrictions imposed by, or obligations you may have to, the Company, its Subsidiaries or Affiliates under any Employment Agreement or otherwise.
Taxes
Regardless of any action the Company takes with respect to any or all income tax, social security or insurance, payroll tax, fringe benefits tax, payment on account or other tax-related withholding (“Tax-Related Items”), you acknowledge that the ultimate liability for all Tax-Related Items legally due by you is and remains your responsibility and that the Company and/or its Subsidiaries or Affiliates (i) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Option grant, including the grant, vesting or exercise of this Option, the subsequent sale of Shares acquired pursuant to such exercise and the receipt of any dividends and (ii) do not commit to structure the terms of the grant or any aspect of this Option to reduce or eliminate your liability for Tax-Related Items.
Prior to exercise of this Option, you will pay or make adequate arrangements satisfactory to the Committee to satisfy all Tax-Related Items. In this regard, you authorize the withholding of all applicable Tax-Related Items legally payable by you from your wages or other cash compensation paid to you by the Company and/or its Subsidiaries or from proceeds of the sale of Shares. Alternatively, or in addition, if permissible under local law, the Company may in its sole and absolute discretion sell or arrange for the sale of Shares that you acquire to meet the obligation for Tax-Related Items. Finally, you will pay to the Company and/or its Subsidiaries any amount of Tax-Related Items that the Company or its Subsidiaries may be required to withhold as a result of your participation in the Plan or your purchase of Shares that cannot be satisfied by the means previously described. The Company may refuse to honor the exercise and refuse to deliver the Shares if you fail to comply with your obligations in connection with the Tax-Related Items as described in this section.
No Guarantee of Continued Service
You acknowledge and agree that the vesting of this Option on the Vesting Date (or such earlier date as set forth in the section above titled “Termination”) is earned only by performing continuing Service (not through the act of being hired or being granted this Award). You further acknowledge and agree that this Award Agreement, the transactions contemplated hereunder and the Vesting Date shall not be construed as giving you the right to be retained in the employ of, or to continue to provide Service to, the Company, its Subsidiaries or any Affiliate. Further, the Company, its Subsidiaries or the applicable Affiliate may at any time dismiss you, free from any liability, or any claim under the Plan, unless otherwise expressly provided in any other agreement binding you, the Company, its Subsidiaries or the applicable Affiliate. The receipt of this Award is not intended to confer any rights on you except as set forth in this Award Agreement.
Company’s Right of Offset
If you become entitled to a distribution of benefits under this Award, and if at such time you have any outstanding debt, obligation, or other liability representing an amount owing to the Company, its Subsidiaries or any of its Affiliates, then the Company, its Subsidiaries or its Affiliates, upon a determination by the Committee, and to the extent permitted by applicable law and it would not cause a violation of Section 409A of the Code, may offset such amount so owing against the amount of benefits otherwise distributable. Such determination shall be made by the Committee.
Acknowledgment of Nature of Award
In accepting this Option, you understand, acknowledge and agree that:
(a) the Plan is established voluntarily by the Company, it is discretionary in nature and may be modified, amended, suspended or terminated by the Company at any time, as provided in the Plan and this Award Agreement;
(b) the Option award is exceptional, voluntary, occasional and discretionary and does not create any contractual or other right to receive future Option awards, or benefits in lieu of Options even if Options have been awarded in the past;
(c) all decisions with respect to future awards, if any, will be at the sole discretion of the Company;
(d) your participation in the Plan is voluntary;
(e) this Option is an extraordinary item that does not constitute compensation of any kind for services of any kind rendered to the Company or its Subsidiaries or Affiliates;
(f) this Option, any Shares acquired under the Plan, and the income and value of same are not part of normal or expected compensation or salary for purposes of calculating any severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments;
(g) the future value of the underlying Shares is unknown, indeterminable, and cannot be predicted with certainty;
(h) if the underlying Shares do not increase in value, this Option will have no value;
(i) if you receive Shares, the value of such Shares acquired upon exercise may increase or decrease in value, even below the Exercise Price per Share;
(j) unless otherwise agreed with the Company in writing, the Options, any Shares acquired under the Plan, and the income and value of same, are not granted as consideration for, or in connection with, any Service you may provide as a director of a Subsidiary or Affiliate;
(k) no claim or entitlement to compensation or damages shall arise from forfeiture of the Option resulting from termination of your Service (for any reason whatsoever, whether or not later found to be invalid or in breach of employment laws in the jurisdiction where you provide Service or the terms of your Employment Agreement, if any), and in consideration of the grant of the Option to which you are otherwise not entitled, you irrevocably agree never to institute any claim against the Company, any of its Subsidiaries or Affiliates, waive your ability, if any, to bring any such claim, and release the Company, and its Subsidiaries and Affiliates from any such claim; if, notwithstanding the foregoing, any such claim is allowed by a court of competent jurisdiction, then, by participating in the Plan, you shall be deemed irrevocably to have agreed not to pursue such claim and agree to execute any and all documents necessary to request dismissal or withdrawal of such claim; and
(l) this Option is subject to the terms of the Plan (including, without limitation, certain provisions regarding Adjustments, Repurchases and Transfers).
Securities Laws
By accepting this Option, you acknowledge that U.S. federal, state or foreign securities laws and/or the Company’s policies regarding trading in its securities may limit or restrict your right to buy or sell Shares, including, without limitation, sales of Shares acquired in connection with this Option. You agree to comply with such securities law requirements and Company policies, as such laws and policies are amended from time to time.
Data Privacy
a.Data Collection and Usage. The Company collects, processes and uses personal data about you, including but not limited to, your name, home address and telephone number, email address, date of birth, social insurance number, employee identification number, hire date, termination date, gross earnings, tax rate, account identification number for the independent stock plan service provider account, any shares of stock or directorships held in the Company, details of all Options or any other entitlement to shares or equivalent benefits awarded, canceled, exercised, vested, unvested or outstanding in your favor, which the Company receives from you or your employer (“Data”) for the purposes of implementing, administering and managing the Plan. The legal basis, where required, for the processing of Data is the legitimate interests of the Company in administering the Plan, where our interests are not overridden by your data protection rights.
b.Stock Plan Administration Service Providers. The Company may transfer Data to one or more independent stock plan service providers, which may assist the Company with the implementation, administration and management of the Plan. Such service provider(s) may open an account for you or ask you to receive and trade shares of common stock. You may be asked to acknowledge, or agree to, separate terms and data processing practices with the service provider(s) with such agreement being a condition of participation in the Plan. Please review these terms and data processing practices carefully. If you do not agree to the independent stock plan service provider’s terms and/or data processing practices, you will not be able to participate in the Plan.
c.International Data Transfers. Please note that Data processed in connection with the Plan will be transferred from your country to the United States, where the Company and its service providers are based. Your country or jurisdiction may have different data privacy laws and protections than the United States. The Company will ensure that appropriate measures are in place for compliance with applicable data protection laws in relation to transfer of Data to the United States.
d.Data Retention. The Company will use your personal data only as long as necessary to implement, administer and manage your participation in the Plan and as required to comply with legal or regulatory obligations, including under tax and securities laws. When the Company no longer needs your personal data for any of the above purposes, the Company will remove it from its systems.
e.Data Subject Rights. You understand that you may have a number of rights under data privacy laws in your jurisdiction. Depending on where you are based, such rights may include the right to (i) request access or copies of personal data processed by the Company, (ii) rectification of incorrect data, (iii) deletion of personal data, (iv) restrictions on processing of personal data, (v) portability of personal data, (vi) lodge complaints with competent data protection authorities in your jurisdiction, and/or (vii) receive a list with the names and addresses of any potential recipients of your personal data. To receive clarification regarding these rights or to exercise these rights, you can contact the Company’s Data Privacy Team at gdpr@kraftheinz.com.
Limits on Transferability; Beneficiaries
This Option shall not be pledged, hypothecated or otherwise encumbered or subject to any lien, obligation or liability to any party, or Transferred, otherwise than by your will or the laws of descent and distribution or to a Beneficiary upon your death, and this Option shall be exercised during your lifetime only by you or your guardian or legal representative, except that this Option may be Transferred to one or more Beneficiaries or other Transferees during your lifetime with the consent of the Committee, and may be exercised by such Transferees in accordance with the terms of this Award Agreement. A Beneficiary, Transferee, or other person claiming any rights under this Award Agreement shall be subject to all terms and conditions of the Plan and this Award Agreement, except as otherwise determined by the Committee, and to any additional terms and conditions deemed necessary or appropriate by the Committee.
No Transfer to any executor or administrator of your estate or to any Beneficiary by will or the laws of descent and distribution of any rights in respect of this Option shall be effective to bind the Company unless the Committee shall have been furnished with (i) written notice thereof and with a copy of the will and/or such evidence as the Committee may deem necessary to establish the validity of the Transfer and (ii) the written agreement of the Transferee to comply with all the terms and conditions applicable to this Option and any Shares purchased upon exercise of this Option that are or would have been applicable to you.
Repayment/Forfeiture
As an additional condition of receiving the Options and without prejudice to the terms of the Company's Restrictive Covenants Agreement (attached as Exhibit B), you agree that the Options and any proceeds or other benefits you may receive hereunder shall be subject to forfeiture and/or repayment to the Company to the extent required (i) under the terms of any policy adopted by the Company as may be amended from time to time (and such requirements shall be deemed incorporated into this Award Agreement without your consent) or (ii) to comply with any requirements imposed under applicable laws and/or the rules and regulations of the securities exchange or inter-dealer quotation system on which the Shares are listed or quoted, including, without limitation, pursuant to Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Further, if you receive any amount in excess of what you should have received under the terms of the Options for any reason (including without limitation by reason of a financial restatement, mistake in calculations or administrative error), all as determined by the Committee, then you shall be required to promptly repay any such excess amount to the Company. Nothing in or about this Award Agreement prohibits you from: (i) filing and, as provided for under Section 21F of the Act, maintaining the confidentiality of a claim with the Commission, (ii) providing the Commission with information that would otherwise violate the non-disclosure restrictions in this Award Agreement, to the extent permitted by Section 21F of the Act; (iii) cooperating, participating or assisting in a Commission investigation or proceeding without notifying the Company; or (iv) receiving a monetary award as set forth in Section 21F of the Act. Furthermore, you are advised that you shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of any Confidential Information (as defined in Exhibit B) that constitutes a trade secret to which the Defend Trade Secrets Act (18 U.S.C. Section 1833(b)) applies that is made (i) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney, in each case, solely for the purpose of reporting or investigating a suspected violation of law; or (ii) in a complaint or other document filed in a lawsuit or proceeding, if such filings are made under seal.
Section 409A
It is intended that the Option awarded pursuant to this Award Agreement be exempt from Section 409A of the Code (“Section 409A”) because it is believed that (i) the Exercise Price per Share may never be less than the Fair Market Value of a Share on the Grant Date and the number of Shares subject to the Option is fixed on the original Grant Date, (ii) the Transfer or exercise of the Option is subject to taxation under Section 83 of the Code and Treasury Regulation 1.83-7, and (iii) the Option does not include any feature for the deferral of compensation other than the deferral of recognition of income until the exercise of the Option. The provisions of this Award Agreement shall be interpreted in a manner consistent with this intention. In the event that the Company believes,
at any time, that any benefit or right under this Award Agreement is subject to Section 409A, then the Committee may (acting alone and without any required consent by you) amend this Award Agreement in such manner as the Committee deems necessary or appropriate to be exempt from or otherwise comply with the requirements of Section 409A (including without limitation, amending the Award Agreement to increase the Exercise Price per Share to such amount as may be required in order for the Option to be exempt from Section 409A).
Notwithstanding the foregoing, the Company, its Subsidiaries and Affiliates do not make any representation to you that the Option awarded pursuant to this Award Agreement shall be exempt from or satisfy the requirements of Section 409A, and the Company, its Subsidiaries and Affiliates shall have no liability or other obligation to indemnify or hold harmless you or any Beneficiary, Transferee or other party for any tax, additional tax, interest or penalties that you or any Beneficiary, Transferee or other party may incur in the event that any provision of this Award Agreement, or any amendment or modification thereof or any other action taken with respect thereto, is deemed to violate any of the requirements of Section 409A.
Entire Agreement; Modification
The Plan, this Award Agreement and, to the extent applicable, your Employment Agreement or any separation agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings, representations and agreements (whether oral or written) of the Company, its Subsidiaries and/or Affiliates and you with respect to the subject matter hereof. This Award Agreement may not be modified in a manner that adversely affects your rights heretofore granted under the Plan, except with your consent or to comply with applicable law or to the extent permitted under other provisions of the Plan.
Governing Law; Jurisdiction; Waiver of Jury Trial
This Award Agreement (together with all exhibits and appendices attached thereto) is governed by the laws of the State of Delaware, without regard to its principles of conflict of laws, and any disputes shall be settled in accordance with the Plan.
To the extent not prohibited by applicable law, each of the parties hereto waives any right it may have to trial by jury in respect of any litigation based on, arising out of, under or in connection with this Award Agreement (together with all exhibits and appendices attached thereto) or the Plan.
Electronic Signatures and Delivery and Acceptance
The Company may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan, including this Award Agreement, by electronic means or request your consent to participate in the Plan by electronic means. You hereby consent to receive such documents by electronic delivery and agree to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company. The Award Agreement if delivered by electronic means with electronic signatures shall be treated in all manner and respects as an original executed document and shall be considered to have the same binding legal effect as if it were the original signed versions thereof delivered in person.
Agreement Severable
This Award Agreement shall be enforceable to the fullest extent allowed by law. In the event that any provision of this Award Agreement is determined to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, then that provision shall be reduced, modified or otherwise conformed to the relevant law, judgment or determination to the degree necessary to render it valid and enforceable without affecting the validity, legality or enforceability of any other provision of this Award Agreement or the validity, legality or enforceability of such provision in any other jurisdiction. Any provision of this Award Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be deemed severable from the remainder of this Award Agreement, and the remaining provisions contained in this Award Agreement shall be construed to preserve to the maximum permissible extent the intent and purposes of this Award Agreement.
Interpretation
The Committee shall have the right to resolve all questions that may arise in connection with the Award or this Award Agreement, including whether you are actively employed. Any interpretation, determination or other action made or taken by the Committee regarding the Plan or this Award Agreement shall be final, binding and conclusive. This Award Agreement shall be binding upon and inure to the benefit of any successor or successors of the Company and any person or persons who shall acquire any rights hereunder in accordance with this Award Agreement or the Plan.
Language
You acknowledge that you are sufficiently proficient in the English language, or have consulted with an advisor who is proficient in English, so as to allow you to understand the terms and conditions of this Award Agreement. If you have received this Award Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
Acknowledgments
By signing this Award Agreement, you acknowledge receipt of a copy of the Plan and represent that you are familiar with the terms and conditions of the Plan, and hereby accept this Option subject to all provisions in this Award Agreement and in the Plan. You hereby agree to accept as final, conclusive and binding all decisions or interpretations of the Committee upon any questions arising under the Plan or this Award Agreement.
Appendix I
Notwithstanding any provision in this Award Agreement, if you work or reside outside the U.S., this Option grant shall be subject to the general non-U.S. terms and conditions and the special terms and conditions for your country set forth in Appendix I. Moreover, if you relocate from the U.S. to one of the countries included in Appendix I or you move between countries included in Appendix I, the general non-U.S. terms and conditions and the special terms and conditions for such country will apply to you, to the extent the Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons. The Appendix I constitutes part of this Award Agreement.
EXHIBIT B
RESTRICTIVE COVENANTS AGREEMENT
I understand that I am or will be an employee to or other service-provider of The Kraft Heinz Company and/or its Subsidiaries and/or its Affiliates (collectively the “Company”), and will learn and have access to the Company’s confidential, trade secret and proprietary information and key business relationships. I understand that the products and services that the Company develops, provides and markets are unique. Further, I know that my promises in this Restrictive Covenants Agreement (the “Agreement”) are an important way for the Company to protect its proprietary interests and that The Kraft Heinz Company would not have granted me a stock option or other equity grant unless I made such promises.
In addition to other good and valuable consideration, I am expressly being given a stock option or other equity grant in exchange for my agreeing to the terms of this Agreement. In consideration of the foregoing, I (the “Executive”) agree as follows:
1.NON-DISCLOSURE OF CONFIDENTIAL INFORMATION. During the course of Executive’s Service, Executive will have access to Confidential Information. For purposes of this Agreement, “Confidential Information” means all data, information, ideas, concepts, discoveries, trade secrets, inventions (whether or not patentable or reduced to practice), innovations, improvements, know-how, developments, techniques, methods, processes, treatments, drawings, sketches, specifications, designs, plans, patterns, models, plans and strategies, and all other confidential or proprietary information or trade secrets in any form or medium (whether merely remembered or embodied in a tangible or intangible form or medium) whether now or hereafter existing, relating to or arising from the past, current or potential business, activities and/or operations of the Company, including, without limitation, any such information relating to or concerning finances, sales, marketing, advertising, transition, promotions, pricing, personnel, customers, suppliers, vendors, raw partners and/or competitors of the Company. Executive agrees that Executive shall not, directly or indirectly, use, make available, sell, disclose or otherwise communicate to any person, other than in the course of Executive’s assigned duties and for the benefit of the Company, either during the period of Executive’s Service or at any time thereafter, any Confidential Information or other confidential or proprietary information received from third parties subject to a duty on the Company’s part to maintain the confidentiality of such information, and to use such information only for certain limited purposes, in each case, which shall have been obtained by Executive during Executive’s Service. The foregoing shall not apply to information that (i) was known to the public prior to its disclosure to Executive; (ii) becomes generally known to the public subsequent to disclosure to Executive through no wrongful act of Executive or any representative of Executive; or (iii) Executive is required to disclose by applicable law, regulation or legal process (provided that, to the extent permitted by law, Executive provides the Company with prior notice of the contemplated disclosure and cooperates with the Company at its expense in seeking a protective order or other appropriate protection of such information).
Pursuant to the U.S. Defend Trade Secrets Act of 2016, Executive shall not be held criminally, or civilly, liable under any Federal or State Trade secret law for the disclosure of a trade secret that is made in confidence either directly or indirectly to a Federal, State, or local government official, or an attorney, for the sole purpose of reporting, or investigating, a violation of law. Moreover, Executive may disclose trade secrets in a complaint, or other document, filed in a lawsuit, or other proceeding, if such filing is made under seal. Finally, if Executive files a lawsuit alleging retaliation by the Company for reporting a suspected violation of the law, Executive may disclose the trade secret to Executive’s attorney and use the trade secret in the court proceeding, if Executive files any document containing the trade secret under seal and does not disclose the trade secret, except pursuant to court order.
No Company policies or practices, including this Non-Disclosure of Confidential Information provision, is intended to or shall limit, prevent, impede or interfere in any way with Executive’s right, without prior notice to the Company, to provide information to the government, participate in investigations, testify in
proceedings regarding the Company’s past or future conduct, or engage in any activities protected under whistle blower statutes.
2.NON-COMPETITION. Executive acknowledges that (i) Executive performs services of a unique nature for the Company that are irreplaceable, and that Executive’s performance of such services to a competing business will result in irreparable harm to the Company, (ii) Executive has had and will continue to have access to Confidential Information which, if disclosed, would unfairly and inappropriately assist in competition against the Company, (iii) in the course of Executive’s employment by or service to a competitor, Executive would inevitably use or disclose such Confidential Information, (iv) the Company has substantial relationships with its customers and Executive has had and will continue to have access to these customers, (v) Executive has received and will receive specialized training from the Company, and (vi) Executive has generated and will continue to generate goodwill for the Company in the course of Executive’s Service. Accordingly, during Executive’s Service and for twelve (12) months following a termination of Executive’s Service for any reason (the “Restricted Period”), Executive will not engage in any business activities, directly or indirectly (whether as an employee, consultant, officer, director, partner, joint venturer, manager, member, principal, agent, or independent contractor, individually, in concert with others, or in any other manner) within the same line or lines of business for which the Executive performed services for the Company and in a capacity that is similar to the capacity in which the Executive was employed by the Company with any person or entity that competes with the Company in the consumer packaged food and beverage industry (“Competitive Business”) anywhere within the same geographic territory(ies) for which the Executive performed services for the Company (the “Restricted Territory”). Notwithstanding the foregoing, nothing herein shall prohibit Executive from being a passive owner of not more than three percent (3%) of the equity securities of a publicly traded corporation engaged in a business that is in competition with the Company, so long as Executive has no active participation in the business of such corporation.
3.NON-SOLICITATION. During the Restricted Period, Executive agrees that Executive shall not, except in the furtherance of Executive’s duties to the Company, directly or indirectly, individually or on behalf of any other person, firm, corporation or other entity, solicit, aid, induce, assist in the solicitation of, or accept any business (other than on behalf of the Company) from, any customer or potential customer of the Company to purchase goods or services then sold by the Company from another person, firm, corporation or other entity or, directly or indirectly, in any way request, suggest or advise any such customer to withdraw or cancel any of their business or refuse to continue to do business with the Company. This restriction shall apply to customers or potential customers who, during the two (2) years immediately preceding the Executive’s termination, had been assigned to the Executive by the Company, or with which the Executive had contact on behalf of the Company while an Executive of the Company, or about which the Executive had access to confidential information by virtue of Executive’s employment with the Company.
4.NON-INTERFERENCE. During the Restricted Period, Executive agrees that Executive shall not, except in the furtherance of Executive’s duties to the Company, directly or indirectly, individually or on behalf of any other person, firm, corporation or other entity, (A) solicit, aid or induce any employee, representative or agent of the Company to leave such employment or retention or to accept employment with or render services to or with any other person, firm, corporation or other entity unaffiliated with the Company or hire or retain any such employee, representative or agent, or take any action to materially assist or aid any other person, firm, corporation or other entity in identifying, hiring or soliciting any such employee, representative or agent, or (B) interfere, or aid or induce any other person or entity in interfering, with the relationship between the Company and its vendors, suppliers or customers. As used herein, the term “solicit, aid or induce” includes, but is not limited to, (i) initiating communications with a Company employee relating to possible employment, (ii) offering bonuses or other compensation to encourage a Company employee to terminate his or her employment with the Company and accept employment with any entity, (iii) recommending a Company employee to any entity, and (iv) aiding an entity in recruitment
of a Company employee. An employee, representative or agent shall be deemed covered by this Section 4 while so employed or retained and for a period of six (6) months thereafter.
5.NON-DISPARAGEMENT. Executive agrees not to make negative comments or otherwise disparage the Company or its officers, directors, employees, shareholders, agents or products or services. The foregoing shall not be violated by truthful statements made in (a) response to legal process, required governmental testimony or filings, or administrative or arbitral proceedings (including, without limitation, depositions in connection with such proceedings) or (b) the good faith performance of Executive’s duties to the Company.
6.INVENTIONS.
a.Executive acknowledges and agrees that all ideas, methods, inventions, discoveries, improvements, work products, developments, software, know-how, processes, techniques, methods, works of authorship and other work product (“Inventions”), whether patentable or unpatentable, (A) that are reduced to practice, created, invented, designed, developed, contributed to, or improved with the use of any Company resources and/or within the scope of Executive’s work with the Company or that relate to the business, operations or actual or demonstrably anticipated research or development of the Company, and that are made or conceived by Executive, solely or jointly with others, during Executive’s Service, or (B) suggested by any work that Executive performs in connection with the Company, either while performing Executive’s duties with the Company or on Executive’s own time, but only insofar as the Inventions are related to Executive’s work as an employee or other service provider to the Company, shall belong exclusively to the Company (or its designee), whether or not patent or other applications for intellectual property protection are filed thereon. Executive will keep full and complete written records (the “Records”), in the manner prescribed by the Company, of all Inventions, and will promptly disclose all Inventions completely and in writing to the Company. The Records shall be the sole and exclusive property of the Company, and Executive will surrender them upon the termination of Service, or upon the Company’s request. Executive irrevocably conveys, transfers and assigns to the Company the Inventions and all patents or other intellectual property rights that may issue thereon in any and all countries, whether during or subsequent to Executive’s Service, together with the right to file, in Executive’s name or in the name of the Company (or its designee), applications for patents and equivalent rights (the “Applications”). Executive will, at any time during and subsequent to Executive’s Service, make such applications, sign such papers, take all rightful oaths, and perform all other acts as may be requested from time to time by the Company to perfect, record, enforce, protect, patent or register the Company’s rights in the Inventions, all without additional compensation to Executive from the Company. Executive will also execute assignments to the Company (or its designee) of the Applications, and give the Company and its attorneys all reasonable assistance (including the giving of testimony) to obtain the Inventions for the Company’s benefit, all without additional compensation to Executive from the Company, but entirely at the Company’s expense.
b.In addition, the Inventions will be deemed Work for Hire, as such term is defined under the copyright laws of the United States, on behalf of the Company and Executive agrees that the Company will be the sole owner of the Inventions, and all underlying rights therein, in all media now known or hereinafter devised, throughout the universe and in perpetuity without any further obligations to Executive. If the Inventions, or any portion thereof, are deemed not to be Work for Hire, or the rights in such Inventions do not otherwise automatically vest in the Company, Executive hereby irrevocably conveys, transfers and assigns to the Company, all rights, in all media now known or hereinafter devised, throughout the universe and in perpetuity, in and to the Inventions, including, without limitation, all of Executive’s right, title and interest in the copyrights (and all renewals, revivals and extensions thereof) to the Inventions, including, without limitation, all rights of any kind or any nature now or hereafter recognized, including, without limitation, the unrestricted right to make modifications, adaptations and revisions to the Inventions, to exploit and allow others to exploit the Inventions and all rights to sue at law or in equity for any infringement,
or other unauthorized use or conduct in derogation of the Inventions, known or unknown, prior to the date hereof, including, without limitation, the right to receive all proceeds and damages therefrom. In addition, Executive hereby waives any so-called “moral rights” with respect to the Inventions. To the extent that Executive has any rights in the results and proceeds of Executive’s service to the Company that cannot be assigned in the manner described herein, Executive agrees to unconditionally waive the enforcement of such rights. Executive hereby waives any and all currently existing and future monetary rights in and to the Inventions and all patents and other registrations for intellectual property that may issue thereon, including, without limitation, any rights that would otherwise accrue to Executive’s benefit by virtue of Executive being an employee of or other service provider to the Company.
7.RETURN OF COMPANY PROPERTY. On the date of Executive’s termination of Service with the Company for any reason (or at any time prior thereto at the Company’s request), Executive shall return all property belonging to the Company (including, but not limited to, any Company-provided laptops, computers, cell phones, wireless electronic mail devices or other equipment, or documents and property belonging to the Company).
8.REASONABLENESS OF COVENANTS. In signing this Agreement, including by electronic means, Executive gives the Company assurance that Executive has carefully read and considered all of the terms and conditions of this Agreement, including the restraints imposed by it. Executive agrees that these restraints are necessary for the reasonable and proper protection of the Company and its Confidential Information and that each and every one of the restraints is reasonable in respect to subject matter, length of time and geographic area, and that these restraints, individually or in the aggregate, will not prevent Executive from obtaining other suitable employment during the period in which Executive is bound by the restraints. Executive acknowledges that each of these covenants has a unique, very substantial and immeasurable value to the Company and that Executive has sufficient assets and skills to provide a livelihood while such covenants remain in force. Executive further covenants that Executive will not challenge the reasonableness or enforceability of any of the covenants set forth in this Agreement, and that Executive will reimburse the Company for all costs (including reasonable attorneys’ fees) incurred in connection with any action to enforce any of the provisions of this Agreement if either the Company prevails on any material issue involved in such dispute or if Executive challenges the reasonableness or enforceability of any of the provisions of this Agreement. It is also agreed that the “Company” as used in this Agreement refers to each of the Company’s Subsidiaries and Affiliates and that each of the Company’s s Subsidiaries and Affiliates will have the right to enforce all of Executive’s obligations to that Subsidiary or Affiliate under this Agreement, as applicable, subject to any limitation or restriction on such rights of the Subsidiary or Affiliate under applicable law.
9.REFORMATION. If it is determined by a court of competent jurisdiction in any state or country that any restriction in this Agreement is excessive in duration or scope or is unreasonable or unenforceable under applicable law, it is the intention of the parties that such restriction may be modified or amended by the court to render it enforceable to the maximum extent permitted by the laws of that state or country.
10.REMEDIES. Executive acknowledges and agrees that the Company’s remedies at law for a breach or threatened breach of any of the provisions of Agreement would be inadequate and, in recognition of this fact, Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond or other security, shall be entitled to obtain equitable relief in the form of specific performance, a temporary restraining order, a temporary or permanent injunction or any other equitable remedy which may then be available, without the necessity of showing actual monetary damages, in addition to any other equitable relief (including without limitation an accounting and/or disgorgement) and/or any other damages as a matter of law.
11.REPURCHASE. Executive acknowledges and agrees that a breach of this Agreement would constitute a “Covenant Breach” as such term is used in the Plan and therefore, in the event of a Covenant Breach,
Executive’s Option and the Award Stock issued therefor (as such terms are defined in the Plan) shall be subject to repurchase by The Kraft Heinz Company in accordance with the terms of the Plan.
12.TOLLING. In the event of any violation of the provisions of this Agreement, Executive acknowledges and agrees that the post-termination restrictions contained in this Agreement shall be extended by a period of time equal to the period of such violation, it being the intention of the parties hereto that the running of the applicable post-termination restriction period shall be tolled during any period of such violation.
13.SURVIVAL OF PROVISIONS. The obligations contained in this Agreement hereof shall survive the termination or expiration of the Executive’s Service with the Company and shall be fully enforceable thereafter.
14.VENUE, PERSONAL JURISDICTION, AND COVENANT NOT TO SUE. Executive expressly agrees to submit to the exclusive jurisdiction and exclusive venue of courts located in the State of Delaware in connection with any litigation which may be brought with respect to a dispute between the Company and Executive in relation to this Restrictive Covenants Agreement, regardless of where Executive resides or where Executive performs services for the Company. Executive hereby irrevocably waives Executive’s rights, if any, to have any disputes between the Company and Executive related to this Restrictive Covenants Agreement decided in any jurisdiction or venue other than a court in the State of Delaware. Executive hereby waives, to the fullest extent permitted by applicable law, any objection which Executive now or hereafter may have to personal jurisdiction or to the laying of venue of any such suit, action or proceeding, and Executive agrees not to plead or claim the same. Executive further irrevocably covenants not to sue the Company related to this Restrictive Covenants Agreement in any jurisdiction or venue other than a court in the State of Delaware. All matters relating to the interpretation, construction, application, validity, and enforcement of this Agreement, and any disputes or controversies arising hereunder, will be governed by the laws of the State of Delaware without giving effect to any choice or conflict of law provision or rule, whether of the State of Delaware or any other jurisdiction, that would cause the application of laws of any jurisdiction other than the State of Delaware.
APPENDIX I
ADDITIONAL TERMS AND CONDITIONS OF
THE KRAFT HEINZ COMPANY 2020 OMNIBUS INCENTIVE PLAN
NON-QUALIFIED STOCK OPTION AWARD AGREEMENT FOR NON-U.S. PARTICIPANTS
TERMS AND CONDITIONS
This Appendix I includes additional terms and conditions that govern this Option granted to you under the Plan if you work or reside outside the U.S. and/or in one of the countries listed below. These terms and conditions are in addition to, or if so indicated, in place of the terms and conditions set forth in the Award Agreement. Certain capitalized terms used but not defined in this Appendix I have the meanings set forth in the Plan and/or the Award Agreement.
If you are a citizen or resident of a country other than the one in which you are currently working, transfer employment and/or residency to another country after this Option is granted to you, or are considered a resident of another country for local law purposes, the terms and conditions contained herein may not be applicable to you, and the Company shall, in its discretion, determine to what extent the terms and conditions contained herein shall apply to you.
NOTIFICATIONS
This Appendix I also includes information regarding exchange controls and certain other issues of which you should be aware with respect to participation in the Plan. The information is based on the securities, exchange control, and other laws in effect in the respective countries as of May 2020. Such laws are often complex and change frequently. As a result, the Company strongly recommends that you not rely on the information in this Appendix I as the only source of information relating to the consequences of your participation in the Plan because the information may be out of date at the time you vest in or exercise this Option or sell Shares acquired under the Plan.
In addition, the information contained herein is general in nature and may not apply to your particular situation, and the Company is not in a position to assure you of a particular result. Accordingly, you should seek appropriate professional advice as to how the relevant laws in your country may apply to your situation.
Finally, if you are a citizen or resident of a country other than the one in which you are currently working, transfer employment and/or residency after this Option is granted or are considered a resident of another country for local law purposes, the notifications contained herein may not be applicable to you in the same manner.
GENERAL NON-U.S. TERMS AND CONDITIONS
TERMS AND CONDITIONS
The following terms and conditions apply to you if you are located outside of the U.S.
Entire Agreement.
The following provisions supplement the entire Award Agreement, generally:
If you are located outside the U.S., in no event will any aspect of this Option be determined in accordance with your Employment Agreement (or other Service contract). The terms and conditions of this Option will be solely determined in accordance with the provisions of the Plan and the Award Agreement, including this Appendix I, which supersede and replace any prior agreement, either written or verbal (including your Employment Agreement, if applicable) in relation to this Option.
Termination.
The following provisions supplement the Termination section of the Award Agreement:
For purposes of the Option, your employment or Service relationship will be considered terminated as of the date you are no longer actively providing Services to the Company or one of its Subsidiaries or Affiliates (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where you provide Service or the terms of your Employment Agreement, if any), and unless otherwise expressly provided in this Award Agreement or determined by the Company, (i) your right to vest in the Option under the Plan, if any, will terminate as of such date and will not be extended by any notice period (e.g., your period of Service would not include any contractual notice period or any period of “garden leave” or similar period mandated under employment laws in the jurisdiction where you provide Service or the terms of your Employment Agreement, if any); and (ii) the period (if any) during which you may exercise the Option after such termination of your employment or Service relationship will commence as of such date and will not be extended by any notice period mandated under employment laws in the jurisdiction where you provide Service or the terms of your Employment Agreement, if any; the Committee shall have the exclusive discretion to determine when you are no longer actively providing Service for purposes of this Option (including whether you may still be considered to be providing Service while on a leave of absence).
Notwithstanding the provisions governing the treatment of this Option upon termination due to Retirement set forth in the Termination section of the Award Agreement, if the Company receives an opinion of counsel that there has been a legal judgment and/or legal development in a particular jurisdiction that would likely result in the treatment in case of a termination due to Retirement as set forth in the Award Agreement being deemed unlawful and/or discriminatory, then the Company will not apply the provisions for termination due to Retirement at the time you
cease to provide Services and this Option will be treated as it would under the rules that apply if your Service ends for resignation.
Termination for Cause.
The implications upon a termination for Cause as set forth in the Award Agreement and Plan shall only be enforced, to the extent deemed permissible under applicable local law, as determined in the sole discretion of the Committee.
Taxes.
The following provisions supplement the Taxes section of the Award Agreement:
You acknowledge that your liability for Tax-Related Items, if any, may exceed the amount withheld by the Company, its Subsidiaries and/or its Affiliates (as applicable).
If you have become subject to tax in more than one jurisdiction, you acknowledge that the Company, its Subsidiaries and Affiliates may be required to withhold or account for Tax-Related Items in more than one jurisdiction.
Depending on the withholding method, the Company may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding amounts or other applicable withholding rates, including maximum applicable rates in your jurisdiction(s), in which case you may receive a refund of any over-withheld amount in cash and will have no entitlement to the Share equivalent. If the obligation for Tax-Related Items is satisfied by withholding in Shares, for tax purposes, you are deemed to have been issued the full number of Shares subject to the exercised Option, notwithstanding that a number of Shares are held back solely for the purpose of paying the Tax-Related Items due as a result of any aspect of your participation in the Plan.
Limits on Transferability; Beneficiaries.
The following provision supplements the Limits on Transferability; Beneficiaries section of the Award Agreement:
If you are located outside the U.S., this Option may not be Transferred to a designated Beneficiary and may only be Transferred upon your death to your legal heirs in accordance with applicable laws of descent and distribution. In no case may this Option be Transferred to another individual during your lifetime.
Acknowledgment of Nature of Award.
The following provisions supplement the Acknowledgment of Nature of Award section of the Award Agreement:
You acknowledge the following with respect to this Option:
(a) This Option and any Shares acquired under the Plan, and the income and value of same, are not intended to replace any pension rights or compensation.
(b) In no event should this Option, any Shares acquired under the Plan, and the income and value of same, be considered as compensation for, or relating in any way to, past services for the Company, its Subsidiaries or any Affiliate.
(c) The Option, any Shares acquired under the Plan and the income and value of same are not part of normal or expected compensation or salary for any purpose.
(d) Neither the Company, its Subsidiaries nor any Affiliate shall be liable for any foreign exchange rate fluctuation between your local currency and the United States Dollar that may affect the value of this Option or of
any amounts due to you pursuant to exercise of this Option or the subsequent sale of any Shares acquired upon exercise.
No Advice Regarding Award.
The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding your participation in the Plan, or your acquisition or sale of the underlying Shares. You are hereby advised to consult with your own personal tax, legal and financial advisors regarding your participation in the Plan before taking any action related to the Plan.
Not a Public Offering in Non-U.S. Jurisdictions.
If you are resident or employed outside of the United States, neither the grant of the Options under the Plan nor the issuance of the underlying Shares upon exercise of the Options is intended to be a public offering of securities in your country of residence (and country of employment, if different). The Company has not submitted any registration statement, prospectus or other filings to the local securities authorities in jurisdictions outside of the United States unless otherwise required under local law.
Language Consent.
If you are resident or employed outside of the United States, you acknowledge and agree that it is your express intent that this Award Agreement, the Plan and all other documents, notices and legal proceedings entered into, given or instituted pursuant to the Options, be drawn up in English.
Insider Trading and Market Abuse Laws.
You may be subject to insider trading restrictions and/or market abuse laws based on the exchange on which the Shares are listed and in applicable jurisdictions including the United States and your country or your broker's country, if different, which may affect your ability to accept, acquire, sell or otherwise dispose of Shares, rights to Shares or rights linked to the value of Shares under the Plan during such times as you are considered to have "inside information" regarding the Company (as defined by the laws in the applicable jurisdictions). Local insider trading laws and regulations may prohibit the cancellation or amendment of orders you placed before you possessed inside information. Furthermore, you could be prohibited from (a) disclosing the inside information to any third party and (b) "tipping" third parties or causing them otherwise to buy or sell securities (third parties include fellow employees). Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under any applicable Company insider trading policy. You acknowledge that it is your responsibility to comply with any applicable restrictions, and you should speak to your personal advisor on this matter.
Foreign Asset/Account, Exchange Control and Tax Reporting.
You may be subject to foreign asset/account, exchange control and/or tax reporting requirements as a result of the acquisition, holding and/or transfer of Shares or cash (including dividends and the proceeds arising from the sale of Shares) derived from your participation in the Plan, to and/or from a brokerage/bank account or legal entity located outside your country. The applicable laws of your country may require that you report such accounts, assets, the balances therein, the value thereof and/or the transactions related thereto to the applicable authorities in such country. You acknowledge that you are responsible for ensuring compliance with any applicable foreign asset/
account, exchange control and tax reporting requirements and should consult your personal legal advisor on this matter.
Imposition of Other Requirements.
The Company reserves the right to impose other requirements on your participation in the Plan, on this Option and on any Shares purchased upon exercise of this Option, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require you to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.
Waiver.
You acknowledge that a waiver by the Company or breach of any provision of the Award Agreement shall not operate or be construed as a waiver of any other provision of the Award Agreement, or of any subsequent breach of the Award Agreement.
COUNTRY-SPECIFIC TERMS AND CONDITIONS/NOTIFICATIONS
AUSTRALIA
NOTIFICATIONS
Securities Law Information.
If you acquire Shares under the Plan and offer such Shares of for sale to a person or entity resident in Australia, the offer may be subject to disclosure requirements under Australian law. You should obtain legal advice regarding your disclosure obligations prior to making any such offer.
Deferred Taxation.
Subdivision 83A-C of the Income Tax Assessment Act, 1997, applies to Options granted under the Plan, such that the Options are intended to be subject to deferred taxation.
BELGIUM
NOTIFICATIONS
Foreign Assets/Account Reporting Information.
If you are a resident of Belgium, you will be required to report any security (e.g., Shares acquired under the Plan) or bank account (including brokerage accounts) established outside of Belgium on your annual tax return. In a separate report, you will be required to provide the National Bank of Belgium with details regarding such foreign accounts (including the account number, bank name and country in which any such account was opened).
BRAZIL
TERMS AND CONDITIONS
Compliance with Law.
By accepting this Option you acknowledge that you agree to comply with applicable Brazilian laws and pay any and all applicable taxes legally due by you associated with the exercise of this Option, the receipt of any dividends, and the sale of Shares acquired under the Plan. You further agree that, for all legal purposes, (a) the benefits provided to you under the Plan are the result of commercial transactions unrelated to your employment or Service relationship;
(b) the Plan is not a part of the terms and conditions of your employment or Service relationship; and (c) the income from the Award, if any, is not part of your remuneration from employment or Service.
NOTIFICATIONS
Exchange Control Information.
If you are resident or domiciled in Brazil, you will be required to submit annually a declaration of assets and rights held outside of Brazil to the Central Bank of Brazil if the aggregate value of such assets and rights is equal to or greater than US$100,000. Assets and rights that must be reported include Shares.
CANADA
TERMS AND CONDITIONS
Exercisability.
The following provision supplements the Exercisability section of the Award Agreement:
Notwithstanding any provision in the Plan or the Award Agreement to the contrary, you are prohibited from surrendering Shares that you already own or attesting to the ownership of Shares to pay the Exercise Price per Share or any Tax-Related Items in connection with this Option.
Plan Document Acknowledgment.
In accepting the grant of Options, you acknowledge that you have received a copy of the Plan, have reviewed the Plan and the Award Agreement in their entirety and fully understand and accept all provisions of the Plan and the Award Agreement.
Termination.
The following provision replaces the first paragraph of the Termination section of the General Non-U.S. Terms and Conditions section of this Appendix I:
In the event of your termination of Service (whether or not later found to be invalid or in breach of employment laws in the jurisdiction where you provide Service or the terms of your Employment Agreement, if any), unless provided otherwise by the Company: (i) your right to vest in this Option (if any) will terminate effective, and (ii) the period (if any) during which you may exercise the vested Option will commence, as of the earlier of (1) the date the you receive notice of termination, or (2) the date you are no longer actively providing Service, regardless of any notice period or period of pay in lieu of such notice required under applicable Canadian employment laws (including, but not limited to statutory law, regulatory law and/or common law).
The Committee shall have the exclusive discretion to determine when you are no longer actively providing Service for purposes of this Option (including whether you may still be considered to be providing Service while on a leave of absence).
The following terms and conditions apply if you are a resident of Quebec:
Language Consent.
The parties acknowledge that it is their express wish that the Award Agreement, as well as all documents, notices and legal proceedings entered into, given or instituted pursuant hereto or relating directly or indirectly hereto, be drawn up in English.
Consentement relatif à la langue.
Les parties reconnaissent avoir expressément exigé la rédaction en anglais de la Convention d’Attribution, ainsi que de tous documents, avis et procédures judiciaires, exécutés, donnés ou intentés en vertu de, ou liés directement ou indirectement à, la présente convention.
NOTIFICATIONS
Securities Law Information.
You are permitted to sell Shares acquired under the Plan through the designated broker appointed under the Plan, if any, provided the sale of the Shares takes place outside of Canada through the facilities of a stock exchange on which the Shares are listed (i.e., Nasdaq).
Foreign Assets/Account Reporting Information.
Canadian residents are required to report any specified foreign property (including Shares and Options) on form T1135 (Foreign Income Verification Statement) if the total cost of such specified foreign property exceeds C$100,000 at any time in the year. The form must be filed by April 30 of the following year. Specified foreign property includes Shares acquired under the Plan and may include the Options. The Options must be reported - generally at a nil cost - if the C$100,000 cost threshold is exceeded because of other foreign property you hold. If Shares are acquired, their cost generally is the adjusted cost base (“ACB”) of the Shares. The ACB would normally equal the fair market value of the Shares at vesting, but if you own other shares, this ACB may have to be averaged with the ACB of the other shares. You should speak with a personal tax advisor to determine the scope of foreign property that must be considered for purposes of this requirement.
CHINA
TERMS AND CONDITIONS
The following provisions apply if you are subject to the exchange control regulations or restrictions in the People’s Republic of China (“China”), as determined by the Company in its sole discretion:
Vesting and Exercisability.
The following provisions replace the Vesting Date, Vesting, Exercisability, and Termination sections of the Award Agreement:
Notwithstanding anything to the contrary in the Award Agreement, due to legal restrictions in China, if and when this Option vests and becomes exercisable, you will be required to pay the Exercise Price per Share by a cashless exercise through a licensed securities broker acceptable to the Company, such that all Shares subject to the exercised Option will be sold immediately upon exercise and the proceeds of sale, less the Exercise Price per Share, any Tax-Related Items and broker’s fees or commissions, will be remitted to you in accordance with any applicable exchange control laws and regulations. The Company reserves the right to lift the exercise restrictions herein depending on the development of local law.
Expiration Date.
Notwithstanding anything to the contrary in the Award Agreement, in the event of your termination of Service, you shall be permitted to exercise this Option to the extent vested and exercisable for the shorter of the post-termination
Option Exercise Period (if any) set forth in the Award Agreement and six months (or such other period as may be required by the State Administration of Foreign Exchange (“SAFE”) after the date of termination of your active Service. At the end of the post-termination Option Exercise Period specified by SAFE, any unexercised portion of this Option will be forfeited without any consideration to you.
Exchange Control Restriction.
You understand and agree that, due to exchange control laws in China, you will be required to immediately repatriate to China the cash proceeds from the cashless exercise of this Option. You further understand that, under local law, such repatriation of the cash proceeds may need to be effected through a special exchange control account established by the Company or any Subsidiary or Affiliate of the Company and you hereby consent and agree that the proceeds from the cashless exercise of this Option may be transferred to such special account prior to being delivered to you. Further, if the proceeds from your participation in the Plan are converted to local currency, you acknowledge that the Company (including its Subsidiaries and Affiliates) is under no obligation to secure any currency conversion rate, and may face delays in converting the proceeds to local currency due to exchange control restrictions in China. You agree to bear the risk of any currency conversion rate fluctuation between the date that
your proceeds are delivered to such special exchange control account and the date of conversion of the proceeds to local currency.
You further agree to comply with any other requirements that may be imposed by the Company in the future in order to facilitate compliance with exchange control requirements in China.
COSTA RICA
There are no country-specific provisions.
EGYPT
NOTIFICATIONS
Exchange Control Information.
If you transfer funds into Egypt in connection with the Options (including proceeds from the sale of Shares or the receipt of any dividends) you are required to transfer the funds through a bank registered in Egypt.
FRANCE
TERMS AND CONDITIONS
Language Consent.
By accepting the Option, you confirm having read and understood the documents relating to the grant of the Option (the Plan and the Award Agreement), which were provided in the English language, and you accept the terms of such documents accordingly.
Consentement relatif à la langue.
En acceptant l'Option, vous confirmez ainsi avoir lu et compris les documents relatifs à l'attribution de l'Option (le Plan et le Contrat d’Attribution) qui vous ont été communiqués en langue anglaise, et vous en acceptez les termes et conditions en connaissance de cause.
NOTIFICATIONS
Foreign Assets/Account Reporting Information.
If you are a French resident and you hold securities (including Shares) or cash outside of France, you must declare all foreign bank and brokerage accounts (including the accounts that were opened and closed during the tax year) on
an annual basis on a special form n°3916, together with your income tax return. If you fail to complete this reporting, you may be subject to penalties.
GERMANY
NOTIFICATIONS
Exchange Control Information.
Cross-border payments in excess of €12,500 must be reported monthly to the German Federal Bank (Bundesbank). The report must be filed electronically using the "General Statistics Reporting Portal" (Allgemeines Meldeportal Statistik) available via Bundesbank’s website (www.bundesbank.de).
HONG KONG
TERMS AND CONDITIONS
Sale Restriction.
The following supplements the Exercisability section of the Award Agreement:
Any Shares received at exercise of Options are a personal investment. If, for any reason, the Options are exercised and Shares are issued to you within six months of the Grant Date, you agree that you will not offer the Shares to the public in Hong Kong or otherwise dispose of the Shares prior to the six-month anniversary of the Grant Date.
NOTIFICATIONS
Securities Law Information.
WARNING: The contents of this document have not been reviewed by any regulatory authority in Hong Kong. You are advised to exercise caution in relation to the offer. If you are in any doubt about any of the contents of this document, you should obtain independent professional advice. Neither the grant of the Options nor the issuance of Shares upon exercise of the Options constitutes a public offering of securities under Hong Kong law. The grant is available only to employees of the Company and its Subsidiaries. The Award Agreement, the Plan and other incidental communication materials distributed in connection with the Options (i) have not been prepared in accordance with and are not intended to constitute a "prospectus" for a public offering of securities under the applicable securities legislation in Hong Kong and (ii) are intended only for the personal use of each eligible employee of the Company or its Subsidiaries and may not be distributed to any other person.
INDIA
TERMS AND CONDITIONS
Exercisability.
The following provision supplements the Exercisability section of the Award Agreement:
Due to legal restrictions in India, should the Shares be listed on a recognized national securities exchange at the time of exercise, you may not exercise this Option using a cashless sell-to-cover exercise, whereby you direct a broker or transfer agent to sell some (but not all) of the Shares subject to the exercised Option and deliver to the Company the amount of the sale proceeds to pay the Exercise Price per Share and any Tax-Related Items. However, payment of
the Exercise Price per Share may be made by any of the other methods of payment acceptable to the Company. The Company reserves the right to provide you with this method of payment depending on the development of local law.
Labor Law Acknowledgment.
The Options and the Shares underlying the Options, and the income and value of same, are extraordinary items that are not part of your annual gross salary.
NOTIFICATIONS
Exchange Control Information.
You are required to repatriate the proceeds from the sale of Shares and any dividends received in relation to the Shares to India within a reasonable amount of time (i.e., within ninety (90) days after receipt for sale proceeds and 180 days of receipt for dividends or within any other time frame prescribed under applicable Indian exchange control laws as may be amended from time to time). You must maintain the foreign inward remittance certificate received from the bank where the foreign currency is deposited in the event that the Reserve Bank of India or your employer requests proof of repatriation. It is your responsibility to comply with applicable exchange control laws in India.
Foreign Assets/Account Reporting Information.
If you are an Indian resident, you are required to report all bank accounts or investments (including the Option and any Shares) that you hold outside of India. You should consult with a personal tax advisor to ensure that you are properly complying with applicable reporting requirements.
INDONESIA
TERMS AND CONDITIONS
Language Consent and Notification.
By accepting the grant of Options, you (i) confirm having read and understood the documents relating to this grant (i.e., the Plan and the Award Agreement) which were provided in the English language, (ii) accept the terms of those documents accordingly, and (iii) agree not to challenge the validity of this document based on Law No. 24 of 2009 on National Flag, Language, Coat of Arms and National Anthem or the implementing Presidential Regulation (when issued).
Dengan menekan tombol “Saya menerima” atau dengan menandatangani dan mengembalikan dokumen ini yang memuat syarat dan ketentuan pemberian anda, (i) anda mengkonfirmasi bahwa anda telah membaca dan mengerti isi dokumen yang terkait dengan pemberian ini yang disediakan untuk anda dalam bahasa Inggris, (ii) Anda menerima syarat dari dokumen-dokumen tersebut, dan (iii) anda setuju bahwa anda tidak akan mengajukan keberatan atas keberlakuan dokumen ini berdasarkan Undang-Undang No. 24 tahun 2009 tentang Bendera, Bahasa dan Lambang Negara serta Lagu Kebangsaan atau Peraturan Presiden pelaksana (ketika diterbitkan).
NOTIFICATIONS
Exchange Control Information.
Indonesian residents must provide the Bank of Indonesia with information on foreign exchange activities in an online monthly report no later than the fifteenth day of the month following the activity. In addition, if you remit funds into Indonesia (e.g., proceeds from the sale of Shares), the Indonesian bank through which the transaction is made will submit a report of the transaction to the Bank of Indonesia for statistical reporting purposes. For transactions of US$10,000 or more, a more detailed description of the transaction must be included in the report and
you may be required to provide information about the transaction (e.g., the relationship between you and the transferor of the funds, the source of the funds, etc.) to the bank in order for the bank to complete the report.
IRELAND
There are no country-specific provisions.
ITALY
TERMS AND CONDITIONS
Exercisability.
The following provision supplements the Exercisability section of the Award Agreement:
The Company reserves the right to restrict the methods and timing of the exercise of the Option at any time to comply with the applicable securities law restrictions in Italy. You may be required to consult with a financial intermediary prior to the exercise of the Option and to exercise the option solely by a “cashless” means as the Company so requires.
Plan Document Acknowledgment.
By accepting the Option, you acknowledge that you have received a copy of the Plan and the Award Agreement, have reviewed each of these documents in their entirety and fully understand and accept all terms of such documents. In this regard, you acknowledge having read and specifically approve the following sections of the Award Agreement and this Appendix I, as applicable: (i) Vesting; (ii) Exercisability; (iii) Termination; (iv) Taxes; (v) No Guarantee of Continued Service; (vi) Acknowledgment of Nature of Award; (vii) Data Privacy; and (viii) Governing Law; Jurisdiction; Waiver of Jury Trial.
NOTIFICATIONS
Foreign Assets/Account Reporting Information.
Italian residents who, during the fiscal year, hold investments abroad or foreign financial assets (e.g., cash, Shares and Options) which may generate income taxable in Italy are required to report such on their annual tax returns (UNICO Form, RW Schedule) or on a special form if no tax return is due. The same reporting obligations apply to Italian residents who, even if they do not directly hold investments abroad or foreign financial assets (e.g., cash, Shares and Options), are beneficial owners of the investment pursuant to Italian money laundering provisions.
Tax on Foreign Financial Assets.
Italian residents may be subject to tax on the value of financial assets held outside of Italy. The taxable amount will be the fair market value of the financial assets (including Shares) assessed at the end of the calendar year. If you are subject to this foreign financial assets tax, you will need to report the value of your financial assets held abroad in
your annual tax return. You are encouraged to consult your personal legal advisor for additional information about the foreign financial assets tax.
JAPAN
NOTIFICATIONS
Exchange Control Information.
If you remit more than ¥30 million for the purchase of Shares in a single transaction, you must file a Payment Report with the Ministry of Finance (through the Bank of Japan or the bank carrying out the transaction). The precise reporting requirements vary depending on whether the relevant payment is made through a bank in Japan. If you acquire Shares whose value exceeds ¥100 million in a single transaction, you must also file a Report Concerning Acquisition Shares (“Securities Acquisition Report”) with the Ministry of Finance through the Bank of Japan within 20 days of acquiring the Shares. The forms to make these reports can be acquired from the Bank of Japan.
A Payment Report is required independently from a Securities Acquisition Report. Therefore, if the total amount that you pay upon a one-time transaction for exercising the Option and acquiring Shares exceeds ¥100 million, you must file both a Payment Report and a Securities Acquisition Report.
Foreign Assets/Account Reporting Information.
If you are a Japanese tax resident, you will be required to report details of any assets held outside of Japan as of December 31st (including any Shares or cash acquired under the Plan) to the extent such assets have a total net fair market value exceeding ¥50 million. Such report will be due by March 15th each year. You should consult with
your personal tax advisor as to whether the reporting obligation applies to you and whether you will be required to include details of any outstanding Shares, Options or cash held by you in the report.
KOREA
NOTIFICATIONS
Foreign Assets/Account Reporting Information.
You must declare all of your foreign financial accounts (i.e., non-Korean bank accounts, brokerage accounts, etc.) to the Korean tax authorities and file a report with respect to such accounts if the value of such accounts exceeds KRW 500 million (or an equivalent amount in foreign currency) on any month-end date during the year.
MEXICO
TERMS AND CONDITIONS
No Entitlement or Claims for Compensation.
These provisions supplement the Acknowledgment of Nature of Award section of the Award Agreement including this Appendix I:
Modification.
By accepting this Option, you understand and agree that any modification of the Plan or the Award Agreement or its termination shall not constitute a change or impairment of the terms and conditions of your employment.
Policy Statement.
The Award of Options the Company is making under the Plan is unilateral and discretionary and, therefore, the Company reserves the absolute right to amend it and discontinue it at any time without any liability.
The Company, with offices at One PPG Place, Pittsburgh, Pennsylvania 15222, U.S.A. is solely responsible for the administration of the Plan and participation in the Plan and the acquisition of Shares does not, in any way, establish an employment relationship between you and the Company since you are participating in the Plan on a wholly commercial basis and the sole employer is Delimex de Mexico, S.A. de C.V., located at Monte Pelvoux #220, Piso 6, Col. Lomas de Chapultepec, Delegacion Miquel Hidalgo C.P. 11000 Mexico, nor does it establish any rights between you and the Company, its Subsidiaries or its Affiliates.
Plan Document Acknowledgment.
By accepting this Option, you acknowledge that you have received copies of the Plan, have reviewed the Plan and the Award Agreement in their entirety and fully understand and accept all provisions of the Plan and the Award Agreement.
In addition, by accepting the Award Agreement, you further acknowledge that you have read and specifically and expressly approve the terms and conditions in the Award Agreement, in which the following is clearly described and established: (i) participation in the Plan does not constitute an acquired right; (ii) the Plan and participation in the Plan is offered by the Company on a wholly discretionary basis; (iii) participation in the Plan is voluntary; and
(iv) the Company and any Subsidiary or Affiliates are not responsible for any decrease in the value of the Shares underlying this Option.
Finally, you hereby declare that you do not reserve any action or right to bring any claim against the Company for any compensation or damages as a result of your participation in the Plan and therefore grant a full and broad release to the Company and any Subsidiary or Affiliate with respect to any claim that may arise under the Plan.
TÉRMINOS Y CONDICIONES
No existirá derecho o demanda por daños y perjuicios.
Estas disposiciones son complementarias de la sección de Reconocimiento de la Naturaleza del Contrato, incluyendo el presente Apéndice I:
Modificación.
Al aceptar esta Opción, usted entiende y acuerda que cualquier modificación al Plan o al Contrato, o su terminación no constituirá un cambio o impedimento a los términos y condiciones de su empleo.
Declaración de Política.
La Entrega de Opciones que la Compañía hace mediante el Plan, es unilateral y discrecional y, por lo tanto, la Compañía se reserva el derecho absoluto de modificarlo o suspenderlo en cualquier momento, sin asumir ninguna responsabilidad.
La Compañía, con oficinas en One PPG Place, Pittsburgh, Pennsylvania 15222,U.S.A. es únicamente responsable de la administración del Plan. La participación en el Plan y la adquisición de Acciones no establece, en ninguna forma, una relación laboral entre usted y la Compañía, toda vez que usted está participando en el Plan en un plano meramente comercial y su único patrón es Administración de Comidas Rapidas S.A. de C.V., localizado en Delimex de Mexico, S.A. de C.V., located at Monte Pelvoux #220, Piso 6, Col. Lomas de Chapultepec, Delegacion Miquel Hidalgo C.P. 11000 Mexico, y tampoco establece ningún derecho entre usted y la Compañía, sus Subsidiarias o Afiliadas.
Reconocimiento del Documento del Plan.
Al aceptar esta Opción, usted reconoce que ha recibido copias de dicho Plan, ha revisado el Plan y el Contrato en su integridad y comprende y acepta plenamente todas las disposiciones del Plan y del Contrato.
Asimismo, al aceptar el Contrato, usted reconoce que ha leído y específica y expresamente aprueba los términos y condiciones en el Contrato, en el cual se establece y describe lo siguiente: (i) la participación en el Plan no constituye un derecho adquirido; (ii) el Plan, y su participación en él es ofrecido por la Compañía sobre una base plenamente discrecional; (iii) la participación en el Plan es voluntaria; y (iv) la Compañía y cualquier Subsidiaria o Afiliada no son responsables por cualquier disminución en el valor de las Acciones implícitas en esta Opción.
Finalmente, por medio del presente usted declara que no se reserva ninguna acción o derecho a presentar cualquier reclamo en contra de la Compañía por cualquier compensación o daño como resultado de su
participación en el Plan y por lo tanto otorga la liberación más amplia que en derecho proceda a la Compañía y cualquier Subsidiaria o Afiliada con respecto a cualquier reclamo que pueda surgir en torno al Plan.
NETHERLANDS
NEW ZEALAND
Notifications
Securities Law Information.
WARNING - You are being offered Options (which, upon exercise in accordance with the terms of the grant of the Options, will be converted into Shares) in the Company. Shares give you a stake in the ownership of the Company. You may receive a return if dividends are paid. Shares are quoted on the Nasdaq. This means you may be able to sell them on the Nasdaq if there are interested buyers. You may get less than you invested. The price will depend on the demand for the Shares.
If the Company runs into financial difficulties and is wound up, you will be paid only after all creditors have been paid. You may lose some or all of your investment.
New Zealand law normally requires people who offer financial products to give information to investors before they invest. This information is designed to help investors to make an informed decision. The usual rules do not apply to this offer because it is made under an employee share scheme. As a result, you may not be given all the information usually required. You will also have fewer other legal protections for this investment.
In compliance with applicable New Zealand securities laws, you are entitled to receive, in electronic or other form and free of cost, copies of the Company’s latest annual report, relevant financial statements and the auditor’s report on said financial statements (if any).
Ask questions, read all documents carefully, and seek independent financial advice before committing yourself.
POLAND
Notifications
Exchange Control Information.
If you transfer funds in excess of a certain threshold (currently €15,000) into or out of Poland, the funds must be transferred via a Polish bank account or financial institution. You are required to retain the documents connected with a foreign exchange transaction for a period of five (5) years, as measured from the end of the year in which such transaction occurred.
Foreign Assets/Account Reporting Information.
Polish residents holding foreign securities (e.g., Shares) and/or maintaining accounts abroad must report information to the National Bank of Poland on transactions and balances of the securities and cash deposited in such accounts if the value of such securities and cash (when combined with all other assets possessed abroad) exceeds PLN 7
million. If required, the reports must be filed on a quarterly basis on special forms that are available on the website of the National Bank of Poland.
PUERTO RICO
Notifications
Securities Law Information.
The offer of the Plan is subject exclusively to United States securities laws, including the United States Securities Exchange Act of 1934, as amended.
RUSSIA
TERMS AND CONDITIONS
U.S. Transaction.
You understand that your acceptance of the Option results in a contract between you and the Company that is completed in the United States and that the Award Agreement is governed by the laws of the State of Delaware, without giving effect to the conflict of laws principles thereof. You are not permitted to sell the Shares directly to other Russian legal entities or individuals.
NOTIFICATIONS
Securities Law Information.
Your employer is not in any way involved with the offer of the Options or administration of the Plan. This Award Agreement, the Plan and all other materials you may receive regarding participation in the Plan do not constitute advertising or an offering of securities in Russia. Absent any requirement under local law, the issuance of securities pursuant to the Plan has not and will not be registered in Russia; hence, the securities described in any Plan-related documents may not be used for offering or public circulation in Russia. In no event will Shares issued upon exercise of the Option be delivered to you in Russia; all Shares will be maintained on your behalf in the United States of America.
Exchange Control and Repatriation Information.
You may be required to repatriate to Russia certain cash amounts you receive with respect to the Options (e.g., dividends, sale proceeds, etc.) as soon as you intend to use those cash amounts for any purpose, including reinvestment. You are responsible for complying with any applicable Russian exchange control and repatriation regulations and rulings. Because Russian exchange control and repatriation regulations and rulings change frequently and without notice, you should consult with a legal advisor to ensure compliance applicable to any aspect of your participation in the Plan, including the grant, vesting and exercise of the Options, issuance of any Shares at exercise, receipt of any proceeds from the sale of Shares and/or receipt of any payments in connection with any Dividend Equivalents or dividends.
Foreign Assets/Account Reporting Information.
Russian residents are required to notify Russian tax authorities within one (1) month of opening, closing or changing the details of a foreign account (which includes a foreign bank account or foreign brokerage account). Russian residents also are required to report (i) the beginning and ending balances in such a foreign account each year and (ii) transactions related to such a foreign account during the calendar year to the Russian tax authorities,
before June 1 of the following year. The tax authorities can require you to provide appropriate supporting documents related to transactions in a foreign bank account.
The first annual report for a foreign brokerage account will be due before June 1, 2021 for the first reporting (calendar) year 2020.
Anti-Corruption Notice.
Anti-corruption laws prohibit certain public servants, their spouses and their dependent children from owning any foreign source financial instruments (e.g., shares of foreign companies such as the Company). Accordingly, you should inform the Company if you are covered by these laws because you should not hold Shares acquired under the Plan.
SINGAPORE
NOTIFICATIONS
Securities Law Information.
The grant of this Option is being made pursuant to the “Qualifying Person” exemption under section 273(1)(f) of the Securities and Futures Act (Chapter 289, 2006 Ed.) (“SFA”) and is exempt from the prospectus and registration requirements under the SFA. The Plan has not been lodged or registered as a prospectus with the Monetary Authority of Singapore and the grant is not made with a view to the Options or Shares being subsequently offered to another party. You should note that this Option is subject to section 257 of the SFA and you should not make (i) any subsequent sale of Shares in Singapore or (ii) any offer of such subsequent sale of Shares subject to the awards in Singapore, unless such sale or offer is made: (a) more than six months after the Grant Date or (b) pursuant to the exemptions under Part XIII Division (1) Subdivision (4) (other than section 280) of the SFA.
Chief Executive Officer / Director Notification Requirement.
If you are the Chief Executive Officer (“CEO”), a director, associate director or shadow director of the Company’s Singapore Subsidiary or Affiliate, you are subject to certain notification requirements under the Singapore Companies Act. Among these requirements is an obligation to notify the Singapore Subsidiary or Affiliate in writing when you receive an interest (e.g., Options, Shares) in the Company, a Subsidiary or Affiliate. In addition, you must notify the Singapore Subsidiary or Affiliate when you sell Shares (including when you sell Shares issued upon exercise of this Option). These notifications must be made within two business days of acquiring or disposing of any interest in the Company or any Subsidiary or Affiliate. In addition, a notification of your interests in the Company, Subsidiary or Affiliate must be made within two business days of becoming CEO or a director.
SPAIN
TERMS AND CONDITIONS
Acknowledgment of Nature of Award.
The following provisions supplement the Acknowledgment of Nature of Award section of the General Non-U.S. Terms and Conditions section of this Appendix I:
By accepting the grant of the Options, you acknowledge that you consent to participation in the Plan and have received a copy of the Plan.
You understand that the Company has unilaterally, gratuitously and discretionally decided to grant Options under the Plan to individuals who may be employees of the Company's Subsidiaries or Affiliates throughout the world. The decision is a limited decision that is entered into upon the express assumption and condition that any grant will
not economically or otherwise bind the Company or its Subsidiaries or Affiliates on an ongoing basis except as provided in the Plan. Consequently, you understand that the Options are granted on the assumption and condition that the Options or the Shares acquired upon exercise shall not become a part of any employment contract with the Company and any of its Subsidiaries and shall not be considered a mandatory benefit, salary for any purposes (including severance compensation) or any other right whatsoever. In addition, you understand that this grant would not be made to you but for the assumptions and conditions referred to above; thus, you acknowledge and freely accept that should any or all of the assumptions be mistaken or should any of the conditions not be met for any reason, then the Options shall be null and void.
You understand and agree that, unless otherwise provided in the Award Agreement, the vesting and settlement of the Options is expressly conditioned on your continuous Service such that if your employment or rendering of Services terminates for any reason whatsoever, your Options will cease vesting immediately effective as of the date of such termination for any reason including, but not limited to, resignation, disciplinary dismissal adjudged to be with cause, disciplinary dismissal adjudged or recognized to be without cause (i.e., subject to a "despido improcedente"), individual or collective dismissal on objective grounds, whether adjudged or recognized to be with or without cause, material modification of the terms of employment under Article 41 of the Workers' Statute, relocation under Article 40 of the Workers' Statute, and/or Article 50 of the Workers' Statute, unilateral withdrawal by your employer and under Article 10.3 of the Royal Decree 1382/1985. Consequently, upon termination for any of the above reasons, you will automatically lose any rights to the Options granted to you that were unvested on the date of termination, as described in the Award Agreement.
NOTIFICATIONS
Securities Law Information.
The Options and the Shares issued pursuant to the exercise of the Options do not qualify under Spanish regulations as securities. No "offer of securities to the public," as defined under Spanish law, has taken place or will take place in the Spanish territory. The Award Agreement has not been nor will it be registered with the Comisión Nacional del Mercado de Valores, and does not constitute a public offering prospectus.
Foreign Assets/Account Reporting Information.
If you are a Spanish resident, you must declare the acquisition, ownership and disposition of Shares to the Dirección General de Comercial e Inversiones (the "DGCI") of the Ministerio de Economia for statistical purposes. This declaration must be made in January for any Shares owned as of December 31 of the prior year by filing a form D-6 with the DGCI; however, if the value of the Shares being reported exceeds €1,502,530 (or if you hold 10% or more of the share capital of the Company or such other amount that would entitle you to join the Board of Directors), the declaration must be filed within one (1) month of the acquisition or disposition of the Shares, as applicable. In addition, if you wish to import the ownership title of any Shares (i.e., share certificates) into Spain, you must declare the importation of such securities to the DGCI.
You also are required to declare electronically to the Bank of Spain any foreign accounts (including brokerage accounts held abroad), any foreign instruments (including Shares) and any transactions with non-Spanish residents (including any payments of Shares made pursuant to the Plan) held in such accounts if the value of the transactions during the prior tax year or the balances in such accounts as of December 31 of the prior tax year exceeds €1,000,000.
To the extent that you hold rights or assets (e.g., Shares acquired under the Plan or cash held in a bank or brokerage account) outside Spain with a value in excess of €50,000 per type of asset as of December 31 each year, you will be required to report information on such assets on your tax return (tax form 720) for such year. After such rights and/or assets are initially reported, the reporting obligation will apply for subsequent years only if the value of such right
or asset increases by more than €20,000 or if you sell or otherwise dispose of previously reported rights or assets. The reporting must be completed by the following March 31.
You are solely responsible for complying with applicable reporting obligations. The laws are often complex and can change frequently. You should consult your personal legal and/or tax advisor to confirm the reporting requirements that will apply to you in connection with the Plan.
SWEDEN
TERMS AND CONDITIONS
Authorization to Withhold. The following provisions supplement the Taxes section of the Award Agreement and the General Non-U.S. Terms and Conditions section of this Appendix I:
Without limiting the Company or your employer’s authority to satisfy their withholding obligations for Tax-Related Items as set forth in the Taxes section of the Award Agreement and the General Non-U.S. Terms and Conditions section of this Appendix I, by exercising the Option, you authorize the Company and your employer to withhold from proceeds of the sale of Shares or any other amount otherwise deliverable to you upon the exercise of Options to satisfy Tax-Related Items, regardless of whether the Company or your employer has an obligation to withhold such Tax-Related Items.
THAILAND
NOTIFICATIONS
Exchange Control Information. If you receive funds in connection with the Plan (e.g., dividends, sale proceeds) with a value equal to or greater than US$1 million, you are required to immediately repatriate such funds to Thailand. Any foreign currency repatriated to Thailand must be converted to Thai Baht or deposited into a foreign currency deposit account opened with any commercial bank in Thailand acting as the authorized agent within 360 days from the date the funds are repatriated to Thailand. You are also required to inform the authorized agent of the details of the foreign currency transaction, including your identification information and the purpose of the transaction.
UNITED ARAB EMIRATES
NOTIFICATIONS
Securities Law Information.
The Plan is being offered only to employees and is in the nature of providing equity incentives to employees of the Company or its Subsidiaries or Affiliates in the United Arab Emirates ("UAE"). Any documents related to the Plan, including the Plan, this Award Agreement, and other grant documents ("Plan Documents"), are intended for distribution only to such employees and must not be delivered to, or relied on by any other person. Prospective purchasers of the securities offered (i.e., the Options) should conduct their own due diligence on the securities.
The Emirates Securities and Commodities Authority has no responsibility for reviewing or verifying any Plan Documents nor has it taken steps to verify the information set out in them, and thus, is not responsible for such documents. Further, neither the Ministry of Economy nor the Dubai Department of Economic Development has
approved this statement nor taken steps to verify the information set out in it, and has no responsibility for it. If you do not understand the contents of the Plan Documents, you should consult an authorized financial advisor.
UNITED KINGDOM
Terms & Conditions
Taxes.
The following provisions supplement the Taxes section of the Award Agreement and the General Non-U.S. Terms and Conditions section of this Appendix I:
Without limitation to the Taxes section of the Award Agreement and the General Non-U.S. Terms and Conditions section of this Appendix I, you agree that you are liable for all Tax-Related Items and hereby covenant to pay all such Tax-Related Items as and when requested by the Company or your employer or by Her Majesty’s Revenue and Customs (“HMRC”) (or any other tax authority or any other relevant authority). You also agree to indemnify and keep indemnified the Company and your employer against any Tax–Related Items that they are required to pay or withhold or have paid or will pay on your behalf to HMRC (or any other tax authority or any other relevant authority).
Notwithstanding the foregoing, if you are a director or executive officer (as within the meaning of the Act), the terms of the immediately foregoing provision will not apply. In the event that you are a director or executive officer and income tax due is not collected from or paid by you by within ninety (90) days of the U.K. tax year in which an event giving rise to the indemnification described above occurs, the amount of any uncollected tax may constitute a benefit to you on which additional income tax and national insurance contributions may be payable. You acknowledge that you ultimately will be responsible for reporting and paying any income tax due on this additional benefit directly to HMRC under the self-assessment regime and for reimbursing the Company or the Employer (as applicable) for the value of any employee national insurance contributions due on this additional benefit, which the Company and/or the Employer may recover from you by any of the means referred to in the Taxes section of the Award Agreement and the General Non-U.S. Terms and Conditions section of this Appendix I.
VENEZUELA
TERMS AND CONDITIONS
Exchange Control Restrictions.
Exchange control restrictions may limit the ability to remit funds out of Venezuela to exercise the Option or to remit funds into Venezuela following the sale of Shares acquired upon exercise of the Option under the Plan. The Company reserves the right to further restrict the exercise of the Option or to amend or cancel the Option at any time in order to comply with the applicable exchange control laws in Venezuela. However, ultimately, you are responsible for complying with exchange control laws in Venezuela and the Company will not be liable for any fines or penalties resulting from your failure to comply with applicable laws. You should consult your personal
advisor prior to accepting the Option to ensure compliance with current regulations. You are solely responsible for ensuring compliance with all exchange control laws in Venezuela.
Investment Representation.
As a condition of the grant of the Option, you acknowledge and agree that any Shares you may acquire upon exercise of the Option are acquired as and intended to be an investment rather than for the resale of the Shares and conversion of the Shares into foreign currency.
NOTIFICATIONS
Securities Law Information.
The Option granted under the Plan and the Shares issued under the Plan are offered as a personal, private, exclusive transaction and are not subject to Venezuelan government securities regulations.
Exhibit 10.3
THE KRAFT HEINZ COMPANY
OMNIBUS INCENTIVE PLAN
FORM OF PERFORMANCE SHARE AWARD NOTICE
Unless defined in this award notice (together with all exhibits and appendices attached thereto, this “Award Notice”), capitalized terms will have the same meanings ascribed to them in The Kraft Heinz Company Performance Share Award Agreement, which is included as Exhibit A (the “Award Agreement” or “Agreement”) and The Kraft Heinz Company 2020 Omnibus Incentive Plan, as may be amended from time to time (the “Plan”).
Subject to your acceptance of this Award Notice, you are hereby being granted an award of Performance Share Units (the “PSUs”) as of the Grant Date set forth below (the “Grant Date”). Each PSU is a bookkeeping entry representing the right to receive one (1) share of The Kraft Heinz Company’s (the “Company”) common stock on the following terms and subject to the provisions of the Plan, which are incorporated herein by reference. In the event of a conflict between the provisions of the Plan and this Award Notice, the provisions of the Plan will govern.
|
|
|
|
|
|
Number of PSUs:
|
_______________
|
Grant Date:
|
_______________
|
Vesting Date:
|
Fifty Percent (50%) on 2-year anniversary of Grant Date; an additional Twenty-Five Percent (25%) on 3-year anniversary of Grant Date; and remaining Twenty-Five Percent (25%) on 4-year anniversary of Grant Date (subject to the terms of the Award Agreement).
|
Performance Period:
|
_______________
|
Performance Target/Payout:
|
_______________
|
Effect of a Termination of Service on Vesting
Other than as set forth below, upon a termination of your Service for any reason prior to the Vesting Date, you will forfeit the PSUs, without any consideration due to you.
If your Service terminates by reason of your death, Retirement or Disability (as defined below) after the Performance Period, 100% of the Performance Share Award Share Payout (as defined in the Award Agreement) determined by the Committee based on actual performance during the Performance Period shall be fully vested and exercisable.
Dividends: The PSUs will not be entitled to accrue any dividends declared on the Company’s common stock.
Acknowledgments
By signing this Award Notice, you agree that the PSUs are granted under and governed by the terms and conditions of this Award Notice (including, without limitation, the terms and conditions set forth on Exhibit A, the Restrictive Covenants Agreement attached as Exhibit B and the terms and conditions set forth on Appendix I) and the Plan.
EXHIBIT A
THE KRAFT HEINZ COMPANY
PERFORMANCE SHARE AWARD AGREEMENT
1.Grant of Performance Share Award.
a.Performance Share Award. In consideration of your agreement to provide services to The Kraft Heinz Company, a corporation organized under the laws of Delaware (the “Company”), or any of its Affiliates, and, as applicable, in consideration for your agreement to the non-competition and non-solicitation covenants provided in the attached Exhibit B, and for other good and valuable consideration, the Company hereby grants as of the date set forth in the Performance Share Award Notice (referred to as the “Notice”) to you a Performance Share Award in the form of Performance Share Units (the “PSUs”) with respect to the Performance Period set forth in the Notice, subject to the terms and provisions of the Notice, this Performance Share Award Agreement, including any appendices (this “Agreement”), and the Company’s 2020 Omnibus Incentive Plan, as amended from time to time (the “Plan”). Unless and until the Performance Share Award becomes payable in the manner set forth in Section 3 hereof, you shall have no right to payment of the Performance Share Award. Prior to payment of the Performance Share Award, the Performance Share Award shall represent an unsecured obligation of the Company, payable (if at all) from the general assets of the Company.
b.Plan.
i.Incorporation of Terms and Conditions. The Performance Share Award and this Agreement are subject to the terms and conditions of the Plan, which are incorporated herein by reference. In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan shall control.
ii.Performance Targets. The Committee, in its sole discretion, shall have the authority to determine, establish and adjust Performance Periods, establish the applicable Performance Targets, adjust the applicable Performance Targets and certify the attainment of Performance Targets.
2.Definitions. All capitalized terms used in this Agreement without definition shall have the meanings ascribed in the Plan and the Notice. The following terms shall have the meanings specified below, unless the context clearly indicates otherwise. The singular pronoun shall include the plural where the context so indicates.
a.“Disability” means (i) a physical or mental condition entitling you to benefits under the long-term disability policy of the Company covering you or (ii) in the absence of any such policy, a physical or mental condition rendering you unable to perform your duties for the Company or any of its Subsidiaries or Affiliates for a period of six (6) consecutive months or longer; provided that if you are a party to an Employment Agreement at the time of termination of your Service and such Employment Agreement contains a different definition of “disability” (or any derivation thereof), the definition in such Employment Agreement shall control for purposes of this Agreement.
b.“Employment Agreement” means an individual written employment agreement between you and the Company or any of its Affiliates, including an offer letter.
c.“Performance Share Award Share Payout” means an amount equal to the Payout or other calculation included in the Notice or Employment Agreement.
d.“Performance Share Award Target” shall mean the target number of Shares subject to this Performance Share Award set forth in the Notice or Employment Agreement.
e.“Retirement” means a termination of Service by you on or after either (a) the later of (i) your 60th birthday and (ii) your completion of five years of Service with the Company, its Subsidiaries or its Affiliates or (b) the later of (i) your 55th birthday and (ii) your completion of ten years of Service with the Company, its Subsidiaries or its Affiliates.
f.“Without Cause” means (i) a termination of your Service by the Company or its Subsidiaries or Affiliates other than for Cause (as defined in the Plan) and other than due to your death, Disability or Retirement or (ii) (A) if you are a party to an Employment Agreement, (B) such Employment Agreement is in effect upon the date of your termination of Service and (C) such Employment Agreement defines “Good Reason”, then “Without Cause” shall also include resignation of your Service for “Good Reason” in accordance with such Employment Agreement.
3.Payment.
a.Form and Time of Payment.
i.Vesting. The Performance Share Award will vest on the “Vesting Date” set forth in the Notice subject to your continued Service with the Company or one of its Subsidiaries, except as otherwise set forth in the Plan or this Agreement. Prior to the vesting and settlement of the Performance Share Award, you will not have any rights of a shareholder with respect to the Performance Share Award or the Shares subject thereto. No Shares will be delivered pursuant to the vesting of the Performance Share Award unless (i) you have complied with your obligations under this Agreement and the Plan and (ii) the vesting of the Performance Share Award and the delivery of such Shares complies with applicable law. Until such time as the Shares are delivered to you (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), you will have no right to vote or receive dividends or any other rights as a shareholder with respect to such Shares, notwithstanding the vesting of the Performance Share Award.
ii.Performance Share Award Payment. Subject to the terms of the Plan and this Agreement, any Performance Share Award that becomes payable shall be made in whole Shares, which shall be issued in book-entry form, registered in your name. In the event the Performance Share Award Share Payout is to be made in Shares results in less than a whole number of Shares, the Performance Share Award Share Payout shall be rounded up or down to the next whole Share (no fractional Shares shall be issued in payment of a Performance Share Award). Any Shares issued in respect of a Performance Share Award Share Payout shall be issued pursuant to the terms and conditions of the Plan and shall reduce the number of Shares available for issuance thereunder.
iii.Dividends. Any cash dividend the Board declares with respect to the Shares during the Performance Period shall be treated in accordance with the Notice.
iv.Payment Timing. Except as otherwise provided in Section 21 hereof or in the Notice, as applicable, (A) the Performance Share Award payment shall be made as soon as practicable following the Vesting Date, but in any event no later than March 15 of the taxable year following such date and (B) a Performance Share Award that becomes payable due to a termination due to your Retirement, death or Disability, shall be paid no later than 60 days after the Vesting Date.
v.Payout Upon Termination. The Notice shall set forth the effect of termination upon the Performance Share Award. If you are terminated Without Cause or due to your resignation and, within the twelve (12) month period subsequent to such termination of your Service, the Company determines that your Service could have been terminated for Cause, subject to anything to the contrary that may be contained in the Notice at the time of termination of your Service, your Service will, at the election of the Company, be deemed to have been terminated for Cause for purposes of this Agreement and the Plan, effective as of the date the events giving rise to Cause occurred and any consequences following from a termination for Cause shall be retroactively applied (including your obligation to repay gains that would not have been realized had your Service been terminated for Cause).
b.Conditions to Payment of Performance Share Award. Notwithstanding any other provision of this Agreement:
i.The Performance Share Award shall not become payable to you or your legal representative unless and until you or your legal representative shall have satisfied all applicable withholding obligations for Tax-Related Items (as defined in Section 5 below), if any, in accordance with Section 5 hereof.
ii.The Company shall not be required to issue or deliver any Shares in payment of the Performance Share Award prior to the fulfillment of all of the following conditions: (A) the admission of the Shares to listing on
all stock exchanges on which the Shares are then listed, (B) the completion of any registration or other qualification of the Shares under any state or federal law or under rulings or regulations of the U.S. Securities and Exchange Commission (the “Commission”) or other governmental regulatory body, which the Committee shall, in its sole and absolute discretion, deem necessary and advisable, or if the offering of the Shares is not so registered, a determination by the Company that the issuance of the Shares would be exempt from any such registration or qualification requirements, (C) the obtaining of any approval or other clearance from any state, federal or foreign governmental agency that the Committee shall, in its absolute discretion, determine to be necessary or advisable and (D) the lapse of any such reasonable period of time following the date the Performance Share Award becomes payable as the Committee may from time to time establish for reasons of administrative convenience, subject to compliance with Section 409A of the Code.
c.Committee Discretion. Anything to the contrary in this Section 3 notwithstanding, the Committee may, in its sole discretion, provide for full or partial payment of the Performance Share Award upon termination of your active employment for any reason prior to the completion of a Performance Period to which a Performance Share Award relates; provided that the Committee shall not exercise such discretion if doing so would cause other Performance Share Awards that are intended to qualify as Qualified Performance-Based Compensation not to qualify.
4.Withholding Taxes. Regardless of any action the Company or, if different, your employer (the “Employer”) takes with respect to any or all income tax, social insurance, payroll tax, payment on account or other tax-related items related to your participation in the Plan and legally applicable to you (“Tax-Related Items”), you acknowledge that the ultimate liability for all Tax-Related Items legally due by you is and remains your responsibility and may exceed the amount, if any, actually withheld by the Company or the Employer. Furthermore, you acknowledge that the Company and/or the Employer (a) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Performance Share Award, including, but not limited to, the grant, vesting, or payment of this Performance Share Award or the subsequent sale of Shares issued in payment of the Performance Share Award; and (b) do not commit to and are under no obligation to structure the terms of the grant of the Performance Share Award or any aspect of your participation in the Plan to reduce or eliminate your liability for Tax-Related Items or achieve any particular tax result. If you are or become subject to Tax-Related Items in more than one jurisdiction, you acknowledge that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for (including report) Tax-Related Items in more than one jurisdiction.
The Company is authorized to satisfy the withholding for any or all Tax-Related Items arising from the granting, vesting, or payment of the Performance Share Award or sale of Shares issued pursuant to the Performance Share Award, as the case may be, by deducting the number of Shares having an aggregate value equal to the amount of Tax-Related Items withholding due from a Performance Share Award Share Payout or otherwise becoming subject to current taxation. If the Company satisfies the Tax-Related Items obligation by withholding a number of Shares as described herein, for tax purposes, you shall be deemed to have been issued the full number of Shares due to you at vesting, notwithstanding that a number of Shares is held back solely for the purpose of such Tax-Related Items withholding.
The Company is also authorized to satisfy the actual Tax-Related Items withholding arising from the granting, vesting or payment of this Performance Share Award, the sale of Shares issued pursuant to the Performance Share Award or hypothetical withholding tax amounts if you are covered under a Company tax equalization policy, as the case may be, by the remittance of the required amounts from any proceeds realized upon the open-market sale of the Shares received in payment of the vested Performance Share Award by you. Such open-market sale is on your behalf and at your direction pursuant to this authorization.
Furthermore, the Company and/or the Employer are authorized to satisfy the Tax-Related Items withholding arising from the granting, vesting, or payment of this Performance Share Award, or sale of Shares issued pursuant to the Performance Share Award, as the case may be, by withholding from your wages, or other cash compensation paid to you by the Company and/or the Employer.
If you are subject to the short-swing profit rules of Section 16(b) of the Act, the Participant may elect the form of withholding in advance of any Tax-Related Items withholding event, and in the absence of the Participant’s election, the Company shall deduct the number of Shares having an aggregate value equal to the amount of Tax-Related Items withholding due from the Performance Share Award Share Payout, or the Committee may determine that a particular method be used to satisfy any Tax Related Items withholding.
Shares deducted from the payment of this Performance Share Award in satisfaction of Tax-Related Items withholding shall be valued at the Fair Market Value of the Shares received in payment of the vested Performance Share Award on the date as of which the amount giving rise to the withholding requirement first became includible in your gross income under applicable tax laws. The Company may refuse to issue or deliver the Shares if you fail to comply with your Tax-Related Items obligations. Depending on the withholding method, the Company may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding amounts or other applicable withholding rates, including maximum applicable rates in your jurisdiction(s).
You shall pay to the Company or the Employer any amount of Tax-Related Items that the Company or the Employer may be required to withhold that cannot be satisfied by the means previously described. If you are covered by a Company tax equalization policy, you also agree to pay to the Company any additional hypothetical tax obligation calculated and paid under the terms and conditions of such tax equalization policy.
5.Nature of Grant. By participating in the Plan and in exchange for receiving the Performance Share Award, you acknowledge, understand and agree that:
a.the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time, unless otherwise provided in the Plan;
b.the grant of the Performance Share Award is exceptional, voluntary and occasional and does not create any contractual or other right to receive future grants of Performance Share Awards, or benefits in lieu of Performance Share Awards, even if Performance Share Awards have been granted in the past;
c.all decisions with respect to future Performance Share Award grants, if any, shall be at the sole discretion of the Board of Directors of the Company or the Committee;
d.the Participant is voluntarily participating in the Plan;
e.the Performance Share Award and any Shares subject to the Performance Share Award are not part of or included in any calculation of severance, resignation, termination, redundancy, dismissal, end of service payments, bonuses, long-service awards, pension, retirement or welfare benefits or similar payments and in no event should be considered as compensation for, or relating in any way to, past services for the Company, the Employer, or any Affiliate;
f.the Performance Share Award grant shall not be interpreted to form or amend an employment or service contract or relationship with the Company or any Affiliate;
g.the future value of the underlying Shares is unknown, indeterminable and cannot be predicted with certainty;
h.the Performance Share Award and the benefits evidenced by this Agreement do not create any entitlement, not otherwise specifically determined by the Company in its discretion, to have the Performance Share Award or any such benefits transferred to, or assumed by, another company, or to be exchanged, cashed out or substituted for, in connection with any corporate transaction affecting the Shares; and
If you reside outside the U.S., the following additional provisions shall apply:
i.the Performance Share Award and the Shares subject to the Performance Share Award, and the income from and value of same, are not intended to replace any pension rights or compensation;
j.the Performance Share Award and the Shares subject to the Performance Share Award are extraordinary items that do not constitute compensation of any kind for services of any kind rendered to the Company or the Employer, and are outside the scope of your employment or service contract, if any;
k.the Performance Share Award and the Shares subject to the Performance Share Award are not part of normal compensation or salary from the Employer and in no event should be considered as compensation for, or relating in any way to, past services for the Company, the Employer or any Affiliate of the Company;
l.no claim or entitlement to compensation or damages shall arise from forfeiture of the Performance Share Award resulting from failure to reach Performance Goals or termination of your employment by the Company or the Employer (for any reason whatsoever and whether or not in breach of any employment laws in the country where you reside or later found to be invalid), and in consideration of the grant of the Performance Share Award to which you are otherwise not entitled, you irrevocably agree never to institute any claim against the Company or the Employer, waive your ability, if any, to bring any such claim, and release the Company and the Employer from any such claim; if, notwithstanding the foregoing, any such claim is allowed by a court of competent jurisdiction, then, by participating in the Plan, you shall be deemed irrevocably to have agreed not to pursue such claim and agree to execute any and all documents necessary to request dismissal or withdrawal of such claims; and
m.neither the Company, the Employer nor any Affiliate shall be liable for any foreign exchange rate fluctuation between your local currency and the United States Dollar that may affect the value of the Performance Share Award, any Shares paid to you or any proceeds resulting from your sale of such Shares.
6.Data Privacy.
a.Data Collection and Usage. The Company collects, processes and uses personal data about you, including but not limited to, your name, home address and telephone number, email address, date of birth, social insurance number, employee identification number, hire date, termination date, gross earnings, tax rate, account identification number for the independent stock plan service provider account, any shares of stock or directorships held in the Company, details of all PSUs or any other entitlement to shares or equivalent benefits awarded, canceled, exercised, vested, unvested or outstanding in your favor, which the Company receives from you or your employer (“Data”) for the purposes of implementing, administering and managing the Plan. The legal basis, where required, for the processing of Data is the legitimate interests of the Company in administering the Plan, where our interests are not overridden by your data protection rights.
b.Stock Plan Administration Service Providers. The Company may transfer Data to one or more independent stock plan service providers, which may assist the Company with the implementation, administration and management of the Plan. Such service provider(s) may open an account for you or ask you to receive and trade shares of common stock. You may be asked to acknowledge, or agree to, separate terms and data processing practices with the service provider(s) with such agreement being a condition of participation in the Plan. Please review these terms and data processing practices carefully. If you do not agree to the independent stock plan service provider’s terms and/or data processing practices, you will not be able to participate in the Plan.
c.International Data Transfers. Please note that Data processed in connection with the Plan will be transferred from your country to the United States, where the Company and its service providers are based. Your country or jurisdiction may have different data privacy laws and protections than the United States. The Company will ensure that appropriate measures are in place for compliance with applicable data protection laws in relation to transfer of Data to the United States.
d.Data Retention. The Company will use your personal data only as long as necessary to implement, administer and manage your participation in the Plan and as required to comply with legal or regulatory obligations, including under tax and securities laws. When the Company no longer needs your personal data for any of the above purposes, the Company will remove it from its systems.
e.Data Subject Rights. You understand that you may have a number of rights under data privacy laws in your jurisdiction. Depending on where you are based, such rights may include the right to (i) request access or copies of personal data processed by the Company, (ii) rectification of incorrect data, (iii) deletion of personal data, (iv) restrictions on processing of personal data, (v) portability of personal data, (vi) lodge complaints with competent data protection authorities in your jurisdiction, and/or (vii) receive a list with the names and addresses of any potential recipients of your personal data. To receive clarification regarding these rights or to exercise these rights, you can contact the Company’s Data Privacy Team at gdpr@kraftheinz.com.
7.Nontransferability of Performance Share Award. The Performance Share Award or the interests or rights therein may not be transferred in any manner other than by will or by the laws of descent and distribution, and may not be assigned, hypothecated or otherwise pledged and shall not be subject to execution, attachment or similar process. Upon any attempt to effect any such disposition, or upon the levy of any such process, in violation of the provisions herein, the Performance Share Award shall immediately become null and void and any rights to receive a payment under the Performance Share Award shall be forfeited.
8.Rights as Shareholder. Neither you nor any person claiming under or through you shall have any of the rights or privileges of a shareholder of the Company in respect of any Shares issuable hereunder unless and until certificates representing such Shares (which may be in uncertificated form) will have been issued and recorded on the books and records of the Company or its transfer agents or registrars, and delivered to you (including through electronic delivery to a brokerage account). After such issuance, recordation and delivery, you shall have all the rights of a shareholder of the Company, including with respect to the right to vote the Shares and the right to receive any cash or Share dividends or other distributions paid to or made with respect to the Shares.
9.Repayment/Forfeiture. The Award shall be canceled and forfeited, if, without the consent of the Company, while employed by or providing services to the Company or any Subsidiary or after termination of such employment or service, you (i) violate a non-competition, non-solicitation or non-disclosure covenant or agreement, (ii) otherwise engage in activity that is in conflict with or adverse to the interest of the Company or any Subsidiary, including fraud or conduct contributing to any financial restatements or irregularities, as determined by the Committee in its sole discretion. In addition, any payments or benefits you may receive hereunder shall be subject to repayment or forfeiture as may be required to comply with the requirements under the Securities Act, the Act, rules promulgated by the Commission or any other applicable law, including the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act, or any securities exchange on which the Shares are listed or traded, as may be in effect from time to time as well as any policy relating to the repayment or forfeiture of compensation that the Company may adopt from time-to-time. Further, if you receive any amount in excess of what you should have received under the terms of the Performance Share Award for any reason (including without limitation by reason of a financial restatement, mistake in calculations or administrative error), all as determined by the Committee, then you shall be required to promptly repay any such excess amount to the Company. Nothing in or about this Agreement prohibits you from: (i) filing and, as provided for under Section 21F of the Act, maintaining the confidentiality of a claim with the Commission, (ii) providing the Commission with information that would otherwise violate the non-disclosure restrictions in this Agreement, to the extent permitted by Section 21F of the Act; (iii) cooperating, participating or assisting in a Commission investigation or proceeding without notifying the Company; or (iv) receiving a monetary award as set forth in Section 21F of the Act. Furthermore, you are advised that you shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of any Confidential Information (as defined in Exhibit B) that constitutes a trade secret to which the Defend Trade Secrets Act (18 U.S.C. Section 1833(b)) applies that is made (i) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney, in each case, solely for the purpose of reporting or investigating a suspected violation of law; or (ii) in a complaint or other document filed in a lawsuit or proceeding, if such filings are made under seal.
10.Restrictions on Resale. You hereby agree not to sell any Shares issued in payment of the Performance Share Award at a time when applicable laws or Company policies prohibit a sale. This restriction shall apply as long as your employment continues and for such period of time after the termination of your employment as the Company may specify.
11.Language. You acknowledge that you are sufficiently proficient in the English language, or have consulted with an advisor who is proficient in English, so as to allow you to understand the terms and conditions of this Agreement. If you have received this Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
12.Effect of a Change in Control. The treatment of a Performance Share Award upon a Change in Control shall be governed by the Plan, provided, however, that to the extent that the Performance Share Award constitute Deferred Compensation, settlement of any portion of the Performance Share Award that may vest in connection with a Change in Control will occur within sixty (60) days following the Vesting Date. In the event that there is a conflict between the terms of this Agreement regarding the effect of a Change in Control on the Performance Share Award and the terms of any Employment Agreement, the terms of this Agreement will govern.
13.Securities Laws and Clawback. By accepting a Performance Share Award, you acknowledge that U.S. federal, state or foreign securities laws and/or the Company’s policies regarding trading in its securities may limit or restrict your right to buy or sell Shares, including, without limitation, sales of Shares acquired in connection with the Performance Share Award. You agree to comply with such securities law requirements and Company policies, as such laws and policies are amended from time to time. You also acknowledge that the Performance Share Award may be forfeited if you engage in activity that is in conflict with or adverse to the interest of the Company or any Subsidiary, including fraud or conduct contributing to any financial restatements or irregularities, as determined by the Committee in its sole discretion or to the extent that you otherwise violate any policy adopted by the Company relating to the recovery of compensation granted, paid, delivered, awarded or otherwise provided to you by the Company as such policy is in effect on the date of grant of the applicable Award or, to the extent necessary to address the requirements of applicable law (including Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, as codified in Section 10D of the Act, Section 304 of the Sarbanes-Oxley Act of 2002 or any other applicable law), as may be amended from time to time.
14.Adjustments. The Performance Goals, as well as the manner in which the Performance Share Award payment is calculated is subject to adjustment in the Committee’s sole discretion in accordance with Section 10(b) of the Plan and the Notice. You shall be notified of such adjustment and such adjustment shall be binding upon the Company and you.
15.NO GUARANTEE OF CONTINUED EMPLOYMENT. YOU HEREBY ACKNOWLEDGE AND AGREE THAT THE VESTING OF THE PERFORMANCE SHARE AWARD PURSUANT TO THE PROVISIONS OF THIS AGREEMENT IS EARNED ONLY IF THE PERFORMANCE GOALS ARE ATTAINED AND THE OTHER TERMS AND CONDITIONS SET FORTH HEREIN ARE SATISFIED AND BY YOUR CONTINUED EMPLOYMENT (SUBJECT TO THE PROVISIONS OF SECTION 3(b) HEREOF) AT THE WILL OF THE COMPANY OR AN AFFILIATE (AND NOT THROUGH THE ACT OF BEING EMPLOYED BY THE COMPANY OR AN AFFILIATE, BEING GRANTED A PERFORMANCE SHARE AWARD, OR RECEIVING SHARES HEREUNDER). YOU FURTHER ACKNOWLEDGE AND AGREE THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE RIGHT TO EARN A PAYMENT UNDER THE PERFORMANCE SHARE AWARD SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED EMPLOYMENT DURING THE PERFORMANCE PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH YOUR RIGHT OR THE RIGHT OF THE COMPANY OR AN AFFILIATE TO TERMINATE YOUR EMPLOYMENT AT ANY TIME, WITH OR WITHOUT CAUSE, AND IN ACCORDANCE WITH APPLICABLE EMPLOYMENT LAWS OF THE COUNTRY WHERE YOU RESIDE.
16.Entire Agreement: Governing Law. The Notice, the Plan and this Agreement, including any appendices, constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and you with respect to the subject matter hereof, and may not be modified adversely to your interest except as provided in the Notice, the Plan or this Agreement or by means of a writing signed by the Company and you. Nothing in the Notice, the Plan and this Agreement (except as expressly provided therein) is intended to confer any rights or remedies on any persons other than the parties. The Notice, the Plan and this Agreement are to be construed in accordance with and governed by the substantive laws of Delaware, U.S.A., without giving effect to any choice of law rule that would cause the application of the laws of any jurisdiction other than the substantive laws of Delaware to the rights and duties of the parties. Unless otherwise provided in the Notice, the Plan or this Agreement, you are deemed to submit to the exclusive jurisdiction of Delaware, U.S.A., and agree that such litigation shall be conducted in the courts of Wilmington County, Delaware, or the federal courts for the United States for the Eastern District of Delaware, where this grant is made and/or to be performed.
17.Conformity to Securities Laws. You acknowledge that the Notice, the Plan and this Agreement are intended to conform to the extent necessary with all provisions of the Securities Act and the Act, and any and all regulations and rules promulgated thereunder by the Commission, including, without limitation, Rule 16b-3. Notwithstanding anything herein to the contrary, the Notice, the Plan and this Agreement shall be administered, and the Performance Share Award is granted, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Notice, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.
18.Administration and Interpretation. The Performance Share Award, the vesting of the Performance Share Award and any payment of the Performance Share Award are subject to, and shall be administered in accordance with, the provisions of this Agreement, as the same may be amended from time to time. Any question or dispute regarding the
administration or interpretation of the Notice, the Plan and this Agreement shall be submitted by you or by the Company to the Committee. The resolution of such question or dispute by the Committee shall be final and binding on all persons.
19.Headings. The captions used in the Notice and this Agreement are inserted for convenience and shall not be deemed a part of the Performance Share Award for construction or interpretation.
20.Notices. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery, upon deposit for delivery by an internationally recognized express mail courier service or upon deposit in the United States mail by certified mail (if the parties are within the United States), with postage and fees prepaid, addressed to the other party at its address as shown in these instruments, or to such other address as such party may designate in writing from time to time to the other part.
21.Successors and Assigns. The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Agreement shall be binding upon you and your heirs, executors, administrators, successors and assign.
22.Severability. Whenever feasible, each provision of the Notice, this Agreement, and the Plan shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision in the Notice, Plan or this Agreement is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of the Notice, the Plan or this Agreement.
23.Waiver. You acknowledge that a waiver by the Company for breach of any provision of the Agreement shall not operate or be construed as a waiver of any other provision of the Award Agreement, or of any subsequent breach of the Agreement.
24.Code Section 409A. This Performance Share Award is intended to be exempt from or to comply with Section 409A of the Code and shall be interpreted, operated and administered in a manner consistent with such intent. To the extent this Agreement provides for the Performance Share Award to become vested and be settled upon your termination of employment, the applicable Shares shall be transferred to you or your beneficiary upon your “separation from service,” within the meaning of Section 409A of the Code; provided that if you are a “specified employee,” within the meaning of Section 409A of the Code, then to the extent the Performance Share Award constitutes nonqualified deferred compensation, within the meaning of Section 409A of the Code, such Shares shall be transferred to you or your beneficiary upon the earlier to occur of (i) the six-month anniversary of such separation from service and (ii) the date of your death.
This Agreement may be amended at any time, without the consent of any party, to avoid the application of Section 409A of the Code in a particular circumstance or that is necessary or desirable to satisfy any of the requirements under Section 409A of the Code, but the Company shall not be under any obligation to make any such amendment. Nothing in the Agreement shall provide a basis for any person to take action against the Company or any Affiliate based on matters covered by Section 409A of the Code, including the tax treatment of any amount paid under the Performance Share Award granted hereunder, and neither the Company nor any of its Affiliates shall under any circumstances have any liability to you or your estate or any other party for any taxes, penalties or interest due on amounts paid or payable under this Agreement, including taxes, penalties or interest imposed under Section 409A of the Code.
25.No Advice Regarding Performance Share Award. The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding your acquisition or sale of any Shares issued in payment of the Performance Share Award. You acknowledge that you should consult with your own personal tax, legal and financial advisors before taking any action related to the Performance Share Award.
26.Language. If you have received this Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version shall control.
27.Appendix I. Notwithstanding any provisions in this Agreement, the Performance Share Award grant shall be subject to any special terms and conditions set forth in Appendix I to this Agreement for your country. Moreover, if you
relocate to one of the countries included in Appendix I, the special terms and conditions for such country shall apply to you, to the extent the Company determines that the application of such terms and conditions is necessary or advisable in order to comply with laws in the country where you reside regarding the issuance of Shares, or to facilitate the administration of the Performance Share Award. Appendix I constitutes part of this Agreement.
28.Electronic Delivery and Acceptance. The Company may, in its sole discretion, decide to deliver any documents related to current or future Performance Share Awards by electronic means or to request your consent to participate in the Plan by electronic means. You hereby consent to receive such documents by electronic delivery and agree to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.
29.Imposition of Other Requirements. The Company reserves the right to impose other requirements on your participation in the Plan or on the Performance Share Award and on any Shares issued in payment of the Performance Share Award, to the extent the Company determines it is necessary or advisable in order to comply with laws in the country where you reside regarding the issuance of Shares, or to facilitate the administration of the Performance Share Award, and to require you to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.
EXHIBIT B
RESTRICTIVE COVENANTS AGREEMENT
I understand that I am or will be an employee to or other service-provider of The Kraft Heinz Company and/or its Subsidiaries and/or its Affiliates (collectively, the “Company”) and will learn and have access to the Company's confidential, trade secret and proprietary information and key business relationships. I understand that the products and services that the Company develops, provides and markets are unique. Further, I know that my promises in this Restrictive Covenants Agreement (the “Agreement”) are an important way for the Company to protect its proprietary interests and that The Kraft Heinz Company would not have granted me Performance Share Units (“PSUs”) or other equity grants unless I made such promises.
In addition to other good and valuable consideration, I am expressly being given PSUs or other equity grants in exchange for my agreeing to the terms of this Agreement. In consideration of the foregoing, I (the “Executive”) agree as follows:
1.NON-DISCLOSURE OF CONFIDENTIAL INFORMATION. During the course of Executive's Service, Executive will have access to Confidential Information. For purposes of this Agreement, “Confidential Information” means all data, information, ideas, concepts, discoveries, trade secrets, inventions (whether or not patentable or reduced to practice), innovations, improvements, know-how, developments, techniques, methods, processes, treatments, drawings, sketches, specifications, designs, plans, patterns, models, plans and strategies, and all other confidential or proprietary information or trade secrets in any form or medium (whether merely remembered or embodied in a tangible or intangible form or medium) whether now or hereafter existing, relating to or arising from the past, current or potential business, activities and/or operations of the Company, including, without limitation, any such information relating to or concerning finances, sales, marketing, advertising, transition, promotions, pricing, personnel, customers, suppliers, vendors, raw partners and/or competitors of the Company. Executive agrees that Executive shall not, directly or indirectly, use, make available, sell, disclose or otherwise communicate to any person, other than in the course of Executive's assigned duties and for the benefit of the Company, either during the period of Executive's Service or at any time thereafter, any Confidential Information or other confidential or proprietary information received from third parties subject to a duty on the Company's part to maintain the confidentiality of such information, and to use such information only for certain limited purposes, in each case, which shall have been obtained by Executive during Executive's Service. The foregoing shall not apply to information that (i) was known to the public prior to its disclosure to Executive; (ii) becomes generally known to the public subsequent to disclosure to Executive through no wrongful act of Executive or any representative of Executive; or (iii) Executive is required to disclose by applicable law, regulation or legal process (provided that, to the extent permitted by law, Executive provides the Company with prior notice of the contemplated disclosure and cooperates with the Company at its expense in seeking a protective order or other appropriate protection of such information).
Pursuant to the U.S. Defend Trade Secrets Act of 2016, Executive shall not be held criminally, or civilly, liable under any Federal or State Trade secret law for the disclosure of a trade secret that is made in confidence either directly or indirectly to a Federal, State, or local government official, or an attorney, for the sole purpose of reporting, or investigating, a violation of law. Moreover, Executive may disclose trade secrets in a complaint, or other document, filed in a lawsuit, or other proceeding, if such filing is made under seal. Finally, if Executive files a lawsuit alleging retaliation by the Company for reporting a suspected violation of the law, Executive may disclose the trade secret to Executive's attorney and use the trade secret in the court proceeding, if Executive files any document containing the trade secret under seal and does not disclose the trade secret, except pursuant to court order.
No Company policies or practices, including this Non-Disclosure of Confidential Information provision, is intended to or shall limit, prevent, impede or interfere in any way with Executive's right, without prior notice to the Company, to provide information to the government, participate in investigations, testify in proceedings regarding the Company's past or future conduct, or engage in any activities protected under whistle blower statutes.
2.NON-COMPETITION. Executive acknowledges that (i) Executive performs services of a unique nature for the Company that are irreplaceable, and that Executive's performance of such services to a competing business will result in irreparable harm to the Company, (ii) Executive has had and will continue to have access to Confidential Information which, if disclosed, would unfairly and inappropriately assist in competition against the Company, (iii) in the course of Executive's employment by or service to a competitor, Executive would inevitably use or disclose such Confidential Information, (iv) the Company has substantial relationships with its customers and Executive has had and
will continue to have access to these customers, (v) Executive has received and will receive specialized training from the Company, and (vi) Executive has generated and will continue to generate goodwill for the Company in the course of Executive's Service. Accordingly, during Executive's Service and for twelve (12) months following a termination of Executive's Service for any reason (the “Restricted Period”), Executive will not engage in any business activities, directly or indirectly (whether as an employee, consultant, officer, director, partner, joint venturer, manager, member, principal, agent, or independent contractor, individually, in concert with others, or in any other manner) within the same line or lines of business for which the Executive performed services for the Company and in a capacity that is similar to the capacity in which the Executive was employed by the Company with any person or entity that competes with the Company in the consumer packaged food and beverage industry (“Competitive Business”) anywhere within the same geographic territory(ies) for which the Executive performed services for the Company (the “Restricted Territory”). Notwithstanding the foregoing, nothing herein shall prohibit Executive from being a passive owner of not more than three percent (3%) of the equity securities of a publicly traded corporation engaged in a business that is in competition with the Company, so long as Executive has no active participation in the business of such corporation.
3.NON-SOLICITATION. During the Restricted Period, Executive agrees that Executive shall not, except in the furtherance of Executive's duties to the Company, directly or indirectly, individually or on behalf of any other person, firm, corporation or other entity, solicit, aid, induce, assist in the solicitation of, or accept any business (other than on behalf of the Company) from, any customer or potential customer of the Company to purchase goods or services then sold by the Company from another person, firm, corporation or other entity or, directly or indirectly, in any way request, suggest or advise any such customer to withdraw or cancel any of their business or refuse to continue to do business with the Company. This restriction shall apply to customers or potential customers who, during the two (2) years immediately preceding the Executive's termination, had been assigned to the Executive by the Company, or with which the Executive had contact on behalf of the Company while an Executive of the Company, or about which the Executive had access to confidential information by virtue of Executive's employment with the Company.
4.NON-INTERFERENCE. During the Restricted Period, Executive agrees that Executive shall not, except in the furtherance of Executive's duties to the Company, directly or indirectly, individually or on behalf of any other person, firm, corporation or other entity, (A) solicit, aid or induce any employee, representative or agent of the Company to leave such employment or retention or to accept employment with or render services to or with any other person, firm, corporation or other entity unaffiliated with the Company or hire or retain any such employee, representative or agent, or take any action to materially assist or aid any other person, firm, corporation or other entity in identifying, hiring or soliciting any such employee, representative or agent, or (B) interfere, or aid or induce any other person or entity in interfering, with the relationship between the Company and its vendors, suppliers or customers. As used herein, the term "solicit, aid or induce" includes, but is not limited to, (i) initiating communications with a Company employee relating to possible employment, (ii) offering bonuses or other compensation to encourage a Company employee to terminate his or her employment with the Company and accept employment with any entity, (iii) recommending a Company employee to any entity, and (iv) aiding an entity in recruitment of a Company employee. An employee, representative or agent shall be deemed covered by this Section 4 while so employed or retained and for a period of six (6) months thereafter.
5.NON-DISPARAGEMENT. Executive agrees not to make negative comments or otherwise disparage the Company or its officers, directors, employees, shareholders, agents or products or services. The foregoing shall not be violated by truthful statements made in (a) response to legal process, required governmental testimony or filings, or administrative or arbitral proceedings (including, without limitation, depositions in connection with such proceedings) or (b) the good faith performance of Executive's duties to the Company.
6.INVENTIONS.
a.Executive acknowledges and agrees that all ideas, methods, inventions, discoveries, improvements, work products, developments, software, know-how, processes, techniques, methods, works of authorship and other work product (“Inventions”), whether patentable or unpatentable, (A) that are reduced to practice, created, invented, designed, developed, contributed to, or improved with the use of any Company resources and/or within the scope of Executive's work with the Company or that relate to the business, operations or actual or demonstrably anticipated research or development of the Company, and that are made or conceived by Executive, solely or jointly with others, during Executive's Service, or (B) suggested by any work that Executive performs in connection with the Company, either while performing Executive's duties with the Company or on Executive's own time, but only insofar as the Inventions are related to Executive's work as an
employee or other service provider to the Company, shall belong exclusively to the Company (or its designee), whether or not patent or other applications for intellectual property protection are filed thereon. Executive will keep full and complete written records (the “Records”), in the manner prescribed by the Company, of all Inventions, and will promptly disclose all Inventions completely and in writing to the Company. The Records shall be the sole and exclusive property of the Company, and Executive will surrender them upon the termination of Service, or upon the Company's request. Executive irrevocably conveys, transfers and assigns to the Company the Inventions and all patents or other intellectual property rights that may issue thereon in any and all countries, whether during or subsequent to Executive's Service, together with the right to file, in Executive's name or in the name of the Company (or its designee), applications for patents and equivalent rights (the “Applications”). Executive will, at any time during and subsequent to Executive's Service, make such applications, sign such papers, take all rightful oaths, and perform all other acts as may be requested from time to time by the Company to perfect, record, enforce, protect, patent or register the Company's rights in the Inventions, all without additional compensation to Executive from the Company. Executive will also execute assignments to the Company (or its designee) of the Applications, and give the Company and its attorneys all reasonable assistance (including the giving of testimony) to obtain the Inventions for the Company's benefit, all without additional compensation to Executive from the Company, but entirely at the Company's expense.
b.In addition, the Inventions will be deemed Work for Hire, as such term is defined under the copyright laws of the United States, on behalf of the Company and Executive agrees that the Company will be the sole owner of the Inventions, and all underlying rights therein, in all media now known or hereinafter devised, throughout the universe and in perpetuity without any further obligations to Executive. If the Inventions, or any portion thereof, are deemed not to be Work for Hire, or the rights in such Inventions do not otherwise automatically vest in the Company, Executive hereby irrevocably conveys, transfers and assigns to the Company, all rights, in all media now known or hereinafter devised, throughout the universe and in perpetuity, in and to the Inventions, including, without limitation, all of Executive's right, title and interest in the copyrights (and all renewals, revivals and extensions thereof) to the Inventions, including, without limitation, all rights of any kind or any nature now or hereafter recognized, including, without limitation, the unrestricted right to make modifications, adaptations and revisions to the Inventions, to exploit and allow others to exploit the Inventions and all rights to sue at law or in equity for any infringement, or other unauthorized use or conduct in derogation of the Inventions, known or unknown, prior to the date hereof, including, without limitation, the right to receive all proceeds and damages therefrom. In addition, Executive hereby waives any so-called "moral rights" with respect to the Inventions. To the extent that Executive has any rights in the results and proceeds of Executive's service to the Company that cannot be assigned in the manner described herein, Executive agrees to unconditionally waive the enforcement of such rights. Executive hereby waives any and all currently existing and future monetary rights in and to the Inventions and all patents and other registrations for intellectual property that may issue thereon, including, without limitation, any rights that would otherwise accrue to Executive's benefit by virtue of Executive being an employee of or other service provider to the Company.
7.RETURN OF COMPANY PROPERTY. On the date of Executive's termination of Service with the Company for any reason (or at any time prior thereto at the Company's request), Executive shall return all property belonging to the Company (including, but not limited to, any Company-provided laptops, computers, cell phones, wireless electronic mail devices or other equipment, or documents and property belonging to the Company).
8.REASONABLENESS OF COVENANTS. In signing this Agreement, including by electronic means, Executive gives the Company assurance that Executive has carefully read and considered all of the terms and conditions of this Agreement, including the restraints imposed by it. Executive agrees that these restraints are necessary for the reasonable and proper protection of the Company and its Confidential Information and that each and every one of the restraints is reasonable in respect to subject matter, length of time and geographic area, and that these restraints, individually or in the aggregate, will not prevent Executive from obtaining other suitable employment during the period in which Executive is bound by the restraints. Executive acknowledges that each of these covenants has a unique, very substantial and immeasurable value to the Company and that Executive has sufficient assets and skills to provide a livelihood while such covenants remain in force. Executive further covenants that Executive will not challenge the reasonableness or enforceability of any of the covenants set forth in this Agreement, and that Executive will reimburse the Company for all costs (including reasonable attorneys' fees) incurred in connection with any action to enforce any of the provisions of this Agreement if either the Company prevails on any material issue involved in
such dispute or if Executive challenges the reasonableness or enforceability of any of the provisions of this Agreement. It is also agreed that the "Company" as used in this Agreement refers to each of the Company's Subsidiaries and Affiliates and that each of the Company's s Subsidiaries and Affiliates will have the right to enforce all of Executive's obligations to that Subsidiary or Affiliate under this Agreement, as applicable, subject to any limitation or restriction on such rights of the Subsidiary or Affiliate under applicable law.
9.REFORMATION. If it is determined by a court of competent jurisdiction in any state or country that any restriction in this Agreement is excessive in duration or scope or is unreasonable or unenforceable under applicable law, it is the intention of the parties that such restriction may be modified or amended by the court to render it enforceable to the maximum extent permitted by the laws of that state or country.
10.REMEDIES. Executive acknowledges and agrees that the Company's remedies at law for a breach or threatened breach of any of the provisions of Agreement would be inadequate and, in recognition of this fact, Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond or other security, shall be entitled to obtain equitable relief in the form of specific performance, a temporary restraining order, a temporary or permanent injunction or any other equitable remedy which may then be available, without the necessity of showing actual monetary damages, in addition to any other equitable relief (including without limitation an accounting and/or disgorgement) and/or any other damages as a matter of law.
11.REPURCHASE. Executive acknowledges and agrees that a breach of this Agreement would constitute a "Covenant Breach" as such term is used in the Plan and therefore, in the event of a Covenant Breach, Executive's PSUs and the Shares issued in payment thereof (as such terms are defined in the Plan) shall be subject to repurchase by The Kraft Heinz Company in accordance with the terms of the Plan.
12.TOLLING. In the event of any violation of the provisions of this Agreement, Executive acknowledges and agrees that the post-termination restrictions contained in this Agreement shall be extended by a period of time equal to the period of such violation, it being the intention of the parties hereto that the running of the applicable post-termination restriction period shall be tolled during any period of such violation.
13.SURVIVAL OF PROVISIONS. The obligations contained in this Agreement hereof shall survive the termination or expiration of the Executive's Service with the Company and shall be fully enforceable thereafter.
14.VENUE, PERSONAL JURISDICTION, AND COVENANT NOT TO SUE. Executive expressly agrees to submit to the exclusive jurisdiction and exclusive venue of courts located in the State of Delaware in connection with any litigation which may be brought with respect to a dispute between the Company and Executive in relation to this Restrictive Covenants Agreement, regardless of where Executive resides or where Executive performs services for the Company. Executive hereby irrevocably waives Executive's rights, if any, to have any disputes between the Company and Executive related to this Restrictive Covenants Agreement decided in any jurisdiction or venue other than a court in the State of Delaware. Executive hereby waives, to the fullest extent permitted by applicable law, any objection which Executive now or hereafter may have to personal jurisdiction or to the laying of venue of any such suit, action or proceeding, and Executive agrees not to plead or claim the same. Executive further irrevocably covenants not to sue the Company related to this Restrictive Covenants Agreement in any jurisdiction or venue other than a court in the State of Delaware. All matters relating to the interpretation, construction, application, validity, and enforcement of this Agreement, and any disputes or controversies arising hereunder, will be governed by the laws of the State of Delaware without giving effect to any choice or conflict of law provision or rule, whether of the State of Delaware or any other jurisdiction, that would cause the application of laws of any jurisdiction other than the State of Delaware.
APPENDIX I
ADDITIONAL TERMS AND CONDITIONS OF
THE KRAFT HEINZ COMPANY OMNIBUS INCENTIVE PLAN
PERFORMANCE SHARE AWARD AGREEMENT FOR NON-U.S. PARTICIPANTS
TERMS AND CONDITIONS
This Appendix I includes additional terms and conditions that govern the Performance Share Award (referred to herein as PSUs) granted to you under the Plan if you work or reside outside the U.S. and/or in one of the countries listed below. These terms and conditions are in addition to, or if so indicated, in place of the terms and conditions set forth in the Agreement. Certain capitalized terms used but not defined in this Appendix I have the meanings set forth in the Plan and/or the Agreement.
If you are a citizen or resident of a country other than the one in which you are currently working, transfer employment and/or residency to another country after the PSUs are granted to you, or are considered a resident of another country for local law purposes, the terms and conditions contained herein may not be applicable to you, and the Company shall, in its discretion, determine to what extent the terms and conditions contained herein shall apply to you.
NOTIFICATIONS
This Appendix I also includes information regarding exchange controls and certain other issues of which you should be aware with respect to participation in the Plan. The information is based on the securities, exchange control, and other laws in effect in the respective countries as of July 2020. Such laws are often complex and change frequently. As a result, the Company strongly recommends that you not rely on the information in this Appendix I as the only source of information relating to the consequences of your participation in the Plan because the information may be out of date at the time you vest in the PSUs or sell Shares acquired under the Plan.
In addition, the information contained herein is general in nature and may not apply to your particular situation, and the Company is not in a position to assure you of a particular result. Accordingly, you should seek appropriate professional advice as to how the relevant laws in your country may apply to your situation.
Finally, if you are a citizen or resident of a country other than the one in which you are currently working, transfer employment and/or residency after the PSUs are granted or are considered a resident of another country for local law purposes, the notifications contained herein may not be applicable to you in the same manner.
GENERAL NON-U.S. TERMS AND CONDITIONS
TERMS AND CONDITIONS
The following terms and conditions apply to you if you are located outside of the U.S.
Entire Agreement.
The following provisions supplement the entire Agreement, generally:
If you are located outside the U.S., in no event will any aspect of the PSUs be determined in accordance with your Employment Agreement (or other Service contract). The terms and conditions of the PSUs will be solely determined in accordance with the provisions of the Plan and the Agreement, including this Appendix I, which supersede and replace any prior agreement, either written or verbal (including your Employment Agreement, if applicable) in relation to the PSUs.
Performance Share Award Payment.
If you are resident or employed outside of the United States, the Company may, in its sole discretion, settle the PSUs in the form of a cash payment to the extent settlement in Shares: (i) is prohibited under local law, (ii) would require you, the Company or one of its Subsidiaries or Affiliates to obtain the approval of any governmental or regulatory body in your country of residence (or your country of employment, if different), (iii) would result in adverse tax consequences for you, the Company or one of its Subsidiaries or Affiliates, or (iv) is administratively burdensome. Alternatively, the Company may, in its sole
discretion settle the PSUs in the form of Shares but require you to sell such Shares immediately or within a specified period following your termination of Service (in which case, this Agreement shall give the Company the authority to issue sales instructions on your behalf).
Termination Without Cause, death and Disability / Payout Upon Termination.
The following provisions supplement the termination provisions of the Award Notice and Agreement, provided, however, that if you are subject to U.S. federal income tax and the PSUs constitute Deferred Compensation, your termination of Service date will be the date of your Separation from Service:
For purposes of the PSU, your employment or Service relationship will be considered terminated as of the date you are no longer actively providing Services to the Company or one of its Subsidiaries or Affiliates (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where you provide Service or the terms of your Employment Agreement, if any), and unless otherwise expressly provided in this Agreement or determined by the Company, your right to vest in the PSU under the Plan, if any, will terminate as of such date and will not be extended by any notice period (e.g., your period of Service would not include any contractual notice period or any period of "garden leave" or similar period mandated under employment laws in the jurisdiction where you provide Service or the terms of your Employment Agreement, if any); the Committee shall have the exclusive discretion to determine when you are no longer actively providing Service for purposes of the PSUs (including whether you may still be considered to be providing Service while on a leave of absence).
Notwithstanding the provisions governing the treatment of the PSUs upon termination due to Retirement as set forth in the Award Notice and Agreement, if the Company receives an opinion of counsel that there has been a legal judgment and/or legal development in a particular jurisdiction that would likely result in the treatment in case of a termination due to Retirement as set forth in the Agreement being deemed unlawful and/or discriminatory, then the Company will not apply the provisions for termination due to Retirement at the time you cease to provide Service and the PSUs will be treated as it would under the rules that apply if your Service ends for resignation.
Termination for Cause.
The implications upon a termination for Cause as set forth in the Agreement and the Plan shall only be enforced, to the extent deemed permissible under applicable local law, as determined in the sole discretion of the Committee.
Not a Public Offering in Non-U.S. Jurisdictions.
If you are resident or employed outside of the United States, neither the grant of the PSUs under the Plan nor the issuance of the underlying Shares upon vesting of the PSUs is intended to be a public offering of securities in your country of residence (and country of employment, if different). The Company has not submitted any registration statement, prospectus or other filings to the local securities authorities in jurisdictions outside of the United States unless otherwise required under local law.
Insider Trading and Market Abuse Laws.
You may be subject to insider trading restrictions and/or market abuse laws based on the exchange on which the Shares are listed and in applicable jurisdictions including the United States and your country or your broker's country, if different, which may affect your ability to accept, acquire, sell or otherwise dispose of Shares, rights to Shares or rights linked to the value of Shares under the Plan during such times as you are considered to have "inside information" regarding the Company (as defined by the laws in the applicable jurisdictions). Local insider trading laws and regulations may prohibit the cancellation or amendment of orders you placed before you possessed inside information. Furthermore, you could be prohibited from (a) disclosing the inside information to any third party and (b) "tipping" third parties or causing them otherwise to buy or sell securities (third parties include fellow employees). Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under any applicable Company insider trading policy. You acknowledge that it is your responsibility to comply with any applicable restrictions, and you should speak to your personal advisor on this matter.
Foreign Asset/Account, Exchange Control and Tax Reporting.
You may be subject to foreign asset/account, exchange control and/or tax reporting requirements as a result of the acquisition, holding and/or transfer of Shares or cash (including dividends, dividend equivalents and the proceeds arising from the sale of
Shares) derived from your participation in the Plan, to and/or from a brokerage/bank account or legal entity located outside your country. The applicable laws of your country may require that you report such accounts, assets, the balances therein, the value thereof and/or the transactions related thereto to the applicable authorities in such country. You acknowledge that you are responsible for ensuring compliance with any applicable foreign asset/account, exchange control and tax reporting requirements and should consult your personal legal advisor on this matter.
COUNTRY-SPECIFIC TERMS AND CONDITIONS/NOTIFICATIONS
AUSTRALIA
NOTIFICATIONS
Offer Document.
This offer document sets out information regarding the grant of PSUs to Australian resident employees of the Company and its Subsidiaries or Affiliates and is provided by the Company to ensure compliance of the Plan with the Australian Securities and Investments Commission's ("ASIC's") Class Order 14/1000 and relevant provisions of the Corporations Act 2001.
In addition to the information set out in the Agreement, you also are being provided with a copy of the Plan, the prospectus and the employee information supplement (collectively, the "Additional Documents").
The Additional Documents provide further information to help you make an informed investment decision about participating in the Plan. The Plan is not a prospectus for the purposes of the Corporations Act 2001.
You should not rely upon any oral statements made in relation to this offer. You should rely only upon the statements contained in the Agreement and the Additional Documents when considering participation in the Plan.
Securities Law Notification
Investment in Shares involves a degree of risk. If you elect to participate in the Plan, you should monitor your participation and consider all risk factors relevant to the acquisition of Shares under the Plan as set out in the Agreement and the Additional Documents.
The information contained in this offer is general information only. It is not advice or information that takes into account your objectives, financial situation and needs.
You should consider obtaining your own financial product advice from an independent person who is licensed by ASIC to give advice about participation in the Plan.
Additional Risk Factors for Australian Residents
You should have regard to risk factors relevant to investment in securities generally and, in particular, to the holding of Shares. For example, the price at which Shares are quoted on the Nasdaq may increase or decrease due to a number of factors. There is no guarantee that the price of the Shares will increase. Factors which may affect the price of Shares include fluctuations in the domestic and international market for listed stocks, general economic conditions, including interest rates, inflation rates, commodity and oil prices, changes to government fiscal, monetary or regulatory policies, legislation or regulation, the nature of the markets in which the Company operates and general operational and business risks.
More information about potential factors that could affect the Company's business and financial results is included in the Company's most recent Annual Report on Form 10-K and the Company's Quarterly Report on Form 10-Q. Copies of these
reports are available at http://www.sec.gov/, on the Company's "Investor Relations" page at http://ir.kraftheinzcompany.com/, and upon request to the Company.
In addition, you should be aware that the Australian dollar value of any Shares acquired at vesting will be affected by the U.S. dollar/Australian dollar exchange rate. Participation in the Plan involves certain risks related to fluctuations in this rate of exchange.
Common Stock
Common stock of a U.S. corporation is analogous to ordinary shares of an Australian corporation.
Dividends may be paid on the Shares out of any funds of the Company legally available for dividends at the discretion of the Board.
The Shares are traded on the Nasdaq in the United States of America under the symbol "KHC."
The Shares are not liable to any further calls for payment of capital or for other assessment by the Company and have no sinking fund provisions, pre-emptive rights, conversion rights or redemption provisions.
Ascertaining the Market Price of Shares
You may ascertain the current market price of the Shares as traded on the Nasdaq at http://www.Nasdaq.com under the symbol "KHC." The Australian dollar equivalent of that price can be obtained at: http://www.rba.gov.au/statistics/frequency/exchange-rates.html.
This will not be a prediction of what the market price per Share will be when the PSUs vest or when the Shares are issued or of the applicable exchange rate on the actual Vesting Date or date the Shares are issued.
Deferred Taxation.
Subdivision 83A-C of the Income Tax Assessment Act, 1997, applies to PSUs granted under the Plan, such that the PSUs are intended to be subject to deferred taxation.
BELGIUM
NOTIFICATIONS
Foreign Assets/Account Reporting Information.
If you are a resident of Belgium, you will be required to report any security (e.g., Shares acquired under the Plan) or bank account (including brokerage accounts) established outside of Belgium on your annual tax return. In a separate report, you will be required to provide the National Bank of Belgium with details regarding such foreign accounts (including the account number, bank name and country in which any such account was opened).
BRAZIL
TERMS AND CONDITIONS
Compliance with Law.
By accepting the PSUs you acknowledge that you agree to comply with applicable Brazilian laws and pay any and all applicable taxes legally due by you associated with the vesting of the PSUs, the receipt of any dividends and/or Dividend Equivalents, and the sale of Shares acquired or issued under the Plan. You further agree that, for all legal purposes, (i) the benefits provided to you under the Plan are the result of commercial transactions unrelated to your employment or Service
relationship, (ii) the Plan is not a part of the terms and conditions of your employment or Service relationship, and (iii) the income from the Award, if any, is not part of your remuneration from employment or Service.
NOTIFICATIONS
Exchange Control Information.
If you are resident or domiciled in Brazil, you will be required to submit annually a declaration of assets and rights held outside of Brazil to the Central Bank of Brazil if the aggregate value of such assets and rights is equal to or greater than US$100,000. Assets and rights that must be reported include Shares.
CANADA
TERMS AND CONDITIONS
Plan Document Acknowledgment.
In accepting the grant of PSUs, you acknowledge that you have received a copy of the Plan, have reviewed the Plan and the Agreement in their entirety and fully understand and accept all provisions of the Plan and the Agreement.
Payout of PSUs in Shares Only.
Pursuant to its discretion under Section 10(d) of the Plan, with respect to all employees residing in Canada, the Company will convert all vested PSUs only into an equivalent number of Shares. If you reside in Canada (or in the event of your death, your legal representative or estate) you will not receive an equivalent or fractional Share cash payment with respect to the vested PSUs.
Termination.
The following provision replaces the first paragraph of the Termination section of the General Non-U.S. Terms and Conditions section of this Appendix I:
In the event of your termination of Service (whether or not later found to be invalid or in breach of employment laws in the jurisdiction where you provide Service or the terms of your Employment Agreement, if any), unless provided otherwise by the Company: (i) your right to vest in the PSUs (if any) will terminate effective, as of the earlier of (1) the date the you receive notice of termination, or (2) the date you are no longer actively providing Service, regardless of any notice period or period of pay in lieu of such notice required under applicable Canadian employment laws (including, but not limited to statutory law, regulatory law and/or common law). You will not earn or be entitled to any pro-rated vesting for the portion of time before the date on which your right to vest terminates, nor will you be entitled to any compensation for lost vesting.
The Committee shall have the exclusive discretion to determine when you are no longer actively providing Service for purposes of the PSUs (including whether you may still be considered to be providing Service while on a leave of absence). Notwithstanding the foregoing, if applicable employment standards legislation explicitly requires continued entitlement to vesting during a statutory notice period, your right to vest in the PSUs under the Plan, if any, will terminate effective as of the
last day of your minimum statutory notice period, but you will not earn or be entitled to pro-rated vesting if the vesting date falls after the end of your statutory notice period, nor will you be entitled to any compensation for lost vesting.
The following terms and conditions apply if you are a resident of Quebec:
Language Consent.
The parties acknowledge that it is their express wish that the Agreement, as well as all documents, notices and legal proceedings entered into, given or instituted pursuant hereto or relating directly or indirectly hereto, be drawn up in English.
Consentement relatif à la langue.
Les parties reconnaissent avoir expressément exigé la rédaction en anglais de la Convention d'Attribution, ainsi que de tous documents, avis et procédures judiciaires, exécutés, donnés ou intentés en vertu de, ou liés directement ou indirectement à, la présente convention.
NOTIFICATIONS
Securities Law Information.
You are permitted to sell Shares acquired under the Plan through the designated broker appointed under the Plan, if any, provided the sale of the Shares takes place outside of Canada through the facilities of a stock exchange on which the Shares are listed (i.e., Nasdaq).
Foreign Assets/Account Reporting Information.
Canadian residents are required to report any specified foreign property (including Shares and PSUs) on form T1135 (Foreign Income Verification Statement) if the total cost of such specified foreign property exceeds C$100,000 at any time in the year. The form must be filed by April 30 of the following year. Specified foreign property includes Shares acquired under the Plan and may include the PSUs. The PSUs must be reported - generally at a nil cost - if the C$100,000 cost threshold is exceeded because of other foreign property you hold. If Shares are acquired, their cost generally is the adjusted cost base ("ACB") of the Shares. The ACB would normally equal the fair market value of the Shares at vesting, but if you own other shares, this ACB may have to be averaged with the ACB of the other shares. You should speak with a personal tax advisor to determine the scope of foreign property that must be considered for purposes of this requirement.
CHINA
TERMS AND CONDITIONS
The following provisions apply if you are subject to the exchange control regulations or restrictions in the People's Republic of China ("China"), as determined by the Company in its sole discretion:
Vesting and Mandatory Sale Restriction.
The following provisions replace the Payment section of the Agreement:
Notwithstanding anything to the contrary in the Agreement, due to legal restrictions in China, you agree that the Company may force the sale of any Shares (i) immediately upon vesting, (ii) following the termination of your Service, (iii) following your transfer to another Subsidiary or Affiliate outside of China, or (iv) within any other timeframe the Company determines to be necessary or advisable. You agree that you must maintain any Shares acquired under the Plan in an account at a broker designated by the Company ("Designated Account"). All Shares deposited in the Designated Account cannot be transferred out of that Designated Account. Within six (6) months after the termination of your Service for any reason (or such other period as determined by the Company in its sole discretion), you must sell all Shares acquired under the Plan. The Company
will direct the automatic sale of any such Shares remaining in the Designated Account at the expiration of this six (6) month period (or such other period as determined by the Company in its sole discretion).
You agree that the Company is authorized to instruct its designated broker to assist with the mandatory sale of such Shares (on your behalf pursuant to this authorization) and you expressly authorize the Company's designated broker to complete the sale of such Shares. You acknowledge that the Company's designated broker is under no obligation to arrange for the sale of the Shares at any particular price. Upon the sale of the Shares, the Company agrees to pay you the cash proceeds from the sale, less any brokerage fees or commissions and subject to any obligation to satisfy Tax-Related Items. You agree that if you sell Shares that you acquire under the Plan, the repatriation requirements described below shall apply.
If you transfer to a Subsidiary or an Affiliate in China or transfer from an Affiliate or Subsidiary in China to another Affiliate outside of China, you may become or remain subject to the requirements set forth in this Appendix I, as determined by the Company in its sole discretion. The Company reserves the right to suspend your participation in the Plan or take such other measures as it deems necessary or advisable to comply with local regulations.
Exchange Control Restriction.
You understand and agree that, due to exchange control laws in China, you will be required to immediately repatriate to China any cash proceeds acquired under the Plan. You further understand that, under local law, such repatriation of the cash proceeds may need to be effected through a special exchange control account established by the Company or any Subsidiary or Affiliate of the Company and you hereby consent and agree that the cash proceeds may be transferred to such special account prior to being delivered to you. Further, if the proceeds from your participation in the Plan are converted to local currency, you acknowledge that the Company (including its Subsidiaries and Affiliates) is under no obligation to secure any currency conversion rate, and may face delays in converting the proceeds to local currency due to exchange control restrictions in China. You agree to bear the risk of any currency conversion rate fluctuation between the date that your proceeds are delivered to such special exchange control account and the date of conversion of the proceeds to local currency.
You further agree to comply with any other requirements that may be imposed by the Company in the future in order to facilitate compliance with exchange control requirements in China.
COLOMBIA
TERMS AND CONDITIONS
Labor Law Acknowledgment.
You acknowledge that pursuant to Article 15 Law 50/1990 (Article 128 of the Colombian Labor Code), the Plan, the PSUs, the underlying Shares, and any other amounts or payments granted or realized from participation in the Plan do not constitute a component of your “salary” for any legal purpose. To this extent, they will not be included and/or considered for purposes of calculating any and all labor benefits, such as legal/fringe benefits, vacation pay, termination or other indemnities, payroll taxes, social insurance contributions or any other labor-related amount which may be payable.
NOTIFICATIONS
Securities Law Information.
The Shares are not and will not be registered with the Colombian registry of publicly traded securities (Registro Nacional de Valores y Emisores) and, therefore, the Shares may not be offered to the public in Colombia. Nothing in the Plan, the Agreement or any other document evidencing the grant of the PSUs should be construed as making a public offer of securities in Colombia.
Exchange Control Information.
You are responsible for complying with any and all Colombian foreign exchange restrictions, approvals and reporting requirements in connection with the PSUs and the Shares you acquire or funds you receive under the Plan. This includes reporting obligations to the Central Bank (Banco de la República). You will be required to register your investment in Shares with the Central Bank, regardless of the value of your investment by filing Central Bank’s Form 11 at any time before disposing of your Shares. You should consult with your personal or legal advisor regarding any obligations that you may have as a result of participating in the Plan.
COSTA RICA
There are no country-specific provisions.
INDONESIA
TERMS AND CONDITIONS
Language Consent and Notification.
By accepting the grant of PSUs, you (i) confirm having read and understood the documents relating to this grant (i.e., the Plan and the Agreement) which were provided in the English language, (ii) accept the terms of those documents accordingly, and (iii) agree not to challenge the validity of this document based on Law No. 24 of 2009 on National Flag, Language, Coat of Arms and National Anthem or the implementing Presidential Regulation (when issued).
Dengan menerima pemberian PSU, anda (i) mengkonfirmasi bahwa anda telah membaca dan mengerti isi dokumen yang terkait dengan pemberian ini (yaitu Rencana dan Perjanjian) yang disediakan dalam bahasa Inggris, (ii) menerima syarat dari dokumen-dokumen tersebut, dan (iii) setuju bahwa anda tidak akan mengajukan keberatan atas keberlakuan dokumen ini berdasarkan Undang-Undang No. 24 tahun 2009 tentang Bendera, Bahasa dan Lambang Negara serta Lagu Kebangsaan atau Peraturan Presiden pelaksana terkait (ketika diterbitkan).
NOTIFICATIONS
Exchange Control Information.
Indonesian residents must provide the Bank of Indonesia with information on foreign exchange activities in an online monthly report no later than the fifteenth day of the month following the activity. In addition, if you remit funds into Indonesia (e.g., proceeds from the sale of Shares), the Indonesian bank through which the transaction is made will submit a report of the transaction to the Bank of Indonesia for statistical reporting purposes. For transactions of US$10,000 or more, a more detailed description of the transaction must be included in the report and you may be required to provide information about the transaction (e.g., the relationship between you and the transferor of the funds, the source of the funds, etc.) to the bank in order for the bank to complete the report.
ITALY
TERMS AND CONDITIONS
Plan Document Acknowledgment.
By accepting the PSUs, you acknowledge that you have received a copy of the Plan and the Agreement, have reviewed each of these documents in their entirety and fully understand and accept all terms of such documents. In this regard, you acknowledge having read and specifically approve the following sections and provisions of the Agreement and this Appendix I, as applicable: (i) Vesting; (ii) Termination; (iii) Repayment/Forfeiture; (iv) Withholding Taxes; (v) No Guarantee of Continued Employment; (vi) Nature of Grant; (vii) Data Privacy; and (viii) Entire Agreement/Governing Law.
NOTIFICATIONS
Foreign Assets/Account Reporting Information.
Italian residents who, during the fiscal year, hold investments abroad or foreign financial assets (e.g., cash, Shares and PSUs) which may generate income taxable in Italy are required to report such on their annual tax returns (UNICO Form, RW Schedule) or on a special form if no tax return is due. The same reporting obligations apply to Italian residents who, even if they do not directly hold investments abroad or foreign financial assets (e.g., cash, Shares and PSUs), are beneficial owners of the investment pursuant to Italian money laundering provisions.
Tax on Foreign Financial Assets.
Italian residents may be subject to tax on the value of financial assets held outside of Italy. The taxable amount will be the fair market value of the financial assets, including Shares assessed at the end of the calendar year. If you are subject to this foreign financial assets tax, you will need to report the value of your financial assets held abroad in your annual tax return. You are encouraged to consult your personal legal advisor for additional information about the foreign financial assets tax.
JAPAN
NOTIFICATIONS
Exchange Control Information.
If you acquire Shares whose value exceeds ¥100 million in a single transaction, you must file a Report Concerning Acquisition Shares (“Securities Acquisition Report”) with the Ministry of Finance through the Bank of Japan within 20 days of acquiring the Shares. The forms to make these reports can be acquired from the Bank of Japan.
Foreign Assets/Account Reporting Information.
If you are a Japanese tax resident, you will be required to report details of any assets held outside of Japan as of December 31st (including any Shares or cash acquired under the Plan) to the extent such assets have a total net fair market value exceeding ¥50 million. Such report will be due by March 15th each year. You should consult with your personal tax advisor as to whether the reporting obligation applies to you and whether you will be required to include details of any outstanding Shares, PSUs or cash held by you in the report.
NETHERLANDS
NEW ZEALAND
NOTIFICATIONS
Securities Law Information.
WARNING - You are being offered PSUs (which, upon vesting in accordance with the terms of the grant of the PSUs, will be converted into Shares) in the Company. Shares give you a stake in the ownership of the Company. You may receive a return if dividends are paid. Shares are quoted on the Nasdaq. This means you may be able to sell them on the Nasdaq if there are interested buyers. You may get less than you invested. The price will depend on the demand for the Shares.
If the Company runs into financial difficulties and is wound up, you will be paid only after all creditors have been paid. You may lose some or all of your investment.
New Zealand law normally requires people who offer financial products to give information to investors before they invest. This information is designed to help investors to make an informed decision. The usual rules do not apply to this offer because it is made under an employee share scheme. As a result, you may not be given all the information usually required. You will also have fewer other legal protections for this investment.
In compliance with applicable New Zealand securities laws, you are entitled to receive, in electronic or other form and free of cost, copies of the Company's latest annual report, relevant financial statements and the auditor's report on said financial statements (if any).
Ask questions, read all documents carefully, and seek independent financial advice before committing yourself.
SINGAPORE
NOTIFICATIONS
Securities Law Information.
The grant of the PSUs is being made pursuant to the "Qualifying Person" exemption under section 273(1)(f) of the Securities and Futures Act (Chapter 289, 2006 Ed.) ("SFA"), under which it is exempt from the prospectus and registration requirements under the SFA. The Plan has not been lodged or registered as a prospectus with the Monetary Authority of Singapore and the grant of the PSUs is not made with a view to the PSUs or Shares being subsequently offered to another party. You should note that the PSUs are subject to section 257 of the SFA and you should not make any subsequent sale of Shares in Singapore or any offer of such subsequent sale of Shares subject to the awards in Singapore, unless such sale or offer in is made: (i) more than six (6) months from the Grant Date or (ii) pursuant to the exemptions under Part XIII Division (1) Subdivision (4) (other than section 280) of the SFA.
Chief Executive Officer/Director Notification Requirement.
If you are the Chief Executive Officer ("CEO"), a director, associate director or shadow director of the Company's Singapore Subsidiary or Affiliate, you are subject to certain notification requirements under the Singapore Companies Act. Among these requirements is an obligation to notify the Singapore Subsidiary or Affiliate in writing when you receive an interest (e.g., PSUs, Shares) in the Company, a Subsidiary or Affiliate. In addition, you must notify the Singapore Subsidiary or Affiliate when you sell Shares (including when you sell Shares issued upon vesting and settlement of the PSUs). These notifications must be made within two (2) business days of acquiring or disposing of any interest in the Company or any Subsidiary or Affiliate. In addition, a notification of your interests in the Company, Subsidiary or Affiliate must be made within two (2) business days of becoming CEO or a director.
UNITED ARAB EMIRATES
NOTIFICATIONS
Securities Law Information.
The Plan is being offered only to employees and is in the nature of providing equity incentives to employees of the Company or its Subsidiaries or Affiliates in the United Arab Emirates ("UAE"). Any documents related to the Plan, including the Plan, the Agreement, and other grant documents ("Plan Documents"), are intended for distribution only to such employees and must not be delivered to, or relied on by any other person. Prospective purchasers of the securities offered (i.e., the PSUs) should conduct their own due diligence on the securities.
The Emirates Securities and Commodities Authority has no responsibility for reviewing or verifying any Plan Documents nor has it taken steps to verify the information set out in them, and thus, is not responsible for such documents. Further, neither the Ministry of Economy nor the Dubai Department of Economic Development has approved this statement nor taken steps to verify the information set out in it, and has no responsibility for it. If you do not understand the contents of the Plan Documents, you should consult an authorized financial advisor.
UNITED KINGDOM
Terms & Conditions
Taxes.
The following provisions supplement the Taxes section of the Agreement:
Without limitation to the Taxes section of the Agreement, you agree that you are liable for all Tax-Related Items and hereby covenant to pay all such Tax-Related Items as and when requested by the Company or the Employer or by Her Majesty's Revenue and Customs ("HMRC") (or any other tax authority or any other relevant authority). You also agree to indemnify and keep indemnified the Company and the Employer against any Tax–Related Items that they are required to pay or withhold or have paid or will pay on your behalf to HMRC (or any other tax authority or any other relevant authority).
Notwithstanding the foregoing, if you are a director or an executive officer (as within the meaning of Section 13(k) of the Act), the terms of the immediately foregoing provision will not apply. In such case, if the amount of any income tax due is not collected from or paid by the you within ninety (90) days of the end of the U.K. tax year (April 6 - April 5) in which an event giving rise to the indemnification described above occurs, the amount of any uncollected income tax may constitute a benefit to you on which additional income tax and national insurance contributions (“NICs”) may be payable. You understand and agree that you will be responsible for reporting and paying any income tax due on this additional benefit directly to HMRC under the self-assessment regime and for reimbursing the Company or the Employer (as appropriate) for the value of any employee NICs due on this additional benefit, which the Company or the Employer may recover from you by any of the means referred to in the Plan or the Agreement.
Exhibit 10.4
THE KRAFT HEINZ COMPANY OMNIBUS INCENTIVE PLAN
RESTRICTED STOCK UNIT AWARD AGREEMENT
Unless defined in this award agreement (together with all exhibits and appendices attached thereto, this "Award Agreement"), capitalized terms will have the same meanings ascribed to them in The Kraft Heinz Company 2020 Omnibus Incentive Plan (as may be amended from time to time, the "Plan").
Subject to your acceptance of this Award Agreement, you are hereby being granted an award of Restricted Stock Units (the "RSUs") as of the Grant Date set forth below (the "Grant Date"). Each RSU is a bookkeeping entry representing the right to receive one (1) share of The Kraft Heinz Company's (the "Company") common stock on the following terms and subject to the provisions of the Plan, which is incorporated herein by reference. In the event of a conflict between the provisions of the Plan and this Award Agreement, the provisions of the Plan will govern.
|
|
|
|
|
|
Number of RSUs:
|
_______________
|
Grant Date:
|
_______________
|
Vesting Date:
|
Fifty Percent (50%) on 2-year anniversary of Grant Date; an additional Twenty-Five Percent (25%) on 3-year anniversary of Grant Date; and remaining Twenty-five Percent (25%) on 4-year anniversary of Grant Date (subject to the terms of the Award Agreement).
|
By agreeing to this Award Agreement, you agree that the RSUs are granted under and governed by the terms and conditions of this Award Agreement (including, without limitation, the terms and conditions set forth on Exhibit A, the Restrictive Covenants Agreement attached as Exhibit B and the terms and conditions set forth on Appendix I) and the Plan.
EXHIBIT A
TERMS AND CONDITIONS OF THE RESTRICTED STOCK UNITS
Vesting
The RSUs will vest on the "Vesting Date" set forth in this Award Agreement subject to your continued Service (including, for the avoidance of doubt, service as a consultant or advisor) with the Company or one of its Subsidiaries, except as otherwise set forth in the Plan or this Award Agreement (including, without limitation, the section below titled "Termination"). Prior to the vesting and settlement of the RSUs, you will not have any rights of a shareholder with respect to the RSUs or the Shares subject thereto.
Shares due to you upon vesting and settlement of the RSUs will be delivered in accordance with the provisions of the section below titled "Settlement of Vested RSUs." However, no Shares will be delivered pursuant to the vesting of the RSUs prior to the fulfillment of all of the following conditions: (i) you have complied with your obligations under this Award Agreement and the Plan, (ii) the vesting of the RSUs and the delivery of such Shares complies with applicable law, (iii) full payment (or satisfactory provision therefor) of any Tax-Related Items (as defined below), (iv) the admission of the Shares to listing on all stock exchanges on which the Shares are then listed, (v) the completion of any registration or other qualification of the Shares under any state or federal law or under rulings or regulations of the Securities and Exchange Commission (the "Commission") or other governmental regulatory body, which the Committee shall, in its sole and absolute discretion, deem necessary and advisable, or if the offering of the Shares is not so registered, a determination by the Company that the issuance of the Shares would be exempt from any such registration or qualification requirements, (vi) the obtaining of any approval or other clearance from any state, federal or foreign governmental agency that the Committee shall, in its absolute discretion, determine to be necessary or advisable and (vii) the lapse of any such reasonable period of time following the date the RSUs become payable as the Committee may from time to time establish for reasons of administrative convenience, subject to compliance with Section 409A of the Code.
Until such time as the Shares are delivered to you (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), you will have no right to vote or receive dividends or any other rights as a shareholder with respect to such Shares, notwithstanding the vesting of the RSUs.
Dividend Equivalents
If while the RSUs are outstanding the Board declares a cash dividend on the Company's common stock, you will be entitled to Dividend Equivalents on the dividend payment date established by the Company equal to the cash dividends payable on the same number of Shares as the number of unvested RSUs subject to this award on the dividend record date established by the Company. Any such Dividend Equivalents will be in the form of additional RSUs, will be subject to the same terms and vesting dates as the underlying RSUs, and will be delivered at the same time and in the same manner as the underlying RSUs originally subject to this award. The number of additional RSUs credited as Dividend Equivalents on the dividend payment date will be determined by dividing (i) the product of (A) the number of your unvested RSUs as of the corresponding dividend record date (including any unvested Restricted Stock Units previously credited as a result of prior payments of Dividend Equivalents) and (B) the per-Share cash dividend paid on the dividend payment date, by (ii) the per-share Fair Market Value of the Shares on the dividend payment date, rounded down to the nearest whole RSU.
Termination
Effect of a Termination of Service on Vesting
Other than as set forth below, upon a termination of your Service for any reason prior to the Vesting Date, you will forfeit the RSUs, without any consideration due to you.
If your Service terminates by reason of your death or Disability (as defined below) your RSUs shall be fully vested and exercisable. If your Service terminates by reason of your Retirement (as defined below) after the second anniversary of the Grant Date of the award, your RSUs shall be fully vested and exercisable.
Settlement of Vested RSUs
To the extent the RSUs become vested pursuant to the terms of this Award Agreement, the Company will issue and deliver to you, or, as applicable, your Beneficiary or the personal representative of your estate, the number of Shares equal to the number of vested RSUs. Such delivery of Shares will occur within the settlement period set forth in the table below, which will vary depending on the applicable vesting event.
|
|
|
|
|
|
Vesting Event
|
Settlement Period
|
•Vesting Date
|
As soon as practicable and no later than 60 days following the Vesting Date
|
•Retirement
|
Within 60 days of your termination date*
|
•Disability
|
Within 60 days of your termination date*
|
•Death
|
Within 60 days of the date of death
|
*If you are subject to U.S. federal income tax and the RSUs constitute an item of non-qualified deferred compensation, within the meaning of Section 409A of the Code, as determined by the Company ("Deferred Compensation"), settlement will occur within this period only if your termination of Service constitutes a "separation from service" within the meaning of Section 409A of the Code ("Separation from Service"); otherwise, settlement will occur in accordance with the original vesting schedule (i.e., as soon as practicable and no later than sixty (60) days following the Vesting Date).
Notwithstanding the foregoing, if you are subject to U.S. federal income tax and the Company determines that you are a "specified employee" within the meaning of Section 409A of the Code, any RSUs that are Deferred Compensation and are subject to settlement upon your Separation from Service will instead be settled on the date that is the first business day following the six (6) month anniversary of such Separation from Service, or, if earlier, upon your death, to the extent required pursuant to Section 409A of the Code.
Applicable Definitions
All capitalized terms used in this Agreement without definition shall have the meanings ascribed in the Plan. For purposes of this Award Agreement, the following terms shall have the following meanings:
"Disability" means (i) a physical or mental condition entitling you to benefits under the long-term disability policy of the Company covering you or (ii) in the absence of any such policy, a physical or mental condition rendering you unable to perform your duties for the Company or any of its Subsidiaries or Affiliates for a period of six (6) consecutive months or longer; provided that if you are a party to an Employment Agreement at the time of termination of your Service and such Employment Agreement contains a different definition of "disability" (or any derivation thereof), the definition in such Employment Agreement will control for purposes of this Award Agreement.
"Employment Agreement" means an individual written employment agreement between you and the Company or any of its Affiliates, including an offer letter.
“Retirement” means a termination of Service by you on or after either (a) the later of (i) your 60th birthday and (ii) your completion of five years of Service with the Company, its Subsidiaries or its Affiliates; or (b) the later of (i) your 55th birthday and (ii) your completion of ten years of Service with the Company, its Subsidiaries or its Affiliates.
"Without Cause" means (i) a termination of your Service by the Company or its Subsidiaries or Affiliates other than for Cause (as defined in the Plan) and other than due to your death, Disability or Retirement or (ii) (A) if you are a party to an Employment Agreement, (B) such Employment Agreement is in effect upon the date of your termination of Service and (C) such Employment Agreement defines "Good Reason", then "Without Cause" shall also include resignation of your Service for "Good Reason" in accordance with such Employment Agreement.
Special Termination Provisions
In the event that there is a conflict between the terms of this Award Agreement regarding the effect of a termination of your Service on the RSUs and the terms of any Employment Agreement, the terms of this Award Agreement will govern.
If you are terminated Without Cause or due to your resignation and, within the twelve (12) month period subsequent to such termination of your Service, the Company determines that your Service could have been terminated for Cause, subject to anything to the contrary that may be contained in your Employment Agreement at the time of termination of your Service, your Service will, at the election of the Company, be deemed to have been terminated for Cause for purposes of this Award Agreement and the Plan, effective as of the date the events giving rise to Cause occurred and any consequences following from a termination for Cause shall be retroactively applied (including your obligation to repay gains that would not have been realized had your Service been terminated for Cause).
Effect of a Change in Control
The treatment of the RSUs upon a Change in Control shall be governed by the Plan, provided, however, that to the extent that the RSUs constitute Deferred Compensation, settlement of any portion of the RSUs that may vest in connection with a Change in Control will occur within sixty (60) days following the Vesting Date. In the event that there is a conflict between the terms of this Award Agreement regarding the effect of a Change in Control on the RSUs and the terms of any Employment Agreement, the terms of this Award Agreement will govern.
Restrictive Covenants
Your Service will provide you with specialized training and unique knowledge and access to confidential information and key business relationships, which, if used in competition with the Company, its Subsidiaries and/or its Affiliates, would cause harm to such entities. As such, in partial consideration of the RSUs granted under this Award Agreement, you agree to comply with the Company's Restrictive Covenants Agreement, attached (and incorporated into this Award Agreement) as Exhibit B. The restrictions and obligations contained in the Restrictive Covenants Agreement are in addition to any restrictions imposed by, or obligations you may have to, the Company, its Subsidiaries or Affiliates under any Employment Agreement or otherwise.
Taxes
You acknowledge that, regardless of any action the Company or your employer (the “Employer”) takes with respect to any or all income tax, social security or insurance, payroll tax, fringe benefits tax, payment on account or other tax-related withholding ("Tax-Related Items"), the ultimate liability for all Tax-Related Items legally due by you is and remains your responsibility and that the Company and/or its Subsidiaries or Affiliates (i) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the RSU grant, including the grant, vesting or settlement of the RSUs, the subsequent sale of Shares acquired pursuant to such settlement and the receipt of any dividends or Dividend Equivalents and (ii) do not commit to structure the terms of the grant or any aspect of the RSUs to reduce or eliminate your liability for Tax-Related Items.
Prior to vesting of the RSUs, you will pay or make adequate arrangements satisfactory to the Committee to satisfy all Tax-Related Items. In this regard, you authorize the withholding of all applicable Tax-Related Items
legally payable by you from your wages or other cash compensation paid to you by the Company and/or its Subsidiaries or Affiliates or from proceeds of the sale of Shares. Alternatively, or in addition, if permissible under local law, the Company may in its sole and absolute discretion (A) sell or arrange for the sale of Shares that you acquire to meet the obligation for Tax-Related Items, and/or (B) withhold the amount of Shares necessary to satisfy the minimum withholding amount, or to the extent permitted by applicable accounting principles, withhold Shares based on a rate of up to the maximum applicable withholding rate. Notwithstanding the foregoing, if you are subject to the short-swing profit rules of Section 16(b) of the Act, you may elect the form of withholding in advance of any Tax-Related Items withholding event, and in the absence of your election, the Company shall deduct the number of Shares having an aggregate value equal to the amount of Tax-Related Items withholding due from the vesting of the RSUs, or the Committee may determine that a particular method be used to satisfy any Tax Related Items withholding.
Further, the Company is authorized to satisfy the withholding for any or all Tax-Related Items arising from the granting, vesting, or payment of the RSUs or sale of Shares issued in settlement of the RSUs, as the case may be, by deducting the number of Shares having an aggregate value equal to the amount of the Tax-Related Items withholding due or otherwise becoming subject to current taxation. If the Company satisfies the Tax-Related Items obligation by withholding a number of Shares as described herein, for tax purposes, you shall be deemed to have been issued the full number of Shares due to you at vesting, notwithstanding that a number of Shares is held back solely for the purpose of such Tax-Related Items withholding.
Furthermore, the Company and/or the Employer are authorized to satisfy the Tax-Related Items withholding arising from the granting, vesting, or payment of this Award, or sale of Shares issued pursuant to the Award, as the case may be, by withholding from the Participant’s wages, or other cash compensation paid to you by the Company and/or the Employer.
Finally, you will pay to the Company and/or its Subsidiaries or Affiliates any amount of Tax-Related Items that the Company or its Subsidiaries or Affiliates may be required to withhold as a result of your participation in the Plan that cannot be satisfied by the means previously described. The Company may refuse to deliver the Shares if you fail to comply with your obligations in connection with the Tax-Related Items as described in this section.
No Guarantee of Continued Service
You acknowledge and agree that the vesting of the RSUs on the Vesting Date (or such earlier date as set forth in the section above titled "Termination") is earned only by performing continuing Service (not through the act of being hired or being granted this Award). You further acknowledge and agree that this Award Agreement, the transactions contemplated hereunder and the Vesting Date shall not be construed as giving you the right to be retained in the employ of, or to continue to provide Service to, the Company or its Subsidiaries. Further, the Company or the applicable Subsidiary may at any time dismiss you, free from any liability, or any claim under the Plan, unless otherwise expressly provided in any other agreement binding you, the Company or the applicable Subsidiary. The receipt of this Award is not intended to confer any rights on you except as set forth in this Award Agreement.
Company's Right of Offset
If you become entitled to a distribution of benefits under this Award, and if at such time you have any outstanding debt, obligation, or other liability representing an amount owing to the Company, its Subsidiaries or any of its Affiliates, then the Company, its Subsidiaries or its Affiliates, upon a determination by the Committee, and to the extent permitted by applicable law and it would not cause a violation of Section 409A of the Code, may offset such amount so owing against the amount of benefits otherwise distributable. Such determination shall be made by the Committee.
Acknowledgment of Nature of Award
In accepting the RSUs, you understand, acknowledge and agree that:
(a) the Plan is established voluntarily by the Company, it is discretionary in nature and may be modified, amended, suspended or terminated by the Company at any time, as provided in the Plan and this Award Agreement;
(b) the award of the RSUs is exceptional, voluntary, occasional and discretionary and does not create any contractual or other right to receive future RSU awards, or benefits in lieu of RSUs even if RSUs have been awarded in the past;
(c) all decisions with respect to future awards, if any, will be at the sole discretion of the Company, including, but not limited to, the form and timing of the RSUs, the number of Shares subject to the RSUs, and the vesting provisions applicable to the RSUs;
(d) your participation in the Plan is voluntary;
(e) the RSUs are an extraordinary item that does not constitute compensation of any kind for services of any kind rendered to the Company or its Subsidiaries;
(f) the RSUs, any Shares acquired under the Plan, and the income and value of same are not part of normal or expected compensation or salary for purposes of calculating any severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments;
(g) the future value of the underlying Shares is unknown, indeterminable, and cannot be predicted with certainty;
(h) unless otherwise agreed with the Company in writing, the RSUs, any Shares acquired under the Plan, and the income and value of same, are not granted as consideration for, or in connection with, any Service you may provide as a director of a Subsidiary or Affiliate;
(i) no claim or entitlement to compensation or damages shall arise from forfeiture of the RSU resulting from termination of your Service (for any reason whatsoever, whether or not later found to be invalid or in breach of employment laws in the jurisdiction where you provide Service or the terms of your Employment Agreement, if any), and in consideration of the grant of the RSU to which you are otherwise not entitled, you irrevocably agree never to institute any claim against the Company, any of its Subsidiaries or Affiliates, waive your ability, if any, to bring any such claim, and release the Company, and its Subsidiaries and Affiliates from any such claim; if, notwithstanding the foregoing, any such claim is allowed by a court of competent jurisdiction, then, by participating in the Plan, you shall be deemed irrevocably to have agreed not to pursue such claim and agree to execute any and all documents necessary to request dismissal or withdrawal of such claim; and
(j) the RSUs are subject to the terms of the Plan (including, without limitation, certain provisions regarding Adjustments, Repurchases and Transfers).
Securities Laws
By accepting the RSUs, you acknowledge that U.S. federal, state or foreign securities laws and/or the Company's policies regarding trading in its securities may limit or restrict your right to buy or sell Shares, including, without limitation, sales of Shares acquired in connection with the RSUs. You agree to comply with such securities law requirements and Company policies, as such laws and policies are amended from time to time.
Data Privacy
a.Data Collection and Usage. The Company collects, processes and uses personal data about you, including but not limited to, your name, home address and telephone number, email address, date of birth, social insurance number, employee identification number, hire date, termination date, gross earnings, tax rate, account identification number for the independent stock plan service provider account, any shares of stock or directorships held in the Company, details of all RSUs or any other entitlement to shares or equivalent benefits awarded, canceled, exercised, vested, unvested or outstanding in your favor, which the Company receives from you or your employer (“Data”) for the purposes of implementing, administering and managing the Plan. The legal basis, where required, for the processing of Data is the legitimate interests of the Company in administering the Plan, where our interests are not overridden by your data protection rights.
b.Stock Plan Administration Service Providers. The Company may transfer Data to one or more independent stock plan service providers, which may assist the Company with the implementation, administration and management of the Plan. Such service provider(s) may open an account for you or ask you to receive and trade shares of common stock. You may be asked to acknowledge, or agree to, separate terms and data processing practices with the service provider(s) with such agreement being a condition of participation in the Plan. Please review these terms and data processing practices carefully. If you do not agree to the independent stock plan service provider’s terms and/or data processing practices, you will not be able to participate in the Plan.
c.International Data Transfers. Please note that Data processed in connection with the Plan will be transferred from your country to the United States, where the Company and its service providers are based. Your country or jurisdiction may have different data privacy laws and protections than the United States. The Company will ensure that appropriate measures are in place for compliance with applicable data protection laws in relation to transfer of Data to the United States.
d.Data Retention. The Company will use your personal data only as long as necessary to implement, administer and manage your participation in the Plan and as required to comply with legal or regulatory obligations, including under tax and securities laws. When the Company no longer needs your personal data for any of the above purposes, the Company will remove it from its systems.
e.Data Subject Rights. You understand that you may have a number of rights under data privacy laws in your jurisdiction. Depending on where you are based, such rights may include the right to (i) request access or copies of personal data processed by the Company, (ii) rectification of incorrect data, (iii) deletion of personal data, (iv) restrictions on processing of personal data, (v) portability of personal data, (vi) lodge complaints with competent data protection authorities in your jurisdiction, and/or (vii) receive a list with the names and addresses of any potential recipients of your personal data. To receive clarification regarding these rights or to exercise these rights, you can contact the Company’s Data Privacy Team at gdpr@kraftheinz.com.
Limits on Transferability; Beneficiaries
The RSUs shall not be pledged, hypothecated or otherwise encumbered or subject to any lien, obligation or liability to any party, or Transferred, otherwise than by your will or the laws of descent and distribution or to a Beneficiary upon your death. A Beneficiary or other person claiming any rights under this Award Agreement shall be subject to all terms and conditions of the Plan and this Award Agreement, except as otherwise determined by the Committee, and to any additional terms and conditions deemed necessary or appropriate by the Committee.
No Transfer to any executor or administrator of your estate or to any Beneficiary by will or the laws of descent and distribution of any rights in respect of the RSUs shall be effective to bind the Company unless the Committee shall have been furnished with (i) written notice thereof and with a copy of the will and/or such evidence as the Committee may deem necessary to establish the validity of the Transfer and (ii) the written agreement of the
Transferee to comply with the terms and conditions of this Award Agreement, to the extent applicable, as determined by the Company.
Repayment/Forfeiture
As an additional condition of receiving the RSUs and without prejudice to the terms of the Company's Restrictive Covenants Agreement (attached as Exhibit B), you agree that the RSUs and any proceeds or other benefits you may receive hereunder shall be subject to forfeiture and/or repayment to the Company to the extent required (i) under the terms of any policy adopted by the Company as may be amended from time to time (and such requirements shall be deemed incorporated into this Award Agreement without your consent) or (ii) to comply with any requirements imposed under applicable laws and/or the rules and regulations of the securities exchange or inter-dealer quotation system on which the Shares are listed or quoted, including, without limitation, pursuant to Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Further, if you receive any amount in excess of what you should have received under the terms of the RSUs for any reason (including without limitation by reason of a financial restatement, mistake in calculations or administrative error), all as determined by the Committee, then you shall be required to promptly repay any such excess amount to the Company. Nothing in or about this Agreement prohibits you from: (i) filing and, as provided for under Section 21F of the Act, maintaining the confidentiality of a claim with the Commission, (ii) providing the Commission with information that would otherwise violate the non-disclosure restrictions in this Agreement, to the extent permitted by Section 21F of the Act; (iii) cooperating, participating or assisting in a Commission investigation or proceeding without notifying the Company; or (iv) receiving a monetary award as set forth in Section 21F of the Act. Furthermore, you are advised that you shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of any Confidential Information (as defined in Exhibit B) that constitutes a trade secret to which the Defend Trade Secrets Act (18 U.S.C. Section 1833(b)) applies that is made (i) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney, in each case, solely for the purpose of reporting or investigating a suspected violation of law; or (ii) in a complaint or other document filed in a lawsuit or proceeding, if such filings are made under seal.
Section 409A
It is intended that the RSUs awarded pursuant to this Award Agreement be exempt from or compliant with Section 409A of the Code ("Section 409A") and the Award Agreement shall be interpreted, construed and operated to reflect this intent. Notwithstanding the foregoing, this Award Agreement and the Plan may be amended at any time, without the consent of any party, to the extent that is necessary or desirable to exempt the RSUs from Section 409A or satisfy any of the requirements under Section 409A, but the Company shall not be under any obligation to make any such amendment. Further, the Company, its Subsidiaries and Affiliates do not make any representation to you that the RSUs awarded pursuant to this Award Agreement shall be exempt from or satisfy the requirements of Section 409A, and the Company, its Subsidiaries and Affiliates shall have no liability or other obligation to indemnify or hold harmless you or any Beneficiary, Transferee or other party for any tax, additional tax, interest or penalties that you or any Beneficiary, Transferee or other party may incur in the event that any provision of this Award Agreement, or any amendment or modification thereof or any other action taken with respect thereto, is deemed to violate any of the requirements of Section 409A.
Entire Agreement; Modification
The Plan, this Award Agreement and, to the extent applicable, your Employment Agreement or any separation agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings, representations and agreements (whether oral or written) of the Company, its Subsidiaries and/or Affiliates and you with respect to the subject matter hereof. This Award Agreement may not be modified in a manner that adversely affects your rights heretofore granted under the Plan, except with your consent or to comply with applicable law or to the extent permitted under other provisions of the Plan.
Governing Law; Jurisdiction; Waiver of Jury Trial
This Award Agreement (together with all exhibits and appendices attached thereto) is governed by the laws of the State of Delaware, without regard to its principles of conflict of laws, and any disputes shall be settled in accordance with the Plan.
To the extent not prohibited by applicable law, each of the parties hereto waives any right it may have to trial by jury in respect of any litigation based on, arising out of, under or in connection with this Award Agreement (together with all exhibits and appendices attached thereto) or the Plan.
Electronic Signatures and Delivery and Acceptance
The Company may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan, including this Award Agreement, by electronic means or request your consent to participate in the Plan by electronic means. You hereby consent to receive such documents by electronic delivery and agree to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company. The Award Agreement if delivered by electronic means with electronic signatures shall be treated in all manner and respects as an original executed document and shall be considered to have the same binding legal effect as if it were the original signed versions thereof delivered in person.
Agreement Severable
This Award Agreement shall be enforceable to the fullest extent allowed by law. In the event that any provision of this Award Agreement is determined to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, then that provision shall be reduced, modified or otherwise conformed to the relevant law, judgment or determination to the degree necessary to render it valid and enforceable without affecting the validity, legality or enforceability of any other provision of this Award Agreement or the validity, legality or enforceability of such provision in any other jurisdiction. Any provision of this Award Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be deemed severable from the remainder of this Award Agreement, and the remaining provisions contained in this Award Agreement shall be construed to preserve to the maximum permissible extent the intent and purposes of this Award Agreement.
Interpretation
The Committee shall have the right to resolve all questions that may arise in connection with the Award or this Award Agreement, including whether you are actively employed. Any interpretation, determination or other action made or taken by the Committee regarding the Plan or this Award Agreement shall be final, binding and conclusive. This Award Agreement shall be binding upon and inure to the benefit of any successor or successors of the Company and any person or persons who shall acquire any rights hereunder in accordance with this Award Agreement or the Plan.
Language
If you have received this Award Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
Acknowledgments
By signing this Award Agreement, you acknowledge receipt of a copy of the Plan and represent that you are familiar with the terms and conditions of the Plan, and hereby accept the RSUs subject to all provisions in this
Award Agreement and in the Plan. You hereby agree to accept as final, conclusive and binding all decisions or interpretations of the Committee upon any questions arising under the Plan or this Award Agreement.
Appendix I
Notwithstanding any provision in this Award Agreement, if you work or reside outside the U.S., the RSUs shall be subject to the general non-U.S. terms and conditions and the special terms and conditions for your country set forth in Appendix I. Moreover, if you relocate from the U.S. to one of the countries included in Appendix I or you move between countries included in Appendix I, the general non-U.S. terms and conditions and the special terms and conditions for such country will apply to you, to the extent the Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons. The Appendix I constitutes part of this Award Agreement.
EXHIBIT B
RESTRICTIVE COVENANTS AGREEMENT
I understand that I am or will be an employee to or other service-provider of The Kraft Heinz Company and/or its Subsidiaries and/or its Affiliates (collectively the "Company"), and will learn and have access to the Company's confidential, trade secret and proprietary information and key business relationships. I understand that the products and services that the Company develops, provides and markets are unique. Further, I know that my promises in this Restrictive Covenants Agreement (the "Agreement") are an important way for the Company to protect its proprietary interests and that The Kraft Heinz Company would not have granted me RSUs or other equity grants unless I made such promises.
In addition to other good and valuable consideration, I am expressly being given RSUs or other equity grants in exchange for my agreeing to the terms of this Agreement. In consideration of the foregoing, I (the "Executive") agree as follows:
1.NON-DISCLOSURE OF CONFIDENTIAL INFORMATION. During the course of Executive's Service, Executive will have access to Confidential Information. For purposes of this Agreement, "Confidential Information" means all data, information, ideas, concepts, discoveries, trade secrets, inventions (whether or not patentable or reduced to practice), innovations, improvements, know-how, developments, techniques, methods, processes, treatments, drawings, sketches, specifications, designs, plans, patterns, models, plans and strategies, and all other confidential or proprietary information or trade secrets in any form or medium (whether merely remembered or embodied in a tangible or intangible form or medium) whether now or hereafter existing, relating to or arising from the past, current or potential business, activities and/or operations of the Company, including, without limitation, any such information relating to or concerning finances, sales, marketing, advertising, transition, promotions, pricing, personnel, customers, suppliers, vendors, raw partners and/or competitors of the Company. Executive agrees that Executive shall not, directly or indirectly, use, make available, sell, disclose or otherwise communicate to any person, other than in the course of Executive's assigned duties and for the benefit of the Company, either during the period of Executive's Service or at any time thereafter, any Confidential Information or other confidential or proprietary information received from third parties subject to a duty on the Company's part to maintain the confidentiality of such information, and to use such information only for certain limited purposes, in each case, which shall have been obtained by Executive during Executive's Service. The foregoing shall not apply to information that (i) was known to the public prior to its disclosure to Executive; (ii) becomes generally known to the public subsequent to disclosure to Executive through no wrongful act of Executive or any representative of Executive; or (iii) Executive is required to disclose by applicable law, regulation or legal process (provided that, to the extent permitted by law, Executive provides the Company with prior notice of the contemplated disclosure and cooperates with the Company at its expense in seeking a protective order or other appropriate protection of such information).
Pursuant to the U.S. Defend Trade Secrets Act of 2016, Executive shall not be held criminally, or civilly, liable under any Federal or State Trade secret law for the disclosure of a trade secret that is made in confidence either directly or indirectly to a Federal, State, or local government official, or an attorney, for the sole purpose of reporting, or investigating, a violation of law. Moreover, Executive may disclose trade secrets in a complaint, or other document, filed in a lawsuit, or other proceeding, if such filing is made under seal. Finally, if Executive files a lawsuit alleging retaliation by the Company for reporting a suspected violation of the law, Executive may disclose the trade secret to Executive's attorney and use the trade secret in the court proceeding, if Executive files any document containing the trade secret under seal and does not disclose the trade secret, except pursuant to court order.
No Company policies or practices, including this Non-Disclosure of Confidential Information provision, is intended to or shall limit, prevent, impede or interfere in any way with Executive's right, without prior notice to the Company, to provide information to the government, participate in investigations, testify in
proceedings regarding the Company's past or future conduct, or engage in any activities protected under whistle blower statutes.
2.NON-COMPETITION. Executive acknowledges that (i) Executive performs services of a unique nature for the Company that are irreplaceable, and that Executive's performance of such services to a competing business will result in irreparable harm to the Company, (ii) Executive has had and will continue to have access to Confidential Information which, if disclosed, would unfairly and inappropriately assist in competition against the Company, (iii) in the course of Executive's employment by or service to a competitor, Executive would inevitably use or disclose such Confidential Information, (iv) the Company has substantial relationships with its customers and Executive has had and will continue to have access to these customers, (v) Executive has received and will receive specialized training from the Company, and (vi) Executive has generated and will continue to generate goodwill for the Company in the course of Executive's Service. Accordingly, during Executive's Service and for twelve (12) months following a termination of Executive's Service for any reason (the "Restricted Period"), Executive will not engage in any business activities, directly or indirectly (whether as an employee, consultant, officer, director, partner, joint venturer, manager, member, principal, agent, or independent contractor, individually, in concert with others, or in any other manner) within the same line or lines of business for which the Executive performed services for the Company and in a capacity that is similar to the capacity in which the Executive was employed by the Company with any person or entity that competes with the Company in the consumer packaged food and beverage industry ("Competitive Business") anywhere within the same geographic territory(ies) for which the Executive performed services for the Company (the "Restricted Territory"). Notwithstanding the foregoing, nothing herein shall prohibit Executive from being a passive owner of not more than three percent (3%) of the equity securities of a publicly traded corporation engaged in a business that is in competition with the Company, so long as Executive has no active participation in the business of such corporation.
3.NON-SOLICITATION. During the Restricted Period, Executive agrees that Executive shall not, except in the furtherance of Executive's duties to the Company, directly or indirectly, individually or on behalf of any other person, firm, corporation or other entity, solicit, aid, induce, assist in the solicitation of, or accept any business (other than on behalf of the Company) from, any customer or potential customer of the Company to purchase goods or services then sold by the Company from another person, firm, corporation or other entity or, directly or indirectly, in any way request, suggest or advise any such customer to withdraw or cancel any of their business or refuse to continue to do business with the Company. This restriction shall apply to customers or potential customers who, during the two (2) years immediately preceding the Executive's termination, had been assigned to the Executive by the Company, or with which the Executive had contact on behalf of the Company while an Executive of the Company, or about which the Executive had access to confidential information by virtue of Executive's employment with the Company.
4.NON-INTERFERENCE. During the Restricted Period, Executive agrees that Executive shall not, except in the furtherance of Executive's duties to the Company, directly or indirectly, individually or on behalf of any other person, firm, corporation or other entity, (A) solicit, aid or induce any employee, representative or agent of the Company to leave such employment or retention or to accept employment with or render services to or with any other person, firm, corporation or other entity unaffiliated with the Company or hire or retain any such employee, representative or agent, or take any action to materially assist or aid any other person, firm, corporation or other entity in identifying, hiring or soliciting any such employee, representative or agent, or (B) interfere, or aid or induce any other person or entity in interfering, with the relationship between the Company and its vendors, suppliers or customers. As used herein, the term "solicit, aid or induce" includes, but is not limited to, (i) initiating communications with a Company employee relating to possible employment, (ii) offering bonuses or other compensation to encourage a Company employee to terminate his or her employment with the Company and accept employment with any entity, (iii) recommending a Company employee to any entity, and (iv) aiding an entity in recruitment of a Company employee. An employee, representative or agent shall be deemed covered by this Section 4 while so employed or retained and for a period of six (6) months thereafter.
5.NON-DISPARAGEMENT. Executive agrees not to make negative comments or otherwise disparage the Company or its officers, directors, employees, shareholders, agents or products or services. The foregoing shall not be violated by truthful statements made in (a) response to legal process, required governmental testimony or filings, or administrative or arbitral proceedings (including, without limitation, depositions in connection with such proceedings) or (b) the good faith performance of Executive's duties to the Company.
6.INVENTIONS.
a.Executive acknowledges and agrees that all ideas, methods, inventions, discoveries, improvements, work products, developments, software, know-how, processes, techniques, methods, works of authorship and other work product ("Inventions"), whether patentable or unpatentable, (A) that are reduced to practice, created, invented, designed, developed, contributed to, or improved with the use of any Company resources and/or within the scope of Executive's work with the Company or that relate to the business, operations or actual or demonstrably anticipated research or development of the Company, and that are made or conceived by Executive, solely or jointly with others, during Executive's Service, or (B) suggested by any work that Executive performs in connection with the Company, either while performing Executive's duties with the Company or on Executive's own time, but only insofar as the Inventions are related to Executive's work as an employee or other service provider to the Company, shall belong exclusively to the Company (or its designee), whether or not patent or other applications for intellectual property protection are filed thereon. Executive will keep full and complete written records (the "Records"), in the manner prescribed by the Company, of all Inventions, and will promptly disclose all Inventions completely and in writing to the Company. The Records shall be the sole and exclusive property of the Company, and Executive will surrender them upon the termination of Service, or upon the Company's request. Executive irrevocably conveys, transfers and assigns to the Company the Inventions and all patents or other intellectual property rights that may issue thereon in any and all countries, whether during or subsequent to Executive's Service, together with the right to file, in Executive's name or in the name of the Company (or its designee), applications for patents and equivalent rights (the "Applications"). Executive will, at any time during and subsequent to Executive's Service, make such applications, sign such papers, take all rightful oaths, and perform all other acts as may be requested from time to time by the Company to perfect, record, enforce, protect, patent or register the Company's rights in the Inventions, all without additional compensation to Executive from the Company. Executive will also execute assignments to the Company (or its designee) of the Applications, and give the Company and its attorneys all reasonable assistance (including the giving of testimony) to obtain the Inventions for the Company's benefit, all without additional compensation to Executive from the Company, but entirely at the Company's expense.
b.In addition, the Inventions will be deemed Work for Hire, as such term is defined under the copyright laws of the United States, on behalf of the Company and Executive agrees that the Company will be the sole owner of the Inventions, and all underlying rights therein, in all media now known or hereinafter devised, throughout the universe and in perpetuity without any further obligations to Executive. If the Inventions, or any portion thereof, are deemed not to be Work for Hire, or the rights in such Inventions do not otherwise automatically vest in the Company, Executive hereby irrevocably conveys, transfers and assigns to the Company, all rights, in all media now known or hereinafter devised, throughout the universe and in perpetuity, in and to the Inventions, including, without limitation, all of Executive's right, title and interest in the copyrights (and all renewals, revivals and extensions thereof) to the Inventions, including, without limitation, all rights of any kind or any nature now or hereafter recognized, including, without limitation, the unrestricted right to make modifications, adaptations and revisions to the Inventions, to exploit and allow others to exploit the Inventions and all rights to sue at law or in equity for any infringement, or other unauthorized use or conduct in derogation of the Inventions, known or unknown, prior to the date hereof, including, without limitation, the right to receive all proceeds and damages therefrom. In addition, Executive hereby waives any so-called "moral rights" with respect to the
Inventions. To the extent that Executive has any rights in the results and proceeds of Executive's service to the Company that cannot be assigned in the manner described herein, Executive agrees to unconditionally waive the enforcement of such rights. Executive hereby waives any and all currently existing and future monetary rights in and to the Inventions and all patents and other registrations for intellectual property that may issue thereon, including, without limitation, any rights that would otherwise accrue to Executive's benefit by virtue of Executive being an employee of or other service provider to the Company.
7.RETURN OF COMPANY PROPERTY. On the date of Executive's termination of Service with the Company for any reason (or at any time prior thereto at the Company's request), Executive shall return all property belonging to the Company (including, but not limited to, any Company-provided laptops, computers, cell phones, wireless electronic mail devices or other equipment, or documents and property belonging to the Company).
8.REASONABLENESS OF COVENANTS. In signing this Agreement, including by electronic means, Executive gives the Company assurance that Executive has carefully read and considered all of the terms and conditions of this Agreement, including the restraints imposed by it. Executive agrees that these restraints are necessary for the reasonable and proper protection of the Company and its Confidential Information and that each and every one of the restraints is reasonable in respect to subject matter, length of time and geographic area, and that these restraints, individually or in the aggregate, will not prevent Executive from obtaining other suitable employment during the period in which Executive is bound by the restraints. Executive acknowledges that each of these covenants has a unique, very substantial and immeasurable value to the Company and that Executive has sufficient assets and skills to provide a livelihood while such covenants remain in force. Executive further covenants that Executive will not challenge the reasonableness or enforceability of any of the covenants set forth in this Agreement, and that Executive will reimburse the Company for all costs (including reasonable attorneys' fees) incurred in connection with any action to enforce any of the provisions of this Agreement if either the Company prevails on any material issue involved in such dispute or if Executive challenges the reasonableness or enforceability of any of the provisions of this Agreement. It is also agreed that the "Company" as used in this Agreement refers to each of the Company's Subsidiaries and Affiliates and that each of the Company's s Subsidiaries and Affiliates will have the right to enforce all of Executive's obligations to that Subsidiary or Affiliate under this Agreement, as applicable, subject to any limitation or restriction on such rights of the Subsidiary or Affiliate under applicable law.
9.REFORMATION. If it is determined by a court of competent jurisdiction in any state or country that any restriction in this Agreement is excessive in duration or scope or is unreasonable or unenforceable under applicable law, it is the intention of the parties that such restriction may be modified or amended by the court to render it enforceable to the maximum extent permitted by the laws of that state or country.
10.REMEDIES. Executive acknowledges and agrees that the Company's remedies at law for a breach or threatened breach of any of the provisions of Agreement would be inadequate and, in recognition of this fact, Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond or other security, shall be entitled to obtain equitable relief in the form of specific performance, a temporary restraining order, a temporary or permanent injunction or any other equitable remedy which may then be available, without the necessity of showing actual monetary damages, in addition to any other equitable relief (including without limitation an accounting and/or disgorgement) and/or any other damages as a matter of law.
11.REPURCHASE. Executive acknowledges and agrees that a breach of this Agreement would constitute a "Covenant Breach" as such term is used in the Plan and therefore, in the event of a Covenant Breach, Executive's RSU and the Award Stock issued therefor (as such terms are defined in the Plan) shall be subject to repurchase by The Kraft Heinz Company in accordance with the terms of the Plan.
12.TOLLING. In the event of any violation of the provisions of this Agreement, Executive acknowledges and agrees that the post-termination restrictions contained in this Agreement shall be extended by a period of time equal to the period of such violation, it being the intention of the parties hereto that the running of the applicable post-termination restriction period shall be tolled during any period of such violation.
13.SURVIVAL OF PROVISIONS. The obligations contained in this Agreement hereof shall survive the termination or expiration of the Executive's Service with the Company and shall be fully enforceable thereafter.
14.VENUE, PERSONAL JURISDICTION, AND COVENANT NOT TO SUE. Executive expressly agrees to submit to the exclusive jurisdiction and exclusive venue of courts located in the State of Delaware in connection with any litigation which may be brought with respect to a dispute between the Company and Executive in relation to this Restrictive Covenants Agreement, regardless of where Executive resides or where Executive performs services for the Company. Executive hereby irrevocably waives Executive's rights, if any, to have any disputes between the Company and Executive related to this Restrictive Covenants Agreement decided in any jurisdiction or venue other than a court in the State of Delaware. Executive hereby waives, to the fullest extent permitted by applicable law, any objection which Executive now or hereafter may have to personal jurisdiction or to the laying of venue of any such suit, action or proceeding, and Executive agrees not to plead or claim the same. Executive further irrevocably covenants not to sue the Company related to this Restrictive Covenants Agreement in any jurisdiction or venue other than a court in the State of Delaware. All matters relating to the interpretation, construction, application, validity, and enforcement of this Agreement, and any disputes or controversies arising hereunder, will be governed by the laws of the State of Delaware without giving effect to any choice or conflict of law provision or rule, whether of the State of Delaware or any other jurisdiction, that would cause the application of laws of any jurisdiction other than the State of Delaware.
APPENDIX I
ADDITIONAL TERMS AND CONDITIONS OF
THE KRAFT HEINZ COMPANY 2020 OMNIBUS INCENTIVE PLAN
RESTRICTED STOCK UNIT AWARD AGREEMENT FOR NON-U.S. PARTICIPANTS
TERMS AND CONDITIONS
This Appendix I includes additional terms and conditions that govern the RSUs granted to you under the Plan if you work or reside outside the U.S. and/or in one of the countries listed below. These terms and conditions are in addition to, or if so indicated, in place of the terms and conditions set forth in the Award Agreement. Certain capitalized terms used but not defined in this Appendix I have the meanings set forth in the Plan and/or the Award Agreement.
If you are a citizen or resident of a country other than the one in which you are currently working, transfer employment and/or residency to another country after the RSUs are granted to you, or are considered a resident of another country for local law purposes, the terms and conditions contained herein may not be applicable to you, and the Company shall, in its discretion, determine to what extent the terms and conditions contained herein shall apply to you.
NOTIFICATIONS
This Appendix I also includes information regarding exchange controls and certain other issues of which you should be aware with respect to participation in the Plan. The information is based on the securities, exchange control, and other laws in effect in the respective countries as of January 2020. Such laws are often complex and change frequently. As a result, the Company strongly recommends that you not rely on the information in this Appendix I as the only source of information relating to the consequences of your participation in the Plan because the information may be out of date at the time you vest in the RSUs or sell Shares acquired under the Plan.
In addition, the information contained herein is general in nature and may not apply to your particular situation, and the Company is not in a position to assure you of a particular result. Accordingly, you should seek appropriate professional advice as to how the relevant laws in your country may apply to your situation.
Finally, if you are a citizen or resident of a country other than the one in which you are currently working, transfer employment and/or residency after the RSUs are granted or are considered a resident of another country for local law purposes, the notifications contained herein may not be applicable to you in the same manner.
GENERAL NON-U.S. TERMS AND CONDITIONS
TERMS AND CONDITIONS
The following terms and conditions apply to you if you are located outside of the U.S.
Entire Agreement.
The following provisions supplement the entire Award Agreement, generally:
If you are located outside the U.S., in no event will any aspect of the RSUs be determined in accordance with your Employment Agreement (or other Service contract). The terms and conditions of the RSUs will be solely determined in accordance with the provisions of the Plan and the Award Agreement, including this Appendix I, which supersede and replace any prior agreement, either written or verbal (including your Employment Agreement, if applicable) in relation to the RSUs.
Vesting.
If you are resident or employed outside of the United States, the Company may, in its sole discretion, settle the RSUs in the form of a cash payment to the extent settlement in Shares: (i) is prohibited under local law, (ii) would require you, the Company or one of its Subsidiaries or Affiliates to obtain the approval of any governmental or regulatory body in your country of residence (or your country of employment, if different), (iii) would result in adverse tax consequences for you, the Company or one of its Subsidiaries or Affiliates, or (iv) is administratively burdensome. Alternatively, the Company may, in its sole discretion settle the RSUs in the form of Shares but require you to sell such Shares immediately or within a specified period following your termination of Service (in which case, this Award Agreement shall give the Company the authority to issue sales instructions on your behalf).
Termination.
The following provisions supplement the Termination section of the Award Agreement, provided, however, that for purposes of the section of the Award Agreement titled "Settlement of Vested RSUs," if you are subject to U.S. federal income tax and the RSUs constitute Deferred Compensation, your termination of Service date will be the date of your Separation from Service:
For purposes of the RSU, your employment or Service relationship will be considered terminated as of the date you are no longer actively providing Services to the Company or one of its Subsidiaries or Affiliates (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where you provide Service or the terms of your Employment Agreement, if any), and unless otherwise expressly provided in this Award Agreement or determined by the Company, your right to vest in the RSU under the Plan, if any, will terminate as of such date and will not be extended by any notice period (e.g., your period of Service would not include any contractual notice period or any period of "garden leave" or similar period mandated under employment laws in the jurisdiction where you provide Service or the terms of your Employment Agreement, if any); the Committee shall have the exclusive discretion to determine when you are no longer actively providing Service for purposes of the RSUs (including whether you may still be considered to be providing Service while on a leave of absence).
Notwithstanding the provisions governing the treatment of the RSUs upon termination due to Retirement set forth in the Termination section of the Award Agreement, if the Company receives an opinion of counsel that there has been a legal judgment and/or legal development in a particular jurisdiction that would likely result in the treatment in case of a termination due to Retirement as set forth in the Award Agreement being deemed unlawful and/or discriminatory, then the Company will not apply the provisions for termination due to Retirement at the time you cease to provide Service and the RSUs will be treated as it would under the rules that apply if your Service ends for resignation.
Termination for Cause.
The implications upon a termination for Cause as set forth in the Award Agreement and Plan shall only be enforced, to the extent deemed permissible under applicable local law, as determined in the sole discretion of the Committee.
Taxes.
The following provisions supplement the Taxes section of the Award Agreement:
You acknowledge that your liability for Tax-Related Items may exceed the amount, if any, withheld by the Company, its Subsidiaries and/or its Affiliates (as applicable).
If you have become subject to tax in more than one jurisdiction, you acknowledge that the Company, its Subsidiaries and Affiliates may be required to withhold or account for Tax-Related Items in more than one jurisdiction.
Depending on the withholding method, the Company may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding amounts or other applicable withholding rates, including maximum applicable rates in your jurisdiction(s), in which case you may receive a refund of any over-withheld amount in cash and will have no entitlement to the Share equivalent. If the obligation for Tax-Related Items is satisfied by withholding in Shares, for tax purposes, you are deemed to have been issued the full number of Shares subject to the vested RSUs, notwithstanding that a number of Shares are held back solely for the purpose of paying the Tax-Related Items due as a result of any aspect of your participation in the Plan.
Limits on Transferability; Beneficiaries.
The following provision supplements the Limits on Transferability; Beneficiaries section of the Award Agreement:
If you are located outside the U.S., the RSUs may not be Transferred to a designated Beneficiary and may only be Transferred upon your death to your legal heirs in accordance with applicable laws of descent and distribution. In no case may the RSUs be Transferred to another individual during your lifetime.
Acknowledgment of Nature of Award.
The following provisions supplement the Acknowledgment of Nature of Award section of the Award Agreement:
You acknowledge the following with respect to the RSUs:
(a) The RSUs, any Shares acquired under the Plan, and the income and value of same, are not intended to replace any pension rights or compensation.
(b) In no event should the RSUs, any Shares acquired under the Plan, and the income and value of same, be considered as compensation for, or relating in any way to, past services for the Company, its Subsidiaries or any Affiliate.
(c) The RSUs, any Shares acquired under the Plan and the income and value of same are not part of normal or expected compensation or salary for any purpose.
(d) Neither the Company, its Subsidiaries nor any Affiliate shall be liable for any foreign exchange rate fluctuation between your local currency and the United States Dollar that may affect the value of the RSUs or of any amounts due to you pursuant to vesting of the RSUs or the subsequent sale of any Shares acquired upon vesting.
Not a Public Offering in Non-U.S. Jurisdictions.
If you are resident or employed outside of the United States, neither the grant of the RSUs under the Plan nor the issuance of the underlying Shares upon vesting of the RSUs is intended to be a public offering of securities in your country of residence (and country of employment, if different). The Company has not submitted any registration statement, prospectus or other filings to the local securities authorities in jurisdictions outside of the United States unless otherwise required under local law.
Language Consent.
If you are in a country where English is not an official language, you acknowledge that you are sufficiently proficient in English to understand the terms and conditions of this Award Agreement or have had the ability to consult with an advisor who is sufficiently proficient in the English language. You further acknowledge and agree that it is your express intent that this Award Agreement, the Plan and all other documents, notices and legal proceedings entered into, given or instituted pursuant to the RSUs, be drawn up in English.
Insider Trading and Market Abuse Laws.
You may be subject to insider trading restrictions and/or market abuse laws based on the exchange on which the Shares are listed and in applicable jurisdictions including the United States and your country or your broker’s country, if different, which may affect your ability to accept, acquire, sell or otherwise dispose of Shares, rights to Shares or rights linked to the value of Shares under the Plan during such times as you are considered to have "inside information" regarding the Company (as defined by the laws in the applicable jurisdictions). Local insider trading laws and regulations may prohibit the cancellation or amendment of orders you placed before you possessed inside information. Furthermore, you could be prohibited from (a) disclosing the inside information to any third party and (b) “tipping” third parties or causing them otherwise to buy or sell securities (third parties include fellow employees). Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under any applicable Company insider trading policy. You acknowledge that it is your responsibility to comply with any applicable restrictions, and you should speak to your personal advisor on this matter.
Foreign Asset/Account, Exchange Control and Tax Reporting.
You may be subject to foreign asset/account, exchange control and/or tax reporting requirements as a result of the acquisition, holding and/or transfer of Shares or cash (including dividends, dividend equivalents and the proceeds arising from the sale of Shares) derived from your participation in the Plan, to and/or from a brokerage/bank account or legal entity located outside your country. The applicable laws of your country may require that you report such accounts, assets, the balances therein, the value thereof and/or the transactions related thereto to the applicable authorities in such country. You acknowledge that you are responsible for ensuring compliance with any applicable foreign asset/account, exchange control and tax reporting requirements and should consult your personal legal advisor on this matter.
No Advice Regarding Award.
The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding your participation in the Plan, or your acquisition or sale of the underlying Shares. You understand and acknowledge that you should consult with your own personal tax, legal and financial advisors regarding your participation in the Plan before taking any action related to the Plan.
Imposition of Other Requirements.
The Company reserves the right to impose other requirements on your participation in the Plan, on the RSUs and on any Shares acquired upon vesting of the RSUs, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require you to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.
Waiver.
You acknowledge that a waiver by the Company for breach of any provision of the Award Agreement shall not operate or be construed as a waiver of any other provision of the Award Agreement, or of any subsequent breach of the Award Agreement.
COUNTRY-SPECIFIC TERMS AND CONDITIONS/NOTIFICATIONS
AUSTRALIA
NOTIFICATIONS
Offer Document.
This offer document sets out information regarding the grant of RSUs to Australian resident employees of the Company and its Subsidiaries or Affiliates and is provided by the Company to ensure compliance of the Plan with the Australian Securities and Investments Commission's ("ASIC's") Class Order 14/1000 and relevant provisions of the Corporations Act 2001.
In addition to the information set out in the Award Agreement, you also are being provided with a copy of the Plan (the "Additional Document").
The Additional Document provides further information to help you make an informed investment decision about participating in the Plan. The Plan is not a prospectus for the purposes of the Corporations Act 2001.
You should not rely upon any oral statements made in relation to this offer. You should rely only upon the statements contained in the Award Agreement and the Additional Document when considering participation in the Plan.
Securities Law Notification
Investment in Shares involves a degree of risk. If you elect to participate in the Plan, you should monitor your participation and consider all risk factors relevant to the acquisition of Shares under the Plan as set out in the Award Agreement and the Additional Document.
The information contained in this offer is general information only. It is not advice or information that takes into account your objectives, financial situation and needs.
You should consider obtaining your own financial product advice from an independent person who is licensed by ASIC to give advice about participation in the Plan.
Additional Risk Factors for Australian Residents
You should have regard to risk factors relevant to investment in securities generally and, in particular, to the holding of Shares. For example, the price at which Shares are quoted on the Nasdaq may increase or decrease due to a number of factors. There is no guarantee that the price of the Shares will increase. Factors which may affect the price of Shares include fluctuations in the domestic and international market for listed stocks, general economic conditions, including interest rates, inflation rates, commodity and oil prices, changes to government fiscal, monetary or regulatory policies, legislation or regulation, the nature of the markets in which the Company operates and general operational and business risks.
More information about potential factors that could affect the Company's business and financial results is included in the Company's most recent Annual Report on Form 10-K and the Company's Quarterly Report on Form 10-Q. Copies of these reports are available at http://www.sec.gov/, on the Company's "Investor Relations" page at http://ir.kraftheinzcompany.com/, and upon request to the Company.
In addition, you should be aware that the Australian dollar value of any Shares acquired at vesting will be affected by the U.S. dollar/Australian dollar exchange rate. Participation in the Plan involves certain risks related to fluctuations in this rate of exchange.
Common Stock
Common stock of a U.S. corporation is analogous to ordinary shares of an Australian corporation.
Dividends may be paid on the Shares out of any funds of the Company legally available for dividends at the discretion of the Board.
The Shares are traded on the Nasdaq in the United States of America under the symbol "KHC."
The Shares are not liable to any further calls for payment of capital or for other assessment by the Company and have no sinking fund provisions, pre-emptive rights, conversion rights or redemption provisions.
Ascertaining the Market Price of Shares
You may ascertain the current market price of the Shares as traded on the Nasdaq at http://www.nasdaq.com under the symbol "KHC." The Australian dollar equivalent of that price can be obtained at: http://www.rba.gov.au/statistics/frequency/exchange-rates.html.
This will not be a prediction of what the market price per Share will be when the RSUs vest or when the Shares are issued or of the applicable exchange rate on the actual Vesting Date or date the Shares are issued.
Deferred Taxation.
Subdivision 83A-C of the Income Tax Assessment Act, 1997, applies to RSUs granted under the Plan, such that the RSUs are intended to be subject to deferred taxation.
BELGIUM
NOTIFICATIONS
Foreign Assets/Account Reporting Information.
If you are a resident of Belgium, you will be required to report any security (e.g., Shares acquired under the Plan) or bank account (including brokerage accounts) established outside of Belgium on your annual tax return. In a separate report, you will be required to provide the National Bank of Belgium with details regarding such foreign accounts (including the account number, bank name and country in which any such account was opened).
BRAZIL
TERMS AND CONDITIONS
Compliance with Law.
By accepting the RSUs you acknowledge that you agree to comply with applicable Brazilian laws and pay any and all applicable taxes legally due by you associated with the vesting of the RSUs, the receipt of any dividends and/or Dividend Equivalents, and the sale of Shares acquired under the Plan. You further agree that, for all legal purposes, (i) the benefits provided to you under the Plan are the result of commercial transactions unrelated to your employment or Service relationship, (ii) the Plan is not a part of the terms and conditions of your employment or Service relationship, and (iii) the income from the Award, if any, is not part of your remuneration from employment or Service.
NOTIFICATIONS
Exchange Control Information.
If you are resident or domiciled in Brazil, you will be required to submit annually a declaration of assets and rights held outside of Brazil to the Central Bank of Brazil if the aggregate value of such assets and rights is equal to or greater than US$100,000. Assets and rights that must be reported include Shares.
CANADA
TERMS AND CONDITIONS
Plan Document Acknowledgment.
In accepting the grant of RSUs, you acknowledge that you have received a copy of the Plan, have reviewed the Plan and the Award Agreement in their entirety and fully understand and accept all provisions of the Plan and the Award Agreement.
Payout of RSUs in Shares Only.
Pursuant to its discretion under the Settlement of Vested RSUs Section of the Plan, with respect to all employees residing in Canada, the Company will convert all vested RSUs only into an equivalent number of Shares. If you reside in Canada (or in the event of your death, your legal representative or estate) you will not receive an equivalent or fractional Share cash payment with respect to the vested RSUs.
Termination.
The following provision replaces the first paragraph of the Termination section of the General Non-U.S. Terms and Conditions section of this Appendix I:
In the event of your termination of Service (whether or not later found to be invalid or in breach of employment laws in the jurisdiction where you provide Service or the terms of your Employment Agreement, if any), unless provided otherwise by the Company: (i) your right to vest in the RSUs (if any) will terminate effective, as of the earlier of (1) the date the you receive notice of termination, or (2) the date you are no longer actively providing Service, regardless of any notice period or period of pay in lieu of such notice required under applicable Canadian employment laws (including, but not limited to statutory law, regulatory law and/or common law).
The Committee shall have the exclusive discretion to determine when you are no longer actively providing Service for purposes of the RSUs (including whether you may still be considered to be providing Service while on a leave of absence).
The following terms and conditions apply if you are a resident of Quebec:
Language Consent.
The parties acknowledge that it is their express wish that the Award Agreement, as well as all documents, notices and legal proceedings entered into, given or instituted pursuant hereto or relating directly or indirectly hereto, be drawn up in English.
Consentement relatif à la langue.
Les parties reconnaissent avoir expressément exigé la rédaction en anglais de la Convention d'Attribution, ainsi que de tous documents, avis et procédures judiciaires, exécutés, donnés ou intentés en vertu de, ou liés directement ou indirectement à, la présente convention.
NOTIFICATIONS
Securities Law Information.
You are permitted to sell Shares acquired under the Plan through the designated broker appointed under the Plan, if any, provided the sale of the Shares takes place outside of Canada through the facilities of a stock exchange on which the Shares are listed (i.e., Nasdaq).
Foreign Assets/Account Reporting Information.
Canadian residents are required to report any specified foreign property (including Shares and RSUs) on form T1135 (Foreign Income Verification Statement) if the total cost of such specified foreign property exceeds C$100,000 at any time in the year. The form must be filed by April 30 of the following year. Specified foreign property includes Shares acquired under the Plan and may include the RSUs. The RSUs must be reported - generally at a nil cost - if the C$100,000 cost threshold is exceeded because of other foreign property you hold. If Shares are acquired, their cost generally is the adjusted cost base ("ACB") of the Shares. The ACB would normally equal the fair market value of the Shares at vesting, but if you own other shares, this ACB may have to be averaged with the ACB of the other shares. You should speak with a personal tax advisor to determine the scope of foreign property that must be considered for purposes of this requirement.
CHILE
NOTIFICATIONS
Securities Law Information.
The private offering of the RSUs starts on the Grant Date and is made subject to general ruling n° 336 of the Chilean Commission for the Financial Market (“CMF”). This offer refers to securities not registered at the securities registry or at the foreign securities registry of the CMF, and therefore such securities are not subject to its oversight. Given that these securities are not registered in Chile, there is no obligation from the issuer to provide public information on them in Chile. These securities cannot be subject to public offering in Chile while they are not registered at the corresponding securities registry in Chile.
La oferta privada de estos RSUs se inicia en la Fecha de Concesión y se acoge a las disposiciones de la norma de carácter general nº 336 de la Comisión para el Mercado Financiero de Chile (“CMF”). Esta oferta versa sobre valores no inscritos en el registro de valores o en el registro de valores extranjeros que lleva la CMF, por lo que tales valores no están sujetos a la fiscalización de ésta. Por tratarse de valores no inscritos en Chile, no existe la obligación por parte del emisor de entregar en Chile información pública respecto de los mismos. Estos valores no podrán ser objeto de oferta pública en Chile mientras no sean inscritos en el registro de valores correspondiente.
CHINA
TERMS AND CONDITIONS
The following provisions apply if you are subject to the exchange control regulations or restrictions in the People's Republic of China ("China"), as determined by the Company in its sole discretion:
Vesting and Mandatory Sale Restriction.
The following provisions replace the Vesting, Termination and Settlement of Vested RSUs sections of the Award Agreement:
Notwithstanding anything to the contrary in the Award Agreement, due to legal restrictions in China, you agree that the Company may force the sale of any Shares (i) immediately upon vesting, (ii) following the termination of your Service, (iii) following your transfer to another Subsidiary or Affiliate outside of China, or (iv) within any other timeframe the Company determines to be necessary or advisable. You agree that you must maintain any Shares acquired under the Plan in an account at a broker designated by the Company ("Designated Account"). All Shares deposited in the Designated Account cannot be transferred out of that Designated Account. Within six (6) months after the termination of your Service for any reason (or such other period as determined by the Company in
its sole discretion), you must sell all Shares acquired under the Plan. The Company will direct the automatic sale of any such Shares remaining in the Designated Account at the expiration of this six (6) month period (or such other period as determined by the Company in its sole discretion).
You agree that the Company is authorized to instruct its designated broker to assist with the mandatory sale of such Shares (on your behalf pursuant to this authorization) and you expressly authorize the Company's designated broker to complete the sale of such Shares. You acknowledge that the Company's designated broker is under no obligation to arrange for the sale of the Shares at any particular price. Upon the sale of the Shares, the Company agrees to pay you the cash proceeds from the sale, less any brokerage fees or commissions and subject to any obligation to satisfy Tax-Related Items. You agree that if you sell Shares that you acquire under the Plan, the repatriation requirements described below shall apply.
If you transfer to a Subsidiary or an Affiliate in China or transfer from an Affiliate or Subsidiary in China to another Affiliate outside of China, you may become or remain subject to the requirements set forth in this Appendix I, as determined by the Company in its sole discretion. The Company reserves the right to suspend your participation in the Plan or take such other measures as it deems necessary or advisable to comply with local regulations.
Exchange Control Restriction.
You understand and agree that, due to exchange control laws in China, you will be required to immediately repatriate to China any cash proceeds acquired under the Plan. You further understand that, under local law, such repatriation of the cash proceeds may need to be effected through a special exchange control account established by the Company or any Subsidiary or Affiliate of the Company and you hereby consent and agree that the cash proceeds may be transferred to such special account prior to being delivered to you. Further, if the proceeds from your participation in the Plan are converted to local currency, you acknowledge that the Company (including its Subsidiaries and Affiliates) is under no obligation to secure any currency conversion rate, and may face delays in converting the proceeds to local currency due to exchange control restrictions in China. You agree to bear the risk of any currency conversion rate fluctuation between the date that your proceeds are delivered to such special exchange control account and the date of conversion of the proceeds to local currency.
You further agree to comply with any other requirements that may be imposed by the Company in the future in order to facilitate compliance with exchange control requirements in China.
COSTA RICA
There are no country-specific provisions.
EGYPT
NOTIFICATIONS
Exchange Control Information.
If you transfer funds into Egypt in connection with the remittance of proceeds from the vesting of the RSUs, sale of Shares or the receipt of any dividends and/or Dividend Equivalents, you are required to transfer the funds through a bank registered in Egypt.
FRANCE
TERMS AND CONDITIONS
Language Consent.
By accepting the RSUs, you confirm having read and understood the documents relating to the grant of the RSUs (the Plan and the Award Agreement), which were provided in the English language, and you accept the terms of such documents accordingly.
Consentement relatif à la langue.
En acceptant l'RSUs, vous confirmez ainsi avoir lu et compris les documents relatifs à l'attribution de l'RSUs (le Plan et le Contrat d'Attribution) qui vous ont été communiqués en langue anglaise, et vous en acceptez les termes et conditions en connaissance de cause.
NOTIFICATIONS
Foreign Assets/Account Reporting Information.
If you are a French resident and you hold securities (including Shares) or cash outside of France, you must declare all foreign bank and brokerage accounts (including the accounts that were opened and closed during the tax year) on an annual basis on a special form n°3916, together with your income tax return. If you fail to complete this reporting, you may be subject to penalties.
GERMANY
NOTIFICATIONS
Exchange Control Information.
Cross-border payments in excess of €12,500 must be reported monthly to the German Federal Bank (Bundesbank). The report must be filed electronically using the "General Statistics Reporting Portal" (Allgemeines Meldeportal Statistik) available via Bundesbank’s website (www.bundesbank.de).
HONG KONG
TERMS AND CONDITIONS
Settlement.
The following supplements the Settlement of Vested RSUs section of the Terms and Conditions section of the Award Agreement including this Appendix I:
Any Shares received at settlement of RSUs are a personal investment. If, for any reason, the RSUs vest and become non-forfeitable and Shares are issued to you within six months of the date of grant, you agree that you will not offer the Shares to the public in Hong Kong or otherwise dispose of the Shares prior to the six-month anniversary of the date of grant.
NOTIFICATIONS
Securities Law Information.
WARNING: The contents of this document have not been reviewed by any regulatory authority in Hong Kong. You are advised to exercise caution in relation to the offer. If you are in any doubt about any of the contents of this document, you should obtain independent professional advice. Neither the grant of the RSUs nor the issuance of Shares upon vesting of the RSUs constitutes a public offering of securities under Hong Kong law. The grant is available only to employees of the Company and its Subsidiaries. The Agreement, the Plan and other incidental communication materials distributed in connection with the RSUs (i) have not been prepared in accordance with and
are not intended to constitute a "prospectus" for a public offering of securities under the applicable securities legislation in Hong Kong and (ii) are intended only for the personal use of each eligible employee of the Company or its Subsidiaries and may not be distributed to any other person.
INDIA
TERMS AND CONDITIONS
Labor Law Acknowledgment.
The RSUs and the Shares underlying the RSUs, and the income and value of same, are extraordinary items that are not part of your annual gross salary.
NOTIFICATIONS
Exchange Control Information.
You are required to repatriate the proceeds from the sale of Shares and any dividends received in relation to the Shares to India within a reasonable amount of time (i.e., within ninety (90) days after receipt for sale proceeds and 180 days of receipt for dividends or within any other time frame prescribed under applicable Indian exchange control laws as may be amended from time to time). You must maintain the foreign inward remittance certificate received from the bank where the foreign currency is deposited in the event that the Reserve Bank of India or your employer requests proof of repatriation. It is your responsibility to comply with applicable exchange control laws in India.
Foreign Assets/Account Reporting Information.
If you are an Indian resident, you are required to report all bank accounts or investments (including the RSUs and any Shares) that you hold outside of India. You should consult with a personal tax advisor to ensure that you are properly complying with applicable reporting requirements.
INDONESIA
NOTIFICATIONS
Exchange Control Information.
Indonesian residents must provide the Bank of Indonesia with information on foreign exchange activities in an online monthly report no later than the fifteenth day of the month following the activity. In addition, if you remit funds into Indonesia (e.g., proceeds from the sale of Shares), the Indonesian bank through which the transaction is made will submit a report of the transaction to the Bank of Indonesia for statistical reporting purposes. For transactions of US$10,000 or more, a more detailed description of the transaction must be included in the report and you may be required to provide information about the transaction (e.g., the relationship between you and the transferor of the funds, the source of the funds, etc.) to the bank in order for the bank to complete the report.
IRELAND
There are no country-specific provisions.
ITALY
TERMS AND CONDITIONS
Plan Document Acknowledgment.
By accepting the RSUs, you acknowledge that you have received a copy of the Plan and the Award Agreement, have reviewed each of these documents in their entirety and fully understand and accept all terms of such documents. In this regard, you acknowledge having read and specifically approve the following sections of the Award Agreement and this Appendix I, as applicable: (i) Vesting; (ii) Termination; (iii) Settlement of Vested RSUs; (iv) Taxes; (v) No Guarantee of Continued Service; (vi) Acknowledgment of Nature of Award; (vii) Data Privacy; and (viii) Governing Law; Jurisdiction; Waiver of Jury Trial.
NOTIFICATIONS
Foreign Assets/Account Reporting Information.
Italian residents who, during the fiscal year, hold investments abroad or foreign financial assets (e.g., cash, Shares and RSUs) which may generate income taxable in Italy are required to report such on their annual tax returns (UNICO Form, RW Schedule) or on a special form if no tax return is due. The same reporting obligations apply to Italian residents who, even if they do not directly hold investments abroad or foreign financial assets (e.g., cash, Shares and RSUs), are beneficial owners of the investment pursuant to Italian money laundering provisions.
Tax on Foreign Financial Assets.
Italian residents may be subject to tax on the value of financial assets held outside of Italy. The taxable amount will be the fair market value of the financial assets, including Shares assessed at the end of the calendar year. If you are subject to this foreign financial assets tax, you will need to report the value of your financial assets held abroad in your annual tax return. You are encouraged to consult your personal legal advisor for additional information about the foreign financial assets tax.
JAPAN
NOTIFICATIONS
Foreign Assets/Account Reporting Information.
If you are a Japanese tax resident, you will be required to report details of any assets held outside of Japan as of December 31st (including any Shares or cash acquired under the Plan) to the extent such assets have a total net fair market value exceeding ¥50,000,000. Such report will be due by March 15th each year. You should consult with your personal tax advisor as to whether the reporting obligation applies to you and whether you will be required to include details of any outstanding Shares, RSUs or cash held by you in the report.
KOREA
NOTIFICATIONS
Foreign Assets/Account Reporting Information.
You must declare all of your foreign financial accounts (i.e., non-Korean bank accounts, brokerage accounts, etc.) to the Korean tax authorities and file a report with respect to such accounts if the value of such accounts exceeds KRW 500 million (or an equivalent amount in foreign currency) on any month-end date during the year.
MALAYSIA
NOTIFICATIONS
Director Notification Requirement.
If you are a director of a Malaysian Subsidiary of Affiliate, you are subject to certain notification requirements under the Malaysian Companies Act, 2016. Among these requirements is an obligation to notify the Malaysian Subsidiary or Affiliate in writing when you receive or dispose of an interest (e.g., RSUs, Shares) in the Company or a related company. This notification must be made within fourteen (14) days of acquiring or disposing of any interest in the Company or a related company.
MEXICO
TERMS AND CONDITIONS
No Entitlement or Claims for Compensation.
These provisions supplement the Acknowledgment of Nature of Award section of the Award Agreement including this Appendix I:
Modification.
By accepting the RSUs, you understand and agree that any modification of the Plan or the Award Agreement or its termination shall not constitute a change or impairment of the terms and conditions of your employment.
Policy Statement.
The Award of RSUs the Company is making under the Plan is unilateral and discretionary and, therefore, the Company reserves the absolute right to amend it and discontinue it at any time without any liability.
The Company, with offices at One PPG Place, Pittsburgh, Pennsylvania 15222, U.S.A. is solely responsible for the administration of the Plan and participation in the Plan and the acquisition of Shares does not, in any way, establish an employment relationship between you and the Company since you are participating in the Plan on a wholly commercial basis and the sole employer is Delimex de Mexico, S.A. de C.V., located at Monte Pelvoux #220, Piso 6, Col. Lomas de Chapultepec, Delegacion Miquel Hidalgo C.P. 11000 Mexico, nor does it establish any rights between you and the Company, its Subsidiaries or its Affiliates.
Plan Document Acknowledgment.
By accepting the RSUs, you acknowledge that you have received copies of the Plan, have reviewed the Plan and the Award Agreement in their entirety and fully understand and accept all provisions of the Plan and the Award Agreement.
In addition, by accepting the Award Agreement, you further acknowledge that you have read and specifically and expressly approve the terms and conditions in the Award Agreement, in which the following is clearly described and established: (i) participation in the Plan does not constitute an acquired right; (ii) the Plan and participation in the Plan is offered by the Company on a wholly discretionary basis; (iii) participation in the Plan is voluntary; and (iv) the Company and any Subsidiary or Affiliates are not responsible for any decrease in the value of the Shares underlying the RSUs.
Finally, you hereby declare that you do not reserve any action or right to bring any claim against the Company for any compensation or damages as a result of your participation in the Plan and therefore grant a full and broad release to the Company and any Subsidiary or Affiliate with respect to any claim that may arise under the Plan.
TÉRMINOS Y CONDICIONES
No existirá derecho o demanda por daños y perjuicios.
Estas disposiciones son complementarias de la sección de Reconocimiento de la Naturaleza del Contrato, incluyendo el presente Apéndice I:
Modificación.
Al aceptar esta RSUs, usted entiende y acuerda que cualquier modificación al Plan o al Contrato, o su terminación no constituirá un cambio o impedimento a los términos y condiciones de su empleo.
Declaración de Política.
El Otorgamiento de RSUs que la Compañía hace mediante el Plan, es unilateral y discrecional y, por lo tanto, la Compañía se reserva el derecho absoluto de modificarlo o descontinuarlo en cualquier momento, sin asumir ninguna responsabilidad.
La Compañía, con oficinas en One PPG Place, Pittsburgh, Pennsylvania 15222, U.S.A. es únicamente responsable de la administración del Plan y la participación en el Plan y la adquisición de Acciones no establece, en ninguna forma, una relación laboral entre usted y la Compañía, toda vez que usted está participando en el Plan en un plano completamente comercial y su único patrón es Delimex de Mexico, S.A. de C.V., ubicado en Monte Pelvoux #220, Piso 6, Col. Lomas de Chapultepec, Delegación Miquel Hidalgo C.P. 11000 México, y tampoco establece ningún derecho entre usted y la Compañía, sus Subsidiarias o Afiliadas.
Reconocimiento del Documento del Plan.
Al aceptar esta RSUs, usted reconoce que ha recibido copias de dicho Plan, ha revisado el Plan y el Contrato en su integridad y comprende y acepta plenamente todas las disposiciones del Plan y del Contrato.
Adicionalmente, al aceptar el Contrato, usted reconoce que ha leído y específica y expresamente aprueba los términos y condiciones en el Contrato, en el cual se establece y describe claramente lo siguiente: (i) la participación en el Plan no constituye un derecho adquirido; (ii) el Plan, y su participación en él es ofrecido por la Compañía sobre una base plenamente discrecional; (iii) la participación en el Plan es voluntaria; y (iv) la Compañía y cualquier Subsidiaria o Afiliada no son responsables por cualquier disminución en el valor de las Acciones implícitas en las RSUs.
Finalmente, por medio del presente usted declara que no se reserva ninguna acción o derecho a presentar cualquier reclamo en contra de la Compañía por cualquier compensación o daño como resultado de su participación en el Plan y por lo tanto otorga la liberación más amplia que en derecho proceda a la Compañía y cualquier Subsidiaria o Afiliada con respecto a cualquier reclamo que pueda surgir en torno al Plan.
NETHERLANDS
NEW ZEALAND
Notifications
Securities Law Information.
WARNING - You are being offered RSUs (which, upon vesting in accordance with the terms of the grant of
the RSUs, will be converted into Shares) in the Company. Shares give you a stake in the ownership of the Company. You may receive a return if dividends are paid. Shares are quoted on the Nasdaq. This means you may be able to sell them on the Nasdaq if there are interested buyers. You may get less than you invested. The price will depend on the demand for the Shares.
If the Company runs into financial difficulties and is wound up, you will be paid only after all creditors have been paid. You may lose some or all of your investment.
New Zealand law normally requires people who offer financial products to give information to investors before they invest. This information is designed to help investors to make an informed decision. The usual rules do not apply to this offer because it is made under an employee share scheme. As a result, you may not be given all the information usually required. You will also have fewer other legal protections for this investment.
In compliance with applicable New Zealand securities laws, you are entitled to receive, in electronic or other form and free of cost, copies of the Company's latest annual report, relevant financial statements and the auditor's report on said financial statements (if any).
Ask questions, read all documents carefully, and seek independent financial advice before committing yourself.
PANAMA
Notifications
Securities Law Information.
The RSUs and the Shares to be issued upon vesting of RSUs are offered in a private transaction. This is not an offer to the public and the offer is not subject to the protections established by Panamanian securities laws.
PAPUA NEW GUINEA
There are no country-specific provisions.
POLAND
Notifications
Exchange Control Information.
If you transfer funds in excess of a certain threshold (currently €15,000) into or out of Poland, the funds must be transferred via a Polish bank account or financial institution. You are required to retain the documents connected with a foreign exchange transaction for a period of five (5) years, as measured from the end of the year in which such transaction occurred.
Foreign Assets/Account Reporting Information.
Polish residents holding foreign securities (e.g., Shares) and/or maintaining accounts abroad must report information to the National Bank of Poland on transactions and balances of the securities and cash deposited in such accounts if the value of such securities and cash (when combined with all other assets possessed abroad) exceeds PLN 7 million. If required, the reports must be filed on a quarterly basis on special forms that are available on the website of the National Bank of Poland.
PUERTO RICO
Notifications
Securities Law Information.
The offer of the Plan is subject exclusively to United States securities laws, including the United States Securities Exchange Act of 1934, as amended.
RUSSIA
TERMS AND CONDITIONS
U.S. Transaction.
You understand that your acceptance of the RSUs results in a contract between you and the Company that is completed in the United States and that the Award Agreement is governed by the laws of the State of Delaware, without giving effect to the conflict of laws principles thereof. You are not permitted to sell the Shares directly to other Russian legal entities or individuals.
NOTIFICATIONS
Securities Law Information.
Your employer is not in any way involved with the offer of the RSUs or administration of the Plan. The Award Agreement, the Plan and all other materials you may receive regarding participation in the Plan do not constitute advertising or an offering of securities in Russia. Absent any requirement under local law, the issuance of securities pursuant to the Plan has not and will not be registered in Russia; hence, the securities described in any Plan-related documents may not be used for offering or public circulation in Russia. In no event will Shares issued upon vesting of the RSUs be delivered to you in Russia; all Shares will be maintained on your behalf in the United States of America.
Exchange Control Information.
You are responsible for complying with any applicable Russian exchange control regulations and rulings. Because Russian exchange control regulations and rulings change frequently and without notice, you should consult with a legal advisor to ensure compliance applicable to any aspect of your participation in the Plan, including the grant and vesting of the RSUs, issuance of any Shares at vesting, receipt of any proceeds from the sale of Shares and/or receipt of any payments in connection with any Dividend Equivalents or dividends.
Foreign Assets/Account Reporting Information.
Russian residents are required to notify Russian tax authorities within one (1) month of opening, closing or changing the details of a foreign account. Russian residents also are required to report (i) the beginning and ending balances in such a foreign bank account each year and (ii) transactions related to such a foreign account during the year to the Russian tax authorities, on or before June 1 of the following year. The tax authorities can require you to provide appropriate supporting documents related to transactions in a foreign bank account.
Anti-Corruption Notice.
Anti-corruption laws prohibit certain public servants, their spouses and their dependent children from owning any foreign source financial instruments (e.g., shares of foreign companies such as the Company). Accordingly, you should inform the Company if you are covered by these laws because you should not hold Shares acquired under the
Plan.
SINGAPORE
NOTIFICATIONS
Securities Law Information.
The grant of the RSUs is being made pursuant to the "Qualifying Person" exemption under section 273(1)(f) of the Securities and Futures Act (Chapter 289, 2006 Ed.) ("SFA"), under which it is exempt from the prospectus and registration requirements under the SFA. The Plan has not been lodged or registered as a prospectus with the Monetary Authority of Singapore and the grant of the RSUs is not made with a view to the RSUs or Shares being subsequently offered to another party. You should note that the RSUs are subject to section 257 of the SFA and you should not make any subsequent sale of Shares in Singapore or any offer of such subsequent sale of Shares subject to the awards in Singapore, unless such sale or offer in is made: (i) more than six (6) months from the Grant Date or (ii) pursuant to the exemptions under Part XIII Division (1) Subdivision (4) (other than section 280) of the SFA.
Chief Executive Officer/Director Notification Requirement.
If you are the Chief Executive Officer ("CEO"), a director, associate director or shadow director of the Company's Singapore Subsidiary or Affiliate, you are subject to certain notification requirements under the Singapore Companies Act. Among these requirements is an obligation to notify the Singapore Subsidiary or Affiliate in writing when you receive an interest (e.g., RSUs, Shares) in the Company, a Subsidiary or Affiliate. In addition, you must notify the Singapore Subsidiary or Affiliate when you sell Shares (including when you sell Shares issued upon vesting and settlement of the RSUs). These notifications must be made within two (2) business days of acquiring or disposing of any interest in the Company or any Subsidiary or Affiliate. In addition, a notification of your interests in the Company, Subsidiary or Affiliate must be made within two (2) business days of becoming CEO or a director.
SPAIN
TERMS AND CONDITIONS
Acknowledgment of Nature of Award.
The following provisions supplement the first paragraph of the Acknowledgment of Nature of Award section of the General Non-U.S. Terms and Conditions section of this Appendix I:
By accepting the grant of the RSUs, you acknowledge that you consent to participation in the Plan and have received a copy of the Plan.
You understand that the Company has unilaterally, gratuitously and discretionally decided to grant RSUs under the Plan to individuals who may be employees of the Company's Subsidiaries or Affiliates throughout the world. The decision is a limited decision that is entered into upon the express assumption and condition that any grant will not economically or otherwise bind the Company or its Subsidiaries or Affiliates on an ongoing basis except as provided in the Plan. Consequently, you understand that the RSUs are granted on the assumption and condition that the RSUs or the Shares acquired upon vesting shall not become a part of any employment contract with the Company and any of its Subsidiaries and shall not be considered a mandatory benefit, salary for any purposes (including severance compensation) or any other right whatsoever. In addition, you understand that this grant would not be made to you but for the assumptions and conditions referred to above; thus, you acknowledge and freely accept that should any or all of the assumptions be mistaken or should any of the conditions not be met for any reason, then the RSUs shall be null and void.
You understand and agree that, unless otherwise provided in the Award Agreement, the vesting and settlement of the RSUs is expressly conditioned on your continuous Service such that if your employment or rendering of Services terminates for any reason whatsoever, your RSUs will cease vesting immediately effective as of the date of such termination for any reason including, but not limited to, resignation, retirement, disciplinary dismissal adjudged to be with cause, disciplinary dismissal adjudged or recognized to be without cause (i.e., subject to a "despido improcedente"), individual or collective dismissal on objective grounds, whether adjudged or recognized to be with or without cause, material modification of the terms of employment under Article 41 of the Workers' Statute, relocation under Article 40 of the Workers' Statute, and/or Article 50 of the Workers' Statute, unilateral withdrawal by your employer and under Article 10.3 of the Royal Decree 1382/1985. Consequently, upon termination for any of the above reasons, you will automatically lose any rights to the RSUs granted to you that were unvested on the date of termination, as described in the Award Agreement.
NOTIFICATIONS
Securities Law Information.
The RSUs and the Shares issued pursuant to the vesting of the RSUs do not qualify under Spanish regulations as securities. No "offer of securities to the public," as defined under Spanish law, has taken place or will take place in the Spanish territory. The Award Agreement has not been nor will it be registered with the Comisión Nacional del Mercado de Valores, and does not constitute a public offering prospectus.
Foreign Assets/Account Reporting Information.
If you are a Spanish resident, you must declare the acquisition, ownership and disposition of Shares to the Dirección General de Comercial e Inversiones (the "DGCI") of the Ministerio de Economia for statistical purposes. This declaration must be made in January for any Shares owned as of December 31 of the prior year by filing a form D-6 with the DGCI; however, if the value of the Shares being reported exceeds €1,502,530 (or if you hold 10% or more of the share capital of the Company or such other amount that would entitle you to join the Board of Directors), the declaration must be filed within one (1) month of the acquisition or disposition of the Shares, as applicable. In addition, if you wish to import the ownership title of any Shares (i.e., share certificates) into Spain, you must declare the importation of such securities to the DGCI.
You also are required to declare electronically to the Bank of Spain any foreign accounts (including brokerage accounts held abroad), any foreign instruments (including Shares) and any transactions with non-Spanish residents (including any payments of Shares made pursuant to the Plan) held in such accounts if the value of the transactions during the prior tax year or the balances in such accounts as of December 31 of the prior tax year exceeds €1,000,000.
To the extent that you hold rights or assets (e.g., Shares acquired under the Plan or cash held in a bank or brokerage account) outside Spain with a value in excess of €50,000 per type of asset as of December 31 each year, you will be required to report information on such assets on your tax return (tax form 720) for such year. After such rights and/or assets are initially reported, the reporting obligation will apply for subsequent years only if the value of such right or asset increases by more than €20,000 or if you sell or otherwise dispose of previously reported rights or assets. The reporting must be completed by the following March 31.
You are solely responsible for complying with applicable reporting obligations. The laws are often complex and can change frequently. You should consult your personal legal and/or tax advisor to confirm the reporting requirements that will apply to you in connection with the Plan.
SWEDEN
There are no country-specific provisions.
THAILAND
NOTIFICATIONS
Exchange Control Information.
If you are a Thai resident and you receive funds in connection with the Plan (e.g., dividends or sale proceeds) with a value equal to or greater than US$200,000 per transaction, you are required to immediately repatriate such funds to Thailand. Any foreign currency repatriated to Thailand must be converted to Thai Baht or deposited into a foreign currency deposit account opened with any commercial bank in Thailand acting as the authorized agent within 360 days from the date the funds are repatriated to Thailand. You are also required to inform the authorized agent of the details of the foreign currency transaction, including your identification information and the purpose of the transaction.
If you do not comply with the above obligations, you may be subject to penalties assessed by the Bank of Thailand. Because exchange control regulations change frequently and without notice, you should consult your legal advisor before selling any Shares (or receiving any other funds in connection with the Plan) to ensure compliance with current regulations. You are responsible for ensuring compliance with all exchange control laws in Thailand, and neither the Company nor your employer will be liable for any fines or penalties resulting from failure to comply with applicable laws.
TURKEY
NOTIFICATIONS
Securities Law Information.
You are permitted to sell Shares acquired under the Plan through the designated broker appointed under the Plan, if any, provided the sale of the Shares takes place outside of Turkey through the facilities of a stock exchange on which the Shares are listed (i.e., Nasdaq).
Exchange Control Information.
Under Turkish law, Turkish residents are permitted to purchase and sell securities or derivatives traded on exchanges abroad only through a financial intermediary licensed in Turkey. Therefore, you may be required to appoint a Turkish broker to assist you with the sale of the Shares acquired under the Plan. You should consult your personal legal advisor before selling any Shares acquired under the Plan to confirm the applicability of this requirement to you.
UNITED ARAB EMIRATES
NOTIFICATIONS
Securities Law Information.
The Plan is being offered only to employees and is in the nature of providing equity incentives to employees of the Company or its Subsidiaries or Affiliates in the United Arab Emirates ("UAE"). Any documents related to the Plan, including the Plan, this Award Agreement, and other grant documents ("Plan Documents"), are intended for distribution only to such employees and must not be delivered to, or relied on by any other person. Prospective purchasers of the securities offered (i.e., the RSUs) should conduct their own due diligence on the securities.
The Emirates Securities and Commodities Authority has no responsibility for reviewing or verifying any Plan Documents nor has it taken steps to verify the information set out in them, and thus, is not responsible for such
documents. Further, neither the Ministry of Economy nor the Dubai Department of Economic Development has approved this statement nor taken steps to verify the information set out in it, and has no responsibility for it. If you do not understand the contents of the Plan Documents, you should consult an authorized financial advisor.
UNITED KINGDOM
Terms & Conditions
Taxes.
The following provisions supplement the Taxes section of the Award Agreement and the General Non-U.S. Terms and Conditions section of this Appendix I:
Without limitation to the Taxes section of the Award Agreement and the General Non-U.S. Terms and Conditions section of this Appendix I, you agree that you are liable for all Tax-Related Items and hereby covenant to pay all such Tax-Related Items as and when requested by the Company or your employer or by Her Majesty's Revenue and Customs ("HMRC") (or any other tax authority or any other relevant authority). You also agree to indemnify and keep indemnified the Company and your employer against any Tax–Related Items that they are required to pay or withhold or have paid or will pay on your behalf to HMRC (or any other tax authority or any other relevant authority).
Notwithstanding the foregoing, if you are a director or executive officer (as within the meaning of the Act), the terms of the immediately foregoing provision will not apply. In the event that you are a director or executive officer and income tax due is not collected from or paid by you by within ninety (90) days of the U.K. tax year in which an event giving rise to the indemnification described above occurs, the amount of any uncollected tax may constitute a benefit to you on which additional income tax and national insurance contributions may be payable. You acknowledge that you ultimately will be responsible for reporting and paying any income tax due on this additional benefit directly to HMRC under the self-assessment regime and for reimbursing the Company or the Employer (as applicable) for the value of any employee national insurance contributions due on this additional benefit, which the Company and/or the Employer may recover from you by any of the means referred to in the Taxes section of the Award Agreement and the General Non-U.S. Terms and Conditions section of this Appendix I.
VENEZUELA
TERMS AND CONDITIONS
Exchange Control Restrictions.
Exchange control restrictions may limit the ability to vest in the RSUs or to remit funds into Venezuela following the sale of Shares acquired under the Plan. The Company reserves the right to further restrict the settlement of the RSUs or to amend or cancel the RSUs at any time in order to comply with the applicable exchange control laws in Venezuela. However, ultimately, you are responsible for complying with exchange control laws in Venezuela and the Company will not be liable for any fines or penalties resulting from your failure to comply with applicable laws. You should consult your personal advisor prior to accepting the RSUs to ensure compliance with current regulations. You are solely responsible for ensuring compliance with all exchange control laws in Venezuela.
Investment Representation.
As a condition of the grant of the RSUs, you acknowledge and agree that any Shares you may acquire upon vesting of the RSUs are acquired as and intended to be an investment rather than for the resale of the Shares and conversion of the Shares into foreign currency.
NOTIFICATIONS
Securities Law Information.
The RSUs granted under the Plan and the Shares issued under the Plan are offered as a personal, private, exclusive transaction and are not subject to Venezuelan government securities regulations.
Exhibit 10.5
THE KRAFT HEINZ COMPANY OMNIBUS INCENTIVE PLAN
RESTRICTED STOCK UNIT AWARD AGREEMENT FOR BANDS B02-B09
Unless defined in this award agreement (together with all exhibits and appendices attached thereto, this "Award Agreement"), capitalized terms will have the same meanings ascribed to them in The Kraft Heinz Company 2020 Omnibus Incentive Plan (as may be amended from time to time, the "Plan").
Subject to your acceptance of this Award Agreement, you are hereby being granted an award of Restricted Stock Units (the "RSUs") as of the Grant Date set forth below (the "Grant Date"). Each RSU is a bookkeeping entry representing the right to receive one (1) share of The Kraft Heinz Company's (the "Company") common stock on the following terms and subject to the provisions of the Plan, which is incorporated herein by reference. In the event of a conflict between the provisions of the Plan and this Award Agreement, the provisions of the Plan will govern.
|
|
|
|
|
|
Number of RSUs:
|
_______________
|
Grant Date:
|
_______________
|
Vesting Date:
|
Fifty Percent (50%) on 2-year anniversary of Grant Date and remaining Fifty Percent (50%) on 3-year anniversary of Grant Date (subject to the terms of the Award Agreement).
|
By agreeing to this Award Agreement, you agree that the RSUs are granted under and governed by the terms and conditions of this Award Agreement (including, without limitation, the terms and conditions set forth on Exhibit A, the Restrictive Covenants Agreement attached as Exhibit B and the terms and conditions set forth on Appendix I) and the Plan.
EXHIBIT A
TERMS AND CONDITIONS OF THE RESTRICTED STOCK UNITS
Vesting
The RSUs will vest on the "Vesting Date" set forth in this Award Agreement subject to your continued Service (including, for the avoidance of doubt, service as a consultant or advisor) with the Company or one of its Subsidiaries, except as otherwise set forth in the Plan or this Award Agreement (including, without limitation, the section below titled "Termination"). Prior to the vesting and settlement of the RSUs, you will not have any rights of a shareholder with respect to the RSUs or the Shares subject thereto.
Shares due to you upon vesting and settlement of the RSUs will be delivered in accordance with the provisions of the section below titled "Settlement of Vested RSUs." However, no Shares will be delivered pursuant to the vesting of the RSUs prior to the fulfillment of all of the following conditions: (i) you have complied with your obligations under this Award Agreement and the Plan, (ii) the vesting of the RSUs and the delivery of such Shares complies with applicable law, (iii) full payment (or satisfactory provision therefor) of any Tax-Related Items (as defined below), (iv) the admission of the Shares to listing on all stock exchanges on which the Shares are then listed, (v) the completion of any registration or other qualification of the Shares under any state or federal law or under rulings or regulations of the Securities and Exchange Commission (the "Commission") or other governmental regulatory body, which the Committee shall, in its sole and absolute discretion, deem necessary and advisable, or if the offering of the Shares is not so registered, a determination by the Company that the issuance of the Shares would be exempt from any such registration or qualification requirements, (vi) the obtaining of any approval or other clearance from any state, federal or foreign governmental agency that the Committee shall, in its absolute discretion, determine to be necessary or advisable and (vii) the lapse of any such reasonable period of time following the date the RSUs become payable as the Committee may from time to time establish for reasons of administrative convenience, subject to compliance with Section 409A of the Code.
Until such time as the Shares are delivered to you (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), you will have no right to vote or receive dividends or any other rights as a shareholder with respect to such Shares, notwithstanding the vesting of the RSUs.
Dividend Equivalents
If while the RSUs are outstanding the Board declares a cash dividend on the Company's common stock, you will be entitled to Dividend Equivalents on the dividend payment date established by the Company equal to the cash dividends payable on the same number of Shares as the number of unvested RSUs subject to this award on the dividend record date established by the Company. Any such Dividend Equivalents will be in the form of additional RSUs, will be subject to the same terms and vesting dates as the underlying RSUs, and will be delivered at the same time and in the same manner as the underlying RSUs originally subject to this award. The number of additional RSUs credited as Dividend Equivalents on the dividend payment date will be determined by dividing (i) the product of (A) the number of your unvested RSUs as of the corresponding dividend record date (including any unvested Restricted Stock Units previously credited as a result of prior payments of Dividend Equivalents) and (B) the per-Share cash dividend paid on the dividend payment date, by (ii) the per-share Fair Market Value of the Shares on the dividend payment date, rounded down to the nearest whole RSU.
Termination
Effect of a Termination of Service on Vesting
Other than as set forth below, upon a termination of your Service for any reason prior to the Vesting Date, you will forfeit the RSUs, without any consideration due to you.
If your Service terminates by reason of your death or Disability (as defined below) your RSUs shall be fully vested and exercisable. If your Service terminates by reason of your Retirement (as defined below) after the second anniversary of the Grant Date of the award, your RSUs shall be fully vested and exercisable.
Settlement of Vested RSUs
To the extent the RSUs become vested pursuant to the terms of this Award Agreement, the Company will issue and deliver to you, or, as applicable, your Beneficiary or the personal representative of your estate, the number of Shares equal to the number of vested RSUs. Such delivery of Shares will occur within the settlement period set forth in the table below, which will vary depending on the applicable vesting event.
|
|
|
|
|
|
Vesting Event
|
Settlement Period
|
•Vesting Date
|
As soon as practicable and no later than 60 days following the Vesting Date
|
•Retirement
|
Within 60 days of your termination date*
|
•Disability
|
Within 60 days of your termination date*
|
•Death
|
Within 60 days of the date of death
|
*If you are subject to U.S. federal income tax and the RSUs constitute an item of non-qualified deferred compensation, within the meaning of Section 409A of the Code, as determined by the Company ("Deferred Compensation"), settlement will occur within this period only if your termination of Service constitutes a "separation from service" within the meaning of Section 409A of the Code ("Separation from Service"); otherwise, settlement will occur in accordance with the original vesting schedule (i.e., as soon as practicable and no later than sixty (60) days following the Vesting Date).
Notwithstanding the foregoing, if you are subject to U.S. federal income tax and the Company determines that you are a "specified employee" within the meaning of Section 409A of the Code, any RSUs that are Deferred Compensation and are subject to settlement upon your Separation from Service will instead be settled on the date that is the first business day following the six (6) month anniversary of such Separation from Service, or, if earlier, upon your death, to the extent required pursuant to Section 409A of the Code.
Applicable Definitions
All capitalized terms used in this Agreement without definition shall have the meanings ascribed in the Plan. For purposes of this Award Agreement, the following terms shall have the following meanings:
"Disability" means (i) a physical or mental condition entitling you to benefits under the long-term disability policy of the Company covering you or (ii) in the absence of any such policy, a physical or mental condition rendering you unable to perform your duties for the Company or any of its Subsidiaries or Affiliates for a period of six (6) consecutive months or longer; provided that if you are a party to an Employment Agreement at the time of termination of your Service and such Employment Agreement contains a different definition of "disability" (or any derivation thereof), the definition in such Employment Agreement will control for purposes of this Award Agreement.
"Employment Agreement" means an individual written employment agreement between you and the Company or any of its Affiliates, including an offer letter.
“Retirement” means a termination of Service by you on or after either (a) the later of (i) your 60th birthday and (ii) your completion of five years of Service with the Company, its Subsidiaries or its Affiliates; or (b) the later of (i) your 55th birthday and (ii) your completion of ten years of Service with the Company, its Subsidiaries or its Affiliates.
"Without Cause" means (i) a termination of your Service by the Company or its Subsidiaries or Affiliates other than for Cause (as defined in the Plan) and other than due to your death, Disability or Retirement or (ii) (A) if you are a party to an Employment Agreement, (B) such Employment Agreement is in effect upon the date of your termination of Service and (C) such Employment Agreement defines "Good Reason", then "Without Cause" shall also include resignation of your Service for "Good Reason" in accordance with such Employment Agreement.
Special Termination Provisions
In the event that there is a conflict between the terms of this Award Agreement regarding the effect of a termination of your Service on the RSUs and the terms of any Employment Agreement, the terms of this Award Agreement will govern.
If you are terminated Without Cause or due to your resignation and, within the twelve (12) month period subsequent to such termination of your Service, the Company determines that your Service could have been terminated for Cause, subject to anything to the contrary that may be contained in your Employment Agreement at the time of termination of your Service, your Service will, at the election of the Company, be deemed to have been terminated for Cause for purposes of this Award Agreement and the Plan, effective as of the date the events giving rise to Cause occurred and any consequences following from a termination for Cause shall be retroactively applied (including your obligation to repay gains that would not have been realized had your Service been terminated for Cause).
Effect of a Change in Control
The treatment of the RSUs upon a Change in Control shall be governed by the Plan, provided, however, that to the extent that the RSUs constitute Deferred Compensation, settlement of any portion of the RSUs that may vest in connection with a Change in Control will occur within sixty (60) days following the Vesting Date. In the event that there is a conflict between the terms of this Award Agreement regarding the effect of a Change in Control on the RSUs and the terms of any Employment Agreement, the terms of this Award Agreement will govern.
Restrictive Covenants
Your Service will provide you with specialized training and unique knowledge and access to confidential information and key business relationships, which, if used in competition with the Company, its Subsidiaries and/or its Affiliates, would cause harm to such entities. As such, in partial consideration of the RSUs granted under this Award Agreement, you agree to comply with the Company's Restrictive Covenants Agreement, attached (and incorporated into this Award Agreement) as Exhibit B. The restrictions and obligations contained in the Restrictive Covenants Agreement are in addition to any restrictions imposed by, or obligations you may have to, the Company, its Subsidiaries or Affiliates under any Employment Agreement or otherwise.
Taxes
You acknowledge that, regardless of any action the Company or your employer (the “Employer”) takes with respect to any or all income tax, social security or insurance, payroll tax, fringe benefits tax, payment on account or other tax-related withholding ("Tax-Related Items"), the ultimate liability for all Tax-Related Items legally due by you is and remains your responsibility and that the Company and/or its Subsidiaries or Affiliates (i) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the RSU grant, including the grant, vesting or settlement of the RSUs, the subsequent sale of Shares acquired pursuant to such settlement and the receipt of any dividends or Dividend Equivalents and (ii) do not commit to structure the terms of the grant or any aspect of the RSUs to reduce or eliminate your liability for Tax-Related Items.
Prior to vesting of the RSUs, you will pay or make adequate arrangements satisfactory to the Committee to satisfy all Tax-Related Items. In this regard, you authorize the withholding of all applicable Tax-Related Items legally payable by you from your wages or other cash compensation paid to you by the Company and/or its Subsidiaries or Affiliates or from proceeds of the sale of Shares. Alternatively, or in addition, if permissible under local law, the Company may in its sole and absolute discretion (A) sell or arrange for the sale of Shares that you acquire to meet the obligation for Tax-Related Items, and/or (B) withhold the amount of Shares necessary to satisfy the minimum withholding amount, or to the extent permitted by applicable accounting principles, withhold Shares based on a rate of up to the maximum applicable withholding rate. Notwithstanding the foregoing, if you are subject to the short-swing profit rules of Section 16(b) of the Act, you may elect the form of withholding in advance of any Tax-Related Items withholding event, and in the absence of your election, the Company shall deduct the
number of Shares having an aggregate value equal to the amount of Tax-Related Items withholding due from the vesting of the RSUs, or the Committee may determine that a particular method be used to satisfy any Tax Related Items withholding.
Further, the Company is authorized to satisfy the withholding for any or all Tax-Related Items arising from the granting, vesting, or payment of the RSUs or sale of Shares issued in settlement of the RSUs, as the case may be, by deducting the number of Shares having an aggregate value equal to the amount of the Tax-Related Items withholding due or otherwise becoming subject to current taxation. If the Company satisfies the Tax-Related Items obligation by withholding a number of Shares as described herein, for tax purposes, you shall be deemed to have been issued the full number of Shares due to you at vesting, notwithstanding that a number of Shares is held back solely for the purpose of such Tax-Related Items withholding.
Furthermore, the Company and/or the Employer are authorized to satisfy the Tax-Related Items withholding arising from the granting, vesting, or payment of this Award, or sale of Shares issued pursuant to the Award, as the case may be, by withholding from the Participant’s wages, or other cash compensation paid to you by the Company and/or the Employer.
Finally, you will pay to the Company and/or its Subsidiaries or Affiliates any amount of Tax-Related Items that the Company or its Subsidiaries or Affiliates may be required to withhold as a result of your participation in the Plan that cannot be satisfied by the means previously described. The Company may refuse to deliver the Shares if you fail to comply with your obligations in connection with the Tax-Related Items as described in this section.
No Guarantee of Continued Service
You acknowledge and agree that the vesting of the RSUs on the Vesting Date (or such earlier date as set forth in the section above titled "Termination") is earned only by performing continuing Service (not through the act of being hired or being granted this Award). You further acknowledge and agree that this Award Agreement, the transactions contemplated hereunder and the Vesting Date shall not be construed as giving you the right to be retained in the employ of, or to continue to provide Service to, the Company or its Subsidiaries. Further, the Company or the applicable Subsidiary may at any time dismiss you, free from any liability, or any claim under the Plan, unless otherwise expressly provided in any other agreement binding you, the Company or the applicable Subsidiary. The receipt of this Award is not intended to confer any rights on you except as set forth in this Award Agreement.
Company's Right of Offset
If you become entitled to a distribution of benefits under this Award, and if at such time you have any outstanding debt, obligation, or other liability representing an amount owing to the Company, its Subsidiaries or any of its Affiliates, then the Company, its Subsidiaries or its Affiliates, upon a determination by the Committee, and to the extent permitted by applicable law and it would not cause a violation of Section 409A of the Code, may offset such amount so owing against the amount of benefits otherwise distributable. Such determination shall be made by the Committee.
Acknowledgment of Nature of Award
In accepting the RSUs, you understand, acknowledge and agree that:
(a) the Plan is established voluntarily by the Company, it is discretionary in nature and may be modified, amended, suspended or terminated by the Company at any time, as provided in the Plan and this Award Agreement;
(b) the award of the RSUs is exceptional, voluntary, occasional and discretionary and does not create any contractual or other right to receive future RSU awards, or benefits in lieu of RSUs even if RSUs have been awarded in the past;
(c) all decisions with respect to future awards, if any, will be at the sole discretion of the Company, including, but not limited to, the form and timing of the RSUs, the number of Shares subject to the RSUs, and the vesting provisions applicable to the RSUs;
(d) your participation in the Plan is voluntary;
(e) the RSUs are an extraordinary item that does not constitute compensation of any kind for services of any kind rendered to the Company or its Subsidiaries;
(f) the RSUs, any Shares acquired under the Plan, and the income and value of same are not part of normal or expected compensation or salary for purposes of calculating any severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments;
(g) the future value of the underlying Shares is unknown, indeterminable, and cannot be predicted with certainty;
(h) unless otherwise agreed with the Company in writing, the RSUs, any Shares acquired under the Plan, and the income and value of same, are not granted as consideration for, or in connection with, any Service you may provide as a director of a Subsidiary or Affiliate;
(i) no claim or entitlement to compensation or damages shall arise from forfeiture of the RSU resulting from termination of your Service (for any reason whatsoever, whether or not later found to be invalid or in breach of employment laws in the jurisdiction where you provide Service or the terms of your Employment Agreement, if any), and in consideration of the grant of the RSU to which you are otherwise not entitled, you irrevocably agree never to institute any claim against the Company, any of its Subsidiaries or Affiliates, waive your ability, if any, to bring any such claim, and release the Company, and its Subsidiaries and Affiliates from any such claim; if, notwithstanding the foregoing, any such claim is allowed by a court of competent jurisdiction, then, by participating in the Plan, you shall be deemed irrevocably to have agreed not to pursue such claim and agree to execute any and all documents necessary to request dismissal or withdrawal of such claim; and
(j) the RSUs are subject to the terms of the Plan (including, without limitation, certain provisions regarding Adjustments, Repurchases and Transfers).
Securities Laws
By accepting the RSUs, you acknowledge that U.S. federal, state or foreign securities laws and/or the Company's policies regarding trading in its securities may limit or restrict your right to buy or sell Shares, including, without limitation, sales of Shares acquired in connection with the RSUs. You agree to comply with such securities law requirements and Company policies, as such laws and policies are amended from time to time.
Data Privacy
a.Data Collection and Usage. The Company collects, processes and uses personal data about you, including but not limited to, your name, home address and telephone number, email address, date of birth, social insurance number, employee identification number, hire date, termination date, gross earnings, tax rate, account identification number for the independent stock plan service provider account, any shares of stock or directorships held in the Company, details of all RSUs or any other entitlement to shares or equivalent benefits awarded, canceled, exercised, vested, unvested or outstanding in your favor, which the Company receives from you or your employer (“Data”) for the purposes of implementing, administering and managing the Plan. The legal basis, where required, for the processing of Data is the legitimate interests of the Company in administering the Plan, where our interests are not overridden by your data protection rights.
b.Stock Plan Administration Service Providers. The Company may transfer Data to one or more independent stock plan service providers, which may assist the Company with the implementation,
administration and management of the Plan. Such service provider(s) may open an account for you or ask you to receive and trade shares of common stock. You may be asked to acknowledge, or agree to, separate terms and data processing practices with the service provider(s) with such agreement being a condition of participation in the Plan. Please review these terms and data processing practices carefully. If you do not agree to the independent stock plan service provider’s terms and/or data processing practices, you will not be able to participate in the Plan.
c.International Data Transfers. Please note that Data processed in connection with the Plan will be transferred from your country to the United States, where the Company and its service providers are based. Your country or jurisdiction may have different data privacy laws and protections than the United States. The Company will ensure that appropriate measures are in place for compliance with applicable data protection laws in relation to transfer of Data to the United States.
d.Data Retention. The Company will use your personal data only as long as necessary to implement, administer and manage your participation in the Plan and as required to comply with legal or regulatory obligations, including under tax and securities laws. When the Company no longer needs your personal data for any of the above purposes, the Company will remove it from its systems.
e.Data Subject Rights. You understand that you may have a number of rights under data privacy laws in your jurisdiction. Depending on where you are based, such rights may include the right to (i) request access or copies of personal data processed by the Company, (ii) rectification of incorrect data, (iii) deletion of personal data, (iv) restrictions on processing of personal data, (v) portability of personal data, (vi) lodge complaints with competent data protection authorities in your jurisdiction, and/or (vii) receive a list with the names and addresses of any potential recipients of your personal data. To receive clarification regarding these rights or to exercise these rights, you can contact the Company’s Data Privacy Team at gdpr@kraftheinz.com.
Limits on Transferability; Beneficiaries
The RSUs shall not be pledged, hypothecated or otherwise encumbered or subject to any lien, obligation or liability to any party, or Transferred, otherwise than by your will or the laws of descent and distribution or to a Beneficiary upon your death. A Beneficiary or other person claiming any rights under this Award Agreement shall be subject to all terms and conditions of the Plan and this Award Agreement, except as otherwise determined by the Committee, and to any additional terms and conditions deemed necessary or appropriate by the Committee.
No Transfer to any executor or administrator of your estate or to any Beneficiary by will or the laws of descent and distribution of any rights in respect of the RSUs shall be effective to bind the Company unless the Committee shall have been furnished with (i) written notice thereof and with a copy of the will and/or such evidence as the Committee may deem necessary to establish the validity of the Transfer and (ii) the written agreement of the Transferee to comply with the terms and conditions of this Award Agreement, to the extent applicable, as determined by the Company.
Repayment/Forfeiture
As an additional condition of receiving the RSUs and without prejudice to the terms of the Company's Restrictive Covenants Agreement (attached as Exhibit B), you agree that the RSUs and any proceeds or other benefits you may receive hereunder shall be subject to forfeiture and/or repayment to the Company to the extent required (i) under the terms of any policy adopted by the Company as may be amended from time to time (and such requirements shall be deemed incorporated into this Award Agreement without your consent) or (ii) to comply with any requirements imposed under applicable laws and/or the rules and regulations of the securities exchange or inter-dealer quotation system on which the Shares are listed or quoted, including, without limitation, pursuant to Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Further, if you receive any amount in excess of what you should have received under the terms of the RSUs for any reason (including without limitation by reason of a financial restatement, mistake in calculations or administrative error), all as determined by
the Committee, then you shall be required to promptly repay any such excess amount to the Company. Nothing in or about this Agreement prohibits you from: (i) filing and, as provided for under Section 21F of the Act, maintaining the confidentiality of a claim with the Commission, (ii) providing the Commission with information that would otherwise violate the non-disclosure restrictions in this Agreement, to the extent permitted by Section 21F of the Act; (iii) cooperating, participating or assisting in a Commission investigation or proceeding without notifying the Company; or (iv) receiving a monetary award as set forth in Section 21F of the Act. Furthermore, you are advised that you shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of any Confidential Information (as defined in Exhibit B) that constitutes a trade secret to which the Defend Trade Secrets Act (18 U.S.C. Section 1833(b)) applies that is made (i) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney, in each case, solely for the purpose of reporting or investigating a suspected violation of law; or (ii) in a complaint or other document filed in a lawsuit or proceeding, if such filings are made under seal.
Section 409A
It is intended that the RSUs awarded pursuant to this Award Agreement be exempt from or compliant with Section 409A of the Code ("Section 409A") and the Award Agreement shall be interpreted, construed and operated to reflect this intent. Notwithstanding the foregoing, this Award Agreement and the Plan may be amended at any time, without the consent of any party, to the extent that is necessary or desirable to exempt the RSUs from Section 409A or satisfy any of the requirements under Section 409A, but the Company shall not be under any obligation to make any such amendment. Further, the Company, its Subsidiaries and Affiliates do not make any representation to you that the RSUs awarded pursuant to this Award Agreement shall be exempt from or satisfy the requirements of Section 409A, and the Company, its Subsidiaries and Affiliates shall have no liability or other obligation to indemnify or hold harmless you or any Beneficiary, Transferee or other party for any tax, additional tax, interest or penalties that you or any Beneficiary, Transferee or other party may incur in the event that any provision of this Award Agreement, or any amendment or modification thereof or any other action taken with respect thereto, is deemed to violate any of the requirements of Section 409A.
Entire Agreement; Modification
The Plan, this Award Agreement and, to the extent applicable, your Employment Agreement or any separation agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings, representations and agreements (whether oral or written) of the Company, its Subsidiaries and/or Affiliates and you with respect to the subject matter hereof. This Award Agreement may not be modified in a manner that adversely affects your rights heretofore granted under the Plan, except with your consent or to comply with applicable law or to the extent permitted under other provisions of the Plan.
Governing Law; Jurisdiction; Waiver of Jury Trial
This Award Agreement (together with all exhibits and appendices attached thereto) is governed by the laws of the State of Delaware, without regard to its principles of conflict of laws, and any disputes shall be settled in accordance with the Plan.
To the extent not prohibited by applicable law, each of the parties hereto waives any right it may have to trial by jury in respect of any litigation based on, arising out of, under or in connection with this Award Agreement (together with all exhibits and appendices attached thereto) or the Plan.
Electronic Signatures and Delivery and Acceptance
The Company may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan, including this Award Agreement, by electronic means or request your consent to participate in the Plan by electronic means. You hereby consent to receive such documents by electronic delivery and agree to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company. The Award Agreement if delivered by electronic means with electronic signatures shall be treated in all manner and respects as an original executed document and shall be
considered to have the same binding legal effect as if it were the original signed versions thereof delivered in person.
Agreement Severable
This Award Agreement shall be enforceable to the fullest extent allowed by law. In the event that any provision of this Award Agreement is determined to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, then that provision shall be reduced, modified or otherwise conformed to the relevant law, judgment or determination to the degree necessary to render it valid and enforceable without affecting the validity, legality or enforceability of any other provision of this Award Agreement or the validity, legality or enforceability of such provision in any other jurisdiction. Any provision of this Award Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be deemed severable from the remainder of this Award Agreement, and the remaining provisions contained in this Award Agreement shall be construed to preserve to the maximum permissible extent the intent and purposes of this Award Agreement.
Interpretation
The Committee shall have the right to resolve all questions that may arise in connection with the Award or this Award Agreement, including whether you are actively employed. Any interpretation, determination or other action made or taken by the Committee regarding the Plan or this Award Agreement shall be final, binding and conclusive. This Award Agreement shall be binding upon and inure to the benefit of any successor or successors of the Company and any person or persons who shall acquire any rights hereunder in accordance with this Award Agreement or the Plan.
Language
If you have received this Award Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
Acknowledgments
By signing this Award Agreement, you acknowledge receipt of a copy of the Plan and represent that you are familiar with the terms and conditions of the Plan, and hereby accept the RSUs subject to all provisions in this Award Agreement and in the Plan. You hereby agree to accept as final, conclusive and binding all decisions or interpretations of the Committee upon any questions arising under the Plan or this Award Agreement.
Appendix I
Notwithstanding any provision in this Award Agreement, if you work or reside outside the U.S., the RSUs shall be subject to the general non-U.S. terms and conditions and the special terms and conditions for your country set forth in Appendix I. Moreover, if you relocate from the U.S. to one of the countries included in Appendix I or you move between countries included in Appendix I, the general non-U.S. terms and conditions and the special terms and conditions for such country will apply to you, to the extent the Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons. The Appendix I constitutes part of this Award Agreement.
EXHIBIT B
RESTRICTIVE COVENANTS AGREEMENT
I understand that I am or will be an employee to or other service-provider of The Kraft Heinz Company and/or its Subsidiaries and/or its Affiliates (collectively the "Company"), and will learn and have access to the Company's confidential, trade secret and proprietary information and key business relationships. I understand that the products and services that the Company develops, provides and markets are unique. Further, I know that my promises in this Restrictive Covenants Agreement (the "Agreement") are an important way for the Company to protect its proprietary interests and that The Kraft Heinz Company would not have granted me RSUs or other equity grants unless I made such promises.
In addition to other good and valuable consideration, I am expressly being given RSUs or other equity grants in exchange for my agreeing to the terms of this Agreement. In consideration of the foregoing, I (the "Executive") agree as follows:
1.NON-DISCLOSURE OF CONFIDENTIAL INFORMATION. During the course of Executive's Service, Executive will have access to Confidential Information. For purposes of this Agreement, "Confidential Information" means all data, information, ideas, concepts, discoveries, trade secrets, inventions (whether or not patentable or reduced to practice), innovations, improvements, know-how, developments, techniques, methods, processes, treatments, drawings, sketches, specifications, designs, plans, patterns, models, plans and strategies, and all other confidential or proprietary information or trade secrets in any form or medium (whether merely remembered or embodied in a tangible or intangible form or medium) whether now or hereafter existing, relating to or arising from the past, current or potential business, activities and/or operations of the Company, including, without limitation, any such information relating to or concerning finances, sales, marketing, advertising, transition, promotions, pricing, personnel, customers, suppliers, vendors, raw partners and/or competitors of the Company. Executive agrees that Executive shall not, directly or indirectly, use, make available, sell, disclose or otherwise communicate to any person, other than in the course of Executive's assigned duties and for the benefit of the Company, either during the period of Executive's Service or at any time thereafter, any Confidential Information or other confidential or proprietary information received from third parties subject to a duty on the Company's part to maintain the confidentiality of such information, and to use such information only for certain limited purposes, in each case, which shall have been obtained by Executive during Executive's Service. The foregoing shall not apply to information that (i) was known to the public prior to its disclosure to Executive; (ii) becomes generally known to the public subsequent to disclosure to Executive through no wrongful act of Executive or any representative of Executive; or (iii) Executive is required to disclose by applicable law, regulation or legal process (provided that, to the extent permitted by law, Executive provides the Company with prior notice of the contemplated disclosure and cooperates with the Company at its expense in seeking a protective order or other appropriate protection of such information).
Pursuant to the U.S. Defend Trade Secrets Act of 2016, Executive shall not be held criminally, or civilly, liable under any Federal or State Trade secret law for the disclosure of a trade secret that is made in confidence either directly or indirectly to a Federal, State, or local government official, or an attorney, for the sole purpose of reporting, or investigating, a violation of law. Moreover, Executive may disclose trade secrets in a complaint, or other document, filed in a lawsuit, or other proceeding, if such filing is made under seal. Finally, if Executive files a lawsuit alleging retaliation by the Company for reporting a suspected violation of the law, Executive may disclose the trade secret to Executive's attorney and use the trade secret in the court proceeding, if Executive files any document containing the trade secret under seal and does not disclose the trade secret, except pursuant to court order.
No Company policies or practices, including this Non-Disclosure of Confidential Information provision, is intended to or shall limit, prevent, impede or interfere in any way with Executive's right,
without prior notice to the Company, to provide information to the government, participate in investigations, testify in proceedings regarding the Company's past or future conduct, or engage in any activities protected under whistle blower statutes.
2.NON-COMPETITION. Executive acknowledges that (i) Executive performs services of a unique nature for the Company that are irreplaceable, and that Executive's performance of such services to a competing business will result in irreparable harm to the Company, (ii) Executive has had and will continue to have access to Confidential Information which, if disclosed, would unfairly and inappropriately assist in competition against the Company, (iii) in the course of Executive's employment by or service to a competitor, Executive would inevitably use or disclose such Confidential Information, (iv) the Company has substantial relationships with its customers and Executive has had and will continue to have access to these customers, (v) Executive has received and will receive specialized training from the Company, and (vi) Executive has generated and will continue to generate goodwill for the Company in the course of Executive's Service. Accordingly, during Executive's Service and for twelve (12) months following a termination of Executive's Service for any reason (the "Restricted Period"), Executive will not engage in any business activities, directly or indirectly (whether as an employee, consultant, officer, director, partner, joint venturer, manager, member, principal, agent, or independent contractor, individually, in concert with others, or in any other manner) within the same line or lines of business for which the Executive performed services for the Company and in a capacity that is similar to the capacity in which the Executive was employed by the Company with any person or entity that competes with the Company in the consumer packaged food and beverage industry ("Competitive Business") anywhere within the same geographic territory(ies) for which the Executive performed services for the Company (the "Restricted Territory"). Notwithstanding the foregoing, nothing herein shall prohibit Executive from being a passive owner of not more than three percent (3%) of the equity securities of a publicly traded corporation engaged in a business that is in competition with the Company, so long as Executive has no active participation in the business of such corporation.
3.NON-SOLICITATION. During the Restricted Period, Executive agrees that Executive shall not, except in the furtherance of Executive's duties to the Company, directly or indirectly, individually or on behalf of any other person, firm, corporation or other entity, solicit, aid, induce, assist in the solicitation of, or accept any business (other than on behalf of the Company) from, any customer or potential customer of the Company to purchase goods or services then sold by the Company from another person, firm, corporation or other entity or, directly or indirectly, in any way request, suggest or advise any such customer to withdraw or cancel any of their business or refuse to continue to do business with the Company. This restriction shall apply to customers or potential customers who, during the two (2) years immediately preceding the Executive's termination, had been assigned to the Executive by the Company, or with which the Executive had contact on behalf of the Company while an Executive of the Company, or about which the Executive had access to confidential information by virtue of Executive's employment with the Company.
4.NON-INTERFERENCE. During the Restricted Period, Executive agrees that Executive shall not, except in the furtherance of Executive's duties to the Company, directly or indirectly, individually or on behalf of any other person, firm, corporation or other entity, (A) solicit, aid or induce any employee, representative or agent of the Company to leave such employment or retention or to accept employment with or render services to or with any other person, firm, corporation or other entity unaffiliated with the Company or hire or retain any such employee, representative or agent, or take any action to materially assist or aid any other person, firm, corporation or other entity in identifying, hiring or soliciting any such employee, representative or agent, or (B) interfere, or aid or induce any other person or entity in interfering, with the relationship between the Company and its vendors, suppliers or customers. As used herein, the term "solicit, aid or induce" includes, but is not limited to, (i) initiating communications with a Company employee relating to possible employment, (ii) offering bonuses or other compensation to encourage a
Company employee to terminate his or her employment with the Company and accept employment with any entity, (iii) recommending a Company employee to any entity, and (iv) aiding an entity in recruitment of a Company employee. An employee, representative or agent shall be deemed covered by this Section 4 while so employed or retained and for a period of six (6) months thereafter.
5.NON-DISPARAGEMENT. Executive agrees not to make negative comments or otherwise disparage the Company or its officers, directors, employees, shareholders, agents or products or services. The foregoing shall not be violated by truthful statements made in (a) response to legal process, required governmental testimony or filings, or administrative or arbitral proceedings (including, without limitation, depositions in connection with such proceedings) or (b) the good faith performance of Executive's duties to the Company.
6.INVENTIONS.
a.Executive acknowledges and agrees that all ideas, methods, inventions, discoveries, improvements, work products, developments, software, know-how, processes, techniques, methods, works of authorship and other work product ("Inventions"), whether patentable or unpatentable, (A) that are reduced to practice, created, invented, designed, developed, contributed to, or improved with the use of any Company resources and/or within the scope of Executive's work with the Company or that relate to the business, operations or actual or demonstrably anticipated research or development of the Company, and that are made or conceived by Executive, solely or jointly with others, during Executive's Service, or (B) suggested by any work that Executive performs in connection with the Company, either while performing Executive's duties with the Company or on Executive's own time, but only insofar as the Inventions are related to Executive's work as an employee or other service provider to the Company, shall belong exclusively to the Company (or its designee), whether or not patent or other applications for intellectual property protection are filed thereon. Executive will keep full and complete written records (the "Records"), in the manner prescribed by the Company, of all Inventions, and will promptly disclose all Inventions completely and in writing to the Company. The Records shall be the sole and exclusive property of the Company, and Executive will surrender them upon the termination of Service, or upon the Company's request. Executive irrevocably conveys, transfers and assigns to the Company the Inventions and all patents or other intellectual property rights that may issue thereon in any and all countries, whether during or subsequent to Executive's Service, together with the right to file, in Executive's name or in the name of the Company (or its designee), applications for patents and equivalent rights (the "Applications"). Executive will, at any time during and subsequent to Executive's Service, make such applications, sign such papers, take all rightful oaths, and perform all other acts as may be requested from time to time by the Company to perfect, record, enforce, protect, patent or register the Company's rights in the Inventions, all without additional compensation to Executive from the Company. Executive will also execute assignments to the Company (or its designee) of the Applications, and give the Company and its attorneys all reasonable assistance (including the giving of testimony) to obtain the Inventions for the Company's benefit, all without additional compensation to Executive from the Company, but entirely at the Company's expense.
b.In addition, the Inventions will be deemed Work for Hire, as such term is defined under the copyright laws of the United States, on behalf of the Company and Executive agrees that the Company will be the sole owner of the Inventions, and all underlying rights therein, in all media now known or hereinafter devised, throughout the universe and in perpetuity without any further obligations to Executive. If the Inventions, or any portion thereof, are deemed not to be Work for
Hire, or the rights in such Inventions do not otherwise automatically vest in the Company, Executive hereby irrevocably conveys, transfers and assigns to the Company, all rights, in all media now known or hereinafter devised, throughout the universe and in perpetuity, in and to the Inventions, including, without limitation, all of Executive's right, title and interest in the copyrights (and all renewals, revivals and extensions thereof) to the Inventions, including, without limitation, all rights of any kind or any nature now or hereafter recognized, including, without limitation, the unrestricted right to make modifications, adaptations and revisions to the Inventions, to exploit and allow others to exploit the Inventions and all rights to sue at law or in equity for any infringement, or other unauthorized use or conduct in derogation of the Inventions, known or unknown, prior to the date hereof, including, without limitation, the right to receive all proceeds and damages therefrom. In addition, Executive hereby waives any so-called "moral rights" with respect to the Inventions. To the extent that Executive has any rights in the results and proceeds of Executive's service to the Company that cannot be assigned in the manner described herein, Executive agrees to unconditionally waive the enforcement of such rights. Executive hereby waives any and all currently existing and future monetary rights in and to the Inventions and all patents and other registrations for intellectual property that may issue thereon, including, without limitation, any rights that would otherwise accrue to Executive's benefit by virtue of Executive being an employee of or other service provider to the Company.
7.RETURN OF COMPANY PROPERTY. On the date of Executive's termination of Service with the Company for any reason (or at any time prior thereto at the Company's request), Executive shall return all property belonging to the Company (including, but not limited to, any Company-provided laptops, computers, cell phones, wireless electronic mail devices or other equipment, or documents and property belonging to the Company).
8.REASONABLENESS OF COVENANTS. In signing this Agreement, including by electronic means, Executive gives the Company assurance that Executive has carefully read and considered all of the terms and conditions of this Agreement, including the restraints imposed by it. Executive agrees that these restraints are necessary for the reasonable and proper protection of the Company and its Confidential Information and that each and every one of the restraints is reasonable in respect to subject matter, length of time and geographic area, and that these restraints, individually or in the aggregate, will not prevent Executive from obtaining other suitable employment during the period in which Executive is bound by the restraints. Executive acknowledges that each of these covenants has a unique, very substantial and immeasurable value to the Company and that Executive has sufficient assets and skills to provide a livelihood while such covenants remain in force. Executive further covenants that Executive will not challenge the reasonableness or enforceability of any of the covenants set forth in this Agreement, and that Executive will reimburse the Company for all costs (including reasonable attorneys' fees) incurred in connection with any action to enforce any of the provisions of this Agreement if either the Company prevails on any material issue involved in such dispute or if Executive challenges the reasonableness or enforceability of any of the provisions of this Agreement. It is also agreed that the "Company" as used in this Agreement refers to each of the Company's Subsidiaries and Affiliates and that each of the Company's s Subsidiaries and Affiliates will have the right to enforce all of Executive's obligations to that Subsidiary or Affiliate under this Agreement, as applicable, subject to any limitation or restriction on such rights of the Subsidiary or Affiliate under applicable law.
9.REFORMATION. If it is determined by a court of competent jurisdiction in any state or country that any restriction in this Agreement is excessive in duration or scope or is unreasonable or unenforceable under applicable law, it is the intention of the parties that such restriction may be modified or amended by the court to render it enforceable to the maximum extent permitted by the laws of that state or country.
10.REMEDIES. Executive acknowledges and agrees that the Company's remedies at law for a breach or threatened breach of any of the provisions of Agreement would be inadequate and, in recognition of this fact, Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond or other security, shall be entitled to obtain equitable relief in the form of specific performance, a temporary restraining order, a temporary or permanent injunction or any other equitable remedy which may then be available, without the necessity of showing actual monetary damages, in addition to any other equitable relief (including without limitation an accounting and/or disgorgement) and/or any other damages as a matter of law.
11.REPURCHASE. Executive acknowledges and agrees that a breach of this Agreement would constitute a "Covenant Breach" as such term is used in the Plan and therefore, in the event of a Covenant Breach, Executive's RSU and the Award Stock issued therefor (as such terms are defined in the Plan) shall be subject to repurchase by The Kraft Heinz Company in accordance with the terms of the Plan.
12.TOLLING. In the event of any violation of the provisions of this Agreement, Executive acknowledges and agrees that the post-termination restrictions contained in this Agreement shall be extended by a period of time equal to the period of such violation, it being the intention of the parties hereto that the running of the applicable post-termination restriction period shall be tolled during any period of such violation.
13.SURVIVAL OF PROVISIONS. The obligations contained in this Agreement hereof shall survive the termination or expiration of the Executive's Service with the Company and shall be fully enforceable thereafter.
14.VENUE, PERSONAL JURISDICTION, AND COVENANT NOT TO SUE. Executive expressly agrees to submit to the exclusive jurisdiction and exclusive venue of courts located in the State of Delaware in connection with any litigation which may be brought with respect to a dispute between the Company and Executive in relation to this Restrictive Covenants Agreement, regardless of where Executive resides or where Executive performs services for the Company. Executive hereby irrevocably waives Executive's rights, if any, to have any disputes between the Company and Executive related to this Restrictive Covenants Agreement decided in any jurisdiction or venue other than a court in the State of Delaware. Executive hereby waives, to the fullest extent permitted by applicable law, any objection which Executive now or hereafter may have to personal jurisdiction or to the laying of venue of any such suit, action or proceeding, and Executive agrees not to plead or claim the same. Executive further irrevocably covenants not to sue the Company related to this Restrictive Covenants Agreement in any jurisdiction or venue other than a court in the State of Delaware. All matters relating to the interpretation, construction, application, validity, and enforcement of this Agreement, and any disputes or controversies arising hereunder, will be governed by the laws of the State of Delaware without giving effect to any choice or conflict of law provision or rule, whether of the State of Delaware or any other jurisdiction, that would cause the application of laws of any jurisdiction other than the State of Delaware.
APPENDIX I
ADDITIONAL TERMS AND CONDITIONS OF
THE KRAFT HEINZ COMPANY 2020 OMNIBUS INCENTIVE PLAN
RESTRICTED STOCK UNIT AWARD AGREEMENT FOR NON-U.S. PARTICIPANTS
TERMS AND CONDITIONS
This Appendix I includes additional terms and conditions that govern the RSUs granted to you under the Plan if you work or reside outside the U.S. and/or in one of the countries listed below. These terms and conditions are in addition to, or if so indicated, in place of the terms and conditions set forth in the Award Agreement. Certain capitalized terms used but not defined in this Appendix I have the meanings set forth in the Plan and/or the Award Agreement.
If you are a citizen or resident of a country other than the one in which you are currently working, transfer employment and/or residency to another country after the RSUs are granted to you, or are considered a resident of another country for local law purposes, the terms and conditions contained herein may not be applicable to you, and the Company shall, in its discretion, determine to what extent the terms and conditions contained herein shall apply to you.
NOTIFICATIONS
This Appendix I also includes information regarding exchange controls and certain other issues of which you should be aware with respect to participation in the Plan. The information is based on the securities, exchange control, and other laws in effect in the respective countries as of January 2020. Such laws are often complex and change frequently. As a result, the Company strongly recommends that you not rely on the information in this Appendix I as the only source of information relating to the consequences of your participation in the Plan because the information may be out of date at the time you vest in the RSUs or sell Shares acquired under the Plan.
In addition, the information contained herein is general in nature and may not apply to your particular situation, and the Company is not in a position to assure you of a particular result. Accordingly, you should seek appropriate professional advice as to how the relevant laws in your country may apply to your situation.
Finally, if you are a citizen or resident of a country other than the one in which you are currently working, transfer employment and/or residency after the RSUs are granted or are considered a resident of another country for local law purposes, the notifications contained herein may not be applicable to you in the same manner.
GENERAL NON-U.S. TERMS AND CONDITIONS
TERMS AND CONDITIONS
The following terms and conditions apply to you if you are located outside of the U.S.
Entire Agreement.
The following provisions supplement the entire Award Agreement, generally:
If you are located outside the U.S., in no event will any aspect of the RSUs be determined in accordance with your Employment Agreement (or other Service contract). The terms and conditions of the RSUs will be solely determined in accordance with the provisions of the Plan and the Award Agreement, including this Appendix I, which supersede and replace any prior agreement, either written or verbal (including your Employment Agreement, if applicable) in relation to the RSUs.
Vesting.
If you are resident or employed outside of the United States, the Company may, in its sole discretion, settle the RSUs in the form of a cash payment to the extent settlement in Shares: (i) is prohibited under local law, (ii) would require you, the Company or one of its Subsidiaries or Affiliates to obtain the approval of any governmental or regulatory body in your country of residence (or your country of employment, if different), (iii) would result in adverse tax consequences for you, the Company or one of its Subsidiaries or Affiliates, or (iv) is administratively burdensome. Alternatively, the Company may, in its sole discretion settle the RSUs in the form of Shares but require you to sell such Shares immediately or within a specified period following your termination of Service (in which case, this Award Agreement shall give the Company the authority to issue sales instructions on your behalf).
Termination.
The following provisions supplement the Termination section of the Award Agreement, provided, however, that for purposes of the section of the Award Agreement titled "Settlement of Vested RSUs," if you are subject to U.S. federal income tax and the RSUs constitute Deferred Compensation, your termination of Service date will be the date of your Separation from Service:
For purposes of the RSU, your employment or Service relationship will be considered terminated as of the date you are no longer actively providing Services to the Company or one of its Subsidiaries or Affiliates (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where you provide Service or the terms of your Employment Agreement, if any), and unless otherwise expressly provided in this Award Agreement or determined by the Company, your right to vest in the RSU under the Plan, if any, will terminate as of such date and will not be extended by any notice period (e.g., your period of Service would not include any contractual notice period or any period of "garden leave" or similar period mandated under employment laws in the jurisdiction where you provide Service or the terms of your Employment Agreement, if any); the Committee shall have the exclusive discretion to determine when you are no longer actively providing Service for purposes of the RSUs (including whether you may still be considered to be providing Service while on a leave of absence).
Notwithstanding the provisions governing the treatment of the RSUs upon termination due to Retirement set forth in the Termination section of the Award Agreement, if the Company receives an opinion of counsel that there has been a legal judgment and/or legal development in a particular jurisdiction that would likely result in the treatment in case of a termination due to Retirement as set forth in the Award Agreement being deemed unlawful and/or discriminatory, then the Company will not apply the provisions for termination due to Retirement at the time you cease to provide Service and the RSUs will be treated as it would under the rules that apply if your Service ends for resignation.
Termination for Cause.
The implications upon a termination for Cause as set forth in the Award Agreement and Plan shall only be enforced, to the extent deemed permissible under applicable local law, as determined in the sole discretion of the Committee.
Taxes.
The following provisions supplement the Taxes section of the Award Agreement:
You acknowledge that your liability for Tax-Related Items may exceed the amount, if any, withheld by the Company, its Subsidiaries and/or its Affiliates (as applicable).
If you have become subject to tax in more than one jurisdiction, you acknowledge that the Company, its Subsidiaries and Affiliates may be required to withhold or account for Tax-Related Items in more than one jurisdiction.
Depending on the withholding method, the Company may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding amounts or other applicable withholding rates, including maximum applicable rates in your jurisdiction(s), in which case you may receive a refund of any over-withheld amount in cash and will have no entitlement to the Share equivalent. If the obligation for Tax-Related Items is satisfied by withholding in Shares, for tax purposes, you are deemed to have been issued the full number of Shares subject to the vested RSUs, notwithstanding that a number of Shares are held back solely for the purpose of paying the Tax-Related Items due as a result of any aspect of your participation in the Plan.
Limits on Transferability; Beneficiaries.
The following provision supplements the Limits on Transferability; Beneficiaries section of the Award Agreement:
If you are located outside the U.S., the RSUs may not be Transferred to a designated Beneficiary and may only be Transferred upon your death to your legal heirs in accordance with applicable laws of descent and distribution. In no case may the RSUs be Transferred to another individual during your lifetime.
Acknowledgment of Nature of Award.
The following provisions supplement the Acknowledgment of Nature of Award section of the Award Agreement:
You acknowledge the following with respect to the RSUs:
(a) The RSUs, any Shares acquired under the Plan, and the income and value of same, are not intended to replace any pension rights or compensation.
(b) In no event should the RSUs, any Shares acquired under the Plan, and the income and value of same, be considered as compensation for, or relating in any way to, past services for the Company, its Subsidiaries or any Affiliate.
(c) The RSUs, any Shares acquired under the Plan and the income and value of same are not part of normal or expected compensation or salary for any purpose.
(d) Neither the Company, its Subsidiaries nor any Affiliate shall be liable for any foreign exchange rate fluctuation between your local currency and the United States Dollar that may affect the value of the RSUs or of any amounts due to you pursuant to vesting of the RSUs or the subsequent sale of any Shares acquired upon vesting.
Not a Public Offering in Non-U.S. Jurisdictions.
If you are resident or employed outside of the United States, neither the grant of the RSUs under the Plan nor the issuance of the underlying Shares upon vesting of the RSUs is intended to be a public offering of securities in your country of residence (and country of employment, if different). The Company has not submitted any registration statement, prospectus or other filings to the local securities authorities in jurisdictions outside of the United States unless otherwise required under local law.
Language Consent.
If you are in a country where English is not an official language, you acknowledge that you are sufficiently proficient in English to understand the terms and conditions of this Award Agreement or have had the ability to consult with an advisor who is sufficiently proficient in the English language. You further acknowledge and agree that it is your express intent that this Award Agreement, the Plan and all other documents, notices and legal proceedings entered into, given or instituted pursuant to the RSUs, be drawn up in English.
Insider Trading and Market Abuse Laws.
You may be subject to insider trading restrictions and/or market abuse laws based on the exchange on which the Shares are listed and in applicable jurisdictions including the United States and your country or your broker’s country, if different, which may affect your ability to accept, acquire, sell or otherwise dispose of Shares, rights to Shares or rights linked to the value of Shares under the Plan during such times as you are considered to have "inside information" regarding the Company (as defined by the laws in the applicable jurisdictions). Local insider trading laws and regulations may prohibit the cancellation or amendment of orders you placed before you possessed inside information. Furthermore, you could be prohibited from (a) disclosing the inside information to any third party and (b) “tipping” third parties or causing them otherwise to buy or sell securities (third parties include fellow employees). Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under any applicable Company insider trading policy. You acknowledge that it is your responsibility to comply with any applicable restrictions, and you should speak to your personal advisor on this matter.
Foreign Asset/Account, Exchange Control and Tax Reporting.
You may be subject to foreign asset/account, exchange control and/or tax reporting requirements as a result of the acquisition, holding and/or transfer of Shares or cash (including dividends, dividend equivalents and the proceeds arising from the sale of Shares) derived from your participation in the Plan, to and/or from a brokerage/bank account or legal entity located outside your country. The applicable laws of your country may require that you report such accounts, assets, the balances therein, the value thereof and/or the transactions related thereto to the applicable authorities in such country. You acknowledge that you are responsible for ensuring compliance with any applicable foreign asset/account, exchange control and tax reporting requirements and should consult your personal legal advisor on this matter.
No Advice Regarding Award.
The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding your participation in the Plan, or your acquisition or sale of the underlying Shares. You understand and acknowledge that you should consult with your own personal tax, legal and financial advisors regarding your participation in the Plan before taking any action related to the Plan.
Imposition of Other Requirements.
The Company reserves the right to impose other requirements on your participation in the Plan, on the RSUs and on any Shares acquired upon vesting of the RSUs, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require you to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.
Waiver.
You acknowledge that a waiver by the Company for breach of any provision of the Award Agreement shall not operate or be construed as a waiver of any other provision of the Award Agreement, or of any subsequent breach of the Award Agreement.
COUNTRY-SPECIFIC TERMS AND CONDITIONS/NOTIFICATIONS
AUSTRALIA
NOTIFICATIONS
Offer Document.
This offer document sets out information regarding the grant of RSUs to Australian resident employees of the Company and its Subsidiaries or Affiliates and is provided by the Company to ensure compliance of the Plan with the Australian Securities and Investments Commission's ("ASIC's") Class Order 14/1000 and relevant provisions of the Corporations Act 2001.
In addition to the information set out in the Award Agreement, you also are being provided with a copy of the Plan (the "Additional Document").
The Additional Document provides further information to help you make an informed investment decision about participating in the Plan. The Plan is not a prospectus for the purposes of the Corporations Act 2001.
You should not rely upon any oral statements made in relation to this offer. You should rely only upon the statements contained in the Award Agreement and the Additional Document when considering participation in the Plan.
Securities Law Notification
Investment in Shares involves a degree of risk. If you elect to participate in the Plan, you should monitor your participation and consider all risk factors relevant to the acquisition of Shares under the Plan as set out in the Award Agreement and the Additional Document.
The information contained in this offer is general information only. It is not advice or information that takes into account your objectives, financial situation and needs.
You should consider obtaining your own financial product advice from an independent person who is licensed by ASIC to give advice about participation in the Plan.
Additional Risk Factors for Australian Residents
You should have regard to risk factors relevant to investment in securities generally and, in particular, to the holding of Shares. For example, the price at which Shares are quoted on the Nasdaq may increase or decrease due to a number of factors. There is no guarantee that the price of the Shares will increase. Factors which may affect the price of Shares include fluctuations in the domestic and international market for listed stocks, general economic conditions, including interest rates, inflation rates, commodity and oil prices, changes to government fiscal, monetary or regulatory policies, legislation or regulation, the nature of the markets in which the Company operates and general operational and business risks.
More information about potential factors that could affect the Company's business and financial results is included in the Company's most recent Annual Report on Form 10-K and the Company's Quarterly Report on Form 10-Q. Copies of these reports are available at http://www.sec.gov/, on the Company's "Investor Relations" page at http://ir.kraftheinzcompany.com/, and upon request to the Company.
In addition, you should be aware that the Australian dollar value of any Shares acquired at vesting will be affected by the U.S. dollar/Australian dollar exchange rate. Participation in the Plan involves certain risks related to fluctuations in this rate of exchange.
Common Stock
Common stock of a U.S. corporation is analogous to ordinary shares of an Australian corporation.
Dividends may be paid on the Shares out of any funds of the Company legally available for dividends at the discretion of the Board.
The Shares are traded on the Nasdaq in the United States of America under the symbol "KHC."
The Shares are not liable to any further calls for payment of capital or for other assessment by the Company and have no sinking fund provisions, pre-emptive rights, conversion rights or redemption provisions.
Ascertaining the Market Price of Shares
You may ascertain the current market price of the Shares as traded on the Nasdaq at http://www.nasdaq.com under the symbol "KHC." The Australian dollar equivalent of that price can be obtained at: http://www.rba.gov.au/statistics/frequency/exchange-rates.html.
This will not be a prediction of what the market price per Share will be when the RSUs vest or when the Shares are issued or of the applicable exchange rate on the actual Vesting Date or date the Shares are issued.
Deferred Taxation. Subdivision 83A-C of the Income Tax Assessment Act, 1997, applies to RSUs granted under the Plan, such that the RSUs are intended to be subject to deferred taxation.
BELGIUM
NOTIFICATIONS
Foreign Assets/Account Reporting Information.
If you are a resident of Belgium, you will be required to report any security (e.g., Shares acquired under the Plan) or bank account (including brokerage accounts) established outside of Belgium on your annual tax return. In a separate report, you will be required to provide the National Bank of Belgium with details regarding such foreign accounts (including the account number, bank name and country in which any such account was opened).
BRAZIL
TERMS AND CONDITIONS
Compliance with Law.
By accepting the RSUs you acknowledge that you agree to comply with applicable Brazilian laws and pay any and all applicable taxes legally due by you associated with the vesting of the RSUs, the receipt of any dividends and/or Dividend Equivalents, and the sale of Shares acquired under the Plan. You further agree that, for all legal purposes, (i) the benefits provided to you under the Plan are the result of commercial transactions unrelated to your employment or Service relationship, (ii) the Plan is not a part of the terms and conditions of your employment or Service relationship, and (iii) the income from the Award, if any, is not part of your remuneration from employment or Service.
NOTIFICATIONS
Exchange Control Information.
If you are resident or domiciled in Brazil, you will be required to submit annually a declaration of assets and rights held outside of Brazil to the Central Bank of Brazil if the aggregate value of such assets and rights is equal to or greater than US$100,000. Assets and rights that must be reported include Shares.
CANADA
TERMS AND CONDITIONS
Plan Document Acknowledgment.
In accepting the grant of RSUs, you acknowledge that you have received a copy of the Plan, have reviewed the Plan and the Award Agreement in their entirety and fully understand and accept all provisions of the Plan and the Award Agreement.
Payout of RSUs in Shares Only.
Pursuant to its discretion under the Settlement of Vested RSUs Section of the Plan, with respect to all employees residing in Canada, the Company will convert all vested RSUs only into an equivalent number of Shares. If you reside in Canada (or in the event of your death, your legal representative or estate) you will not receive an equivalent or fractional Share cash payment with respect to the vested RSUs.
Termination.
The following provision replaces the first paragraph of the Termination section of the General Non-U.S. Terms and Conditions section of this Appendix I:
In the event of your termination of Service (whether or not later found to be invalid or in breach of employment laws in the jurisdiction where you provide Service or the terms of your Employment Agreement, if any), unless provided otherwise by the Company: (i) your right to vest in the RSUs (if any) will terminate effective, as of the earlier of (1) the date the you receive notice of termination, or (2) the date you are no longer actively providing Service, regardless of any notice period or period of pay in lieu of such notice required under applicable Canadian employment laws (including, but not limited to statutory law, regulatory law and/or common law).
The Committee shall have the exclusive discretion to determine when you are no longer actively providing Service for purposes of the RSUs (including whether you may still be considered to be providing Service while on a leave of absence).
The following terms and conditions apply if you are a resident of Quebec:
Language Consent.
The parties acknowledge that it is their express wish that the Award Agreement, as well as all documents, notices and legal proceedings entered into, given or instituted pursuant hereto or relating directly or indirectly hereto, be drawn up in English.
Consentement relatif à la langue.
Les parties reconnaissent avoir expressément exigé la rédaction en anglais de la Convention d'Attribution, ainsi que de tous documents, avis et procédures judiciaires, exécutés, donnés ou intentés en vertu de, ou liés directement ou indirectement à, la présente convention.
NOTIFICATIONS
Securities Law Information.
You are permitted to sell Shares acquired under the Plan through the designated broker appointed under the Plan, if any, provided the sale of the Shares takes place outside of Canada through the facilities of a stock exchange on which the Shares are listed (i.e., Nasdaq).
Foreign Assets/Account Reporting Information.
Canadian residents are required to report any specified foreign property (including Shares and RSUs) on form T1135 (Foreign Income Verification Statement) if the total cost of such specified foreign property exceeds C$100,000 at any time in the year. The form must be filed by April 30 of the following year. Specified foreign property includes Shares acquired under the Plan and may include the RSUs. The RSUs must be reported - generally at a nil cost - if the C$100,000 cost threshold is exceeded because of other foreign property you hold. If Shares are acquired, their cost generally is the adjusted cost base ("ACB") of the Shares. The ACB would normally equal the fair market value of the Shares at vesting, but if you own other shares, this ACB may have to be averaged with the ACB of the other shares. You should speak with a personal tax advisor to determine the scope of foreign property that must be considered for purposes of this requirement.
CHILE
NOTIFICATIONS
Securities Law Information.
The private offering of the RSUs starts on the Grant Date and is made subject to general ruling n° 336 of the Chilean Commission for the Financial Market (“CMF”). This offer refers to securities not registered at the securities registry or at the foreign securities registry of the CMF, and therefore such securities are not subject to its oversight. Given that these securities are not registered in Chile, there is no obligation from the issuer to provide public information on them in Chile. These securities cannot be subject to public offering in Chile while they are not registered at the corresponding securities registry in Chile.
La oferta privada de estos RSUs se inicia en la Fecha de Concesión y se acoge a las disposiciones de la norma de carácter general nº 336 de la Comisión para el Mercado Financiero de Chile (“CMF”). Esta oferta versa sobre valores no inscritos en el registro de valores o en el registro de valores extranjeros que lleva la CMF, por lo que tales valores no están sujetos a la fiscalización de ésta. Por tratarse de valores no inscritos en Chile, no existe la obligación por parte del emisor de entregar en Chile información pública respecto de los mismos. Estos valores no podrán ser objeto de oferta pública en Chile mientras no sean inscritos en el registro de valores correspondiente.
CHINA
TERMS AND CONDITIONS
The following provisions apply if you are subject to the exchange control regulations or restrictions in the People's Republic of China ("China"), as determined by the Company in its sole discretion:
Vesting and Mandatory Sale Restriction.
The following provisions replace the Vesting, Termination and Settlement of Vested RSUs sections of the Award Agreement:
Notwithstanding anything to the contrary in the Award Agreement, due to legal restrictions in China, you agree that the Company may force the sale of any Shares (i) immediately upon vesting, (ii) following the termination of your Service, (iii) following your transfer to another Subsidiary or Affiliate outside of China, or (iv) within any other timeframe the Company determines to be necessary or advisable. You agree that you must maintain any Shares acquired under the Plan in an account at a broker designated by the Company ("Designated Account"). All Shares deposited in the Designated Account cannot be transferred out of that Designated Account. Within six (6) months after the termination of your Service for any reason (or such other period as determined by the Company in its sole discretion), you must sell all Shares acquired under the Plan. The Company will direct the automatic sale of any such Shares remaining in the Designated Account at the expiration of this six (6) month period (or such other period as determined by the Company in its sole discretion).
You agree that the Company is authorized to instruct its designated broker to assist with the mandatory sale of such Shares (on your behalf pursuant to this authorization) and you expressly authorize the Company's designated broker to complete the sale of such Shares. You acknowledge that the Company's designated broker is under no obligation to arrange for the sale of the Shares at any particular price. Upon the sale of the Shares, the Company agrees to pay you the cash proceeds from the sale, less any brokerage fees or commissions and subject to any obligation to satisfy Tax-Related Items. You agree that if you sell Shares that you acquire under the Plan, the repatriation requirements described below shall apply.
If you transfer to a Subsidiary or an Affiliate in China or transfer from an Affiliate or Subsidiary in China to another Affiliate outside of China, you may become or remain subject to the requirements set forth in this Appendix I, as determined by the Company in its sole discretion. The Company reserves the right to suspend your participation in the Plan or take such other measures as it deems necessary or advisable to comply with local regulations.
Exchange Control Restriction.
You understand and agree that, due to exchange control laws in China, you will be required to immediately repatriate to China any cash proceeds acquired under the Plan. You further understand that, under local law, such repatriation of the cash proceeds may need to be effected through a special exchange control account established by the Company or any Subsidiary or Affiliate of the Company and you hereby consent and agree that the cash proceeds may be transferred to such special account prior to being delivered to you. Further, if the proceeds from your participation in the Plan are converted to local currency, you acknowledge that the Company (including its Subsidiaries and Affiliates) is under no obligation to secure any currency conversion rate, and may face delays in converting the proceeds to local currency due to exchange control restrictions in China. You agree to bear the risk of any currency conversion rate fluctuation between the date that your proceeds are delivered to such special exchange control account and the date of conversion of the proceeds to local currency.
You further agree to comply with any other requirements that may be imposed by the Company in the future in order to facilitate compliance with exchange control requirements in China.
COSTA RICA
There are no country-specific provisions.
EGYPT
NOTIFICATIONS
Exchange Control Information.
If you transfer funds into Egypt in connection with the remittance of proceeds from the vesting of the RSUs, sale of Shares or the receipt of any dividends and/or Dividend Equivalents, you are required to transfer the funds through a bank registered in Egypt.
FRANCE
TERMS AND CONDITIONS
Language Consent.
By accepting the RSUs, you confirm having read and understood the documents relating to the grant of the RSUs (the Plan and the Award Agreement), which were provided in the English language, and you accept the terms of such documents accordingly.
Consentement relatif à la langue.
En acceptant l'RSUs, vous confirmez ainsi avoir lu et compris les documents relatifs à l'attribution de l'RSUs (le Plan et le Contrat d'Attribution) qui vous ont été communiqués en langue anglaise, et vous en acceptez les termes et conditions en connaissance de cause.
NOTIFICATIONS
Foreign Assets/Account Reporting Information.
If you are a French resident and you hold securities (including Shares) or cash outside of France, you must declare all foreign bank and brokerage accounts (including the accounts that were opened and closed during the tax year) on an annual basis on a special form n°3916, together with your income tax return. If you fail to complete this reporting, you may be subject to penalties.
GERMANY
NOTIFICATIONS
Exchange Control Information.
Cross-border payments in excess of €12,500 must be reported monthly to the German Federal Bank (Bundesbank). The report must be filed electronically using the "General Statistics Reporting Portal" (Allgemeines Meldeportal Statistik) available via Bundesbank’s website (www.bundesbank.de).
HONG KONG
TERMS AND CONDITIONS
Settlement.
The following supplements the Settlement of Vested RSUs section of the Terms and Conditions section of the Award Agreement including this Appendix I:
Any Shares received at settlement of RSUs are a personal investment. If, for any reason, the RSUs vest and become non-forfeitable and Shares are issued to you within six months of the date of grant, you agree that you will not offer the Shares to the public in Hong Kong or otherwise dispose of the Shares prior to the six-month anniversary of the date of grant.
NOTIFICATIONS
Securities Law Information.
WARNING: The contents of this document have not been reviewed by any regulatory authority in Hong Kong. You are advised to exercise caution in relation to the offer. If you are in any doubt about any of the contents of this document, you should obtain independent professional advice. Neither the grant of the RSUs nor the issuance of Shares upon vesting of the RSUs constitutes a public offering of securities under Hong Kong law. The grant is available only to employees of the Company and its Subsidiaries. The Agreement, the Plan and other incidental communication materials distributed in connection with the RSUs (i) have not been prepared in accordance with and are not intended to constitute a "prospectus" for a public offering of securities under the applicable securities legislation in Hong Kong and (ii) are intended only for the personal use of each eligible employee of the Company or its Subsidiaries and may not be distributed to any other person.
INDIA
TERMS AND CONDITIONS
Labor Law Acknowledgment.
The RSUs and the Shares underlying the RSUs, and the income and value of same, are extraordinary items that are not part of your annual gross salary.
NOTIFICATIONS
Exchange Control Information.
You are required to repatriate the proceeds from the sale of Shares and any dividends received in relation to the Shares to India within a reasonable amount of time (i.e., within ninety (90) days after receipt for sale proceeds and 180 days of receipt for dividends or within any other time frame prescribed under applicable Indian exchange control laws as may be amended from time to time). You must maintain the foreign inward remittance certificate received from the bank where the foreign currency is deposited in the event that the Reserve Bank of India or your employer requests proof of repatriation. It is your responsibility to comply with applicable exchange control laws in India.
Foreign Assets/Account Reporting Information.
If you are an Indian resident, you are required to report all bank accounts or investments (including the RSUs and any Shares) that you hold outside of India. You should consult with a personal tax advisor to ensure that you are properly complying with applicable reporting requirements.
INDONESIA
NOTIFICATIONS
Exchange Control Information.
Indonesian residents must provide the Bank of Indonesia with information on foreign exchange activities in an online monthly report no later than the fifteenth day of the month following the activity. In addition, if you remit funds into Indonesia (e.g., proceeds from the sale of Shares), the Indonesian bank through which the transaction is made will submit a report of the transaction to the Bank of Indonesia for statistical reporting purposes. For transactions of US$10,000 or more, a more detailed description of the transaction must be included in the report and you may be required to provide information about the transaction (e.g., the relationship between you and the transferor of the funds, the source of the funds, etc.) to the bank in order for the bank to complete the report.
IRELAND
There are no country-specific provisions.
ITALY
TERMS AND CONDITIONS
Plan Document Acknowledgment.
By accepting the RSUs, you acknowledge that you have received a copy of the Plan and the Award Agreement, have reviewed each of these documents in their entirety and fully understand and accept all terms of such documents. In this regard, you acknowledge having read and specifically approve the following sections of the Award Agreement and this Appendix I, as applicable: (i) Vesting; (ii) Termination; (iii) Settlement of Vested RSUs; (iv) Taxes; (v) No Guarantee of Continued Service; (vi) Acknowledgment of Nature of Award; (vii) Data Privacy; and (viii) Governing Law; Jurisdiction; Waiver of Jury Trial.
NOTIFICATIONS
Foreign Assets/Account Reporting Information.
Italian residents who, during the fiscal year, hold investments abroad or foreign financial assets (e.g., cash, Shares and RSUs) which may generate income taxable in Italy are required to report such on their annual tax returns (UNICO Form, RW Schedule) or on a special form if no tax return is due. The same reporting obligations apply to Italian residents who, even if they do not directly hold investments abroad or foreign financial assets (e.g., cash, Shares and RSUs), are beneficial owners of the investment pursuant to Italian money laundering provisions.
Tax on Foreign Financial Assets.
Italian residents may be subject to tax on the value of financial assets held outside of Italy. The taxable amount will be the fair market value of the financial assets, including Shares assessed at the end of the calendar year. If you are subject to this foreign financial assets tax, you will need to report the value of your financial assets held abroad in your annual tax return. You are encouraged to consult your personal legal advisor for additional information about the foreign financial assets tax.
JAPAN
NOTIFICATIONS
Foreign Assets/Account Reporting Information.
If you are a Japanese tax resident, you will be required to report details of any assets held outside of Japan as of December 31st (including any Shares or cash acquired under the Plan) to the extent such assets have a total net fair market value exceeding ¥50,000,000. Such report will be due by March 15th each year. You should consult with your personal tax advisor as to whether the reporting obligation applies to you and whether you will be required to include details of any outstanding Shares, RSUs or cash held by you in the report.
KOREA
NOTIFICATIONS
Foreign Assets/Account Reporting Information.
You must declare all of your foreign financial accounts (i.e., non-Korean bank accounts, brokerage accounts, etc.) to the Korean tax authorities and file a report with respect to such accounts if the value of such accounts exceeds KRW 500 million (or an equivalent amount in foreign currency) on any month-end date during the year.
MALAYSIA
NOTIFICATIONS
Director Notification Requirement.
If you are a director of a Malaysian Subsidiary of Affiliate, you are subject to certain notification requirements under the Malaysian Companies Act, 2016. Among these requirements is an obligation to notify the Malaysian Subsidiary or Affiliate in writing when you receive or dispose of an interest (e.g., RSUs, Shares) in the Company or a related company. This notification must be made within fourteen (14) days of acquiring or disposing of any interest in the Company or a related company.
MEXICO
TERMS AND CONDITIONS
No Entitlement or Claims for Compensation.
These provisions supplement the Acknowledgment of Nature of Award section of the Award Agreement including this Appendix I:
Modification.
By accepting the RSUs, you understand and agree that any modification of the Plan or the Award Agreement or its termination shall not constitute a change or impairment of the terms and conditions of your employment.
Policy Statement.
The Award of RSUs the Company is making under the Plan is unilateral and discretionary and, therefore, the Company reserves the absolute right to amend it and discontinue it at any time without any liability.
The Company, with offices at One PPG Place, Pittsburgh, Pennsylvania 15222, U.S.A. is solely responsible for the administration of the Plan and participation in the Plan and the acquisition of Shares does not, in any way, establish an employment relationship between you and the Company since you are participating in the Plan on a wholly commercial basis and the sole employer is Delimex de Mexico, S.A. de C.V., located at Monte Pelvoux #220, Piso 6, Col. Lomas de Chapultepec, Delegacion Miquel Hidalgo C.P. 11000 Mexico, nor does it establish any rights between you and the Company, its Subsidiaries or its Affiliates.
Plan Document Acknowledgment.
By accepting the RSUs, you acknowledge that you have received copies of the Plan, have reviewed the Plan and the Award Agreement in their entirety and fully understand and accept all provisions of the Plan and the Award Agreement.
In addition, by accepting the Award Agreement, you further acknowledge that you have read and specifically and expressly approve the terms and conditions in the Award Agreement, in which the following is clearly described and established: (i) participation in the Plan does not constitute an acquired right; (ii) the Plan and participation in the Plan is offered by the Company on a wholly discretionary basis; (iii) participation in the Plan is voluntary; and (iv) the Company and any Subsidiary or Affiliates are not responsible for any decrease in the value of the Shares underlying the RSUs.
Finally, you hereby declare that you do not reserve any action or right to bring any claim against the Company for any compensation or damages as a result of your participation in the Plan and therefore grant a full and broad release to the Company and any Subsidiary or Affiliate with respect to any claim that may arise under the Plan.
TÉRMINOS Y CONDICIONES
No existirá derecho o demanda por daños y perjuicios.
Estas disposiciones son complementarias de la sección de Reconocimiento de la Naturaleza del Contrato, incluyendo el presente Apéndice I:
Modificación.
Al aceptar esta RSUs, usted entiende y acuerda que cualquier modificación al Plan o al Contrato, o su terminación no constituirá un cambio o impedimento a los términos y condiciones de su empleo.
Declaración de Política.
El Otorgamiento de RSUs que la Compañía hace mediante el Plan, es unilateral y discrecional y, por lo tanto, la Compañía se reserva el derecho absoluto de modificarlo o descontinuarlo en cualquier momento, sin asumir ninguna responsabilidad.
La Compañía, con oficinas en One PPG Place, Pittsburgh, Pennsylvania 15222, U.S.A. es únicamente responsable de la administración del Plan y la participación en el Plan y la adquisición de Acciones no establece, en ninguna forma, una relación laboral entre usted y la Compañía, toda vez que usted está participando en el Plan en un plano completamente comercial y su único patrón es Delimex de Mexico, S.A. de C.V., ubicado en Monte Pelvoux #220, Piso 6, Col. Lomas de Chapultepec, Delegación Miquel Hidalgo C.P. 11000 México, y tampoco establece ningún derecho entre usted y la Compañía, sus Subsidiarias o Afiliadas.
Reconocimiento del Documento del Plan.
Al aceptar esta RSUs, usted reconoce que ha recibido copias de dicho Plan, ha revisado el Plan y el Contrato en su integridad y comprende y acepta plenamente todas las disposiciones del Plan y del Contrato.
Adicionalmente, al aceptar el Contrato, usted reconoce que ha leído y específica y expresamente aprueba los términos y condiciones en el Contrato, en el cual se establece y describe claramente lo siguiente: (i) la participación en el Plan no constituye un derecho adquirido; (ii) el Plan, y su participación en él es ofrecido por la Compañía sobre una base plenamente discrecional; (iii) la participación en el Plan es voluntaria; y (iv) la Compañía y cualquier Subsidiaria o Afiliada no son responsables por cualquier disminución en el valor de las Acciones implícitas en las RSUs.
Finalmente, por medio del presente usted declara que no se reserva ninguna acción o derecho a presentar cualquier reclamo en contra de la Compañía por cualquier compensación o daño como resultado de su participación en el Plan y por lo tanto otorga la liberación más amplia que en derecho proceda a la Compañía y cualquier Subsidiaria o Afiliada con respecto a cualquier reclamo que pueda surgir en torno al Plan.
NETHERLANDS
NEW ZEALAND
Notifications
Securities Law Information.
WARNING - You are being offered RSUs (which, upon vesting in accordance with the terms of the grant of the RSUs, will be converted into Shares) in the Company. Shares give you a stake in the ownership of the Company. You may receive a return if dividends are paid. Shares are quoted on the Nasdaq. This means you may be able to sell them on the Nasdaq if there are interested buyers. You may get less than you invested. The price will depend on the demand for the Shares.
If the Company runs into financial difficulties and is wound up, you will be paid only after all creditors have been paid. You may lose some or all of your investment.
New Zealand law normally requires people who offer financial products to give information to investors before they invest. This information is designed to help investors to make an informed decision. The usual rules do not apply to this offer because it is made under an employee share scheme. As a result, you may not be given all the information usually required. You will also have fewer other legal protections for this investment.
In compliance with applicable New Zealand securities laws, you are entitled to receive, in electronic or other form and free of cost, copies of the Company's latest annual report, relevant financial statements and the auditor's report on said financial statements (if any).
Ask questions, read all documents carefully, and seek independent financial advice before committing yourself.
PANAMA
Notifications
Securities Law Information.
The RSUs and the Shares to be issued upon vesting of RSUs are offered in a private transaction. This is not an offer to the public and the offer is not subject to the protections established by Panamanian securities laws.
PAPUA NEW GUINEA
There are no country-specific provisions.
POLAND
Notifications
Exchange Control Information.
If you transfer funds in excess of a certain threshold (currently €15,000) into or out of Poland, the funds must be transferred via a Polish bank account or financial institution. You are required to retain the documents connected with a foreign exchange transaction for a period of five (5) years, as measured from the end of the year in which such transaction occurred.
Foreign Assets/Account Reporting Information.
Polish residents holding foreign securities (e.g., Shares) and/or maintaining accounts abroad must report information to the National Bank of Poland on transactions and balances of the securities and cash deposited in such accounts if the value of such securities and cash (when combined with all other assets possessed abroad) exceeds PLN 7 million. If required, the reports must be filed on a quarterly basis on special forms that are available on the website of the National Bank of Poland.
PUERTO RICO
Notifications
Securities Law Information.
The offer of the Plan is subject exclusively to United States securities laws, including the United States Securities Exchange Act of 1934, as amended.
RUSSIA
TERMS AND CONDITIONS
U.S. Transaction.
You understand that your acceptance of the RSUs results in a contract between you and the Company that is completed in the United States and that the Award Agreement is governed by the laws of the State of Delaware, without giving effect to the conflict of laws principles thereof. You are not permitted to sell the Shares directly to other Russian legal entities or individuals.
NOTIFICATIONS
Securities Law Information.
Your employer is not in any way involved with the offer of the RSUs or administration of the Plan. The Award Agreement, the Plan and all other materials you may receive regarding participation in the Plan do not constitute advertising or an offering of securities in Russia. Absent any requirement under local law, the issuance of securities pursuant to the Plan has not and will not be registered in Russia; hence, the securities described in any Plan-related documents may not be used for offering or public circulation in Russia. In no event will Shares issued upon vesting of the RSUs be delivered to you in Russia; all Shares will be maintained on your behalf in the United States of America.
Exchange Control Information.
You are responsible for complying with any applicable Russian exchange control regulations and rulings. Because Russian exchange control regulations and rulings change frequently and without notice, you should consult with a legal advisor to ensure compliance applicable to any aspect of your participation in the Plan, including the grant and vesting of the RSUs, issuance of any Shares at vesting, receipt of any proceeds from the sale of Shares and/or receipt of any payments in connection with any Dividend Equivalents or dividends.
Foreign Assets/Account Reporting Information.
Russian residents are required to notify Russian tax authorities within one (1) month of opening, closing or changing the details of a foreign account. Russian residents also are required to report (i) the beginning and ending balances in such a foreign bank account each year and (ii) transactions related to such a foreign account during the year to the Russian tax authorities, on or before June 1 of the following year. The tax authorities can require you to provide appropriate supporting documents related to transactions in a foreign bank account.
Anti-Corruption Notice.
Anti-corruption laws prohibit certain public servants, their spouses and their dependent children from owning any foreign source financial instruments (e.g., shares of foreign companies such as the Company). Accordingly, you
should inform the Company if you are covered by these laws because you should not hold Shares acquired under the Plan.
SINGAPORE
NOTIFICATIONS
Securities Law Information.
The grant of the RSUs is being made pursuant to the "Qualifying Person" exemption under section 273(1)(f) of the Securities and Futures Act (Chapter 289, 2006 Ed.) ("SFA"), under which it is exempt from the prospectus and registration requirements under the SFA. The Plan has not been lodged or registered as a prospectus with the Monetary Authority of Singapore and the grant of the RSUs is not made with a view to the RSUs or Shares being subsequently offered to another party. You should note that the RSUs are subject to section 257 of the SFA and you should not make any subsequent sale of Shares in Singapore or any offer of such subsequent sale of Shares subject to the awards in Singapore, unless such sale or offer in is made: (i) more than six (6) months from the Grant Date or (ii) pursuant to the exemptions under Part XIII Division (1) Subdivision (4) (other than section 280) of the SFA.
Chief Executive Officer/Director Notification Requirement.
If you are the Chief Executive Officer ("CEO"), a director, associate director or shadow director of the Company's Singapore Subsidiary or Affiliate, you are subject to certain notification requirements under the Singapore Companies Act. Among these requirements is an obligation to notify the Singapore Subsidiary or Affiliate in writing when you receive an interest (e.g., RSUs, Shares) in the Company, a Subsidiary or Affiliate. In addition, you must notify the Singapore Subsidiary or Affiliate when you sell Shares (including when you sell Shares issued upon vesting and settlement of the RSUs). These notifications must be made within two (2) business days of acquiring or disposing of any interest in the Company or any Subsidiary or Affiliate. In addition, a notification of your interests in the Company, Subsidiary or Affiliate must be made within two (2) business days of becoming CEO or a director.
SPAIN
TERMS AND CONDITIONS
Acknowledgment of Nature of Award.
The following provisions supplement the first paragraph of the Acknowledgment of Nature of Award section of the General Non-U.S. Terms and Conditions section of this Appendix I:
By accepting the grant of the RSUs, you acknowledge that you consent to participation in the Plan and have received a copy of the Plan.
You understand that the Company has unilaterally, gratuitously and discretionally decided to grant RSUs under the Plan to individuals who may be employees of the Company's Subsidiaries or Affiliates throughout the world. The decision is a limited decision that is entered into upon the express assumption and condition that any grant will not economically or otherwise bind the Company or its Subsidiaries or Affiliates on an ongoing basis except as provided in the Plan. Consequently, you understand that the RSUs are granted on the assumption and condition that the RSUs or the Shares acquired upon vesting shall not become a part of any employment contract with the Company and any of its Subsidiaries and shall not be considered a mandatory benefit, salary for any purposes (including severance compensation) or any other right whatsoever. In addition, you understand that this grant would not be made to you but for the assumptions and conditions referred to above; thus, you acknowledge and freely accept that should any or all of the assumptions be mistaken or should any of the conditions not be met for any reason, then the RSUs shall be null and void.
You understand and agree that, unless otherwise provided in the Award Agreement, the vesting and settlement of the RSUs is expressly conditioned on your continuous Service such that if your employment or rendering of Services terminates for any reason whatsoever, your RSUs will cease vesting immediately effective as of the date of
such termination for any reason including, but not limited to, resignation, retirement, disciplinary dismissal adjudged to be with cause, disciplinary dismissal adjudged or recognized to be without cause (i.e., subject to a "despido improcedente"), individual or collective dismissal on objective grounds, whether adjudged or recognized to be with or without cause, material modification of the terms of employment under Article 41 of the Workers' Statute, relocation under Article 40 of the Workers' Statute, and/or Article 50 of the Workers' Statute, unilateral withdrawal by your employer and under Article 10.3 of the Royal Decree 1382/1985. Consequently, upon termination for any of the above reasons, you will automatically lose any rights to the RSUs granted to you that were unvested on the date of termination, as described in the Award Agreement.
NOTIFICATIONS
Securities Law Information.
The RSUs and the Shares issued pursuant to the vesting of the RSUs do not qualify under Spanish regulations as securities. No "offer of securities to the public," as defined under Spanish law, has taken place or will take place in the Spanish territory. The Award Agreement has not been nor will it be registered with the Comisión Nacional del Mercado de Valores, and does not constitute a public offering prospectus.
Foreign Assets/Account Reporting Information.
If you are a Spanish resident, you must declare the acquisition, ownership and disposition of Shares to the Dirección General de Comercial e Inversiones (the "DGCI") of the Ministerio de Economia for statistical purposes. This declaration must be made in January for any Shares owned as of December 31 of the prior year by filing a form D-6 with the DGCI; however, if the value of the Shares being reported exceeds €1,502,530 (or if you hold 10% or more of the share capital of the Company or such other amount that would entitle you to join the Board of Directors), the declaration must be filed within one (1) month of the acquisition or disposition of the Shares, as applicable. In addition, if you wish to import the ownership title of any Shares (i.e., share certificates) into Spain, you must declare the importation of such securities to the DGCI.
You also are required to declare electronically to the Bank of Spain any foreign accounts (including brokerage accounts held abroad), any foreign instruments (including Shares) and any transactions with non-Spanish residents (including any payments of Shares made pursuant to the Plan) held in such accounts if the value of the transactions during the prior tax year or the balances in such accounts as of December 31 of the prior tax year exceeds €1,000,000.
To the extent that you hold rights or assets (e.g., Shares acquired under the Plan or cash held in a bank or brokerage account) outside Spain with a value in excess of €50,000 per type of asset as of December 31 each year, you will be required to report information on such assets on your tax return (tax form 720) for such year. After such rights and/or assets are initially reported, the reporting obligation will apply for subsequent years only if the value of such right or asset increases by more than €20,000 or if you sell or otherwise dispose of previously reported rights or assets. The reporting must be completed by the following March 31.
You are solely responsible for complying with applicable reporting obligations. The laws are often complex and can change frequently. You should consult your personal legal and/or tax advisor to confirm the reporting requirements that will apply to you in connection with the Plan.
SWEDEN
There are no country-specific provisions.
THAILAND
NOTIFICATIONS
Exchange Control Information.
If you are a Thai resident and you receive funds in connection with the Plan (e.g., dividends or sale proceeds) with a value equal to or greater than US$200,000 per transaction, you are required to immediately repatriate such funds to Thailand. Any foreign currency repatriated to Thailand must be converted to Thai Baht or deposited into a foreign currency deposit account opened with any commercial bank in Thailand acting as the authorized agent within 360 days from the date the funds are repatriated to Thailand. You are also required to inform the authorized agent of the details of the foreign currency transaction, including your identification information and the purpose of the transaction.
If you do not comply with the above obligations, you may be subject to penalties assessed by the Bank of Thailand. Because exchange control regulations change frequently and without notice, you should consult your legal advisor before selling any Shares (or receiving any other funds in connection with the Plan) to ensure compliance with current regulations. You are responsible for ensuring compliance with all exchange control laws in Thailand, and neither the Company nor your employer will be liable for any fines or penalties resulting from failure to comply with applicable laws.
TURKEY
NOTIFICATIONS
Securities Law Information.
You are permitted to sell Shares acquired under the Plan through the designated broker appointed under the Plan, if any, provided the sale of the Shares takes place outside of Turkey through the facilities of a stock exchange on which the Shares are listed (i.e., Nasdaq).
Exchange Control Information.
Under Turkish law, Turkish residents are permitted to purchase and sell securities or derivatives traded on exchanges abroad only through a financial intermediary licensed in Turkey. Therefore, you may be required to appoint a Turkish broker to assist you with the sale of the Shares acquired under the Plan. You should consult your personal legal advisor before selling any Shares acquired under the Plan to confirm the applicability of this requirement to you.
UNITED ARAB EMIRATES
NOTIFICATIONS
Securities Law Information.
The Plan is being offered only to employees and is in the nature of providing equity incentives to employees of the Company or its Subsidiaries or Affiliates in the United Arab Emirates ("UAE"). Any documents related to the Plan, including the Plan, this Award Agreement, and other grant documents ("Plan Documents"), are intended for distribution only to such employees and must not be delivered to, or relied on by any other person. Prospective purchasers of the securities offered (i.e., the RSUs) should conduct their own due diligence on the securities.
The Emirates Securities and Commodities Authority has no responsibility for reviewing or verifying any Plan Documents nor has it taken steps to verify the information set out in them, and thus, is not responsible for such documents. Further, neither the Ministry of Economy nor the Dubai Department of Economic Development has approved this statement nor taken steps to verify the information set out in it, and has no responsibility for it. If you do not understand the contents of the Plan Documents, you should consult an authorized financial advisor.
UNITED KINGDOM
Terms & ConditionsTaxes.
The following provisions supplement the Taxes section of the Award Agreement and the General Non-U.S. Terms and Conditions section of this Appendix I:
Without limitation to the Taxes section of the Award Agreement and the General Non-U.S. Terms and Conditions section of this Appendix I, you agree that you are liable for all Tax-Related Items and hereby covenant to pay all such Tax-Related Items as and when requested by the Company or your employer or by Her Majesty's Revenue and Customs ("HMRC") (or any other tax authority or any other relevant authority). You also agree to indemnify and keep indemnified the Company and your employer against any Tax–Related Items that they are required to pay or withhold or have paid or will pay on your behalf to HMRC (or any other tax authority or any other relevant authority).
Notwithstanding the foregoing, if you are a director or executive officer (as within the meaning of the Act), the terms of the immediately foregoing provision will not apply. In the event that you are a director or executive officer and income tax due is not collected from or paid by you by within ninety (90) days of the U.K. tax year in which an event giving rise to the indemnification described above occurs, the amount of any uncollected tax may constitute a benefit to you on which additional income tax and national insurance contributions may be payable. You acknowledge that you ultimately will be responsible for reporting and paying any income tax due on this additional benefit directly to HMRC under the self-assessment regime and for reimbursing the Company or the Employer (as applicable) for the value of any employee national insurance contributions due on this additional benefit, which the Company and/or the Employer may recover from you by any of the means referred to in the Taxes section of the Award Agreement and the General Non-U.S. Terms and Conditions section of this Appendix I.
VENEZUELA
TERMS AND CONDITIONS
Exchange Control Restrictions.
Exchange control restrictions may limit the ability to vest in the RSUs or to remit funds into Venezuela following the sale of Shares acquired under the Plan. The Company reserves the right to further restrict the settlement of the RSUs or to amend or cancel the RSUs at any time in order to comply with the applicable exchange control laws in Venezuela. However, ultimately, you are responsible for complying with exchange control laws in Venezuela and the Company will not be liable for any fines or penalties resulting from your failure to comply with applicable laws. You should consult your personal advisor prior to accepting the RSUs to ensure compliance with current regulations. You are solely responsible for ensuring compliance with all exchange control laws in Venezuela.
Investment Representation.
As a condition of the grant of the RSUs, you acknowledge and agree that any Shares you may acquire upon vesting of the RSUs are acquired as and intended to be an investment rather than for the resale of the Shares and conversion of the Shares into foreign currency.
NOTIFICATIONS
Securities Law Information.
The RSUs granted under the Plan and the Shares issued under the Plan are offered as a personal, private, exclusive transaction and are not subject to Venezuelan government securities regulations.
Exhibit 10.6
THE KRAFT HEINZ COMPANY OMNIBUS INCENTIVE PLAN
FORM OF MATCHING RESTRICTED STOCK UNIT AWARD AGREEMENT
Unless defined in this award agreement (together with all exhibits and appendices attached thereto, this "Award Agreement"), capitalized terms will have the same meanings ascribed to them in The Kraft Heinz Company 2016 Omnibus Incentive Plan (as may be amended from time to time, the "Plan").
Subject to your acceptance of this Award Agreement, you are hereby being granted an award of Restricted Stock Units (the "RSUs") as of the Grant Date set forth below (the "Grant Date"). The RSUs are granted in connection with your purchase of Shares in the Company's 2020 Bonus Swap Program (the "Related Shares"). Each RSU is a bookkeeping entry representing the right to receive one (1) share of The Kraft Heinz Company's (the "Company") common stock on the following terms and subject to the provisions of the Plan, which is incorporated herein by reference. In the event of a conflict between the provisions of the Plan and this Award Agreement, the provisions of the Plan will govern.
|
|
|
|
|
|
Grant Date:
|
_______________
|
Vesting Date:
|
3-year anniversary of Grant Date (subject to the terms of the Award Agreement)
|
By agreeing to this Award Agreement, you agree that the RSUs are granted under and governed by the terms and conditions of this Award Agreement (including, without limitation, the terms and conditions set forth on Exhibit A, the Restrictive Covenants Agreement attached as Exhibit B and the terms and conditions set forth on Appendix I) and the Plan.
EXHIBIT A
TERMS AND CONDITIONS OF THE MATCHING RESTRICTED STOCK UNITS
Vesting
The RSUs will vest on the "Vesting Date" set forth in this Award Agreement provided that you remain employed by the Company or one of its Subsidiaries, except as otherwise set forth in the Plan or this Award Agreement (including, without limitation, the section below titled "Termination"), and subject to forfeiture as set forth in the section below titled "Forfeiture of Unvested RSUs upon the Transfer of Related Shares." Prior to the vesting and settlement of the RSUs, you will not have any rights of a shareholder with respect to the RSUs or the Shares subject thereto.
Shares due to you upon vesting and settlement of the RSUs will be delivered in accordance with the provisions of the section below titled "Settlement of Vested RSUs." However, no Shares will be delivered pursuant to the vesting of the RSUs unless (i) you have complied with your obligations under this Award Agreement and the Plan, (ii) the vesting of the RSUs and the delivery of such Shares complies with applicable law and (iii) full payment (or satisfactory provision therefor) of any Tax-Related Items (as defined below) has been received by the Company or its Subsidiary or Affiliate, as applicable. Until such time as the Shares are delivered to you (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), you will have no right to vote or receive dividends or any other rights as a shareholder with respect to such Shares, notwithstanding the vesting of the RSUs.
Dividend Equivalents
If while the RSUs are outstanding the Board declares a cash dividend on the Company's common stock, you will be entitled to Dividend Equivalents on the dividend payment date established by the Company equal to the cash dividends payable on the same number of Shares as the number of unvested RSUs subject to this award on the dividend record date established by the Company. Any such Dividend Equivalents will be in the form of additional RSUs, will be subject to the same terms and vesting dates as the underlying RSUs, and will be delivered at the same time and in the same manner as the underlying RSUs originally subject to this award. The number of additional RSUs credited as Dividend Equivalents on the dividend payment date will be determined by dividing (i) the product of (A) the number of your unvested RSUs as of the corresponding dividend record date (including any unvested Restricted Stock Units previously credited as a result of prior payments of Dividend Equivalents) and (B) the per-Share cash dividend paid on the dividend payment date, by (ii) the per-share Fair Market Value of the Shares on the dividend payment date, rounded down to the nearest whole RSU.
Termination
Effect of a Termination of Service on Vesting
Other than as set forth below, upon a termination of your Service for any reason prior to the Vesting Date, you will forfeit the RSUs, including any accrued Dividend Equivalents, without any consideration due to you.
If prior to the Vesting Date, but more than one year after the Grant Date, the Company terminates your Service Without Cause (as defined below), your RSUs shall be vested as if 25% of the RSUs had previously vested on the first anniversary of the Grant Date on which you were providing Service and 50% of the RSUs had previously vested on the second anniversary of the Grant Date on which you were providing Service.
If prior to the Vesting Date, but more than one year after the Grant Date, your Service terminates by reason of your death, Retirement or Disability (as defined below), your RSUs shall be fully vested and exercisable.
Settlement of Vested RSUs
To the extent the RSUs become vested pursuant to the terms of this Award Agreement, the Company will issue and deliver to you, or, as applicable, your Beneficiary or the personal representative of your estate, the number
of Shares equal to the number of vested RSUs. Such delivery of Shares will occur within the settlement period set forth in the table below, which will vary depending on the applicable vesting event.
|
|
|
|
|
|
Vesting Event
|
Settlement Period
|
•Vesting Date
|
As soon as practicable and no later than 60 days following the Vesting Date
|
•Termination of Service Without Cause
|
Within 60 days of your termination date*
|
•Retirement
|
Within 60 days of your termination date*
|
•Disability
|
Within 60 days of your termination date*
|
•Death
|
Within 60 days of the date of death
|
*If you are subject to U.S. federal income tax and the RSUs constitute an item of non-qualified deferred compensation as determined by the Company ("Deferred Compensation"), settlement will occur within this period only if your termination of Service constitutes a "separation from service" within the meaning of Section 409A of the Code ("Separation from Service"); otherwise, settlement will occur in accordance with the original vesting schedule (i.e., as soon as practicable and no later than sixty (60) days following the Vesting Date).
Notwithstanding the foregoing, if you are subject to U.S. federal income tax and the Company determines that you are a "specified employee" within the meaning of Section 409A of the Code, any RSUs that are subject to settlement upon your Separation from Service will instead be settled on the date that is the first business day following the six (6) month anniversary of such Separation from Service, or, if earlier, upon your death, to the extent required pursuant to Section 409A of the Code.
Applicable Definitions
For purposes of this Award Agreement, the following terms shall have the following meanings:
"Disability" means (i) a physical or mental condition entitling you to benefits under the long-term disability policy of the Company covering you or (ii) in the absence of any such policy, a physical or mental condition rendering you unable to perform your duties for the Company or any of its Subsidiaries or Affiliates for a period of six (6) consecutive months or longer; provided that if you are a party to an Employment Agreement at the time of termination of your Service and such Employment Agreement contains a different definition of "disability" (or any derivation thereof), the definition in such Employment Agreement will control for purposes of this Award Agreement.
"Retirement" means a termination of Service by you on or after either (a) the later of (i) your 60th birthday and (ii) your completion of five years of Service with the Company, its Subsidiaries or its Affiliates; or (b) the later of (i) your 55th birthday and (ii) your completion of ten years of Service with the Company, its Subsidiaries or its Affiliates.
"Without Cause" means (i) a termination of your Service by the Company or its Subsidiaries or Affiliates other than for Cause (as defined in the Plan) and other than due to your death, Disability or Retirement or (ii) (A) if you are a party to an Employment Agreement, (B) such Employment Agreement is in effect upon the date of your termination of Service and (C) such Employment Agreement defines "Good Reason", then "Without Cause" shall also include resignation of your Service for "Good Reason" in accordance with such Employment Agreement.
Special Termination Provisions
In the event that there is a conflict between the terms of this Award Agreement regarding the effect of a termination of your Service on the RSUs and the terms of any Employment Agreement, the terms of this Award Agreement will govern.
If you are terminated Without Cause or due to your resignation and, within the twelve (12) month period subsequent to such termination of your Service, the Company determines that your Service could have been terminated for Cause, subject to anything to the contrary that may be contained in your Employment Agreement at the time of termination of your Service, your Service will, at the election of the Company, be deemed to have been terminated for Cause for purposes of this Award Agreement and the Plan, effective as of the date the events giving rise to Cause occurred and any consequences following from a termination for Cause shall be retroactively applied (including your obligation to repay gains that would not have been realized had your Service been terminated for Cause).
Effect of a Company Sale
The treatment of the RSUs upon a Company Sale shall be governed by the Plan, provided, however, that to the extent that the RSUs constitute Deferred Compensation, settlement of any portion of the RSUs that may vest in connection with a Company Sale will occur within sixty (60) days following the Vesting Date. In the event that there is a conflict between the terms of this Award Agreement regarding the effect of a Company Sale on the RSUs and the terms of any Employment Agreement, the terms of this Award Agreement will govern.
Restrictive Covenants
Your Service will provide you with specialized training and unique knowledge and access to confidential information and key business relationships, which, if used in competition with the Company, its Subsidiaries and/or its Affiliates, would cause harm to such entities. As such, in partial consideration of the RSUs granted under this Award Agreement, you agree to comply with the Company's Restrictive Covenants Agreement, attached (and incorporated into this Award Agreement) as Exhibit B. The restrictions and obligations contained in the Restrictive Covenants Agreement are in addition to any restrictions imposed by, or obligations you may have to, the Company, its Subsidiaries or Affiliates under any Employment Agreement or otherwise.
Forfeiture of Unvested RSUs upon the Transfer of Related Shares
Transfer (other than pursuant to the laws of descent) of the Related Shares before the RSUs vest (whether on the Vesting Date or such earlier date set forth in the section above titled "Termination" or elsewhere in the Award Agreement), will result in immediate forfeiture of all or a portion of the unvested RSUs granted under this Award Agreement as set forth below:
(i) If you Transfer more than 50% of the Related Shares, you will forfeit all unvested RSUs, including any accrued Dividend Equivalents.
(ii) If you Transfer 50% or less of the Related Shares (the "Transferred Percentage"), you will forfeit a portion of the unvested RSUs equal to twice the Transferred Percentage, plus any Dividend Equivalents accrued with respect to such RSUs.
Taxes
You acknowledge that, regardless of any action the Company takes with respect to any or all income tax, social security or insurance, payroll tax, fringe benefits tax, payment on account or other tax-related withholding ("Tax-Related Items"), the ultimate liability for all Tax-Related Items legally due by you is and remains your responsibility and that the Company and/or its Subsidiaries or Affiliates (i) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the RSU grant, including the grant, vesting or settlement of the RSUs, the subsequent sale of Shares acquired pursuant to such settlement and the receipt of any dividends or Dividend Equivalents and (ii) do not commit to structure the terms of the grant or any aspect of the RSUs to reduce or eliminate your liability for Tax-Related Items.
Prior to vesting of the RSUs, you will pay or make adequate arrangements satisfactory to the Committee to satisfy all Tax-Related Items. In this regard, you authorize the withholding of all applicable Tax-Related Items legally payable by you from your wages or other cash compensation paid to you by the Company and/or its Subsidiaries or Affiliates or from proceeds of the sale of Shares. Alternatively, or in addition, if permissible under
local law, the Company may in its sole and absolute discretion (A) sell or arrange for the sale of Shares that you acquire to meet the obligation for Tax-Related Items, and/or (B) withhold the amount of Shares necessary to satisfy the minimum withholding amount, or to the extent permitted by applicable accounting principles, withhold Shares based on a rate of up to the maximum applicable withholding rate. Notwithstanding the foregoing, if you are subject to the short-swing profit rules of Section 16(b) of the Securities Exchange Act of 1934, the Company will withhold in Shares upon the relevant tax withholding event, unless the use of such withholding method is prevented by applicable law or has materially adverse accounting or tax consequences, in which case, the Tax-Related Items obligation may be satisfied by one or a combination of the other methods set forth above.
Further, the Company may cause the RSUs to vest prior to the Vesting Date to the extent necessary to satisfy any liability for Tax-Related Items that arises prior to settlement of the RSUs by means of method (A) or (B) above, provided that to avoid a prohibited acceleration under Section 409A of the Code for any RSUs that constitute Deferred Compensation, the number of RSUs so vested will not exceed the number necessary to satisfy the liability for Tax-Related Items.
Finally, you will pay to the Company and/or its Subsidiaries or Affiliates any amount of Tax-Related Items that the Company or its Subsidiaries or Affiliates may be required to withhold as a result of your participation in the Plan that cannot be satisfied by the means previously described. The Company may refuse to deliver the Shares if you fail to comply with your obligations in connection with the Tax-Related Items as described in this section.
No Guarantee of Continued Service
You acknowledge and agree that the vesting of the RSUs on the Vesting Date (or such earlier date as set forth in the section above titled "Termination") is earned only by performing continuing Service (not through the act of being hired or being granted this Award). You further acknowledge and agree that this Award Agreement, the transactions contemplated hereunder and the Vesting Date shall not be construed as giving you the right to be retained in the employ of, or to continue to provide Service to, the Company or its Subsidiaries. Further, the Company or the applicable Subsidiary may at any time dismiss you, free from any liability, or any claim under the Plan, unless otherwise expressly provided in any other agreement binding you, the Company or the applicable Subsidiary. The receipt of this Award is not intended to confer any rights on you except as set forth in this Award Agreement.
Company's Right of Offset
If you become entitled to a distribution of benefits under this Award, and if at such time you have any outstanding debt, obligation, or other liability representing an amount owing to the Company, its Subsidiaries or any of its Affiliates, then the Company, its Subsidiaries or its Affiliates, upon a determination by the Committee, and to the extent permitted by applicable law and it would not cause a violation of Section 409A of the Code, may offset such amount so owing against the amount of benefits otherwise distributable. Such determination shall be made by the Committee.
Acknowledgment of Nature of Award
In accepting the RSUs, you understand, acknowledge and agree that:
(a) the Plan is established voluntarily by the Company, it is discretionary in nature and may be modified, amended, suspended or terminated by the Company at any time, as provided in the Plan and this Award Agreement;
(b) the award of the RSUs is exceptional, voluntary, occasional and discretionary and does not create any contractual or other right to receive future RSU awards, or benefits in lieu of RSUs even if RSUs have been awarded in the past;
(c) all decisions with respect to future awards, if any, will be at the sole discretion of the Company, including, but not limited to, the form and timing of the RSUs, the number of Shares subject to the RSUs, and the vesting provisions applicable to the RSUs;
(d) your participation in the Plan is voluntary;
(e) the RSUs are an extraordinary item that does not constitute compensation of any kind for services of any kind rendered to the Company or its Subsidiaries;
(f) the RSUs, any Shares acquired under the Plan, and the income and value of same are not part of normal or expected compensation or salary for purposes of calculating any severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments;
(g) the future value of the underlying Shares is unknown, indeterminable, and cannot be predicted with certainty;
(h) unless otherwise agreed with the Company in writing, the RSUs, any Shares acquired under the Plan, and the income and value of same, are not granted as consideration for, or in connection with, any Service you may provide as a director of a Subsidiary or Affiliate;
(i) no claim or entitlement to compensation or damages shall arise from forfeiture of the RSU resulting from termination of your Service (for any reason whatsoever, whether or not later found to be invalid or in breach of employment laws in the jurisdiction where you provide Service or the terms of your Employment Agreement, if any), and in consideration of the grant of the RSU to which you are otherwise not entitled, you irrevocably agree never to institute any claim against the Company, any of its Subsidiaries or Affiliates, waive your ability, if any, to bring any such claim, and release the Company, and its Subsidiaries and Affiliates from any such claim; if, notwithstanding the foregoing, any such claim is allowed by a court of competent jurisdiction, then, by participating in the Plan, you shall be deemed irrevocably to have agreed not to pursue such claim and agree to execute any and all documents necessary to request dismissal or withdrawal of such claim; and
(j) the RSUs are subject to the terms of the Plan (including, without limitation, certain provisions regarding Adjustments, Repurchases and Transfers).
Securities Laws
By accepting the RSUs, you acknowledge that U.S. federal, state or foreign securities laws and/or the Company's policies regarding trading in its securities may limit or restrict your right to buy or sell Shares, including, without limitation, sales of Shares acquired in connection with the RSUs. You agree to comply with such securities law requirements and Company policies, as such laws and policies are amended from time to time.
Data Privacy
a.Data Collection and Usage. The Company collects, processes and uses personal data about you, including but not limited to, your name, home address and telephone number, email address, date of birth, social insurance number, employee identification number, hire date, termination date, gross earnings, tax rate, account identification number for the independent stock plan service provider account, any shares of stock or directorships held in the Company, details of all RSUs or any other entitlement to shares or equivalent benefits awarded, canceled, exercised, vested, unvested or outstanding in your favor, which the Company receives from you or your employer (“Data”) for the purposes of implementing, administering and managing the Plan. The legal basis, where required, for the processing of Data is the legitimate interests of the Company in administering the Plan, where our interests are not overridden by your data protection rights.
b.Stock Plan Administration Service Providers. The Company may transfer Data to one or more independent stock plan service providers, which may assist the Company with the implementation, administration and management of the Plan. Such service provider(s) may open an account for you or ask you to receive and trade shares of common stock. You may be
asked to acknowledge, or agree to, separate terms and data processing practices with the service provider(s) with such agreement being a condition of participation in the Plan. Please review these terms and data processing practices carefully. If you do not agree to the independent stock plan service provider’s terms and/or data processing practices, you will not be able to participate in the Plan.
c.International Data Transfers. Please note that Data processed in connection with the Plan will be transferred from your country to the United States, where the Company and its service providers are based. Your country or jurisdiction may have different data privacy laws and protections than the United States. The Company will ensure that appropriate measures are in place for compliance with applicable data protection laws in relation to transfer of Data to the United States.
d.Data Retention. The Company will use your personal data only as long as necessary to implement, administer and manage your participation in the Plan and as required to comply with legal or regulatory obligations, including under tax and securities laws. When the Company no longer needs your personal data for any of the above purposes, the Company will remove it from its systems.
e.Data Subject Rights. You understand that you may have a number of rights under data privacy laws in your jurisdiction. Depending on where you are based, such rights may include the right to (i) request access or copies of personal data processed by the Company, (ii) rectification of incorrect data, (iii) deletion of personal data, (iv) restrictions on processing of personal data, (v) portability of personal data, (vi) lodge complaints with competent data protection authorities in your jurisdiction, and/or (vii) receive a list with the names and addresses of any potential recipients of your personal data. To receive clarification regarding these rights or to exercise these rights, you can contact the Company’s Data Privacy Team at gdpr@kraftheinz.com.
Limits on Transferability; Beneficiaries
The RSUs shall not be pledged, hypothecated or otherwise encumbered or subject to any lien, obligation or liability to any party, or Transferred, otherwise than by your will or the laws of descent and distribution or to a Beneficiary upon your death. A Beneficiary or other person claiming any rights under this Award Agreement shall be subject to all terms and conditions of the Plan and this Award Agreement, except as otherwise determined by the Committee, and to any additional terms and conditions deemed necessary or appropriate by the Committee.
No Transfer to any executor or administrator of your estate or to any Beneficiary by will or the laws of descent and distribution of any rights in respect of the RSUs shall be effective to bind the Company unless the Committee shall have been furnished with (i) written notice thereof and with a copy of the will and/or such evidence as the Committee may deem necessary to establish the validity of the Transfer and (ii) the written agreement of the Transferee to comply with the terms and conditions of this Award Agreement, to the extent applicable, as determined by the Company.
Repayment/Forfeiture
As an additional condition of receiving the RSUs and without prejudice to the terms of the Company's Restrictive Covenants Agreement (attached as Exhibit B), you agree that the RSUs and any proceeds or other benefits you may receive hereunder shall be subject to forfeiture and/or repayment to the Company to the extent required (i) under the terms of any policy adopted by the Company as may be amended from time to time (and such requirements shall be deemed incorporated into this Award Agreement without your consent) or (ii) to comply with any requirements imposed under applicable laws and/or the rules and regulations of the securities exchange or inter-dealer quotation system on which the Shares are listed or quoted, including, without limitation, pursuant to Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Further, if you receive any amount in excess of what you should have received under the terms of the RSUs for any reason (including without
limitation by reason of a financial restatement, mistake in calculations or administrative error), all as determined by the Committee, then you shall be required to promptly repay any such excess amount to the Company.
Section 409A
It is intended that the RSUs awarded pursuant to this Award Agreement be exempt from or compliant with Section 409A of the Code ("Section 409A") and the Award Agreement shall be interpreted, construed and operated to reflect this intent. Notwithstanding the foregoing, this Award Agreement and the Plan may be amended at any time, without the consent of any party, to the extent that is necessary or desirable to exempt the RSUs from Section 409A or satisfy any of the requirements under Section 409A, but the Company shall not be under any obligation to make any such amendment. Further, the Company, its Subsidiaries and Affiliates do not make any representation to you that the RSUs awarded pursuant to this Award Agreement shall be exempt from or satisfy the requirements of Section 409A, and the Company, its Subsidiaries and Affiliates shall have no liability or other obligation to indemnify or hold harmless you or any Beneficiary, Transferee or other party for any tax, additional tax, interest or penalties that you or any Beneficiary, Transferee or other party may incur in the event that any provision of this Award Agreement, or any amendment or modification thereof or any other action taken with respect thereto, is deemed to violate any of the requirements of Section 409A.
Entire Agreement; Modification
The Plan, this Award Agreement and, to the extent applicable, your Employment Agreement or any separation agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings, representations and agreements (whether oral or written) of the Company, its Subsidiaries and/or Affiliates and you with respect to the subject matter hereof. This Award Agreement may not be modified in a manner that adversely affects your rights heretofore granted under the Plan, except with your consent or to comply with applicable law or to the extent permitted under other provisions of the Plan.
Governing Law; Jurisdiction; Waiver of Jury Trial
This Award Agreement (together with all exhibits and appendices attached thereto) is governed by the laws of the State of Delaware, without regard to its principles of conflict of laws, and any disputes shall be settled in accordance with the Plan. The parties expressly agree to submit to the exclusive jurisdiction and exclusive venue of courts located in the State of Delaware in connection with any litigation which may be brought with respect to a dispute in relation to this Award Agreement.
To the extent not prohibited by applicable law, each of the parties hereto waives any right it may have to trial by jury in respect of any litigation based on, arising out of, under or in connection with this Award Agreement (together with all exhibits and appendices attached thereto) or the Plan.
Electronic Signatures and Delivery and Acceptance
The Company may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan, including this Award Agreement, by electronic means or request your consent to participate in the Plan by electronic means. You hereby consent to receive such documents by electronic delivery and agree to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company. The Award Agreement if delivered by electronic means with electronic signatures shall be treated in all manner and respects as an original executed document and shall be considered to have the same binding legal effect as if it were the original signed versions thereof delivered in person.
Agreement Severable
This Award Agreement shall be enforceable to the fullest extent allowed by law. In the event that any provision of this Award Agreement is determined to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, then that provision shall be reduced, modified or otherwise conformed to the relevant law, judgment or determination to the degree necessary to render it valid and enforceable without
affecting the validity, legality or enforceability of any other provision of this Award Agreement or the validity, legality or enforceability of such provision in any other jurisdiction. Any provision of this Award Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be deemed severable from the remainder of this Award Agreement, and the remaining provisions contained in this Award Agreement shall be construed to preserve to the maximum permissible extent the intent and purposes of this Award Agreement.
Interpretation
The Committee shall have the right to resolve all questions that may arise in connection with the Award or this Award Agreement, including whether you are actively employed. Any interpretation, determination or other action made or taken by the Committee regarding the Plan or this Award Agreement shall be final, binding and conclusive. This Award Agreement shall be binding upon and inure to the benefit of any successor or successors of the Company and any person or persons who shall acquire any rights hereunder in accordance with this Award Agreement or the Plan.
Language
If you have received this Award Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
Acknowledgments
By signing this Award Agreement, you acknowledge receipt of a copy of the Plan and represent that you are familiar with the terms and conditions of the Plan, and hereby accept the RSUs subject to all provisions in this Award Agreement and in the Plan. You hereby agree to accept as final, conclusive and binding all decisions or interpretations of the Committee upon any questions arising under the Plan or this Award Agreement.
Appendix I
Notwithstanding any provision in this Award Agreement, if you work or reside outside the U.S., the RSUs shall be subject to the general non-U.S. terms and conditions and the special terms and conditions for your country set forth in Appendix I. Moreover, if you relocate from the U.S. to one of the countries included in Appendix I or you move between countries included in Appendix I, the general non-U.S. terms and conditions and the special terms and conditions for such country will apply to you, to the extent the Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons. The Appendix I constitutes part of this Award Agreement.
EXHIBIT B
RESTRICTIVE COVENANTS AGREEMENT
I understand that I am or will be an employee to or other service-provider of The Kraft Heinz Company and/or its Subsidiaries and/or its Affiliates (collectively the "Company"), and will learn and have access to the Company's confidential, trade secret and proprietary information and key business relationships. I understand that the products and services that the Company develops, provides and markets are unique. Further, I know that my promises in this Restrictive Covenants Agreement (the "Agreement") are an important way for the Company to protect its proprietary interests and that The Kraft Heinz Company would not have granted me RSUs or other equity grants unless I made such promises.
In addition to other good and valuable consideration, I am expressly being given RSUs or other equity grants in exchange for my agreeing to the terms of this Agreement. In consideration of the foregoing, I (the "Executive") agree as follows:
1.NON-DISCLOSURE OF CONFIDENTIAL INFORMATION. During the course of Executive's Service, Executive will have access to Confidential Information. For purposes of this Agreement, "Confidential Information" means all data, information, ideas, concepts, discoveries, trade secrets, inventions (whether or not patentable or reduced to practice), innovations, improvements, know-how, developments, techniques, methods, processes, treatments, drawings, sketches, specifications, designs, plans, patterns, models, plans and strategies, and all other confidential or proprietary information or trade secrets in any form or medium (whether merely remembered or embodied in a tangible or intangible form or medium) whether now or hereafter existing, relating to or arising from the past, current or potential business, activities and/or operations of the Company, including, without limitation, any such information relating to or concerning finances, sales, marketing, advertising, transition, promotions, pricing, personnel, customers, suppliers, vendors, raw partners and/or competitors of the Company. Executive agrees that Executive shall not, directly or indirectly, use, make available, sell, disclose or otherwise communicate to any person, other than in the course of Executive's assigned duties and for the benefit of the Company, either during the period of Executive's Service or at any time thereafter, any Confidential Information or other confidential or proprietary information received from third parties subject to a duty on the Company's part to maintain the confidentiality of such information, and to use such information only for certain limited purposes, in each case, which shall have been obtained by Executive during Executive's Service. The foregoing shall not apply to information that (i) was known to the public prior to its disclosure to Executive; (ii) becomes generally known to the public subsequent to disclosure to Executive through no wrongful act of Executive or any representative of Executive; or (iii) Executive is required to disclose by applicable law, regulation or legal process (provided that, to the extent permitted by law, Executive provides the Company with prior notice of the contemplated disclosure and cooperates with the Company at its expense in seeking a protective order or other appropriate protection of such information).
Pursuant to the U.S. Defend Trade Secrets Act of 2016, Executive shall not be held criminally, or civilly, liable under any Federal or State Trade secret law for the disclosure of a trade secret that is made in confidence either directly or indirectly to a Federal, State, or local government official, or an attorney, for the sole purpose of reporting, or investigating, a violation of law. Moreover, Executive may disclose trade secrets in a complaint, or other document, filed in a lawsuit, or other proceeding, if such filing is made under seal. Finally, if Executive files a lawsuit alleging retaliation by the Company for reporting a suspected violation of the law, Executive may disclose the trade secret to Executive's attorney and use the trade secret in the court proceeding, if Executive files any document containing the trade secret under seal and does not disclose the trade secret, except pursuant to court order.
No Company policies or practices, including this Non-Disclosure of Confidential Information provision, is intended to or shall limit, prevent, impede or interfere in any way with Executive's right, without prior
notice to the Company, to provide information to the government, participate in investigations, testify in proceedings regarding the Company's past or future conduct, or engage in any activities protected under whistle blower statutes.
2.NON-COMPETITION. Executive acknowledges that (i) Executive performs services of a unique nature for the Company that are irreplaceable, and that Executive's performance of such services to a competing business will result in irreparable harm to the Company, (ii) Executive has had and will continue to have access to Confidential Information which, if disclosed, would unfairly and inappropriately assist in competition against the Company, (iii) in the course of Executive's employment by or service to a competitor, Executive would inevitably use or disclose such Confidential Information, (iv) the Company has substantial relationships with its customers and Executive has had and will continue to have access to these customers, (v) Executive has received and will receive specialized training from the Company, and (vi) Executive has generated and will continue to generate goodwill for the Company in the course of Executive's Service. Accordingly, during Executive's Service and for twelve (12) months following a termination of Executive's Service for any reason (the "Restricted Period"), Executive will not engage in any business activities, directly or indirectly (whether as an employee, consultant, officer, director, partner, joint venturer, manager, member, principal, agent, or independent contractor, individually, in concert with others, or in any other manner) within the same line or lines of business for which the Executive performed services for the Company and in a capacity that is similar to the capacity in which the Executive was employed by the Company with any person or entity that competes with the Company in the consumer packaged food and beverage industry ("Competitive Business") anywhere within the same geographic territory(ies) for which the Executive performed services for the Company (the "Restricted Territory"). Notwithstanding the foregoing, nothing herein shall prohibit Executive from being a passive owner of not more than three percent (3%) of the equity securities of a publicly traded corporation engaged in a business that is in competition with the Company, so long as Executive has no active participation in the business of such corporation.
3.NON-SOLICITATION. During the Restricted Period, Executive agrees that Executive shall not, except in the furtherance of Executive's duties to the Company, directly or indirectly, individually or on behalf of any other person, firm, corporation or other entity, solicit, aid, induce, assist in the solicitation of, or accept any business (other than on behalf of the Company) from, any customer or potential customer of the Company to purchase goods or services then sold by the Company from another person, firm, corporation or other entity or, directly or indirectly, in any way request, suggest or advise any such customer to withdraw or cancel any of their business or refuse to continue to do business with the Company. This restriction shall apply to customers or potential customers who, during the two (2) years immediately preceding the Executive's termination, had been assigned to the Executive by the Company, or with which the Executive had contact on behalf of the Company while an Executive of the Company, or about which the Executive had access to confidential information by virtue of Executive's employment with the Company.
4.NON-INTERFERENCE. During the Restricted Period, Executive agrees that Executive shall not, except in the furtherance of Executive's duties to the Company, directly or indirectly, individually or on behalf of any other person, firm, corporation or other entity, (A) solicit, aid or induce any employee, representative or agent of the Company to leave such employment or retention or to accept employment with or render services to or with any other person, firm, corporation or other entity unaffiliated with the Company or hire or retain any such employee, representative or agent, or take any action to materially assist or aid any other person, firm, corporation or other entity in identifying, hiring or soliciting any such employee, representative or agent, or (B) interfere, or aid or induce any other person or entity in interfering, with the relationship between the Company and its vendors, suppliers or customers. As used herein, the term "solicit, aid or induce" includes, but is not limited to, (i) initiating communications with a Company employee relating to possible employment, (ii) offering bonuses or other compensation to encourage a
Company employee to terminate his or her employment with the Company and accept employment with any entity, (iii) recommending a Company employee to any entity, and (iv) aiding an entity in recruitment of a Company employee. An employee, representative or agent shall be deemed covered by this Section 4 while so employed or retained and for a period of six (6) months thereafter.
5.NON-DISPARAGEMENT. Executive agrees not to make negative comments or otherwise disparage the Company or its officers, directors, employees, shareholders, agents or products or services. The foregoing shall not be violated by truthful statements made in (a) response to legal process, required governmental testimony or filings, or administrative or arbitral proceedings (including, without limitation, depositions in connection with such proceedings) or (b) the good faith performance of Executive's duties to the Company.
6.INVENTIONS.
a.Executive acknowledges and agrees that all ideas, methods, inventions, discoveries, improvements, work products, developments, software, know-how, processes, techniques, methods, works of authorship and other work product ("Inventions"), whether patentable or unpatentable, (A) that are reduced to practice, created, invented, designed, developed, contributed to, or improved with the use of any Company resources and/or within the scope of Executive's work with the Company or that relate to the business, operations or actual or demonstrably anticipated research or development of the Company, and that are made or conceived by Executive, solely or jointly with others, during Executive's Service, or (B) suggested by any work that Executive performs in connection with the Company, either while performing Executive's duties with the Company or on Executive's own time, but only insofar as the Inventions are related to Executive's work as an employee or other service provider to the Company, shall belong exclusively to the Company (or its designee), whether or not patent or other applications for intellectual property protection are filed thereon. Executive will keep full and complete written records (the "Records"), in the manner prescribed by the Company, of all Inventions, and will promptly disclose all Inventions completely and in writing to the Company. The Records shall be the sole and exclusive property of the Company, and Executive will surrender them upon the termination of Service, or upon the Company's request. Executive irrevocably conveys, transfers and assigns to the Company the Inventions and all patents or other intellectual property rights that may issue thereon in any and all countries, whether during or subsequent to Executive's Service, together with the right to file, in Executive's name or in the name of the Company (or its designee), applications for patents and equivalent rights (the "Applications"). Executive will, at any time during and subsequent to Executive's Service, make such applications, sign such papers, take all rightful oaths, and perform all other acts as may be requested from time to time by the Company to perfect, record, enforce, protect, patent or register the Company's rights in the Inventions, all without additional compensation to Executive from the Company. Executive will also execute assignments to the Company (or its designee) of the Applications, and give the Company and its attorneys all reasonable assistance (including the giving of testimony) to obtain the Inventions for the Company's benefit, all without additional compensation to Executive from the Company, but entirely at the Company's expense.
b.In addition, the Inventions will be deemed Work for Hire, as such term is defined under the copyright laws of the United States, on behalf of the Company and Executive agrees that the Company will be the sole owner of the Inventions, and all underlying rights therein, in all media now known or hereinafter devised, throughout the universe and in perpetuity without any further obligations to Executive. If the Inventions, or any portion thereof, are deemed not to be Work for
Hire, or the rights in such Inventions do not otherwise automatically vest in the Company, Executive hereby irrevocably conveys, transfers and assigns to the Company, all rights, in all media now known or hereinafter devised, throughout the universe and in perpetuity, in and to the Inventions, including, without limitation, all of Executive's right, title and interest in the copyrights (and all renewals, revivals and extensions thereof) to the Inventions, including, without limitation, all rights of any kind or any nature now or hereafter recognized, including, without limitation, the unrestricted right to make modifications, adaptations and revisions to the Inventions, to exploit and allow others to exploit the Inventions and all rights to sue at law or in equity for any infringement, or other unauthorized use or conduct in derogation of the Inventions, known or unknown, prior to the date hereof, including, without limitation, the right to receive all proceeds and damages therefrom. In addition, Executive hereby waives any so-called "moral rights" with respect to the Inventions. To the extent that Executive has any rights in the results and proceeds of Executive's service to the Company that cannot be assigned in the manner described herein, Executive agrees to unconditionally waive the enforcement of such rights. Executive hereby waives any and all currently existing and future monetary rights in and to the Inventions and all patents and other registrations for intellectual property that may issue thereon, including, without limitation, any rights that would otherwise accrue to Executive's benefit by virtue of Executive being an employee of or other service provider to the Company.
7.RETURN OF COMPANY PROPERTY. On the date of Executive's termination of Service with the Company for any reason (or at any time prior thereto at the Company's request), Executive shall return all property belonging to the Company (including, but not limited to, any Company-provided laptops, computers, cell phones, wireless electronic mail devices or other equipment, or documents and property belonging to the Company).
8.REASONABLENESS OF COVENANTS. In signing this Agreement, including by electronic means, Executive gives the Company assurance that Executive has carefully read and considered all of the terms and conditions of this Agreement, including the restraints imposed by it. Executive agrees that these restraints are necessary for the reasonable and proper protection of the Company and its Confidential Information and that each and every one of the restraints is reasonable in respect to subject matter, length of time and geographic area, and that these restraints, individually or in the aggregate, will not prevent Executive from obtaining other suitable employment during the period in which Executive is bound by the restraints. Executive acknowledges that each of these covenants has a unique, very substantial and immeasurable value to the Company and that Executive has sufficient assets and skills to provide a livelihood while such covenants remain in force. Executive further covenants that Executive will not challenge the reasonableness or enforceability of any of the covenants set forth in this Agreement, and that Executive will reimburse the Company for all costs (including reasonable attorneys' fees) incurred in connection with any action to enforce any of the provisions of this Agreement if either the Company prevails on any material issue involved in such dispute or if Executive challenges the reasonableness or enforceability of any of the provisions of this Agreement. It is also agreed that the "Company" as used in this Agreement refers to each of the Company's Subsidiaries and Affiliates and that each of the Company's s Subsidiaries and Affiliates will have the right to enforce all of Executive's obligations to that Subsidiary or Affiliate under this Agreement, as applicable, subject to any limitation or restriction on such rights of the Subsidiary or Affiliate under applicable law.
9.REFORMATION. If it is determined by a court of competent jurisdiction in any state or country that any restriction in this Agreement is excessive in duration or scope or is unreasonable or unenforceable under applicable law, it is the intention of the parties that such restriction may be modified or amended by the court to render it enforceable to the maximum extent permitted by the laws of that state or country.
10.REMEDIES. Executive acknowledges and agrees that the Company's remedies at law for a breach or threatened breach of any of the provisions of Agreement would be inadequate and, in recognition of this fact, Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond or other security, shall be entitled to obtain equitable relief in the form of specific performance, a temporary restraining order, a temporary or permanent injunction or any other equitable remedy which may then be available, without the necessity of showing actual monetary damages, in addition to any other equitable relief (including without limitation an accounting and/or disgorgement) and/or any other damages as a matter of law.
11.REPURCHASE. Executive acknowledges and agrees that a breach of this Agreement would constitute a "Covenant Breach" as such term is used in the Plan and therefore, in the event of a Covenant Breach, Executive's RSU and the Award Stock issued therefor (as such terms are defined in the Plan) shall be subject to repurchase by The Kraft Heinz Company in accordance with the terms of the Plan.
12.TOLLING. In the event of any violation of the provisions of this Agreement, Executive acknowledges and agrees that the post-termination restrictions contained in this Agreement shall be extended by a period of time equal to the period of such violation, it being the intention of the parties hereto that the running of the applicable post-termination restriction period shall be tolled during any period of such violation.
13.SURVIVAL OF PROVISIONS. The obligations contained in this Agreement hereof shall survive the termination or expiration of the Executive's Service with the Company and shall be fully enforceable thereafter.
14.VENUE, PERSONAL JURISDICTION, AND COVENANT NOT TO SUE. Executive expressly agrees to submit to the exclusive jurisdiction and exclusive venue of courts located in the State of Delaware in connection with any litigation which may be brought with respect to a dispute between the Company and Executive in relation to this Restrictive Covenants Agreement, regardless of where Executive resides or where Executive performs services for the Company. Executive hereby irrevocably waives Executive's rights, if any, to have any disputes between the Company and Executive related to this Restrictive Covenants Agreement decided in any jurisdiction or venue other than a court in the State of Delaware. Executive hereby waives, to the fullest extent permitted by applicable law, any objection which Executive now or hereafter may have to personal jurisdiction or to the laying of venue of any such suit, action or proceeding, and Executive agrees not to plead or claim the same. Executive further irrevocably covenants not to sue the Company related to this Restrictive Covenants Agreement in any jurisdiction or venue other than a court in the State of Delaware. All matters relating to the interpretation, construction, application, validity, and enforcement of this Agreement, and any disputes or controversies arising hereunder, will be governed by the laws of the State of Delaware without giving effect to any choice or conflict of law provision or rule, whether of the State of Delaware or any other jurisdiction, that would cause the application of laws of any jurisdiction other than the State of Delaware.
APPENDIX I
ADDITIONAL TERMS AND CONDITIONS OF
THE KRAFT HEINZ COMPANY 2016 OMNIBUS INCENTIVE PLAN
MATCHING RESTRICTED STOCK UNIT AWARD AGREEMENT FOR NON-U.S. PARTICIPANTS
TERMS AND CONDITIONS
This Appendix I includes additional terms and conditions that govern the RSUs granted to you under the Plan if you work or reside outside the U.S. and/or in one of the countries listed below. These terms and conditions are in addition to, or if so indicated, in place of the terms and conditions set forth in the Award Agreement. Certain capitalized terms used but not defined in this Appendix I have the meanings set forth in the Plan and/or the Award Agreement.
If you are a citizen or resident of a country other than the one in which you are currently working, transfer employment and/or residency to another country after the RSUs are granted to you, or are considered a resident of another country for local law purposes, the terms and conditions contained herein may not be applicable to you, and the Company shall, in its discretion, determine to what extent the terms and conditions contained herein shall apply to you.
NOTIFICATIONS
This Appendix I also includes information regarding exchange controls and certain other issues of which you should be aware with respect to participation in the Plan. The information is based on the securities, exchange control, and other laws in effect in the respective countries as of January 2020. Such laws are often complex and change frequently. As a result, the Company strongly recommends that you not rely on the information in this Appendix I as the only source of information relating to the consequences of your participation in the Plan because the information may be out of date at the time you vest in the RSUs or sell Shares acquired under the Plan.
In addition, the information contained herein is general in nature and may not apply to your particular situation, and the Company is not in a position to assure you of a particular result. Accordingly, you should seek appropriate professional advice as to how the relevant laws in your country may apply to your situation.
Finally, if you are a citizen or resident of a country other than the one in which you are currently working, transfer employment and/or residency after the RSUs are granted or are considered a resident of another country for local law purposes, the notifications contained herein may not be applicable to you in the same manner.
GENERAL NON-U.S. TERMS AND CONDITIONS
TERMS AND CONDITIONS
The following terms and conditions apply to you if you are located outside of the U.S.
Entire Agreement.
The following provisions supplement the entire Award Agreement, generally:
If you are located outside the U.S., in no event will any aspect of the RSUs be determined in accordance with your Employment Agreement (or other Service contract). The terms and conditions of the RSUs will be solely determined in accordance with the provisions of the Plan and the Award Agreement, including this Appendix I, which supersede and replace any prior agreement, either written or verbal (including your Employment Agreement, if applicable) in relation to the RSUs.
Vesting.
If you are resident or employed outside of the United States, the Company may, in its sole discretion, settle the RSUs in the form of a cash payment to the extent settlement in Shares: (i) is prohibited under local law, (ii) would require you, the Company or one of its Subsidiaries or Affiliates to obtain the approval of any governmental or regulatory body in your country of residence (or your country of employment, if different), (iii) would result in adverse tax consequences for you, the Company or one of its Subsidiaries or Affiliates, or (iv) is administratively burdensome. Alternatively, the Company may, in its sole discretion settle the RSUs in the form of Shares but require you to sell such Shares immediately or within a specified period following your termination of Service (in which case, this Award Agreement shall give the Company the authority to issue sales instructions on your behalf).
Termination.
The following provisions supplement the Termination section of the Award Agreement, provided, however, that for purposes of the section of the Award Agreement titled "Settlement of Vested RSUs," if you are subject to U.S. federal income tax and the RSUs constitute Deferred Compensation, your termination of Service date will be the date of your Separation from Service:
For purposes of the RSU, your employment or Service relationship will be considered terminated as of the date you are no longer actively providing Services to the Company or one of its Subsidiaries or Affiliates (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where you provide Service or the terms of your Employment Agreement, if any), and unless otherwise expressly provided in this Award Agreement or determined by the Company, your right to vest in the RSU under the Plan, if any, will terminate as of such date and will not be extended by any notice period (e.g., your period of Service would not include any contractual notice period or any period of "garden leave" or similar period mandated under employment laws in the jurisdiction where you provide Service or the terms of your Employment Agreement, if any); the Committee shall have the exclusive discretion to determine when you are no longer actively providing Service for purposes of the RSUs (including whether you may still be considered to be providing Service while on a leave of absence).
Notwithstanding the provisions governing the treatment of the RSUs upon termination due to Retirement set forth in the Termination section of the Award Agreement, if the Company receives an opinion of counsel that there has been a legal judgment and/or legal development in a particular jurisdiction that would likely result in the treatment in case of a termination due to Retirement as set forth in the Award Agreement being deemed unlawful and/or discriminatory, then the Company will not apply the provisions for termination due to Retirement at the time you cease to provide Service and the RSUs will be treated as it would under the rules that apply if your Service ends for resignation.
Termination for Cause.
The implications upon a termination for Cause as set forth in the Award Agreement and Plan shall only be enforced, to the extent deemed permissible under applicable local law, as determined in the sole discretion of the Committee.
Taxes.
The following provisions supplement the Taxes section of the Award Agreement:
You acknowledge that your liability for Tax-Related Items may exceed the amount, if any, withheld by the Company, its Subsidiaries and/or its Affiliates (as applicable).
If you have become subject to tax in more than one jurisdiction, you acknowledge that the Company, its Subsidiaries and Affiliates may be required to withhold or account for Tax-Related Items in more than one jurisdiction.
Depending on the withholding method, the Company may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding amounts or other applicable withholding rates, including maximum applicable rates in your jurisdiction(s), in which case you may receive a refund of any over-withheld amount in cash and will have no entitlement to the Share equivalent. If the obligation for Tax-Related Items is satisfied by withholding in Shares, for tax purposes, you are deemed to have been issued the full number of Shares subject to the vested RSUs, notwithstanding that a number of Shares are held back solely for the purpose of paying the Tax-Related Items due as a result of any aspect of your participation in the Plan.
Limits on Transferability; Beneficiaries.
The following provision supplements the Limits on Transferability; Beneficiaries section of the Award Agreement:
If you are located outside the U.S., the RSUs may not be Transferred to a designated Beneficiary and may only be Transferred upon your death to your legal heirs in accordance with applicable laws of descent and distribution. In no case may the RSUs be Transferred to another individual during your lifetime.
Acknowledgment of Nature of Award.
The following provisions supplement the Acknowledgment of Nature of Award section of the Award Agreement:
You acknowledge the following with respect to the RSUs:
(a) The RSUs, any Shares acquired under the Plan, and the income and value of same, are not intended to replace any pension rights or compensation.
(b) In no event should the RSUs, any Shares acquired under the Plan, and the income and value of same, be considered as compensation for, or relating in any way to, past services for the Company, its Subsidiaries or any Affiliate.
(c) The RSU, any Shares acquired under the Plan and the income and value of same are not part of normal or expected compensation or salary for any purpose.
(d) Neither the Company, its Subsidiaries nor any Affiliate shall be liable for any foreign exchange rate fluctuation between your local currency and the United States Dollar that may affect the value of the RSUs or of any amounts due to you pursuant to vesting of the RSUs or the subsequent sale of any Shares acquired upon vesting.
Not a Public Offering in Non-U.S. Jurisdictions.
If you are resident or employed outside of the United States, neither the grant of the RSUs under the Plan nor the issuance of the underlying Shares upon vesting of the RSUs is intended to be a public offering of securities in your country of residence (and country of employment, if different). The Company has not submitted any registration statement, prospectus or other filings to the local securities authorities in jurisdictions outside of the United States unless otherwise required under local law.
Language Consent.
If you are in a country where English is not an official language, you acknowledge that you are sufficiently proficient in English to understand the terms and conditions of this Award Agreement or have had the ability to consult with an advisor who is sufficiently proficient in the English language. You further acknowledge and agree that it is your express intent that this Award Agreement, the Plan and all other documents, notices and legal proceedings entered into, given or instituted pursuant to the RSUs, be drawn up in English.
Insider Trading and Market Abuse Laws.
You may be subject to insider trading restrictions and/or market abuse laws based on the exchange on which the Shares are listed and in applicable jurisdictions including the United States and your country or your broker's country, if different, which may affect your ability to accept, acquire, sell or otherwise dispose of Shares, rights to Shares or rights linked to the value of Shares under the Plan during such times as you are considered to have "inside information" regarding the Company (as defined by the laws in the applicable jurisdictions). Local insider trading laws and regulations may prohibit the cancellation or amendment of orders you placed before you possessed inside information. Furthermore, you could be prohibited from (a) disclosing the inside information to any third party and (b) "tipping" third parties or causing them otherwise to buy or sell securities (third parties include fellow employees). Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under any applicable Company insider trading policy. You acknowledge that it is your responsibility to comply with any applicable restrictions, and you should speak to your personal advisor on this matter.
Foreign Asset/Account, Exchange Control and Tax Reporting.
You may be subject to foreign asset/account, exchange control and/or tax reporting requirements as a result of the acquisition, holding and/or transfer of Shares or cash (including dividends, dividend equivalents and the proceeds arising from the sale of Shares) derived from your participation in the Plan, to and/or from a brokerage/bank account or legal entity located outside your country. The applicable laws of your country may require that you report such accounts, assets, the balances therein, the value thereof and/or the transactions related thereto to the applicable authorities in such country. You acknowledge that you are responsible for ensuring compliance with any applicable foreign asset/account, exchange control and tax reporting requirements and should consult your personal legal advisor on this matter.
No Advice Regarding Award.
The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding your participation in the Plan, or your acquisition or sale of the underlying Shares. You understand and acknowledge that you should consult with your own personal tax, legal and financial advisors regarding your participation in the Plan before taking any action related to the Plan.
Imposition of Other Requirements.
The Company reserves the right to impose other requirements on your participation in the Plan, on the RSUs and on any Shares acquired upon vesting of the RSUs, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require you to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.
Waiver.
You acknowledge that a waiver by the Company for breach of any provision of the Award Agreement shall not operate or be construed as a waiver of any other provision of the Award Agreement, or of any subsequent breach of the Award Agreement.
COUNTRY-SPECIFIC TERMS AND CONDITIONS/NOTIFICATIONS
AUSTRALIA
NOTIFICATIONS
Offer Document.
This offer document sets out information regarding the grant of RSUs to Australian resident employees of the Company and its Subsidiaries or Affiliates and is provided by the Company to ensure compliance of the Plan with the Australian Securities and Investments Commission's ("ASIC's") Class Order 14/1000 and relevant provisions of the Corporations Act 2001.
In addition to the information set out in the Award Agreement, you also are being provided with copies of the following documents:
a.the Plan;
b.the Bonus Election Form; and
c.the Bonus Election Form FAQs
(collectively, the "Additional Documents").
The Additional Documents provide further information to help you make an informed investment decision about participating in the Plan. The Plan is not a prospectus for the purposes of the Corporations Act 2001.
You should not rely upon any oral statements made in relation to this offer. You should rely only upon the statements contained in the Award Agreement and the Additional Documents when considering participation in the Plan.
Securities Law Notification
Investment in Shares involves a degree of risk. If you elect to participate in the Plan, you should monitor your participation and consider all risk factors relevant to the acquisition of Shares under the Plan as set out in the Award Agreement and the Additional Documents.
The information contained in this offer is general information only. It is not advice or information that takes into account your objectives, financial situation and needs.
You should consider obtaining your own financial product advice from an independent person who is licensed by ASIC to give advice about participation in the Plan.
Additional Risk Factors for Australian Residents
You should have regard to risk factors relevant to investment in securities generally and, in particular, to the holding of Shares. For example, the price at which Shares are quoted on the Nasdaq may increase or decrease due to a number of factors. There is no guarantee that the price of the Shares will increase. Factors which may affect the price of Shares include fluctuations in the domestic and international market for listed stocks, general economic conditions, including interest rates, inflation rates, commodity and oil prices, changes to government fiscal, monetary or regulatory policies, legislation or regulation, the nature of the markets in which the Company operates and general operational and business risks.
More information about potential factors that could affect the Company's business and financial results is included in the Company's most recent Annual Report on Form 10-K and the Company's Quarterly Report on Form 10-Q. Copies of these reports are available at http://www.sec.gov/, on the Company's "Investor Relations" page at http://ir.kraftheinzcompany.com/, and upon request to the Company.
In addition, you should be aware that the Australian dollar value of any Shares acquired at vesting will be affected by the U.S. dollar/Australian dollar exchange rate. Participation in the Plan involves certain risks related to fluctuations in this rate of exchange.
Common Stock
Common stock of a U.S. corporation is analogous to ordinary shares of an Australian corporation.
Dividends may be paid on the Shares out of any funds of the Company legally available for dividends at the discretion of the Board.
The Shares are traded on the Nasdaq in the United States of America under the symbol "KHC."
The Shares are not liable to any further calls for payment of capital or for other assessment by the Company and have no sinking fund provisions, pre-emptive rights, conversion rights or redemption provisions.
Ascertaining the Market Price of Shares
You may ascertain the current market price of the Shares as traded on the Nasdaq at http://www.Nasdaq.com under the symbol "KHC." The Australian dollar equivalent of that price can be obtained at: http://www.rba.gov.au/statistics/frequency/exchange-rates.html.
This will not be a prediction of what the market price per Share will be when the RSUs vest or when the Shares are issued or of the applicable exchange rate on the actual Vesting Date or date the Shares are issued.
Deferred Taxation.
Subdivision 83A-C of the Income Tax Assessment Act, 1997, applies to RSUs granted under the Plan, such that the RSUs are intended to be subject to deferred taxation.
BELGIUM
NOTIFICATIONS
Foreign Assets/Account Reporting Information.
If you are a resident of Belgium, you will be required to report any security (e.g., Shares acquired under the Plan) or bank account (including brokerage accounts) established outside of Belgium on your annual tax return. In a separate report, you will be required to provide the National Bank of Belgium with details regarding such foreign accounts (including the account number, bank name and country in which any such account was opened).
BRAZIL
TERMS AND CONDITIONS
Compliance with Law.
By accepting the RSUs you acknowledge that you agree to comply with applicable Brazilian laws and pay any and all applicable taxes legally due by you associated with the vesting of the RSUs, the receipt of any dividends and/or Dividend Equivalents, and the sale of Shares acquired under the Plan. You further agree that, for all legal purposes, (i) the benefits provided to you under the Plan are the result of commercial transactions unrelated to your employment or Service relationship, (ii) the Plan is not a part of the terms and conditions of your employment or Service relationship, and (iii) the income from the Award, if any, is not part of your remuneration from employment or Service.
NOTIFICATIONS
Exchange Control Information.
If you are resident or domiciled in Brazil, you will be required to submit annually a declaration of assets and rights held outside of Brazil to the Central Bank of Brazil if the aggregate value of such assets and rights is equal to or greater than US$100,000. Assets and rights that must be reported include Shares.
CANADA
TERMS AND CONDITIONS
Plan Document Acknowledgment.
In accepting the grant of RSUs, you acknowledge that you have received a copy of the Plan, have reviewed the Plan and the Award Agreement in their entirety and fully understand and accept all provisions of the Plan and the Award Agreement.
Payout of RSUs in Shares Only.
Pursuant to its discretion under the Settlement of Vested RSUs Section of the Plan, with respect to all employees residing in Canada, the Company will convert all vested RSUs only into an equivalent number of Shares. If you reside in Canada (or in the event of your death, your legal representative or estate) you will not receive an equivalent or fractional Share cash payment with respect to the vested RSUs.
Termination.
The following provision replaces the first paragraph of the Termination section of the General Non-U.S. Terms and Conditions section of this Appendix I:
In the event of your termination of Service (whether or not later found to be invalid or in breach of employment laws in the jurisdiction where you provide Service or the terms of your Employment Agreement, if any), unless provided otherwise by the Company: (i) your right to vest in the RSUs (if any) will terminate effective, as of the earlier of (1) the date the you receive notice of termination, or (2) the date you are no longer actively providing Service, regardless of any notice period or period of pay in lieu of such notice required under applicable Canadian employment laws (including, but not limited to statutory law, regulatory law and/or common law).
The Committee shall have the exclusive discretion to determine when you are no longer actively providing Service for purposes of the RSUs (including whether you may still be considered to be providing Service while on a leave of absence).
The following terms and conditions apply if you are a resident of Quebec:
Language Consent.
The parties acknowledge that it is their express wish that the Award Agreement, as well as all documents, notices and legal proceedings entered into, given or instituted pursuant hereto or relating directly or indirectly hereto, be drawn up in English.
Consentement relatif à la langue.
Les parties reconnaissent avoir expressément exigé la rédaction en anglais de la Convention d'Attribution, ainsi que de tous documents, avis et procédures judiciaires, exécutés, donnés ou intentés en vertu de, ou liés directement ou indirectement à, la présente convention.
NOTIFICATIONS
Securities Law Information.
You are permitted to sell Shares acquired under the Plan through the designated broker appointed under the Plan, if any, provided the sale of the Shares takes place outside of Canada through the facilities of a stock exchange on which the Shares are listed (i.e., Nasdaq).
Foreign Assets/Account Reporting Information.
Canadian residents are required to report any specified foreign property (including Shares and RSUs) on form T1135 (Foreign Income Verification Statement) if the total cost of such specified foreign property exceeds C$100,000 at any time in the year. The form must be filed by April 30 of the following year. Specified foreign property includes Shares acquired under the Plan and may include the RSUs. The RSUs must be reported -
generally at a nil cost - if the C$100,000 cost threshold is exceeded because of other foreign property you hold. If Shares are acquired, their cost generally is the adjusted cost base ("ACB") of the Shares. The ACB would normally equal the fair market value of the Shares at vesting, but if you own other shares, this ACB may have to be averaged with the ACB of the other shares. You should speak with a personal tax advisor to determine the scope of foreign property that must be considered for purposes of this requirement.
CHILE
NOTIFICATIONS
Securities Law Information.
The private offering of the RSUs starts on the Grant Date and is made subject to general ruling n° 336 of the Chilean Commission for the Financial Market (“CMF”). This offer refers to securities not registered at the securities registry or at the foreign securities registry of the CMF, and therefore such securities are not subject to its oversight. Given that these securities are not registered in Chile, there is no obligation from the issuer to provide public information on them in Chile. These securities cannot be subject to public offering in Chile while they are not registered at the corresponding securities registry in Chile.
La oferta privada de estos RSUs se inicia en la Fecha de Concesión y se acoge a las disposiciones de la norma de carácter general nº 336 de la Comisión para el Mercado Financiero de Chile (“CMF”). Esta oferta versa sobre valores no inscritos en el registro de valores o en el registro de valores extranjeros que lleva la CMF, por lo que tales valores no están sujetos a la fiscalización de ésta. Por tratarse de valores no inscritos en Chile, no existe la obligación por parte del emisor de entregar en Chile información pública respecto de los mismos. Estos valores no podrán ser objeto de oferta pública en Chile mientras no sean inscritos en el registro de valores correspondiente.
CHINA
TERMS AND CONDITIONS
The following provisions apply if you are subject to the exchange control regulations or restrictions in the People's Republic of China ("China"), as determined by the Company in its sole discretion:
Vesting and Mandatory Sale Restriction.
The following provisions replace the Vesting, Termination and Settlement of Vested RSUs sections of the Award Agreement:
Notwithstanding anything to the contrary in the Award Agreement, due to legal restrictions in China, you agree that the Company may force the sale of any Shares (i) immediately upon vesting, (ii) following the termination of your Service, (iii) following your transfer to another Subsidiary or Affiliate outside of China, or (iv) within any other timeframe the Company determines to be necessary or advisable. You agree that you must maintain any Shares acquired under the Plan in an account at a broker designated by the Company ("Designated Account"). All Shares deposited in the Designated Account cannot be transferred out of that Designated Account. Within six (6) months after the termination of your Service for any reason (or such other period as determined by the Company in its sole discretion), you must sell all Shares acquired under the Plan. The Company will direct the automatic sale of any such Shares remaining in the Designated Account at the expiration of this six (6) month period (or such other period as determined by the Company in its sole discretion).
You agree that the Company is authorized to instruct its designated broker to assist with the mandatory sale of such Shares (on your behalf pursuant to this authorization) and you expressly authorize the Company's designated broker to complete the sale of such Shares. You acknowledge that the Company's designated broker is under no obligation to arrange for the sale of the Shares at any particular price. Upon the sale of the Shares, the Company agrees to pay you the cash proceeds from the sale, less any brokerage fees or commissions and subject to any obligation to satisfy
Tax-Related Items. You agree that if you sell Shares that you acquire under the Plan, the repatriation requirements described below shall apply.
If you transfer to a Subsidiary or an Affiliate in China or transfer from an Affiliate or Subsidiary in China to another Affiliate outside of China, you may become or remain subject to the requirements set forth in this Appendix I, as determined by the Company in its sole discretion. The Company reserves the right to suspend your participation in the Plan or take such other measures as it deems necessary or advisable to comply with local regulations.
Exchange Control Restriction.
You understand and agree that, due to exchange control laws in China, you will be required to immediately repatriate to China any cash proceeds acquired under the Plan. You further understand that, under local law, such repatriation of the cash proceeds may need to be effected through a special exchange control account established by the Company or any Subsidiary or Affiliate of the Company and you hereby consent and agree that the cash proceeds may be transferred to such special account prior to being delivered to you. Further, if the proceeds from your participation in the Plan are converted to local currency, you acknowledge that the Company (including its Subsidiaries and Affiliates) is under no obligation to secure any currency conversion rate, and may face delays in converting the proceeds to local currency due to exchange control restrictions in China. You agree to bear the risk of any currency conversion rate fluctuation between the date that your proceeds are delivered to such special exchange control account and the date of conversion of the proceeds to local currency.
You further agree to comply with any other requirements that may be imposed by the Company in the future in order to facilitate compliance with exchange control requirements in China.
COSTA RICA
There are no country-specific provisions.
EGYPT
NOTIFICATIONS
Exchange Control Information.
If you transfer funds into Egypt in connection with the remittance of proceeds from the vesting of the RSUs, sale of Shares or the receipt of any dividends and/or Dividend Equivalents, you are required to transfer the funds through a bank registered in Egypt.
FRANCE
TERMS AND CONDITIONS
Language Consent.
By accepting the RSUs, you confirm having read and understood the documents relating to the grant of the RSUs (the Plan and the Award Agreement), which were provided in the English language, and you accept the terms of such documents accordingly.
Consentement relatif à la langue.
En acceptant l'RSUs, vous confirmez ainsi avoir lu et compris les documents relatifs à l'attribution de l'RSUs (le Plan et le Contrat d'Attribution) qui vous ont été communiqués en langue anglaise, et vous en acceptez les termes et conditions en connaissance de cause.
NOTIFICATIONS
Foreign Assets/Account Reporting Information.
If you are a French resident and you hold securities (including Shares) or cash outside of France, you must declare all foreign bank and brokerage accounts (including the accounts that were opened and closed during the tax year) on an annual basis on a special form n°3916, together with your income tax return. If you fail to complete this reporting, you may be subject to penalties.
GERMANY
NOTIFICATIONS
Exchange Control Information.
Cross-border payments in excess of €12,500 must be reported monthly to the German Federal Bank (Bundesbank). The report must be filed electronically using the "General Statistics Reporting Portal" (Allgemeines Meldeportal Statistik) available via Bundesbank’s website (www.bundesbank.de).
HONG KONG
TERMS AND CONDITIONS
Settlement.
The following supplements the Settlement of Vested RSUs section of the Terms and Conditions section of the Award Agreement including this Appendix I:
Any Shares received at settlement of RSUs are a personal investment. If, for any reason, the RSUs vest and become non-forfeitable and Shares are issued to you within six months of the date of grant, you agree that you will not offer the Shares to the public in Hong Kong or otherwise dispose of the Shares prior to the six-month anniversary of the date of grant.
NOTIFICATIONS
Securities Law Information.
WARNING: The contents of this document have not been reviewed by any regulatory authority in Hong Kong. You are advised to exercise caution in relation to the offer. If you are in any doubt about any of the contents of this document, you should obtain independent professional advice. Neither the grant of the RSUs nor the issuance of Shares upon vesting of the RSUs constitutes a public offering of securities under Hong Kong law. The grant is available only to employees of the Company and its Subsidiaries. The Agreement, the Plan and other incidental communication materials distributed in connection with the RSUs (i) have not been prepared in accordance with and are not intended to constitute a "prospectus" for a public offering of securities under the applicable securities legislation in Hong Kong and (ii) are intended only for the personal use of each eligible employee of the Company or its Subsidiaries and may not be distributed to any other person.
INDIA
TERMS AND CONDITIONS
Labor Law Acknowledgment.
The RSUs and the Shares underlying the RSUs, and the income and value of same, are extraordinary items that are not part of your annual gross salary.
NOTIFICATIONS
Exchange Control Information.
You are required to repatriate the proceeds from the sale of Shares and any dividends received in relation to the Shares to India within a reasonable amount of time (i.e., within ninety (90) days after receipt for sale proceeds and 180 days of receipt for dividends or within any other time frame prescribed under applicable Indian exchange control laws as may be amended from time to time). You must maintain the foreign inward remittance certificate received from the bank where the foreign currency is deposited in the event that the Reserve Bank of India or your employer requests proof of repatriation. It is your responsibility to comply with applicable exchange control laws in India.
Foreign Assets/Account Reporting Information.
If you are an Indian resident, you are required to report all bank accounts or investments (including the RSUs and any Shares) that you hold outside of India. You should consult with a personal tax advisor to ensure that you are properly complying with applicable reporting requirements.
INDONESIA
NOTIFICATIONS
Exchange Control Information.
Indonesian residents must provide the Bank of Indonesia with information on foreign exchange activities in an online monthly report no later than the fifteenth day of the month following the activity. In addition, if you remit funds into Indonesia (e.g., proceeds from the sale of Shares), the Indonesian bank through which the transaction is made will submit a report of the transaction to the Bank of Indonesia for statistical reporting purposes. For transactions of US$10,000 or more, a more detailed description of the transaction must be included in the report and you may be required to provide information about the transaction (e.g., the relationship between you and the transferor of the funds, the source of the funds, etc.) to the bank in order for the bank to complete the report.
IRELAND
There are no country-specific provisions.
ITALY
TERMS AND CONDITIONS
Plan Document Acknowledgment.
By accepting the RSUs, you acknowledge that you have received a copy of the Plan and the Award Agreement, have reviewed each of these documents in their entirety and fully understand and accept all terms of such documents. In this regard, you acknowledge having read and specifically approve the following sections of the Award Agreement and this Appendix I, as applicable: (i) Vesting; (ii) Termination; (iii) Settlement of Vested RSUs; (iv) Forfeiture of Unvested RSUs Upon the Transfer of Related Shares; (v) Taxes; (vi) No Guarantee of Continued Service; (vii) Acknowledgment of Nature of Award; (viii) Data Privacy; and (ix) Governing Law; Jurisdiction; Waiver of Jury Trial.
NOTIFICATIONS
Foreign Assets/Account Reporting Information.
Italian residents who, during the fiscal year, hold investments abroad or foreign financial assets (e.g., cash, Shares and RSUs) which may generate income taxable in Italy are required to report such on their annual tax returns (UNICO Form, RW Schedule) or on a special form if no tax return is due. The same reporting obligations apply to Italian residents who, even if they do not directly hold investments abroad or foreign financial assets (e.g., cash, Shares and RSUs), are beneficial owners of the investment pursuant to Italian money laundering provisions.
Tax on Foreign Financial Assets.
Italian residents may be subject to tax on the value of financial assets held outside of Italy. The taxable amount will be the fair market value of the financial assets, including Shares assessed at the end of the calendar year. If you are subject to this foreign financial assets tax, you will need to report the value of your financial assets held abroad in your annual tax return. You are encouraged to consult your personal legal advisor for additional information about the foreign financial assets tax.
JAPAN
NOTIFICATIONS
Foreign Assets/Account Reporting Information.
If you are a Japanese tax resident, you will be required to report details of any assets held outside of Japan as of December 31st (including any Shares or cash acquired under the Plan) to the extent such assets have a total net fair market value exceeding ¥50,000,000. Such report will be due by March 15th each year. You should consult with your personal tax advisor as to whether the reporting obligation applies to you and whether you will be required to include details of any outstanding Shares, RSUs or cash held by you in the report.
KOREA
NOTIFICATIONS
Foreign Assets/Account Reporting Information.
You must declare all of your foreign financial accounts (i.e., non-Korean bank accounts, brokerage accounts, etc.) to the Korean tax authorities and file a report with respect to such accounts if the value of such accounts exceeds KRW 500 million (or an equivalent amount in foreign currency) on any month-end date during the year.
MALAYSIA
NOTIFICATIONS
Director Notification Requirement.
If you are a director of a Malaysian Subsidiary of Affiliate, you are subject to certain notification requirements under the Malaysian Companies Act, 2016. Among these requirements is an obligation to notify the Malaysian Subsidiary or Affiliate in writing when you receive or dispose of an interest (e.g., RSUs, Shares) in the Company or a related company. This notification must be made within fourteen (14) days of acquiring or disposing of any interest in the Company or a related company.
MEXICO
TERMS AND CONDITIONS
No Entitlement or Claims for Compensation.
These provisions supplement the Acknowledgment of Nature of Award section of the Award Agreement including this Appendix I:
Modification.
By accepting the RSUs, you understand and agree that any modification of the Plan or the Award Agreement or its termination shall not constitute a change or impairment of the terms and conditions of your employment.
Policy Statement.
The Award of RSUs the Company is making under the Plan is unilateral and discretionary and, therefore, the Company reserves the absolute right to amend it and discontinue it at any time without any liability.
The Company, with offices at One PPG Place, Pittsburgh, Pennsylvania 15222, U.S.A. is solely responsible for the administration of the Plan and participation in the Plan and the acquisition of Shares does not, in any way, establish an employment relationship between you and the Company since you are participating in the Plan on a wholly commercial basis and the sole employer is Delimex de Mexico, S.A. de C.V., located at Monte Pelvoux #220, Piso 6, Col. Lomas de Chapultepec, Delegacion Miquel Hidalgo C.P. 11000 Mexico, nor does it establish any rights between you and the Company, its Subsidiaries or its Affiliates.
Plan Document Acknowledgment.
By accepting the RSUs, you acknowledge that you have received copies of the Plan, have reviewed the Plan and the Award Agreement in their entirety and fully understand and accept all provisions of the Plan and the Award Agreement.
In addition, by accepting the Award Agreement, you further acknowledge that you have read and specifically and expressly approve the terms and conditions in the Award Agreement, in which the following is clearly described and established: (i) participation in the Plan does not constitute an acquired right; (ii) the Plan and participation in the Plan is offered by the Company on a wholly discretionary basis; (iii) participation in the Plan is voluntary; and (iv) the Company and any Subsidiary or Affiliates are not responsible for any decrease in the value of the Shares underlying the RSUs.
Finally, you hereby declare that you do not reserve any action or right to bring any claim against the Company for any compensation or damages as a result of your participation in the Plan and therefore grant a full and broad release to the Company and any Subsidiary or Affiliate with respect to any claim that may arise under the Plan.
TÉRMINOS Y CONDICIONES
No existirá derecho o demanda por daños y perjuicios.
Estas disposiciones son complementarias de la sección de Reconocimiento de la Naturaleza del Contrato, incluyendo el presente Apéndice I:
Modificación.
Al aceptar esta RSUs, usted entiende y acuerda que cualquier modificación al Plan o al Contrato, o su terminación no constituirá un cambio o impedimento a los términos y condiciones de su empleo.
Declaración de Política.
El Otorgamiento de RSUs que la Compañía hace mediante el Plan, es unilateral y discrecional y, por lo tanto, la Compañía se reserva el derecho absoluto de modificarlo o descontinuarlo en cualquier momento, sin asumir ninguna responsabilidad.
La Compañía, con oficinas en One PPG Place, Pittsburgh, Pennsylvania 15222, U.S.A. es únicamente responsable de la administración del Plan y la participación en el Plan y la adquisición de Acciones no establece, en ninguna forma, una relación laboral entre usted y la Compañía, toda vez que usted está participando en el Plan en un plano completamente comercial y su único patrón es Delimex de Mexico, S.A. de C.V., ubicado en Monte Pelvoux #220, Piso 6, Col. Lomas de Chapultepec, Delegación Miquel Hidalgo C.P. 11000 México, y tampoco establece ningún derecho entre usted y la Compañía, sus Subsidiarias o Afiliadas.
Reconocimiento del Documento del Plan.
Al aceptar esta RSUs, usted reconoce que ha recibido copias de dicho Plan, ha revisado el Plan y el Contrato en su integridad y comprende y acepta plenamente todas las disposiciones del Plan y del Contrato.
Adicionalmente, al aceptar el Contrato, usted reconoce que ha leído y específica y expresamente aprueba los términos y condiciones en el Contrato, en el cual se establece y describe claramente lo siguiente: (i) la participación en el Plan no constituye un derecho adquirido; (ii) el Plan, y su participación en él es ofrecido por la
Compañía sobre una base plenamente discrecional; (iii) la participación en el Plan es voluntaria; y (iv) la Compañía y cualquier Subsidiaria o Afiliada no son responsables por cualquier disminución en el valor de las Acciones implícitas en las RSUs.
Finalmente, por medio del presente usted declara que no se reserva ninguna acción o derecho a presentar cualquier reclamo en contra de la Compañía por cualquier compensación o daño como resultado de su participación en el Plan y por lo tanto otorga la liberación más amplia que en derecho proceda a la Compañía y cualquier Subsidiaria o Afiliada con respecto a cualquier reclamo que pueda surgir en torno al Plan.
NETHERLANDS
NEW ZEALAND
Notifications
Securities Law Information.
WARNING - You are being offered RSUs (which, upon vesting in accordance with the terms of the grant of the RSUs, will be converted into Shares) in the Company. Shares give you a stake in the ownership of the Company. You may receive a return if dividends are paid. Shares are quoted on the Nasdaq. This means you may be able to sell them on the Nasdaq if there are interested buyers. You may get less than you invested. The price will depend on the demand for the Shares.
If the Company runs into financial difficulties and is wound up, you will be paid only after all creditors have been paid. You may lose some or all of your investment.
New Zealand law normally requires people who offer financial products to give information to investors before they invest. This information is designed to help investors to make an informed decision. The usual rules do not apply to this offer because it is made under an employee share scheme. As a result, you may not be given all the information usually required. You will also have fewer other legal protections for this investment.
In compliance with applicable New Zealand securities laws, you are entitled to receive, in electronic or other form and free of cost, copies of the Company's latest annual report, relevant financial statements and the auditor's report on said financial statements (if any).
Ask questions, read all documents carefully, and seek independent financial advice before committing yourself.
PANAMA
Notifications
Securities Law Information.
The RSUs and the Shares to be issued upon vesting of RSUs are offered in a private transaction. This is not an offer to the public and the offer is not subject to the protections established by Panamanian securities laws.
PAPUA NEW GUINEA
There are no country-specific provisions.
POLAND
Notifications
Exchange Control Information.
If you transfer funds in excess of a certain threshold (currently €15,000) into or out of Poland, the funds must be transferred via a Polish bank account or financial institution. You are required to retain the documents connected with a foreign exchange transaction for a period of five (5) years, as measured from the end of the year in which such transaction occurred.
Foreign Assets/Account Reporting Information.
Polish residents holding foreign securities (e.g., Shares) and/or maintaining accounts abroad must report information to the National Bank of Poland on transactions and balances of the securities and cash deposited in such accounts if the value of such securities and cash (when combined with all other assets possessed abroad) exceeds PLN 7 million. If required, the reports must be filed on a quarterly basis on special forms that are available on the website of the National Bank of Poland.
PUERTO RICO
Notifications
Securities Law Information.
The offer of the Plan is subject exclusively to United States securities laws, including the United States Securities Exchange Act of 1934, as amended.
RUSSIA
TERMS AND CONDITIONS
U.S. Transaction.
You understand that your acceptance of the RSUs results in a contract between you and the Company that is completed in the United States and that the Award Agreement is governed by the laws of the State of Delaware, without giving effect to the conflict of laws principles thereof. You are not permitted to sell the Shares directly to other Russian legal entities or individuals.
NOTIFICATIONS
Securities Law Information.
Your employer is not in any way involved with the offer of the RSUs or administration of the Plan. The Award Agreement, the Plan and all other materials you may receive regarding participation in the Plan do not constitute advertising or an offering of securities in Russia. Absent any requirement under local law, the issuance of securities pursuant to the Plan has not and will not be registered in Russia; hence, the securities described in any Plan-related documents may not be used for offering or public circulation in Russia. In no event will Shares issued upon vesting of the RSUs be delivered to you in Russia; all Shares will be maintained on your behalf in the United States of America.
Exchange Control Information.
You are responsible for complying with any applicable Russian exchange control regulations and rulings. Because Russian exchange control regulations and rulings change frequently and without notice, you should consult with a legal advisor to ensure compliance applicable to any aspect of your participation in the Plan, including the grant and vesting of the RSUs, issuance of any Shares at vesting, receipt of any proceeds from the sale of Shares and/or receipt of any payments in connection with any Dividend Equivalents or dividends.
Foreign Assets/Account Reporting Information.
Russian residents are required to notify Russian tax authorities within one (1) month of opening, closing or changing the details of a foreign account. Russian residents also are required to report (i) the beginning and ending balances in such a foreign bank account each year and (ii) transactions related to such a foreign account during the year to the Russian tax authorities, on or before June 1 of the following year. The tax authorities can require you to provide appropriate supporting documents related to transactions in a foreign bank account.
Anti-Corruption Notice.
Anti-corruption laws prohibit certain public servants, their spouses and their dependent children from owning any foreign source financial instruments (e.g., shares of foreign companies such as the Company). Accordingly, you should inform the Company if you are covered by these laws because you should not hold Shares acquired under the Plan.
SINGAPORE
NOTIFICATIONS
Securities Law Information.
The grant of the RSUs is being made pursuant to the "Qualifying Person" exemption under section 273(1)(f) of the Securities and Futures Act (Chapter 289, 2006 Ed.) ("SFA"), under which it is exempt from the prospectus and registration requirements under the SFA. The Plan has not been lodged or registered as a prospectus with the Monetary Authority of Singapore and the grant of the RSUs is not made with a view to the RSUs or Shares being subsequently offered to another party. You should note that the RSUs are subject to section 257 of the SFA and you should not make any subsequent sale of Shares in Singapore or any offer of such subsequent sale of Shares subject to the awards in Singapore, unless such sale or offer in is made: (i) more than six (6) months from the Grant Date or (ii) pursuant to the exemptions under Part XIII Division (1) Subdivision (4) (other than section 280) of the SFA.
Director Notification Requirement.
If you are a director, associate director or shadow director of the Company's Singapore Subsidiary or Affiliate, you are subject to certain notification requirements under the Singapore Companies Act. Among these requirements is an obligation to notify the Singapore Subsidiary or Affiliate in writing when you receive an interest (e.g., RSUs, Shares) in the Company, a Subsidiary or Affiliate. In addition, you must notify the Singapore Subsidiary or Affiliate when you sell Shares (including when you sell Shares issued upon vesting and settlement of the RSUs). These notifications must be made within two (2) business days of acquiring or disposing of any interest in the Company or any Subsidiary or Affiliate. In addition, a notification of your interests in the Company, Subsidiary or Affiliate must be made within two (2) business days of becoming a director.
SPAIN
TERMS AND CONDITIONS
Acknowledgment of Nature of Award.
The following provisions supplement the first paragraph of the Acknowledgment of Nature of Award section of the General Non-U.S. Terms and Conditions section of this Appendix I:
By accepting the grant of the RSUs, you acknowledge that you consent to participation in the Plan and have received a copy of the Plan.
You understand that the Company has unilaterally, gratuitously and discretionally decided to grant RSUs under the Plan to individuals who may be employees of the Company's Subsidiaries or Affiliates throughout the world. The decision is a limited decision that is entered into upon the express assumption and condition that any grant will not economically or otherwise bind the Company or its Subsidiaries or Affiliates on an ongoing basis except as
provided in the Plan. Consequently, you understand that the RSUs are granted on the assumption and condition that the RSUs or the Shares acquired upon vesting shall not become a part of any employment contract with the Company and any of its Subsidiaries and shall not be considered a mandatory benefit, salary for any purposes (including severance compensation) or any other right whatsoever. In addition, you understand that this grant would not be made to you but for the assumptions and conditions referred to above; thus, you acknowledge and freely accept that should any or all of the assumptions be mistaken or should any of the conditions not be met for any reason, then the RSUs shall be null and void.
You understand and agree that, unless otherwise provided in the Award Agreement, the vesting and settlement of the RSUs is expressly conditioned on your continuous Service such that if your employment or rendering of Services terminates for any reason whatsoever, your RSUs will cease vesting immediately effective as of the date of such termination for any reason including, but not limited to, resignation, retirement, disciplinary dismissal adjudged to be with cause, disciplinary dismissal adjudged or recognized to be without cause (i.e., subject to a "despido improcedente"), individual or collective dismissal on objective grounds, whether adjudged or recognized to be with or without cause, material modification of the terms of employment under Article 41 of the Workers' Statute, relocation under Article 40 of the Workers' Statute, and/or Article 50 of the Workers' Statute, unilateral withdrawal by your employer and under Article 10.3 of the Royal Decree 1382/1985. Consequently, upon termination for any of the above reasons, you will automatically lose any rights to the RSUs granted to you that were unvested on the date of termination, as described in the Award Agreement.
NOTIFICATIONS
Securities Law Information.
The RSUs and the Shares issued pursuant to the vesting of the RSUs do not qualify under Spanish regulations as securities. No "offer of securities to the public," as defined under Spanish law, has taken place or will take place in the Spanish territory. The Award Agreement has not been nor will it be registered with the Comisión Nacional del Mercado de Valores, and does not constitute a public offering prospectus.
Foreign Assets/Account Reporting Information.
If you are a Spanish resident, you must declare the acquisition, ownership and disposition of Shares to the Dirección General de Comercial e Inversiones (the "DGCI") of the Ministerio de Economia for statistical purposes. This declaration must be made in January for any Shares owned as of December 31 of the prior year by filing a form D-6 with the DGCI; however, if the value of the Shares being reported exceeds €1,502,530 (or if you hold 10% or more of the share capital of the Company or such other amount that would entitle you to join the Board of Directors), the declaration must be filed within one (1) month of the acquisition or disposition of the Shares, as applicable. In addition, if you wish to import the ownership title of any Shares (i.e., share certificates) into Spain, you must declare the importation of such securities to the DGCI.
You also are required to declare electronically to the Bank of Spain any foreign accounts (including brokerage accounts held abroad), any foreign instruments (including Shares) and any transactions with non-Spanish residents (including any payments of Shares made pursuant to the Plan) held in such accounts if the value of the transactions during the prior tax year or the balances in such accounts as of December 31 of the prior tax year exceeds €1,000,000.
To the extent that you hold rights or assets (e.g., Shares acquired under the Plan or cash held in a bank or brokerage account) outside Spain with a value in excess of €50,000 per type of asset as of December 31 each year, you will be required to report information on such assets on your tax return (tax form 720) for such year. After such rights and/or assets are initially reported, the reporting obligation will apply for subsequent years only if the value of such right or asset increases by more than €20,000 or if you sell or otherwise dispose of previously reported rights or assets. The reporting must be completed by the following March 31.
You are solely responsible for complying with applicable reporting obligations. The laws are often complex and can change frequently. You should consult your personal legal and/or tax advisor to confirm the reporting requirements that will apply to you in connection with the Plan.
SWEDEN
There are no country-specific provisions.
THAILAND
NOTIFICATIONS
Exchange Control Information.
If you are a Thai resident and you receive funds in connection with the Plan (e.g., dividends or sale proceeds) with a value equal to or greater than US$200,000 per transaction, you are required to immediately repatriate such funds to Thailand. Any foreign currency repatriated to Thailand must be converted to Thai Baht or deposited into a foreign currency deposit account opened with any commercial bank in Thailand acting as the authorized agent within 360 days from the date the funds are repatriated to Thailand. You are also required to inform the authorized agent of the details of the foreign currency transaction, including your identification information and the purpose of the transaction.
If you do not comply with the above obligations, you may be subject to penalties assessed by the Bank of Thailand. Because exchange control regulations change frequently and without notice, you should consult your legal advisor before selling any Shares (or receiving any other funds in connection with the Plan) to ensure compliance with current regulations. You are responsible for ensuring compliance with all exchange control laws in Thailand, and neither the Company nor your employer will be liable for any fines or penalties resulting from failure to comply with applicable laws.
TURKEY
NOTIFICATIONS
Securities Law Information.
You are permitted to sell Shares acquired under the Plan through the designated broker appointed under the Plan, if any, provided the sale of the Shares takes place outside of Turkey through the facilities of a stock exchange on which the Shares are listed (i.e., Nasdaq).
Exchange Control Information.
Under Turkish law, Turkish residents are permitted to purchase and sell securities or derivatives traded on exchanges abroad only through a financial intermediary licensed in Turkey. Therefore, you may be required to appoint a Turkish broker to assist you with the sale of the Shares acquired under the Plan. You should consult your personal legal advisor before selling any Shares acquired under the Plan to confirm the applicability of this requirement to you.
UNITED ARAB EMIRATES
NOTIFICATIONS
Securities Law Information.
The Plan is being offered only to employees and is in the nature of providing equity incentives to employees of the Company or its Subsidiaries or Affiliates in the United Arab Emirates ("UAE"). Any documents related to the Plan, including the Plan, this Award Agreement, and other grant documents ("Plan Documents"), are intended for distribution only to such employees and must not be delivered to, or relied on by any other person. Prospective purchasers of the securities offered (i.e., the RSUs) should conduct their own due diligence on the securities.
The Emirates Securities and Commodities Authority has no responsibility for reviewing or verifying any Plan Documents nor has it taken steps to verify the information set out in them, and thus, is not responsible for such documents. Further, neither the Ministry of Economy nor the Dubai Department of Economic Development has
approved this statement nor taken steps to verify the information set out in it, and has no responsibility for it. If you do not understand the contents of the Plan Documents, you should consult an authorized financial advisor.
UNITED KINGDOM
Terms & Conditions
Taxes.
The following provisions supplement the Taxes section of the Award Agreement and the General Non-U.S. Terms and Conditions section of this Appendix I:
Without limitation to the Taxes section of the Award Agreement and the General Non-U.S. Terms and Conditions section of this Appendix I, you agree that you are liable for all Tax-Related Items and hereby covenant to pay all such Tax-Related Items as and when requested by the Company or your employer or by Her Majesty's Revenue and Customs ("HMRC") (or any other tax authority or any other relevant authority). You also agree to indemnify and keep indemnified the Company and your employer against any Tax–Related Items that they are required to pay or withhold or have paid or will pay on your behalf to HMRC (or any other tax authority or any other relevant authority).
Notwithstanding the foregoing, if you are a director or executive officer (as within the meaning of the Act), the terms of the immediately foregoing provision will not apply. In the event that you are a director or executive officer and income tax due is not collected from or paid by you by within ninety (90) days of the U.K. tax year in which an event giving rise to the indemnification described above occurs, the amount of any uncollected tax may constitute a benefit to you on which additional income tax and national insurance contributions may be payable. You acknowledge that you ultimately will be responsible for reporting and paying any income tax due on this additional benefit directly to HMRC under the self-assessment regime and for reimbursing the Company or the Employer (as applicable) for the value of any employee national insurance contributions due on this additional benefit, which the Company and/or the Employer may recover from you by any of the means referred to in the Taxes section of the Award Agreement and the General Non-U.S. Terms and Conditions section of this Appendix I.
VENEZUELA
TERMS AND CONDITIONS
Exchange Control Restrictions.
Exchange control restrictions may limit the ability to vest in the RSUs or to remit funds into Venezuela following the sale of Shares acquired under the Plan. The Company reserves the right to further restrict the settlement of the RSUs or to amend or cancel the RSUs at any time in order to comply with the applicable exchange control laws in Venezuela. However, ultimately, you are responsible for complying with exchange control laws in Venezuela and the Company will not be liable for any fines or penalties resulting from your failure to comply with applicable laws. You should consult your personal advisor prior to accepting the RSUs to ensure compliance with current regulations. You are solely responsible for ensuring compliance with all exchange control laws in Venezuela.
Investment Representation.
As a condition of the grant of the RSUs, you acknowledge and agree that any Shares you may acquire upon vesting of the RSUs are acquired as and intended to be an investment rather than for the resale of the Shares and conversion of the Shares into foreign currency.
NOTIFICATIONS
Securities Law Information.
The RSUs granted under the Plan and the Shares issued under the Plan are offered as a personal, private, exclusive transaction and are not subject to Venezuelan government securities regulations.
Exhibit 22.1
The Kraft Heinz Company
List of Subsidiary Guarantors and Issuers of Guaranteed Securities
As of June 27, 2020, The Kraft Heinz Company was the sole guarantor of all the unsecured registered notes issued by Kraft Heinz Foods Company, a Pennsylvania Limited Liability Company, our 100% owned operating subsidiary.
|
|
|
Description of KHFC Senior Notes
|
2.800% senior notes due 2020
|
3.125% senior notes due 2021
|
Floating rate U.S. dollar senior notes due 2021
|
2.850% senior notes due 2022
|
3.500% senior notes due June 2022
|
3.500% senior notes due July 2022
|
Floating rate U.S. dollar senior notes due 2022
|
4.000% senior notes due 2023
|
2.000% Euro senior notes due 2023
|
1.500% Euro senior notes due 2024
|
3.950% senior notes due 2025
|
3.000% senior notes due 2026
|
4.125% British Pound senior notes due 2027
|
2.250% Euro senior notes due 2028
|
6.375% senior debentures due 2028
|
4.625% senior notes due 2029
|
6.750% senior debentures due 2032
|
5.000% senior notes due 2035
|
6.875% senior notes due 2039
|
7.125% senior debentures due 2039
|
6.500% senior notes due 2040
|
5.000% senior notes due 2042
|
5.200% senior notes due 2045
|
4.375% senior notes due 2046
|
Exhibit 31.1
I, Miguel Patricio, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q for the period ended June 27, 2020 of The Kraft Heinz Company;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
|
|
|
|
By:
|
/s/ Miguel Patricio
|
|
Miguel Patricio
|
|
Chief Executive Officer
|
Date: July 31, 2020
Exhibit 31.2
I, Paulo Basilio, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q for the period ended June 27, 2020 of The Kraft Heinz Company;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
|
|
|
|
By:
|
/s/ Paulo Basilio
|
|
Paulo Basilio
|
|
Global Chief Financial Officer
|
Date: July 31, 2020
Exhibit 32.1
18 U.S.C. SECTION 1350 CERTIFICATION
I, Miguel Patricio, Chief Executive Officer of The Kraft Heinz Company (the “Company”), hereby certify that, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, to my knowledge:
1.The Company’s Quarterly Report on Form 10-Q for the period ended June 27, 2020 (the “Form 10-Q”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
|
|
|
|
By:
|
/s/ Miguel Patricio
|
Name:
|
Miguel Patricio
|
Title:
|
Chief Executive Officer
|
Date: July 31, 2020
The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Form 10-Q or as a separate disclosure document.
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to The Kraft Heinz Company and will be retained by The Kraft Heinz Company and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
18 U.S.C. SECTION 1350 CERTIFICATION
I, Paulo Basilio, Global Chief Financial Officer of The Kraft Heinz Company (the “Company”), hereby certify that, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, to my knowledge:
1.The Company’s Quarterly Report on Form 10-Q for the period ended June 27, 2020 (the “Form 10-Q”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
|
|
|
|
By:
|
/s/ Paulo Basilio
|
Name:
|
Paulo Basilio
|
Title:
|
Global Chief Financial Officer
|
Date: July 31, 2020
The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Form 10-Q or as a separate disclosure document.
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to The Kraft Heinz Company and will be retained by The Kraft Heinz Company and furnished to the Securities and Exchange Commission or its staff upon request.