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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark one)
| ☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2016
OR
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
COMMISSION FILE NUMBER 1-16483
Mondelēz International, Inc.
(Exact name of registrant as specified in its charter)
| Virginia | 52-2284372 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| Three Parkway North, Deerfield, Illinois | 60015 | |
| (Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area code: 847-943-4000
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class |
Name of each exchange on which registered | |
| Class A Common Stock, no par value | The NASDAQ Global Select Market | |
| 1.125% Notes due 2017 | New York Stock Exchange LLC | |
| 2.375% Notes due 2021 | New York Stock Exchange LLC | |
| 1.000% Notes due 2022 | New York Stock Exchange LLC | |
| 1.625% Notes due 2023 | New York Stock Exchange LLC | |
| 1.625% Notes due 2027 | New York Stock Exchange LLC | |
| 2.375% Notes due 2035 | New York Stock Exchange LLC | |
| 4.500% Notes due 2035 | New York Stock Exchange LLC | |
| 3.875% Notes due 2045 | New York Stock Exchange LLC |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Note: Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those Sections.
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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ☒ No ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☒ | Accelerated filer ☐ |
Non-accelerated filer ☐ | Smaller reporting company ☐ | |||
| (Do not check if a smaller reporting company) | ||||||
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the shares of Class A Common Stock held by non-affiliates of the registrant, computed by reference to the closing price of such stock on June 30, 2016, was $71 billion. At February 17, 2017, there were 1,526,612,169 shares of the registrant’s Class A Common Stock outstanding.
Documents Incorporated by Reference
Portions of the registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission in connection with its annual meeting of shareholders expected to be held on May 17, 2017 are incorporated by reference into Part III hereof.
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In this report, for all periods presented, “we,” “us,” “our,” “the Company” and “Mondelēz International” refer to Mondelēz International, Inc. and subsidiaries. References to “Common Stock” refer to our Class A Common Stock.
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Forward-Looking Statements
This report contains a number of forward-looking statements. Words, and variations of words, such as “will,” “may,” “expect,” “would,” “could,” “might,” “intend,” “plan,” “believe,” “estimate,” “anticipate,” “deliver,” “seek,” “aim,” “potential,” “target,” “outlook” and similar expressions are intended to identify our forward-looking statements, including but not limited to statements about: our future performance, including our future revenue growth and margins; our strategy for growing our people, growing our business and growing our impact; price volatility and pricing actions; the cost environment and measures to address increased costs; the United Kingdom’s vote to exit the European Union and its effect on demand for our products and our financial results and operations; the costs of, timing of expenditures under and completion of our restructuring program; snack category growth, our effect on demand and our market position; consumer snacking behaviors; commodity prices and supply; investments; innovation; political and economic conditions and volatility; currency exchange rates, controls and restrictions; our operations in Venezuela and Argentina; integration of our EEMEA business into our Europe and Asia Pacific segments; overhead costs; pension liabilities related to the JDE coffee business transactions; our JDE ownership interest; the significance of the coffee category to our future results; the sale of most of our grocery business in Australia and New Zealand; matters related to the acquisition of a biscuit operation in Vietnam; completion of the sale of several manufacturing facilities in France and sale or license of several local confectionery brands; completion of the Keurig purchase price allocation; manufacturing and distribution capacity; legal matters; changes in laws and regulations and regulatory compliance; the estimated value of goodwill and intangible assets; impairment of goodwill and intangible assets and our projections of operating results and other factors that may affect our impairment testing; our accounting estimates and judgments; pension expenses, contributions and assumptions; employee benefit plan expenses, obligations and assumptions; our sustainability initiatives; tax positions; our liquidity, funding sources and uses of funding, including our use of commercial paper; reinvestment of earnings; our risk management program, including the use of financial instruments and the effectiveness of our hedging activities; capital expenditures and funding; share repurchases; dividends; long-term value and return on investment for our shareholders; compliance with financial and long-term debt covenants; guarantees; and our contractual obligations.
These forward-looking statements involve risks and uncertainties, many of which are beyond our control. Important factors that could cause actual results to differ materially from those described in our forward-looking statements include, but are not limited to, risks from operating globally including in emerging markets; changes in currency exchange rates, controls and restrictions; continued volatility of commodity and other input costs; weakness in economic conditions; weakness in consumer spending; pricing actions; unanticipated disruptions to our business; competition; acquisitions and divestitures; the restructuring program and our other transformation initiatives not yielding the anticipated benefits; changes in the assumptions on which the restructuring program is based; protection of our reputation and brand image; management of our workforce; consolidation of retail customers and competition with retailer and other economy brands; changes in our relationships with suppliers or customers; legal, regulatory, tax or benefit law changes, claims or actions; strategic transactions; our ability to innovate and differentiate our products; significant changes in valuation factors that may adversely affect our impairment testing of goodwill and intangible assets; perceived or actual product quality issues or product recalls; failure to maintain effective internal control over financial reporting; volatility of capital or other markets; pension costs; use of information technology and third party service providers; our ability to protect our intellectual property and intangible assets; a shift in our pre-tax income among jurisdictions, including the United States; and tax law changes. 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.
PART I
General
We are one of the world’s largest snack companies with global net revenues of $25.9 billion and net earnings of $1.7 billion in 2016. We manufacture and market delicious snack food and beverage products for consumers in approximately 165 countries around the world. Our portfolio includes many iconic snack brands including Nabisco, Oreo, LU and belVita biscuits; Cadbury, Milka, Cadbury Dairy Milk and Toblerone chocolate; Trident gum; Halls candy and Tang powdered beverages.
We are proud members of the Standard and Poor’s 500, NASDAQ 100 and Dow Jones Sustainability Index. Our Common Stock trades on The NASDAQ Global Select Market under the symbol “MDLZ.” We have been incorporated in the Commonwealth of Virginia since 2000.
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Strategy
We intend to leverage our core strengths, including our advantaged geographic footprint, market leadership positions and portfolio of iconic brands and innovation platforms, to achieve three primary goals of growing our people, growing our business and growing our impact.
| • | Grow our People: We hire and inspire our people to engage in challenging and rewarding career experiences and to contribute their talent to create a great place to work. We collaborate globally, scale ideas quickly and develop world-class capabilities. Our culture is fast-moving, bold, innovative and accountable, reflecting the traits and skills necessary to thrive in a competitive global marketplace. To support and build on the success of our people in a continually-evolving business environment, we invest in our people and their development, foster respect for one another, celebrate diversity and commit to authenticity at every level. We also work to create an environment in which our people can demonstrate innovative and courageous leadership to make a difference in every role they play in the Company. As reflected in our actions and our investments in our people, we value their contributions and are committed to their success. |
| • | Grow our Business: We aim to deliver strong, profitable long-term growth by accelerating our core snacks business and expanding the reach of our Power Brands globally. Leveraging our Power brands – including Oreo, LU and belVita biscuits; Milka, Cadbury Dairy Milk and Toblerone chocolate; Trident gum and Halls candy – and our innovation platforms, we plan to innovate boldly and connect with our consumers wherever they are, including new markets around the world, using both traditional and digital channels. As consumer consumption patterns change to more accessible, frequent and better-for-you snacking, we are enhancing the goodness of many of our brands (including providing simpler and wholesome ingredient-focused snacks), expanding the well-being offerings in our portfolio and inspiring consumers to snack mindfully by providing clear and simple nutrition information. As shopping expands further online, we are also working to grow our e-commerce platform and on-line presence with consumers. To fuel these investments, we have been working to optimize our cost structure. These efforts include reinventing our supply chain, including adding and upgrading to more efficient production lines, while reducing the complexity of our product offerings, ingredients and number of suppliers. We also continue to aggressively manage our overhead costs. We have embraced and embedded zero-based budgeting practices across the organization to identify potential areas of cost reductions and capture and sustain savings within our ongoing operating budgets. Through these actions, we’re leveraging our brands, platforms and capabilities to drive long-term value and return on investment for our shareholders. |
| • | Grow our Impact: Our growth is linked to enhancing the well-being of the people who make and enjoy our products, the communities we serve and the planet and its limited resources. As consumers seek foods that taste delicious and match their lifestyle goals, we are committed to meeting their well-being needs by becoming a leader in tasty, accessible, well-being snacks. To ensure the safety of our people, we have implemented world-class safety programs, workplace wellness programs and policies to promote fair and equal treatment. We conduct business in compliance with the law, our company policies and accepted standards of business conduct. We also seek to improve consumers’ well-being by providing innovative community programs focused on learning about food choices, preparing healthy meals, growing nutritious foods and encouraging children to play. We encourage our people to contribute time and talent to community programs, and we provide humanitarian aid to communities in times of need. We also leverage our global operating scale to secure sustainable raw materials and work with suppliers to drive meaningful social and environmental changes. |
Reportable Segments
Our operations and management structure are organized into four reportable operating segments:
| • | Latin America |
| • | Asia, Middle East, and Africa (“AMEA”) |
| • | Europe |
| • | North America |
On October 1, 2016, we integrated our Eastern Europe, Middle East, and Africa (“EEMEA”) operating segment into our Europe and Asia Pacific operating segments to further leverage and optimize the operating scale built within the Europe and Asia Pacific regions. Russia, Ukraine, Turkey, Belarus, Georgia and Kazakhstan were combined within our Europe region, while the remaining Middle East and African countries were combined within our Asia Pacific region to form the AMEA operating segment. We have reflected the segment change as if it had occurred in all periods presented.
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We manage our operations by region to leverage regional operating scale, manage different and changing business environments more effectively and pursue growth opportunities as they arise in our key markets. Our regional management teams have responsibility for the business, product categories and financial results in the regions.
We use segment operating income to evaluate segment performance and allocate resources. We believe it is appropriate to disclose this measure to help investors analyze segment performance and trends. For a definition and reconciliation of segment operating income to consolidated pre-tax earnings as well as other information on our segments, see Note 16, Segment Reporting.
Our segment net revenues for each of the last three years were:
| For the Years Ended December 31, | ||||||||||||
| 2016 | 2015 | 2014 | ||||||||||
| (in millions) | ||||||||||||
| Net revenues: |
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| Latin America |
$ | 3,392 | $ | 4,988 | $ | 5,153 | ||||||
| AMEA |
5,816 | 6,002 | 6,367 | |||||||||
| Europe |
9,755 | 11,672 | 15,788 | |||||||||
| North America |
6,960 | 6,974 | 6,936 | |||||||||
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| $ | 25,923 | $ | 29,636 | $ | 34,244 | |||||||
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Our segment operating income for each of the last three years was:
| For the Years Ended December 31, | ||||||||||||||||||||||||
| 2016 | 2015 | 2014 | ||||||||||||||||||||||
| (in millions) | (in millions) | (in millions) | ||||||||||||||||||||||
| Segment operating income: |
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| Latin America |
$ | 271 | 8.7% | $ | 485 | 14.6% | $ | 475 | 12.3% | |||||||||||||||
| AMEA |
506 | 16.2% | 389 | 11.7% | 530 | 13.6% | ||||||||||||||||||
| Europe |
1,267 | 40.6% | 1,350 | 40.5% | 1,952 | 50.3% | ||||||||||||||||||
| North America |
1,078 | 34.5% | 1,105 | 33.2% | 922 | 23.8% | ||||||||||||||||||
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| $ | 3,122 | 100.0% | $ | 3,329 | 100.0% | $ | 3,879 | 100.0% | ||||||||||||||||
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The deconsolidation of our global coffee business in 2015, the deconsolidation of our Venezuela operations beginning with our 2016 results, currency and other items significantly affect the comparability of our consolidated and segment operating results from year to year. Please see Management’s Discussion and Analysis of Financial Condition and Results of Operations for a review of our operating results.
Our brands span five product categories:
| • | Biscuits (including cookies, crackers and salted snacks) |
| • | Chocolate |
| • | Gum & candy |
| • | Beverages (including coffee through July 2, 2015 and powdered beverages) |
| • | Cheese & grocery |
During 2016, our segments contributed to our net revenues in the following product categories:
| Percentage of 2016 Net Revenues by Product Category | ||||||||||||||||||||||||
| Gum & | Cheese & | |||||||||||||||||||||||
| Segment |
Biscuits | Chocolate | Candy | Beverages | Grocery | Total | ||||||||||||||||||
| Latin America |
2.8% | 2.9% | 3.6% | 2.6% | 1.2% | 13.1% | ||||||||||||||||||
| AMEA |
6.1% | 7.3% | 3.7% | 2.4% | 2.9% | 22.4% | ||||||||||||||||||
| Europe |
10.4% | 18.7% | 3.5% | 0.7% | 4.3% | 37.6% | ||||||||||||||||||
| North America |
21.6% | 1.0% | 4.3% | – | – | 26.9% | ||||||||||||||||||
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| 40.9% | 29.9% | 15.1% | 5.7% | 8.4% | 100.0% | |||||||||||||||||||
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Within our product categories, the classes of products that contributed 10% or more to consolidated net revenues were:
| For the Years Ended December 31, | ||||||||||||||||||||
| 2016 | 2015 | 2014 (1) | ||||||||||||||||||
| Biscuits - Cookies and crackers |
36% | 34% | 30% | |||||||||||||||||
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Chocolate - Tablets, bars and other |
30% | 27% | 28% | |||||||||||||||||
| Beverages - Coffee |
– | 6% | 11% | |||||||||||||||||
| (1) | During 2014, we realigned some of our products across product categories and as such, we reclassified the product category net revenues on a basis consistent with the 2015 and 2016 presentation. |
Significant Divestitures and Acquisitions
For information on our significant divestitures and acquisitions, please refer to Note 2, Divestitures and Acquisitions, and specifically, in connection with our global coffee business deconsolidation, see the discussions under JDE Coffee Business Transactions and Keurig Transaction.
Customers
No single customer accounted for 10% or more of our net revenues from continuing operations in 2016. Our five largest customers accounted for 16.6% and our ten largest customers accounted for 22.9% of net revenues from continuing operations in 2016.
Seasonality
Demand for our products is generally balanced over the first three quarters of the year and increases in the fourth quarter primarily because of holidays and other seasonal events. Depending on when Easter falls, there may also be a shift between the first and second quarter results. We build inventory based on expected demand and typically fill customer orders within a few days of receipt so the backlog of unfilled orders is not material. Funding for working capital items, including inventory and receivables, is normally sourced from operating cash flows and short-term commercial paper borrowings. For additional information on our liquidity, working capital management, cash flow and financing activities, see Liquidity and Capital Resources, Note 1, Summary of Significant Accounting Policies, and Note 7, Debt and Borrowing Arrangements, appearing later in this 10-K filing.
Competition
We face competition in all aspects of our business. Competitors include large multi-national as well as numerous local and regional companies. Some competitors have different profit objectives and investment time horizons than we do and therefore approach pricing and promotional decisions differently. We compete based on product quality, brand recognition and loyalty, service, product innovation, taste, convenience, the ability to identify and satisfy consumer preferences, effectiveness of sales and marketing, routes to market and distribution networks, promotional activity and price. Improving our market position or introducing a new product requires substantial research, development, advertising and promotional expenditures. We believe these investments lead to better products for the consumer and support our growth and market position.
Distribution and Marketing
Across our segments, we generally sell our products to supermarket chains, wholesalers, supercenters, club stores, mass merchandisers, distributors, convenience stores, gasoline stations, drug stores, value stores and other retail food outlets. We distribute our products through direct store delivery, company-owned and satellite warehouses, distribution centers and other facilities. We use the services of independent sales offices and agents in some of our international locations.
We also sell our products on a growing number of e-commerce platforms as consumer consumption patterns change (reflecting greater consumer time compression and technology use) and retail increasingly expands online. Within our digital and social marketing, we create opportunities for consumers to easily find and buy our products online. We have built relationships with several retailers to develop customized programs that fit their and our formats and provide consumers additional personalized offerings from our snacks portfolio.
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We conduct marketing efforts through three principal sets of activities: (i) consumer marketing and advertising including on-air, print, outdoor, digital and social media and other product promotions; (ii) consumer sales incentives such as coupons and rebates; and (iii) trade promotions to support price features, displays and other merchandising of our products by our customers.
Raw Materials and Packaging
We purchase and use large quantities of commodities, including cocoa, dairy, wheat, corn products, palm and other vegetable oils, sugar and other sweeteners and nuts. In addition, we purchase and use significant quantities of packaging materials to package our products and natural gas, fuels and electricity for our factories and warehouses. We monitor worldwide supply, commodity cost and currency trends so we can cost-effectively secure ingredients, packaging and fuel required for production.
A number of external factors such as weather conditions, commodity market conditions, currency fluctuations and the effects of governmental agricultural or other programs affect the cost and availability of raw materials and agricultural materials used in our products. We address higher commodity costs and currency impacts primarily through hedging, higher pricing and manufacturing and overhead cost control. We use hedging techniques to limit the impact of fluctuations in the cost of our principal raw materials; however, we may not be able to fully hedge against commodity cost changes, and our hedging strategies may not protect us from increases in specific raw material costs.
While the costs of our principal raw materials fluctuate, we believe there will continue to be an adequate supply of the raw materials we use and that they will generally remain available from numerous sources. For additional information on our commodity costs, refer to the Commodity Trends section within Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Intellectual Property
Our intellectual property rights (including trademarks, patents, copyrights, registered designs, proprietary trade secrets, technology and know-how) are material to our business.
We own numerous trademarks and patents in many countries around the world. Depending on the country, trademarks remain valid for as long as they are in use or their registration status is maintained. Trademark registrations generally are for renewable, fixed terms. We also have patents for a number of current and potential products. Our patents cover inventions ranging from basic packaging techniques to processes relating to specific products and to the products themselves. Our issued patents extend for varying periods according to the date of patent application filing or grant and the legal term of patents in the various countries where patent protection is obtained. The actual protection afforded by a patent, which can vary from country to country, depends upon the type of patent, the scope of its coverage as determined by the patent office or courts in the country, and the availability of legal remedies in the country. While our patent portfolio is material to our business, the loss of one patent or a group of related patents would not have a material adverse effect on our business.
From time to time, we grant third parties licenses to use one or more of our trademarks in connection with the manufacture, sale or distribution of third party products. Similarly, we sell some products under brands we license from third parties. In our agreement with Kraft Foods Group, Inc. (“Kraft Foods Group,” which is now part of The Kraft Heinz Company), we each granted the other party various licenses to use certain of our and their respective intellectual property rights in named jurisdictions following the spin-off of our North American grocery business.
Research and Development
We pursue four objectives in research and development: product safety and quality, growth through new products, superior consumer satisfaction and reduced costs. Our innovation efforts focus on anticipating consumer demands and adapting quickly to changing market trends. Wellness products and healthy snacking are a significant focus of our current research and development initiatives. These initiatives aim to accelerate our growth and margins by addressing consumer needs and market trends and leveraging our global innovation platforms, Power Brands and breakthrough technologies. In September 2016, we announced our plan to invest $65 million over 2017-2018 to build out and modernize our network of global research and development facilities. We are focusing our technical resources at nine large locations to drive global growth and innovation. These global hubs will enable greater effectiveness, improved efficiency and accelerated project delivery. These locations are in Curitiba, Brazil; Suzhou, China; Thane, India; Mexico City, Mexico; East Hanover, New Jersey; Wroclaw, Poland; Jurong, Singapore; Bournville, United Kingdom and Reading, United Kingdom.
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At December 31, 2016, we had approximately 2,550 scientists and engineers, of which approximately 1,950 are primarily focused on research and development and the remainder are primarily focused on quality assurance and regulatory affairs. Our research and development expense was $376 million in 2016, $409 million in 2015 and $455 million in 2014. Our total research and development expense was lower in 2016 and 2015 primarily due to the deconsolidation of our global coffee business in July 2015, currency and cost optimization initiatives.
Regulation
Our food products and ingredients are subject to local, national and multi-national regulations related to labeling, packaging, pricing, marketing and advertising, privacy and related areas. In addition, various jurisdictions regulate our operations by licensing and inspecting our manufacturing plants and facilities, enforcing standards for selected food products, grading food products, and regulating trade practices related to the sale and pricing of our food products. Many of the food commodities we use in our operations are subject to government agricultural policy and intervention, and the scrutiny of human rights issues in industry supply chains has led to developing regulation in many countries. These policies have substantial effects on prices and supplies and are subject to periodic governmental and administrative review.
Examples of laws and regulations that affect our business include selective food taxes, labeling requirements such as nutrient profiling, marketing restrictions, potential withdrawal of trade concessions as dispute settlement retaliation and sanctions on sales or sourcing of raw materials. We will continue to monitor developments in laws and regulations. At this time, we do not expect the cost of complying with new laws and regulations will be material. Also refer to Note 1, Summary of Significant Accounting Policies – Currency Translation and Highly Inflationary Accounting, for additional information on government regulations and currency-related impacts on our operations in the United Kingdom, Argentina and other countries.
Environmental Regulation
Throughout the countries in which we do business, we are subject to local, national and multi-national environmental laws and regulations relating to the protection of the environment. We have programs across our business units designed to meet applicable environmental compliance requirements. In the United States, the laws and regulations include the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act and the Comprehensive Environmental Response, Compensation, and Liability Act. Based on information currently available, we believe that our compliance with environmental laws and regulations will not have a material effect on our financial results.
Sustainability
A key strategic goal for us is to Grow our Impact, and we seek to do that in part by sourcing our products sustainably, reducing the environmental impact of our operations and packaging, and being mindful of the limited resources available around the world. We continue to leverage our global operating scale to secure sustainable raw materials and work with suppliers to drive meaningful social and environmental changes, focusing on where we can make the most impact. For example, we have taken direct accountability for building a sustainable cocoa supply with our $400 million Cocoa Life program. And we’re improving sustainability in our wheat supply by working with farmers in North America and through our Harmony program in Europe.
Our 2020 sustainability goals aim to place us at the forefront in the fight against climate change with ambitious targets for an end-to-end approach to reduce our carbon footprint, including reducing our absolute CO2 emissions from manufacturing and addressing deforestation in key raw material supply chains. We are also working to cut our absolute water footprint in manufacturing, focusing on priority sites where water is most scarce, and we are working to reduce waste in manufacturing and packaging.
We have been recognized for our ongoing economic, environmental and social contributions and this year were listed again on the Dow Jones Sustainability Index (“DJSI”) – World and North American Indices. The DJSI selects the top 10% of global companies and top 20% of North American companies based on an extensive review of financial and sustainability programs within each industry. We improved our overall score to reach the 95th percentile of our industry and achieved perfect scores in health and nutrition, raw material sourcing and water-related risks.
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We also participate in the CDP Climate and Water disclosures and continue to work to reduce our carbon and water footprints. We ranked 4th in the Access to Nutrition Index, a global index that assesses and ranks the world’s largest food and beverage companies on their nutrition-related commitments, practices and performance. We are committed to continue this and other related work in the areas of sustainable resources and agriculture, mindful snacking, community partnerships and safety of our products and people.
Employees
We employed through our consolidated subsidiaries approximately 90,000 people worldwide at December 31, 2016 and approximately 99,000 at December 31, 2015. Employees represented by labor unions or workers’ councils represent approximately 65% of our 78,000 employees outside the United States and approximately 28% of our 12,000 U.S. employees. Our business units are subject to various local, national and multi-national laws and regulations relating to their relationships with their employees. In accordance with European Union requirements, we also have established a European Workers Council composed of management and elected members of our workforce. We or our subsidiaries are a party to numerous collective bargaining agreements and we work to renegotiate these collective bargaining agreements on satisfactory terms when they expire.
International Operations
Based on where we sell our products, we generated 75.6% of our 2016 net revenues, 78.7% of our 2015 net revenues and 82.1% of our 2014 net revenues from continuing operations outside the United States. We sell our products to consumers in approximately 165 countries. At December 31, 2016, we had operations in more than 80 countries and made our products at 150 manufacturing and processing facilities in 52 countries. Refer to Note 16, Segment Reporting, for additional information on our U.S. and non-U.S. operations. Refer to Item 2, Properties, for more information on our manufacturing and other facilities. Also, for a discussion of risks related to our operations outside the United States, see “Risk Factors” in Item 1A.
Executive Officers of the Registrant
The following are our executive officers as of February 24, 2017:
| Name |
Age |
Title | ||
| Irene B. Rosenfeld | 63 | Chairman and Chief Executive Officer | ||
| Brian T. Gladden | 51 | Executive Vice President and Chief Financial Officer | ||
| Maurizio Brusadelli | 48 | Executive Vice President and President, Asia, Middle East and Africa | ||
| Timothy P. Cofer | 48 | Executive Vice President and Chief Growth Officer | ||
| Roberto de Oliveira Marques | 51 | Executive Vice President and President, North America | ||
| Robin S. Hargrove | 51 | Executive Vice President, Research, Development and Quality | ||
| Alejandro R. Lorenzo | 45 | Executive Vice President and President, Latin America | ||
| Karen J. May | 58 | Executive Vice President, Human Resources | ||
| Daniel P. Myers | 61 | Executive Vice President, Integrated Supply Chain | ||
| Gerhard W. Pleuhs | 60 | Executive Vice President and General Counsel | ||
| Hubert Weber | 54 | Executive Vice President and President, Europe | ||
Ms. Rosenfeld became Chief Executive Officer and a director in June 2006 and became Chairman of the Board in March 2007. Prior to that, she served as Chairman and Chief Executive Officer of Frito-Lay, a division of PepsiCo, Inc., a food and beverage company, from September 2004 to June 2006. Ms. Rosenfeld was employed continuously by Mondelēz International and its predecessor, General Foods Corporation, in various capacities from 1981 until 2003, including President of Kraft Foods North America and President of Operations, Technology, Information Systems and Kraft Foods, Canada, Mexico and Puerto Rico.
Mr. Gladden became Executive Vice President and Chief Financial Officer in December 2014. He joined Mondelēz International in October 2014. Prior to that, he served as Senior Vice President and Chief Financial Officer of Dell Inc., a provider of technology products and services, from June 2008 until February 2014, and as President and Chief Executive Officer of SABIC Innovative Plastics, a manufacturer of industrial plastics, from August 2007 to May 2008. Mr. Gladden spent 19 years at the General Electric Company, a multinational conglomerate, in a variety of key leadership positions, including Vice President and General Manager, Resin Business and Chief Financial Officer, GE Plastics.
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Mr. Brusadelli became Executive Vice President and President, Asia Pacific in January 2016 and Executive Vice President and President, Asia, Middle East and Africa in October 2016. He previously served as President Biscuits Business, South East Asia, Japan and Sales Asia Pacific from September 2015 to December 2015, President Markets and Sales Asia Pacific from September 2014 to September 2015, President United Kingdom and Ireland from September 2012 to August 2014 and President Gum & Candy Europe from December 2010 until August 2012. Prior to that, Mr. Brusadelli held various positions of increasing responsibility around the world. Mr. Brusadelli joined Mondelēz International in 1993.
Mr. Cofer became Executive Vice President and Chief Growth Officer in January 2016. Prior to that, he served as Executive Vice President and President, Asia Pacific and EEMEA from September 2013 until December 2015, Executive Vice President and President, Europe from August 2011 until September 2013, Senior Vice President, Global Chocolate Category from June 2010 to August 2011, Senior Vice President, Strategy and Integration from January 2010 to June 2010, President of Pizza from January 2008 to January 2010, Senior Vice President and General Manager of Oscar Mayer from January 2007 to January 2008 and Vice President and General Manager of EU Chocolate from June 2003 to January 2007. Mr. Cofer joined Mondelēz International in 1992.
Mr. de Oliveira Marques became Executive Vice President and President, North America in March 2015. Prior to joining Mondelēz International, Mr. de Oliveira Marques worked at Johnson & Johnson, a global manufacturer of human health and well-being related products, for 27 years in a variety of leadership positions, most recently as Company Group Chairman, Consumer North America from January 2011 to February 2015 and as Company Group Chairman, Consumer Health Care, Global Design Unit from April 2007 to December 2010.
Mr. Hargrove became Executive Vice President, Research, Development & Quality in April 2015. Prior to that, he served as Senior Vice President, Research, Development & Quality for Mondelēz Europe from January 2013 to March 2015. Before joining Mondelēz International, Mr. Hargrove worked at PepsiCo, Inc., a global food and beverage company, for 19 years in a variety of leadership positions, most recently as Senior Vice President, Research and Development, Europe from December 2006 to December 2012.
Mr. Lorenzo became Executive Vice President and President, Latin America in January 2017. Prior to that, he served as President, Global Biscuits Category from January 2015 until December 2016; President, Brazil from September 2012 to December 2014; Vice President, Strategy & Marketing, Beverages and Groceries from January 2011 to August 2012; and Senior Category Director, Beverages and Groceries, Brazil from July 2008 until December 2010. Mr. Lorenzo joined Mondelēz International in 2003.
Ms. May became Executive Vice President, Human Resources in October 2005. Prior to that, she was Corporate Vice President, Human Resources for Baxter International Inc., a healthcare company, from February 2001 to September 2005.
Mr. Myers became Executive Vice President, Integrated Supply Chain in September 2011. Prior to that, he worked for Procter & Gamble, a consumer products company, for 33 years in a variety of leadership positions, most recently serving as Vice President, Product Supply for P&G’s Global Hair Care business from September 2007 to August 2011.
Mr. Pleuhs became Executive Vice President and General Counsel in April 2012. In this role, Mr. Pleuhs oversees the legal, compliance, security, corporate and governance affairs functions within Mondelēz International. Previously, Mr. Pleuhs served as Senior Vice President & Deputy General Counsel, Business Units from November 2007 to March 2012 and Senior Vice President and Deputy General Counsel, International for Kraft Foods Global, Inc. from July 2004 to November 2007. Before joining Mondelēz International in 1990, Mr. Pleuhs held a number of senior positions within the German Law Department of Jacobs Kaffee Deutschland GmbH, an international beverage and confectionery company, prior to and after its acquisition by Altria Group, the former parent company of Mondelēz International. Mr. Pleuhs has a law degree from the University of Kiel, Germany and is licensed to practice law in Germany and admitted as house counsel in Illinois.
Mr. Weber became Executive Vice President and President Europe in September 2013. Prior to that, he served as President of the European and Global Coffee category from September 2010 until September 2013, President of the DACH region (Germany, Austria and Switzerland) from February 2009 to August 2010, Managing Director, Spain from August 2007 to January 2009, Vice President of Global Tassimo Venture Team from July 2004 to July 2007 and Senior Director, International Sales, Kraft Foods International from January 2000 to June 2004. Mr. Weber joined Mondelēz International in 1988.
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Ethics and Governance
We adopted the Mondelēz International Code of Conduct, which qualifies as a code of ethics under Item 406 of Regulation S-K. The code applies to all of our employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions. Our code of ethics is available free of charge on our web site at www.mondelezinternational.com and will be provided free of charge to any shareholder submitting a written request to: Corporate Secretary, Mondelēz International, Inc., Three Parkway North, Deerfield, IL 60015. We will disclose any waiver we grant to an executive officer or director under our code of ethics, or certain amendments to the code of ethics, on our web site at www.mondelezinternational.com.
In addition, we adopted Corporate Governance Guidelines, charters for each of the Board’s four standing committees and the Code of Business Conduct and Ethics for Non-Employee Directors. All of these materials are available on our web site at www.mondelezinternational.com and will be provided free of charge to any shareholder requesting a copy by writing to: Corporate Secretary, Mondelēz International, Inc., Three Parkway North, Deerfield, IL 60015.
Available Information
Our Internet address is www.mondelezinternational.com. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are available free of charge as soon as possible after we electronically file them with, or furnish them to, the U.S. Securities and Exchange Commission (the “SEC”). You can access our filings with the SEC by visiting www.mondelezinternational.com. The information on our web site is not, and shall not be deemed to be, a part of this Annual Report on Form 10-K or incorporated into any other filings we make with the SEC.
You should read the following risk factors carefully when evaluating our business and the forward-looking information contained in this Annual Report on Form 10-K. Any of the following risks could materially and adversely affect our business, operating results, financial condition and the actual outcome of matters described in this Annual Report on Form 10-K. While we believe we have identified and discussed below the key risk factors affecting our business, there may be additional risks and uncertainties that we do not presently know or that we do not currently believe to be significant that may adversely affect our business, performance or financial condition in the future.
We operate in a highly competitive industry.
The food and snacking industry is highly competitive. Our principal competitors include major international food, snack and beverage companies that, like us, operate in multiple geographic areas as well as numerous local and regional companies. We compete based on product quality, brand recognition and loyalty, service, product innovation, taste, convenience, the ability to identify and satisfy consumer preferences, effectiveness of sales and marketing, routes to market and distribution networks, promotional activity and price. If we do not effectively respond to challenges from our competitors, our business could be adversely affected.
Competitor and customer pressures may require that we reduce our prices. These pressures may also restrict our ability to increase prices in response to commodity and other cost increases. Failure to effectively assess, timely change and set proper pricing or trade incentives may negatively impact the achievement of our strategic and financial goals. The rapid emergence of new distribution channels, such as e-commerce, may create consumer price deflation, affecting our retail customer relationships and presenting additional challenges to increasing prices in response to commodity or other cost increases. We may need to increase or reallocate spending on marketing, advertising and new product innovation to protect or increase market share. These expenditures might not result in trade and consumer acceptance of our efforts. If we reduce prices or our costs increase but we cannot increase sales volumes to offset those changes, then our financial condition and results of operations will suffer.
In addition, companies in our industry are under increasing pressure to improve the efficiency of their overall cost structures. We are pursuing a transformation agenda with the goals of focusing our portfolio, improving our cost structure and operating model, and accelerating our growth. If we do not achieve these objectives or do not implement transformation in a way that minimizes disruptions to our business, our financial condition and results of operations could be materially and adversely affected.
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Maintaining, extending and expanding our reputation and brand image is essential to our business success.
Our success depends on our ability to maintain brand image for our existing products, extend our brands into new geographies and to new distribution platforms, including e-commerce, and expand our brand image with new and renewed product offerings.
We seek to maintain, extend and expand our brand image through marketing investments, including advertising and consumer promotions, and both product renovation and innovation. Failure to effectively address the continuing global focus on well-being, including weight management, changing consumer perceptions of certain ingredients, and increasing attention from the media, shareholders, consumers, activists and other stakeholders on the role of food marketing could adversely affect our brand image. Undue caution on our part in addressing these challenges could weaken our competitive position. Such pressures could also lead to stricter regulations and increased focus on food and snacking marketing practices. Increased legal or regulatory restrictions on our advertising, consumer promotions and marketing, or our response to those restrictions, could limit our efforts to maintain, extend and expand our brands. Moreover, adverse publicity about regulatory or legal action against us, product quality and safety, where we manufacture our products or environmental and human and workplace rights risks in our supply chain could damage our reputation and brand image, undermine our customers’ confidence and reduce demand for our products, even if the regulatory or legal action is unfounded or these matters are immaterial to our operations. Our sponsorship relationships could also subject us to negative publicity.
In addition, our success in maintaining, extending and expanding our brand image depends on our ability to adapt to a rapidly changing marketing and media environment, including our increasing reliance on social media and online dissemination of marketing and advertising campaigns. A variety of legal and regulatory restrictions limit how and to whom we market our products. These restrictions may limit our ability to maintain, extend and expand our brand image, particularly as social media and the communications environment continue to evolve. Negative posts or comments about us on social networking web sites (whether factual or not) or security breaches related to use of our social media and failure to respond effectively to these posts, comments or activities could seriously damage our reputation and brand image across the various regions in which we operate. In addition, we might fail to invest sufficiently in maintaining, extending and expanding our brand image, and our marketing efforts might not achieve desired results. As a result, we might be required to recognize impairment charges on our intangible assets or goodwill. Furthermore, third parties may sell counterfeit or spurious versions of our products that are inferior or pose safety risks. If that happens, consumers could confuse these counterfeit products for our products or have a bad experience with the counterfeit brand, causing consumers to refrain from purchasing our brands. If we do not successfully maintain, extend and expand our reputation and brand image, then our brands, product sales, financial condition and results of operations could be materially and adversely affected.
We are subject to risks from operating globally.
We are a global company and generated 75.6% of our 2016 net revenues, 78.7% of our 2015 net revenues and 82.1% of our 2014 net revenues outside the United States. We manufacture and market our products in approximately 165 countries and have operations in more than 80 countries. Therefore, we are subject to risks inherent in global operations. Those risks include:
| • | compliance with U.S. laws affecting operations outside of the United States, including anti-bribery laws such as the Foreign Corrupt Practices Act (“FCPA”); |
| • | compliance with antitrust and competition laws, trade laws, data privacy laws, anti-bribery laws, and a variety of other local, national and multi-national regulations and laws in multiple regimes; |
| • | changes in tax laws, including enactment of new U.S. and foreign jurisdiction tax laws, interpretation of tax laws and tax audit outcomes; |
| • | currency devaluations or fluctuations in currency values, including in developing markets such as Argentina, Brazil, China, Mexico, Russia, Turkey, Egypt, Nigeria, Ukraine and South Africa as well as in developed markets such as the United Kingdom and other countries within the European Union; |
| • | the imposition of increased or new tariffs, quotas, trade barriers or similar restrictions on our sales or key commodities like cocoa, potential changes in U.S. trade programs and trade relations with other countries, or regulations, taxes or policies that might negatively affect our sales; |
| • | changes in capital controls, including currency exchange controls, government currency policies such as demonetization in India or other limits on our ability to import raw materials or finished product into various countries or repatriate cash from outside the United States; |
| • | increased sovereign risk, such as default by or deterioration in the economies and credit ratings of governments, particularly in our Latin America and AMEA regions; |
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| • | changes in local regulations and laws, the uncertainty of enforcement of remedies in foreign jurisdictions, and foreign ownership restrictions and the potential for nationalization or expropriation of property or other resources; |
| • | varying abilities to enforce intellectual property and contractual rights; |
| • | discriminatory or conflicting fiscal policies; |
| • | greater risk of uncollectible accounts and longer collection cycles; and |
| • | design, implementation and use of effective control environment processes across our diverse operations and employee base. |
In addition, political and economic changes or volatility, geopolitical regional conflicts, terrorist activity, political unrest, civil strife, acts of war, public corruption, expropriation and other economic or political uncertainties could interrupt and negatively affect our business operations or customer demand. High unemployment or the slowdown in economic growth in some markets could constrain consumer spending. As a branded food company that seeks to sell our products at a premium, declining consumer purchasing power could result in loss of market share and adversely impact our profitability. Continued instability in the banking and governmental sectors of certain countries or the dynamics and uncertainties associated with the United Kingdom’s vote to exit the European Union (“Brexit”), including currency exchange rate fluctuations and volatility in global stock markets, could have a negative effect on our business. All of these factors could result in increased costs or decreased revenues, and could materially and adversely affect our product sales, financial condition, results of operations, and our relationships with customers, suppliers and employees in the short or long term.
Our operations in certain emerging markets expose us to political, economic and regulatory risks.
Our growth strategy depends in part on our ability to expand our operations in emerging markets, including among others Brazil, China, India, Mexico, Russia, Argentina, Ukraine, the Middle East, Africa and Southeast Asia. However, some emerging markets have greater political, economic and currency volatility and greater vulnerability to infrastructure and labor disruptions than more established markets. In many countries, particularly those with emerging economies, engaging in business practices prohibited by laws and regulations with extraterritorial reach, such as the FCPA and the U.K. Bribery Act, or local anti-bribery laws may be more common. These laws generally prohibit companies and their employees, contractors or agents from making improper payments to government officials, including in connection with obtaining permits or engaging in other actions necessary to do business. Failure to comply with these laws could subject us to civil and criminal penalties that could materially and adversely affect our reputation, financial condition and results of operations.
In addition, competition in emerging markets is increasing as our competitors grow their global operations and low cost local manufacturers expand and improve their production capacities. Our success in emerging markets is critical to achieving our growth strategy. If we cannot successfully increase our business in emerging markets and manage associated political, economic and regulatory risks, our product sales, financial condition and results of operations could be adversely affected, such as occurred when we deconsolidated and changed to the cost method of accounting for our Venezuelan operations at the close of 2015 or any potential impact on our business in Venezuela from future economic or political developments.
Unanticipated business disruptions could adversely affect our ability to provide our products to our customers.
We manufacture and source products and materials on a global scale. We have a complex network of suppliers and material needs, owned manufacturing locations, co-manufacturing locations, distribution networks and information systems that support our ability to provide our products to our customers consistently. Factors that are hard to predict or beyond our control, like weather, natural disasters, supply and commodity shortages, fire, explosions, terrorism, political unrest, generalized labor unrest or health pandemics could damage or disrupt our operations or our suppliers’ or co-manufacturers’ operations. If we do not effectively respond to disruptions in our operations, for example, by finding alternative suppliers or replacing capacity at key manufacturing or distribution locations, or cannot quickly repair damage to our information, production or supply systems, we may be late in delivering or unable to deliver products to our customers and the quality and safety of our products might be negatively affected. If that occurs, we may lose our customers’ confidence or suffer damage to our reputation, and long-term consumer demand for our products could decline. In addition, we might not have the functions, processes or organizational capability necessary to achieve on our anticipated timeframes our strategic ambition to reconfigure our supply chain and drive efficiencies to fuel growth. Further, our ability to supply multiple markets with a streamlined manufacturing footprint may be negatively impacted by portfolio complexity, changes in volume produced and changes to regulatory restrictions or labor-related constraints on our ability to adjust production capacity in the markets in which we operate. These events could materially and adversely affect our product sales, financial condition and results of operations.
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We are subject to currency exchange rate fluctuations.
At December 31, 2016, we sold our products in approximately 165 countries and had operations in more than 80 countries. Consequently, a significant portion of our business is exposed to currency exchange rate fluctuations. Our financial results and capital ratios are sensitive to movements in currency exchange rates because a large portion of our assets, liabilities, revenue and expenses must be translated into U.S. dollars for reporting purposes or converted into U.S. dollars to service obligations such as our U.S. dollar-denominated indebtedness and to pay dividends to our shareholders. In addition, movements in currency exchange rates can affect transaction costs because we source product ingredients from various countries. We seek to mitigate our exposure to exchange rate fluctuations, primarily on cross-currency transactions, but our efforts may not be successful. Accordingly, changes in the currency exchange rates that we use to translate our results into U.S. dollars for financial reporting purposes or for transactions involving multiple currencies could materially and adversely affect our financial condition and results of operations.
Commodity and other input prices are volatile and may increase or decrease significantly or availability of commodities may become constrained.
We purchase and use large quantities of commodities, including cocoa, dairy, wheat, corn products, palm and other vegetable oils, sugar and other sweeteners, and nuts. In addition, we purchase and use significant quantities of packaging materials to package our products and natural gas, fuels and electricity for our factories and warehouses. Prices for these raw materials, other supplies and energy are volatile and can fluctuate due to conditions that are difficult to predict. These conditions include global competition for resources, currency fluctuations, political conditions, severe weather, the potential longer-term consequences of climate change on agricultural productivity, crop disease or pests, water risk, health pandemics, consumer or industrial demand, and changes in governmental trade, alternative energy and agricultural programs. Increasing focus on climate change, deforestation, water, animal welfare and human rights concerns and other risks associated with the global food system may lead to increased activism focusing on consumer goods companies, government intervention and consumer response, and could adversely affect our or our suppliers’ reputation and business and our ability to procure the materials we need to operate our business. Many of the commodities we purchase are grown by smallholder farmers, who might lack the capacity to invest to increase productivity or adapt to changing conditions. Although we monitor our exposure to commodity prices and hedge against input price increases, we cannot fully hedge against changes in commodity costs, and our hedging strategies may not protect us from increases in specific raw material costs. Continued volatility in the prices of commodities and other supplies we purchase could increase or decrease the costs of our products, and our profitability could suffer as a result. Moreover, increases in the price of our products, including increases to cover higher input costs, may result in lower sales volumes, while decreases in input costs could require us to lower our prices and thereby affect our revenues, profits or margins. Likewise, constraints in the supply of key commodities may limit our ability to grow our net revenues and earnings. If our mitigation activities are not effective, if we are unable to price to cover increased costs or must reduce our prices, or if we are limited by supply constraints, our financial condition and results of operations could be materially adversely affected.
Complying with changes in and inconsistencies among laws and regulations in many countries in which we operate could increase our costs.
Our activities throughout the world are highly regulated and subject to government oversight. Various laws and regulations govern food production, storage, distribution, sales, advertising, labeling and marketing, as well as licensing, trade, labor, tax and environmental matters, and health and safety practices. Government authorities regularly change laws and regulations and their interpretations. Our compliance with new or revised laws and regulations or the interpretation and application of existing laws and regulations could materially and adversely affect our product sales, financial condition and results of operations. For instance, our financial condition and results of operations could be negatively affected by the regulatory and economic impact of changes in taxation and trade relations among the United States and other countries or changes in the European Union such as Brexit.
We may be unable to hire or retain and develop key personnel or a highly skilled and diverse global workforce or manage changes in our workforce.
We must hire, retain and develop effective leaders and a highly skilled and diverse global workforce. We compete to hire new personnel in the many countries in which we manufacture and market our products and then to develop and retain their skills and competencies. Unplanned turnover or failure to develop adequate succession plans for leadership positions or to hire and retain a diverse global workforce with the skills and in the locations we need to operate and grow our business could deplete our institutional knowledge base and erode our competitiveness.
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We also face increased personnel-related risks in connection with implementing the changes in our transformation agenda related to our operating model and business processes, including building a global shared services capability and reconfiguring our supply chain. These risks could lead to operational challenges, including increased competition for employees with the skills we require to achieve our business goals; higher employee turnover, including of employees with key capabilities; and challenges in developing the capabilities necessary to build and effectively execute a shared services function and transform our business processes. Furthermore, we might be unable to manage appropriately changes in, or that affect, our workforce or satisfy the legal requirements associated with how we manage and compensate our employees. This includes our management of employees represented by labor unions or workers’ councils, who represent approximately 65% of our 78,000 employees outside the United States and approximately 28% of our 12,000 U.S. employees. Strikes, work stoppages or other forms of labor unrest by our employees or those of our suppliers or distributors, or situations like the re-negotiation of collective bargaining agreements covering eight U.S. facilities that expired in February 2016, could cause disruptions to our supply chain, manufacturing or distribution processes.
These risks could materially and adversely affect our reputation, ability to meet the needs of our customers, product sales, financial condition and results of operations.
Our retail customers are consolidating and we must leverage our value proposition in order to compete against retailer and other economy brands.
Retail customers, such as supermarkets, warehouse clubs and food distributors in the European Union, the United States and our other major markets continue to consolidate or form buying alliances, resulting in fewer, larger customers with whom we can conduct business. Large retail customers and customer alliances can resist our efforts to increase prices, delist our products or reduce the shelf space allotted to our products, and demand lower pricing, increased promotional programs, longer payment terms or specifically tailored products. Retail customers might also adopt these tactics in their dealings with us in response to the significant growth in online retailing for consumer products, which is outpacing the growth of traditional retail channels. In addition, larger retail customers have the scale to develop supply chains that permit them to operate with reduced inventories or to develop and market their own retailer and other economy brands that compete with some of our products. Our products must provide higher quality or value to our consumers than the less expensive alternatives, particularly during periods of economic uncertainty. Consumers may not buy our products if consumers perceive the difference in the quality or value between our products and the retailer or other economy brands has narrowed. If consumers switch to purchasing or otherwise prefer the retailer or other economy brands, then we could lose market share or sales volumes, or we may need to shift our product mix to lower margin offerings.
Retail consolidation also increases the risk that adverse changes in our customers’ business operations or financial performance will have a corresponding material adverse effect on us. For example, if our customers cannot access sufficient funds or financing, then they may delay, decrease or cancel purchases of our products, or delay or fail to pay us for previous purchases.
If we do not effectively respond to retail consolidation, increasing retail power and competition from retailer and other economy brands, our reputation, brands, product sales, financial condition and results of operations could be materially and adversely affected.
We are subject to changes in our relationships with significant customers or suppliers.
During 2016, our five largest customers accounted for 16.6% of our net revenues. There can be no assurance that our customers will continue to purchase our products in the same mix or quantities or on the same terms as in the past, particularly as increasingly powerful retailers continue to demand lower pricing and develop their own brands. The loss of or disruptions related to significant customers could result in a material reduction in sales or change in the mix of products we sell to a significant customer. This could materially and adversely affect our product sales, financial condition and results of operations.
Additionally, disputes with significant suppliers, including disputes related to pricing or performance, could adversely affect our ability to supply products to our customers or operate our business and could materially and adversely affect our product sales, financial condition and results of operations.
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We may decide or be required to recall products or be subjected to product liability claims.
We could decide, or laws or regulations could require us, to recall products due to suspected or confirmed and deliberate or unintentional product contamination, spoilage or other adulteration, product mislabeling or product tampering. In addition, if another company recalls or experiences negative publicity related to a product in a category in which we compete, consumers might reduce their overall consumption of products in this category. Any of these events could materially and adversely affect our reputation, brands, product sales, financial condition and results of operations.
We may also suffer losses if our products or operations or those of our suppliers violate applicable laws or regulations, or if our or our suppliers’ products cause injury, illness or death. In addition, our marketing could face claims of false or deceptive advertising or other criticism. A significant product liability or other legal judgment against us, a related regulatory enforcement action, a widespread product recall or attempts to manipulate us based on threats related to the safety of our products could materially and adversely affect our reputation and profitability. Moreover, even if a product liability, consumer fraud or other claim is unsuccessful, has no merit or is not pursued, the negative publicity surrounding assertions against our products or processes could materially and adversely affect our reputation, brands, product sales, financial condition and results of operations.
We could be subject to legal or tax claims or other regulatory enforcement actions.
We are a large snack food company operating in highly regulated environments and constantly evolving legal, tax and regulatory frameworks around the world. Consequently, we are subject to greater risk of litigation, legal or tax claims, or other regulatory enforcement actions. There can be no assurance that our employees, contractors or agents will not violate policies and procedures we have implemented to promote compliance with existing laws and regulations. Moreover, our failure to maintain effective control environment processes, including in connection with the development of our global shared services capability, could lead to violations, unintentional or otherwise, of laws and regulations. Litigation, legal or tax claims, or regulatory enforcement actions arising out of our failure or alleged failure to comply with applicable laws, regulations or controls could subject us to civil and criminal penalties that could materially and adversely affect our reputation, product sales, financial condition and results of operations.
We may not successfully identify, complete or manage strategic transactions.
We regularly evaluate a variety of potential strategic transactions, including acquisitions, divestitures, joint ventures, equity method investments and other strategic alliances that could further our strategic business objectives. We may not successfully identify, complete or manage the risks presented by these strategic transactions. Our success depends, in part, upon our ability to identify suitable transactions; negotiate favorable contractual terms; comply with applicable regulations and receive necessary consents, clearances and approvals (including regulatory and antitrust clearances and approvals); integrate or separate businesses; realize the full extent of the benefits, cost savings or synergies presented by strategic transactions; effectively implement control environment processes with employees joining us as a result of a transaction; minimize adverse effects on existing business relationships with suppliers and customers; achieve accurate estimates of fair value; minimize potential loss of customers or key employees; and minimize indemnities and potential disputes with buyers, sellers and strategic partners. In addition, execution or oversight of strategic transactions may result in the diversion of management attention from our existing business and may present financial, managerial and operational risks.
With respect to acquisitions and joint ventures in particular, we are also exposed to potential risks based on our ability to conform standards, controls, policies and procedures, and business cultures; consolidate and streamline operations and infrastructures; identify and eliminate redundant and underperforming operations and assets; manage inefficiencies associated with the integration of operations; and coordinate antitrust and competition laws in the United States, the European Union and other jurisdictions. Joint ventures and similar strategic alliances pose additional risks, as we share ownership and management responsibilities with one or more other parties who may not have the same objectives, priorities, strategies or resources as we do. Strategic alliances we have entered into include combining our wholly owned coffee businesses with those of D.E Master Blenders 1753 B.V. (“DEMB”) to create a new company, Jacobs Douwe Egberts (“JDE”), in July 2015 and exchanging a portion of our equity ownership in JDE for equity in the new holding company of Keurig Green Mountain, Inc. (“Keurig”) in March 2016. Transactions or ventures into which we enter might not meet our financial and non-financial control and compliance expectations or yield the anticipated benefits. Depending on the nature of the business ventures, including whether they operate globally, these ventures could also be subject to many of the same risks we are, including political, economic and regulatory risks, currency exchange rate fluctuations, and volatility of commodity and other input prices. Either partner might fail to recognize alliance relationships that could expose the business to higher risk or make the venture not as productive as expected.
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Furthermore, we may not be able to complete, on terms favorable to us, desired or proposed divestitures of businesses that do not meet our strategic objectives or our growth or profitability targets. Our divestiture activities, or related activities such as reorganizations, restructuring programs and transformation initiatives, may require us to recognize impairment charges or to take action to reduce costs that remain after we complete a divestiture. Gains or losses on the sales of, or lost operating income from, those businesses may also affect our profitability.
Any of these risks could materially and adversely affect our business, product sales, financial condition and results of operations.
We must correctly predict, identify and interpret changes in consumer preferences and demand and offer new products that meet those changes.
Consumer preferences for food and snacking products change continually. Our success depends on our ability to predict, identify and interpret the tastes, dietary habits, packaging, sales channel and other preferences of consumers around the world and to offer products that appeal to these preferences. Moreover, weak economic conditions, recession, equity market volatility or other factors could affect consumer preferences and demand. If we do not offer products that appeal to consumers or if we misjudge consumer demand for our products, our sales and market share will decrease and our profitability could suffer.
We must distinguish among short-term fads, mid-term trends and long-term changes in consumer preferences. If we do not accurately predict which shifts in consumer preferences will be long-term, or if we fail to introduce new and improved products to satisfy those changing preferences, our sales could decline. In addition, because of our varied consumer base, including by geography, we must offer an array of products that satisfy the broad spectrum of consumer preferences. If we fail to expand our product offerings successfully across product categories, or if we do not rapidly develop products in faster growing and more profitable categories, demand for our products could decrease and our profitability could suffer.
Prolonged negative perceptions concerning the health, environmental and social implications of certain food products and ingredients could influence consumer preferences and acceptance of some of our products and marketing programs. For example, consumers have increasingly focused on health and wellness, including weight management and reducing sodium and added sugar consumption. In addition, consumer preferences differ by region, and we must monitor and adjust our use of ingredients to respond to these regional preferences. We might be unsuccessful in our efforts to effectively respond to changing consumer preferences and social expectations. Continued negative perceptions and failure to satisfy consumer preferences could materially and adversely affect our reputation, product sales, financial condition and results of operations.
We could fail to maintain effective internal control over financial reporting.
The accuracy of our financial reporting depends on the effectiveness of our internal control over financial reporting. Internal control over financial reporting can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements and may not prevent or detect misstatements because of its inherent limitations. These limitations include, among others, the possibility of human error, inadequacy or circumvention of controls and fraud. If we do not maintain effective internal control over financial reporting or design and implement controls sufficient to provide reasonable assurance with respect to the preparation and fair presentation of our financial statements, including in connection with controls executed for us by third parties, we might fail to timely detect any misappropriation of corporate assets or inappropriate allocation or use of funds and could be unable to file accurate financial reports on a timely basis. As a result, our reputation, results of operations and stock price could be materially adversely affected.
We increasingly rely on information technology and third party service providers.
We rely on information technology and third party service providers to process, transmit and store company information via business applications, internal networks and the Internet. We use these technologies and third party service providers to support our global business processes and activities, including communicating with our employees, customers and suppliers; running critical business operations; engaging in mergers and acquisitions and other corporate transactions; conducting research and development activities; meeting regulatory, legal and tax requirements; and executing various digital marketing and consumer promotion activities.
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Working with these technologies and third party service providers creates risks related to confidentiality, integrity and continuity, and some of these risks may be outside of our control. Confidentiality and integrity of information may be jeopardized by deliberate or unintentional misuse, manipulation or disclosure of information; physical theft; or cybersecurity data breaches by our employees, suppliers, hackers, criminal groups, nation-state organizations, social-activist organizations or other third parties. We currently utilize third party e-commerce providers and request that they have the appropriate cybersecurity controls and meet regulatory requirements. Going forward, should we decide to transact e-commerce direct to consumers as the merchant, we would implement additional procedures, controls and technology to address cybersecurity and regulatory compliance. We might face increased risk if new initiatives such as e-commerce increase the amount of confidential information that we process and maintain, and the cybersecurity and compliance controls we or our third party providers implement are not effective. Continuity of business applications and services may be disrupted by errors in systems’ maintenance, migration of applications to the cloud, power outages, hardware or software failures, viruses or malware, denial of service and other cyber security attacks, telecommunication failures, natural disasters, terrorist attacks and other catastrophic events.
Should any of these risks materialize, the need to coordinate with various third party service providers might complicate our efforts to resolve the related issues. If our controls, disaster recovery and business continuity plans do not effectively resolve the issues in a timely manner, our product sales, financial condition and results of operations may be materially and adversely affected, and we may experience delays in reporting our financial results.
In addition, should confidential information belonging to us or our employees, customers, consumers, partners, suppliers, or governmental or regulatory authorities be misused or breached, we may suffer financial losses relating to remediation, damage to our reputation or brands, loss of intellectual property, or penalties or litigation related to violation of data privacy laws and regulations.
Weak financial performance, downgrades in our credit ratings, illiquid global capital markets and volatile global economic conditions could limit our access to the global capital markets, reduce our liquidity and increase our borrowing costs.
We access the long-term and short-term global capital markets to obtain financing. Our financial performance, our short- and long-term debt credit ratings, interest rates, the stability of financial institutions with which we partner, the liquidity of the overall global capital markets and the state of the global economy, including the food industry, could affect our access to, and the availability or cost of, financing on acceptable terms and conditions and our ability to pay dividends in the future. There can be no assurance that we will have access to the global capital markets on terms we find acceptable.
We regularly access the commercial paper markets in the United States and Europe for ongoing funding requirements. A downgrade in our credit ratings by a credit rating agency could increase our borrowing costs and adversely affect our ability to issue commercial paper. Disruptions in the global commercial paper market or other effects of volatile economic conditions on the global credit markets also could reduce the amount of commercial paper that we could issue and raise our borrowing costs for both short- and long-term debt offerings.
Limitations on our ability to access the global capital markets, a reduction in our liquidity or an increase in our borrowing costs could materially and adversely affect our financial condition and results of operations.
Volatility in the equity markets, interest rates, our participation in multi-employer pension plans or other factors could substantially increase our pension costs.
We sponsor a number of defined benefit pension plans for our employees throughout the world. At the end of 2016, the projected benefit obligation of our defined benefit pension plans was $11.4 billion and plan assets were $9.5 billion. The difference between plan obligations and assets, or the funded status of the plans, significantly affects the net periodic benefit costs of our pension plans and the ongoing funding requirements of those plans. Our largest funded defined benefit pension plans are funded with trust assets invested in a globally diversified portfolio of investments, including equities and corporate and government debt. Among other factors, changes in interest rates, mortality rates, early retirement rates, investment returns, funding requirements in the jurisdictions in which the plans operate, the viability of other employers in the multi-employer pension plans in which we participate and the market value of plan assets can affect the level of plan funding, cause volatility in the net periodic pension cost and increase our future funding requirements. Legislative and other governmental regulatory actions may also increase funding requirements for our pension plans’ benefits obligation.
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Volatility in the global capital markets may increase the risk that we are required to make additional cash contributions to the pension plans and recognize further increases in our net periodic pension cost.
Due to our participation in multi-employer pension plans, we may have exposure under those plans that extends beyond what our obligation would be with respect to our employees. Our contributions to a multi-employer plan may increase beyond our bargaining obligations depending on the financial condition of the multi-employer plan. We may be required to participate in funding the unfunded obligations of the plan allocable to a withdrawing employer, and our costs might increase as a result. Further, if we partially or completely withdraw from a multi-employer pension plan, we may be required to pay a partial or complete withdrawal liability. This withdrawal liability will generally increase if there is also a mass withdrawal of other participating employers or if the plan terminates. (See Note 9, Benefit Plans, to the consolidated financial statements for more information on our multi-employer pension plans.)
A significant increase in our pension benefit obligations or funding requirements could curtail our ability to invest in the business and adversely affect our financial condition and results of operations.
Our failure to protect our valuable intellectual property rights could reduce the value of our products and brands.
We consider our intellectual property rights, particularly and most notably our trademarks, but also our patents, trade secrets, copyrights and licensing agreements, to be a significant and valuable part of our business. We attempt to protect our intellectual property rights by taking advantage of a combination of patent, trademark, copyright and trade secret laws in various countries, as well as licensing agreements, third party nondisclosure and assignment agreements and policing of third party misuses of our intellectual property. Our failure to obtain or adequately protect our intellectual property rights, or any change in law or other changes that serve to lessen or remove the current legal protections of our intellectual property, may diminish our competitiveness and could materially harm our business.
We may be unaware of third party claims of intellectual property infringement relating to our technology, brands or products. Any litigation regarding patents or other intellectual property could be costly and time-consuming and could divert management’s and other key personnel’s attention from our business operations. Third party claims of intellectual property infringement might require us to pay monetary damages or enter into costly license agreements. We also may be subject to injunctions against development and sale of certain of our products. Any of these occurrences could materially and adversely affect our reputation, product sales, financial condition and results of operations.
Item 1B. Unresolved Staff Comments.
None.
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On December 31, 2016, we had 150 manufacturing and processing facilities in 52 countries and 130 distribution centers and depots worldwide. During 2016, we added 5 new manufacturing facilities and disposed of or ceased operations in 9 manufacturing facilities. We also added 4 new distribution facilities and no longer own or lease 12 distribution facilities. In addition, a decrease of 49 distribution facilities in predominantly EU and AMEA primarily reflects distribution facilities that are owned or leased by third party logistics partners. In addition to our owned or leased properties listed below, we also utilize a highly distributed network of warehouses and distribution centers that are owned or leased by third party logistics partners, contract manufacturers, co-packers or other strategic partners. We believe we have or will add sufficient capacity to meet our planned operating needs. It is our practice to maintain all of our plants and other facilities in good condition.
| As of December 31, 2016 | ||||||||
| Number of | Number of | |||||||
| Manufacturing | Distribution | |||||||
| Facilities | Facilities | |||||||
| Latin America (1) |
17 | 5 | ||||||
| AMEA |
51 | 38 | ||||||
| Europe |
67 | 5 | ||||||
| North America |
15 | 82 | ||||||
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|
|
|
|||||
| Total |
150 | 130 | ||||||
|
|
|
|
|
|||||
| Owned |
139 | 22 | ||||||
| Leased |
11 | 108 | ||||||
|
|
|
|
|
|||||
| Total |
150 | 130 | ||||||
|
|
|
|
|
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| (1) | Excludes properties utilized by our Venezuelan businesses, which were deconsolidated effective as of the close of the 2015 fiscal year. Refer to Note 1, Summary of Significant Accounting Policies – Currency Translation and Highly Inflationary Accounting: Venezuela, for more information. |
Information regarding legal proceedings is available in Note 12, Commitments and Contingencies, to the consolidated financial statements in this report.
Item 4. Mine Safety Disclosures.
Not applicable.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
We have listed our Common Stock on The NASDAQ Global Select Market under the symbol “MDLZ.” At January 31, 2017, there were 56,105 holders of record of our Common Stock. Information regarding the market price of our Common Stock and dividends declared during the last two fiscal years is included in Note 17, Quarterly Financial Data (Unaudited), to the consolidated financial statements.
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Comparison of Five-Year Cumulative Total Return
The following graph compares the cumulative total return on our Common Stock with the cumulative total return of the S&P 500 Index and the Mondelēz International performance peer group index. The graph assumes, in each case, that an initial investment of $100 is made at the beginning of the five-year period. The cumulative total return reflects market prices at the end of each year and the reinvestment of dividends each year (and takes into account the value of Kraft Foods Group shares distributed in the spin-off of our grocery business). The vertical line below indicates the October 1, 2012 Spin-Off date and is intended to facilitate comparisons of performance against peers listed below and the stock market before and following the Spin-Off.
| Mondelēz International |
S&P 500 | 2016 Performance Peer Group |
2015 Performance Peer Group |
|||||||||||||
| Date |
||||||||||||||||
| December 2011 |
$ | 100.00 | $ | 100.00 | $ | 100.00 | $ | 100.00 | ||||||||
| December 2012 |
107.06 | 116.00 | 110.47 | 110.47 | ||||||||||||
| December 2013 |
151.05 | 153.57 | 131.58 | 131.58 | ||||||||||||
| December 2014 |
157.97 | 174.60 | 141.57 | 141.57 | ||||||||||||
| December 2015 |
198.09 | 177.01 | 145.10 | 145.10 | ||||||||||||
| December 2016 |
199.21 | 198.18 | 151.78 | 149.60 | ||||||||||||
The Mondelēz International performance peer group consists of the following companies considered our market competitors or that have been selected on the basis of industry, global focus or industry leadership: Campbell Soup Company, The Coca-Cola Company, Colgate-Palmolive Company, Danone S.A., General Mills, Inc., The Hershey Company, Kellogg Company, Nestlé S.A., PepsiCo, Inc., The Procter & Gamble Company, Unilever PLC and The Kraft Heinz Company. We added The Kraft Heinz Company to our performance peer group in 2016 and its performance history is only included for 2016 because the company was formed in 2015.
This performance graph and other information furnished under this Part II Item 5(a) of this Form 10-K shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Exchange Act.
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Issuer Purchases of Equity Securities
Our stock repurchase activity for each of the three months in the quarter ended December 31, 2016 was:
| Issuer Purchases of Equity Securities | ||||||||||||||||
| Period |
Total Number of Shares Purchased (1) |
Average Price Paid per Share |
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) |
Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (2) |
||||||||||||
| October 1-31, 2016 |
2,270,497 | $ | 44.02 | 2,264,152 | $ | 3,559,545,482 | ||||||||||
| November 1-30, 2016 |
12,524,719 | 42.83 | 12,522,439 | 3,023,387,254 | ||||||||||||
| December 1-31, 2016 |
4,269,081 | 41.82 | 4,264,741 | 2,845,045,875 | ||||||||||||
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|
|
|
|||||||||||||
| For the Quarter Ended December 31, 2016 |
19,064,297 | 42.75 | 19,051,332 | |||||||||||||
|
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|
|
|
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| (1) | The total number of shares purchased includes: (i) shares purchased pursuant to the repurchase program described in (2) below; and (ii) shares tendered to us by employees who used shares to exercise options and to pay the related taxes for grants of restricted and deferred stock that vested, totaling 6,345 shares, 2,280 shares and 4,340 shares for the fiscal months of October, November and December 2016, respectively. |
| (2) | Our Board of Directors authorized the repurchase of $13.7 billion of our Common Stock through December 31, 2018. Specifically, on March 12, 2013, our Board of Directors authorized the repurchase of up to the lesser of 40 million shares or $1.2 billion of our Common Stock through March 12, 2016. On August 6, 2013, our Audit Committee, with authorization delegated from our Board of Directors, increased the repurchase program capacity to $6.0 billion of Common Stock repurchases and extended the expiration date to December 31, 2016. On December 3, 2013, our Board of Directors approved an increase of $1.7 billion to the program related to a new accelerated share repurchase program, which concluded in May 2014. On July 29, 2015, our Finance Committee, with authorization delegated from our Board of Directors, approved a $6.0 billion increase that raised the repurchase program capacity to $13.7 billion and extended the program through December 31, 2018. See related information in Note 11, Capital Stock. |
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Item 6. Selected Financial Data
Mondelēz International, Inc.
Selected Financial Data – Five Year Review (1)
| 2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||
| (in millions, except per share and employee data) | ||||||||||||||||||||
| Continuing Operations (2) |
||||||||||||||||||||
| Net revenues |
$ | 25,923 | $ | 29,636 | $ | 34,244 | $ | 35,299 | $ | 35,015 | ||||||||||
| Earnings from continuing operations, net of taxes |
1,669 | 7,291 | 2,201 | 2,332 | 1,606 | |||||||||||||||
| Net earnings attributable to Mondelēz International: |
||||||||||||||||||||
| Per share, basic |
1.07 | 4.49 | 1.29 | 1.30 | 0.90 | |||||||||||||||
| Per share, diluted |
1.05 | 4.44 | 1.28 | 1.29 | 0.88 | |||||||||||||||
| Cash Flow and Financial Position (3) |
||||||||||||||||||||
| Net cash provided by operating activities |
2,838 | 3,728 | 3,562 | 6,410 | 3,923 | |||||||||||||||
| Capital expenditures |
1,224 | 1,514 | 1,642 | 1,622 | 1,610 | |||||||||||||||
| Property, plant and equipment, net |
8,229 | 8,362 | 9,827 | 10,247 | 10,010 | |||||||||||||||
| Total assets |
61,538 | 62,843 | 66,771 | 72,464 | 75,421 | |||||||||||||||
| Long-term debt |
13,217 | 14,557 | 13,821 | 14,431 | 15,519 | |||||||||||||||
| Total Mondelēz International shareholders’ equity |
25,161 | 28,012 | 27,750 | 32,373 | 32,276 | |||||||||||||||
| Shares outstanding at year end (4) |
1,528 | 1,580 | 1,664 | 1,705 | 1,778 | |||||||||||||||
| Per Share and Other Data (5) |
||||||||||||||||||||
| Book value per shares outstanding |
16.47 | 17.73 | 16.68 | 18.99 | 18.15 | |||||||||||||||
| Dividends declared per share (6) |
0.72 | 0.64 | 0.58 | 0.54 | 1.00 | |||||||||||||||
| Common Stock closing price at year end (7) |
44.33 | 44.84 | 36.33 | 35.30 | 25.45 | |||||||||||||||
| Number of employees |
90,000 | 99,000 | 104,000 | 107,000 | 110,000 | |||||||||||||||
| (1) | The selected financial data should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K and Annual Reports on Form 10-K for earlier periods. A significant portion of our business is exposed to currency exchange rate fluctuation as a large portion of our assets, liabilities, revenue and expenses must be translated into U.S. dollars for reporting purposes. Refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations for a discussion of operating results on a constant currency basis where noted. |
| (2) | Significant items impacting the comparability of our results from continuing operations include: Spin-Off Costs in 2012-2014; Restructuring Programs in 2012-2016; Cost Savings Initiatives in 2013 and 2012; the contribution of our global coffee businesses and investment in JDE and related gain in 2015; the gain on Keurig equity method investment exchange in 2016;other divestitures and sales of property in 2016, 2015, 2013 and 2012; acquisitions in 2016, 2015 and 2013; the Cadbury acquisition-related Integration Program in 2012-2014; the benefit from the Cadbury acquisition-related indemnification resolution in 2013; losses on debt extinguishment in 2013-2016; unrealized gains on the coffee business transaction currency hedges in 2014 and 2015; debt tender offers completed in 2013-2016; loss on deconsolidation of Venezuela in 2015; the remeasurement of net monetary assets in Venezuela in 2013-2015; accounting calendar changes in 2015 and 2013; impairment charges related to intangible assets in 2016, 2015, 2014 and 2012; losses related to interest rate swaps in 2016 and 2015; and our provision for income taxes in all years. Please refer to Notes 1, Summary of Significant Accounting Policies; 2, Divestitures and Acquisitions; 5, Goodwill and Intangible Assets; 6, Restructuring Programs; 7, Debt and Borrowing Arrangements; 8, Financial Instruments; 12, Commitments and Contingencies; 14, Income Taxes; and 16, Segment Reporting, for additional information regarding items affecting comparability of our results from continuing operations. |
| (3) | Our Cash Flow and Financial Position information includes Kraft Foods Group data for periods prior to the October 1, 2012 Spin-Off date. Refer to the Annual Report on Form 10-K for the year ended December 31, 2012 for information on the divested net assets and items impacting cash flow. Other items impacting comparability primarily relate to the Keurig and JDE coffee business transactions in 2014-2016, the loss on deconsolidation of Venezuela in 2015 and the receipt of net cash proceeds from the resolution of the Starbucks arbitration in 2013. Beginning in 2015, debt issuance costs related to recognized debt liabilities were recorded as a deduction from the related debt obligations instead of as long-term other assets on the consolidated balance sheet. We made this reclassification in the prior years presented to be consistent with the 2016 and 2015 presentation. |
| (4) | Refer to Note 11, Capital Stock, for additional information on our share repurchase program in 2013-2016. |
| (5) | Per Share and Other Data includes Kraft Foods Group data for periods prior to the October 1, 2012 Spin-Off date. Refer to the Annual Report on Form 10-K for the year ended December 31, 2015, for additional information on the resolution of the Starbucks arbitration in 2013. |
| (6) | Refer to the Equity and Dividends section within Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information on our dividends following the October 1, 2012 Spin-Off. |
| (7) | Closing prices reflect historical market prices and have not been adjusted for periods prior to October 1, 2012 to reflect the Spin-Off of Kraft Foods Group on that date. |
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis contains forward-looking statements. It should be read in conjunction with the other sections of this Annual Report on Form 10-K, including the consolidated financial statements and related notes contained in Item 8, “Forward-Looking Statements” and “Risk Factors” contained in Item 1A.
Description of the Company
We manufacture and market primarily snack food products, including biscuits (cookies, crackers and salted snacks), chocolate, gum & candy and various cheese & grocery products, as well as powdered beverage products. We have operations in more than 80 countries and sell our products in approximately 165 countries.
We aim to deliver strong, profitable long-term growth by accelerating our core snacks business and expanding the reach of our Power Brands globally. Leveraging our Power brands and our innovation platforms, we plan to innovate boldly and connect with our consumers wherever they are, including new markets around the world, using both traditional and digital channels. As consumer consumption patterns change to more accessible, frequent and better-for-you snacking, we are enhancing the goodness of many of our brands (including providing simpler and wholesome ingredient-focused snacks), expanding the well-being offerings in our portfolio and inspiring consumers to snack mindfully by providing clear and simple nutrition information. As shopping expands further online, we are also working to grow our e-commerce platform and on-line presence with consumers. To fuel these investments, we have been working to optimize our cost structure. These efforts include reinventing our supply chain, including adding and upgrading to more efficient production lines, while reducing the complexity of our product offerings, ingredients and number of suppliers. We also continue to aggressively manage our overhead costs. We have embraced and embedded zero-based budgeting practices across the organization to identify potential areas of cost reductions and capture and sustain savings within our ongoing operating budgets. Through these actions, we’re leveraging our brands, platforms and capabilities to drive long-term value and return on investment for our shareholders.
Coffee Business Transactions
JDE Coffee Business Transactions:
On July 2, 2015, we completed transactions to combine our wholly owned coffee businesses with those of DEMB to create a new company, JDE. At that time, our equity interest in JDE was 43.5% with the remaining 56.5% held by a subsidiary of Acorn Holdings B.V. (“AHBV,” owner of DEMB prior to July 2, 2015). In connection with these transactions, in 2015, we recorded a final pre-tax gain of $6.8 billion ($6.6 billion after-tax) from the deconsolidation of our legacy coffee businesses. We also recorded approximately $1.0 billion of cumulative pre-tax net gains ($436 million in 2015 and $628 million in 2014) and cash related to currency hedging in connection with the expected cash consideration to be received in euros. We received €3.8 billion of cash ($4.2 billion) as of July 2, 2015 and with the cash from hedging currency, we effectively received $5.2 billion of cash. On July 5, 2016, we also received from JDE an expected $275 million cash payment to settle a receivable for tax formation costs that were part of the initial sales price. As part of our final sales price negotiations, we also retained the right to collect future cash payments if certain estimated pension liabilities are realized over an agreed amount in the future. As such, we may recognize additional income related to this negotiated term in the future. As further described below, following the March 2016 exchange of JDE shares for an investment in Keurig and stock-based compensation activity at JDE during 2016, as of December 31, 2016, our equity interest in JDE was 26.4%. We recorded equity earnings of $100 million in 2016 and equity losses of $58 million in 2015 related to our investment in JDE.
On June 30, 2016, we entered into agreements with AHBV and its affiliates to establish a new stock-based compensation arrangement tied to the issuance of JDE equity compensation awards to JDE employees. This arrangement replaced a temporary equity compensation program tied to the issuance of AHBV equity compensation to JDE employees. New Class C, D and E JDE shares were authorized and issued for investments made by JDE employees and to issue shares when JDE awards vest. As new shares of JDE are issued, the Class A and B ownership interests of JDE decrease. Under these arrangements, dilution of the JDE shares is limited to 2%. Based on estimated award achievement, we do not expect our JDE ownership interest to decrease below 26.27%. Following these stock-based compensation issuances, our ownership interest in JDE was 26.4% as of December 31, 2016.
See Note 2, Divestitures and Acquisitions, for additional details on the JDE coffee business transactions.
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Keurig Transaction:
On March 3, 2016, a subsidiary of AHBV completed a $13.9 billion acquisition of all of the outstanding common stock of Keurig through a merger transaction. On March 7, 2016, we exchanged with a subsidiary of AHBV a portion of our equity interest in JDE with a carrying value of €1.7 billion (approximately $2.0 billion as of March 7, 2016) for an interest in Keurig with a fair value of $2.0 billion based on the merger consideration per share for Keurig. We recorded the difference between the fair value of Keurig and our basis in JDE shares as a $43 million gain on the equity method investment exchange. Following the exchange, our ownership interest in JDE became 26.5% and we owned a 24.2% interest in Keurig. Both AHBV and we hold our investments in Keurig through a combination of equity and shareholder loan interests, with the same pro-rata ownership of each. Our initial $2.0 billion investment in Keurig includes a $1.6 billion Keurig equity interest and a $0.4 billion shareholder loan receivable, which are reported on a combined basis within equity method investments on our consolidated balance sheet as of December 31, 2016. The shareholder loan has a 5.5% interest rate and is payable at the end of a seven-year term on February 27, 2023. Within equity earnings, we recorded equity earnings of $77 million and interest income from the shareholder loan of $20 million in 2016. Additionally, we received $14 million of interest payments on the shareholder loan and $4 million in dividends on our investment in Keurig in 2016. See Note 2, Divestitures and Acquisitions, for additional details on the Keurig transaction.
Coffee Business Equity Earnings:
We have reflected the results of our historical coffee businesses and equity earnings from JDE, Keurig and Dongsuh Foods Corporation (“DSF”) in our results from continuing operations as the coffee category continues to be a significant part of our net earnings and business strategy going forward. Historically, our coffee businesses and the income from equity method investments were recorded within our operating income as these businesses were part of our base business. While we retain an ongoing interest in coffee through equity method investments including JDE, Keurig and DSF, and we have significant influence with our equity method investments, we do not control these operations directly. As such, in the third quarter of 2015, we began to recognize equity method investment earnings, consisting primarily of investments in coffee businesses, outside of operating income. For periods prior to the third quarter of 2015, our historical coffee business and equity method investment earnings were included within our operating income. See Note 2, Divestitures and Acquisitions, for more information.
Venezuela Deconsolidation
Effective as of the close of the 2015 fiscal year, we concluded that we no longer met the accounting criteria for consolidation of our Venezuelan subsidiaries due to a loss of control over our Venezuelan operations and an other-than-temporary lack of currency exchangeability. At that time, we deconsolidated and changed to the cost method of accounting for our Venezuelan operations. We recorded a $778 million pre-tax loss on December 31, 2015 as we reduced the value of our cost method investment in Venezuela and all Venezuelan receivables held by our other subsidiaries to realizable fair value, resulting in full impairment. The recorded loss also included historical cumulative translation adjustments related to our Venezuelan operations that had previously been recorded in accumulated other comprehensive losses within equity.
As of the start of 2016, we no longer include net revenues, earnings or net assets of our Venezuelan subsidiaries within our consolidated financial statements in our reported GAAP results (we exclude Venezuela in our non-GAAP results for all historical periods presented). Under the cost method of accounting, earnings are only recognized to the extent cash is received and we have not received any distributed cash from our Venezuela operations in 2016. Given the current and ongoing difficult economic, regulatory and business environment in Venezuela, there continues to be significant uncertainty related to our operations in Venezuela, and we expect these conditions will continue for the foreseeable future. We monitor the extent of our ability to control our Venezuelan operations and the liquidity and availability of cash and U.S. dollars needed to operate in Venezuela, as our current situation in Venezuela may change over time and lead to consolidation at a future date. See Discussion and Analysis of Historical Results – Items Affecting Comparability of Financial Results below, and Note 1, Summary of Significant Accounting Policies – Currency Translation and Highly Inflationary Accounting: Venezuela, for more information on our historical Venezuelan operating results, including the remeasurement losses and loss on deconsolidation.
| • | Net revenues decreased 12.5% to $25.9 billion in 2016 and decreased 13.5% to $29.6 billion in 2015. Net revenues in 2016 were significantly affected by the deconsolidation of our historical coffee business, unfavorable currency translation as the U.S. dollar strengthened against most currencies in which we operate compared to exchange rates in the prior year, the deconsolidation of our historical Venezuelan operations and the year-over-year impact of the accounting calendar change in 2015. |
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| • | Organic Net Revenue increased 1.3% to $27.1 billion in 2016 and increased 1.4% to $30.1 billion in 2015 after recasting prior years to exclude the historical Venezuela deconsolidated operating results and historical operating results from a small 2016 divestiture in the Latin America region. Organic Net Revenue also excludes the impact of our historical global coffee business which was deconsolidated in the JDE coffee business transactions in July 2015. Organic Net Revenue is a non-GAAP financial measure and is on a constant currency basis. We use Organic Net Revenue as it provides improved year-over-year comparability of our underlying results (see the definition of Organic Net Revenue and our reconciliation with net revenues within Non-GAAP Financial Measures appearing later in this section). |
| • | Diluted EPS attributable to Mondelēz International decreased 76.4% to $1.05 in 2016 and increased 246.9% to $4.44 in 2015. The gain on the coffee business deconsolidation and other significant items affected the comparability of our reported results, as further described in the Discussion and Analysis of Historical Results appearing later in this section and in the notes to the consolidated financial statements. |
| • | Adjusted EPS increased 19.8% to $1.94 in 2016 and decreased 6.4% to $1.62 in 2015 after recasting prior years to exclude the historical Venezuela deconsolidated operating results, historical operating results from a small 2016 divestiture in the Latin America region and historical mark-to-market impacts. On a constant currency basis, Adjusted EPS increased 24.1% to $2.01 in 2016 and increased 9.8% to $1.90 in 2015. Adjusted EPS and Adjusted EPS on a constant currency basis are non-GAAP financial measures. We use these measures as they provide improved year-over-year comparability of our underlying results (see the definition of Adjusted EPS and our reconciliation with diluted EPS within Non-GAAP Financial Measures appearing later in this section). |
We seek to achieve profitable, long-term growth and manage our business to attain this goal using our key operating metrics: Organic Net Revenue, Adjusted Operating Income and Adjusted EPS. We use these non-GAAP financial metrics and related computations such as margins internally to evaluate and manage our business and to plan and make near- and long-term operating and strategic decisions. As such, we believe these metrics are useful to investors as they provide supplemental information in addition to our U.S. GAAP financial results. We believe providing investors with the same financial information that we use internally ensures that investors have the same data to make comparisons of our historical operating results, identify trends in our underlying operating results and gain additional insight and transparency on how we evaluate our business. We believe our non-GAAP financial measures should always be considered in relation to our GAAP results and we have provided reconciliations between our GAAP and non-GAAP financial measures in Non-GAAP Financial Measures which appears later in this section.
In addition to monitoring our key operating metrics, we monitor a number of developments or trends that could impact our revenue and profitability objectives.
Long-Term Demographics and Consumer Trends – Snack food consumption is highly correlated to GDP growth, urbanization of the population and rising discretionary income levels associated with a growing middle class, particularly in emerging markets. Over the long-term, we expect these trends to continue leading to growth in consumer behaviors such as migration to more frequent, smaller meals and snacks and greater use of convenience foods. In the near term, low GDP growth, economic recessionary pressures, weak consumer confidence, a strong U.S. dollar and changing consumer trends have slowed category and our net revenue growth. We recognize these factors and the changing consumer trends such as the increasing emphasis on well-being, time compression, growing income disparity, digital revolution and an evolving retail landscape, and we are investing in our well-being snacks portfolio, product and marketing innovation and new routes to market including e-commerce to position ourselves for future growth.
Demand – We monitor consumer spending and our market share within the food and beverage categories in which we sell our products. Growth in these global categories (excluding Venezuela) decreased from approximately 3.4% in 2015 to 2.4% in 2016. Over the long-term, we expect category growth to improve when the macroeconomic environment improves. We continue to make investments in our brand portfolio and build strong routes to market to address the needs of consumers in emerging and developed markets. In doing so, we anticipate driving demand in our categories and growing our position in these markets.
Volatility of Global Markets – Our growth strategy depends in part on our ability to expand our operations, particularly in emerging markets. Some of these markets have greater political and economic volatility, vulnerability to infrastructure and labor disruptions and sensitivity to world oil and energy prices, as we noted this past year in markets including Brazil, Russia, India, China, Ukraine, the Middle East and Nigeria. Volatility in these markets affects demand for and the costs of our products and requires frequent changes in how we operate our business. We expect continued volatility across our markets, particularly emerging markets. As such, we are focused on investing in our global Power Brands and routes to market while we protect our margins through the management of costs and pricing.
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Competition – We operate in highly competitive markets that include global, regional and local competitors. Our advantaged geographic footprint, operating scale and portfolio of brands have all significantly contributed to building our market-leading positions across most of the product categories in which we sell. To grow and maintain our market positions, we focus on meeting consumer needs and preferences through new product innovations and product quality. We also continue to optimize our manufacturing and other operations and invest in our brands through ongoing research and development, advertising, marketing and consumer promotions.
Pricing – We adjust our product prices based on a number of variables including demand, the competitive environment and changes in our product input costs. Our net revenue growth and profitability may be affected as we adjust prices to address new conditions. In 2015 and 2016, we generally increased prices in response to higher commodity costs, currency and other market factors. In 2017, we anticipate that we will adjust our prices in response to changing market conditions. Price competition or delayed price increases by competitors or customers may continue to affect net revenues or market share in the near term as the market adjusts to the changes in input costs and other market conditions.
Operating Costs – Our operating costs include raw materials, labor, selling, general and administrative expenses, taxes, currency impacts and financing costs. We manage these costs through cost saving and productivity initiatives, sourcing and hedging programs, pricing actions, refinancing and tax planning. We also continue to work on programs to expand our profitability and margins, such as our 2014-2018 Restructuring Program, which is designed to bring about significant reductions in our operating cost structure in both our supply chain and overhead costs. We also integrated our EEMEA business into our Europe and Asia Pacific segments effective October 1, 2016. We expect this change to have a favorable impact on our operating performance prospectively due to greater leverage of our European and AMEA regional businesses and resulting cost structure. We also began to re-negotiate collective bargaining agreements covering eight U.S. facilities that expired in February 2016. We continue to work toward reaching a new agreement and have plans to ensure business continuity during the re-negotiations.
Currency – As a global company with 75.6% of our net revenues generated outside the United States, we are exposed to changes in global economic conditions and currency movements. In the last three years, the U.S. dollar has generally strengthened relative to other currencies in which we operate, and several countries experienced significant declines in or devaluations of their currency. These currency movements had a significant negative effect on our reported results of operations. Our 2016 net revenues were $25.9 billion, down 12.5% from 2015, including a negative 4.6 percentage point impact from currency translation. Our 2015 net revenues were $29.6 billion, down 13.5% from 2014, including a negative 12.6 percentage point impact from currency translation (and a 12.0 percentage point impact excluding currency impacts related to Venezuela). Our 2014 net revenues were $34.2 billion, down 3.0% from 2013, including a negative 5.2 percentage point impact from currency translation (and a 3.9 percentage point impact excluding currency impacts related to Venezuela).
We have historically been exposed to currency devaluation risks impacting earnings particularly, but not only, in connection with our Venezuela operations that were deconsolidated at the close of the 2015 fiscal year. In the months following Brexit, there was significant volatility in the global stock markets and currency exchange rates, affecting the markets in which we conduct business. The value of the British pound sterling relative to the U.S. dollar declined significantly with further volatility in the exchange rate expected over the Brexit transition period. The devaluation of the British pound sterling negatively affected our translated results reported in U.S. dollars. To partially offset the translation of certain of our overseas operations, including the United Kingdom, we have net investment hedges in the form of local currency denominated debt. We generally do not hedge against currency translation and primarily seek to hedge against economic losses on cross-currency transactions. Due to limited markets for hedging currency transactions and other factors, we may not be able to effectively hedge all of our cross-currency transaction risks. The local economies, monetary policies and currency hedging availability can affect our ability to hedge against currency-related economic losses. While we work to mitigate our exposure to these currency risks, factors such as continued global and local market volatility, actions by foreign governments, political uncertainty, limited hedging opportunities and other factors could lead to further unfavorable currency impacts in the future. While we continue to monitor and work to safeguard our business, Brexit could adversely affect future demand for our products, our financial results and operations, and our relationships with customers, suppliers and employees in the short or long-term. We may not be able to fully offset the increased risks related to Brexit, which could impact profitability in the near-term or longer should these conditions continue. See Note 1, Summary of Significant Accounting Policies – Currency Translation and Highly Inflationary Accounting: Venezuela and United Kingdom, for related information.
Financing Costs – We regularly evaluate our variable and fixed-rate debt. We continue to use lower-cost, short- and long-term debt to finance our ongoing working capital, capital expenditures and other investments, dividends and share repurchases. During 2016, we retired $6.2 billion of our long-term debt and related costs and issued lower-cost, long-term euro, Swiss franc and U.S. dollar-denominated debt. Our weighted-average interest rate on our total debt as of December 31, 2016 was 2.2%, down from 3.7% as of December 31, 2015 and down from 4.3% as of December 31, 2014. Refer to Note 7, Debt and Borrowing Arrangements, for additional debt activity in 2017.
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Discussion and Analysis of Historical Results
Items Affecting Comparability of Financial Results
The following table includes significant income or (expense) items that affected the comparability of our pre-tax results of operations and our effective tax rates. Please refer to the notes to the consolidated financial statements indicated below for more information. Refer also to the Consolidated Results of Operations – Net Earnings and Earnings per Share Attributable to Mondelēz International table for the after-tax per share impacts of these items.
| For the Years Ended December 31, | ||||||||||||||||
| See Note | 2016 | 2015 | 2014 | |||||||||||||
| (in millions, except percentages) | ||||||||||||||||
| JDE coffee business transactions: |
Note 2 | |||||||||||||||
| Gain on contribution |
$ | – | $ | 6,809 | $ | – | ||||||||||
| Incremental costs for readying |
– | (278 | ) | (77 | ) | |||||||||||
| Currency-related hedging net gains (1) |
– | 436 | 628 | |||||||||||||
| Gain on Keurig equity method investment exchange (2) |
43 | – | – | |||||||||||||
| Venezuela: |
Note 1 | |||||||||||||||
| Historical operating income (3) |
– | 266 | 181 | |||||||||||||
| Remeasurement of net monetary assets: |
||||||||||||||||
| Q1 2014: 6.30 to 10.70 bolivars |
– | – | (142 | ) | ||||||||||||
| SICAD I remeasurements through December 31, 2014 |
– | – | (25 | ) | ||||||||||||
| Q1 2015: 11.50 to 12.00 bolivars |
– | (11 | ) | – | ||||||||||||
| Loss on deconsolidation |
– | (778 | ) | – | ||||||||||||
| 2014-2018 Restructuring Program: |
Note 6 | |||||||||||||||
| Restructuring charges |
(714 | ) | (711 | ) | (274 | ) | ||||||||||
| Implementation charges |
(372 | ) | (291 | ) | (107 | ) | ||||||||||
| 2012-2014 Restructuring Program: |
Note 6 | |||||||||||||||
| Restructuring charges |
– | 4 | (360 | ) | ||||||||||||
| Implementation charges |
– | – | (99 | ) | ||||||||||||
| Loss on debt extinguishment and |
Note 7 | (427 | ) | (753 | ) | (495 | ) | |||||||||
| Loss related to interest rate swaps |
Note 7 & 8 | (97 | ) | (34 | ) | – | ||||||||||
| Intangible asset impairment charges |
Note 5 | (137 | ) | (71 | ) | (57 | ) | |||||||||
| Divestitures, acquisitions and |
Note 2 | |||||||||||||||
| Gain on sale of trademarks |
15 | – | – | |||||||||||||
| Gain on divestiture |
9 | 13 | – | |||||||||||||
| Divestiture-related costs |
(86 | ) | – | – | ||||||||||||
| Acquisition-related costs |
(1 | ) | (8 | ) | (2 | ) | ||||||||||
| Other acquisition integration costs |
(7 | ) | (9 | ) | (4 | ) | ||||||||||
| Gains on sales of property |
46 | – | 7 | |||||||||||||
| Mark-to-market (losses) / gains from derivatives (4) |
Note 16 | (94 | ) | 56 | (73 | ) | ||||||||||
| Spin-Off Costs |
Note 2 | – | – | (35 | ) | |||||||||||
| Effective tax rate |
Note 14 | 8.9% | 7.5% | 13.8% | ||||||||||||
| (1) | To lock in an expected U.S. dollar value of the cash to be received in euros upon closing of the JDE coffee business transactions, we entered into currency exchange forward contracts beginning in May 2014, when the transaction was announced. We recognized related currency hedging net gains of $436 million in 2015 and $628 million in 2014. See Note 2, Divestitures and Acquisitions, for more information on the JDE coffee business transactions and related hedging transactions. |
| (2) | The gain on equity method investment exchange is recorded outside of pre-tax operating results on the consolidated statement of earnings as it relates to our after-tax equity method investments. |
| (3) | Excludes the impact of remeasurement losses and 2014-2018 Restructuring Program charges that are shown separately. |
| (4) | Unrealized gains or losses on commodity and forecasted currency transaction derivatives. 2015 and 2014 amounts exclude coffee commodity and currency derivative impacts that are included within the coffee operating results throughout the following sections. |
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Consolidated Results of Operations
The following discussion compares our consolidated results of operations for 2016 with 2015 and 2015 with 2014.
2016 compared with 2015
| For the Years Ended December 31, |
||||||||||||||||
| 2016 | 2015 | $ change | % change | |||||||||||||
| (in millions, except per share data) | ||||||||||||||||
| Net revenues |
$ | 25,923 | $ | 29,636 | $ | (3,713) | (12.5)% | |||||||||
| Operating income |
2,569 | 8,897 | (6,328) | (71.1)% | ||||||||||||
| Earnings from continuing operations |
1,669 | 7,291 | (5,622) | (77.1)% | ||||||||||||
| Net earnings attributable to |
1,659 | 7,267 | (5,608) | (77.2)% | ||||||||||||
| Diluted earnings per share attributable to Mondelēz International |
1.05 | 4.44 | (3.39) | (76.4)% | ||||||||||||
Net Revenues – Net revenues decreased $3,713 million (12.5%) to $25,923 million in 2016, and Organic Net Revenue (1) increased $360 million (1.3%) to $27,067 million. Power Brands net revenues decreased 11.8%, primarily due to the deconsolidation of our historical coffee business, unfavorable currency and the deconsolidation of our historical Venezuelan operations, and Power Brands Organic Net Revenue increased 2.8%. Emerging markets net revenues decreased 19.1%, primarily due to the deconsolidation of our historical Venezuelan operations, unfavorable currency and the deconsolidation of our historical coffee business, and emerging markets Organic Net Revenue increased 2.7%. The underlying changes in net revenues and Organic Net Revenue are detailed below:
| 2016 | ||||
| Change in net revenues (by percentage point) |
||||
| Total change in net revenues |
(12.5)% | |||
| Add back the following items affecting comparability: |
||||
| Historical coffee business (1) |
5.6pp | |||
| Unfavorable currency |
4.6pp | |||
| Historical Venezuelan operations (2) |
3.7pp | |||
| Impact of accounting calendar change |
0.2pp | |||
| Impact of divestitures |
– | |||
| Impact of acquisitions |
(0.3)pp | |||
|
|
|
|||
| Total change in Organic Net Revenue (3) |
1.3% | |||
|
|
|
|||
| Higher net pricing |
1.6pp | |||
| Unfavorable volume/mix |
(0.3)pp | |||
| (1) | Includes our historical global coffee business prior to the July 2, 2015 JDE coffee business transactions. Refer to Note 2, Divestitures and Acquisitions, and Non-GAAP Financial Measures appearing later in this section for more information. |
| (2) | Includes the historical results of our Venezuelan subsidiaries (including Venezuela currency impacts) prior to the December 31, 2015 deconsolidation. Refer to Note 1, Summary of Significant Accounting Policies – Currency Translation and Highly Inflationary Accounting: Venezuela, for more information. |
| (3) | Please see the Non-GAAP Financial Measures section at the end of this item. |
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Net revenue decline of 12.5% was driven by the impact of the deconsolidation of our historical coffee business, unfavorable currency, the deconsolidation of our historical Venezuelan operations and the year-over-year impact of the 2015 accounting calendar change, partially offset by our underlying Organic Net Revenue growth of 1.3% and the impact of acquisitions. The adjustment for deconsolidating our historical coffee business resulted in a year-over-year decrease in net revenues of $1,627 million for 2016. Unfavorable currency impacts decreased net revenues by $1,244 million, due primarily to the strength of the U.S. dollar relative to several currencies, including the Argentinean peso, British pound sterling, Mexican peso, Brazilian real, Chinese yuan and Russian ruble. The deconsolidation of our historical Venezuelan operations resulted in a year-over-year decrease in net revenues of $1,217 million for 2016. The North America segment accounting calendar change in 2015 resulted in a year-over-year decrease in net revenues of $76 million for 2016. Our underlying Organic Net Revenue growth was driven by higher net pricing, partially offset by unfavorable volume / mix. Net pricing was up, which includes the benefit of carryover pricing from 2015 as well as the effects of input cost-driven pricing actions taken during 2016. Higher net pricing was reflected in Latin America and AMEA, partially offset by lower net pricing in Europe and North America. Unfavorable volume / mix was reflected in Latin America and AMEA, mostly offset by favorable volume / mix in Europe and North America. Unfavorable volume / mix in Latin America and AMEA was largely due to price elasticity as well as strategic decisions to exit certain low-margin product lines. The impact of acquisitions primarily includes the July 15, 2015 acquisition of a biscuit operation in Vietnam, which added $71 million of incremental net revenues for 2016, and the November 2, 2016 purchase of a license to manufacture, market and sell Cadbury-branded biscuits in additional key markets, which added $16 million of incremental net revenues for 2016.
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Operating Income – Operating income decreased $6,328 million (71.1%) to $2,569 million in 2016, Adjusted Operating Income (1) increased $463 million (13.3%) to $3,953 million and Adjusted Operating Income on a constant currency basis (1) increased $639 million (18.3%) to $4,129 million due to the following:
| Operating | ||||||||
| Income | Change | |||||||
| (in millions) | (percentage point) | |||||||
| Operating Income for the Year Ended December 31, 2015 |
$ | 8,897 | ||||||
| 2012-2014 Restructuring Program costs (2) |
(4 | ) | (0.1)pp | |||||
| 2014-2018 Restructuring Program costs (2) |
1,002 | 32.2pp | ||||||
| Operating income from Venezuelan subsidiaries (3) |
(281 | ) | (9.8)pp | |||||
| Remeasurement of net monetary assets in Venezuela (3) |
11 | 0.3pp | ||||||
| Loss on deconsolidation of Venezuela (3) |
778 | 33.4pp | ||||||
| Costs associated with the JDE coffee business transactions (4) |
278 | 13.3pp | ||||||
| Gain on the JDE coffee business transactions (4) |
(6,809 | ) | (94.1)pp | |||||
| Reclassification of historical coffee business operating income (5) |
(342 | ) | (15.3)pp | |||||
| Reclassification of equity method investment earnings (6) |
(51 | ) | (2.7)pp | |||||
| Operating income from divestiture (7) |
(8 | ) | (0.4)pp | |||||
| Gain on divestiture (7) |
(13 | ) | (0.4)pp | |||||
| Intangible asset impairment charges (8) |
71 | 2.1pp | ||||||
| Acquisition integration costs (9) |
9 | 0.3pp | ||||||
| Acquisition-related costs (9) |
8 | 0.3pp | ||||||
| Mark-to-market gains from derivatives (10) |
(56 | ) | (1.7)pp | |||||
|
|
|
|||||||
|
Adjusted Operating Income (1) for the Year Ended December 31, 2015 |
$ | 3,490 | ||||||
| Higher net pricing |
415 | 12.0pp | ||||||
| Higher input costs |
(126 | ) | (3.6)pp | |||||
| Unfavorable volume/mix |
(9 | ) | (0.3)pp | |||||
| Lower selling, general and administrative expenses |
322 | 9.3pp | ||||||
| Gains on sales of property (9) |
46 | 1.3pp | ||||||
| Higher VAT-related settlements |
24 | 0.7pp | ||||||
| Impact from acquisitions (9) |
4 | 0.1pp | ||||||
| Impact of accounting calendar change (11) |
(36 | ) | (1.2)pp | |||||
| Other |
(1 | ) | – | |||||
|
|
|
|
|
|||||
| Total change in Adjusted Operating Income (constant currency) (1) |
639 | 18.3% | ||||||
| Unfavorable currency - translation |
(176 | ) | (5.0)pp | |||||
|
|
|
|
|
|||||
| Total change in Adjusted Operating Income (1) |
463 | 13.3% | ||||||
|
|
|
|||||||
|
Adjusted Operating Income (1) for the Year Ended December 31, 2016 |
$ | 3,953 | ||||||
| 2014-2018 Restructuring Program costs (2) |
(1,086 | ) | (33.3)pp | |||||
| Divestiture-related costs (12) |
(86 | ) | (2.5)pp | |||||
| Operating income from divestiture (7) |
2 | 0.1pp | ||||||
| Gain on divestiture (7) |
9 | 0.3pp | ||||||
| Gain on sale of intangible assets (9) |
15 | 0.4pp | ||||||
| Intangible asset impairment charges (8) |
(137 | ) | (3.8)pp | |||||
| Acquisition integration costs (9) |
(7 | ) | (0.2)pp | |||||
| Acquisition-related costs (9) |
(1 | ) | (0.1)pp | |||||
| Mark-to-market losses from derivatives (10) |
(94 | ) | (2.7)pp | |||||
| Other / rounding |
1 | – | ||||||
|
|
|
|
|
|||||
| Operating Income for the Year Ended December 31, 2016 |
$ | 2,569 | (71.1)% | |||||
|
|
|
|
|
|||||
| (1) | Refer to the Non-GAAP Financial Measures section at the end of this item. |
| (2) | Refer to Note 6, Restructuring Programs, for information on our 2014-2018 Restructuring Program and 2012-2014 Restructuring Program. |
| (3) | Includes the historical results of our Venezuelan subsidiaries prior to the December 31, 2015 deconsolidation. Refer to Note 1, Summary of Significant Accounting Policies – Currency Translation and Highly Inflationary Accounting: Venezuela, for more information on the deconsolidation and remeasurement loss in 2015. |
| (4) | Refer to Note 2, Divestitures and Acquisitions, for more information on the JDE coffee business transactions. |
| (5) | Includes our historical global coffee business prior to the July 2, 2015 deconsolidation. We reclassified the results of our historical coffee business from Adjusted Operating Income and included them with equity method investment earnings in Adjusted EPS to facilitate comparisons of past and future coffee operating results. Refer to Note 2, Divestitures and Acquisitions, and Non-GAAP Financial Measures appearing later in this section for more information. |
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| (6) | Historically, we recorded income from equity method investments within our operating income as these investments operated as extensions of our base business. Beginning in the third quarter of 2015, to align with the accounting for JDE earnings, we began to record the earnings from our equity method investments in equity method investment earnings outside of operating income. In periods prior to July 2, 2015, we have reclassified the equity method earnings from Adjusted Operating Income to evaluate our operating results on a consistent basis. |
| (7) | Refer to Note 2, Divestitures and Acquisitions, for more information on the April 23, 2015 divestiture of Ajinomoto General Foods (“AGF”) and the December 1, 2016 sale of a confectionery business in Costa Rica. The divestiture of AGF generated a pre-tax gain of $13 million and after-tax loss of $9 million in 2015. The sale of the confectionery business in Costa Rica generated a pre-tax and after-tax gain of $9 million in 2016. |
| (8) | Refer to Note 2, Divestitures and Acquisitions, and Note 5, Goodwill and Intangible Assets, for more information on the impairment charges recorded in 2016 and 2015 related to trademarks. |
| (9) | Refer to Note 2, Divestitures and Acquisitions, for more information on the 2016 purchase of a license to manufacture, market and sell Cadbury-branded biscuits in additional key markets, 2016 intangible asset sale in Finland, 2015 acquisitions of a biscuit operation in Vietnam and Enjoy Life Foods and other property sales in 2016. |
| (10) | Refer to Note 8, Financial Instruments, Note 16, Segment Reporting, and Non-GAAP Financial Measures appearing later in this section for more information on these unrealized gains and losses on commodity and forecasted currency transaction derivatives. |
| (11) | Refer to Note 1, Summary of Significant Accounting Policies – Accounting Calendar Change, for more information on the accounting calendar change in 2015. |
| (12) | Includes costs incurred and accrued related to the planned sale of a confectionery business in France. Refer to Note 2, Divestitures and Acquisitions, for more information. |
During 2016, we realized higher net pricing while input costs increased modestly. Higher net pricing, which included the carryover impact of pricing actions taken in 2015, was reflected in Latin America and AMEA, partially offset by lower net pricing in Europe and North America. The increase in input costs was driven by higher raw material costs, in part due to higher currency exchange transaction costs on imported materials, which were partially offset by lower manufacturing costs due to productivity. Unfavorable volume / mix was driven by Latin America and AMEA, which was mostly offset by favorable volume / mix in Europe and North America.
Total selling, general and administrative expenses decreased $1,037 million from 2015, due to a number of factors noted in the table above, including in part, the deconsolidation of our historical coffee business, a favorable currency impact, lower costs associated with the JDE coffee business transactions, the deconsolidation of our Venezuelan operations, gains on the sales of property, VAT-related settlements and the absence of devaluation charges related to our net monetary assets in Venezuela in 2016. The decreases were partially offset by increases from divestiture-related costs associated with the planned sale of a confectionery business in France, the reclassification of equity method investment earnings, higher implementation costs incurred for the 2014-2018 Restructuring Program and the impact of acquisitions.
Excluding the factors noted above, selling, general and administrative expenses decreased $322 million from 2015. The decrease was driven primarily by lower overhead costs due to continued cost reduction efforts.
We recorded a benefit of $54 million in 2016 from VAT-related settlements in Latin America as compared to $30 million in 2015. Unfavorable currency impacts decreased operating income by $176 million due primarily to the strength of the U.S. dollar relative to most currencies, including the British pound sterling, Argentinean peso and Mexican peso.
Excluding the portion related to deconsolidating our historical coffee business, the change in mark-to-market gains / (losses) from derivatives decreased operating income by $150 million in 2016. In 2016, the net unrealized losses on commodity and forecasted currency transaction derivatives were $94 million, as compared to net unrealized gains of $56 million ($96 million including coffee related activity) in 2015.
Operating income margin decreased from 30.0% in 2015, to 9.9% in 2016. The decrease in operating income margin was driven primarily by last year’s pre-tax gain on the JDE coffee business transactions, the deconsolidation of our historical coffee business, the deconsolidation of our Venezuelan operations, the unfavorable year-over-year change in mark-to-market gains / losses from derivatives, higher costs incurred for the 2014-2018 Restructuring Program, divestiture-related costs associated with the planned sale of a confectionery business in France, higher intangible asset impairment charges and the reclassification of equity method earnings. The items that decreased our operating income margin were partially offset by the prior-year loss on the Venezuela deconsolidation, an increase in our Adjusted Operating Income margin and the absence of costs associated with the JDE coffee business transactions. Adjusted Operating Income margin increased from 13.0% in 2015 to 15.3% in 2016. The increase in Adjusted Operating Income margin was driven primarily by lower overheads from cost reduction programs, improved gross margin reflecting productivity efforts, gains on sales of property and VAT-related settlements.
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Net Earnings and Earnings per Share Attributable to Mondelēz International – Net earnings attributable to Mondelēz International of $1,659 million decreased by $5,608 million (77.2%) in 2016. Diluted EPS attributable to Mondelēz International was $1.05 in 2016, down $3.39 (76.4%) from 2015. Adjusted EPS (1) was $1.94 in 2016, up $0.32 (19.8%) from 2015. Adjusted EPS on a constant currency basis (1) was $2.01 in 2016, up $0.39 (24.1%) from 2015.
| Diluted EPS | ||||
|
Diluted EPS Attributable to Mondelēz International for the Year Ended December 31, 2015 |
$ | 4.44 | ||
| 2012-2014 Restructuring Program costs (2) |
– | |||
| 2014-2018 Restructuring Program costs (2) |
0.45 | |||
| Net earnings from Venezuelan subsidiaries (3) |
(0.10 | ) | ||
| Remeasurement of net monetary assets in Venezuela (3) |
0.01 | |||
| Loss on deconsolidation of Venezuela (3) |
0.48 | |||
| (Income) / costs associated with the JDE coffee business transactions (4) |
(0.01 | ) | ||
| Gain on the JDE coffee business transactions (4) |
(4.05 | ) | ||
| Net earnings from divestiture (5) |
0.02 | |||
| Loss on divestiture (5) |
0.01 | |||
| Intangible asset impairment charges (6) |
0.03 | |||
| Acquisition integration costs (7) |
– | |||
| Acquisition-related costs (7) |
– | |||
| Mark-to-market gains from derivatives (8) |
(0.03 | ) | ||
| Loss on debt extinguishment and related expenses (9) |
0.29 | |||
| Loss related to interest rate swaps (10) |
0.01 | |||
| Equity method investee acquisition-related and other adjustments (11) |
0.07 | |||
|
|
|
|||
| Adjusted EPS (1) for the Year Ended December 31, 2015 |
$ | 1.62 | ||
| Increase in operations |
0.27 | |||
| Decrease in operations from historical coffee business, |
(0.05 | ) | ||
| Gains on sales of property (7) |
0.02 | |||
| VAT-related settlements |
0.03 | |||
| Impact of acquisitions (7) |
– | |||
| Impact of accounting calendar change (13) |
(0.01 | ) | ||
| Lower interest and other expense, net (14) |
– | |||
| Changes in shares outstanding (15) |
0.08 | |||
| Changes in income taxes (16) |
0.05 | |||
|
|
|
|||
| Adjusted EPS (constant currency) (1) for the Year Ended December 31, 2016 |
$ | 2.01 | ||
| Unfavorable currency - translation |
(0.07 | ) | ||
|
|
|
|||
| Adjusted EPS (1) for the Year Ended December 31, 2016 |
$ | 1.94 | ||
| 2014-2018 Restructuring Program costs (2) |
(0.51 | ) | ||
| Divestiture-related costs (17) |
(0.05 | ) | ||
| Net earnings from divestiture (5) |
– | |||
| Gain on divestiture (5) |
– | |||
| Gain on sale of intangible asset (7) |
0.01 | |||
| Intangible asset impairment charges (11) |
(0.06 | ) | ||
| Acquisition integration costs (7) |
(0.01 | ) | ||
| Acquisition-related costs (7) |
– | |||
| Mark-to-market losses from derivatives (8) |
(0.05 | ) | ||
| Loss related to interest rate swaps (10) |
(0.04 | ) | ||
| Loss on debt extinguishment and related expenses (9) |
(0.17 | ) | ||
| Gain on equity method investment exchange (7) |
0.03 | |||
| Equity method investee acquisition-related and other adjustments (11) |
(0.04 | ) | ||
|
|
|
|||
|
Diluted EPS Attributable to Mondelēz International for the Year Ended December 31, 2016 |
$ | 1.05 | ||
|
|
|
|||
| (1) | Refer to the Non-GAAP Financial Measures section appearing later in this section. |
| (2) | Refer to Note 6, Restructuring Programs, for more information on our 2014-2018 Restructuring Program and our 2012-2014 Restructuring Program. |
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| (3) | Includes the historical results of our Venezuelan subsidiaries prior to the December 31, 2015 deconsolidation. Refer to Note 1, Summary of Significant Accounting Policies – Currency Translation and Highly Inflationary Accounting: Venezuela, for more information on the deconsolidation and remeasurement loss in 2015. |
| (4) | Refer to Note 2, Divestitures and Acquisitions, for more information on the JDE coffee business transactions. Net gains of $436 million in the first nine months of 2015 on the currency hedges related to the JDE coffee business transactions were recorded in interest and other expense, net and are included in the (income) / costs associated with the JDE coffee business transactions of $(0.01) in the table above. |
| (5) | Refer to Note 2, Divestitures and Acquisitions, for more information on the April 23, 2015 divestiture of AGF and the December 1, 2016 sale of a confectionery business in Costa Rica. The divestiture of AGF generated a pre-tax gain of $13 million and after-tax loss of $9 million in 2015. The sale of the confectionery business in Costa Rica generated a pre-tax and after-tax gain of $9 million in 2016. |
| (6) | Refer to Note 2, Divestitures and Acquisitions, and Note 5, Goodwill and Intangible Assets, for more information on the impairment charges recorded in 2016 and 2015 related to trademarks. |
| (7) | Refer to Note 2, Divestitures and Acquisitions, for more information on the 2016 purchase of a license to manufacture, market and sell Cadbury-branded biscuits in additional key markets, 2016 intangible asset sale in Finland, 2015 acquisitions of a biscuit operation in Vietnam and Enjoy Life Foods and other property sales in 2016. |
| (8) | Refer to Note 8, Financial Instruments, Note 16, Segment Reporting, and Non-GAAP Financial Measures appearing later in this section for more information on these unrealized gains and losses on commodity and forecasted currency transaction derivatives. |
| (9) | Refer to Note 7, Debt and Borrowing Arrangements, for more information on our loss on debt extinguishment and related expenses in connection with our debt tender offers. |
| (10) | Refer to Note 8, Financial Instruments, for more information on our interest rate swaps, which we no longer designate as cash flow hedges during the three months ended March 31, 2016 and 2015 due to changes in financing and hedging plans. |
| (11) | Includes our proportionate share of unusual or infrequent items, such as acquisition and divestiture-related costs and restructuring program costs, recorded by our JDE and Keurig equity method investees. |
| (12) | Includes our historical global coffee business prior to the July 2, 2015 deconsolidation. We reclassified the results of our historical coffee business from Adjusted Operating Income and included them with equity method investment earnings in Adjusted EPS to facilitate comparisons of past and future coffee operating results. Refer to Note 2, Divestitures and Acquisitions, and Non-GAAP Financial Measures appearing later in this section for more information. |
| (13) | Refer to Note 1, Summary of Significant Accounting Policies, for more information on the accounting calendar change in 2015. |
| (14) | Excludes the favorable currency impact on interest expense related to our non-U.S. dollar-denominated debt which is included in currency translation. |
| (15) | Refer to Note 10, Stock Plans, for more information on our equity compensation programs, Note 11, Capital Stock, for more information on our share repurchase program and Note 15, Earnings Per Share, for earnings per share weighted-average share information. |
| (16) | Refer to Note 14, Income Taxes, for more information on the change in our income taxes and effective tax rate. |
| (17) | Includes costs incurred and accrued related to the planned sale of a confectionery business in France. Refer to Note 2, Divestitures and Acquisitions, for more information. |
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2015 compared with 2014
| For the Years Ended December 31, |
||||||||||||||||
| 2015 | 2014 | $ change | % change | |||||||||||||
| (in millions, except per share data) | ||||||||||||||||
| Net revenues |
$ | 29,636 | $ | 34,244 | $ | (4,608) | (13.5)% | |||||||||
| Operating income |
8,897 | 3,242 | 5,655 | 174.4% | ||||||||||||
| Earnings from continuing operations |
7,291 | 2,201 | 5,090 | 231.3% | ||||||||||||
| Net earnings attributable to |
7,267 | 2,184 | 5,083 | 232.7% | ||||||||||||
| Diluted earnings per share attributable to |
4.44 | 1.28 | 3.16 | 246.9% | ||||||||||||
Net Revenues – Net revenues decreased $4,608 million (13.5%) to $29,636 million in 2015, and Organic Net Revenue (1) increased $407 million (1.4%) to $30,105 million. Power Brands net revenues decreased 12.6%, primarily due to unfavorable currency and the deconsolidation of our historical coffee business, and Power Brands Organic Net Revenue increased 3.3%. Emerging markets net revenues decreased 10.6%, primarily due to unfavorable currency and the deconsolidation of our historical coffee business, and emerging markets Organic Net Revenue increased 4.8%. The underlying changes in net revenues and Organic Net Revenue are detailed below:
| 2015 | ||||
| Change in net revenues (by percentage point) |
||||
| Total change in net revenues |
(13.5)% | |||
| Add back of the following items affecting comparability: |
||||
| Unfavorable currency |
12.0pp | |||
| Historical coffee business (1) |
5.3pp | |||
| Historical Venezuelan operations (2) |
(1.6)pp | |||
| Impact of acquisitions |
(0.6)pp | |||
| Impact of accounting calendar change |
(0.2)pp | |||
|
|
|
|||
| Total change in Organic Net Revenue (3) |
1.4% | |||
|
|
|
|||
| Higher net pricing |
3.9pp | |||
| Unfavorable volume/mix |
(2.5)pp | |||
| (1) | Includes our historical global coffee business prior to the July 2, 2015 coffee business transactions. Refer to Note 2, Divestitures and Acquisitions, and Non-GAAP Financial Measures appearing later in this section for more information. |
| (2) | Includes the historical results of our Venezuelan subsidiaries (including Venezuela currency impacts) prior to the December 31, 2015 deconsolidation. Refer to Note 1, Summary of Significant Accounting Policies – Currency Translation and Highly Inflationary Accounting: Venezuela, for more information. |
| (3) | Please see the Non-GAAP Financial Measures section at the end of this item. |
Net revenue decline of 13.5% was driven by unfavorable currency and the impact of the deconsolidation of our historical coffee business, partially offset by the historical results of our Venezuelan operations, our underlying Organic Net Revenue growth of 1.4%, the impact of acquisitions and the impact of an accounting calendar change. Unfavorable currency impacts decreased net revenues by $3,565 million, due primarily to the strength of the U.S. dollar relative to several currencies, including the euro, Brazilian real, Russian ruble, Australian dollar and British pound sterling. The adjustment for deconsolidating our historical coffee business resulted in a year-over-year decrease in net revenues of $2,149 million for 2015. The historical results of our Venezuelan subsidiaries prior to the December 31, 2015 deconsolidation contributed a year-over year increase in net revenues of $457 million for 2015. Organic Net Revenue growth was driven by higher net pricing, partially offset by unfavorable volume / mix. Net pricing was up as we realized the effects of input cost-driven pricing actions taken during the year. Higher net pricing was reflected across all segments. Unfavorable volume / mix was largely due to price elasticity as well as strategic decisions to exit certain low-margin product lines. Unfavorable volume / mix was reflected in all segments except North America. The July 2015 acquisition of a biscuit operation in Vietnam added $128 million in incremental net revenues (constant currency basis) for the year. The February 2015 acquisition of the Enjoy Life Foods snack food business in North America added $37 million in incremental net revenues for the year. The North America segment accounting calendar change resulted in a year-over-year increase in net revenues of $78 million for the year.
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Operating Income – Operating income increased $5,655 million (174.4%) to $8,897 million in 2015, Adjusted Operating Income (1) decreased $65 million (1.8%) to $3,490 million and Adjusted Operating Income on a constant currency basis (1) increased $388 million (10.9%) to $3,943 million due to the following:
| Operating | ||||||||
| Income | Change | |||||||
| (in millions) | (percentage point) | |||||||
| Operating Income for the Year Ended December 31, 2014 |
$ | 3,242 | ||||||
| Spin-Off Costs (2) |
35 | 1.3pp | ||||||
| 2012-2014 Restructuring Program costs (3) |
459 | 14.5pp | ||||||
| 2014-2018 Restructuring Program costs (3) |
381 | 15.2pp | ||||||
| Operating income from Venezuelan subsidiaries (4) |
(175 | ) | (5.0)pp | |||||
| Remeasurement of net monetary assets in Venezuela (4) |
167 | 7.1pp | ||||||
| Costs associated with the coffee business transactions (5) |
77 | 3.1pp | ||||||
| Reclassification of historical coffee business operating income (6) |
(646 | ) | (22.3)pp | |||||
| Reclassification of equity method investment earnings (7) |
(104 | ) | (4.2)pp | |||||
| Operating income from divestiture (8) |
(9 | ) | (0.3)pp | |||||
| Intangible asset impairment charges (9) |
57 | 2.1pp | ||||||
| Integration Program and other acquisition integration costs (10) |
(4 | ) | (0.1)pp | |||||
| Acquisition-related costs (11) |
2 | 0.1pp | ||||||
| Mark-to-market losses on derivatives (12) |
73 | 2.8pp | ||||||
|
|
|
|||||||
| Adjusted Operating Income (1) for the Year Ended December 31, 2014 |
$ | 3,555 | ||||||
| Higher net pricing |
1,146 | 32.2pp | ||||||
| Higher input costs |
(186 | ) | (5.2)pp | |||||
| Unfavorable volume/mix |
(248 | ) | (7.0)pp | |||||
| Higher selling, general and administrative expenses |
(321 | ) | (9.0)pp | |||||
| Impact of accounting calendar change (4) |
37 | 1.1pp | ||||||
| Impact from acquisitions (8) |
20 | 0.5pp | ||||||
| Lower VAT-related settlements |
(54 | ) | (1.5)pp | |||||
| Gain on sale of property in 2014 |
(7 | ) | (0.2)pp | |||||
| Other, net |
1 | – | ||||||
|
|
|
|
|
|||||
| Total change in Adjusted Operating Income (constant currency) (1) |
388 | 10.9% | ||||||
| Unfavorable currency - translation |
(453 | ) | (12.7)pp | |||||
|
|
|
|
|
|||||
| Total change in Adjusted Operating Income (1) |
(65 | ) | (1.8)% | |||||
|
|
|
|
|
|||||
| Adjusted Operating Income (1) for the Year Ended December 31, 2015 |
$ | 3,490 | ||||||
| 2012-2014 Restructuring Program costs (3) |
4 | 0.1pp | ||||||
| 2014-2018 Restructuring Program costs (3) |
(1,002 | ) | (37.3)pp | |||||
| Operating income from Venezuelan subsidiaries (4) |
281 | 9.1pp | ||||||
| Remeasurement of net monetary assets in Venezuela (4) |
(11 | ) | (0.3)pp | |||||
| Loss on deconsolidation of Venezuela (4) |
(778 | ) | (24.0)pp | |||||
| Costs associated with the coffee business transactions (5) |
(278 | ) | (11.7)pp | |||||
| Gain on the coffee business transactions (5) |
6,809 | 210.0pp | ||||||
| Reclassification of historical coffee business operating income (6) |
342 | 14.1pp | ||||||
| Reclassification of equity method investment earnings (7) |
51 | 2.2pp | ||||||
| Operating income from divestiture (8) |
8 | 0.3pp | ||||||
| Gain on divestiture (8) |
13 | 0.4pp | ||||||
| Intangible asset impairment charges (9) |
(71 | ) | (2.3)pp | |||||
| Acquisition integration costs (10) |
(9 | ) | (0.3)pp | |||||
| Acquisition-related costs (11) |
(8 | ) | (0.3)pp | |||||
| Mark-to-market gains on derivatives (12) |
56 | 1.9pp | ||||||
|
|
|
|
|
|||||
| Operating Income for the Year Ended December 31, 2015 |
$ | 8,897 | 174.4% | |||||
|
|
|
|
|
|||||
| (1) | Refer to the Non-GAAP Financial Measures section at the end of this item. |
| (2) | Refer to Note 2, Divestitures and Acquisitions, for more information on Spin-Off Costs incurred in 2014 following the 2012 Kraft Foods Group divestiture. |
| (3) | Refer to Note 6, Restructuring Programs, for information on our 2014-2018 Restructuring Program and our 2012-2014 Restructuring Program. |
| (4) | Refer to Note 1, Summary of Significant Accounting Policies, for more information on the loss on deconsolidation of Venezuela in 2015, remeasurements of net monetary assets in Venezuela in 2015 and 2014 and the accounting calendar change in 2015. |
| (5) | Refer to Note 2, Divestitures and Acquisitions, for more information on the coffee business transactions. |
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| (6) | Includes our historical global coffee business prior to the July 2, 2015 divestiture. We reclassified the results of our historical coffee business from Adjusted Operating Income and included them with equity method investment earnings in Adjusted EPS to facilitate comparisons of past and future coffee operating results. Refer to Note 2, Divestitures and Acquisitions, and Non-GAAP Financial Measures appearing later in this section for more information. |
| (7) | Historically, we have recorded income from equity method investments within our operating income as these investments operated as extensions of our base business. Beginning in the third quarter of 2015, to align with the accounting for JDE earnings, we began to record the earnings from our equity method investments in after-tax equity method investment earnings outside of operating income. In periods prior to July 2, 2015, we have reclassified the equity method earnings from Adjusted Operating Income to evaluate our operating results on a consistent basis. |
| (8) | Refer to Note 2, Divestitures and Acquisitions, for more information on the April 23, 2015 divestiture of AGF and the December 1, 2016 sale of a confectionery business in Costa Rica. The divestiture of AGF generated a pre-tax gain of $13 million and after-tax loss of $9 million in 2015. The sale of the confectionery business in Costa Rica generated a pre-tax and after-tax gain of $9 million in 2016. |
| (9) | Refer to Note 5, Goodwill and Intangible Assets, for more information on the impairment charges recorded in 2015 and 2014 related to trademarks. |
| (10) | Refer to Note 7, Integration Program and Cost Savings Initiatives, to the consolidated financial statements in our Form 10-K for the year ended December 31, 2015 for more information on our integration costs in 2015 and 2014. |
| (11) | Refer to Note 2, Divestitures and Acquisitions, for more information on the acquisitions of a biscuit operation in Vietnam and Enjoy Life Foods. |
| (12) | Refer to Note 8, Financial Instruments, Note 16, Segment Reporting, and Non-GAAP Financial Measures appearing later in this section for more information on these unrealized gains and losses on commodity and forecasted currency transaction derivatives. |
During 2015, higher net pricing outpaced increased input costs. Higher net pricing, due to input-cost driven pricing actions taken during the year, was reflected across all segments. The increase in input costs was driven by higher raw material costs, in part due to higher currency exchange transaction costs on imported materials, partially offset by lower manufacturing costs. Unfavorable volume / mix was reflected across all segments.
Total selling, general and administrative expenses decreased $880 million from 2014, due to a number of factors noted in the table above, including in part, a favorable currency impact, the adjustment for deconsolidating our historical coffee business, lower devaluation charges related to our net monetary assets in Venezuela and the absence of 2012-2014 Restructuring Program costs. The decreases were partially offset by increases from higher costs incurred for the 2014-2018 Restructuring Program, costs associated with the coffee business transactions, lower value-added tax (“VAT”)-related settlements, the reclassification of equity method investment earnings, the impact of acquisitions and a gain on a sale of property in 2014.
Excluding the factors noted above, selling, general and administrative expenses increased $321 million from 2014. The increase was driven primarily by higher advertising and consumer promotions support, particularly behind our Power Brands.
We recorded a benefit of $30 million in 2015 from VAT-related settlements in Latin America as compared to $84 million in 2014. Unfavorable currency impacts decreased operating income by $453 million, due primarily to the strength of the U.S. dollar relative to most currencies, including the euro, Brazilian real, British pound sterling, Australian dollar and Russian ruble.
Excluding the portion related to deconsolidating our historical coffee business, the change in unrealized gains / (losses) increased operating income by $129 million in 2015. In 2015, the net unrealized gains on currency and commodity hedging activity were $56 million ($96 million including coffee related activity), as compared to net unrealized losses of $73 million ($112 million including coffee related activity) in 2014 related to currency and commodity hedging activity.
Operating income margin increased from 9.5% in 2014 to 30.0% in 2015. The increase in operating income margin was driven primarily by the pre-tax gain on the coffee business transactions, an increase in our Adjusted Operating Income margin, the absence of 2012-2014 Restructuring Program costs, the favorable year-over-year change in mark-to-market gains / losses from derivatives and lower devaluation charges related to our net monetary assets in Venezuela. The items that increased operating income margin were partially offset by the loss on deconsolidation of Venezuela, higher costs incurred for the 2014-2018 Restructuring Program and costs associated with the coffee business transactions. Adjusted Operating Income margin increased from 12.0% in 2014 to 13.0% in 2015. The increase in Adjusted Operating Income margin was driven primarily by improved gross margin, reflecting productivity efforts, and improved overhead leverage from cost reduction programs, partially offset by increased advertising and consumer promotions support.
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Net Earnings and Earnings per Share Attributable to Mondelēz International – Net earnings attributable to Mondelēz International of $7,267 million increased by $5,083 million (232.7%) in 2015. Diluted EPS attributable to Mondelēz International was $4.44 in 2015, up $3.16 (246.9%) from 2014. Adjusted EPS (1) was $1.62 in 2015, down $0.11 (6.4%) from 2014. Adjusted EPS on a constant currency basis (1) was $1.90 in 2015, up $0.17 (9.8%) from 2014.
| Diluted EPS | ||||
| Diluted EPS Attributable to Mondelēz International for the Year Ended December 31, 2014 |
$ | 1.28 | ||
| Spin-Off Costs (2) |
0.01 | |||
| 2012-2014 Restructuring Program costs (3) |
0.21 | |||
| 2014-2018 Restructuring Program costs (3) |
0.16 | |||
| Net earnings from Venezuelan subsidiaries (4) |
(0.05 | ) | ||
| Remeasurement of net monetary assets in Venezuela (4) |
0.09 | |||
| (Income) / costs associated with the coffee business transactions (5) |
(0.19 | ) | ||
| Net earnings from divestiture (6) |
(0.01 | ) | ||
| Intangible asset impairment charges (7) |
0.02 | |||
| Integration Program and other acquisition integration costs (8) |
– | |||
| Acquisition-related costs (9) |
– | |||
| Mark-to-market losses from derivatives (10) |
0.03 | |||
| Loss on debt extinguishment and related expenses (11) |
0.18 | |||
|
|
|
|||
| Adjusted EPS (1) for the Year Ended December 31, 2014 |
$ | 1.73 | ||
| Increase in operations |
0.18 | |||
| Decrease in operations from historical coffee business, |
(0.08 | ) | ||
| Impact of accounting calendar change (4) |
0.01 | |||
| Impact of acquisitions (10) |
0.01 | |||
| Lower VAT-related settlements |
(0.03 | ) | ||
| Gain on sale of property in 2014 |
– | |||
| Lower interest and other expense, net (13) |
0.06 | |||
| Changes in shares outstanding (14) |
0.07 | |||
| Changes in income taxes (15) |
(0.05 | ) | ||
|
|
|
|||
| Adjusted EPS (constant currency) (1) for the Year Ended December 31, 2015 |
$ | 1.90 | ||
| Unfavorable currency - translation |
(0.28 | ) | ||
|
|
|
|||
| Adjusted EPS (1) for the Year Ended December 31, 2015 |
$ | 1.62 | ||
| 2012-2014 Restructuring Program costs (3) |
– | |||
| 2014-2018 Restructuring Program costs (3) |
(0.45 | ) | ||
| Net earnings from Venezuelan subsidiaries (4) |
0.10 | |||
| Remeasurement of net monetary assets in Venezuela (4) |
(0.01 | ) | ||
| Loss on deconsolidation of Venezuela (4) |
(0.48 | ) | ||
| Income / (costs) associated with the coffee business transactions (5) |
0.01 | |||
| Gain on the coffee business transactions (5) |
4.05 | |||
| Net earnings from divestiture (6) |
(0.02 | ) | ||
| Loss on divestiture (6) |
(0.01 | ) | ||
| Intangible asset impairment charges (7) |
(0.03 | ) | ||
| Acquisition integration costs (8) |
– | |||
| Acquisition-related costs (9) |
– | |||
| Mark-to-market gains from derivatives (10) |
0.03 | |||
| Loss on debt extinguishment and related expenses (11) |
(0.29 | ) | ||
| Loss related to interest rate swaps (16) |
(0.01 | ) | ||
| Equity method investee acquisition-related and other adjustments (17) |
(0.07 | ) | ||
|
|
|
|||
| Diluted EPS Attributable to Mondelēz International for the Year Ended December 31, 2015 |
$ | 4.44 | ||
|
|
|
|||
| (1) | Refer to the Non-GAAP Financial Measures section appearing later in this section. |
| (2) | Refer to Note 2, Divestitures and Acquisitions, for more information on Spin-Off Costs incurred in 2014 following the 2012 Kraft Foods Group divestiture. |
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Table of Contents
| (3) | Refer to Note 6, Restructuring Programs, for more information on our 2014-2018 Restructuring Program and our 2012-2014 Restructuring Program. |
| (4) | Refer to Note 1, Summary of Significant Accounting Policies, for more information on the loss on deconsolidation of Venezuela in 2015, remeasurements of net monetary assets in Venezuela in 2015 and 2014 and the accounting calendar change in 2015. |
| (5) | Refer to Note 2, Divestitures and Acquisitions, for more information on the coffee business transactions. Net gains of $436 million in 2015 and $628 million in 2014 on the currency hedges related to the coffee business transactions were recorded in interest and other expense, net and are included in the income / (costs) associated with the coffee business transactions of $0.01 in 2015 and $(0.19) in 2014 above. |
| (6) | Includes the divestiture of AGF that closed on April 23, 2015 and the December 1, 2016 sale of a confectionery business in Costa Rica and does not include the deconsolidation of our coffee businesses. The divestiture of AGF generated a pre-tax gain of $13 million and after-tax loss of $9 million in 2015. The sale of the confectionery business in Costa Rica generated a pre-tax and after-tax gain of $9 million in 2016. Refer to Note 2, Divestitures and Acquisitions, and Non-GAAP Financial Measures appearing later in this section for more information. |
| (7) | Refer to Note 5, Goodwill and Intangible Assets, for more information on the impairment charges recorded in 2015 and 2014 related to trademarks. |
| (8) | Refer to Note 7, Integration Program and Cost Savings Initiatives, to the consolidated financial statements in our Form 10-K for the year ended December 31, 2015 for more information on our integration costs in 2015 and 2014. |
| (9) | Refer to Note 2, Divestitures and Acquisitions, for more information on the acquisitions of a biscuit operation in Vietnam and Enjoy Life Foods. |
| (10) | Refer to Note 8, Financial Instruments, Note 16, Segment Reporting, and Non-GAAP Financial Measures appearing later in this section for more information on these unrealized gains and losses on commodity and forecasted currency transaction derivatives. |
| (11) | Refer to Note 7, Debt and Borrowing Arrangements, for more information on our loss on debt extinguishment and related expenses in connection with our debt tender offers. |
| (12) | Includes our historical global coffee business prior to the July 2, 2015 deconsolidation. We reclassified the results of our historical coffee business from Adjusted Operating Income and included them with equity method investment earnings in Adjusted EPS to facilitate comparisons of past and future coffee operating results. Refer to Note 2, Divestitures and Acquisitions, and Non-GAAP Financial Measures appearing later in this section for more information. |
| (13) | Excludes the favorable currency impact on interest expense related to our non-U.S. dollar-denominated debt which is included in currency translation. |
| (14) | Refer to Note 10, Stock Plans, for more information on our equity compensation programs and share repurchase program and Note 15, Earnings Per Share, for earnings per share weighted-average share information. |
| (15) | Refer to Note 14, Income Taxes, for more information on the change in our income taxes and effective tax rate. |
| (16) | Refer to Note 8, Financial Instruments, for more information on our interest rate swaps, which we no longer designate as cash flow hedges during the three months ended March 31, 2015 due to a change in financing and hedging plans. |
| (17) | Includes our proportionate share of unusual or infrequent items, such as acquisition and divestiture-related costs and restructuring program costs, recorded by our JDE equity method investee. |
Results of Operations by Reportable Segment
Our operations and management structure are organized into four reportable operating segments:
| • | Latin America |
| • | AMEA |
| • | Europe |
| • | North America |
On October 1, 2016, we integrated our EEMEA operating segment into our Europe and Asia Pacific operating segments to further leverage and optimize the operating scale built within the Europe and Asia Pacific regions. Russia, Ukraine, Turkey, Belarus, Georgia and Kazakhstan were combined within our Europe operating segment, while the remaining Middle East and African countries were combined within our Asia Pacific region to form a new AMEA regional operating segment. We have reflected the segment change as if it had occurred in all periods presented.
We manage our operations by region to leverage regional operating scale, manage different and changing business environments more effectively and pursue growth opportunities as they arise in our key markets. Our regional management teams have responsibility for the business, product categories and financial results in the regions.
Historically, we have recorded income from equity method investments within our operating income as these investments were part of our base business. Beginning in the third quarter of 2015, to align with the accounting for our new coffee equity method investment in JDE, we began to record the earnings from our equity method investments in equity method investment earnings outside of segment operating income. For the six months ended December 31, 2015, after-tax equity method investment net earnings were less than $1 million on a combined basis. Earnings from equity method investments through July 2, 2015 recorded within segment operating income were $52 million in AMEA and $4 million in North America. For the year ended December 31, 2014 these earnings were $104 million in AMEA and $9 million in North America. See Note 1, Summary of Significant Accounting Policies – Principles of Consolidation, and Note 2, Divestitures and Acquisitions, for additional information.
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Table of Contents
In 2015, we also began to report stock-based compensation for our corporate employees within general corporate expenses that were reported within our North America region. We reclassified $32 million of corporate stock-based compensation expense in 2015 from the North America segment to general corporate expenses.
We use segment operating income to evaluate segment performance and allocate resources. We believe it is appropriate to disclose this measure to help investors analyze segment performance and trends. See Note 16, Segment Reporting, for additional information on our segments and Items Affecting Comparability of Financial Results earlier in this section for items affecting our segment operating results.
Our segment net revenues and earnings, revised to reflect our new segment structure in all periods, were:
| For the Years Ended December 31, | ||||||||||||
| 2016 | 2015 | 2014 | ||||||||||
| (in millions) | ||||||||||||
| Net revenues: |
||||||||||||
| Latin America (1) |
$ | 3,392 | $ | 4,988 | $ | 5,153 | ||||||
| AMEA (2) |
5,816 | 6,002 | 6,367 | |||||||||
| Europe (2) |
9,755 | 11,672 | 15,788 | |||||||||
| North America |
6,960 | 6,974 | 6,936 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net revenues |
$ | 25,923 | $ | 29,636 | $ | 34,244 | ||||||
|
|
|
|
|
|
|
|||||||
| (1) | Net revenues of $1,217 million for 2015 and $760 million for 2014 from our Venezuelan subsidiaries are included in our consolidated financial statements. Beginning in 2016, we account for our Venezuelan subsidiaries using the cost method of accounting and no longer include net revenues of our Venezuelan subsidiaries within our consolidated financial statements. Refer to Note 1, Summary of Significant Accounting Policies – Currency Translation and Highly Inflationary Accounting: Venezuela, for more information. |
| (2) | On July 2, 2015, we contributed our global coffee businesses primarily from our Europe and AMEA segments. Net revenues of our global coffee business were $1,561 million in Europe and $66 million in AMEA for the year ended December 31, 2015. Refer to Note 2, Divestitures and Acquisitions – JDE Coffee Business Transactions, for more information. |
| For the Years Ended December 31, | ||||||||||||
| 2016 | 2015 | 2014 | ||||||||||
| (in millions) | ||||||||||||
| Earnings before income taxes: |
||||||||||||
| Operating income: |
||||||||||||
| Latin America |
$ | 271 | $ | 485 | $ | 475 | ||||||
| AMEA |
506 | 389 | 530 | |||||||||
| Europe |
1,267 | 1,350 | 1,952 | |||||||||
| North America |
1,078 | 1,105 | 922 | |||||||||
| Unrealized (losses) / gains on hedging activities (mark-to-market impacts) |
(94 | ) | 96 | (112 | ) | |||||||
| General corporate expenses |
(291 | ) | (383 | ) | (317 | ) | ||||||
| Amortization of intangibles |
(176 | ) | (181 | ) | (206 | ) | ||||||
| Gains on divestitures and |
9 | 6,822 | – | |||||||||
| Loss on deconsolidation of Venezuela |
– | (778 | ) | – | ||||||||
| Acquisition-related costs |
(1 | ) | (8 | ) | (2 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Operating income |
2,569 | 8,897 | 3,242 | |||||||||
| Interest and other expense, net |
(1,115 | ) | (1,013 | ) | (688 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Earnings before income taxes |
$ | 1,454 | $ | 7,884 | $ | 2,554 | ||||||
|
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Latin America
| For the Years Ended December 31, |
||||||||||||||||
| 2016 | 2015 | $ change | % change | |||||||||||||
| (in millions) | ||||||||||||||||
| Net revenues |
$ | 3,392 | $ | 4,988 | $ | (1,596 | ) | (32.0)% | ||||||||
| Segment operating income |
271 | 485 | (214 | ) | (44.1)% | |||||||||||
| For the Years Ended December 31, |
||||||||||||||||
| 2015 | 2014 | $ change | % change | |||||||||||||
| (in millions) | ||||||||||||||||
| Net revenues |
$ | 4,988 | $ | 5,153 | $ | (165 | ) | (3.2)% | ||||||||
| Segment operating income |
485 | 475 | 10 | 2.1% | ||||||||||||
2016 compared with 2015:
Net revenues decreased $1,596 million (32.0%), due to the deconsolidation of our Venezuelan operations (21.9 pp), unfavorable currency (14.8 pp), unfavorable volume / mix (5.3 pp) and the impact of a divestiture (0.1 pp), partially offset by higher net pricing (10.1 pp). The deconsolidation of our Venezuelan operations resulted in a year-over-year decrease in net revenues of $1,217 million. Unfavorable currency impacts were due primarily to the strength of the U.S. dollar relative to most currencies in the region, including the Argentinean peso and Mexican peso. Unfavorable volume / mix, which primarily occurred in Brazil and Argentina, was largely due to the impact of pricing-related elasticity as well as strategic decisions to exit certain low-margin product lines. Unfavorable volume / mix was driven by declines in all categories except for cheese & grocery. Higher net pricing was reflected across all categories driven primarily by Argentina, Brazil and Mexico.
Segment operating income decreased $214 million (44.1%), primarily due to higher raw material costs, the deconsolidation of our Venezuelan operations, unfavorable volume / mix and unfavorable currency. These unfavorable items were partially offset by higher net pricing, lower other selling, general and administrative expenses (including higher year-over year VAT-related settlements), lower manufacturing costs, lower advertising and consumer promotion costs, lower costs incurred for the 2014-2018 Restructuring Program and the absence of remeasurement losses in 2016 related to our net monetary assets in Venezuela.
2015 compared with 2014:
Net revenues decreased $165 million (3.2%), due to unfavorable currency (21.0 pp), unfavorable volume / mix (5.1 pp) and the adjustment for deconsolidating our historical coffee business (0.1 pp), partially offset by higher net pricing (12.0 pp) and the favorable historical results of our Venezuelan subsidiaries prior to the December 31, 2015 deconsolidation (11.0 pp). Unfavorable currency impacts were due primarily to the strength of the U.S. dollar relative to most currencies in the region, including the Brazilian real, Mexican peso and Argentinean peso. Unfavorable volume / mix was largely due to the impact of pricing-related elasticity as well as strategic decisions to exit certain low-margin product lines. Unfavorable volume / mix was driven by declines in chocolate, refreshment beverages and cheese & grocery, partially offset by gains in biscuits, gum & candy. The adjustment for deconsolidating our historical coffee business resulted in a year-over-year decrease in net revenues of $5 million. Higher net pricing was reflected across all categories. Both the unfavorable volume / mix and higher net pricing were driven primarily by Brazil and Argentina.
Segment operating income increased $10 million (2.1%), primarily due to higher net pricing, higher remeasurement losses in 2014 related to our net monetary assets in Venezuela, the favorable historical results of our Venezuelan subsidiaries prior to the December 31, 2015 deconsolidation, lower manufacturing costs and the absence of 2012-2014 Restructuring Program costs. These favorable items were partially offset by higher raw material costs, unfavorable currency, higher advertising and consumer promotion costs, higher other selling, general and administrative expenses (including lower year-over-year VAT-related settlements), unfavorable volume / mix, higher costs incurred for the 2014-2018 Restructuring Program and an intangible asset impairment charge in 2015 related to a biscuit trademark.
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AMEA
| For the Years Ended December 31, |
||||||||||||||||
| 2016 | 2015 | $ change | % change | |||||||||||||
| (in millions) | ||||||||||||||||
| Net revenues |
$ | 5,816 | $ | 6,002 | $ | (186 | ) | (3.1)% | ||||||||
| Segment operating income |
506 | 389 | 117 | 30.1% | ||||||||||||
| For the Years Ended December 31, |
||||||||||||||||
| 2015 | 2014 | $ change | % change | |||||||||||||
| (in millions) | ||||||||||||||||
| Net revenues |
$ | 6,002 | $ | 6,367 | $ | (365 | ) | (5.7)% | ||||||||
| Segment operating income |
389 | 530 | (141 | ) | (26.6)% | |||||||||||
2016 compared with 2015:
Net revenues decreased $186 million (3.1%), due to unfavorable currency (3.7 pp), the adjustment for deconsolidating our historical coffee business (1.1 pp) and unfavorable volume / mix (1.0 pp), partially offset by higher net pricing (1.5 pp) and the impact of an acquisition (1.2 pp). Unfavorable currency impacts were due primarily to the strength of the U.S. dollar relative to most currencies in the region, including the Chinese yuan, Indian rupee, South African rand, Egyptian pound, Nigerian naira, Australian dollar and Philippine peso, partially offset by the strength of the Japanese yen relative to the U.S. dollar. The adjustment for deconsolidating our historical coffee business resulted in a year-over-year decrease in net revenues of $66 million. Unfavorable volume / mix, including the unfavorable impact of strategic decisions to exit certain low-margin product lines, was driven by declines in candy, cheese & grocery, refreshment beverages and chocolate, partially offset by gains in biscuits and gum. Higher net pricing was driven by chocolate, candy, biscuits and refreshment beverages, partially offset by lower net pricing in cheese & grocery and gum. The acquisition of a biscuit operation in Vietnam in July 2015 added net revenues of $71 million (constant currency basis).
Segment operating income increased $117 million (30.1%), primarily due to lower manufacturing costs, higher net pricing, lower other selling, general and administrative expenses, lower costs incurred for the 2014-2018 Restructuring Program, the absence of costs associated with the coffee business transactions, the impact of the Vietnam acquisition and lower advertising and consumer promotion costs. These favorable items were partially offset by higher raw material costs, the reclassification of equity method investment earnings, unfavorable volume / mix, unfavorable currency, the deconsolidation of our historical coffee business, and the impact of divestitures.
2015 compared with 2014:
Net revenues decreased $365 million (5.7%), due to unfavorable currency (8.8 pp), unfavorable volume / mix (2.5 pp) and the adjustment for deconsolidating our historical coffee business (0.6 pp), partially offset by higher net pricing (4.2 pp) and the impact of an acquisition (2.0 pp). Unfavorable currency impacts were due primarily to the strength of the U.S. dollar relative to most currencies in the region, including the Australian dollar, South African rand, Indian rupee, Japanese yen, Nigerian naira, Chinese yuan and Egyptian pound. Unfavorable volume / mix was due largely to the impact of pricing-related elasticity as well as strategic decisions to exit certain low-margin product lines. Unfavorable volume / mix was driven by declines in all categories except biscuits and gum. The adjustment for deconsolidating our historical coffee business resulted in a year-over-year decrease in net revenues of $49 million. Higher net pricing was reflected across all categories. The acquisition of a biscuit operation in Vietnam in July 2015 added net revenues of $128 million (constant currency basis).
Segment operating income decreased $141 million (26.6%), primarily due to higher raw material costs, higher costs incurred for the 2014-2018 Restructuring Program, higher advertising and consumer promotion costs, unfavorable currency, higher other selling, general and administrative expenses (including a phase-out of a local tax incentive program), the reclassification of equity method investment earnings, unfavorable volume / mix, the adjustment for deconsolidating our historical coffee business, costs associated with the coffee business transactions and higher other acquisition-related integration costs. These unfavorable items were partially offset by higher net pricing, lower manufacturing costs, the absence of 2012-2014 Restructuring Program costs, the impact of the Vietnam acquisition and lower intangible asset impairment charges (related to candy and biscuit trademarks in 2015 and a biscuit trademark in 2014).
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Europe
| For the Years Ended December 31, |
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| 2016 | 2015 | $ change | % change | |||||||||||||
| (in millions) | ||||||||||||||||
| Net revenues |
$ | 9,755 | $ | 11,672 | $ | (1,917 | ) | (16.4)% | ||||||||
| Segment operating income |
1,267 | 1,350 | (83 | ) | (6.1)% | |||||||||||
| For the Years Ended December 31, |
||||||||||||||||
| 2015 | 2014 | $ change | % change | |||||||||||||
| (in millions) | ||||||||||||||||
| Net revenues |
$ | 11,672 | $ | 15,788 | $ | (4,116 | ) | (26.1)% | ||||||||
| Segment operating income |
1,350 | 1,952 | (602 | ) | (30.8)% | |||||||||||
2016 compared with 2015:
Net revenues decreased $1,917 million (16.4%), due to the adjustment for deconsolidating our historical coffee business (12.9 pp), unfavorable currency (4.3 pp) and lower net pricing (0.4 pp), partially offset by favorable volume / mix (1.1 pp) and the impact of an acquisition (0.1 pp). The adjustment for deconsolidating our historical coffee business resulted in a year-over-year decrease in net revenues of $1,561 million. Unfavorable currency impacts reflected the strength of the U.S. dollar against most currencies in the region, primarily the British pound sterling. Lower net pricing was reflected across most categories except gum and refreshment beverages. Favorable volume / mix, including the unfavorable impact of strategic decisions to exit certain low-margin product lines, was driven by biscuits, chocolate and cheese & grocery, partially offset by declines in gum, refreshment beverages and candy. The purchase of the license to manufacture, market and sell Cadbury-branded biscuits in November 2016 added net revenues of $16 million (constant currency basis).
Segment operating income decreased $83 million (6.1%), primarily due to the deconsolidation of our historical coffee business, unfavorable currency, higher raw material costs, divestiture-related costs, higher costs incurred for the 2014-2018 Restructuring Program, lower net pricing and higher intangible asset impairment charges. These unfavorable items were partially offset by the absence of costs associated with the JDE coffee business transactions, lower manufacturing costs, lower other selling, general and administrative expenses and favorable volume / mix.
2015 compared with 2014:
Net revenues decreased $4,116 million (26.1%), due to unfavorable currency (16.2 pp), the adjustment for deconsolidating our historical coffee business (9.4 pp) and unfavorable volume / mix (3.3 pp), partially offset by higher net pricing (2.8 pp). Unfavorable currency impacts primarily reflected the strength of the U.S. dollar against most currencies in the region, including the euro and British pound sterling. The adjustment for deconsolidating our historical coffee business resulted in a year-over-year decrease in net revenues of $2,095 million. Unfavorable volume / mix was largely due to the impact of pricing-related elasticity as well as strategic decisions to exit certain low-margin product lines. Unfavorable volume / mix was driven by declines in chocolate, gum, refreshment beverages and cheese & grocery, partially offset by gains in biscuits. Higher net pricing was driven by chocolate, gum and candy, partially offset by lower net pricing in cheese & grocery and refreshment beverages.
Segment operating income decreased $602 million (30.8%), primarily due to the adjustment for deconsolidating our historical coffee business, unfavorable currency, higher raw material costs, higher costs incurred for the 2014-2018 Restructuring Program, costs associated with the coffee business transactions, unfavorable volume / mix, higher advertising and consumer promotion costs and higher intangible asset impairment charges related to a candy trademark. These unfavorable items were partially offset by higher net pricing, the lower manufacturing costs, absence of 2012-2014 Restructuring Program costs and lower other selling, general and administrative expenses (net of the unfavorable year-over-year impact from the 2014 gain on a sale of property in the United Kingdom).
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North America
| For the Years Ended December 31, |
||||||||||||||||
| 2016 | 2015 | $ change | % change | |||||||||||||
| (in millions) | ||||||||||||||||
| Net revenues |
$ | 6,960 | $ | 6,974 | $ | (14 | ) | (0.2)% | ||||||||
| Segment operating income |
1,078 | 1,105 | (27 | ) | (2.4)% | |||||||||||
| For the Years Ended December 31, |
||||||||||||||||
| 2015 | 2014 | $ change | % change | |||||||||||||
| (in millions) | ||||||||||||||||
| Net revenues |
$ | 6,974 | $ | 6,936 | $ | 38 | 0.5% | |||||||||
| Segment operating income |
1,105 | 922 | 183 | 19.8% | ||||||||||||
2016 compared with 2015:
Net revenues decreased $14 million (0.2%), due to the impact of an accounting calendar change made in the prior year (1.1 pp), unfavorable currency (0.3 pp) and lower net pricing (0.2 pp), partially offset by favorable volume/mix (1.4 pp). The prior-year change in North America’s accounting calendar resulted in a year-over-year decrease in net revenues of $76 million. Unfavorable currency impact was due to the strength of the U.S. dollar relative to the Canadian dollar. Lower net pricing was reflected in biscuits, partially offset by higher net pricing in chocolate, gum and candy. Favorable volume / mix, including the unfavorable impact of strategic decisions to exit certain low-margin product lines, was driven by gains in biscuits and candy, partially offset by declines in gum and chocolate.
Segment operating income decreased $27 million (2.4%), primarily due to higher costs incurred for the 2014-2018 Restructuring Program, higher advertising and consumer promotion costs, intangible asset impairment charges, the year-over-year impact of the prior-year accounting calendar change, higher raw material costs and lower net pricing. These unfavorable items were mostly offset by lower other selling, general and administrative expenses (including the gain on sale of property), lower manufacturing costs, favorable volume/mix and the gain on the sale of an intangible asset.
2015 compared with 2014:
Net revenues increased $38 million (0.5%), due to an accounting calendar change (1.2 pp), an acquisition (0.5 pp), favorable volume / mix (0.5 pp) and higher net pricing (0.3 pp), partially offset by unfavorable currency (2.0 pp). The change in North America’s accounting calendar added net revenues of $78 million (constant currency basis). The acquisition of the Enjoy Life Foods snack food business in February 2015 added net revenues of $37 million. Favorable volume / mix was driven by gains in biscuits and candy, partially offset by declines in gum and chocolate. Higher net pricing was reflected in gum and chocolate, partially offset by lower net pricing in biscuits and candy. Unfavorable currency impact was due to the strength of the U.S. dollar relative to the Canadian dollar.
Segment operating income increased $183 million (19.8%), primarily due to the absence of 2012-2014 Restructuring Program costs, lower manufacturing costs, lower other selling, general and administrative expenses (including the reclassification of corporate stock-based compensation), the impact of an accounting calendar change, higher net pricing and lower raw material costs. These favorable items were partially offset by higher costs incurred for the 2014-2018 Restructuring Program, unfavorable currency, higher advertising and consumer promotion costs, unfavorable volume / mix and the reclassification of equity method investment earnings.
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We prepare our consolidated financial statements in conformity with U.S. GAAP. The preparation of these financial statements requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the periods presented. Actual results could differ from those estimates and assumptions. Note 1, Summary of Significant Accounting Policies, to the consolidated financial statements includes a summary of the significant accounting policies we used to prepare our consolidated financial statements. We have discussed the selection and disclosure of our critical accounting policies and estimates with our Audit Committee. The following is a review of our most significant assumptions and estimates.
Goodwill and Non-Amortizable Intangible Assets:
We test goodwill and non-amortizable intangible assets for impairment on an annual basis on October 1. We assess goodwill impairment risk throughout the year by performing a qualitative review of entity-specific, industry, market and general economic factors affecting our goodwill reporting units. We review our operating segment and reporting unit structure for goodwill testing annually or as significant changes in the organization occur. Annually, we may perform qualitative testing, or depending on factors such as prior-year test results, current year developments, current risk evaluations and other practical considerations, we may elect to do quantitative testing instead. Quantitative impairment testing consists of a two-step evaluation. The first step compares a reporting unit’s estimated fair value with its carrying value. We estimate a reporting unit’s fair value using a discounted cash flow method which incorporates planned growth rates, market-based discount rates and estimates of residual value. This year, for our Europe and North America reporting units, we used a market-based, weighted-average cost of capital of 6.7% to discount the projected cash flows of those operations. For our Latin America and AMEA reporting units, we used a risk-rated discount rate of 9.7%. Estimating the fair value of individual reporting units requires us to make assumptions and estimates regarding our future plans and industry and economic conditions, and our actual results and conditions may differ over time. If the carrying value of a reporting unit’s net assets exceeds its fair value, we would apply a second step to measure the difference between the carrying value and implied fair value of goodwill. If the carrying value of goodwill exceeds its implied fair value, the goodwill is impaired and its carrying value is reduced to the implied fair value of the goodwill.
On October 1, 2016, we integrated our EEMEA operating segment into our Europe and Asia Pacific operating segments. As a result, EEMEA goodwill of $1.3 billion was reallocated to new reporting units based on the relative fair value of the EEMEA component businesses that moved to the Europe and Asia Pacific segments. Goodwill by segment as of December 31, 2016 reflects the results of the reallocation and the December 31, 2015 goodwill by segment information was recast to reflect the October 1, 2016 reallocation of goodwill.
On July 2, 2015, we deconsolidated our global coffee businesses from our Europe and AMEA segments. Goodwill was deconsolidated from the impacted reporting units based on relative fair values of the coffee and remaining businesses. Intangible assets contributed with the coffee business transactions were specifically identified. We deconsolidated total goodwill of $1,664 million and intangible assets of less than $1 million during the third quarter of 2015. Refer to Note 2, Divestitures and Acquisitions – JDE Coffee Business Transactions, for more information.
In 2016, 2015 and 2014, there were no impairments of goodwill. In connection with our 2016 annual impairment testing, each of our reporting units had sufficient fair value in excess of carrying value. While all reporting units passed our annual impairment testing, if planned business performance expectations are not met or specific valuation factors outside of our control, such as discount rates, change significantly, then the estimated fair values of a reporting unit or reporting units might decline and lead to a goodwill impairment in the future.
Annually, we assess non-amortizable intangible assets for impairment by performing a qualitative review and assessing events and circumstances that could affect the fair value or carrying value of the indefinite-lived intangible assets. If significant potential impairment risk exists for a specific asset, we quantitatively test it for impairment by comparing its estimated fair value with its carrying value. We determine estimated fair value using planned growth rates, market-based discount rates and estimates of royalty rates. If the carrying value of the asset exceeds its estimated fair value, the asset is impaired and its carrying value is reduced to the estimated fair value.
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During our 2016 annual testing of non-amortizable intangible assets, we recorded $98 million of impairment charges related to five trademarks. The impairments arose due to lower than expected product growth in part driven by decisions to redirect support from these trademarks to other regional and global brands, as well as slowdowns in local economies. We recorded charges related to biscuits, candy and gum trademarks of $41 million in AMEA, $32 million in North America, $22 million in Europe, and $3 million in Latin America. The impairment charges were calculated as the excess of the carrying value over the estimated fair value of the intangible assets on a global basis and were recorded within asset impairment and exit costs. We primarily use a relief of royalty valuation method, which utilizes estimates of future sales, growth rates, royalty rates and discount rates in determining a brand’s global fair value. During our 2016 intangible asset impairment review, we noted nine brands, including the five impaired trademarks, with $630 million of aggregate book value as of December 31, 2016 that each had a fair value in excess of book value of 10% or less. While these other four intangible assets passed our annual impairment testing and we believe our current plans for each of these brands will allow them to continue to not be impaired, if planned business performance expectations are not met or specific valuation factors outside of our control, such as discount rates, change significantly, then a brand or brands could become impaired in the future. In 2015, we recorded a charge related to candy and biscuit trademarks of $44 million in our AMEA segment, $22 million in Europe and $5 million in Latin America. Additionally, in connection with the deconsolidation of our Venezuelan operations on December 31, 2015, we recorded $12 million of impairment charges within the loss on deconsolidation of Venezuela related to a biscuit trademark. In 2014, we recorded a $48 million charge related to a biscuit trademark in our AMEA segment and a $9 million charge related to a candy trademark in our Europe segment.
Refer to Note 5, Goodwill and Intangible Assets, for additional information.
Trade and marketing programs:
We promote our products with advertising, marketing, sales incentives and trade promotions. These programs include, but are not limited to, cooperative advertising, in-store displays, consumer promotions, new product introduction fees, discounts, coupons, rebates and volume-based incentives. We expense advertising costs either in the period the advertising first takes place or as incurred. Sales incentive and trade promotion activities are recorded as a reduction to revenues based on amounts estimated due to customers and consumers at the end of a period. We base these estimates principally on historical utilization and redemption rates. For interim reporting purposes, advertising expenses and sales incentives are charged to operations as a percentage of volume, based on estimated volume and estimated program spending. We do not defer costs on our year-end consolidated balance sheet and all marketing costs are recorded as an expense in the year incurred.
Employee Benefit Plans:
We sponsor various employee benefit plans throughout the world. These include primarily pension plans and postretirement healthcare benefits. For accounting purposes, we estimate the pension and post-retirement healthcare benefit obligations utilizing assumptions and estimates for discount rates; expected returns on plan assets; expected compensation increases; employee-related factors such as turnover, retirement age and mortality; and health care cost trends. We review our actuarial assumptions on an annual basis and make modifications to the assumptions based on current rates and trends when appropriate. Our assumptions also reflect our historical experiences and management’s best judgment regarding future expectations. These and other assumptions affect the annual expense and obligations recognized for the underlying plans.
As permitted by U.S. GAAP, we generally amortize the effect of changes in the assumptions over future periods. The cost or benefit of plan changes, such as increasing or decreasing benefits for prior employee service (prior service cost), is deferred and included in expense on a straight-line basis over the average remaining service period of the employees expected to receive benefits.
Since pension and post-retirement liabilities are measured on a discounted basis, the discount rate significantly affects our plan obligations and expenses. The expected return on plan assets assumption affects our pension plan expenses, as many of our pension plans are partially funded. The assumptions for discount rates and expected rates of return and our process for setting these assumptions are described in Note 9, Benefit Plans, to the consolidated financial statements.
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While we do not anticipate further changes in the 2017 assumptions for our U.S. and non-U.S. pension and postretirement health care plans, as a sensitivity measure, a fifty-basis point change in our discount rates or the expected rate of return on plan assets would have the following effects, increase / (decrease), on our annual benefit plan costs:
| As of December 31, 2016 | ||||||||||||||||
| U.S. Plans | Non-U.S. Plans | |||||||||||||||
| Fifty-Basis-Point | Fifty-Basis-Point | |||||||||||||||
| Increase | Decrease | Increase | Decrease | |||||||||||||
| (in millions) | ||||||||||||||||
| Effect of change in discount rate on pension costs |
$ | (14 | ) | $ | 16 | $ | (63 | ) | $ | 67 | ||||||
| Effect of change in expected rate of return on plan assets on pension costs |
(7 | ) | 7 | (39 | ) | 39 | ||||||||||
| Effect of change in discount rate on postretirement health care costs |
(4 | ) | 4 | (1 | ) | 1 | ||||||||||
Income Taxes:
As a global company, we calculate and provide for income taxes in each tax jurisdiction in which we operate. The provision for income taxes includes the amounts payable or refundable for the current year, the effect of deferred taxes and impacts from uncertain tax positions. Our provision for income taxes is significantly affected by shifts in the geographic mix of our pre-tax earnings across tax jurisdictions, changes in tax laws and regulations, tax planning opportunities available in each tax jurisdiction and the ultimate outcome of various tax audits.
Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statement and tax bases of our assets and liabilities and for operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates that will apply to taxable income in the years in which those differences are expected to be recovered or settled. Valuation allowances are established for deferred tax assets when it is more likely than not that a tax benefit will not be realized.
We believe our tax positions comply with applicable tax laws and that we have properly accounted for uncertain tax positions. We recognize tax benefits in our financial statements from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by tax authorities based on the technical merits of the position. The amount we recognize is measured as the largest benefit that has a greater than 50 percent likelihood of being realized upon settlement. We evaluate uncertain tax positions on an ongoing basis and adjust the amount recognized in light of changing facts and circumstances, such as the progress of a tax audit or expiration of a statute of limitations. We believe the estimates and assumptions used to support our evaluation of uncertain tax positions are reasonable. However, final determination of historical tax liabilities, either by settlement with tax authorities or due to expiration of statutes of limitations, could be materially different from estimates reflected on our consolidated balance sheet and historical income tax provisions. The outcome of these final determinations could have a material effect on our provision for income taxes, net earnings or cash flows in the period in which the determination is made.
No taxes have been provided on undistributed foreign earnings that are planned to be indefinitely reinvested. If future events, such as material changes in long-term investment requirements, necessitate that these earnings be distributed, an additional provision for taxes may apply, which could materially affect our provision for income taxes, net earnings or cash flows.
See Note 14, Income Taxes, for additional information on our effective tax rate, current and deferred taxes, valuation allowances and unrecognized tax benefits.
Contingencies:
See Note 12, Commitments and Contingencies, to the consolidated financial statements.
New Accounting Guidance:
See Note 1, Summary of Significant Accounting Policies, to the consolidated financial statements for a discussion of new accounting standards.
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Liquidity and Capital Resources
We believe that cash from operations, our $4.5 billion revolving credit facility and our authorized long-term financing will provide sufficient liquidity for our working capital needs, planned capital expenditures, future contractual obligations, share repurchases and payment of our anticipated quarterly dividends. We continue to utilize our commercial paper program, international credit lines and long-term debt issuances for regular funding requirements. We also use intercompany loans with our international subsidiaries to improve financial flexibility. Earnings outside of the United States are considered indefinitely reinvested and no material tax liability has been accrued as of December 31, 2016. Overall, we do not expect any negative effects to our funding sources that would have a material effect on our liquidity, including the indefinite reinvestment of our earnings outside of the United States.
Net Cash Provided by Operating Activities:
Operating activities provided net cash of $2,838 million in 2016, $3,728 million in 2015 and $3,562 million in 2014. Cash flows from operating activities were lower in 2016 than 2015 due to higher contributions to our pension benefit plans in 2016 and higher working capital cash improvements in 2015 than in 2016. Cash flows from operating activities in all years were favorably impacted by working capital improvements, primarily due to continually decreasing our cash conversion cycle (a metric that measures working capital efficiency and utilizes days sales outstanding, days inventory on hand and days payables outstanding) to negative 28 days in 2016, negative 12 days in 2015 and positive 10 days in 2014. Cash flows from operating activities were favorable in 2015 relative to 2014 primarily due to higher relative working capital cash improvements than in 2014 and significant tax payments in 2014 related to the $2.6 billion Starbucks arbitration award we received in late 2013, partially offset by higher contributions to our pension benefit plans in 2015.
Net Cash Provided by / (Used in) Investing Activities:
Net cash used in investing activities was $1,029 million in 2016, net cash provided by investing activities was $2,649 million in 2015 and net cash used in investing activities was $1,642 million in 2014. The increase in net cash used in investing activities in 2016 relative to 2015 and the increase in net cash provided by investing activities in 2015 relative to 2014 primarily relate to $4.7 billion of proceeds, net of divested cash and transaction costs, from the contribution of our global coffee businesses, the divestiture of AGF and the cash receipt of $1.0 billion due to the settlement of currency exchange forward contracts related to our coffee business transactions in 2015. The increase in net cash used in investing activities in 2016 relative to 2015 is partially offset by lower capital expenditures in 2016 of $290 million. The increase in net cash provided by investing activities in 2015 relative to 2014 is also driven by lower capital expenditures in 2015 of $128 million, partially offset by the $611 million reduction of cash due to the Venezuela deconsolidation, $501 million of contributed JDE receivables and a $43 million cash payment to fund a capital increase in JDE and $527 million of payments to acquire a biscuit operation in Vietnam and the Enjoy Life Foods snack food business in 2015.
Capital expenditures were $1,224 million in 2016, $1,514 million in 2015 and $1,642 million in 2014. We continue to make capital expenditures primarily to modernize manufacturing facilities and support new product and productivity initiatives. We expect 2017 capital expenditures to be up to $1.2 billion, including capital expenditures in connection with our 2014-2018 Restructuring Program. We expect to continue to fund these expenditures from operations.
Net Cash Used in Financing Activities:
Net cash used in financing activities was $1,862 million in 2016, $5,883 million in 2015 and $2,688 million in 2014. The decrease in net cash used in financing activities in 2016 relative to 2015 was primarily due to higher net short-term debt issuances and $1.0 billion of lower share repurchases following the exceptional year of share repurchases using proceeds from the global coffee business transactions in 2015. The increase in net cash used in financing activities in 2015 relative to 2014 was primarily due to higher repayments of long-term debt in 2015 (including the tender offers and euro notes maturities), $1.9 billion of higher share repurchases and higher net short-term debt repayments, partially offset by higher proceeds received from long-term note issuances.
Debt:
From time to time we refinance long-term and short-term debt. Refer to Note 7, Debt and Borrowing Arrangements, for details of our tender offers, debt issuances and maturities during 2016, 2015 and 2014. The nature and amount of our long-term and short-term debt and the proportionate amount of each varies as a result of current and expected business requirements, market conditions and other factors. Due to seasonality, in the first and second quarters of the year, our working capital requirements grow, increasing the need for short-term financing. The third and fourth quarters of the year typically generate higher cash flows. As such, we may issue commercial paper or secure other forms of financing throughout the year to meet short-term working capital needs.
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During 2016, one of our subsidiaries, Mondelez International Holdings Netherlands B.V. (“MIHN”), issued debt totaling $4.5 billion. The operations held by MIHN generated approximately 74.1 percent (or $19.2 billion) of the $25.9 billion of consolidated net revenue during fiscal year 2016 and represented approximately 81.7 percent (or $20.6 billion) of the $25.2 billion of net assets as of December 31, 2016.
On February 3, 2017, our Board of Directors approved a new $5 billion long-term financing authority to replace the prior authority.
In the next 12 months, we expect $1.4 billion of long-term debt will mature as follows: €750 million ($789 million as of December 31, 2016) in January 2017, fr.175 million Swiss franc notes ($172 million as of December 31, 2016) in March 2017 and $488 million in August 2017. We expect to fund these repayments with a combination of cash from operations and the issuance of commercial paper or long-term debt.
Our total debt was $17.2 billion at December 31, 2016 and $15.4 billion at December 31, 2015. Our debt-to-capitalization ratio was 0.41 at December 31, 2016 and 0.35 at December 31, 2015. At December 31, 2016, the weighted-average term of our outstanding long-term debt was 6.6 years. Our average daily commercial borrowings were $2.2 billion in 2016, $2.2 billion in 2015 and $1.9 billion in 2014. We had $2.4 billion of commercial paper borrowings outstanding at December 31, 2016 and none outstanding as of December 31, 2015, as commercial paper interest rates continued to be favorable in late 2016 and we had a bond maturity refinanced with commercial paper in December 2016. We expect to continue to use commercial paper borrowings to finance various short or long-term financing needs. We expect to continue to use commercial paper to finance various short and long-term financing needs and to comply with our long-term debt covenants. Refer to Note 7, Debt and Borrowing Arrangements, for more information on our debt and debt covenants.
We regularly monitor worldwide supply, commodity cost and currency trends so we can cost-effectively secure ingredients, packaging and fuel required for production. During 2016, the primary drivers of the increase in our aggregate commodity costs were higher currency-related costs on our commodity purchases and increased costs for packaging and other raw materials, partially offset by lower costs for nuts, dairy, energy, sugar, grains and oils and cocoa.
A number of external factors such as weather conditions, commodity market conditions, currency fluctuations and the effects of governmental agricultural or other programs affect the cost and availability of raw materials and agricultural materials used in our products. We address higher commodity costs and currency impacts primarily through hedging, higher pricing and manufacturing and overhead cost control. We use hedging techniques to limit the impact of fluctuations in the cost of our principal raw materials; however, we may not be able to fully hedge against commodity cost changes, and our hedging strategies may not protect us from increases in specific raw material costs. Due to competitive or market conditions, planned trade or promotional incentives, fluctuations in currency exchange rates or other factors, our pricing actions may also lag commodity cost changes temporarily.
We expect price volatility and a slightly higher aggregate cost environment to continue in 2017. While the costs of our principal raw materials fluctuate, we believe there will continue to be an adequate supply of the raw materials we use and that they will generally remain available from numerous sources.
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Off-Balance Sheet Arrangements and Aggregate Contractual Obligations
We have no significant off-balance sheet arrangements other than the contractual obligations discussed below.
Guarantees:
As discussed in Note 12, Commitments and Contingencies, we enter into third-party guarantees primarily to cover the long-term obligations of our vendors. As part of these transactions, we guarantee that third parties will make contractual payments or achieve performance measures. At December 31, 2016, we had no material third-party guarantees recorded on our consolidated balance sheet.
In addition, at December 31, 2016, we were contingently liable for $758 million of guarantees related to our own performance. These include letters of credit, surety bonds and guarantees related to the payment of custom duties and taxes.
Guarantees do not have, and we do not expect them to have, a material effect on our liquidity.
Aggregate Contractual Obligations:
The following table summarizes our contractual obligations at December 31, 2016.
| Payments Due | ||||||||||||||||||||
| Total | 2017 | 2018-19 | 2020-21 | 2022 and Thereafter |
||||||||||||||||
| (in millions) | ||||||||||||||||||||
| Debt (1) |
$ | 14,732 | $ | 1,451 | $ | 3,792 | $ | 3,916 | $ | 5,573 | ||||||||||
| Interest expense (2) |
3,650 | 388 | 656 | 483 | 2,123 | |||||||||||||||
| Capital leases |
5 | – | 2 | 2 | 1 | |||||||||||||||
| Operating leases (3) |
921 | 241 | 318 | 205 | 157 | |||||||||||||||
| Purchase obligations: (4) |
||||||||||||||||||||
| Inventory and production costs |
5,404 | 2,123 | 2,526 | 336 | 419 | |||||||||||||||
| Other |
713 | 628 | 75 | 9 | 1 | |||||||||||||||
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|
|
|
|
|
|
|
|
|
|||||||||||
| 6,117 | 2,751 | 2,601 | 345 | 420 | ||||||||||||||||
| Other long-term liabilities (5) |
409 | 21 | 137 | 102 | 149 | |||||||||||||||
|
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|
|
|
|
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|
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|
|
|||||||||||
| Total |
$ | 25,834 | $ | 4,852 | $ | 7,506 | $ | 5,053 | $ | 8,423 | ||||||||||
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| (1) | Amounts include the expected cash payments of our debt excluding capital leases, which are presented separately in the table above. The amounts also exclude $69 million of net unamortized non-cash bond premiums and discounts and mark-to-market adjustments related to our interest rate swaps recorded in total debt. |
| (2) | Amounts represent the expected cash payments of our interest expense on our long-term debt. Interest calculated on our euro, British pound sterling and Swiss franc notes was forecasted using currency exchange rates as of December 31, 2016. An insignificant amount of interest expense was excluded from the table for a portion of our other non-U.S. debt obligations due to the complexities involved in forecasting expected interest payments. |
| (3) | Operating lease payments represent the minimum rental commitments under non-cancelable operating leases. |
| (4) | Purchase obligations for inventory and production costs (such as raw materials, indirect materials and supplies, packaging, co-manufacturing arrangements, storage and distribution) are commitments for projected needs to be utilized in the normal course of business. Other purchase obligations include commitments for marketing, advertising, capital expenditures, information technology and professional services. Arrangements are considered purchase obligations if a contract specifies all significant terms, including fixed or minimum quantities to be purchased, a pricing structure and approximate timing of the transaction. Most arrangements are cancelable without a significant penalty and with short notice (usually 30 days). Any amounts reflected on the consolidated balance sheet as accounts payable and accrued liabilities are excluded from the table above. |
| (5) | Other long-term liabilities include estimated future benefit payments for our postretirement health care plans through December 31, 2026 of $195 million. We are unable to reliably estimate the timing of the payments beyond 2026; as such, they are excluded from the above table. There are also another $179 million of various other long-term liabilities that are expected to be paid over the next 5 years. In addition, the following long-term liabilities included on the consolidated balance sheet are excluded from the table above: accrued pension costs, income taxes, insurance accruals and other accruals. We are unable to reliably estimate the timing of the payments (or contributions beyond 2017, in the case of accrued pension costs) for these items. We currently expect to make approximately $468 million in contributions to our pension plans in 2017. As of December 31, 2016, our total liability for income taxes, including uncertain tax positions and associated accrued interest and penalties, was $899 million. We currently estimate payments of approximately $232 million related to these positions over the next 12 months. |
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Stock Plans:
See Note 10, Stock Plans, to the consolidated financial statements for more information on our stock plans and grant activity during 2016, 2015 and 2014.
Share Repurchases:
See Note 11, Capital Stock, to the consolidated financial statements for more information on our share repurchase and accelerated share repurchase programs.
We intend to continue to use a portion of our cash for share repurchases. On July 29, 2015, our Finance Committee, with authorization delegated from our Board of Directors, approved an increase of $6.0 billion in the share repurchase program, raising the authorization to $13.7 billion of Common Stock repurchases, and extended the program through December 31, 2018. We repurchased $10.8 billion of shares ($2.6 billion in 2016, $3.6 billion in 2015, $1.9 billion in 2014 and $2.7 billion in 2013) through December 31, 2016. The number of shares that we ultimately repurchase under our share repurchase program may vary depending on numerous factors, including share price and other market conditions, our ongoing capital allocation planning, levels of cash and debt balances, other demands for cash, such as acquisition activity, general economic or business conditions and board and management discretion. Additionally, our share repurchase activity during any particular period may fluctuate. We may accelerate, suspend, delay or discontinue our share repurchase program at any time, without notice.
Dividends:
We paid dividends of $1,094 million in 2016, $1,008 million in 2015 and $964 million in 2014. On July 19, 2016, our Board of Directors approved a 12% increase in the quarterly dividend to $0.19 per common share or $0.76 per common share on an annual basis. On July 23, 2015, our Board of Directors approved a 13% increase at that time in the quarterly dividend to $0.17 per common share or $0.68 per common share on an annual basis. On August 5, 2014, our Audit Committee, with authorization from our Board of Directors, approved a 7% increase at that time in the quarterly dividend to $0.15 per common share or $0.60 per common share on an annual basis. The declaration of dividends is subject to the discretion of our Board of Directors and depends on various factors, including our net earnings, financial condition, cash requirements, future prospects and other factors that our Board of Directors deems relevant to its analysis and decision making.
For U.S. income tax purposes only, the Company has calculated that 100% of the distributions paid to its shareholders in January 2016 are characterized as a qualified dividend paid from U.S. earnings and profits. The distributions the Company paid to its shareholders in April, July and October are characterized as a return of capital to each shareholder, up to the extent of the shareholder’s tax basis. If a shareholder does not have sufficient tax basis, these distributions could result in taxable gains to the shareholder. Shareholders should consult their tax advisors for a full understanding of all of the tax consequences of the receipt of dividends, including distributions in excess of our U.S. earnings and profits.
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We use non-GAAP financial information and believe it is useful to investors as it provides additional information to facilitate comparisons of historical operating results, identify trends in our underlying operating results and provide additional insight and transparency on how we evaluate our business. We use non-GAAP financial measures to budget, make operating and strategic decisions and evaluate our performance. We have detailed the non-GAAP adjustments that we make in our non-GAAP definitions below. The adjustments generally fall within the following categories: acquisition & divestiture activities, gains and losses on intangible asset sales and non-cash impairments, major program restructuring activities, constant currency and related adjustments, major program financing and hedging activities and other major items affecting comparability of operating results. We believe the non-GAAP measures should always be considered along with the related U.S. GAAP financial measures. We have provided the reconciliations between the GAAP and non-GAAP financial measures below, and we also discuss our underlying GAAP results throughout our Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Form 10-K.
Our primary non-GAAP financial measures are listed below and reflect how we evaluate our current and prior-year operating results. As new events or circumstances arise, these definitions could change. When our definitions change, we provide the updated definitions and present the related non-GAAP historical results on a comparable basis.
| • | “Organic Net Revenue” is defined as net revenues excluding the impacts of acquisitions, divestitures (1), our historical global coffee business (2), our historical Venezuelan operations, accounting calendar changes and currency rate fluctuations (3). We also evaluate Organic Net Revenue growth from emerging markets and our Power Brands. |
| • | Our emerging markets include our Latin America region in its entirety; the AMEA region, excluding Australia, New Zealand and Japan; and the following countries from the Europe region: Russia, Ukraine, Turkey, Kazakhstan, Belarus, Georgia, Poland, Czech Republic, Slovak Republic, Hungary, Bulgaria, Romania, the Baltics and the East Adriatic countries. |
| • | Our Power Brands include some of our largest global and regional brands such as Oreo, Chips Ahoy!, Ritz, TUC / Club Social and belVita biscuits; Cadbury Dairy Milk, Milka and Lacta chocolate; Trident gum; Hall’s candy; and Tang powdered beverages. |
| • | “Adjusted Operating Income” is defined as operating income excluding the impacts of Spin-Off Costs (4); the 2012-2014 Restructuring Program (5); the 2014-2018 Restructuring Program (5); Venezuela remeasurement and deconsolidation losses and historical operating results; gains or losses (including non-cash impairment charges) on goodwill and intangible assets; divestiture (1) or acquisition gains or losses and related integration and acquisition costs; the JDE coffee business transactions (2) gain and net incremental costs; the operating results of divestitures (1); our historical global coffee business operating results (2); mark-to-market impacts from commodity and forecasted currency transaction derivative contracts (6); and equity method investment earnings historically reported within operating income (7). We also present “Adjusted Operating Income margin,” which is subject to the same adjustments as Adjusted Operating Income. We also evaluate growth in our Adjusted Operating Income on a constant currency basis (3). |
| • | “Adjusted EPS” is defined as diluted EPS attributable to Mondelēz International from continuing operations excluding the impacts of Spin-Off Costs (4); the 2012-2014 Restructuring Program (5); the 2014-2018 Restructuring Program (5); Venezuela remeasurement and deconsolidation losses and historical operating results; losses on debt extinguishment and related expenses; gains or losses (including non-cash impairment charges) on goodwill and intangible assets; divestiture (1) or acquisition gains or losses and related integration and acquisition costs; the JDE coffee business transactions (2) gain, transaction hedging gains or losses and net incremental costs; gain on the equity method investment exchange; net earnings from divestitures (1); mark-to-market impacts from commodity and forecasted currency transaction derivative contracts (6); and gains or losses on interest rate swaps no longer designated as accounting cash flow hedges due to changed financing and hedging plans. Similarly, within Adjusted EPS, our equity method investment net earnings exclude our proportionate share of our investees’ unusual or infrequent items (8), such as acquisition and divestiture-related costs and restructuring program costs. We also evaluate growth in our Adjusted EPS on a constant currency basis (3). |
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| (1) | Divestitures include completed sales of businesses and exits of major product lines upon completion of a sale or licensing agreement. |
| (2) | In connection with the JDE coffee business transactions that closed on July 2, 2015, because we exchanged our coffee interests for similarly-sized coffee interests in JDE at the time of the transaction, we have deconsolidated and not included our historical global coffee business results within divestitures in our non-GAAP financial measures and in the related Management’s Discussion and Analysis of Financial Condition and Results of Operations. We continue to have an ongoing interest in the coffee business and as such, we include the earnings of JDE, Keurig and our historical coffee business within continuing results of operations. Within Adjusted EPS, we included these earnings with equity method investment earnings and deconsolidated our historical coffee business results from Organic Net Revenue and Adjusted Operating Income to facilitate comparisons of past and future coffee operating results. |
| (3) | Constant currency operating results are calculated by dividing or multiplying, as appropriate, the current-period local currency operating results by the currency exchange rates used to translate the financial statements in the comparable prior-year period to determine what the current-period U.S. dollar operating results would have been if the currency exchange rate had not changed from the comparable prior-year period. |
| (4) | Refer to Note 2, Divestitures and Acquisitions – Spin-Off of Kraft Foods Group, to the consolidated financial statements for more information on Spin-Off Costs incurred in connection with the October 1, 2012 spin-off of the Kraft Foods Group grocery business. |
| (5) | Non-GAAP adjustments related to the 2014-2018 Restructuring Program and the 2012-2014 Restructuring Program reflect costs incurred that relate to the objectives of our program to transform our supply chain network and organizational structure. Costs that do not meet the program objectives are not reflected in the non-GAAP adjustments. |
| (6) | During the third quarter of 2016, we began to exclude unrealized gains and losses (mark-to-market impacts) from outstanding commodity and forecasted currency transaction derivatives from our non-GAAP earnings measures until such time that the related exposures impact our operating results. Since we purchase commodity and forecasted currency transaction contracts to mitigate price volatility primarily for inventory requirements in future periods, we made this adjustment to remove the volatility of these future inventory purchases on current operating results to facilitate comparisons of our underlying operating performance across periods. We also discontinued designating commodity and forecasted currency transaction derivatives for hedge accounting treatment. To facilitate comparisons of our underlying operating results, we have recast all historical non-GAAP earnings measures to exclude the mark-to-market impacts. |
| (7) | Historically, we have recorded income from equity method investments within our operating income as these investments operated as extensions of our base business. Beginning in the third quarter of 2015, we began to record the earnings from our equity method investments in after-tax equity method investment earnings outside of operating income following the deconsolidation of our coffee business. See Note 1, Summary of Significant Accounting Policies – Principles of Consolidation, for more information. In periods prior to July 2, 2015, we have reclassified the equity method earnings from our Adjusted Operating Income to after-tax equity method investment earnings within Adjusted EPS to be consistent with the deconsolidation of our coffee business results on July 2, 2015 and in order to evaluate our operating results on a consistent basis. |
| (8) | We have excluded our proportionate share of our equity method investees’ unusual or infrequent items in order to provide investors with a comparable view of our performance across periods. Although we have shareholder rights and board representation commensurate with our ownership interests in our equity method investees and review the underlying operating results and unusual or infrequent items with them each reporting period, we do not have direct control over their operations or resulting revenue and expenses. Our use of equity method investment net earnings on an adjusted basis is not intended to imply that we have any such control. Our GAAP “diluted EPS attributable to Mondelēz International from continuing operations” includes all of the investees’ unusual and infrequent items. |
We believe that the presentation of these non-GAAP financial measures, when considered together with our U.S. GAAP financial measures and the reconciliations to the corresponding U.S. GAAP financial measures, provides you with a more complete understanding of the factors and trends affecting our business than could be obtained absent these disclosures. Because non-GAAP financial measures vary among companies, the non-GAAP financial measures presented in this report may not be comparable to similarly titled measures used by other companies. Our use of these non-GAAP financial measures is not meant to be considered in isolation or as a substitute for any U.S. GAAP financial measure. A limitation of these non-GAAP financial measures is they exclude items detailed below that have an impact on our U.S. GAAP reported results. The best way this limitation can be addressed is by evaluating our non-GAAP financial measures in combination with our U.S. GAAP reported results and carefully evaluating the following tables that reconcile U.S. GAAP reported figures to the non-GAAP financial measures in this Form 10-K.
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Organic Net Revenue:
Applying the definition of “Organic Net Revenue”, the adjustments made to “net revenues” (the most comparable U.S. GAAP financial measure) were to exclude the impact of currency, our historical Venezuelan operations, the adjustment for deconsolidating our historical coffee business, an accounting calendar change, acquisitions and divestiture. We believe that Organic Net Revenue reflects the underlying growth from the ongoing activities of our business and provides improved comparability of results. We also evaluate our Organic Net Revenue growth from emerging markets and Power Brands, and these underlying measures are also reconciled to U.S. GAAP below.
| For the Year Ended December 31, 2016 | For the Year Ended December 31, 2015 | |||||||||||||||||||||||
| Emerging Markets |
Developed Markets |
Total | Emerging Markets |
Developed Markets |
Total | |||||||||||||||||||
| (in millions) | (in millions) | |||||||||||||||||||||||
| Net Revenue |
$ | 9,370 | $ | 16,553 | $ | 25,923 | $ | 11,585 | $ | 18,051 | $ | 29,636 | ||||||||||||
| Impact of currency |
896 | 348 | 1,244 | – | – | – | ||||||||||||||||||
| Historical Venezuelan operations (1) |
– | – | – | (1,217 | ) | – | (1,217 | ) | ||||||||||||||||
| Historical coffee business (2) |
– | – | – | (442 | ) | (1,185 | ) | (1,627 | ) | |||||||||||||||
| Impact of accounting |
– | – | – | – | (76 | ) | (76 | ) | ||||||||||||||||
| Impact of acquisitions |
(71 | ) | (21 | ) | (92 | ) | – | – | – | |||||||||||||||
| Impact of divestiture |
(8 | ) | – | (8 | ) | (9 | ) | – | (9 | ) | ||||||||||||||
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| Organic Net Revenue |
$ | 10,187 | $ | 16,880 | $ | 27,067 | $ | 9,917 | $ | 16,790 | $ | 26,707 | ||||||||||||
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| For the Year Ended December 31, 2016 | For the Year Ended December 31, 2015 (3) | |||||||||||||||||||||||
| Power Brands |
Non-Power Brands |
Total | Power Brands |
Non-Power Brands |
Total | |||||||||||||||||||
| (in millions) | (in millions) | |||||||||||||||||||||||
| Net Revenue |
$ | 17,951 | $ | 7,972 | $ | 25,923 | $ | 20,350 | $ | 9,286 | $ | 29,636 | ||||||||||||
| Impact of currency |
844 | 400 | 1,244 | – | – | – | ||||||||||||||||||
| Historical Venezuelan operations (1) |
– | – | – | (823 | ) | (394 | ) | (1,217 | ) | |||||||||||||||
| Historical coffee business (2) |
– | – | – | (1,179 | ) | (448 | ) | (1,627 | ) | |||||||||||||||
| Impact of accounting |
– | – | – | (59 | ) | (17 | ) | (76 | ) | |||||||||||||||
| Impact of acquisitions |
– | (92 | ) | (92 | ) | – | – | – | ||||||||||||||||
| Impact of divestiture |
– | (8 | ) | (8 | ) | – | (9 | ) | (9 | ) | ||||||||||||||
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|
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| Organic Net Revenue |
$ | 18,795 | $ | 8,272 | $ | 27,067 | $ | 18,289 | $ | 8,418 | $ | 26,707 | ||||||||||||
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| For the Year Ended December 31, 2015 | For the Year Ended December 31, 2014 | |||||||||||||||||||||||
| Emerging Markets |
Developed Markets |
Total | Emerging Markets |
Developed Markets |
Total | |||||||||||||||||||
| (in millions) | (in millions) | |||||||||||||||||||||||
| Net Revenue |
$ | 11,585 | $ | 18,051 | $ | 29,636 | $ | 12,961 | $ | 21,283 | $ | 34,244 | ||||||||||||
| Impact of currency |
1,826 | 1,739 | 3,565 | – | – | – | ||||||||||||||||||
| Historical Venezuelan operations (1) |
(1,217 | ) | – | (1,217 | ) | (760 | ) | – | (760 | ) | ||||||||||||||
| Historical coffee business (2) |
(442 | ) | (1,185 | ) | (1,627 | ) | (1,105 | ) | (2,671 | ) | (3,776 | ) | ||||||||||||
| Impact of accounting |
– | (78 | ) | (78 | ) | – | – | – | ||||||||||||||||
| Impact of acquisitions |
(128 | ) | (37 | ) | (165 | ) | – | – | – | |||||||||||||||
| Impact of divestiture |
(9 | ) | – | (9 | ) | (10 | ) | – | (10 | ) | ||||||||||||||
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| Organic Net Revenue |
$ | 11,615 | $ | 18,490 | $ | 30,105 | $ | 11,086 | $ | 18,612 | $ | 29,698 | ||||||||||||
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| For the Year Ended December 31, 2015 | For the Year Ended December 31, 2014 (3) | |||||||||||||||||||||||
| Power Brands |
Non-Power Brands |
Total | Power Brands |
Non-Power Brands |
Total | |||||||||||||||||||
| (in millions) | (in millions) | |||||||||||||||||||||||
| Net Revenue |
$ | 20,350 | $ | 9,286 | $ | 29,636 | $ | 23,282 | $ | 10,962 | $ | 34,244 | ||||||||||||
| Impact of currency |
2,405 | 1,160 | 3,565 | – | – | – | ||||||||||||||||||
| Historical Venezuelan operations (1) |
(823 | ) | (394 | ) | (1,217 | ) | (511 | ) | (249 | ) | (760 | ) | ||||||||||||
| Historical coffee business (2) |
(1,179 | ) | (448 | ) | (1,627 | ) | (2,732 | ) | (1,044 | ) | (3,776 | ) | ||||||||||||
| Impact of accounting |
(60 | ) | (18 | ) | (78 | ) | – | – | – | |||||||||||||||
| Impact of acquisitions |
– | (165 | ) | (165 | ) | – | – | – | ||||||||||||||||
| Impact of divestiture |
– | (9 | ) | (9 | ) | – | (10 | ) | (10 | ) | ||||||||||||||
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| Organic Net Revenue |
$ | 20,693 | $ | 9,412 | $ | 30,105 | $ | 20,039 | $ | 9,659 | $ | 29,698 | ||||||||||||
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| (1) | Includes the historical results of our Venezuelan subsidiaries prior to the December 31, 2015 deconsolidation. Refer to Note 1, Summary of Significant Accounting Policies – Currency Translation and Highly Inflationary Accounting: Venezuela, for more information. |
| (2) | Includes our historical global coffee business prior to the July 2, 2015 JDE coffee business transactions. Refer to Note 2, Divestitures and Acquisitions, and our non-GAAP definitions appearing earlier in this section for more information. |
| (3) | Each year we reevaluate our Power Brands and confirm the brands in which we will continue to make disproportionate investments. As such, we may make changes in our planned investments in primarily regional Power Brands following our annual review cycles. For 2016, we made limited changes to our list of regional Power Brands and as such, we reclassified 2015 and 2014 Power Brand net revenues on a basis consistent with the current list of Power Brands. |
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Adjusted Operating Income:
Applying the definition of “Adjusted Operating Income”, the adjustments made to “operating income” (the most comparable U.S. GAAP financial measure) were to exclude Spin-Off costs, 2012-2014 Restructuring Program costs, 2014-2018 Restructuring Program costs, Venezuela historical operating results and remeasurement and deconsolidation losses, the JDE coffee business transactions gain and net incremental costs, operating income from our historical coffee business, equity method investment earnings reclassified to after-tax earnings in Q3 2015 in connection with the coffee business transactions, operating results of the AGF divestiture, pre-tax gains on the AGF and Costa Rica confectionery business divestitures, divestiture-related costs incurred for the planned sale of a confectionery business in France, gain on sale of an intangible asset, impairment charges related to intangible assets, the Integration Program and other acquisition integration costs, acquisition-related costs and mark-to-market impacts from commodity and forecasted currency transaction derivative contracts. We also present “Adjusted Operating Income margin,” which is subject to the same adjustments as Adjusted Operating Income, and evaluate Adjusted Operating Income on a constant currency basis. We believe these measures provide improved comparability of underlying operating results.
| For the Years Ended | ||||||||||||||||
| December 31, | ||||||||||||||||
| 2016 | 2015 | $ Change | % Change | |||||||||||||
| (in millions) | ||||||||||||||||
| Operating Income |
$ | 2,569 | $ | 8,897 | $ | (6,328 | ) | (71.1)% | ||||||||
| 2012-2014 Restructuring Program costs (1) |
– | (4 | ) | 4 | ||||||||||||
| 2014-2018 Restructuring Program costs (1) |
1,086 | 1,002 | 84 | |||||||||||||
| Operating income from Venezuelan subsidiaries (2) |
– | (281 | ) | 281 | ||||||||||||
| Remeasurement of net monetary assets in Venezuela (2) |
– | 11 | (11 | ) | ||||||||||||
| Loss on deconsolidation of Venezuela (2) |
– | 778 | (778 | ) | ||||||||||||
| Costs associated with JDE coffee business transactions (3) |
– | 278 | (278 | ) | ||||||||||||
| Gain on the JDE coffee business transactions (3) |
– | (6,809 | ) | 6,809 | ||||||||||||
| Reclassification of historical coffee business operating income (4) |
– | (342 | ) | 342 | ||||||||||||
| Reclassification of equity method investment earnings (5) |
– | (51 | ) | 51 | ||||||||||||
| Operating income from divestiture (6) |
(2 | ) | (8 | ) | 6 | |||||||||||
| Gain on divestiture (6) |
(9 | ) | (13 | ) | 4 | |||||||||||
| Divestiture-related costs (7) |
86 | – | 86 | |||||||||||||
| Gain on sale of intangible asset (8) |
(15 | ) | – | (15 | ) | |||||||||||
| Intangible asset impairment charges (9) |
137 | 71 | 66 | |||||||||||||
| Acquisition integration costs (8) |
7 | 9 | (2 | ) | ||||||||||||
| Acquisition-related costs (8) |
1 | 8 | (7 | ) | ||||||||||||
| Mark-to-market losses / (gains) from derivatives (10) |
94 | (56 | ) | 150 | ||||||||||||
| Other / rounding |
(1 | ) | – | (1 | ) | |||||||||||
|
|
|
|
|
|
|
|||||||||||
| Adjusted Operating Income |
$ | 3,953 | $ | 3,490 | $ | 463 | 13.3% | |||||||||
| Impact of unfavorable currency |
176 | – | 176 | |||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Adjusted Operating Income (constant currency) |
$ | 4,129 | $ | 3,490 | $ | 639 | 18.3% | |||||||||
|
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|
|
|
|
|
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| For the Years Ended | ||||||||||||||||
| December 31, | ||||||||||||||||
| 2015 | 2014 | $ Change | % Change | |||||||||||||
| (in millions) | ||||||||||||||||
| Operating Income |
$ | 8,897 | $ | 3,242 | $ | 5,655 | 174.4% | |||||||||
| Spin-Off Costs (11) |
– | 35 | (35 | ) | ||||||||||||
| 2012-2014 Restructuring Program costs (1) |
(4 | ) | 459 | (463 | ) | |||||||||||
| 2014-2018 Restructuring Program costs (1) |
1,002 | 381 | 621 | |||||||||||||
| Operating income from Venezuelan subsidiaries (2) |
(281 | ) | (175 | ) | (106 | ) | ||||||||||
| Remeasurement of net monetary assets in Venezuela (2) |
11 | 167 | (156 | ) | ||||||||||||
| Loss on deconsolidation of Venezuela (2) |
778 | – | 778 | |||||||||||||
| Costs associated with JDE coffee business transactions (3) |
278 | 77 | 201 | |||||||||||||
| Gain on the JDE coffee business transactions (3) |
(6,809 | ) | – | (6,809 | ) | |||||||||||
| Reclassification of historical coffee business operating income (4) |
(342 | ) | (646 | ) | 304 | |||||||||||
| Reclassification of equity method earnings (5) |
(51 | ) | (104 | ) | 53 | |||||||||||
| Operating income from divestiture (6) |
(8 | ) | (9 | ) | 1 | |||||||||||
| Gain on divestiture (6) |
(13 | ) | – | (13 | ) | |||||||||||
| Intangible asset impairment charges (9) |
71 | 57 | 14 | |||||||||||||
| Integration Program and other acquisition integration costs (8) |
9 | (4 | ) | 13 | ||||||||||||
| Acquisition-related costs (8) |
8 | 2 | 6 | |||||||||||||
| Mark-to-market (gains) / losses from derivatives (10) |
(56 | ) | 73 | (129 | ) | |||||||||||
|
|
|
|
|
|
|
|||||||||||
| Adjusted Operating Income |
$ | 3,490 | $ | 3,555 | $ | (65 | ) | (1.8)% | ||||||||
| Impact of unfavorable currency |
453 | – | 453 | |||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Adjusted Operating Income (constant currency) |
$ | 3,943 | $ | 3,555 | $ | 388 | 10.9% | |||||||||
|
|
|
|
|
|
|
|||||||||||
| (1) | Refer to Note 6, Restructuring Programs, for more information on our 2014-2018 Restructuring Program and our 2012-2014 Restructuring Program. |
| (2) | Includes the historical results of our Venezuelan subsidiaries prior to the December 31, 2015 deconsolidation. Refer to Note 1, Summary of Significant Accounting Policies – Currency Translation and Highly Inflationary Accounting: Venezuela, for more information on the deconsolidation and remeasurement loss in 2015. |
| (3) | Refer to Note 2, Divestitures and Acquisitions, for more information on the JDE coffee business transactions. |
| (4) | Includes our historical global coffee business prior to the July 2, 2015 deconsolidation. We reclassified the results of our historical coffee business from Adjusted Operating Income and included them with equity method investment earnings in Adjusted EPS to facilitate comparisons of past and future coffee operating results. Refer to Note 2, Divestitures and Acquisitions, and Non-GAAP Financial Measures appearing later in this section for more information. |
| (5) | Historically, we have recorded income from equity method investments within our operating income as these investments operated as extensions of our base business. Beginning in the third quarter of 2015, to align with the accounting for JDE earnings, we began to record the earnings from our equity method investments in equity method investment earnings outside of operating income. In periods prior to July 2, 2015, we have reclassified the equity method earnings from Adjusted Operating Income to evaluate our operating results on a consistent basis. |
| (6) | Refer to Note 2, Divestitures and Acquisitions, for more information on the December 1, 2016 divestiture of a confectionery business in Costa Rica and the April 23, 2015 divestiture of AGF. The divestiture of the Costa Rica confectionery business generated a pre-tax gain of $9 million in 2016 and the divestiture of AGF generated a pre-tax gain of $13 million and after-tax loss of $9 million in 2015. |
| (7) | Includes costs incurred related to the planned sale of a confectionery business in France. Refer to Note 2, Divestitures and Acquisitions, for more information. |
| (8) | Refer to Note 2, Divestitures and Acquisitions, for more information on the 2016 intangible asset sale in Finland, 2015 acquisitions of a biscuit operation in Vietnam and Enjoy Life Foods and other property sales in 2016. |
| (9) | Refer to Note 2, Divestitures and Acquisitions, and Note 5, Goodwill and Intangible Assets, for more information on the impairment charges recorded in 2016, 2015 and 2014 related to trademarks. |
| (10) | Refer to Note 8, Financial Instruments, Note 16, Segment Reporting, and Non-GAAP Financial Measures appearing later in this section for more information on these unrealized gains and losses on commodity and forecasted currency transaction derivatives. |
| (11) | Refer to Note 2, Divestitures and Acquisitions, for more information on Spin-Off Costs incurred in 2014 following the 2012 Kraft Foods Group divestiture. |
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Adjusted EPS:
Applying the definition of “Adjusted EPS” (1), the adjustments made to “diluted EPS attributable to Mondelēz International” (the most comparable U.S. GAAP financial measure) were to exclude Spin-Off Costs, 2012-2014 Restructuring Program costs, 2014-2018 Restructuring Program costs; Venezuela historical operating results and deconsolidation and remeasurement losses; the JDE coffee business transactions gain, hedging gains and incremental costs; net earnings from the AGF divestiture; after-tax gain on the Costa Rica confectionery business divestiture and after-tax loss on the AGF divestiture; divestiture-related costs incurred for the planned sale of a confectionery business in France; gain on sale of intangible asset; impairment charges related to intangible assets; acquisition integration costs; acquisition-related costs; mark-to-market impacts from commodity and forecasted currency transaction derivative contracts; a loss on debt extinguishment and related expenses; losses on interest rate swaps no longer designated as accounting cash flow hedges due to changed financing and hedging plans; gain on the equity method investment exchange; and our proportionate share of unusual or infrequent items recorded by our JDE and Keurig equity method investees. We also evaluate Adjusted EPS on a constant currency basis. We believe Adjusted EPS provides improved comparability of underlying operating results.
| For the Years Ended | ||||||||||||||||
| December 31, | ||||||||||||||||
| 2016 | 2015 | $ Change | % Change | |||||||||||||
| Diluted EPS attributable to Mondelēz International |
$ | 1.05 | $ | 4.44 | $ | (3.39 | ) | (76.4)% | ||||||||
| 2014-2018 Restructuring Program costs |
0.51 | 0.45 | 0.06 | |||||||||||||
| Net earnings from Venezuelan subsidiaries |
– | (0.10 | ) | 0.10 | ||||||||||||
| Loss on deconsolidation of Venezuela |
– | 0.48 | (0.48 | ) | ||||||||||||
| Remeasurement of net monetary assets |
– | 0.01 | (0.01 | ) | ||||||||||||
| Income / (costs) associated with the JDE coffee business transactions (2) |
– | (0.01 | ) | 0.01 | ||||||||||||
| Gain on the JDE coffee business transactions (2) |
– | (4.05 | ) | 4.05 | ||||||||||||
| Net earnings from divestiture (3) |
– | 0.02 | (0.02 | ) | ||||||||||||
| Gain / loss on divestiture (3) |
(0.01 | ) | 0.01 | (0.02 | ) | |||||||||||
| Divestiture-related costs (4) |
0.05 | – | 0.05 | |||||||||||||
| Gain on sale of intangible asset |
0.01 | – | 0.01 | |||||||||||||
| Intangible asset impairment charges |
0.06 | 0.03 | 0.03 | |||||||||||||
| Acquisition integration costs |
(0.01 | ) | – | (0.01 | ) | |||||||||||
| Acquisition-related costs |
0.01 | – | 0.01 | |||||||||||||
| Mark-to-market losses / (gains) from derivatives |
0.05 | (0.03 | ) | 0.08 | ||||||||||||
| Loss on debt extinguishment and related expenses |
0.17 | 0.29 | (0.12 | ) | ||||||||||||
| Loss related to interest rate swaps |
0.04 | 0.01 | 0.03 | |||||||||||||
| Gain on equity method investment exchange (5) |
(0.03 | ) | – | (0.03 | ) | |||||||||||
| Equity method investee acquisition-related and other adjustments (6) |
0.04 | 0.07 | (0.03 | ) | ||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Adjusted EPS |
$ | 1.94 | $ | 1.62 | $ | 0.32 | 19.8% | |||||||||
| Impact of unfavorable currency |
0.07 | – | 0.07 | |||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Adjusted EPS (constant currency) |
$ | 2.01 | $ | 1.62 | $ | 0.39 | 24.1% | |||||||||
|
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|
|
|
|
|
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| For the Years Ended | ||||||||||||||||
| December 31, | ||||||||||||||||
| 2015 | 2014 | $ Change | % Change | |||||||||||||
| Diluted EPS attributable to Mondelēz International |
$ | 4.44 | $ | 1.28 | $ | 3.16 | 246.9% | |||||||||
| Spin-Off Costs |
– | 0.01 | (0.01 | ) | ||||||||||||
| 2012-2014 Restructuring Program costs |
– | 0.21 | (0.21 | ) | ||||||||||||
| 2014-2018 Restructuring Program costs |
0.45 | 0.16 | 0.29 | |||||||||||||
| Net earnings from Venezuelan subsidiaries |
(0.10 | ) | (0.05 | ) | (0.05 | ) | ||||||||||
| Loss on deconsolidation of Venezuela |
0.48 | – | 0.48 | |||||||||||||
| Remeasurement of net monetary assets |
0.01 | 0.09 | (0.08 | ) | ||||||||||||
| Income / (costs) associated with the JDE coffee business transactions (2) |
(0.01 | ) | (0.19 | ) | 0.18 | |||||||||||
| Gain on the JDE coffee business transactions (2) |
(4.05 | ) | – | (4.05 | ) | |||||||||||
| Net earnings from divestiture (3) |
0.02 | (0.01 | ) | 0.03 | ||||||||||||
| Gain / loss on divestiture (3) |
0.01 | – | 0.01 | |||||||||||||
| Intangible asset impairment charges |
0.03 | 0.02 | 0.01 | |||||||||||||
| Acquisition integration costs |
– | – | – | |||||||||||||
| Acquisition-related costs |
– | – | – | |||||||||||||
| Mark-to-market (gains) / losses from derivatives |
(0.03 | ) | 0.03 | (0.06 | ) | |||||||||||
| Loss on debt extinguishment and related expenses |
0.29 | 0.18 | 0.11 | |||||||||||||
| Loss related to interest rate swaps |
0.01 | – | 0.01 | |||||||||||||
| Equity method investee acquisition-related and other adjustments (6) |
0.07 | – | 0.07 | |||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Adjusted EPS |
$ | 1.62 | $ | 1.73 | $ | (0.11 | ) | (6.4)% | ||||||||
| Impact of unfavorable currency |
0.28 | – | 0.28 | |||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Adjusted EPS (constant currency) |
$ | 1.90 | $ | 1.73 | $ | 0.17 | 9.8% | |||||||||
|
|
|
|
|
|
|
|||||||||||
| (1) | The tax expense / {benefit) of each of the pre-tax items excluded from our GAAP results was computed based on the facts and tax assumptions associated with each item, and such impacts have also been excluded from Adjusted EPS. |
| • | For the year ended December 31, 2016, taxes for the: 2014-2018 Restructuring Program costs were $(288) million, intangible asset impairment charges were $(37) million, gain on sale of intangible asset was $3 million, acquisition integration costs were zero, gain on equity method investment exchange was $2 million, divestiture-related costs were $(15) million, loss on debt extinguishment and related costs were $(163) million, loss related to interest rate swaps were $(36) million and mark-to-market gains / (losses) from derivatives were $(11) million. |
| • | For the year ended December 31, 2015, taxes for the: 2014-2018 Restructuring Program costs were $(262) million, income / costs associated with the JDE coffee business transactions were $145 million, net earnings from Venezuelan subsidiaries were $107 million, gain on the JDE coffee business transactions were $183 million, intangible asset impairment charges were $(13) million, net earnings from divestitures were $33 million, loss on debt extinguishment and related costs were $(275) million, loss related to interest rate swaps were $(13) million and mark-to-market gains / (losses) from derivatives were $15 million. |
| • | For the year ended December 31, 2014, taxes for the: Spin-Off Costs were $(13) million, 2012-2014 Restructuring Program costs were $(107) million, 2014-2018 Restructuring Program costs were $(101) million, net earnings from Venezuelan subsidiaries were $90 million, remeasurement of net monetary assets in Venezuela was $(16) million, income / costs associated with the JDE coffee business transactions were $219 million, intangible asset impairment charges were $(18) million, loss on debt extinguishment and related costs were $(188) million and mark-to-market gains / (losses) from derivatives were $(23) million. |
| (2) | Refer to Note 2, Divestitures and Acquisitions, for more information on the JDE coffee business transactions. Net gains of $436 million in 2015 and $628 million in 2014 on the currency hedges related to the JDE coffee business transactions were recorded in interest and other expense, net and are included in the income / (costs) associated with the JDE coffee business transactions of $(0.01) in the table above. |
| (3) | Refer to Note 2, Divestitures and Acquisitions, for more information on the April 23, 2015 divestiture of AGF and the December 1, 2016 sale of a confectionery business in Costa Rica. The divestiture of AGF generated a pre-tax gain of $13 million and after-tax loss of $9 million in 2015. The sale of the confectionery business in Costa Rica generated a pre-tax and after-tax gain of $9 million in 2016. |
| (4) | Includes costs incurred related to the planned sale of a confectionery business in France. Refer to Note 2, Divestitures and Acquisitions, for more information. |
| (5) | Refer to Note 2, Divestitures and Acquisitions, for more information on the 2016 acquisition of an interest in Keurig. |
| (6) | Includes our proportionate share of unusual or infrequent items, such as acquisition and divestiture-related costs and restructuring program costs, recorded by our JDE and Keurig equity method investees. |
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Table of Contents
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
As we operate globally, we are primarily exposed to currency exchange rate, commodity price and interest rate market risks. We monitor and manage these exposures as part of our overall risk management program. Our risk management program focuses on the unpredictability of financial markets and seeks to reduce the potentially adverse effects that the volatility of these markets may have on our operating results. We principally utilize derivative instruments to reduce significant, unanticipated earnings fluctuations that may arise from volatility in currency exchange rates, commodity prices and interest rates. For additional information on our derivative activity and the types of derivative instruments we use to hedge our currency exchange, commodity price and interest rate exposures, see Note 8, Financial Instruments.
Many of our non-U.S. subsidiaries operate in functional currencies other than the U.S. dollar. Fluctuations in currency exchange rates create volatility in our reported results as we translate the balance sheets, operating results and cash flows of these subsidiaries into the U.S. dollar for consolidated reporting purposes. The translation of non-U.S. dollar denominated balance sheets and statements of earnings of our subsidiaries into the U.S. dollar for consolidated reporting generally results in a cumulative translation adjustment to other comprehensive income within equity. A stronger U.S. dollar relative to other functional currencies adversely affects our consolidated earnings and net assets while a weaker U.S. dollar benefits our consolidated earnings and net assets. While we hedge significant forecasted currency exchange transactions as well as certain net assets of non-U.S. operations and other currency impacts, we cannot fully predict or eliminate volatility arising from changes in currency exchange rates on our consolidated financial results. See Consolidated Results of Operations and Results of Operations by Reportable Segment under Discussion and Analysis of Historical Results for currency exchange effects on our financial results. For additional information on the impact of currency policies, Brexit, recent currency devaluations, the deconsolidation of our Venezuelan operation and the historical remeasurement of our Venezuelan net monetary assets on our financial condition and results of operations, also see Note 1, Summary of Significant Accounting Policies—Currency Translation and Highly Inflationary Accounting.
We also continually monitor the market for commodities that we use in our products. Input costs may fluctuate widely due to international demand, weather conditions, government policy and regulation and unforeseen conditions. To manage input cost volatility, we enter into forward purchase agreements and other derivative financial instruments. We also pursue productivity and cost saving measures and take pricing actions when necessary to mitigate the impact of higher input costs on earnings.
We regularly evaluate our variable and fixed-rate debt as well as current and expected interest rates in the markets in which we raise capital. Our primary exposures include movements in U.S. Treasury rates, corporate credit spreads, London Interbank Offered Rates (“LIBOR”), Euro Interbank Offered Rate (“EURIBOR”) and commercial paper rates. We periodically use interest rate swaps and forward interest rate contracts to achieve a desired proportion of variable versus fixed rate debt based on current and projected market conditions. In addition to using interest rate derivatives to manage future interest payments, during 2016, we retired $6.2 billion of our long-term debt and related costs and issued $6.4 billion of lower borrowing cost debt. Our weighted-average interest rate on our total debt as of December 31, 2016 was 2.2%, down from 3.7% as of December 31, 2015.
There were no significant changes in the types of derivative instruments we use to hedge our exposures between December 31, 2015 and December 31, 2016. See Note 8, Financial Instruments, for more information on 2016 derivative activity.
Value at Risk:
We use a value at risk (“VAR”) computation to estimate: 1) the potential one-day loss in the fair value of our interest rate-sensitive financial instruments; and 2) the potential one-day loss in pre-tax earnings of our currency and commodity price-sensitive derivative financial instruments. The VAR analysis was done separately for our currency exchange, fixed income and commodity risk portfolios as of each quarter end during the periods presented below. The instruments included in the VAR computation were currency exchange forwards and options for currency exchange risk, debt and swaps for interest rate risk, and commodity forwards, futures and options for commodity risk. Excluded from the computation were anticipated transactions, currency trade payables and receivables, and net investments in non-U.S. subsidiaries, which the above-mentioned instruments are intended to hedge.
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The VAR model assumes normal market conditions, a 95% confidence interval and a one-day holding period. A parametric delta-gamma approximation technique was used to determine the expected return distribution in interest rates, currencies and commodity prices for the purpose of calculating the fixed income, currency exchange and commodity VAR, respectively. The parameters used for estimating the expected return distributions were determined by observing interest rate, currency exchange, and commodity price movements over the prior quarter for the calculation of VAR amounts at December 31, 2016 and 2015, and over each of the four prior quarters for the calculation of average VAR amounts during each year. The values of currency and commodity options do not change on a one-to-one basis with the underlying currency or commodity and were valued accordingly in the VAR computation.
As of December 31, 2016 and December 31, 2015, the estimated potential one-day loss in fair value of our interest rate-sensitive instruments, primarily debt, and the estimated potential one-day loss in pre-tax earnings from our currency and commodity instruments, as calculated in the VAR model, were:
| Pre-Tax Earnings Impact | Fair Value Impact | |||||||||||||||||||||||||||||||
| At 12/31/16 | Average | High | Low | At 12/31/16 | Average | High | Low | |||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||
| Instruments sensitive to: |
||||||||||||||||||||||||||||||||
| Interest rates |
$ 62 | $ 62 | $ 91 | $ 45 | ||||||||||||||||||||||||||||
| Foreign currency rates |
$ 10 | $ 18 | $ 26 | $ 10 | ||||||||||||||||||||||||||||
| Commodity prices |
16 | 12 | 16 | 10 | ||||||||||||||||||||||||||||
| Pre-Tax Earnings Impact | Fair Value Impact | |||||||||||||||||||||||||||||||
| At 12/31/15 | Average | High | Low | At 12/31/15 | Average | High | Low | |||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||
| Instruments sensitive to: |
||||||||||||||||||||||||||||||||
| Interest rates |
$ 56 | $ 60 | $ 78 | $ 50 | ||||||||||||||||||||||||||||
| Foreign currency rates |
$ 16 | $ 55 | $ 103 | $ 16 | ||||||||||||||||||||||||||||
| Commodity prices |
15 | 23 | 31 | 15 | ||||||||||||||||||||||||||||
The impacts in the 2015 tables above have not been recast to reflect the deconsolidation of our legacy coffee business or Venezuela business and the related derivative activity for those businesses as it is impracticable to do so.
This VAR computation is a risk analysis tool designed to statistically estimate the maximum expected daily loss, under the specified confidence interval and assuming normal market conditions, from adverse movements in interest rates, currency exchange rates and commodity prices. The computation does not represent actual losses in fair value or earnings we will incur, nor does it consider the effect of favorable changes in market rates. We cannot predict actual future movements in market rates and do not present these VAR results to be indicative of future movements in market rates or to be representative of any actual impact that future changes in market rates may have on our future financial results.
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Item 8. Financial Statements and Supplementary Data.
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Mondelēz International, Inc.:
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of earnings, comprehensive earnings, equity and cash flows present fairly, in all material respects, the financial position of Mondelēz International, Inc. and its subsidiaries at December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2016 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the Report of Management on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ PRICEWATERHOUSECOOPERS LLP
Chicago, Illinois
February 24, 2017
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Mondelēz International, Inc. and Subsidiaries
Consolidated Statements of Earnings
For the Years Ended December 31
(in millions of U.S. dollars, except per share data)
| 2016 | 2015 | 2014 | ||||||||||
| Net revenues |
$ | 25,923 | $ | 29,636 | $ | 34,244 | ||||||
| Cost of sales |
15,795 | 18,124 | 21,647 | |||||||||
|
|
|
|
|
|
|
|||||||
| Gross profit |
10,128 | 11,512 | 12,597 | |||||||||
| Selling, general and administrative expenses |
6,540 | 7,577 | 8,457 | |||||||||
| Asset impairment and exit costs |
852 | 901 | 692 | |||||||||
| Gains on divestitures |
(9 | ) | (6,822 | ) | – | |||||||
| Loss on deconsolidation of Venezuela |
– | 778 | – | |||||||||
| Amortization of intangibles |
176 | 181 | 206 | |||||||||
|
|
|
|
|
|
|
|||||||
| Operating income |
2,569 | 8,897 | 3,242 | |||||||||
| Interest and other expense, net |
1,115 | 1,013 | 688 | |||||||||
|
|
|
|
|
|
|
|||||||
| Earnings before income taxes |
1,454 | 7,884 | 2,554 | |||||||||
| Provision for income taxes |
(129 | ) | (593 | ) | (353 | ) | ||||||
| Gain on equity method investment exchange |
43 | – | – | |||||||||
| Equity method investment net earnings |
301 | – | – | |||||||||
|
|
|
|
|
|
|
|||||||
| Net earnings |
1,669 | 7,291 | 2,201 | |||||||||
| Noncontrolling interest earnings |
(10 | ) | (24 | ) | (17 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Net earnings attributable to Mondelēz International |
$ | 1,659 | $ | 7,267 | $ | 2,184 | ||||||
|
|
|
|
|
|
|
|||||||
| Per share data: |
||||||||||||
| Basic earnings per share attributable to Mondelēz International |
$ | 1.07 | $ | 4.49 | $ | 1.29 | ||||||
|
|
|
|
|
|
|
|||||||
| Diluted earnings per share attributable to Mondelēz International |
$ | 1.05 | $ | 4.44 | $ | 1.28 | ||||||
|
|
|
|
|
|
|
|||||||
| Dividends declared |
$ | 0.72 | $ | 0.64 | $ | 0.58 | ||||||
|
|
|
|
|
|
|
|||||||
See accompanying notes to the consolidated financial statements.
61
Table of Contents
Mondelēz International, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Earnings
For the Years Ended December 31
(in millions of U.S. dollars)
| 2016 | 2015 | 2014 | ||||||||||
| Net earnings |
$ | 1,669 | $ | 7,291 | $ | 2,201 | ||||||
| Other comprehensive earnings / (losses), net of tax: |
||||||||||||
| Currency translation adjustment |
(925 | ) | (2,990 | ) | (3,661 | ) | ||||||
| Pension and other benefit plans |
(153 | ) | 340 | (682 | ) | |||||||
| Derivative cash flow hedges |
(75 | ) | (44 | ) | (119 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Total other comprehensive earnings / (losses) |
(1,153 | ) | (2,694 | ) | (4,462 | ) | ||||||
| Comprehensive earnings / (losses) |
516 | 4,597 | (2,261 | ) | ||||||||
| less: Comprehensive earnings / (losses) attributable to noncontrolling interests |
(7 | ) | (2 | ) | (16 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Comprehensive earnings / (losses) attributable to Mondelēz International |
$ | 523 | $ | 4,599 | $ | (2,245 | ) | |||||
|
|
|
|
|
|
|
|||||||
See accompanying notes to the consolidated financial statements.
62
Table of Contents
Mondelēz International, Inc. and Subsidiaries
Consolidated Balance Sheets, as of December 31
(in millions of U.S. dollars, except share data)
| 2016 | 2015 | |||||||
| ASSETS |
||||||||
| Cash and cash equivalents |
$ | 1,741 | $ | 1,870 | ||||
| Trade receivables (net of allowances of $58 at December 31, 2016 |
2,611 | 2,634 | ||||||
| Other receivables (net of allowances of $93 at December 31, 2016 |
859 | 1,212 | ||||||
| Inventories, net |
2,469 | 2,609 | ||||||
| Other current assets |
800 | 633 | ||||||
|
|
|
|
|
|||||
| Total current assets |
8,480 | 8,958 | ||||||
| Property, plant and equipment, net |
8,229 | 8,362 | ||||||
| Goodwill |
20,276 | 20,664 | ||||||
| Intangible assets, net |
18,101 | 18,768 | ||||||
| Prepaid pension assets |
159 | 69 | ||||||
| Deferred income taxes |
358 | 277 | ||||||
| Equity method investments |
5,585 | 5,387 | ||||||
| Other assets |
350 | 358 | ||||||
|
|
|
|
|
|||||
| TOTAL ASSETS |
$ | 61,538 | $ | 62,843 | ||||
|
|
|
|
|
|||||
| LIABILITIES |
||||||||
| Short-term borrowings |
$ | 2,531 | $ | 236 | ||||
| Current portion of long-term debt |
1,451 | 605 | ||||||
| Accounts payable |
5,318 | 4,890 | ||||||
| Accrued marketing |
1,745 | 1,634 | ||||||
| Accrued employment costs |
736 | 844 | ||||||
| Other current liabilities |
2,636 | 2,713 | ||||||
|
|
|
|
|
|||||
| Total current liabilities |
14,417 | 10,922 | ||||||
| Long-term debt |
13,217 | 14,557 | ||||||
| Deferred income taxes |
4,721 | 4,750 | ||||||
| Accrued pension costs |
2,014 | 2,183 | ||||||
| Accrued postretirement health care costs |
382 | 499 | ||||||
| Other liabilities |
1,572 | 1,832 | ||||||
|
|
|
|
|
|||||
| TOTAL LIABILITIES |
36,323 | 34,743 | ||||||
| Commitments and Contingencies (Note 12) |
||||||||
| EQUITY |
||||||||
| Common Stock, no par value (5,000,000,000 shares authorized and 1,996,537,778 shares issued at December 31, 2016 and December 31, 2015) |
– | – | ||||||
| Additional paid-in capital |
31,847 | 31,760 | ||||||
| Retained earnings |
21,149 | 20,700 | ||||||
| Accumulated other comprehensive losses |
(11,122 | ) | (9,986 | ) | ||||
| Treasury stock, at cost (468,172,237 shares at December 31, 2016 and 416,504,624 shares at December 31, 2015) |
(16,713 | ) | (14,462 | ) | ||||
|
|
|
|
|
|||||
| Total Mondelēz International Shareholders’ Equity |
25,161 | 28,012 | ||||||
| Noncontrolling interest |
54 | 88 | ||||||
|
|
|
|
|
|||||
| TOTAL EQUITY |
25,215 | 28,100 | ||||||
|
|
|
|
|
|||||
| TOTAL LIABILITIES AND EQUITY |
$ | 61,538 | $ | 62,843 | ||||
|
|
|
|
|
|||||
See accompanying notes to the consolidated financial statements.
63
Table of Contents
Mondelēz International, Inc. and Subsidiaries
Consolidated Statements of Equity
(in millions of U.S. dollars, except per share data)
| Mondelēz International Shareholders’ Equity | ||||||||||||||||||||||||||||
| Accumulated | ||||||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||||
| Additional | Comprehensive | |||||||||||||||||||||||||||
| Common | Paid-in | Retained | Earnings / | Treasury | Noncontrolling | Total | ||||||||||||||||||||||
| Stock | Capital | Earnings | (Losses) | Stock | Interest | Equity | ||||||||||||||||||||||
| Balances at January 1, 2014 |
$ | – | $ | 31,396 | $ | 13,419 | $ | (2,889 | ) | $ | (9,553 | ) | $ | 159 | $ | 32,532 | ||||||||||||
| Comprehensive earnings / (losses): |
||||||||||||||||||||||||||||
| Net earnings |
– | – | 2,184 | – | – | 17 | 2,201 | |||||||||||||||||||||
| Other comprehensive losses, |
– | – | – | (4,429 | ) | – | (33 | ) | (4,462 | ) | ||||||||||||||||||
| Exercise of stock options and |
– | 271 | (98 | ) | – | 332 | – | 505 | ||||||||||||||||||||
| Common Stock repurchased |
– | – | – | – | (1,891 | ) | – | (1,891 | ) | |||||||||||||||||||
| Cash dividends declared ($0.58 per share) |
– | – | (976 | ) | – | – | – | (976 | ) | |||||||||||||||||||
| Dividends paid on noncontrolling interest and other activities |
– | (16 | ) | – | – | – | (40 | ) | (56 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Balances at December 31, 2014 |
$ | – | $ | 31,651 | $ | 14,529 | $ | (7,318 | ) | $ | (11,112 | ) | $ | 103 | $ | 27,853 | ||||||||||||
| Comprehensive earnings / (losses): |
||||||||||||||||||||||||||||
| Net earnings |
– | – | 7,267 | – | – | 24 | 7,291 | |||||||||||||||||||||
| Other comprehensive losses, net of income taxes |
– | – | – | (2,668 | ) | – | (26 | ) | (2,694 | ) | ||||||||||||||||||
| Exercise of stock options and |
– | 109 | (70 | ) | – | 272 | – | 311 | ||||||||||||||||||||
| Common Stock repurchased |
– | – | – | – | (3,622 | ) | – | (3,622 | ) | |||||||||||||||||||
| Cash dividends declared |
– | – | (1,026 | ) | – | – | – | (1,026 | ) | |||||||||||||||||||
| Dividends paid on noncontrolling interest and other activities |
– | – | – | – | – | (13 | ) | (13 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Balances at December 31, 2015 |
$ | – | $ | 31,760 | $ | 20,700 | $ | (9,986 | ) | $ | (14,462 | ) | $ | 88 | $ | 28,100 | ||||||||||||
| Comprehensive earnings / (losses): |
||||||||||||||||||||||||||||
| Net earnings |
– | – | 1,659 | – | – | 10 | 1,669 | |||||||||||||||||||||
| Other comprehensive earnings / (losses), net of income taxes |
– | – | – | (1,136 | ) | – | (17 | ) | (1,153 | ) | ||||||||||||||||||
| Exercise of stock options and |
– | 87 | (94 | ) | – | 350 | – | 343 | ||||||||||||||||||||
| Common Stock repurchased |
– | – | – | – | (2,601 | ) | – | (2,601 | ) | |||||||||||||||||||
| Cash dividends declared |
– | – | (1,116 | ) | – | – | – | (1,116 | ) | |||||||||||||||||||
| Dividends paid on noncontrolling interest and other activities |
– | – | – | – | – | (27 | ) | (27 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Balances at December 31, 2016 |
$ | – | $ | 31,847 | $ | 21,149 | $ | (11,122 | ) | $ | (16,713 | ) | $ | 54 | $ | 25,215 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
See accompanying notes to the consolidated financial statements.
64
Table of Contents
Mondelēz International, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the Years Ended December 31
(in millions of U.S. dollars)
| 2016 | 2015 | 2014 | ||||||||||
| CASH PROVIDED BY / (USED IN) OPERATING ACTIVITIES |
||||||||||||
| Net earnings |
$ | 1,669 | $ | 7,291 | $ | 2,201 | ||||||
| Adjustments to reconcile net earnings to operating cash flows: |
||||||||||||
| Depreciation and amortization |
823 | 894 | 1,059 | |||||||||
| Stock-based compensation expense |
140 | 136 | 141 | |||||||||
| Deferred income tax benefit |
(141 | ) | (30 | ) | (186 | ) | ||||||
| Asset impairments and accelerated depreciation |
446 | 345 | 240 | |||||||||
| Loss on early extinguishment of debt |
428 | 748 | 493 | |||||||||
| Loss on deconsolidation of Venezuela |
– | 778 | – | |||||||||
| Gains on divestitures and JDE coffee business transactions |
(9 | ) | (6,822 | ) | – | |||||||
| JDE coffee business transactions currency-related net gains |
– | (436 | ) | (628 | ) | |||||||
| Gain on equity method investment exchange |
(43 | ) | – | – | ||||||||
| Equity method investment net earnings |
(301 | ) | (56 | ) | (113 | ) | ||||||
| Distributions from equity method investments |
75 | 58 | 63 | |||||||||
| Other non-cash items, net |
(43 | ) | 199 | (134 | ) | |||||||
| Change in assets and liabilities, net of acquisitions and divestitures: |
||||||||||||
| Receivables, net |
31 | 44 | 184 | |||||||||
| Inventories, net |
62 | (49 | ) | (188 | ) | |||||||
| Accounts payable |
409 | 659 | 387 | |||||||||
| Other current assets |
(176 | ) | 28 | (86 | ) | |||||||
| Other current liabilities |
60 | 152 | 135 | |||||||||
| Change in pension and postretirement assets and liabilities, net |
(592 | ) | (211 | ) | (6 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Net cash provided by operating activities |
2,838 | 3,728 | 3,562 | |||||||||
|
|
|
|
|
|
|
|||||||
| CASH PROVIDED BY / (USED IN) INVESTING ACTIVITIES |
||||||||||||
| Capital expenditures |
(1,224 | ) | (1,514 | ) | (1,642 | ) | ||||||
| Proceeds from JDE coffee business transactions |
– | 1,050 | – | |||||||||
| Acquisitions, net of cash received |
(246 | ) | (527 | ) | (7 | ) | ||||||
| Proceeds from JDE coffee business transaction and divestitures, |
303 | 4,735 | – | |||||||||
| Reduction of cash due to Venezuela deconsolidation |
– | (611 | ) | – | ||||||||
| Capital contribution to JDE |
– | (544 | ) | – | ||||||||
| Proceeds from sale of property, plant and equipment and other assets |
138 | 60 | 7 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net cash (used in) / provided by investing activities |
(1,029 | ) | 2,649 | (1,642 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| CASH PROVIDED BY / (USED IN) FINANCING ACTIVITIES |
||||||||||||
| Issuances of commercial paper, maturities greater than 90 days |
1,540 | 613 | 2,082 | |||||||||
| Repayments of commercial paper, maturities greater than 90 days |
(1,031 | ) | (710 | ) | (2,713 | ) | ||||||
| Net (repayments) / issuances of other short-term borrowings |
1,741 | (931 | ) | 398 | ||||||||
| Long-term debt proceeds |
5,640 | 4,624 | 3,032 | |||||||||
| Long-term debt repaid |
(6,186 | ) | (4,975 | ) | (3,017 | ) | ||||||
| Repurchase of Common Stock |
(2,601 | ) | (3,622 | ) | (1,700 | ) | ||||||
| Dividends paid |
(1,094 | ) | (1,008 | ) | (964 | ) | ||||||
| Other |
129 | 126 | 194 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net cash used in financing activities |
(1,862 | ) | (5,883 | ) | (2,688 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Effect of exchange rate changes on cash and cash equivalents |
(76 | ) | (255 | ) | (223 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Cash and cash equivalents: |
||||||||||||
| (Decrease) / increase |
(129 | ) | 239 | (991 | ) | |||||||
| Balance at beginning of period |
1,870 | 1,631 | 2,622 | |||||||||
|
|
|
|
|
|
|
|||||||
| Balance at end of period |
$ | 1,741 | $ | 1,870 | $ | 1,631 | ||||||
|
|
|
|
|
|
|
|||||||
| Cash paid: |
||||||||||||
| Interest |
$ | 630 | $ | 747 | $ | 827 | ||||||
|
|
|
|
|
|
|
|||||||
| Income taxes |
$ | 527 | $ | 745 | $ | 1,238 | ||||||
|
|
|
|
|
|
|
|||||||
See accompanying notes to the consolidated financial statements.
65
Table of Contents
Mondelēz International, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 1. Summary of Significant Accounting Policies
Description of Business:
Mondelēz International, Inc. was incorporated in 2000 in the Commonwealth of Virginia. Mondelēz International, Inc., through its subsidiaries (collectively “Mondelēz International,” “we,” “us” and “our”), sells food and beverage products to consumers in approximately 165 countries.
Principles of Consolidation:
The consolidated financial statements include Mondelēz International, Inc. as well as our wholly owned and majority owned subsidiaries. For all periods presented through December 31, 2015, the operating results of our Venezuelan subsidiaries are included in our consolidated financial statements. As of the close of the fourth quarter of 2015, we deconsolidated our Venezuelan operations from our consolidated financial statements and recognized a loss on deconsolidation. See Currency Translation and Highly Inflationary Accounting: Venezuela below for more information.
We account for investments in which we exercise significant influence (20%-50% ownership interest) under the equity method of accounting. On July 2, 2015, we contributed our global coffee businesses to a new company, Jacobs Douwe Egberts (“JDE”), in which we now hold an equity interest (collectively, the “JDE coffee business transactions”). Historically, our coffee businesses and the income from equity method investments were recorded within our operating income as these businesses were part of our base business. While we retain an ongoing interest in coffee through equity method investments including JDE, Keurig Green Mountain Inc. (“Keurig”) and Dongsuh Foods Corporation (“DSF”), and we have significant influence with our equity method investments, we do not control these operations directly. As such, in the third quarter of 2015, we began to recognize equity method investment earnings, consisting primarily of investments in coffee businesses, outside of operating income and segment income. For periods prior to the third quarter of 2015, our historical coffee business and equity method investment earnings were included within our operating income and segment income. For the six months ended December 31, 2015, after-tax equity method investment net earnings were less than $1 million on a combined basis and thus are not shown on our consolidated statement of earnings for this period. Please see Note 2, Divestitures and Acquisitions – JDE Coffee Business Transactions and Keurig Transaction, and Note 16, Segment Reporting, for more information on these transactions.
We use the cost method of accounting for investments in which we have an ownership interest of less than 20% and in which we do not exercise significant influence. The noncontrolling interest represents the noncontrolling investors’ interests in the results of subsidiaries that we control and consolidate. All intercompany transactions are eliminated.
Use of Estimates:
We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which require us to make estimates and assumptions that affect a number of amounts in our consolidated financial statements. Significant accounting policy elections, estimates and assumptions include, among others, pension and benefit plan assumptions, valuation assumptions of goodwill and intangible assets, useful lives of long-lived assets, restructuring program liabilities, marketing program accruals, insurance and self-insurance reserves and income taxes. We base our estimates on historical experience and other assumptions that we believe are reasonable. 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 consolidated financial statements.
Segment Change:
On October 1, 2016, we integrated our Eastern Europe, Middle East, and Africa (“EEMEA”) operating segment into our Europe and Asia Pacific operating segments to further leverage and optimize the operating scale built within the Europe and Asia Pacific regions. Russia, Ukraine, Turkey, Belarus, Georgia and Kazakhstan were combined within our Europe region, while the remaining Middle East and African countries were combined within our Asia Pacific region to form a new Asia, Middle East and Africa (“AMEA”) operating segment. We have reflected the segment change as if it had occurred in all periods presented.
66
Table of Contents
As of October 1, 2016, our operations and management structure was organized into four reportable operating segments:
| • | Latin America |
| • | AMEA |
| • | Europe |
| • | North America |
See Note 16, Segment Reporting, for additional information on our segments.
Currency Translation and Highly Inflationary Accounting:
We translate the results of operations of our subsidiaries from multiple currencies using average exchange rates during each period and translate balance sheet accounts using exchange rates at the end of each period. We record currency translation adjustments as a component of equity (except for highly inflationary currencies) and realized exchange gains and losses on transactions in earnings. In 2016, none of our consolidated subsidiaries were subject to highly inflationary accounting.
United Kingdom. On June 23, 2016, the United Kingdom (“U.K.”) voted by referendum to exit the European Union; this vote is commonly referred to as “Brexit.” The referendum is non-binding and the exit from the European Union is not immediate. Once the United Kingdom invokes E.U. Article 50, there is a two-year window in which the United Kingdom and the European Commission can negotiate the future terms for imports, exports, taxes, employment, immigration and other areas.
Brexit has caused volatility in global stock markets and currency exchange rates, affecting the markets in which we operate. The implications of Brexit could adversely affect demand for our products, our financial results and operations, and our relationships with customers, suppliers and employees in the short or long-term. On June 24, 2016, the value of the British pound sterling relative to the U.S. dollar fell by 9%. Since that date, the value of the British pound sterling relative to the U.S. dollar declined an additional 11% through December 31, 2016. Further volatility in the exchange rate is expected over the transition period.
As the business operating environment remains uncertain, we continue to monitor our investments and currency exposures abroad. As the United Kingdom is not a highly-inflationary economy, we record currency translation adjustments within equity and realized exchange gains and losses on transactions in earnings. While we did not experience significant business disruptions in our U.K. businesses immediately following the referendum, the devaluation of the British pound sterling in 2016 adversely affected our translated results reported in U.S. dollars. We have a natural hedge in the form of pound sterling-denominated debt that acts as a net investment hedge, moving counter to adverse pound sterling currency translation impacts. British pound sterling currency transaction risks are largely mitigated due to our global chocolate businesses buying cocoa in British pound sterling. Our U.K. operations contributed $2.2 billion, or 8.6% of consolidated net revenues for the year ended December 31, 2016.
Venezuela. From January 1, 2010 through December 31, 2015, we accounted for the results of our Venezuelan subsidiaries using the U.S. dollar as the functional currency as prescribed by U.S. GAAP for highly inflationary economies.
Effective as of the close of the 2015 fiscal year, we concluded that we no longer met the accounting criteria for consolidation of our Venezuelan subsidiaries due to a loss of control over our Venezuelan operations and an other-than-temporary lack of currency exchangeability. During the fourth quarter of 2015, representatives of the Venezuelan government arbitrarily imposed pricing restrictions on our local operations that resulted in our inability to recover operating costs. We immediately began an appeal process with the Venezuelan authorities to demonstrate that our pricing was in line with the regulatory requirements. In January 2016, local officials communicated that some of the pricing restrictions had been lifted; however, the legally required administrative order had not been issued and it was uncertain when it would be issued. The legal and regulatory environment also became more unreliable. While we had been complying with the Venezuelan law governing pricing and profitability controls and followed the legal process for appeal, the appeal process was not available to us as outlined under law. Additionally, we were increasingly facing issues procuring raw materials and packaging. Taken together, these actions, the economic environment in Venezuela and the progressively limited access to dollars to import goods through the use of any of the available currency mechanisms impaired our ability to operate and control our Venezuelan businesses. As a result of these factors, we concluded that we no longer met the criteria for the consolidation of our Venezuelan subsidiaries.
67
Table of Contents
As of the close of the 2015 fiscal year, we deconsolidated and changed to the cost method of accounting for our Venezuelan operations. We recorded a $778 million pre-tax loss on December 31, 2015 as we reduced the value of our cost method investment in Venezuela and all Venezuelan receivables held by our other subsidiaries to realizable fair value, resulting in full impairment. The recorded loss also included historical cumulative translation adjustments related to our Venezuelan operations that had previously been recorded in accumulated other comprehensive losses within equity. The fair value of our investments in our Venezuelan subsidiaries was estimated based on discounted cash flow projections of current and expected operating losses in the foreseeable future and our ability to operate the business on a sustainable basis. Our fair value estimate included U.S. dollar exchange and discount rate assumptions that reflect the inflation and economic uncertainty in Venezuela.
For 2015 and prior periods presented, the operating results of our Venezuela operations were included in our consolidated statements of earnings. During this time, we recognized a number of currency-related remeasurement losses resulting from devaluations of the Venezuela bolivar exchange rates we historically used to source U.S. dollars for purchases of imported raw materials, packaging and other goods and services. The following table sets forth a history of the remeasurement losses, the deconsolidation loss and historical operating results and financial position of our Venezuelan subsidiaries for the periods presented:
| For the Years Ended December 31, | ||||||||
| 2015 | 2014 | |||||||
| (in millions) | ||||||||
| Net revenues |
$ | 1,217 | $ | 760 | ||||
| Operating income (excluding remeasurement and |
266 | 181 | ||||||
| Remeasurement losses: |
||||||||
| Q1 2014: 6.30 to 10.70 bolivars to the U.S. dollar |
– | (142 | ) | |||||
| SICAD I remeasurements through |
– | (25 | ) | |||||
| Q1 2015: 11.50 to 12.00 bolivars to the U.S. dollar |
(11 | ) | – | |||||
| Loss on deconsolidation |
(778 | ) | – | |||||
| As of December 31, | ||||||||
| 2015 | 2014 | |||||||
| (in millions) | ||||||||
| Cash (1) |
$ | 611 | $ | 278 | ||||
| Net monetary assets (1) |
405 | 236 | ||||||
| Net assets (1) |
658 | 500 | ||||||
| (1) | Represents the financial position of our Venezuelan subsidiaries prior to the accounting change on December 31, 2015. |
Beginning in 2016, we no longer include net revenues, earnings or net assets of our Venezuelan subsidiaries within our consolidated financial statements. Under the cost method of accounting, earnings are only recognized to the extent cash is received. Given the current and ongoing difficult economic, regulatory and business environment in Venezuela, there continues to be significant uncertainty related to our operations in Venezuela, and we expect these conditions will continue for the foreseeable future. We will monitor the extent of our ability to control our Venezuelan operations and the liquidity and availability of U.S. dollars at different rates, as our current situation in Venezuela may change over time and lead to consolidation at a future date.
Argentina. On December 16, 2015, the new Argentinean government fiscal authority announced the lifting of strict currency controls and reduced restrictions on exports and imports. The next day, the value of the Argentinean peso relative to the U.S. dollar fell by 36%. In 2016, the value of the Argentinean peso relative to the U.S. dollar declined an additional 23%. Further volatility in the exchange rate is expected. While the business operating environment remains challenging, we continue to monitor and actively manage our investment and exposures in Argentina. We continue executing our hedging programs and refining our product portfolio to improve our product offerings, mix and profitability. We also continue to implement additional cost reduction initiatives to optimize and streamline our manufacturing facilities and commercial operations to protect the business together with pricing strategy to offset inflationary pressures. While further currency declines could have an adverse impact on our ongoing results of operations, we believe the actions by the government to reduce economic controls and business restrictions will provide favorable opportunities for our Argentinean subsidiaries. Our Argentinean operations contributed $583 million, or 2.2% of consolidated net revenues for the year ended December 31, 2016. As of December 31, 2016, the net monetary liabilities of our Argentina operations were not material. Argentina is not designated as a highly-inflationary economy for accounting purposes, so we record currency translation adjustments within equity and realized exchange gains and losses on transactions in earnings.
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Other Countries. Since we have operations in over 80 countries and sell in approximately 165 countries, we monitor economic and currency-related risks and seek to take protective measures in response to these exposures. Some of the countries in which we do business have recently experienced periods of significant economic uncertainty. These include Brazil, China, Mexico, Russia, Turkey, Egypt, Nigeria, Ukraine and South Africa, most of which have had either currency devaluation or volatility in exchange rates. We continue to monitor operations, currencies and net monetary exposures in these countries. At this time, we do not anticipate any risk to our operating results from changing to highly inflationary accounting in these countries.
Cash and Cash Equivalents:
Cash and cash equivalents include demand deposits with banks and all highly liquid investments with original maturities of three months or less.
Transfers of Financial Assets:
We account for transfers of financial assets, such as uncommitted revolving non-recourse accounts receivable factoring arrangements, when we have surrendered control over the related assets. Determining whether control has transferred requires an evaluation of relevant legal considerations, an assessment of the nature and extent of our continuing involvement with the assets transferred and any other relevant considerations. We use receivable factoring arrangements periodically when circumstances are favorable to manage liquidity. We have a factoring arrangement with a major global bank for a maximum combined capacity of $802 million. Under the program, we may sell eligible short-term trade receivables to the bank in exchange for cash. We then continue to collect the receivables sold, acting solely as a collecting agent on behalf of the bank. We also enter into arrangements with customers to achieve earlier collection of receivables. The total incremental cost of factoring receivables for all regions was $9 million in 2016, $7 million in 2015 and $7 million in 2014 and was recorded in net revenue. The outstanding principal amount of receivables under all arrangements amounted to $745 million as of December 31, 2016, $666 million as of December 31, 2015 and $421 million as of December 31, 2014.
Accounting Calendar Change:
In connection with moving toward a common consolidation date across the Company, in the first quarter of 2015, we changed the consolidation date for our North America segment from the last Saturday of each period to the last calendar day of each period. The change had a favorable impact of $76 million on net revenues and $36 million on operating income in 2015. As a result of this change, each of our operating subsidiaries now reports results as of the last calendar day of the period. As the effect to prior-period results was not material, we have not revised prior-period results.
Inventories:
We value our inventory using the average cost method. We also record inventory allowances for overstock and obsolete inventories due to ingredient and packaging changes.
Long-Lived Assets:
Property, plant and equipment are stated at historical cost and depreciated by the straight-line method over the estimated useful lives of the assets. Machinery and equipment are depreciated over periods ranging from 3 to 20 years and buildings and building improvements over periods up to 40 years.
We review long-lived assets, including amortizable intangible assets, for realizability on an ongoing basis. Changes in depreciation, generally accelerated depreciation, are determined and recorded when estimates of the remaining useful lives or residual values of long-term assets change. We also review for impairment when conditions exist that indicate the carrying amount of the assets may not be fully recoverable. In those circumstances, we perform undiscounted operating cash flow analyses to determine if an impairment exists. When testing for asset impairment, we group assets and liabilities at the lowest level for which cash flows are separately identifiable. Any impairment loss is calculated as the excess of the asset’s carrying value over its estimated fair value. Fair value is estimated based on the discounted cash flows for the asset group over the remaining useful life or based on the expected cash proceeds for the asset less costs of disposal. Any significant impairment losses would be recorded within asset impairment and exit costs in the consolidated statements of earnings.
Software Costs:
We capitalize certain computer software and software development costs incurred in connection with developing or obtaining computer software for internal use. Capitalized software costs are included in property, plant and equipment and amortized on a straight-line basis over the estimated useful lives of the software, which do not exceed seven years.
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Goodwill and Non-Amortizable Intangible Assets:
We test goodwill and non-amortizable intangible assets for impairment on an annual basis on October 1. We assess goodwill impairment risk throughout the year by performing a qualitative review of entity-specific, industry, market and general economic factors affecting our goodwill reporting units. We review our operating segment and reporting unit structure for goodwill testing annually or as significant changes in the organization occur. Annually, we may perform qualitative testing, or depending on factors such as prior-year test results, current year developments, current risk evaluations and other practical considerations, we may elect to do quantitative testing instead. In the event that significant potential goodwill impairment risk exists for a specific reporting unit, we apply a two-step quantitative test. The first step compares the reporting unit’s estimated fair value with its carrying value. We estimate a reporting unit’s fair value using a discounted cash flow method which incorporates planned growth rates, market-based discount rates and estimates of residual value. This year, for our Europe and North America reporting units, we used a market-based, weighted-average cost of capital of 6.7% to discount the projected cash flows of those operations. For our Latin America and AMEA reporting units, we used a risk-rated discount rate of 9.7%. Estimating the fair value of individual reporting units requires us to make assumptions and estimates regarding our future plans, industry and economic conditions, and our actual results and conditions may differ over time. If the carrying value of a reporting unit’s net assets exceeds its fair value, we would apply a second step to measure the difference between the carrying value and implied fair value of goodwill. If the carrying value of goodwill exceeds its implied fair value, the goodwill is impaired and its carrying value is reduced to the implied fair value of the goodwill.
Annually we assess non-amortizable intangible assets for impairment by performing a qualitative review and assessing events and circumstances that could affect the fair value or carrying value of the indefinite-lived intangible assets. If significant potential impairment risk exists for a specific asset, we quantitatively test it for impairment by comparing its estimated fair value with its carrying value. We determine estimated fair value using planned growth rates, market-based discount rates and estimates of royalty rates. If the carrying value of the asset exceeds its fair value, we consider the asset impaired and reduce its carrying value to the estimated fair value. We amortize definite-lived intangible assets over their estimated useful lives and evaluate them for impairment as we do other long-lived assets.
Insurance and Self-Insurance:
We use a combination of insurance and self-insurance for a number of risks, including workers’ compensation, general liability, automobile liability, product liability and our obligation for employee healthcare benefits. We estimate the liabilities associated with these risks on an undiscounted basis by evaluating and making judgments about historical claims experience and other actuarial assumptions and the estimated impact on future results.
Revenue Recognition:
We recognize revenues when title and risk of loss pass to customers, which generally occurs upon delivery or shipment of goods. Revenues are recorded net of sales incentives and trade promotions and include all shipping and handling charges billed to customers. Our shipping and handling costs are classified as part of cost of sales. Provisions for product returns and other trade allowances are also recorded as reductions to revenues within the same period that the revenue is recognized.
Marketing and Research and Development:
We promote our products with advertising, marketing, sales incentives and trade promotions. These programs include, but are not limited to, cooperative advertising, in-store displays, consumer promotions, new product introduction fees, discounts, coupons, rebates and volume-based incentives. We expense advertising costs either in the period the advertising first takes place or as incurred. Sales incentive and trade promotion activities are recorded as a reduction to revenues based on amounts estimated due to customers and consumers at the end of a period. We base these estimates principally on historical utilization and redemption rates. For interim reporting purposes, advertising expenses and sales incentives are charged to operations as a percentage of volume, based on estimated volume and estimated program spending. We do not defer costs on our year-end consolidated balance sheet and all marketing costs are recorded as an expense in the year incurred. Advertising expense was $1,396 million in 2016, $1,542 million in 2015 and $1,552 million in 2014. Advertising declined in 2016 due primarily to the deconsolidation of our historical global coffee business and due to currency changes. We expense product research and development costs as incurred. Research and development expense was $376 million in 2016, $409 million in 2015 and $455 million in 2014. Our total research and development expense was lower in 2016 and 2015 primarily due to the deconsolidation of our global coffee business in July 2015, currency and cost optimization initiatives. We record marketing and research and development expenses within selling, general and administrative expenses.
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Employee Benefit Plans:
We provide a range of benefits to our current and retired employees. These include pension benefits, postretirement health care benefits and postemployment benefits depending upon jurisdiction, tenure, job level and other factors. Local statutory requirements govern many of the benefit plans we provide around the world. Local government plans generally cover health care benefits for retirees outside the United States, Canada and United Kingdom. Our U.S., Canadian and U.K. subsidiaries provide health care and other benefits to most retired employees. Our postemployment benefit plans provide primarily severance benefits for eligible salaried and certain hourly employees. The cost for these plans is recognized in earnings primarily over the working life of the covered employee.
Financial Instruments:
We use financial instruments to manage our currency exchange rate, commodity price and interest rate risks. We monitor and manage these exposures as part of our overall risk management program, which focuses on the unpredictability of financial markets and seeks to reduce the potentially adverse effects that the volatility of these markets may have on our operating results. A principal objective of our risk management strategies is to reduce significant, unanticipated earnings fluctuations that may arise from volatility in currency exchange rates, commodity prices and interest rates, principally through the use of derivative instruments.
We use a combination of primarily currency forward contracts, futures, options and swaps; commodity forward contracts, futures and options; and interest rate swaps to manage our exposure to cash flow variability, protect the value of our existing currency assets and liabilities and protect the value of our debt. See Note 8, Financial Instruments, for more information on the types of derivative instruments we use.
We record derivative financial instruments on a gross basis and at fair value in our consolidated balance sheets within other current assets or other current liabilities due to their relatively short-term duration. Cash flows from derivative instruments are classified in the consolidated statements of cash flows based on the nature of the derivative instrument. Changes in the fair value of a derivative that is designated as a cash flow hedge, to the extent that the hedge is effective, are recorded in accumulated other comprehensive earnings / (losses) and reclassified to earnings when the hedged item affects earnings. Changes in fair value of economic hedges and the ineffective portion of all hedges are recognized in current period earnings. Changes in the fair value of a derivative that is designated as a fair value hedge, along with the changes in the fair value of the related hedged asset or liability, are recorded in earnings in the same period. We use non-U.S. dollar denominated debt to hedge a portion of our net investment in non-U.S. operations against adverse movements in exchange rates, with currency movements related to the debt and net investment and the related deferred taxes recorded within currency translation adjustment in accumulated other comprehensive earnings / (losses).
In order to qualify for hedge accounting, a specified level of hedging effectiveness between the derivative instrument and the item being hedged must exist at inception and throughout the hedged period. We must also formally document the nature of and relationship between the derivative and the hedged item, as well as our risk management objectives, strategies for undertaking the hedge transaction and method of assessing hedge effectiveness. Additionally, for a hedge of a forecasted transaction, the significant characteristics and expected term of the forecasted transaction must be specifically identified, and it must be probable that the forecasted transaction will occur. If it is no longer probable that the hedged forecasted transaction will occur, we would recognize the gain or loss related to the derivative in earnings.
When we use derivatives, we are exposed to credit and market risks. Credit risk exists when a counterparty to a derivative contract might fail to fulfill its performance obligations under the contract. We reduce our credit risk by entering into transactions with counterparties with high quality, investment grade credit ratings, limiting the amount of exposure with each counterparty and monitoring the financial condition of our counterparties. We also maintain a policy of requiring that all significant, non-exchange traded derivative contracts with a duration of one year or longer are governed by an International Swaps and Derivatives Association master agreement. Market risk exists when the value of a derivative or other financial instrument might be adversely affected by changes in market conditions and commodity prices, currency exchange rates or interest rates. We manage derivative market risk by limiting the types of derivative instruments and derivative strategies we use and the degree of market risk that we plan to hedge through the use of derivative instruments.
Commodity cash flow hedges. We are exposed to price risk related to forecasted purchases of certain commodities that we primarily use as raw materials. We enter into commodity forward contracts primarily for wheat, sugar and other sweeteners, soybean and vegetable oils and cocoa. Commodity forward contracts generally are not subject to the accounting requirements for derivative instruments and hedging activities under the normal purchases exception. We also use commodity futures and options to hedge the price of certain input costs, including cocoa, energy costs, sugar and other sweeteners, wheat, packaging, dairy, corn, and soybean and vegetable oils. Some of these derivative instruments are highly effective and qualify for hedge accounting treatment. We also sell commodity futures to unprice future purchase commitments, and we occasionally use related futures to cross-hedge a commodity exposure. We are not a party to leveraged derivatives and, by policy, do not use financial instruments for speculative purposes.
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Currency exchange cash flow hedges. We use various financial instruments to mitigate our exposure to changes in exchange rates from third-party and intercompany current and forecasted transactions. These instruments may include currency exchange forward contracts, futures, options and swaps. Based on the size and location of our businesses, we use these instruments to hedge our exposure to certain currencies, including the euro, pound sterling, Swiss franc, Canadian dollar and Mexican peso.
Interest rate cash flow and fair value hedges. We manage interest rate volatility by modifying the pricing or maturity characteristics of certain liabilities so that the net impact on expense is not, on a material basis, adversely affected by movements in interest rates. As a result of interest rate fluctuations, hedged fixed-rate liabilities appreciate or depreciate in market value. We expect the effect of this unrealized appreciation or depreciation to be substantially offset by our gains or losses on the derivative instruments that are linked to these hedged liabilities. We use derivative instruments, including interest rate swaps that have indices related to the pricing of specific liabilities as part of our interest rate risk management strategy. As a matter of policy, we do not use highly leveraged derivative instruments for interest rate risk management. We use interest rate swaps to economically convert a portion of our fixed-rate debt into variable-rate debt. Under the interest rate swap contracts, we agree with other parties to exchange, at specified intervals, the difference between fixed-rate and floating-rate interest amounts, which is calculated based on an agreed-upon notional amount. We also use interest rate swaps to hedge the variability of interest payment cash flows on a portion of our future debt obligations. Most recently in October 2016, we executed cross-currency interest rate swaps that we use to hedge interest payment cash flows on newly issued debt denominated in a different currency than the functional currency of the borrowing entity. Substantially all of these derivative instruments are highly effective and qualify for hedge accounting treatment.
Hedges of net investments in non-U.S. operations. We have numerous investments outside the United States. The net assets of these subsidiaries are exposed to changes and volatility in currency exchange rates. We use local currency denominated debt to hedge our non-U.S. net investments against adverse movements in exchange rates. We designated our euro, pound sterling and Swiss franc denominated borrowings as a net investment hedge of a portion of our overall European operations. The gains and losses on our net investment in these designated European operations are economically offset by losses and gains on our euro, pound sterling and Swiss franc denominated borrowings. The change in the debt’s value, net of deferred taxes, is recorded in the currency translation adjustment component of accumulated other comprehensive earnings / (losses).
Income Taxes:
Our provision for income taxes includes amounts payable or refundable for the current year, the effect of deferred tax and impacts from uncertain tax positions. We recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement and tax basis of our assets and liabilities, operating loss carryforwards and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the years in which those differences are expected to reverse.
The realization of certain deferred tax assets is dependent on generating sufficient taxable income in the appropriate jurisdiction prior to the expiration of the carryforward periods. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. When assessing the need for a valuation allowance, we consider any carryback potential, future reversals of existing taxable temporary differences (including liabilities for unrecognized tax benefits), future taxable income and tax planning strategies.
We recognize tax benefits in our financial statements from uncertain tax positions only if it is more likely than not that the tax position will be sustained by the taxing authorities based on the technical merits of the position. The amount we recognize is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon settlement. Future changes in judgment related to the expected resolution of uncertain tax positions could affect income in the period when the change occurs.
New Accounting Pronouncements:
In January 2017, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) that clarifies the definition of a business with the objective of adding guidance to assist companies with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The definition of a business may affect many areas of accounting including acquisitions, disposals, goodwill and consolidation. The ASU is applied on a prospective basis and is effective for fiscal years beginning after December 15, 2017 with early adoption permitted. We are currently assessing the ASU and potential prospective impact on our consolidated financial statements.
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In November 2016, the FASB issued an ASU that requires the change in restricted cash or cash equivalents to be included with other changes in cash and cash equivalents in the statement of cash flows. The ASU is effective for fiscal years beginning after December 15, 2017, with early adoption permitted. We anticipate adopting this standard at the same time as the cash flow statement classification changes described below go into effect on January 1, 2018. We are currently assessing the impact on our consolidated financial statements.
In October 2016, the FASB issued an ASU to amend the consolidation guidance on the treatment of indirect interests held through related parties that are under common control. Under the amendments, a single decision maker is required to include those interests on a proportionate basis consistent with indirect interests held through other related parties. The ASU is effective for fiscal years beginning after December 15, 2016, with early adoption permitted. We adopted the new standard on December 31, 2016 and it did not have a material impact on our consolidated financial statements.
In October 2016, the FASB issued an ASU that requires the recognition of tax consequences of intercompany asset transfers other than inventory when the transfer occurs and removes the exception to postpone recognition until the asset has been sold to an outside party. The ASU is effective for fiscal years beginning after December 15, 2017, with early adoption permitted. We anticipate adopting on January 1, 2018 and do not expect the ASU to have a material impact on our consolidated financial statements.
In August 2016, the FASB issued an ASU to provide guidance on eight specific cash flow classification issues and reduce diversity in practice in how some cash receipts and cash payments are presented and classified in the statement of cash flows. The ASU is effective for fiscal years beginning after December 15, 2017, with early adoption permitted. We anticipate adopting this standard on January 1, 2018. We are currently assessing the impact on our consolidated statements of cash flows.
In March 2016, the FASB issued an ASU to simplify the accounting for stock-based compensation. The ASU addresses several areas of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and cash flow statement presentation. The ASU is effective for fiscal years beginning after December 15, 2016, with early adoption permitted. We will adopt the standard on January 1, 2017. Following adoption and on a prospective basis, we anticipate greater volatility in our consolidated statements of earnings as we will record certain stock-based compensation tax impacts in earnings (within the provision for income taxes) while under the former guidance and for periods prior to January 1, 2017, the tax impacts were recorded directly to equity (within additional paid-in capital).
In March 2016, the FASB issued an ASU that simplifies the transition accounting for increases in investments that require a change from the cost basis to the equity method of accounting. U.S. GAAP currently requires the impact of such changes in accounting method to be retroactively applied to all prior periods that the investment was held. Under the new standard, adjustments to the investor’s basis in the investment should be recorded on the date the investment becomes qualified for equity method accounting. The equity method of accounting is then applied prospectively from that date. The ASU is effective for fiscal years beginning after December 15, 2016, with early adoption permitted. We early adopted this standard on December 31, 2016 and it did not have an impact on our consolidated financial statements.
In March 2016, the FASB issued an ASU that clarifies whether contingent put and call options meet the “clearly and closely related” criteria in connection with accounting for embedded derivatives. U.S GAAP requires that embedded derivatives be separated from the host contract and accounted for separately as derivatives if certain criteria are met. The criteria include determining that the economic characteristics and risks of the embedded derivatives are not “clearly and closely related” to those of the host contract. The ASU is effective for fiscal years beginning after December 15, 2016, with early adoption permitted. We adopted the new standard on December 31, 2016 and it did not have a material impact on our consolidated financial statements.
In March 2016, the FASB issued an ASU that applies when there is a contract novation to a new counterparty for a derivative designated as an accounting hedge. The ASU clarifies that such a change in counterparty does not, in and of itself, require de-designation of the hedging relationship, provided that all other hedge accounting criteria continue to be met. The ASU is effective for fiscal years beginning after December 15, 2016, with early adoption permitted. We adopted the new standard on December 31, 2016 and it did not have a material impact on our consolidated financial statements.
In February 2016, the FASB issued an ASU on lease accounting. The ASU revises existing U.S. GAAP and outlines a new model for lessors and lessees to use in accounting for lease contracts. The guidance requires lessees to recognize a right-of-use asset and a lease liability on the balance sheet for all leases, with the exception of short-term leases. In the consolidated statement of earnings, lessees will classify leases as either operating (resulting in straight-line expense) or financing (resulting in a front-loaded expense pattern). The ASU is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. We anticipate adopting the new standard on January 1, 2019. We have made progress in our due diligence and continue to assess the impact of the new standard across our operations and on our consolidated financial statements.
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In January 2016, the FASB issued an ASU that provides updated guidance for the recognition, measurement, presentation and disclosure of financial assets and liabilities. The standard requires that equity investments (other than those accounted for under equity method of accounting or those that result in consolidation of the investee) be measured at fair value, with changes in fair value recognized in net income. The standard also impacts financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. The ASU is effective for fiscal years beginning after December 15, 2017. This ASU is not expected to have a significant impact on our consolidated financial statements.
In May 2014, the FASB issued an ASU on revenue recognition from contracts with customers. The ASU outlines a new, single comprehensive model for companies to use in accounting for revenue. The core principle is that an entity should recognize revenue to depict the transfer of control over promised goods or services to a customer in an amount that reflects the consideration the entity expects to be entitled to receive in exchange for the goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows from customer contracts, including significant judgments made in recognizing revenue. In 2016, the FASB issued several ASUs that clarified principal versus agent (gross versus net) revenue presentation considerations, confirmed certain prepaid stored-value products should be accounted for under the new revenue recognition ASU and not under other U.S. GAAP and clarified the guidance for identifying performance obligations within a contract and the accounting for licenses. The FASB also issued two ASUs providing technical corrections, narrow scope exceptions and practical expedients to clarify and improve the implementation of the new revenue recognition guidance. The revenue guidance is effective for annual reporting periods beginning after December 15, 2017, with early adoption permitted as of the original effective date (annual reporting periods beginning after December 15, 2016). The ASU may be applied retrospectively to historical periods presented or as a cumulative-effect adjustment as of the date of adoption. We plan to adopt the new standard on January 1, 2018 on a full retrospective basis. We continue to make significant progress on quantifying the impact of the ASU on our consolidated financial statements and planning the final process, policy and disclosure changes that will go into effect on January 1, 2018. At this time, we do not expect a material impact from adopting the new revenue standards.
Reclassifications:
Certain amounts previously reported have been reclassified to conform to current-year presentation. See Segment Change above and Notes 5, Goodwill and Intangible Assets, 6, Restructuring Programs, and 16, Segment Reporting, for information on changes in prior-period segment goodwill, segment earnings and segment net asset reclassifications made in connection with the segment change that went into effect on October 1, 2016. We also reclassified certain amounts previously reported within our consolidated statements of comprehensive earnings and Note 13, Reclassifications from Accumulated Other Comprehensive Income, to be consistent with the current-year presentation.
Note 2. Divestitures and Acquisitions
JDE Coffee Business Transactions:
On July 2, 2015, we completed transactions to combine our wholly owned coffee businesses with those of D.E Master Blenders 1753 B.V. (“DEMB”) to create a new company, JDE. Following the exchange of a portion of our investment in JDE for an interest in Keurig in March 2016, we held a 26.5% equity interest in JDE. (See discussion of the Keurig Transaction below.) The remaining 73.5% equity interest in JDE was held by a subsidiary of Acorn Holdings B.V. (“AHBV,” owner of DEMB prior to July 2, 2015). Following the transactions discussed under JDE Stock-Based Compensation Arrangements below, as of December 31, 2016, we hold a 26.4% equity interest in JDE.
The consideration we received in the JDE coffee business transactions completed on July 2, 2015 consisted of €3.8 billion of cash ($4.2 billion as of July 2, 2015), a 43.5% equity interest in JDE (prior to the decrease in ownership due to the Keurig transaction and the compensation arrangements discussed below) and $794 million in receivables (related to sales price adjustments and tax formation cost payments). During the third quarter of 2015, we also recorded $283 million of cash and receivables from JDE related to reimbursement of costs that we incurred in separating our coffee businesses. The cash and equity consideration we received at closing reflects our retaining our interest in our Korea-based joint venture, DSF. During the second quarter of 2015, we also completed the sale of our interest in a Japanese coffee joint venture, Ajinomoto General Foods, Inc. (“AGF”). In lieu of contributing our interest in the AGF joint venture to JDE, we contributed the net cash proceeds from this sale as part of the overall JDE coffee business transactions. See Other Divestitures and Acquisitions for a discussion of the AGF divestiture.
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On July 5, 2016, we received an expected cash payment of $275 million from JDE to settle the receivable related to tax formation costs that were part of the initial sales price.
In connection with the contribution of our global coffee businesses to JDE on July 2, 2015, we recorded a final pre-tax gain of $6.8 billion (or $6.6 billion after-tax) in 2015 after final adjustments described below. As previously reported, we deconsolidated net assets totaling $2.9 billion and reduced accumulated other comprehensive losses for the transfer of coffee business-related pension obligations by $90 million. We also recorded approximately $1.0 billion of pre-tax net gains related to hedging the expected cash proceeds from the transactions as described further below. During the fourth quarter of 2015, we and JDE concluded negotiations of a sales price adjustment and completed the valuation of our investment in JDE. Primarily due to the negotiated resolution of the sales price adjustment in the fourth quarter of 2015, we recorded a $313 million reduction in the pre-tax gain on the coffee transaction, reducing the $7.1 billion estimated gain in the third quarter of 2015 to the $6.8 billion final gain for 2015. As part of our sales price negotiations, we retained the right to collect future cash payments if certain estimated pension liabilities are realized over an agreed amount in the future. As such, we may recognize additional income related to this negotiated term in the future.
The final value of our 43.5% investment in JDE on July 2, 2015 was €4.1 billion ($4.5 billion as of July 2, 2015). The fair value of the JDE investment was determined using both income-based and market-based valuation techniques. The discounted cash flow analysis reflected growth, discount and tax rates and other assumptions reflecting the underlying combined businesses and countries in which the combined coffee businesses operate. The fair value of the JDE investment also included the fair values of the Carte Noire and Merrild businesses, which JDE agreed to divest to comply with the conditioned approval by the European Commission related to the JDE coffee business transactions. As of the end of the first quarter of 2016, these businesses were sold by JDE. As the July 2, 2015 fair values for these businesses were recorded by JDE at their pending sales values, we did not record any gain or loss on the sales of these businesses in our share of JDE’s earnings.
In 2014 and 2015, in connection with the expected receipt of cash in euros at the time of closing, we entered into a number of consecutive currency exchange forward contracts to lock in an equivalent expected value in U.S. dollars as of the date the JDE coffee business transactions were first announced in May 2014. Cumulatively, we realized aggregate net gains and received cash of approximately $1.0 billion on these hedging contracts that increased the cash we received in connection with the JDE coffee business transactions from $4.2 billion in cash consideration received to $5.2 billion. In connection with these currency contracts and the transfer of the sale proceeds to our subsidiaries that deconsolidated net assets and shares, we recognized a net gain of $436 million in 2015 and $628 million in 2014 within interest and other expense, net.
We also incurred incremental expenses related to readying our global coffee businesses for the transactions that totaled $278 million for the year ended December 31, 2015 and $77 million for the year ended December 31, 2014. Of these total expenses, $123 million was recorded within asset impairment and exit costs in 2015 and the remainder was recorded within selling, general and administrative expenses of primarily our Europe segment, as well as within general corporate expenses.
JDE Capital Increase:
On December 18, 2015, AHBV and we agreed to provide JDE additional capital to pay down some of its debt with lenders. Our pro rata share of the capital increase was €499 million ($544 million as of December 18, 2015) and was made in return for a pro rata number of additional shares in JDE such that our ownership in JDE did not change following the capital increase. To fund our share of the capital increase, we contributed €460 million ($501 million) of JDE receivables and made a €39 million ($43 million) cash payment.
JDE Stock-Based Compensation Arrangements:
On June 30, 2016, we entered into agreements with AHBV and its affiliates to establish a new stock-based compensation arrangement tied to the issuance of JDE equity compensation awards to JDE employees. This arrangement replaced a temporary equity compensation program tied to the issuance of AHBV equity compensation to JDE employees. New Class C, D and E JDE shares were authorized and issued for investments made by and vested stock-based compensation awards granted to JDE employees. Under these arrangements, dilution of the JDE shares is limited to 2%. Upon execution of the agreements and the creation of the Class C, D and E JDE shares, as a percentage of the total JDE issued shares, our Class B shares decreased from 26.5% to 26.4% and AHBV’s Class A shares decreased from 73.5% to 73.22%, while the Class C, D and E shares, held by AHBV and its affiliates until the JDE employee awards vest, comprised 0.38% of JDE’s shares. Additional Class C shares are available to be issued when planned long-term incentive plan (“JDE LTIP”) awards vest, generally over the next five years. When the JDE Class C shares are issued in connection with the vested JDE LTIP awards, the Class A and B relative ownership interests will decrease. Based on estimated achievement and forfeiture assumptions, we do not expect our JDE ownership interest to decrease below 26.27%. Following vesting of stock awards and new employee stock investments, as of December 31, 2016, our ownership interest in JDE was 26.4%.
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JDE Tax Matter Resolution:
On July 19, 2016, the Supreme Court of Spain reached a final resolution on a challenged JDE tax position held by a predecessor DEMB company that resulted in an unfavorable tax expense of €114 million. As a result, our share of JDE’s equity earnings during the third quarter of 2016 was negatively affected by €30 million ($34 million).
Keurig Transaction:
On March 3, 2016, a subsidiary of AHBV completed a $13.9 billion acquisition of all of the outstanding common stock of Keurig through a merger transaction. On March 7, 2016, we exchanged with a subsidiary of AHBV a portion of our equity interest in JDE with a carrying value of €1.7 billion (approximately $2.0 billion as of March 7, 2016) for an interest in Keurig with a fair value of $2.0 billion based on the merger consideration per share for Keurig. We recorded the difference between the fair value of Keurig and our basis in JDE shares as a $43 million gain on the equity method investment exchange in March 2016. Immediately following the exchange, our ownership interest in JDE was 26.5% and our interest in Keurig was 24.2%. Both AHBV and we hold our investments in Keurig through a combination of equity and interests in a shareholder loan, with pro-rata ownership of each. Our initial $2.0 billion investment in Keurig includes a $1.6 billion Keurig equity interest and a $0.4 billion shareholder loan receivable, which are reported on a combined basis within equity method investments on our consolidated balance sheet as of December 31, 2016. The shareholder loan has a 5.5% interest rate and is payable at the end of a seven-year term on February 27, 2023. Within equity method investment net earnings, we recorded equity earnings of $77 million and interest income from the shareholder loan of $20 million in 2016. Additionally, we received $14 million of interest payments on the shareholder loan and $4 million in dividends on our investment in Keurig for the year ended December 31, 2016. We continue to account for our investments in JDE and Keurig under the equity method and recognize our share of their earnings within equity method investment earnings and our share of their dividends within our cash flows. As of December 31, 2016, Keurig reflected a preliminary acquisition purchase price allocation and related remeasurement updates that we have recorded in our fourth quarter 2016 results. We anticipate the purchase price allocation work will be finalized in the first quarter of 2017.
Coffee Business Equity Earnings:
We have reflected the results of our historical coffee businesses and equity earnings from JDE, Keurig and DSF in our results from continuing operations as the coffee category continues to be a significant part of our net earnings and business strategy going forward. Historically, our coffee businesses and the income from equity method investments were recorded within our operating income as these businesses were part of our base business. While we retain an ongoing interest in coffee through equity method investments including JDE, Keurig and DSF, and we have significant influence with our equity method investments, we do not control these operations directly. As such, in the third quarter of 2015, we began to recognize equity method investment earnings, consisting primarily of investments in coffee businesses, outside of operating income. For periods prior to the third quarter of 2015, our historical coffee business and equity method investment earnings were included within our operating income.
Of the $301 million equity method investment net earnings in 2016, the contribution from JDE was $100 million, from Keurig was $97 million (since March 7, 2016), from DSF was $75 million and from all other equity investments was $29 million. In 2015, JDE incurred a $58 million loss, which was fully offset by earnings of $38 million from DSF and $21 million from other equity method investments. Within operating income for the first half of 2015, $296 million after-tax ($342 million pre-tax) earnings related to our legacy coffee business, $40 million was from DSF and $16 million was from our other equity method investments. In 2014, $572 million ($646 million pre-tax) earnings related to our legacy coffee business, $83 million was from DSF and $30 million was from our other equity method investments.
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Summary Financial Information for Equity Method Investments:
Summarized financial information for JDE, Keurig, DSF and our other equity method investments is reflected below.
| As of December 31, | ||||||||||||
| 2016 | 2015 | |||||||||||
| (in millions) | ||||||||||||
| Current assets |
$ | 4,458 | $ | 3,943 | ||||||||
| Noncurrent assets |
35,089 | 20,936 | ||||||||||
|
|
|
|
|
|||||||||
| Total assets |
$ | 39,547 | $ | 24,879 | ||||||||
| Current liabilities |
$ | 4,148 | $ | 2,779 | ||||||||
| Noncurrent liabilities |
16,472 | 9,880 | ||||||||||
|
|
|
|
|
|||||||||
| Total liabilities |
$ | 20,620 | $ | 12,659 | ||||||||
| Total net equity of investees |
$ | 18,927 | $ | 12,220 | ||||||||
| Mondelēz International ownership interests |
24%-50% | 40%-50% | ||||||||||
|
|
|
|
|
|||||||||
| Mondelēz International share of investee net equity (1) |
$ | 5,145 | $ | 5,387 | ||||||||
| Keurig shareholder loan |
440 | – | ||||||||||
|
|
|
|
|
|||||||||
| Equity method investments |
$ | 5,585 | $ | 5,387 | ||||||||
|
|
|
|
|
|||||||||
| For the Years Ended December 31, | ||||||||||||
| 2016 | 2015 | 2014 | ||||||||||
| (in millions) | ||||||||||||
| Net revenues |
$ | 10,923 | $ | 4,993 | $ | 2,721 | ||||||
| Gross profit |
4,219 | 1,551 | 921 | |||||||||
| Income from continuing operations |
839 | 96 | 226 | |||||||||
| Net income |
839 | 97 | 226 | |||||||||
| Net income attributable to investees |
$ | 838 | $ | 97 | $ | 226 | ||||||
| Mondelēz International ownership interests |
24%-50% | 40%-50% | 40%-50% | |||||||||
|
|
|
|
|
|
|
|||||||
| Mondelēz International share of investee net income |
$ | 281 | $ | 56 | $ | 113 | ||||||
| Keurig shareholder loan interest income |
20 | – | – | |||||||||
|
|
|
|
|
|
|
|||||||
| Equity method investment net earnings (2) |
$ | 301 | $ | 56 | $ | 113 | ||||||
|
|
|
|
|
|
|
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| (1) | Includes approximately $325 million of basis differences between the U.S. GAAP accounting basis for our equity method investments and the U.S. GAAP accounting basis of our investees’ equity. |
| (2) | Historically, we have recorded income from equity method investments within our operating income as these investments operated as extensions of our base business. Beginning in the third quarter of 2015, to align with the accounting for JDE earnings, we began to record the earnings from our equity method investments in after-tax equity method investment earnings outside of operating income. For the six months ended December 31, 2015, after-tax equity method investment net earnings were less than $1 million on a combined basis. Earnings from equity method investments recorded within segment operating income were $56 million for the six months ended July 2, 2015 and $113 million for the year ended December 31, 2014. See Note 1, Summary of Significant Accounting Policies – Principles of Consolidation, for additional information. |
Spin-Off of Kraft Foods Group:
On October 1, 2012, we divested the Kraft Foods Group grocery business in a spin-off (“Spin-Off”). In 2014, we concluded our Spin-Off-related transition plans and recorded final Spin-Off transaction, transition and financing and related costs (“Spin-Off Costs”) of $35 million in 2014 in pre-tax earnings within selling, general and administrative expenses.
Other Divestitures and Acquisitions:
On January 18, 2017, we reached an agreement to sell most of our grocery business in Australia and New Zealand to Bega Cheese Limited for approximately $460 million Australian dollars ($346 million as of January 18, 2017). As of December 31, 2016, the asset group to be sold consisted of approximately $25 million of current assets and approximately $125 million of non-current assets based on the December 31, 2016 Australian-to-U.S. dollar exchange rate. We expect the transaction to close in 2017.
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On March 31, 2016, we received a binding offer totaling €176 million ($185 million as of December 31, 2016) for the sale of several manufacturing facilities in France and the sale or license of several local confectionery brands. Taking into account agreed upon sales price adjustments related to cash, employee-related liabilities and working capital to be transferred at closing, we currently estimate a sales price of €225 million ($237 million as of December 31, 2016) based on net book values as of December 31, 2016. The final sales price is subject to change as working capital and other account balances may change at the time of closing. The transactions are subject to E.U. and local regulatory approvals, completion of employee consultation requirements and additional steps to prepare the assets for transfer. During the fourth quarter, we received the Works Council approval and the buyer obtained anti-trust clearance in all markets where it was required. As of December 31, 2016, the held for sale assets and liabilities consisted of $125 million of current assets, $174 million of non-current assets, $33 million of current liabilities and $29 million of non-current liabilities based on the December 31, 2016 euro-to-U.S. dollar exchange rate. On March 31, 2016, we recorded a $14 million impairment charge for a gum & candy trademark as a portion of its carrying value would not be recoverable based on future cash flows expected under a planned license agreement with the buyer. In May 2016, we recorded an additional $5 million impairment charge for another candy trademark to reduce the overall net assets to the estimated net sales proceeds after transaction costs. Additionally, in 2016, we incurred and accrued $86 million of incremental expenses to ready the business for the sale transactions expected to close in 2017. We recorded these costs within cost of sales and selling, general and administrative expenses of our Europe segment.
During the year ended December 31, 2016, we also completed the following sale transactions:
| • | On December 31, 2016, we completed the sale of a chocolate factory in Belgium. In connection with this transaction, we recorded a pre-tax loss of €65 million ($68 million as of December 31, 2016), within asset impairment and exit costs in our Europe segment. The loss includes a fixed asset impairment charge of €30 million ($31 million as of December 31, 2016), a loss on disposal of €22 million ($23 million as of December 31, 2016) and incremental expenses we incurred and accrued of €13 million ($14 million as of December 31, 2016) related to selling the factory. |
| • | On December 1, 2016, we completed the sale of a confectionery business in Costa Rica represented by a local brand. The sales price was $28 million and we recorded a pre-tax gain of $9 million within gains on divestiture within our Latin America segment. We divested approximately $11 million of property, plant and equipment, $4 million of goodwill and $2 million of inventory. In connection with this transaction, we incurred $2 million of transaction costs and accrued expenses. |
| • | On August 26, 2016, we recorded a $7 million gain for the sale of a U.S.-owned biscuit trademark. The gain was recorded within selling, general and administrative expenses in 2016. |
| • | On May 2, 2016, we completed the sale of certain local biscuit brands in Finland as part of our strategic decisions to exit select small and local brands and shift investment towards our Power Brands. The sales price was €14 million ($16 million as of May 2, 2016) and we recorded a pre-tax gain of $6 million ($5 million after-tax) within selling, general and administrative expenses of our Europe segment in the year ended December 31, 2016. We divested $8 million of indefinite-lived intangible assets and less than $1 million of other assets. We received cash proceeds of €12 million ($14 million as of May 2, 2016) upon closing and another €2 million ($2 million as of October 31, 2016) of consideration following the completion of post-closing requirements. The additional $2 million of consideration increased the pre-tax gain to $8 million ($6 million after-tax) through December 31, 2016. |
On November 2, 2016, we purchased from Burton’s Biscuit Company certain intangibles, which include the license to manufacture, market and sell Cadbury-branded biscuits in additional key markets around the world, including in the United Kingdom, France, Ireland, North America and Saudi Arabia. The transaction was accounted for as a business combination. Total cash paid for the acquired assets was £199 million ($246 million as of December 31, 2016). We are working to complete the valuation work and have recorded a preliminary purchase price allocation of $72 million to definite-life intangible assets, $156 million to goodwill, $14 million to property, plant and equipment and $4 million to inventory as of December 31, 2016.
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During the third quarter of 2016, we completed the acquisition of a Vietnamese biscuit operation within our AMEA segment. On July 15, 2015, we acquired an 80% interest in the biscuit operation and on August 22, 2016, we acquired the remaining 20% interest. Total cash paid for the biscuit operation, intellectual property, non-compete and consulting agreements less purchase price adjustments was 12,404 billion Vietnamese dong ($569 million using applicable exchange rates on July 15, 2015, November 27, 2015 and August 22, 2016). On August 22, 2016, in connection with acquiring the remaining 20% interest in the biscuit operation, we released escrowed funds of $70 million and retained an agreed $20 million related to two outstanding acquisition-related matters that are expected to be resolved in 2017. As of December 31, 2016, we released an additional $5 million of the escrowed funds and are holding $15 million until the outstanding acquisition matters are resolved. On August 22, 2016, we also made a final payment of 759 billion Vietnamese dong ($35 million as of August 22, 2016) for the non-compete and consulting agreements. The non-compete and consulting agreements were recorded as prepaid contracts within other current and non-current assets and will be amortized into net earnings over the term of the agreements. During the third quarter of 2016, we also finalized the valuation and purchase price allocation of the acquired net assets of the business, which included $10 million of inventory, $49 million of property, plant and equipment, $86 million of intangible assets, $385 million of goodwill and $31 million of other net liabilities. In periods following the initial July 15, 2015 first closing date, the allocation of the net asset fair values had an immaterial impact on our operating results. The acquisition added incremental net revenues of $71 million in 2016 and $121 million in 2015 and added incremental operating income of $5 million in 2016 and $21 million in 2015. Within selling, general and administrative expenses, we recorded integration costs of $7 million in 2016 and $9 million in 2015 and acquisition costs of $7 million in 2015 and $2 million in 2014.
On April 23, 2015, we completed the divestiture of our 50% equity interest in AGF, our Japanese coffee joint venture, to our joint venture partner, which generated cash proceeds of 27 billion Japanese yen ($225 million as of April 23, 2015) and a pre-tax gain of $13 million (after-tax loss of $9 million) in the second quarter of 2015. Upon closing, we divested our $99 million investment in the joint venture, $65 million of goodwill and $41 million of accumulated other comprehensive losses. We also incurred approximately $7 million of transaction costs in 2015.
On February 16, 2015, we acquired a U.S. snack food company, Enjoy Life Foods, within our North America segment. We paid cash and settled debt totaling $81 million in connection with the acquisition. Upon finalizing the valuation of the acquired net assets during the second quarter of 2015, we recorded an $81 million purchase price allocation of $58 million in identifiable intangible assets, $20 million of goodwill and $3 million of other net assets. The acquisition-related costs and operating results of the acquisition were not material to our consolidated financial statements for the years ended December 31, 2016 and 2015.
Sales of Property:
On November 9, 2016, we completed the sale of a manufacturing plant in Russia and recorded total expenses of $12 million, including a related fixed asset impairment charge of $4 million within asset impairments and exit costs. The sale of the land, buildings and equipment generated cash proceeds of $6 million.
In 2016, we also sold property within our North America segment and from our centrally held corporate assets. In the third quarter, we sold property in North America that generated cash proceeds of $10 million and a pre-tax gain of $6 million and we sold a corporate aircraft hangar that generated cash proceeds of $3 million and a pre-tax gain of $1 million. In the second quarter, we also sold separate property in North America that generated cash proceeds of $40 million and a pre-tax gain of $33 million and we sold a corporate aircraft that generated cash proceeds of $20 million and a pre-tax gain of $6 million. The gains were recorded within selling, general and administrative expenses and cash proceeds were recorded in cash flows from other investing activities in year ended December 31, 2016.
Note 3. Inventories
Inventories consisted of the following:
| As of December 31, | ||||||||
| 2016 | 2015 | |||||||
| (in millions) | ||||||||
| Raw materials |
$ | 722 | $ | 782 | ||||
| Finished product |
1,865 | 1,930 | ||||||
|
|
|
|
|
|||||
| 2,587 | 2,712 | |||||||
| Inventory reserves |
(118 | ) | (103 | ) | ||||
|
|
|
|
|
|||||
| Inventories, net |
$ | 2,469 | $ | 2,609 | ||||
|
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|
|
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Note 4. Property, Plant and Equipment
Property, plant and equipment consisted of the following:
| As of December 31, | ||||||||
| 2016 | 2015 | |||||||
| (in millions) | ||||||||
| Land and land improvements |
$ | 471 | $ | 495 | ||||
| Buildings and building improvements |
2,801 | 2,753 | ||||||
| Machinery and equipment |
10,302 | 10,044 | ||||||
| Construction in progress |
1,113 | 1,262 | ||||||
|
|
|
|
|
|||||
| 14,687 | 14,554 | |||||||
| Accumulated depreciation |
(6,458 | ) | (6,192 | ) | ||||
|
|
|
|
|
|||||
| Property, plant and equipment, net |
$ | 8,229 | $ | 8,362 | ||||
|
|
|
|
|
|||||
Capital expenditures of $1.2 billion for the year ended December 31, 2016 exclude $343 million of accrued capital expenditures remaining unpaid at December 31, 2016 and include payment for $322 million of capital expenditures that were accrued and unpaid at December 31, 2015.
In connection with our restructuring program, we recorded non-cash asset write-downs (including accelerated depreciation and asset impairments) of $301 million in 2016, $264 million in 2015 and $173 million in 2014 (see Note 6, Restructuring Programs). These charges were recorded in the consolidated statements of earnings within asset impairment and exit costs and in the following segment results as follows:
| For the Years Ended December 31, | ||||||||||||
| 2016 | 2015 | 2014 | ||||||||||
| (in millions) | ||||||||||||
| Latin America |
$ | 22 | $ | 46 | $ | 14 | ||||||
| AMEA |
44 | 88 | 34 | |||||||||
| Europe |
122 | 65 | 42 | |||||||||
| North America |
111 | 65 | 83 | |||||||||
| Corporate |
2 | – | – | |||||||||
|
|
|
|
|
|
|
|||||||
| Total non-cash asset write-downs |
$ | 301 | $ | 264 | $ | 173 | ||||||
|
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|
|
|
|
|
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Note 5. Goodwill and Intangible Assets
Goodwill by segment below reflects our latest segment structure for both periods presented:
| As of December 31, | ||||||||
| 2016 | 2015 | |||||||
| (in millions) | ||||||||
| Latin America |
$ | 897 | $ | 858 | ||||
| AMEA |
3,324 | 3,537 | ||||||
| Europe |
7,170 | 7,404 | ||||||
| North America |
8,885 | 8,865 | ||||||
|
|
|
|
|
|||||
| Goodwill |
$ | 20,276 | $ | 20,664 | ||||
|
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|
|
|
|||||
Intangible assets consisted of the following:
| As of December 31, | ||||||||
| 2016 | 2015 | |||||||
| (in millions) | ||||||||
| Non-amortizable intangible assets |
$ | 17,004 | $ | 17,527 | ||||
| Amortizable intangible assets |
2,315 | 2,320 | ||||||
|
|
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|
|
|||||
| 19,319 | 19,847 | |||||||
| Accumulated amortization |
(1,218 | ) | (1,079 | ) | ||||
|
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|
|
|
|||||
| Intangible assets, net |
$ | 18,101 | $ | 18,768 | ||||
|
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Non-amortizable intangible assets consist principally of brand names purchased through our acquisitions of Nabisco Holdings Corp., the Spanish and Portuguese operations of United Biscuits, the global LU biscuit business of Groupe Danone S.A. and Cadbury Limited. Amortizable intangible assets consist primarily of trademarks, customer-related intangibles, process technology, licenses and non-compete agreements. At December 31, 2016, the weighted-average life of our amortizable intangible assets was 13.5 years.
Amortization expense for intangible assets was $176 million in 2016, $181 million in 2015 and $206 million in 2014. We currently estimate annual amortization expense for each of the next five years to be approximately $171 million, estimated using December 31, 2016 exchange rates.
Changes in goodwill and intangible assets consisted of:
| 2016 | 2015 | |||||||||||||||
| Goodwill | Intangible Assets, at cost |
Goodwill | Intangible Assets, at cost |
|||||||||||||
| (in millions) | ||||||||||||||||
| Balance at January 1 |
$ | 20,664 | $ | 19,847 | $ | 23,389 | $ | 21,335 | ||||||||
| Changes due to: |
||||||||||||||||
| Currency |
(464 | ) | (540 | ) | (1,477 | ) | (1,462 | ) | ||||||||
| Coffee business transactions |
(4 | ) | (8 | ) | (1,729 | ) | – | |||||||||
| Acquisitions |
80 | 158 | 481 | 58 | ||||||||||||
| Asset impairments |
– | (137 | ) | – | (83 | ) | ||||||||||
| Other |
– | (1 | ) | – | (1 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Balance at December 31 |
$ | 20,276 | $ | 19,319 | $ | 20,664 | $ | 19,847 | ||||||||
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Changes to goodwill and intangibles were:
| • | Coffee business transactions and divestitures – On December 1, 2016, we divested $4 million of goodwill related to the sale of a confectionery business in Costa Rica. On May 2, 2016, we sold $8 million of non-amortizable intangible assets in Finland. On July 2, 2015, we deconsolidated $1,664 million of goodwill and less than $1 million of intangible assets in connection with the coffee business transactions. On April 23, 2015, we completed the divestiture of our 50% equity interest in AGF, which resulted in divesting $65 million of goodwill. See Note 2, Divestitures and Acquisitions, for additional information on these transactions. |
| • | Acquisitions – On November 2, 2016, we purchased from Burton’s Biscuit Company certain intangibles, which include a license to manufacture, market and sell Cadbury-branded biscuits in additional key markets. As a result of the acquisition, we recorded a preliminary purchase price allocation of $156 million to goodwill and $72 million to amortizable intangible assets. In connection with the completion of the Vietnam biscuit operation in 2016, we finalized the purchase price allocation of the consideration paid to the net assets acquired and recorded $25 million of amortizable intangible assets and $61 million of non-amortizable intangible assets related to acquired trademarks and customer-related intangible assets. A preliminary goodwill balance was recorded in the third quarter of 2015 and subsequently adjusted by $76 million to $385 million during the first nine months of 2016 to reflect finalized intangible asset and other asset fair valuations. On February 16, 2015, we also acquired Enjoy Life Foods and recorded $20 million of goodwill and $58 million in identifiable intangible assets. See Note 2, Divestitures and Acquisitions – Other Divestitures and Acquisitions, for additional information. |
| • | Asset impairments – We recorded $137 million of intangible asset impairments in 2016, $83 million in 2015 and $57 million in 2014. Charges related to our annual testing of non-amortizable intangible assets are described further below. Additionally, during 2016, $20 million of impairments recorded in our Europe segment related to the planned sale of a confectionery business in France (see Note 2, Divestitures and Acquisitions – Other Divestitures and Acquisitions, for additional information). In 2016, we also recorded $19 million of charges in our Europe, North America and AMEA segments resulting from the discontinuation of four biscuit products and one candy product. Additionally, in 2015, in connection with the deconsolidation of our Venezuelan operations on December 31, 2015, we recorded $12 million of impairment charges within the loss on deconsolidation of Venezuela related to a biscuit trademark. |
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In 2016, 2015 and 2014, there were no impairments of goodwill. In connection with our 2016 annual impairment testing, each of our reporting units had sufficient fair value in excess of carrying value. While all reporting units passed our annual impairment testing, if planned business performance expectations are not met or specific valuation factors outside of our control, such as discount rates, change significantly, then the estimated fair values of a reporting unit or reporting units might decline and lead to a goodwill impairment in the future.
During our 2016 annual testing of non-amortizable intangible assets, we recorded $98 million of impairment charges related to five trademarks. The impairments arose due to lower than expected product growth in part driven by decisions to redirect support from these trademarks to other regional and global brands, as well as slowdowns in local economies. We recorded charges related to biscuits, candy and gum trademarks of $41 million in AMEA, $32 million in North America, $22 million in Europe, and $3 million in Latin America. The impairment charges were calculated as the excess of the carrying value over the estimated fair value of the intangible assets on a global basis and were recorded within asset impairment and exit costs. We primarily use a relief of royalty valuation method, which utilizes estimates of future sales, growth rates, royalty rates and discount rates in determining a brand’s global fair value. During our 2016 intangible asset impairment review, we noted nine brands, including the five impaired trademarks, with $630 million of aggregate book value as of December 31, 2016 that each had a fair value in excess of book value of 10% or less. While the other four intangible assets passed our annual impairment testing and we believe our current plans for each of these brands will allow them to continue to not be impaired, if the product line expectations are not met or specific valuation factors outside of our control, such as discount rates, change significantly, then a brand or brands could become impaired in the future. In 2015, we recorded a $44 million charge related to candy and biscuit trademarks in our AMEA segment, $22 million in Europe and $5 million in Latin America. In 2014, we recorded a $48 million charge related to a biscuit trademark in our AMEA segment and a $9 million charge related to a candy trademark in our Europe segment.
Note 6. Restructuring Programs
On May 6, 2014, our Board of Directors approved a $3.5 billion restructuring program, comprised of approximately $2.5 billion in cash costs and $1 billion in non-cash costs (the “2014-2018 Restructuring Program”) and up to $2.2 billion of capital expenditures. On August 31, 2016, our Board of Directors approved a reallocation within the $5.7 billion total cost of the programs of $600 million of previously approved capital expenditures to be spent on restructuring program cash costs. There was no change to the total $5.7 billion cost of the programs and no change to the total $4.7 billion of cash outlays. The $5.7 billion total cost of the programs is now comprised of approximately $4.1 billion of restructuring program costs ($3.1 billion cash costs and $1 billion non-cash costs) and up to $1.6 billion of capital expenditures. The primary objective of the 2014-2018 Restructuring Program is to reduce our operating cost structure in both our supply chain and overhead costs. The program is intended primarily to cover severance as well as asset disposals and other manufacturing-related one-time costs. Since inception, we have incurred total restructuring and related implementation charges of $2.5 billion related to the 2014-2018 Restructuring Program. We have incurred the majority of the program’s charges through 2016 and we expect to complete the program by year-end 2018.
Restructuring Costs:
We recorded restructuring charges of $714 million in 2016, $711 million 2015 and $274 million in 2014 within asset impairment and exit costs. The 2014-2018 Restructuring Program liability activity for the years ended December 31, 2016 and 2015 was:
| Severance | ||||||||||||
| and related | Asset | |||||||||||
| costs | Write-downs | Total | ||||||||||
| (in millions) | ||||||||||||
| Liability balance, January 1, 2015 |
$ | 224 | $ | – | $ | 224 | ||||||
| Charges |
442 | 269 | 711 | |||||||||
| Cash spent |
(243 | ) | – | (243 | ) | |||||||
| Non-cash settlements / adjustments |
(4 | ) | (269 | ) | (273 | ) | ||||||
| Currency |
(24 | ) | – | (24 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Liability balance, December 31, 2015 |
$ | 395 | $ | – | $ | 395 | ||||||
|
|
|
|
|
|
|
|||||||
| Charges |
402 | 312 | 714 | |||||||||
| Cash spent |
(315 | ) | – | (315 | ) | |||||||
| Non-cash settlements / adjustments |
(9 | ) | (312 | ) | (321 | ) | ||||||
| Currency |
(9 | ) | – | (9 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Liability balance, December 31, 2016 |
$ | 464 | $ | – | $ | 464 | ||||||
|
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|
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|
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We spent $315 million in 2016 and $243 million in 2015 in cash severance and related costs. We also recognized non-cash pension settlement losses (See Note 9, Benefit Plans), non-cash asset write-downs (including accelerated depreciation and asset impairments) and other non-cash adjustments totaling $321 million in 2016 and $273 million in 2015. At December 31, 2016, $379 million of our net restructuring liability was recorded within other current liabilities and $85 million was recorded within other long-term liabilities.
Implementation Costs:
Implementation costs are directly attributable to restructuring activities; however, they do not qualify for special accounting treatment as exit or disposal activities. We believe the disclosure of implementation costs provides readers of our financial statements with more information on the total costs of our 2014-2018 Restructuring Program. Implementation costs primarily relate to reorganizing our operations and facilities in connection with our supply chain reinvention program and other identified productivity and cost saving initiatives. The costs include incremental expenses related to the closure of facilities, costs to terminate certain contracts and the simplification of our information systems. Within our continuing results of operations, we recorded implementation costs of $372 million in 2016, $291 million in 2015 and $107 million in 2014. We recorded these costs within cost of sales and general corporate expense within selling, general and administrative expenses.
Restructuring and Implementation Costs in Operating Income:
During 2016, 2015 and 2014, we recorded restructuring and implementation costs related to the 2014-2018 Restructuring Program within operating income by segment (as revised to reflect our new segment structure) as follows:
| Latin | North | |||||||||||||||||||||||
| America | AMEA | Europe |
America (1) | Corporate (2) | Total | |||||||||||||||||||
| (in millions) |
||||||||||||||||||||||||
| For the Year Ended December 31, 2016 |
||||||||||||||||||||||||
| Restructuring Costs |
$ | 111 | $ | 96 | $ | 310 | $ | 183 | $ | 14 | $ | 714 | ||||||||||||
| Implementation Costs |
54 | 48 | 88 | 121 | 61 | 372 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total |
$ | 165 | $ | 144 | $ | 398 | $ | 304 | $ | 75 | $ | 1,086 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| For the Year Ended December 31, 2015 |
||||||||||||||||||||||||
| Restructuring Costs |
$ | 145 | $ | 181 | $ | 243 | $ | 114 | $ | 28 | $ | 711 | ||||||||||||
| Implementation Costs |
39 | 26 | 78 | 69 | 79 | 291 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total |
$ | 184 | $ | 207 | $ | 321 | $ | 183 | $ | 107 | $ | 1,002 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| For the Year Ended December 31, 2014 |
||||||||||||||||||||||||
| Restructuring Costs |
$ | 81 | $ | 30 | $ | 96 | $ | 57 | $ | 10 | $ | 274 | ||||||||||||
| Implementation Costs |
16 | 12 | 38 | 5 | 36 | 107 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total |
$ | 97 | $ | 42 | $ | 134 | $ | 62 | $ | 46 | $ | 381 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total Project 2014-2016 (3) |
||||||||||||||||||||||||
| Restructuring Costs |
$ | 337 | $ | 307 | $ | 649 | $ | 354 | $ | 52 | $ | 1,699 | ||||||||||||
| Implementation Costs |
109 | 86 | 204 | 195 | 176 | 770 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total |
$ | 446 | $ | 393 | $ | 853 | $ | 549 | $ | 228 | $ | 2,469 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| (1) | During 2016, our North America region implementation costs included incremental costs that we incurred related to re-negotiating collective bargaining agreements that expired at the end of February 2016 for eight U.S. facilities and related to executing business continuity plans for the North America business. |
| (2) | Includes adjustment for rounding. |
| (3) | Includes all charges recorded since program inception on May 6, 2014 through December 31, 2016. |
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2012-2014 Restructuring Program
On October 1, 2012, we completed the Spin-Off of our North American grocery business, Kraft Foods Group, to our shareholders. Prior to this transaction, in 2012, our Board of Directors approved $1.5 billion of restructuring and related implementation costs (the “2012-2014 Restructuring Program”) reflecting primarily severance, asset disposals and other manufacturing-related one-time costs. The primary objective of the 2012-2014 Restructuring Program was to ensure that Mondelēz International and Kraft Foods Group were each set up to operate efficiently and execute on our respective business strategies upon separation and in the future.
Of the $1.5 billion of 2012-2014 Restructuring Program costs, we retained approximately $925 million and Kraft Foods Group retained the balance of the program. Through the end of 2014, we incurred total restructuring and related implementation charges of $899 million and completed incurring planned charges on the 2012-2014 Restructuring Program.
Restructuring Costs:
We recorded reversals to the restructuring charges of $4 million in 2015 related to accruals no longer required. We recorded restructuring charges of $360 million in 2014 within asset impairment and exit costs. During 2014, we recorded out-of-period accruals for $73 million of severance ($52 million related to 2014 and $21 million related to 2013) in connection with a change in the timing of accruals for ongoing negotiations with workers’ councils and labor unions.
The 2012-2014 Restructuring Program liability activity for the years ended December 31, 2016 and 2015 was:
| Severance | ||||||||||||
| and related | Asset | |||||||||||
| costs | Write-downs | Total | ||||||||||
| (in millions) | ||||||||||||
| Liability balance, January 1, 2015 |
$ | 128 | $ | – | $ | 128 | ||||||
| Charges |
(4 | ) | – | (4 | ) | |||||||
| Cash spent |
(66 | ) | – | (66 | ) | |||||||
| Non-cash settlements / adjustments |
(4 | ) | – | (4 | ) | |||||||
| Currency |
(7 | ) | – | (7 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Liability balance, December 31, 2015 |
$ | 47 | $ | – | $ | 47 | ||||||
|
|
|
|
|
|
|
|||||||
| Charges |
– | – | – | |||||||||
| Cash spent |
(21 | ) | – | (21 | ) | |||||||
| Non-cash settlements / adjustments |
(6 | ) | – | (6 | ) | |||||||
| Currency |
(1 | ) | – | (1 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Liability balance, December 31, 2016 |
$ | 19 | $ | – | $ | 19 | ||||||
|
|
|
|
|
|
|
|||||||
We spent $21 million in 2016 and $66 million in 2015 in cash severance and related costs. We also recognized non-cash pension plan settlement losses (See Note 9, Benefit Plans) and non-cash adjustments totaling $6 million in 2016 and $4 million in 2015. At December 31, 2016, $18 million of our net restructuring liability was recorded within other current liabilities and less than $1 million was recorded within other long-term liabilities.
Implementation Costs:
Implementation costs related to our 2012-2014 Restructuring Program primarily relate to activities in connection with the Kraft Foods Group Spin-Off such as reorganizing our operations and facilities, the discontinuance of certain product lines and incremental expenses related to the closure of facilities, replicating our information systems infrastructure and reorganizing our sales function. Within our continuing results of operations, we recorded implementation costs of $99 million in 2014. We recorded these costs within cost of sales and selling, general and administrative expenses.
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Restructuring and Implementation Costs in Operating Income:
During 2014 and since inception of the 2012-2014 Restructuring Program, we recorded restructuring and implementation costs within operating income by segment (as revised to reflect our new segment structure) as follows:
| Latin | North | |||||||||||||||||||||||
| America | AMEA | Europe |
America | Corporate (1) | Total | |||||||||||||||||||
| (in millions) |
||||||||||||||||||||||||
| For the Year Ended December 31, 2014 |
||||||||||||||||||||||||
| Restructuring Costs |
$ | 8 | $ | 77 | $ | 162 | $ | 113 | $ | – | $ | 360 | ||||||||||||
| Implementation Costs |
3 | 6 | 54 | 32 | 4 | 99 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total |
$ | 11 | $ | 83 | $ | 216 | $ | 145 | $ | 4 | $ | 459 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total Project 2012-2014 (2) |
||||||||||||||||||||||||
| Restructuring Costs |
$ | 36 | $ | 83 | $ | 271 | $ | 337 | $ | 2 | $ | 729 | ||||||||||||
| Implementation Costs |
3 | 8 | 90 | 65 | 4 | 170 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total |
$ | 39 | $ | 91 | $ | 361 | $ | 402 | $ | 6 | $ | 899 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| (1) | Includes adjustment for rounding. |
| (2) | Includes all charges recorded since program inception in 2012 through conclusion on December 31, 2014. |
Note 7. Debt and Borrowing Arrangements
Short-Term Borrowings:
Our short-term borrowings and related weighted-average interest rates consisted of:
| As of December 31, | ||||||||||||||||
| 2016 | 2015 | |||||||||||||||
| Amount | Weighted- | Amount | Weighted- | |||||||||||||
| Outstanding | Average Rate | Outstanding | Average Rate | |||||||||||||
| (in millions) | (in millions) | |||||||||||||||
| Commercial paper |
$ | 2,371 | 1.0% | $ | – | 0.0% | ||||||||||
| Bank loans |
160 | 10.6% | 236 | 9.5% | ||||||||||||
|
|
|
|
|
|||||||||||||
| Total short-term borrowings |
$ | 2,531 | $ | 236 | ||||||||||||
|
|
|
|
|
|||||||||||||
As of December 31, 2016, the commercial paper issued and outstanding had between 3 and 88 days remaining to maturity. Bank loans include borrowings on primarily uncommitted credit lines maintained by some of our international subsidiaries to meet short-term working capital needs.
Borrowing Arrangements:
We maintain a $4.5 billion multi-year senior unsecured revolving credit facility for general corporate purposes, including working capital needs, and to support our commercial paper program. On October 14, 2016, the revolving credit agreement, which was scheduled to expire on October 11, 2018, was extended through October 11, 2021. The revolving credit agreement includes a covenant that we maintain a minimum shareholders’ equity of at least $24.6 billion, excluding accumulated other comprehensive earnings / (losses) and the cumulative effects of any changes in accounting principles. At December 31, 2016, we complied with this covenant as our shareholders’ equity, as defined by the covenant, was $36.3 billion. The revolving credit facility agreement also contains customary representations, covenants and events of default. There are no credit rating triggers, provisions or other financial covenants that could require us to post collateral as security. As of December 31, 2016, no amounts were drawn on the facility.
Some of our international subsidiaries maintain primarily uncommitted credit lines to meet short-term working capital needs. Collectively, these credit lines amounted to $1.8 billion at December 31, 2016 and $1.9 billion at December 31, 2015. Borrowings on these lines amounted to $160 million at December 31, 2016 and $236 million at December 31, 2015.
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Long-Term Debt:
Our long-term debt consisted of (interest rates are as of December 31, 2016):
| As of December 31, | ||||||||
| 2016 | 2015 | |||||||
| (in millions) | ||||||||
| U.S. dollar notes, 0.881% to 7.000% (weighted-average effective rate
3.527%), |
$ | 8,812 | $ | 8,371 | ||||
| Euro notes, 1.000% to 2.375% (weighted-average effective rate
1.808%), |
3,980 | 4,305 | ||||||
|
Pound sterling notes, 3.875% to 7.250% (weighted-average
effective rate 4.441%), |
418 | 1,399 | ||||||
|
Swiss franc notes, 0.000% to 1.125% (weighted-average
effective rate 0.636%), |
1,449 | 1,075 | ||||||
| Capital leases and other obligations |
9 | 12 | ||||||
|
|
|
|
|
|||||
| Total |
14,668 | 15,162 | ||||||
| Less current portion of long-term debt |
(1,451 | ) | (605 | ) | ||||
|
|
|
|
|
|||||
| Long-term debt |
$ | 13,217 | $ | 14,557 | ||||
|
|
|
|
|
|||||
Deferred debt issuance costs of $40 million as of December 31, 2016 and $46 million as of December 31, 2015 are netted against the related debt in the table above. These amounts were reclassified from long-term other assets to offset the related debt in the fourth quarter of 2015, except for deferred financing costs related to our revolving credit facility which remain in long-term other assets and were immaterial for all periods presented.
As of December 31, 2016, aggregate maturities of our debt and capital leases based on stated contractual maturities, excluding unamortized non-cash bond premiums, discounts, bank fees and mark-to-market adjustments of $(69) million, were (in millions):
|
2017 |
2018 | 2019 | 2020 | 2021 | Thereafter | Total | ||||||
| $1,451 | $1,144 | $2,650 | $658 | $3,260 | $5,574 | $14,737 |
On December 16, 2016, we redeemed $850 million of 2.250% fixed rate notes, maturing on February 1, 2019, that were issued on January 16, 2014. The notes were redeemed at a redemption cost equal to $866 million, plus accrued and unpaid interest of $7 million. In connection with this redemption, during the three months ended December 31, 2016, we recorded a $19 million loss on debt extinguishment within interest and other expense, net.
On October 31, 2016, we completed a cash tender offer and retired $3.18 billion of U.S. dollar, euro and British pound sterling-denominated notes. We financed the repurchase of the notes, including the payment of accrued interest and other costs incurred, from net proceeds received on October 28, 2016 from the $3.75 billion note issuance and the term loans described below. In connection with retiring this debt, during the three months ended December 31, 2016, we recorded a $409 million loss on debt extinguishment within interest expense related to the amount we paid to retire the debt in excess of its carrying value and from recognizing unamortized premiums and deferred financing costs in earnings at the time of the debt extinguishment. Cash costs related to tendering the debt are included in long-term debt repayments in the consolidated statement of cash flows for the year ended December 31, 2016. We also recognized $1 million in interest income related to the partial settlement of fair value hedges due to the tender.
On October 19, 2016, Mondelez International Holdings Netherlands B.V. (“MIHN”), a wholly owned subsidiary of Mondelēz International, Inc., launched an offering of $3.75 billion of notes, guaranteed by Mondelēz International, Inc. The $1.75 billion of 1.625% notes and the $500 million of floating rate notes will mature on October 28, 2019 and the $1.5 billion of 2.0% notes will mature on October 28, 2021. On October 28, 2016, we received proceeds, net of discounts and associated financing costs, of $3.73 billion. Proceeds from the notes issuance were used for general corporate purposes, including to grant loans or make distributions to Mondelēz International, Inc. or its subsidiaries to fund the October 2016 cash tender offer and near-term debt maturities. We recorded approximately $20 million of deferred financing costs and discounts, which will be amortized into interest expense over the life of the notes. We entered into cross-currency swaps, serving as cash flow hedges, so that the U.S. dollar-denominated debt payments will effectively be paid in euros over the life of the debt.
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On October 14, 2016, MIHN executed a $1.5 billion bank term loan facility. The loan facility consists of two $750 million loans, one with a three-year maturity and the other with a five-year maturity. The term loans can be drawn at any time for 60 days after signing. On October 25, 2016, we gave notice of our intent to fully draw on the loan with a five-year maturity, and funding occurred on October 28, 2016. Proceeds from the $750 million term loan may be used for general corporate purposes, including funding of the tender offer or other debt. On October 25, 2016, we also gave notice of our intent to terminate the $750 million loan with the three-year maturity.
On February 9, 2016, $1,750 million of our 4.125% U.S. dollar notes matured. The notes and accrued interest to date were paid with net proceeds from the fr.400 million Swiss franc-denominated notes issued on January 26, 2016 and the €700 million euro-denominated notes issued on January 21, 2016, as well as cash on hand and the issuance of commercial paper. As we refinanced $1,150 million of the matured notes with net proceeds from the long-term debt issued in January 2016, we reflected this amount within long-term debt as of December 31, 2015.
On January 26, 2016, we issued fr.400 million of Swiss franc-denominated notes, or $399 million in U.S. dollars locked in with a forward currency contract on January 12, 2016, consisting of:
| • | fr.250 million (or $249 million) of 0.080% fixed rate notes that mature on January 26, 2018 |
| • | fr.150 million (or $150 million) of 0.650% fixed rate notes that mature on July 26, 2022 |
We received proceeds, net of premiums and deferred financing costs, of $398 million that were used to partially fund the February 2016 note maturity and for other general corporate purposes. We recorded approximately $1 million of premiums and deferred financing costs, which will be amortized into interest expense over the life of the notes.
On January 21, 2016, we issued €700 million of euro-denominated 1.625% notes, or $760 million in U.S. dollars locked in with a forward currency contract on January 13, 2016. The euro-denominated notes will mature on January 20, 2023. We received proceeds, net of discounts and deferred financing costs, of $752 million that were used to partially fund the February 2016 note maturity and for other general corporate purposes. We recorded approximately $8 million of discounts and deferred financing costs, which will be amortized into interest expense over the life of the notes.
On November 30, 2015, we completed a cash tender offer and retired £247 million of British pound sterling-denominated 7.250% notes, or approximately $372 million in U.S. dollars as of November 30, 2015, due in July 2018. We financed the repurchase of these notes, including the payment of accrued interest and other costs incurred, from net proceeds received from the £400 million British pound sterling-denominated notes issuance on November 25, 2015 described below. In connection with retiring this debt, during the three months ended December 31, 2015, we recorded a $40 million loss on extinguishment of debt within interest expense related to the amount we paid to retire the debt in excess of its carrying value and from recognizing unamortized premiums and deferred financing costs in earnings at the time of the debt extinguishment. Cash costs related to tendering the debt are included in long-term debt repayments in the consolidated statement of cash flows for the year ended December 31, 2015.
On November 25, 2015, we issued £400 million of British pound sterling-denominated 4.500% notes, or $609 million in U.S. dollars locked in with a forward currency contract on November 19, 2015, that mature on December 3, 2035. We received proceeds net of discounts and deferred financing costs of $604 million that were used to fund the November 2015 cash tender offer and for other general corporate purposes. We recorded approximately $5 million of discounts and deferred financing costs, which will be amortized into interest expense over the life of the notes.
On October 6, 2015 we issued fr.400 million of Swiss franc-denominated notes, or $410 million in U.S. dollars locked in with a forward currency contract on September 21, 2015, consisting of:
| • | fr.135 million (or $138 million) of 0.625% fixed rate notes that mature on October 6, 2020 |
| • | fr.265 million (or $272 million) of 1.125% fixed rate notes that mature on December 21, 2023 |
We received proceeds net of premiums and deferred financing costs of $410 million that were used for general corporate purposes and to fund upcoming debt maturities. We recorded the fr.400 million of Swiss franc-denominated notes and less than $1 million of premiums and deferred financing costs, which will be amortized into interest expense over the life of the notes.
On June 11, 2015, €400 million of our floating rate euro-denominated notes matured. The notes and accrued interest to date were paid with cash on hand and the issuance of commercial paper.
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On March 30, 2015, we issued fr.675 million of Swiss franc-denominated notes, or approximately $694 million in U.S. dollars as of March 31, 2015, consisting of:
| • | fr.175 million (or $180 million) of 0.000% fixed rate notes that mature on March 30, 2017 |
| • | fr.300 million (or $308 million) of 0.625% fixed rate notes that mature on December 30, 2021 |
| • | fr.200 million (or $206 million) of 1.125% fixed rate notes that mature on December 30, 2025 |
We received net proceeds of $675 million that were used for general corporate purposes. We recorded approximately $2 million of premiums and deferred financing costs, which will be amortized into interest expense over the life of the notes.
On March 20, 2015, €850 million of our 6.250% euro-denominated notes matured. The notes and accrued interest to date were paid with the issuance of commercial paper and cash on hand.
On March 20, 2015, we completed a cash tender offer and retired $2.5 billion of long-term U.S. dollar debt consisting of:
| • | $102 million of our 6.500% Notes due in August 2017 |
| • | $115 million of our 6.125% Notes due in February 2018 |
| • | $80 million of our 6.125% Notes due in August 2018 |
| • | $691 million of our 5.375% Notes due in February 2020 |
| • | $201 million of our 6.500% Notes due in November 2031 |
| • | $26 million of our 7.000% Notes due in August 2037 |
| • | $71 million of our 6.875% Notes due in February 2038 |
| • | $69 million of our 6.875% Notes due in January 2039 |
| • | $1,143 million of our 6.500% Notes due in February 2040 |
We financed the repurchase of these notes, including the payment of accrued interest and other costs incurred, from net proceeds received from the $2.8 billion notes issuance on March 6, 2015 described below and the issuance of commercial paper. In connection with retiring this debt, during the first three months of 2015, we recorded a $708 million loss on extinguishment of debt within interest expense related to the amount we paid to retire the debt in excess of its carrying value and from recognizing unamortized discounts and deferred financing costs in earnings at the time of the debt extinguishment. Cash costs related to tendering the debt are included in long-term debt repayments in the consolidated statement of cash flows for the year ended December 31, 2015. We also recognized $5 million of charges within interest expense from hedging instruments related to the retired debt. Upon extinguishing the debt, the deferred cash flow hedge amounts were recorded in earnings.
On March 6, 2015, we issued €2.0 billion of euro-denominated notes and £450 million of British pound sterling-denominated notes, or approximately $2.8 billion in U.S. dollars as of March 31, 2015, consisting of:
| • | €500 million (or $537 million) of 1.000% fixed rate notes that mature on March 7, 2022 |
| • | €750 million (or $805 million) of 1.625% fixed rate notes that mature on March 8, 2027 |
| • | €750 million (or $805 million) of 2.375% fixed rate notes that mature on March 6, 2035 |
| • | £450 million (or $667 million) of 3.875% fixed rate notes that mature on March 6, 2045 |
We received net proceeds of $2,890 million that were used to fund the March 2015 tender offer and for other general corporate purposes. We recorded approximately $29 million of discounts and deferred financing costs, which will be amortized into interest expense over the life of the notes.
Our weighted-average interest rate on our total debt was 2.2% as of December 31, 2016, 3.7% as of December 31, 2015 and 4.3% as of December 31, 2014.
Fair Value of Our Debt:
The fair value of our short-term borrowings at December 31, 2016 and December 31, 2015 reflects current market interest rates and approximates the amounts we have recorded on our consolidated balance sheet. The fair value of our long-term debt was determined using quoted prices in active markets (Level 1 valuation data) for the publicly traded debt obligations. At December 31, 2016, the aggregate fair value of our total debt was $17,882 million and its carrying value was $17,199 million. At December 31, 2015, the aggregate fair value of our total debt was $15,908 million and its carrying value was $15,398 million.
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Interest and Other Expense, net:
Interest and other expense, net within our results of continuing operations consisted of:
| For the Years Ended December 31, | ||||||||||||
| 2016 | 2015 | 2014 | ||||||||||
| (in millions) | ||||||||||||
| Interest expense, debt |
$ | 515 | $ | 609 | $ | 778 | ||||||
| Loss on debt extinguishment and related expenses |
427 | 753 | 495 | |||||||||
|
JDE coffee business transactions currency-related net gains |
– | (436 | ) | (628 | ) | |||||||
| Loss related to interest rate swaps |
97 | 34 | – | |||||||||
| Other expense, net |
76 | 53 | 43 | |||||||||
|
|
|
|
|
|
|
|||||||
| Interest and other expense, net |
$ | 1,115 | $ | 1,013 | $ | 688 | ||||||
|
|
|
|
|
|
|
|||||||
See Note 2, Divestitures and Acquisitions, and Note 8, Financial Instruments, for information on the currency exchange forward contracts associated with the JDE coffee business transactions. Also see Note 8, Financial Instruments, for information on the loss related to U.S. dollar interest rate swaps no longer designated as accounting cash flow hedges during the first quarters of 2016 and 2015.
Note 8. Financial Instruments
Fair Value of Derivative Instruments:
Derivative instruments were recorded at fair value in the consolidated balance sheets as follows:
| As of December 31, | ||||||||||||||||
| 2016 | 2015 | |||||||||||||||
| Asset | Liability | Asset | Liability | |||||||||||||
| Derivatives | Derivatives | Derivatives | Derivatives | |||||||||||||
| (in millions) | ||||||||||||||||
| Derivatives designated as accounting hedges: |
||||||||||||||||
| Currency exchange contracts |
$ | 19 | $ | 8 | $ | 20 | $ | 7 | ||||||||
| Commodity contracts |
17 | 22 | 37 | 35 | ||||||||||||
| Interest rate contracts |
108 | 19 | 12 | 57 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | 144 | $ | 49 | $ | 69 | $ | 99 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Derivatives not designated as accounting hedges: |
||||||||||||||||
| Currency exchange contracts |
$ | 29 | $ | 43 | $ | 61 | $ | 33 | ||||||||
| Commodity contracts |
112 | 167 | 70 | 56 | ||||||||||||
| Interest rate contracts |
27 | 19 | 43 | 28 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | 168 | $ | 229 | $ | 174 | $ | 117 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total fair value |
$ | 312 | $ | 278 | $ | 243 | $ | 216 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
During 2016 and 2015, derivatives designated as accounting hedges include cash flow and fair value hedges and derivatives not designated as accounting hedges include economic hedges. Non-U.S. dollar denominated debt designated as a hedge of our net investments in non-U.S. operations is not reflected in the table above, but is included in long-term debt summarized in Note 7, Debt and Borrowing Arrangements. We record derivative assets and liabilities on a gross basis in our consolidated balance sheet. The fair value of our asset derivatives is recorded within other current assets and the fair value of our liability derivatives is recorded within other current liabilities.
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The fair values (asset / (liability)) of our derivative instruments were determined using:
| As of December 31, 2016 | ||||||||||||||||
| Quoted Prices in | ||||||||||||||||
| Active Markets | Significant | Significant | ||||||||||||||
| Total | for Identical | Other Observable | Unobservable | |||||||||||||
| Fair Value of Net | Assets | Inputs | Inputs | |||||||||||||
| Asset / (Liability) | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| (in millions) | ||||||||||||||||
| Currency exchange contracts |
$ | (3 | ) | $ | – | $ | (3 | ) | $ | – | ||||||
| Commodity contracts |
(60 | ) | (86 | ) | 26 | – | ||||||||||
| Interest rate contracts |
97 | – | 97 | – | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total derivatives |
$ | 34 | $ | (86 | ) | $ | 120 | $ | – | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| As of December 31, 2015 | ||||||||||||||||
| Quoted Prices in | ||||||||||||||||
| Active Markets | Significant | Significant | ||||||||||||||
| Total | for Identical | Other Observable | Unobservable | |||||||||||||
| Fair Value of Net | Assets | Inputs | Inputs | |||||||||||||
| Asset / (Liability) | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| (in millions) | ||||||||||||||||
| Currency exchange contracts |
$ | 41 | $ | – | $ | 41 | $ | – | ||||||||
| Commodity contracts |
16 | 29 | (13 | ) | – | |||||||||||
| Interest rate contracts |
(30 | ) | – | (30 | ) | – | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total derivatives |
$ | 27 | $ | 29 | $ | (2 | ) | $ | – | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
Level 1 financial assets and liabilities consist of exchange-traded commodity futures and listed options. The fair value of these instruments is determined based on quoted market prices on commodity exchanges. Our exchange-traded derivatives are generally subject to master netting arrangements that permit net settlement of transactions with the same counterparty when certain criteria are met, such as in the event of default. We also are required to maintain cash margin accounts in connection with funding the settlement of our open positions, and the margin requirements generally fluctuate daily based on market conditions. We have recorded margin deposits related to our exchange-traded derivatives of $133 million as of December 31, 2016 and margin deposits of $22 million as of December 31, 2015 within other current assets. Based on our net asset or liability positions with individual counterparties, in the event of default and immediate net settlement of all of our open positions, for derivatives we have in a net asset position, our counterparties would owe us a total of $48 million as of December 31, 2016 and $52 million as of December 31, 2015. For derivatives we have in a net liability position, we would owe $2 million as of December 31, 2016. As of December 31, 2015, there were no Level 1 derivatives in a net liability position.
Level 2 financial assets and liabilities consist primarily of over-the-counter (“OTC”) currency exchange forwards, options and swaps; commodity forwards and options; and interest rate swaps. Our currency exchange contracts are valued using an income approach based on observable market forward rates less the contract rate multiplied by the notional amount. Commodity derivatives are valued using an income approach based on the observable market commodity index prices less the contract rate multiplied by the notional amount or based on pricing models that rely on market observable inputs such as commodity prices. Our calculation of the fair value of interest rate swaps is derived from a discounted cash flow analysis based on the terms of the contract and the observable market interest rate curve. Our calculation of the fair value of financial instruments takes into consideration the risk of nonperformance, including counterparty credit risk. Our OTC derivative transactions are governed by International Swap Dealers Association agreements and other standard industry contracts. Under these agreements, we do not post nor require collateral from our counterparties. The majority of our commodity and currency exchange OTC derivatives do not have a legal right of set-off. In connection with our OTC derivatives that could be net-settled in the event of default, assuming all parties were to fail to comply with the terms of the agreements, for derivatives we have in a net liability position, we would owe $40 million as of December 31, 2016 and $101 million as of December 31, 2015, and for derivatives we have in a net asset position, our counterparties would owe us a total of $162 million as of December 31, 2016 and $64 million as of December 31, 2015. We manage the credit risk in connection with these and all our derivatives by entering into transactions with counterparties with investment grade credit ratings, limiting the amount of exposure with each counterparty and monitoring the financial condition of our counterparties.
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Derivative Volume:
The net notional values of our derivative instruments were:
| Notional Amount | ||||||||
| As of December 31, | ||||||||
| 2016 | 2015 | |||||||
| (in millions) | ||||||||
| Currency exchange contracts: |
||||||||
| Intercompany loans and forecasted interest payments |
$ | 3,343 | $ | 4,148 | ||||
| Forecasted transactions |
1,452 | 1,094 | ||||||
| Commodity contracts |
837 | 732 | ||||||
| Interest rate contracts |
6,365 | 3,033 | ||||||
| Net investment hedge – euro notes |
4,012 | 4,345 | ||||||
| Net investment hedge – pound sterling notes |
419 | 1,404 | ||||||
| Net investment hedge – Swiss franc notes |
1,447 | 1,073 | ||||||
Cash Flow Hedges:
Cash flow hedge activity, net of taxes, within accumulated other comprehensive earnings / (losses) included:
| For the Years Ended December 31, | ||||||||||||
| 2016 | 2015 | 2014 | ||||||||||
| (in millions) | ||||||||||||
| Accumulated gain / (loss) at January 1 |
$ | (45 | ) | $ | (2 | ) | $ | 117 | ||||
|
Transfer of realized losses / (gains) in fair value to earnings |
53 | – | (40 | ) | ||||||||
| Unrealized gain / (loss) in fair value |
(129 | ) | (43 | ) | (79 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Accumulated gain / (loss) at December 31 |
$ | (121 | ) | $ | (45 | ) | $ | (2 | ) | |||
|
|
|
|
|
|
|
|||||||
After-tax gains / (losses) reclassified from accumulated other comprehensive earnings / (losses) into net earnings were:
| For the Years Ended December 31, | ||||||||||||
| 2016 | 2015 | 2014 | ||||||||||
| (in millions) | ||||||||||||
| Currency exchange contracts – forecasted transactions |
$ | (1 | ) | $ | 83 | $ | 26 | |||||
| Commodity contracts |
(4 | ) | (52 | ) | 16 | |||||||
| Interest rate contracts |
(48 | ) | (31 | ) | (2 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Total |
$ | (53 | ) | $ | – | $ | 40 | |||||
|
|
|
|
|
|
|
|||||||
After-tax gains / (losses) recognized in other comprehensive earnings / (losses) were:
| For the Years Ended December 31, | ||||||||||||
| 2016 | 2015 | 2014 | ||||||||||
| (in millions) | ||||||||||||
| Currency exchange contracts – forecasted transactions |
$ | 8 | $ | 40 | $ | 82 | ||||||
| Commodity contracts |
(34 | ) | (35 | ) | (2 | ) | ||||||
| Interest rate contracts |
(103 | ) | (48 | ) | (159 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Total |
$ | (129 | ) | $ | (43 | ) | $ | (79 | ) | |||
|
|
|
|
|
|
|
|||||||
Pre-tax gains / (losses) on ineffectiveness recognized in net earnings from continuing operations were:
| For the Years Ended December 31, | ||||||||||||
| 2016 | 2015 | 2014 | ||||||||||
| (in millions) | ||||||||||||
| Commodity contracts |
$ | 2 | $ | (4 | ) | $ | (10 | ) | ||||
Within interest and other expense, net, we recorded pre-tax losses of $97 million in the first quarter of 2016 and $34 million in the first quarter of 2015 related to amounts excluded from effectiveness testing. These amounts relate to interest rate swaps no longer designated as cash flow hedges due to changes in financing plans. Due to lower overall costs and our decision to hedge a greater portion of our net investments in operations that use currencies other than the U.S. dollar as their functional currencies, we changed our plans to issue U.S. dollar-denominated debt and instead issued euro and Swiss franc-denominated notes in the current year first quarter, and euro, British pound sterling and Swiss franc-denominated notes in the prior-year first quarter. Amounts excluded from effectiveness testing were not material for the remainder of 2016 and 2015 and prior year periods.
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We record pre-tax and after-tax (i) gains or losses reclassified from accumulated other comprehensive earnings / (losses) into earnings, (ii) gains or losses on ineffectiveness and (iii) gains or losses on amounts excluded from effectiveness testing in:
| • | cost of sales for commodity contracts; |
| • | cost of sales for currency exchange contracts related to forecasted transactions; and |
| • | interest and other expense, net for interest rate contracts and currency exchange contracts related to intercompany loans. |
Based on current market conditions, we would expect to transfer losses of $31 million (net of taxes) for commodity cash flow hedges, unrealized gains of $10 million (net of taxes) for currency cash flow hedges and unrealized losses of $2 million (net of taxes) for interest rate cash flow hedges to earnings during the next 12 months.
Hedge Coverage:
As of December 31, 2016, we hedged transactions forecasted to impact cash flows over the following periods:
| • | commodity transactions for periods not exceeding the next 12 months; |
| • | interest rate transactions for periods not exceeding the next 6 years and 10 months; and |
| • | currency exchange transactions for periods not exceeding the next 12 months. |
Fair Value Hedges:
Pre-tax gains / (losses) due to changes in fair value of our interest rate swaps and related hedged long-term debt were recorded in interest and other expense, net:
| For the Years Ended December 31, | ||||||||||||
| 2016 | 2015 | 2014 | ||||||||||
| (in millions) | ||||||||||||
| Derivatives |
$ | (6 | ) | $ | (1 | ) | $ | 13 | ||||
| Borrowings |
6 | 1 | (13 | ) | ||||||||
Fair value hedge ineffectiveness and amounts excluded from effectiveness testing were not material for all periods presented.
Economic Hedges:
Pre-tax gains / (losses) recorded in net earnings for economic hedges were:
| For the Years Ended December 31, | Location of Recognized |
|||||||||||||||
| 2016 | 2015 | 2014 | in Earnings | |||||||||||||
| (in millions) | ||||||||||||||||
| Currency exchange contracts: |
||||||||||||||||
| Intercompany loans and |
$ | 21 | $ | 29 | $ | 4 | |
Interest and other expense, net |
| |||||||
| Forecasted transactions |
(76 | ) | 29 | 29 | Cost of sales | |||||||||||
| Forecasted transactions |
11 | 435 | 610 | |
Interest and other expense, net |
| ||||||||||
| Forecasted transactions |
7 | (12 | ) | (4 | ) | |
Selling, general and administrative expenses |
| ||||||||
| Commodity contracts |
(101 | ) | (38 | ) | (136 | ) | Cost of sales | |||||||||
|
|
|
|
|
|
|
|||||||||||
| Total |
$ | (138 | ) | $ | 443 | $ | 503 | |||||||||
|
|
|
|
|
|
|
|||||||||||
In connection with the coffee business transactions, we entered into a number of consecutive euro to U.S. dollar currency exchange forward contracts in 2015 and 2014 to lock in an equivalent expected value in U.S. dollars. The mark-to-market gains and losses on the derivatives were recorded in earnings. We recorded net gains of $436 million for the year ended December 31, 2015 and $628 million for the year ended December 31, 2014 within interest and other expense, net in connection with the forward contracts and the transferring of proceeds to our subsidiaries where coffee net assets and shares were deconsolidated. The currency hedge and related gains and losses were recorded within interest and other expense, net. See Note 2, Divestitures and Acquisitions — JDE Coffee Business Transactions, for additional information.
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Hedges of Net Investments in International Operations:
After-tax gains / (losses) related to hedges of net investments in international operations in the form of euro, pound sterling and Swiss franc-denominated debt were:
| Location of | ||||||||||||||
| For the Years Ended December 31, | Gain / (Loss) | |||||||||||||
| 2016 | 2015 | 2014 | Recognized in AOCI | |||||||||||
| (in millions) | ||||||||||||||
| Euro notes |
$ | 73 | $ | 268 | $ | 328 | Currency | |||||||
| Pound sterling notes |
148 | 42 | 39 | Translation | ||||||||||
| Swiss franc notes |
12 | 9 | – | Adjustment | ||||||||||
Note 9. Benefit Plans
Pension Plans
Prior to the July 2, 2015 closing of the coffee business transactions, certain active employees who transitioned to JDE participated in our Non-U.S. pension plans. Following the transactions, benefits began to be provided directly by JDE to participants continuing with JDE. JDE assumed certain pension plan obligations and received the related plan assets. In 2015, we reduced our net benefit plan liabilities by $131 million and the related deferred tax assets by $24 million. For participants that elected not to transfer into the JDE plans, we retained the plan obligations and related plan assets.
Obligations and Funded Status:
The projected benefit obligations, plan assets and funded status of our pension plans were:
| U.S. Plans | Non-U.S. Plans | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| (in millions) | ||||||||||||||||
| Benefit obligation at January 1 |
$ | 1,566 | $ | 1,606 | $ | 9,547 | $ | 10,854 | ||||||||
| Service cost |
57 | 64 | 147 | 188 | ||||||||||||
| Interest cost |
61 | 67 | 229 | 307 | ||||||||||||
| Benefits paid |
(32 | ) | (35 | ) | (425 | ) | (435 | ) | ||||||||
| Settlements paid |
(91 | ) | (88 | ) | – | 1 | ||||||||||
| Actuarial (gains) / losses |
52 | (49 | ) | 1,284 | (262 | ) | ||||||||||
| Deconsolidation of JDE coffee business |
– | – | – | (261 | ) | |||||||||||
| Divestiture |
– | – | (5 | ) | – | |||||||||||
| Currency |
– | – | (979 | ) | (766 | ) | ||||||||||
| Other |
1 | 1 | 16 | (79 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Benefit obligation at December 31 |
1,614 | 1,566 | 9,814 | 9,547 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Fair value of plan assets at January 1 |
1,247 | 1,216 | 7,721 | 8,362 | ||||||||||||
| Actual return on plan assets |
118 | (71 | ) | 1,079 | 192 | |||||||||||
| Contributions |
378 | 225 | 419 | 318 | ||||||||||||
| Benefits paid |
(32 | ) | (35 | ) | (425 | ) | (435 | ) | ||||||||
| Settlements paid |
(91 | ) | (88 | ) | – | – | ||||||||||
| Deconsolidation of JDE coffee business |
– | – | – | (130 | ) | |||||||||||
| Divestiture |
– | – | (4 | ) | – | |||||||||||
| Currency |
– | – | (863 | ) | (579 | ) | ||||||||||
| Other |
– | – | (1 | ) | (7 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Fair value of plan assets at December 31 |
1,620 | 1,247 | 7,926 | 7,721 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net pension assets (liability) at December 31 |
$ | 6 | $ | (319 | ) | $ | (1,888 | ) | $ | (1,826 | ) | |||||
|
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|
|
|
|
|
|
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The accumulated benefit obligation, which represents benefits earned to the measurement date, was $1,540 million at December 31, 2016 and $1,463 million at December 31, 2015 for the U.S. pension plans. The accumulated benefit obligation for the non-U.S. pension plans was $9,531 million at December 31, 2016 and $9,267 million at December 31, 2015.
For salaried and non-union hourly employees hired after January 1, 2009, we discontinued benefits under our U.S. pension plans and replaced them with an enhanced Company contribution to our employee defined contribution plan. Effective December 31, 2019, benefit accruals will cease under the U.S. non-union pension plan. For non-union employees participating in that plan on December 31, 2019, we will calculate the pension benefit obligation based on pay and service as of that date and no longer accrue new benefits.
The combined U.S. and non-U.S. pension plans resulted in a net pension liability of $1,882 million at December 31, 2016 and $2,145 million at December 31, 2015. We recognized these amounts in our consolidated balance sheets as follows:
| As of December 31, | ||||||||
| 2016 | 2015 | |||||||
| (in millions) | ||||||||
| Prepaid pension assets |
$ | 159 | $ | 69 | ||||
| Other accrued liabilities |
(27 | ) | (31 | ) | ||||
| Accrued pension costs |
(2,014 | ) | (2,183 | ) | ||||
|
|
|
|
|
|||||
| $ | (1,882 | ) | $ | (2,145 | ) | |||
|
|
|
|
|
|||||
Certain of our U.S. and non-U.S. plans are underfunded and have accumulated benefit obligations in excess of plan assets. For these plans, the projected benefit obligations, accumulated benefit obligations and the fair value of plan assets were:
| U.S. Plans | Non-U.S. Plans | |||||||||||||||
| As of December 31, | As of December 31, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| (in millions) | ||||||||||||||||
| Projected benefit obligation |
$ | 96 | $ | 1,566 | $ | 8,386 | $ | 8,139 | ||||||||
| Accumulated benefit obligation |
88 | 1,463 | 8,168 | 7,920 | ||||||||||||
| Fair value of plan assets |
2 | 1,247 | 6,451 | 6,252 | ||||||||||||
We used the following weighted-average assumptions to determine our benefit obligations under the pension plans:
| U.S. Plans | Non-U.S. Plans | |||||||||||||||
| As of December 31, | As of December 31, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Discount rate |
4.19% | 4.50% | 2.31% | 3.11% | ||||||||||||
| Expected rate of return on plan assets |
6.25% | 6.75% | 5.14% | 5.87% | ||||||||||||
| Rate of compensation increase |
4.00% | 4.00% | 3.29% | 3.18% | ||||||||||||
Year-end discount rates for our U.S., Canadian, Eurozone and U.K. plans were developed from a model portfolio of high quality, fixed-income debt instruments with durations that match the expected future cash flows of the benefit obligations. Year-end discount rates for our remaining non-U.S. plans were developed from local bond indices that match local benefit obligations as closely as possible. Changes in our discount rates were primarily the result of changes in bond yields year-over-year. We determine our expected rate of return on plan assets from the plan assets’ historical long-term investment performance, current asset allocation and estimates of future long-term returns by asset class.
At the end of 2015, we changed the approach used to measure service and interest costs for pension benefits. For 2015, we measured service and interest costs utilizing a single weighted-average discount rate derived from the yield curve used to measure the plan obligations. For 2016, we measured service and interest costs by applying the specific spot rates along that yield curve to the plans’ liability cash flows. We believe the new approach provided a more precise measurement of service and interest costs by aligning the timing of the plans’ liability cash flows to the corresponding spot rates on the yield curve. The impact of this change was a decrease in net periodic pension cost of approximately $64 million for the year ended December 31, 2016. This change did not affect the measurement of our plan obligations. We accounted for this change as a change in accounting estimate and, accordingly, accounted for it on a prospective basis.
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Components of Net Periodic Pension Cost:
Net periodic pension cost consisted of the following:
| U.S. Plans | Non-U.S. Plans | |||||||||||||||||||||||
| For the Years Ended December 31, | For the Years Ended December 31, | |||||||||||||||||||||||
| 2016 | 2015 | 2014 | 2016 | 2015 | 2014 | |||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||
| Service cost |
$ | 57 | $ | 64 | $ | 57 | $ | 147 | $ | 188 | $ | 184 | ||||||||||||
| Interest cost |
61 | 67 | 67 | 229 | 307 | 388 | ||||||||||||||||||
| Expected return on plan assets |
(97 | ) | (93 | ) | (81 | ) | (418 | ) | (478 | ) | (485 | ) | ||||||||||||
| Amortization: |
||||||||||||||||||||||||
| Net loss from experience |
42 | 43 | 29 | 120 | 141 | 106 | ||||||||||||||||||
| Prior service cost (1) |
2 | 2 | 2 | (3 | ) | 15 | – | |||||||||||||||||
|
Settlement losses and |
30 | 19 | 28 | 6 | 2 | 14 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net periodic pension cost |
$ | 95 | $ | 102 | $ | 102 | $ | 81 | $ | 175 | $ | 207 | ||||||||||||
|
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|
|
|
|
|
|
|
|
|
|
|||||||||||||
| (1) | For the year ended December 31, 2015, amortization of prior service cost includes $17 million of pension curtailment losses related to employees who transitioned to JDE upon the contribution of our global coffee business. Refer to Note 2, Divestitures and Acquisitions – JDE Coffee Business Transactions, for more information. |
| (2) | Settlement losses include $15 million for the year ended December 31, 2016 and $9 million for the year ended December 31, 2015 of pension settlement losses for employees who elected lump-sum payments in connection with our 2014-2018 Restructuring Program. Retired employees who elected lump-sum payments resulted in net settlement losses in 2016 of $15 million for our U.S. plans and $6 million for our non-U.S. plans and in 2015 of $10 million for our U.S. plans and $2 million for our non-U.S. plans. Employees who elected lump-sum payments in connection with our 2012-2014 Restructuring Program and cost saving initiatives and retired employees who elected lump-sum payments resulted in net settlement losses for our U.S. plans of $28 million in 2014. In addition, we incurred special termination benefit costs of $2 million in 2014 in the non-U.S. plans related to the 2012-2014 Restructuring Program. See Note 6, Restructuring Programs, for more information. We recorded an additional $90 million of pension settlement losses related to the coffee business transactions within the gain on the coffee business transactions. Refer to Note 2, Divestitures and Acquisitions – JDE Coffee Business Transactions, for more information. |
For the U.S. plans, we determine the expected return on plan assets component of net periodic benefit cost using a calculated market return value that recognizes the cost over a four year period. For our non-U.S. plans, we utilize a similar approach with varying cost recognition periods for some plans, and with others, we determine the expected return on plan assets based on asset fair values as of the measurement date.
As of December 31, 2016, for the combined U.S. and non-U.S. pension plans, we expected to amortize from accumulated other comprehensive earnings / (losses) into net periodic pension cost during 2017:
| • | an estimated $202 million of net loss from experience differences; and |
| • | $1 million of estimated prior service credit. |
We used the following weighted-average assumptions to determine our net periodic pension cost:
| U.S. Plans | Non-U.S. Plans | |||||||||||||||||||||||
| For the Years Ended December 31, | For the Years Ended December 31, | |||||||||||||||||||||||
| 2016 | 2015 | 2014 | 2016 | 2015 | 2014 | |||||||||||||||||||
| Discount rate | 4.50% | 4.20% | 5.10% | 3.11% | 2.99% | 4.03% | ||||||||||||||||||
| Expected rate of return on |
6.75% | 7.25% | 7.75% | 5.87% | 5.96% | 6.17% | ||||||||||||||||||
| Rate of compensation increase | 4.00% | 4.00% | 4.00% | 3.18% | 3.26% | 3.63% | ||||||||||||||||||
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Plan Assets:
The fair value of pension plan assets was determined using the following fair value measurements:
| As of December 31, 2016 | ||||||||||||||||
| Quoted Prices | Significant | |||||||||||||||
| Asset Category |
Total Fair Value |
in Active Markets for Identical Assets (Level 1) |
Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
||||||||||||
| (in millions) | ||||||||||||||||
| U.S. equity securities |
$ | 1 | $ | 1 | $ | – | $ | – | ||||||||
| Non-U.S. equity securities |
427 | 427 | – | – | ||||||||||||
| Pooled funds - equity securities |
1,524 | 286 | 1,235 | 3 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total equity securities |
1,952 | 714 | 1,235 | 3 | ||||||||||||
| Government bonds |
3,009 | 37 | 2,972 | – | ||||||||||||
| Pooled funds - fixed-income securities |
756 | 103 | 618 | 35 | ||||||||||||
| Corporate bonds and other |
852 | 357 | (43 | ) | 538 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total fixed-income securities |
4,617 | 497 | 3,547 | 573 | ||||||||||||
| Real estate |
170 | 98 | 50 | 22 | ||||||||||||
| Hedge funds |
– | – | – | – | ||||||||||||
| Private equity |
2 | – | – | 2 | ||||||||||||
| Cash |
73 | 72 | 1 | – | ||||||||||||
| Other |
3 | 1 | – | 2 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total assets in the fair value hierarchy |
$ | 6,817 | $ | 1,382 | $ | 4,833 | $ | 602 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Investments measured at net asset value |
2,667 | |||||||||||||||
|
|
|
|||||||||||||||
| Total Investments at fair value |
$ | 9,484 | ||||||||||||||
|
|
|
|||||||||||||||
| As of December 31, 2015 | ||||||||||||||||
| Quoted Prices | Significant | |||||||||||||||
| Asset Category |
Total Fair Value |
in Active Markets for Identical Assets (Level 1) |
Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
||||||||||||
| (in millions) | ||||||||||||||||
| U.S. equity securities |
$ | 2 | $ | 2 | $ | – | $ | – | ||||||||
| Non-U.S. equity securities |
498 | 412 | 86 | – | ||||||||||||
| Pooled funds - equity securities |
1,468 | 275 | 1,193 | – | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total equity securities |
1,968 | 689 | 1,279 | – | ||||||||||||
| Government bonds |
1,770 | 35 | 1,735 | – | ||||||||||||
| Pooled funds - fixed-income securities |
575 | 118 | 431 | 26 | ||||||||||||
| Corporate bonds and other |
1,686 | 320 | 701 | 665 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total fixed-income securities |
4,031 | 473 | 2,867 | 691 | ||||||||||||
| Real estate |
339 | 109 | – | 230 | ||||||||||||
| Hedge funds |
– | – | – | – | ||||||||||||
| Private equity |
2 | – | – | 2 | ||||||||||||
| Cash |
138 | 138 | – | – | ||||||||||||
| Other |
2 | 1 | – | 1 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total assets in the fair value hierarchy |
$ | 6,480 | $ | 1,410 | $ | 4,146 | $ | 924 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Investments measured at net asset value |
2,422 | |||||||||||||||
|
|
|
|||||||||||||||
| Total investments at fair value |
$ | 8,902 | ||||||||||||||
|
|
|
|||||||||||||||
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We excluded plan assets of $62 million at December 31, 2016 and $66 million at December 31, 2015 from the above tables related to certain insurance contracts as they are reported at contract value, in accordance with authoritative guidance.
Fair value measurements:
| • | Level 1 – includes primarily U.S and non-U.S. equity securities and government bonds valued using quoted prices in active markets. |
| • | Level 2 – includes primarily pooled funds, including assets in real estate pooled funds, valued using net asset values of participation units held in common collective trusts, as reported by the managers of the trusts and as supported by the unit prices of actual purchase and sale transactions. Level 2 plan assets also include corporate bonds and other fixed-income securities, valued using independent observable market inputs, such as matrix pricing, yield curves and indices. |
| • | Level 3 – includes investments valued using unobservable inputs that reflect the plans’ assumptions that market participants would use in pricing the assets, based on the best information available. |
| • | Fair value estimates for pooled funds are calculated by the investment advisor when reliable quotations or pricing services are not readily available for certain underlying securities. The estimated value is based on either cost or last sale price for most of the securities valued in this fashion. |
| • | Fair value estimates for private equity investments are calculated by the general partners using the market approach to estimate the fair value of private investments. The market approach utilizes prices and other relevant information generated by market transactions, type of security, degree of liquidity, restrictions on the disposition, latest round of financing data, company financial statements, relevant valuation multiples and discounted cash flow analyses. |
| • | Fair value estimates for real estate investments are calculated by the investment managers using the present value of future cash flows expected to be received from the investments, based on valuation methodologies such as appraisals, local market conditions, and current and projected operating performance. |
| • | Fair value estimates for investments in hedge fund-of-funds are calculated by the investment managers using the net asset value per share of the investment as reported by the money managers of the underlying funds. |
| • | Fair value estimates for certain fixed-income securities such as insurance contracts are calculated based on the future stream of benefit payments discounted using prevailing interest rates based on the valuation date. |
| • | Net asset value – primarily includes real estate funds, hedge funds and private equity investments for which net asset values are normally used. |
Changes in our Level 3 plan assets, which are recorded in other comprehensive earnings / (losses), included:
| Asset Category |
January 1, 2016 Balance |
Net Realized and Unrealized Gains/ (Losses) |
Net Purchases, Issuances and Settlements |
Net Transfers Into/(Out of) Level 3 |
Currency Impact |
December 31, 2016 Balance |
||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||
| Non-U.S. equity |
$ | – | $ | – | $ | – | $ | 3 | $ | – | 3 | |||||||||||||
| Pooled funds- |
26 | 6 | 15 | (7 | ) | (5 | ) | 35 | ||||||||||||||||
| Corporate bond and other |
665 | 21 | (41 | ) | – | (107 | ) | 538 | ||||||||||||||||
| Real estate |
230 | – | (184 | ) | (3 | ) | (21 | ) | 22 | |||||||||||||||
| Hedge funds |
– | – | – | – | – | – | ||||||||||||||||||
| Private equity |
3 | – | – | 1 | – | 4 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total Level 3 investments |
$ | 924 | $ | 27 | $ | (210 | ) | $ | (6 | ) | $ | (133 | ) | $ | 602 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Asset Category |
January 1, 2015 Balance |
Net Realized and Unrealized Gains/ (Losses) |
Net Purchases, Issuances and Settlements |
Net Transfers Into/(Out of) Level 3 |
Currency Impact |
December 31, 2015 Balance |
||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||
| Pooled funds- |
$ | 97 | $ | (1 | ) | $ | 25 | $ | (89 | ) | $ | (6 | ) | $ | 26 | |||||||||
| Corporate bond and other |
749 | 4 | (50 | ) | – | (38 | ) | 665 | ||||||||||||||||
| Real estate |
292 | 19 | 61 | (125 | ) | (17 | ) | 230 | ||||||||||||||||
| Hedge funds |
829 | 13 | (312 | ) | (499 | ) | (31 | ) | – | |||||||||||||||
| Private equity |
240 | 17 | (36 | ) | (206 | ) | (12 | ) | 3 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total Level 3 investments |
$ | 2,207 | $ | 52 | $ | (312 | ) | $ | (919 | ) | $ | (104 | ) | $ | 924 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
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The decreases in Level 3 pension plan investments during 2016 were primarily due to net settlements in real estate funds and the effects of currency. The decreases in Level 3 pension plan investments during 2015 were primarily due to net settlements in hedge funds and the effects of currency.
The percentage of fair value of pension plan assets was:
| U.S. Plans | Non-U.S. Plans | |||||||||||||||
| As of December 31, | As of December 31, | |||||||||||||||
| Asset Category |
2016 | 2015 | 2016 | 2015 | ||||||||||||
| Equity securities |
33% | 32% | 29% | 32% | ||||||||||||
| Fixed-income securities |
63% | 65% | 57% | 50% | ||||||||||||
| Real estate |
4% | 3% | 5% | 6% | ||||||||||||
| Hedge funds |
– | – | 6% | 7% | ||||||||||||
| Private equity |
– | – | 2% | 3% | ||||||||||||
| Cash |
– | – | 1% | 1% | ||||||||||||
| Other |
– | – | – | 1% | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
100% | 100% | 100% | 100% | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
For our U.S. plans, our investment strategy is to reduce the risk of underfunded plans in part through appropriate asset allocation within our plan assets. We attempt to maintain our target asset allocation by rebalancing between asset classes as we make contributions and monthly benefit payments. The strategy involves using indexed U.S. equity and international equity securities and actively managed U.S. investment grade fixed-income securities (which constitute 95% or more of fixed-income securities) with smaller allocations to high yield fixed-income securities.
For our non-U.S. plans, the investment strategy is subject to local regulations and the asset / liability profiles of the plans in each individual country. In aggregate, the asset allocation targets of our non-U.S. plans are broadly characterized as a mix of approximately 34% equity securities (including investments in real estate), approximately 64% fixed-income securities and approximately 2% other alternative securities. Our investment strategy for our largest non-U.S. plan, which comprises 63% of our non-U.S. pension assets, is designed to balance risk and return by diversifying across a wide range of return-seeking and liability matching assets, invested in a range of both active and passive mandates. We target an allocation of approximately 24% in equity securities, 21% credit, 6% private markets, 9% other diversifying assets, and 40% liability matching assets. The strategy uses indexed global developed equities, actively managed global investment grade and alternative credit, global private equity and real estate, other diversifying assets including hedge funds, and other liability matching assets including a buy-in annuity policy.
Employer Contributions:
In 2016, we contributed $378 million (of which, $350 million was voluntarily contributed) to our U.S. pension plans and $403 million (of which, $100 million was a non-recurring contribution related to merging our legacy Cadbury plans in the United Kingdom) to our non-U.S. pension plans. In addition, employees contributed $16 million to our non-U.S. plans. We make contributions to our U.S. and non-U.S. pension plans primarily to the extent that they are tax deductible and do not generate an excise tax liability.
In 2017, we estimate that our pension contributions will be $13 million to our U.S. plans and $455 million to our non-U.S. plans based on current tax laws. Of the total 2017 pension contributions, $250 million is expected to be non-recurring. Our actual contributions may be different due to many factors, including changes in tax and other benefit laws, significant differences between expected and actual pension asset performance or interest rates.
Future Benefit Payments:
The estimated future benefit payments from our pension plans at December 31, 2016 were (in millions):
| Year ending: |
2017 | 2018 | 2019 | 2020 | 2021 | 2022-2026 | ||||||||||||||||||
| U.S. Plans | $ | 89 | $ | 97 | $ | 103 | $ | 107 | $ | 108 | $ | 568 | ||||||||||||
| Non-U.S. Plans | 357 | 356 | 363 | 378 | 400 | 2,138 | ||||||||||||||||||
Multiemployer Pension Plans:
In accordance with obligations we have under collective bargaining agreements, we made contributions to multiemployer pension plans of $25 million in 2016, $31 million in 2015 and $32 million in 2014. There are risks of participating in multiemployer pension plans that are different from single employer plans. Assets contributed to a multiemployer plan by one employer may be used to provide benefits to employees of other participating employers. If a participating employer stops contributing to the plan, the unfunded obligations of the plan are borne by the remaining participating employers. If the Company stops participating in its multi-employer pension plans, the Company may be required to pay those plans an amount based on its allocable share of the unfunded vested benefits of the plans, referred to as a withdrawal liability.
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Table of Contents
The only individually significant multiemployer plan we participate in as of December 31, 2016 is the Bakery and Confectionery Union and Industry International Pension Fund (the “Fund”). Our contributions to the Fund exceeded 5% of total contributions to the Fund for fiscal years 2016, 2015 and 2014. Our contributions to the Fund were $21 million in 2016, $27 million in 2015 and $25 million in 2014. Our contributions to other multiemployer pension plans that were not individually significant were $4 million in 2016, $4 million in 2015 and $7 million in 2014. Our contributions are based on our contribution rates under our collective bargaining agreements, the number of our eligible employees and Fund surcharges.
| Expiration Date | ||||||||||||||||
| Pension | FIP / RP | of Collective- | ||||||||||||||
| EIN / Pension | Protection Act | Status Pending / | Surcharge | Bargaining | ||||||||||||
| Pension Fund |
Plan Number | Zone Status | Implemented | Imposed | Agreements | |||||||||||
| Bakery and Confectionery Union and Industry International Pension Fund |
526118572 | Red | Implemented | Yes | 2/29/2016 | |||||||||||
Effective January 1, 2012, the Fund’s zone status changed to “Red”. As a result of this certification, beginning in July 2012, we were charged a 10% surcharge on our contribution rates. The Fund subsequently adopted a rehabilitation plan on November 7, 2012 that required contribution increases and reductions to benefit provisions. Although our collective bargaining agreements with the Fund expired during 2016, we are obligated to make contributions to the Fund and we continue to work with the union toward reaching an agreement. The Fund’s actuarial valuation was last completed as of January 1, 2016. As of August 28, 2016, the 10% surcharge is no longer applicable but we are required to pay higher contributions under the Fund’s rehabilitation plan.
Other Costs:
We sponsor and contribute to employee defined contribution plans. These plans cover eligible salaried, non-union and union employees. Our contributions and costs are determined by the matching of employee contributions, as defined by the plans. Amounts charged to expense in continuing operations for defined contribution plans totaled $44 million in 2016, $45 million in 2015 and $46 million in 2014.
Postretirement Benefit Plans
Obligations:
Our postretirement health care plans are not funded. The changes in and the amount of the accrued benefit obligation were:
| As of December 31, | ||||||||
| 2016 | 2015 | |||||||
| (in millions) | ||||||||
| Accrued benefit obligation at January 1 |
$ | 511 | $ | 538 | ||||
| Service cost |
12 | 15 | ||||||
| Interest cost |
20 | 22 | ||||||
| Benefits paid |
(14 | ) | (10 | ) | ||||
| Plan amendments (1) |
(149 | ) | – | |||||
| Currency |
3 | (22 | ) | |||||
| Assumption changes |
34 | (30 | ) | |||||
| Actuarial (gains) / losses |
(23 | ) | (2 | ) | ||||
|
|
|
|
|
|||||
| Accrued benefit obligation at December 31 |
$ | 394 | $ | 511 | ||||
|
|
|
|
|
|||||
| (1) | Plan amendments included a change in eligibility requirements related to medical and life insurance benefits and a change in benefits for Medicare-eligible participants. |
The current portion of our accrued postretirement benefit obligation of $12 million at December 31, 2016 and $11 million at December 31, 2015 was included in other accrued liabilities.
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We used the following weighted-average assumptions to determine our postretirement benefit obligations:
| U.S. Plans | Non-U.S. Plans | |||||||||||||||
| As of December 31, | As of December 31, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Discount rate |
4.14% | 4.60% | 4.55% | 4.77% | ||||||||||||
| Health care cost trend rate |
6.50% | 6.50% | 5.50% | 5.37% | ||||||||||||
| Ultimate trend rate |
5.00% | 5.00% | 5.68% | 5.55% | ||||||||||||
| Year that the rate reaches the |
2020 | 2020 | 2018 | 2018 | ||||||||||||
Year-end discount rates for our U.S., Canadian and U.K. plans were developed from a model portfolio of high quality, fixed-income debt instruments with durations that match the expected future cash flows of the benefit obligations. Year-end discount rates for our remaining non-U.S. plans were developed from local bond indices that match local benefit obligations as closely as possible. Changes in our discount rates were primarily the result of changes in bond yields year-over-year. Our expected health care cost trend rate is based on historical costs.
At the end 2015, we changed the approach used to measure service and interest costs for other postretirement benefits. For 2015, we measured service and interest costs utilizing a single weighted-average discount rate derived from the yield curve used to measure the plan obligations. For 2016, we measured service and interest costs by applying the specific spot rates along that yield curve to the plans’ liability cash flows. We believe the new approach provided a more precise measurement of service and interest costs by aligning the timing of the plans’ liability cash flows to the corresponding spot rates on the yield curve. The impact of this change was a decrease in net periodic postretirement cost of approximately $4 million for the year ended December 31, 2016. This change does not affect the measurement of our plan obligations. We accounted for this change as a change in accounting estimate and, accordingly, accounted for it on a prospective basis.
Assumed health care cost trend rates have a significant impact on the amounts reported for the health care plans. A one-percentage-point change in assumed health care cost trend rates would have the following effects:
| As of December 31, 2016 | ||||||||||||
| One-Percentage-Point | ||||||||||||
| Increase | Decrease | |||||||||||
| (in millions) | ||||||||||||
| Effect on postretirement benefit obligation |
$ | 41 | $ | (33 | ) | |||||||
| Effect on annual service and interest cost |
3 | (2 | ) | |||||||||
Components of Net Periodic Postretirement Health Care Costs:
Net periodic postretirement health care costs consisted of the following:
| For the Years Ended December 31, | ||||||||||||
| 2016 | 2015 | 2014 | ||||||||||
| (in millions) | ||||||||||||
| Service cost |
$ | 12 | $ | 15 | $ | 13 | ||||||
| Interest cost |
20 | 22 | 22 | |||||||||
| Amortization: |
||||||||||||
| Net loss from experience differences |
10 | 13 | 5 | |||||||||
| Prior service credit (1) |
(20 | ) | (7 | ) | (10 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Net periodic postretirement health care costs |
$ | 22 | $ | 43 | $ | 30 | ||||||
|
|
|
|
|
|
|
|||||||
| (1) | For the year ended December 31, 2016, amortization of prior service credit includes $9 million of curtailment gain related to a change in the eligibility requirement. |
As of December 31, 2016, we expected to amortize from accumulated other comprehensive earnings / (losses) into pre-tax net periodic postretirement health care costs during 2017:
| • | an estimated $15 million of net loss from experience differences, and |
| • | an estimated $40 million of prior service credit. |
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Table of Contents
We used the following weighted-average assumptions to determine our net periodic postretirement health care cost:
| U.S. Plans | Non-U.S. Plans | |||||||||||
| For the Years Ended December 31, | For the Years Ended December 31, | |||||||||||
| 2016 | 2015 | 2014 | 2016 | 2015 | 2014 | |||||||
| Discount rate |
4.60% | 4.20% | 5.10% | 4.77% | 4.52% | 5.17% | ||||||
| Health care cost trend rate |
6.50% | 6.50% | 7.00% | 5.50% | 5.18% | 5.11% | ||||||
Future Benefit Payments:
Our estimated future benefit payments for our postretirement health care plans at December 31, 2016 were (in millions):
| Year ending: |
2017 | 2018 | 2019 | 2020 | 2021 | 2022-2026 | ||||||
| U.S. Plans |
$8 | $10 | $11 | $12 | $13 | $80 | ||||||
| Non-U.S. Plans |
5 | 5 | 5 | 6 | 6 | 34 | ||||||
Other Costs:
We made contributions to multiemployer medical plans totaling $19 million in 2016, $20 million in 2015 and $18 million in 2014. These plans provide medical benefits to active employees and retirees under certain collective bargaining agreements.
Postemployment Benefit Plans
Obligations:
Our postemployment plans are primarily not funded. The changes in and the amount of the accrued benefit obligation at December 31, 2016 and 2015 were:
| 2016 | 2015 | |||||||
| (in millions) | ||||||||
| Accrued benefit obligation at January 1 |
$ | 95 | $ | 94 | ||||
| Service cost |
7 | 7 | ||||||
| Interest cost |
6 | 5 | ||||||
| Benefits paid |
(9 | ) | (7 | ) | ||||
| Assumption changes |
(21 | ) | (3 | ) | ||||
| Actuarial gains |
(7 | ) | (1 | ) | ||||
|
|
|
|
|
|||||
| Accrued benefit obligation at December 31 |
$ | 71 | $ | 95 | ||||
|
|
|
|
|
|||||
The accrued benefit obligation was determined using a weighted-average discount rate of 6.2% in 2016 and 2015, an assumed weighted-average ultimate annual turnover rate of 0.3% in 2016 and 2015, assumed compensation cost increases of 4.0% in 2016 and 2015 and assumed benefits as defined in the respective plans.
Postemployment costs arising from actions that offer employees benefits in excess of those specified in the respective plans are charged to expense when incurred.
Components of Net Periodic Postemployment Costs:
Net periodic postemployment costs consisted of the following:
| For the Years Ended December 31, | ||||||||||||
| 2016 | 2015 | 2014 | ||||||||||
| (in millions) | ||||||||||||
| Service cost |
$ | 7 | $ | 7 | $ | 9 | ||||||
| Interest cost |
6 | 5 | 6 | |||||||||
| Amortization of net gains |
(1 | ) | – | – | ||||||||
|
|
|
|
|
|
|
|||||||
| Net periodic postemployment costs |
$ | 12 | $ | 12 | $ | 15 | ||||||
|
|
|
|
|
|
|
|||||||
As of December 31, 2016, the estimated net gain for the postemployment benefit plans that we expected to amortize from accumulated other comprehensive earnings / (losses) into net periodic postemployment costs during 2017 was approximately $4 million.
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Table of Contents
Note 10. Stock Plans
Under our Amended and Restated 2005 Performance Incentive Plan (the “Plan”), we are authorized through May 21, 2024 to issue a maximum of 243.7 million shares of our Common Stock to employees and non-employee directors. As of December 31, 2016, there were 74.2 million shares available to be granted under the Plan.
Stock Options:
Stock options (including stock appreciation rights) are granted at an exercise price equal to the market value of the underlying stock on the grant date, generally become exercisable in three annual installments beginning on the first anniversary of the grant date and have a maximum term of ten years.
We account for our employee stock options under the fair value method of accounting using a Black-Scholes methodology to measure stock option expense at the date of grant. The fair value of the stock options at the date of grant is amortized to expense over the vesting period. We recorded compensation expense related to stock options held by our employees of $57 million in 2016, $50 million in 2015 and $47 million in 2014 in our results from continuing operations. The deferred tax benefit recorded related to this compensation expense was $15 million in 2016, $13 million in 2015 and $12 million in 2014. The unamortized compensation expense related to our employee stock options was $52 million at December 31, 2016 and is expected to be recognized over a weighted-average period of 1 year.
Our weighted-average Black-Scholes fair value assumptions were:
| Risk-Free Interest Rate |
Expected Life | Expected Volatility |
Expected Dividend Yield |
Fair Value at Grant Date |
||||||||||||||||
| 2016 |
1.40% | 6 years | 23.11% | 1.61% | $ | 7.86 | ||||||||||||||
| 2015 |
1.70% | 6 years | 18.51% | 1.61% | $ | 6.12 | ||||||||||||||
| 2014 |
1.87% | 6 years | 21.48% | 1.64% | $ | 6.60 | ||||||||||||||
The risk-free interest rate represents the constant maturity U.S. government treasuries rate with a remaining term equal to the expected life of the options. The expected life is the period over which our employees are expected to hold their options. Volatility reflects historical movements in our stock price for a period commensurate with the expected life of the options. The dividend yield reflects the dividend yield in place at the time of the historical grants.
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Stock option activity is reflected below:
| Weighted- | ||||||||||||||||
| Average | Average | |||||||||||||||
| Exercise or | Remaining | Aggregate | ||||||||||||||
| Shares Subject | Grant Price | Contractual | Intrinsic | |||||||||||||
| to Option | Per Share | Term | Value | |||||||||||||
| Balance at January 1, 2014 |
55,783,439 | $ | 21.96 | $ | 744 million | |||||||||||
|
|
|
|||||||||||||||
| Annual grant to eligible employees |
9,919,810 | 34.17 | ||||||||||||||
| Additional options issued |
500,250 | 33.65 | ||||||||||||||
|
|
|
|||||||||||||||
| Total options granted |
10,420,060 | 34.14 | ||||||||||||||
| Options exercised (1) |
(8,076,550 | ) | 20.85 | $ | 125 million | |||||||||||
| Options cancelled |
(1,695,398 | ) | 27.65 | |||||||||||||
|
|
|
|||||||||||||||
| Balance at December 31, 2014 |
56,431,551 | 24.19 | $ | 685 million | ||||||||||||
|
|
|
|||||||||||||||
| Annual grant to eligible employees |
8,899,530 | 36.94 | ||||||||||||||
| Additional options issued |
901,340 | 35.84 | ||||||||||||||
|
|
|
|||||||||||||||
| Total options granted |
9,800,870 | 36.84 | ||||||||||||||
| Options exercised (1) |
(6,444,515 | ) | 22.94 | $ | 108 million | |||||||||||
| Options cancelled |
(2,753,798 | ) | 32.35 | |||||||||||||
|
|
|
|||||||||||||||
| Balance at December 31, 2015 (2) |
57,034,108 | 26.12 | $ | 1,068 million | ||||||||||||
|
|
|
|||||||||||||||
| Annual grant to eligible employees |
7,517,290 | 39.70 | ||||||||||||||
| Additional options issued |
115,800 | 42.26 | ||||||||||||||
|
|
|
|||||||||||||||
| Total options granted |
7,633,090 | 39.74 | ||||||||||||||
| Options exercised (1) |
(8,883,101 | ) | 24.09 | $ | 174 million | |||||||||||
| Options cancelled |
(2,182,485 | ) | 35.23 | |||||||||||||
|
|
|
|||||||||||||||
| Balance at December 31, 2016 |
53,601,612 | 28.02 | 6 years | $ | 874 million | |||||||||||
|
|
|
|||||||||||||||
| Exercisable at December 31, 2016 |
39,016,883 | 24.43 | 5 years | $ | 777 million | |||||||||||
|
|
|
|||||||||||||||
| (1) | Cash received from options exercised was $221 million in 2016, $148 million in 2015 and $168 million in 2014. The actual tax benefit realized for the tax deductions from the option exercises totaled $31 million in 2016, $58 million in 2015 and $29 million in 2014. |
| (2) | Prior-year aggregate intrinsic value has been revised. |
Deferred Stock Units, Performance Share Units and Restricted Stock:
Historically we have made grants of deferred stock units, performance share units and restricted stock. Beginning in 2016, we only grant deferred stock units and performance share units and no longer grant restricted stock. We may grant shares of deferred stock units to eligible employees, giving them, in most instances, all of the rights of shareholders, except that they may not sell, assign, pledge or otherwise encumber the shares and our deferred stock units do not have voting rights until vested. Shares of deferred stock units are subject to forfeiture if certain employment conditions are not met. Deferred stock units generally vest on the third anniversary of the grant date. Performance share units granted under our 2005 Plan vest based on varying performance, market and service conditions. The unvested performance share units have no voting rights and do not pay dividends. Dividend equivalents accumulated over the vesting period are paid only after the performance share units vest.
The fair value of the deferred stock units, performance share units and restricted stock at the date of grant is amortized to earnings over the restriction period. We recorded compensation expense related to deferred stock units, performance share units and restricted stock of $83 million in 2016, $86 million in 2015 and $94 million in 2014 in our results from continuing operations. The deferred tax benefit recorded related to this compensation expense was $22 million in 2016, $24 million in 2015 and $26 million in 2014. The unamortized compensation expense related to our deferred stock units, performance share units and restricted stock was $111 million at December 31, 2016 and is expected to be recognized over a weighted-average period of 2 years.
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Our deferred stock unit, performance share unit and restricted stock activity is reflected below:
| Weighted-Average | Weighted-Average | |||||||||||||||
| Number | Fair Value | Aggregate | ||||||||||||||
| of Shares | Grant Date | Per Share | Fair Value | |||||||||||||
| Balance at January 1, 2014 |
11,648,587 | $ | 24.48 | |||||||||||||
|
|
|
|||||||||||||||
| Annual grant to eligible employees: |
Feb. 19, 2014 | |||||||||||||||
| Performance share units |
1,143,620 | 34.97 | ||||||||||||||
| Restricted stock |
750,410 | 34.17 | ||||||||||||||
| Deferred stock units |
1,240,820 | 34.17 | ||||||||||||||
| Additional shares granted (1) |
935,463 | Various | 33.15 | |||||||||||||
|
|
|
|||||||||||||||
| Total shares granted |
4,070,313 | 34.16 | $ | 139 million | ||||||||||||
| Vested (2) |
(4,380,452 | ) | 22.98 | $ | 101 million | |||||||||||
| Forfeited (2) |
(755,808 | ) | 28.14 | |||||||||||||
|
|
|
|||||||||||||||
| Balance at December 31, 2014 |
10,582,640 | 28.56 | ||||||||||||||
|
|
|
|||||||||||||||
| Annual grant to eligible employees: |
Feb. 18, 2015 | |||||||||||||||
| Performance share units |
1,598,290 | 36.94 | ||||||||||||||
| Restricted stock |
386,910 | 36.94 | ||||||||||||||
| Deferred stock units |
866,640 | 36.94 | ||||||||||||||
| Additional shares granted (1) |
1,087,322 | Various | 39.35 | |||||||||||||
|
|
|
|||||||||||||||
| Total shares granted |
3,939,162 | 37.61 | $ | 148 million | ||||||||||||
| Vested (2) |
(3,905,745 | ) | 37.83 | $ | 148 million | |||||||||||
| Forfeited (2) |
(1,197,841 | ) | 32.51 | |||||||||||||
|
|
|
|||||||||||||||
| Balance at December 31, 2015 |
9,418,216 | 28.00 | ||||||||||||||
|
|
|
|||||||||||||||
| Annual grant to eligible employees: |
Feb. 22, 2016 | |||||||||||||||
| Performance share units |
1,406,500 | 39.70 | ||||||||||||||
| Deferred stock units |
1,040,790 | 39.70 | ||||||||||||||
| Additional shares granted (1) |
864,851 | Various | 31.29 | |||||||||||||
|
|
|
|||||||||||||||
| Total shares granted |
3,312,141 | 37.50 | $ | 124 million | ||||||||||||
| Vested (2) |
(3,992,902 | ) | 40.22 | $ | 161 million | |||||||||||
| Forfeited (2) |
(1,143,828 | ) | 37.49 | |||||||||||||
|
|
|
|||||||||||||||
| Balance at December 31, 2016 |
7,593,627 | 24.29 | ||||||||||||||
|
|
|
|||||||||||||||
| (1) | Includes performance share units, deferred stock units and restricted stock. |
| (2) | Includes performance share units, deferred stock units and restricted stock. The actual tax benefit realized for the tax deductions from the shares vested totaled $18 million in 2016, $18 million in 2015 and $20 million in 2014. |
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Note 11. Capital Stock
Our amended and restated articles of incorporation authorize 5.0 billion shares of Class A common stock (“Common Stock”) and 500 million shares of preferred stock. There were no preferred shares issued and outstanding at December 31, 2016, 2015 and 2014. Shares of Common Stock issued, in treasury and outstanding were:
| Shares | ||||||||||||
| Shares Issued | Treasury Shares | Outstanding | ||||||||||
| Balance at January 1, 2014 |
1,996,537,778 | (291,141,184 | ) | 1,705,396,594 | ||||||||
| Shares repurchased |
– | (51,931,864 | ) | (51,931,864 | ) | |||||||
| Exercise of stock options and issuance of |
– | 10,176,269 | 10,176,269 | |||||||||
|
|
|
|
|
|
|
|||||||
| Balance at December 31, 2014 |
1,996,537,778 | (332,896,779 | ) | 1,663,640,999 | ||||||||
|
|
|
|
|
|
|
|||||||
| Shares repurchased |
– | (91,875,878 | ) | (91,875,878 | ) | |||||||
| Exercise of stock options and issuance of |
– | 8,268,033 | 8,268,033 | |||||||||
|
|
|
|
|
|
|
|||||||
| Balance at December 31, 2015 |
1,996,537,778 | (416,504,624 | ) | 1,580,033,154 | ||||||||
|
|
|
|
|
|
|
|||||||
| Shares repurchased |
– | (61,972,713 | ) | (61,972,713 | ) | |||||||
| Exercise of stock options and issuance of |
– | 10,305,100 | 10,305,100 | |||||||||
|
|
|
|
|
|
|
|||||||
| Balance at December 31, 2016 |
1,996,537,778 | (468,172,237 | ) | 1,528,365,541 | ||||||||
|
|
|
|
|
|
|
|||||||
Stock plan awards to employees and non-employee directors are issued from treasury shares. At December 31, 2016, 134 million shares of Common Stock held in treasury were reserved for stock options and other stock awards.
Share Repurchase Program:
During 2013, our Board of Directors authorized the repurchase of $7.7 billion of our Common Stock through December 31, 2016. On July 29, 2015, our Finance Committee, with authorization delegated from our Board of Directors, approved an increase of $6.0 billion in the share repurchase program, raising the authorization to $13.7 billion of Common Stock repurchases, and extended the program through December 31, 2018. Repurchases under the program are determined by management and are wholly discretionary. Prior to January 1, 2016, we had repurchased $8.2 billion of Common Stock pursuant to this authorization. During 2016, we repurchased 62.0 million shares of Common Stock at an average cost of $41.97 per share, or an aggregate cost of $2.6 billion, all of which was paid during 2016. All share repurchases were funded through available cash and commercial paper issuances. During 2015, we repurchased 91.9 million shares of Common Stock at an average cost of $39.43 per share, or an aggregate cost of $3.6 billion, all of which was paid during 2015. As of December 31, 2016, we have $2.8 billion in remaining share repurchase capacity.
In December 2013, we initiated an accelerated share repurchase (“ASR”) program. On December 3, 2013, we paid $1.7 billion and received an initial delivery of 44.8 million shares of Common Stock valued at $1.5 billion. We increased treasury stock by $1.5 billion, and the remaining $0.2 billion was recorded against additional paid in capital. In May 2014, the ASR program concluded and we received an additional 5.1 million shares, valued at $0.2 billion, for a total of 49.9 million shares with an average repurchase price of $34.10 per share over the life of the ASR program. The final settlement was based on the volume-weighted average price of our Common Stock during the purchase period less a fixed per share discount. Upon conclusion of the ASR program and receipt of the remaining repurchased shares, the $0.2 billion recorded in additional paid in capital was reclassified to treasury stock.
Note 12. Commitments and Contingencies
Legal Proceedings:
We routinely are involved in legal proceedings, claims and governmental inspections or investigations (“Legal Matters”) arising in the ordinary course of our business.
As we previously disclosed in February 2011, we received a subpoena from the SEC in connection with an investigation under the Foreign Corrupt Practices Act (“FCPA”), primarily related to a facility in India that we acquired in the Cadbury acquisition. The subpoena primarily requested information regarding dealings with Indian governmental agencies and officials to obtain approvals related to the operation of that facility. In January 2017, we reached an agreement with the SEC to settle charges related to internal controls and books-and-records provisions of the FCPA without admitting or denying the charges. As part of the settlement, Mondelēz International Inc. agreed to pay a civil penalty of $13 million to resolve the investigation. We do not anticipate any material adverse effect on our business or financial condition as a result of resolving this matter.
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In February 2013 and March 2014, Cadbury India Limited (now known as Mondelez India Foods Private Limited), a subsidiary of Mondelēz International, and other parties received show cause notices from the Indian Central Excise Authority (the “Excise Authority”) calling upon the parties to demonstrate why the Excise Authority should not collect a total of 3.7 billion Indian rupees ($55 million as of December 31, 2016) of unpaid excise tax and an equivalent amount of penalties, as well as interest, related to production at the same Indian facility. We contested these demands for unpaid excise taxes, penalties and interest. On March 27, 2015, after several hearings, the Commissioner of the Excise Authority issued an order denying the excise exemption that we claimed for the Indian facility and confirming the Excise Authority’s demands for total taxes and penalties in the amount of 5.8 billion Indian rupees ($86 million as of December 31, 2016). We have appealed this order. In addition, the Excise Authority issued additional show cause notices in February 2015 and December 2015 on the same issue but covering the periods January to October 2014 and November 2014 to September 2015, respectively. These notices added a total of 2.4 billion Indian rupees ($35 million as of December 31, 2016) of unpaid excise taxes as well as penalties to be determined up to an amount equivalent to that claimed by the Excise Authority and interest. We believe that the decision to claim the excise tax benefit is valid and we are continuing to contest the show cause notices through the administrative and judicial process.
In April 2013, the staff of the U.S. Commodity Futures Trading Commission (“CFTC”) advised us and Kraft Foods Group that it was investigating activities related to the trading of December 2011 wheat futures contracts that occurred prior to the Spin-Off of Kraft Foods Group. We cooperated with the staff in its investigation. On April 1, 2015, the CFTC filed a complaint against Kraft Foods Group and Mondelēz Global LLC (“Mondelēz Global”) in the U.S. District Court for the Northern District of Illinois, Eastern Division (the “CFTC action”). The complaint alleges that Kraft Foods Group and Mondelēz Global (1) manipulated or attempted to manipulate the wheat markets during the fall of 2011; (2) violated position limit levels for wheat futures and (3) engaged in non-competitive trades by trading both sides of exchange-for-physical Chicago Board of Trade wheat contracts. The CFTC seeks civil monetary penalties of either triple the monetary gain for each violation of the Commodity Exchange Act (the “Act”) or $1 million for each violation of Section 6(c)(1), 6(c)(3) or 9(a)(2) of the Act and $140,000 for each additional violation of the Act, plus post-judgment interest; an order of permanent injunction prohibiting Kraft Foods Group and Mondelēz Global from violating specified provisions of the Act; disgorgement of profits; and costs and fees. In December 2015, the court denied Mondelēz Global and Kraft Foods Group’s motion to dismiss the CFTC’s claims of market manipulation and attempted manipulation, and the parties are now in discovery. Additionally, several class action complaints were filed against Kraft Foods Group and Mondelēz Global in the U.S. District Court for the Northern District of Illinois by investors in wheat futures and options on behalf of themselves and others similarly situated. The complaints make similar allegations as those made in the CFTC action and seek class action certification; an unspecified amount for damages, interest and unjust enrichment; costs and fees; and injunctive, declaratory and other unspecified relief. In June 2015, these suits were consolidated in the Northern District of Illinois. In June 2016, the court denied Mondelēz Global and Kraft Foods Group’s motion to dismiss, and the parties are now in discovery. It is not possible to predict the outcome of these matters; however, based on our Separation and Distribution Agreement with Kraft Foods Group dated as of September 27, 2012, we expect to predominantly bear any monetary penalties or other payments in connection with the CFTC action.
While we cannot predict with certainty the results of any Legal Matters in which we are currently involved, we do not expect that the ultimate costs to resolve any of these Legal Matters, individually or in the aggregate, will have a material effect on our financial results.
Third-Party Guarantees:
We enter into third-party guarantees primarily to cover the long-term obligations of our vendors. As part of these transactions, we guarantee that third parties will make contractual payments or achieve performance measures. At December 31, 2016, we had no material third-party guarantees recorded on our consolidated balance sheet.
Leases:
Rental expenses recorded in continuing operations were $317 million in 2016, $331 million in 2015 and $399 million in 2014. As of December 31, 2016, minimum rental commitments under non-cancelable operating leases in effect at year-end were (in millions):
| 2017 |
2018 | 2019 | 2020 | 2021 | Thereafter | Total | ||||||||||||||||||
|
$ 241 |
$ | 175 | $ | 143 | $ | 115 | $ | 90 | $ | 157 | $ | 921 | ||||||||||||
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Table of Contents
Note 13. Reclassifications from Accumulated Other Comprehensive Income
The following table summarizes the changes in the accumulated balances of each component of accumulated other comprehensive earnings / (losses) attributable to Mondelēz International. Amounts reclassified from accumulated other comprehensive earnings / (losses) to net earnings (net of tax) were net losses of $250 million in 2016, $350 million in 2015 and $79 million in 2014.
| For the Years Ended December 31, | ||||||||||||
| 2016 | 2015 | 2014 | ||||||||||
| (in millions) | ||||||||||||
| Currency Translation Adjustments: |
||||||||||||
| Balance at beginning of period |
$ | (8,006 | ) | $ | (5,042 | ) | $ | (1,414 | ) | |||
| Currency translation adjustments |
(847 | ) | (2,905 | ) | (3,433 | ) | ||||||
| Reclassification to earnings related to: |
||||||||||||
| Venezuela deconsolidation |
– | 99 | – | |||||||||
| Equity method investment exchange |
57 | – | – | |||||||||
| Tax (expense) / benefit |
(135 | ) | (184 | ) | (228 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Other comprehensive earnings / (losses) |
(925 | ) | (2,990 | ) | (3,661 | ) | ||||||
| Less: loss attributable to noncontrolling interests |
17 | 26 | 33 | |||||||||
|
|
|
|
|
|
|
|||||||
| Balance at end of period |
(8,914 | ) | (8,006 | ) | (5,042 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Pension and Other Benefit Plans: |
||||||||||||
| Balance at beginning of period |
$ | (1,934 | ) | $ | (2,274 | ) | $ | (1,592 | ) | |||
| Net actuarial gain / (loss) arising during period |
(491 | ) | (60 | ) | (1,388 | ) | ||||||
| Tax (expense) / benefit on net actuarial gain / (loss) |
70 | 3 | 442 | |||||||||
| Losses / (gains) reclassified into net earnings: |
||||||||||||
| Amortization of experience losses and prior service costs (1) |
150 | 207 | 132 | |||||||||
| Settlement losses (1) |
36 | 111 | 42 | |||||||||
| Venezuela deconsolidation |
– | 2 | – | |||||||||
| Tax (expense) / benefit on reclassifications (2) |
(46 | ) | (69 | ) | (56 | ) | ||||||
| Currency impact |
128 | 146 | 146 | |||||||||
|
|
|
|
|
|
|
|||||||
| Other comprehensive earnings / (losses) |
(153 | ) | 340 | (682 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Balance at end of period |
(2,087 | ) | (1,934 | ) | (2,274 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Derivative Cash Flow Hedges: |
||||||||||||
| Balance at beginning of period |
$ | (46 | ) | $ | (2 | ) | $ | 117 | ||||
| Net derivative gains / (losses) |
(151 | ) | (75 | ) | (166 | ) | ||||||
| Tax (expense) / benefit on net derivative gain / (loss) |
20 | 30 | 86 | |||||||||
| Losses / (gains) reclassified into net earnings: |
||||||||||||
| Currency exchange contracts – |
3 | (90 | ) | (27 | ) | |||||||
| Commodity contracts (3) |
9 | 64 | (21 | ) | ||||||||
| Interest rate contracts (4) |
83 | 47 | 3 | |||||||||
| Tax (expense) / benefit on reclassifications (2) |
(42 | ) | (21 | ) | 6 | |||||||
| Currency impact |
3 | 1 | – | |||||||||
|
|
|
|
|
|
|
|||||||
| Other comprehensive earnings / (losses) |
(75 | ) | (44 | ) | (119 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Balance at end of period |
(121 | ) | (46 | ) | (2 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Accumulated other comprehensive income attributable to Mondelēz International: |
||||||||||||
| Balance at beginning of period |
$ | (9,986 | ) | $ | (7,318 | ) | $ | (2,889 | ) | |||
| Total other comprehensive earnings / (losses) |
(1,153 | ) | (2,694 | ) | (4,462 | ) | ||||||
| Less: loss attributable to noncontrolling interests |
17 | 26 | 33 | |||||||||
|
|
|
|
|
|
|
|||||||
| Other comprehensive earnings / (losses) attributable to Mondelēz International |
(1,136 | ) | (2,668 | ) | (4,429 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Balance at end of period |
$ | (11,122 | ) | $ | (9,986 | ) | $ | (7,318 | ) | |||
|
|
|
|
|
|
|
|||||||
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| (1) | These reclassified gains or losses are included in the components of net periodic benefit costs disclosed in Note 9, Benefit Plans. Settlement losses include the transfer of coffee business-related pension obligations in the amount of $90 million in 2015. |
| (2) | Taxes related to reclassified gains or losses are recorded within the provision for income taxes. |
| (3) | These reclassified gains or losses are recorded within cost of sales. |
| (4) | These reclassified gains or losses are recorded within interest and other expense, net. |
Note 14. Income Taxes
Earnings / (losses) from continuing operations before income taxes and the provision for income taxes consisted of:
| For the Years Ended December 31, | ||||||||||||
| 2016 | 2015 | 2014 | ||||||||||
| (in millions) | ||||||||||||
| Earnings / (losses) from continuing operations |
||||||||||||
| United States |
$ | (364 | ) | $ | 43 | $ | (135 | ) | ||||
| Outside United States |
1,818 | 7,841 | 2,689 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total |
$ | 1,454 | $ | 7,884 | $ | 2,554 | ||||||
|
|
|
|
|
|
|
|||||||
| Provision for income taxes: |
||||||||||||
| United States federal: |
||||||||||||
| Current |
$ | (227 | ) | $ | (90 | ) | $ | (125 | ) | |||
| Deferred |
141 | 136 | 28 | |||||||||
|
|
|
|
|
|
|
|||||||
| (86 | ) | 46 | (97 | ) | ||||||||
| State and local: |
||||||||||||
| Current |
7 | 6 | 20 | |||||||||
| Deferred |
8 | (3 | ) | 11 | ||||||||
|
|
|
|
|
|
|
|||||||
| 15 | 3 | 31 | ||||||||||
|
|
|
|
|
|
|
|||||||
| Total United States |
(71 | ) | 49 | (66 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Outside United States: |
||||||||||||
| Current |
490 | 707 | 644 | |||||||||
| Deferred |
(290 | ) | (163 | ) | (225 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Total outside United States |
200 | 544 | 419 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total provision for income taxes |
$ | 129 | $ | 593 | $ | 353 | ||||||
|
|
|
|
|
|
|
|||||||
We recorded out-of-period adjustments of $14 million net expense in 2015 and $31 million net expense in 2014 that had an immaterial impact on the annual provision for income taxes.
The effective income tax rate on pre-tax earnings differed from the U.S. federal statutory rate for the following reasons:
| For the Years Ended December 31, | ||||||||||||
| 2016 | 2015 | 2014 | ||||||||||
| U.S. federal statutory rate |
35.0% | 35.0% | 35.0% | |||||||||
| Increase / (decrease) resulting from: |
||||||||||||
| State and local income taxes, net of federal tax benefit excluding IRS audit impacts |
0.8% | (0.1)% | 0.3% | |||||||||
| Foreign rate differences |
(18.6)% | (2.5)% | (14.5)% | |||||||||
| Reversal of other tax accruals no longer required |
(7.7)% | (1.4)% | (10.5)% | |||||||||
| Tax accrual on investment in Keurig |
2.3% | – | – | |||||||||
| Tax legislation |
(4.0)% | (0.5)% | – | |||||||||
| Gains on coffee business transactions and divestitures |
– | (26.9)% | – | |||||||||
| Loss on deconsolidation of Venezuela |
– | 3.5% | – | |||||||||
| Remeasurement of net monetary assets in Venezuela |
– | – | 1.7% | |||||||||
| Non-deductible expenses |
0.9% | 0.3% | 1.5% | |||||||||
| Other |
0.2% | 0.1% | 0.3% | |||||||||
|
|
|
|
|
|
|
|||||||
| Effective tax rate |
8.9% | 7.5% | 13.8% | |||||||||
|
|
|
|
|
|
|
|||||||
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Our 2016 effective tax rate of 8.9% was favorably impacted by the mix of pre-tax income in various non-U.S. tax jurisdictions and net tax benefits from $161 million of discrete one-time events. The discrete net tax benefits related to favorable audit settlements and statutes of limitations in various jurisdictions and the net reduction of our U.K. and French deferred tax liabilities resulting from tax legislation enacted during 2016 that reduced the corporate income tax rates in each country.
Our 2015 effective tax rate of 7.5% was favorably impacted by the one-time third quarter sale of our coffee business that resulted in a pre-tax gain of $6,809 million and $184 million of related tax expense, as well as $27 million of tax costs incurred to remit proceeds up from lower-tier foreign subsidiaries to allow cash to be redeployed within our retained foreign operations. The benefit of the third quarter transaction was partially offset by the tax costs associated with the sale of our interest in AGF in the first half of the year and the impact of deconsolidating our Venezuelan operations on December 31, 2015. Excluding the impacts of these transactions, our effective tax rate would have been 17.8%, reflecting favorable impacts from the mix of pre-tax income in various non-U.S. tax jurisdictions and net tax benefits from $119 million of discrete one-time events. The remaining discrete one-time events primarily related to favorable tax audit settlements and expirations of statutes of limitations in several jurisdictions and the net reduction of U.K. deferred tax liabilities resulting from tax legislation enacted during 2015 that reduced the U.K. corporate income tax rate.
Our 2014 effective tax rate of 13.8% was favorably impacted by the mix of pre-tax income in various non-U.S. tax jurisdictions and net tax benefits from $206 million of discrete one-time events. The discrete net tax benefits primarily related to favorable tax audit settlements and expirations of statues of limitations in several jurisdictions.
The tax effects of temporary differences that gave rise to deferred income tax assets and liabilities consisted of the following:
| As of December 31, | ||||||||
| 2016 | 2015 | |||||||
| (in millions) | ||||||||
| Deferred income tax assets: |
||||||||
| Accrued postretirement and postemployment benefits |
$ | 214 | $ | 230 | ||||
| Accrued pension costs |
370 | 414 | ||||||
| Other employee benefits |
237 | 265 | ||||||
| Accrued expenses |
379 | 343 | ||||||
| Loss carryforwards |
619 | 636 | ||||||
| Other |
331 | 352 | ||||||
|
|
|
|
|
|||||
| Total deferred income tax assets |
2,150 | 2,240 | ||||||
|
|
|
|
|
|||||
| Valuation allowance |
(310 | ) | (303 | ) | ||||
|
|
|
|
|
|||||
| Net deferred income tax assets |
$ | 1,840 | $ | 1,937 | ||||
|
|
|
|
|
|||||
| Deferred income tax liabilities: |
||||||||
| Intangible assets |
$ | (5,174 | ) | $ | (5,365 | ) | ||
| Property, plant and equipment |
(557 | ) | (636 | ) | ||||
| Other |
(472 | ) | (409 | ) | ||||
|
|
|
|
|
|||||
| Total deferred income tax liabilities |
(6,203 | ) | (6,410 | ) | ||||
|
|
|
|
|
|||||
| Net deferred income tax liabilities |
$ | (4,363 | ) | $ | (4,473 | ) | ||
|
|
|
|
|
|||||
At December 31, 2016, the company has pre-tax loss carryforwards of $3,517 million, of which $1,223 million will expire at various dates between 2017 and 2036 and the remaining $2,294 million can be carried forward indefinitely.
Our significant valuation allowances relate to loss carryforwards in Mexico and Ireland where we do not currently expect to generate gains of the proper character to utilize the carryforwards in the future.
At December 31, 2016, neither applicable U.S. federal income taxes nor foreign withholding taxes have been provided on approximately $19.8 billion of accumulated earnings of non-U.S. subsidiaries that are expected to be indefinitely reinvested. It is impracticable for us to determine the amount of unrecognized deferred tax liabilities on these indefinitely reinvested earnings. Future tax law changes or changes in the needs of our non-U.S. subsidiaries could require us to recognize deferred tax liabilities on a portion, or all, of our accumulated earnings that were previously expected to be indefinitely reinvested.
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The changes in our unrecognized tax benefits were:
| For the Years Ended December 31, | ||||||||||||
| 2016 | 2015 | 2014 | ||||||||||
| (in millions) | ||||||||||||
| January 1 |
$ | 756 | $ | 852 | $ | 1,189 | ||||||
| Increases from positions taken during prior periods |
18 | 34 | 143 | |||||||||
| Decreases from positions taken during prior periods |
(123 | ) | (74 | ) | (247 | ) | ||||||
| Increases from positions taken during the current period |
90 | 84 | 147 | |||||||||
| Decreases relating to settlements with taxing authorities |
(75 | ) | (13 | ) | (203 | ) | ||||||
| Reductions resulting from the lapse of the applicable statute of limitations |
(43 | ) | (41 | ) | (64 | ) | ||||||
| Currency / other |
(13 | ) | (86 | ) | (113 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| December 31 |
$ | 610 | $ | 756 | $ | 852 | ||||||
|
|
|
|
|
|
|
|||||||
As of January 1, 2016, our unrecognized tax benefits were $756 million. If we had recognized all of these benefits, the net impact on our income tax provision would have been $652 million. Our unrecognized tax benefits were $610 million at December 31, 2016, and if we had recognized all of these benefits, the net impact on our income tax provision would have been $549 million. Within the next 12 months, our unrecognized tax benefits could increase by approximately $40 million due to unfavorable audit developments or decrease by approximately $160 million due to audit settlements and the expiration of statutes of limitations in various jurisdictions. We include accrued interest and penalties related to uncertain tax positions in our tax provision. We had accrued interest and penalties of $185 million as of January 1, 2016 and $189 million as of December 31, 2016. Our 2016 provision for income taxes included $15 million for interest and penalties.
Our income tax filings are regularly examined by federal, state and non-U.S. tax authorities. Examination by the IRS of our 2013-2015 U.S. federal income tax filings will begin in the first quarter of 2017. U.S. state and non-U.S. jurisdictions have statutes of limitations generally ranging from three to five years; however, these statutes are often extended by mutual agreement with the tax authorities. Years still open to examination by non-U.S. tax authorities in major jurisdictions include (earliest open tax year in parentheses): Brazil (2011), China (2007), France (2010), Germany (2010), India (2005), Italy (2011) and the United Kingdom (2013).
Note 15. Earnings Per Share
Basic and diluted earnings per share (“EPS”) were calculated as follows:
| For the Years Ended December 31, | ||||||||||||
| 2016 | 2015 | 2014 | ||||||||||
| (in millions, except per share data) | ||||||||||||
| Net earnings |
$ | 1,669 | $ | 7,291 | $ | 2,201 | ||||||
| Noncontrolling interest |
(10 | ) | (24 | ) | (17 | ) | ||||||
|
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|
|
|
|
|
|||||||
| Net earnings attributable to Mondelēz International |
$ | 1,659 | $ | 7,267 | $ | 2,184 | ||||||
|
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|
|
|
|
|
|||||||
| Weighted-average shares for basic EPS |
1,556 | 1,618 | 1,691 | |||||||||
| Plus incremental shares from assumed conversions of |
17 | 19 | 18 | |||||||||
|
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|
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|
|
|||||||
| Weighted-average shares for diluted EPS |
1,573 | 1,637 | 1,709 | |||||||||
|
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|
|
|
|||||||
| Basic earnings per share attributable to |
$ | 1.07 | $ | 4.49 | $ | 1.29 | ||||||
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|
|||||||
| Diluted earnings per share attributable to |
$ | 1.05 | $ | 4.44 | $ | 1.28 | ||||||
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We exclude antidilutive Mondelēz International stock options from our calculation of weighted-average shares for diluted EPS. We excluded 7.8 million antidilutive stock options for the year ended December 31, 2016, 5.1 million antidilutive stock options for the year ended December 31, 2015 and 8.6 million antidilutive stock options for the year ended December 31, 2014.
Note 16. Segment Reporting
We manufacture and market primarily snack food products, including biscuits (cookies, crackers and salted snacks), chocolate, gum & candy and various cheese & grocery products, as well as powdered beverage products. We manage our global business and report operating results through geographic units.
Our operations and management structure are organized into four reportable operating segments:
| • | Latin America |
| • | AMEA |
| • | Europe |
| • | North America |
On October 1, 2016, we integrated our EEMEA operating segment into our Europe and Asia Pacific operating segments to further leverage and optimize the operating scale built within the Europe and Asia Pacific regions. Russia, Ukraine, Turkey, Belarus, Georgia and Kazakhstan were combined within our Europe operating segment, while the remaining Middle East and African countries were combined within our Asia Pacific region to form the AMEA regional operating segment. We have reflected the segment change as if it had occurred in all periods presented.
We manage our operations by region to leverage regional operating scale, manage different and changing business environments more effectively and pursue growth opportunities as they arise in our key markets. Our regional management teams have responsibility for the business, product categories and financial results in the regions.
Historically, we have recorded income from equity method investments within our operating income as these investments were part of our base business. Beginning in the third quarter of 2015, to align with the accounting for our new coffee equity method investment in JDE, we began to record the earnings from our equity method investments in equity method investment earnings outside of segment operating income. For the six months ended December 31, 2015, after-tax equity method investment net earnings were less than $1 million on a combined basis. Earnings from equity method investments through July 2, 2015 recorded within segment operating income were $52 million in AMEA and $4 million in North America. For the year ended December 31, 2014, these earnings were $104 million in AMEA and $9 million in North America. See Note 1, Summary of Significant Accounting Policies – Principles of Consolidation, and Note 2, Divestitures and Acquisitions, for additional information.
In 2015, we also began to report stock-based compensation for our corporate employees within general corporate expenses that were reported within our North America region. We reclassified $32 million of corporate stock-based compensation expense in 2015 from the North America segment to general corporate expenses.
We use segment operating income to evaluate segment performance and allocate resources. We believe it is appropriate to disclose this measure to help investors analyze segment performance and trends. Segment operating income excludes unrealized gains and losses on hedging activities (which are a component of cost of sales), general corporate expenses (which are a component of selling, general and administrative expenses), amortization of intangibles, gains and losses on divestitures or acquisitions, gain on the JDE coffee business transactions, loss on deconsolidation of Venezuela and acquisition-related costs (which are a component of selling, general and administrative expenses) in all periods presented. We exclude these items from segment operating income in order to provide better transparency of our segment operating results. Furthermore, we centrally manage interest and other expense, net. Accordingly, we do not present these items by segment because they are excluded from the segment profitability measure that management reviews.
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Our segment net revenues and earnings, revised to reflect our new segment structure, were:
| For the Years Ended December 31, | ||||||||||||
| 2016 | 2015 | 2014 | ||||||||||
| (in millions) | ||||||||||||
| Net revenues: |
||||||||||||
| Latin America (1) |
$ | 3,392 | $ | 4,988 | $ | 5,153 | ||||||
| AMEA (2) |
5,816 | 6,002 | 6,367 | |||||||||
| Europe (2) |
9,755 | 11,672 | 15,788 | |||||||||
| North America |
6,960 | 6,974 | 6,936 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net revenues |
$ | 25,923 | $ | 29,636 | $ | 34,244 | ||||||
|
|
|
|
|
|
|
|||||||
| (1) | Net revenues of $1,217 million for 2015 and $760 million for 2014 from our Venezuelan subsidiaries are included in our consolidated financial statements. Beginning in 2016, we account for our Venezuelan subsidiaries using the cost method of accounting and no longer include net revenues of our Venezuelan subsidiaries within our consolidated financial statements. Refer to Note 1, Summary of Significant Accounting Policies – Currency Translation and Highly Inflationary Accounting: Venezuela, for more information. |
| (2) | On July 2, 2015, we contributed our global coffee businesses primarily from our Europe and AMEA segments. Net revenues of our global coffee business were $1,561 million in Europe and $66 million in AMEA for the year ended December 31, 2015. Refer to Note 2, Divestitures and Acquisitions – JDE Coffee Business Transactions, for more information. |
| For the Years Ended December 31, | ||||||||||||
| 2016 | 2015 | 2014 | ||||||||||
| (in millions) | ||||||||||||
| Earnings before income taxes: |
||||||||||||
| Operating income: |
||||||||||||
| Latin America |
$ | 271 | $ | 485 | $ | 475 | ||||||
| AMEA |
506 | 389 | 530 | |||||||||
| Europe |
1,267 | 1,350 | 1,952 | |||||||||
| North America |
1,078 | 1,105 | 922 | |||||||||
| Unrealized (losses) / gains on hedging activities (mark-to-market impacts) |
(94 | ) | 96 | (112 | ) | |||||||
| General corporate expenses |
(291 | ) | (383 | ) | (317 | ) | ||||||
| Amortization of intangibles |
(176 | ) | (181 | ) | (206 | ) | ||||||
| Gains on divestitures and JDE coffee business transactions |
9 | 6,822 | – | |||||||||
| Loss on deconsolidation of Venezuela |
– | (778 | ) | – | ||||||||
| Acquisition-related costs |
(1 | ) | (8 | ) | (2 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Operating income |
2,569 | 8,897 | 3,242 | |||||||||
| Interest and other expense, net |
(1,115 | ) | (1,013 | ) | (688 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Earnings before income taxes |
$ | 1,454 | $ | 7,884 | $ | 2,554 | ||||||
|
|
|
|
|
|
|
|||||||
No single customer accounted for 10% or more of our net revenues from continuing operations in 2016. Our five largest customers accounted for 16.6% and our ten largest customers accounted for 22.9% of net revenues from continuing operations in 2016.
Items impacting our segment operating results are discussed in Note 1, Summary of Significant Accounting Policies, including the Venezuela deconsolidation and currency devaluation, Note 2, Divestitures and Acquisitions, Note 5, Goodwill and Intangible Assets, and Note 6, Restructuring Programs. Also see Note 7, Debt and Borrowing Arrangements, and Note 8, Financial Instruments, for more information on our interest and other expense, net for each period.
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Total assets, depreciation expense and capital expenditures by segment, revised to reflect our new segment structure, were:
| For the Years Ended December 31, | ||||||||||||
| 2016 | 2015 | 2014 | ||||||||||
| (in millions) | ||||||||||||
| Total assets: |
||||||||||||
| Latin America |
$ | 5,156 | $ | 4,673 | $ | 6,470 | ||||||
| AMEA |
10,031 | 10,460 | 10,549 | |||||||||
| Europe |
19,934 | 21,026 | 27,240 | |||||||||
| North America |
20,694 | 21,175 | 21,287 | |||||||||
| Equity method investments |
5,585 | 5,387 | 662 | |||||||||
| Unallocated assets (1) |
138 | 122 | 563 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total assets |
$ | 61,538 | $ | 62,843 | $ | 66,771 | ||||||
|
|
|
|
|
|
|
|||||||
| (1) | Unallocated assets consist primarily of cash and cash equivalents, deferred income taxes, centrally held property, plant and equipment, prepaid pension assets and derivative financial instrument balances. We had debt issuance costs related to recognized debt liabilities of $40 million as of December 31, 2016, $46 million as of December 31, 2015 and $44 million as of December 31, 2014. |
| For the Years Ended December 31, | ||||||||||||
| 2016 | 2015 | 2014 | ||||||||||
| (in millions) | ||||||||||||
| Depreciation expense: |
||||||||||||
| Latin America |
$ | 92 | $ | 94 | $ | 118 | ||||||
| AMEA |
161 | 155 | 154 | |||||||||
| Europe |
253 | 299 | 407 | |||||||||
| North America |
141 | 165 | 174 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total depreciation expense |
$ | 647 | $ | 713 | $ | 853 | ||||||
|
|
|
|
|
|
|
|||||||
| For the Years Ended December 31, | ||||||||||||
| 2016 | 2015 | 2014 | ||||||||||
| (in millions) | ||||||||||||
| Capital Expenditures: |
||||||||||||
| Latin America |
$ | 321 | $ | 354 | $ | 460 | ||||||
| AMEA |
349 | 381 | 451 | |||||||||
| Europe |
294 | 517 | 553 | |||||||||
| North America |
260 | 262 | 178 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total capital expenditures |
$ | 1,224 | $ | 1,514 | $ | 1,642 | ||||||
|
|
|
|
|
|
|
|||||||
Geographic data for net revenues (recognized in the countries where products are sold) and long-lived assets, excluding deferred tax, goodwill, intangible assets and equity method investments, were:
| For the Years Ended December 31, | ||||||||||||
| 2016 | 2015 | 2014 | ||||||||||
| (in millions) | ||||||||||||
| Net revenues: |
||||||||||||
| United States |
$ | 6,329 | $ | 6,302 | $ | 6,143 | ||||||
| Other |
19,594 | 23,334 | 28,101 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total net revenues |
$ | 25,923 | $ | 29,636 | $ | 34,244 | ||||||
|
|
|
|
|
|
|
|||||||
| As of December 31, | ||||||||||||
| 2016 | 2015 | 2014 | ||||||||||
| (in millions) | ||||||||||||
| Long-lived assets: |
||||||||||||
| United States |
$ | 1,508 | $ | 1,551 | $ | 1,564 | ||||||
| Other |
7,229 | 7,238 | 8,801 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total long-lived assets |
$ | 8,737 | $ | 8,789 | $ | 10,365 | ||||||
|
|
|
|
|
|
|
|||||||
No individual country within Other exceeded 10% of our net revenues or long-lived assets for all periods presented.
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Net revenues by product category, revised to reflect our new segment structure, were:
| For the Year Ended December 31, 2016 | ||||||||||||||||||||
| Latin | North | |||||||||||||||||||
| America (1) | AMEA | Europe | America | Total (1) | ||||||||||||||||
| (in millions) | ||||||||||||||||||||
| Biscuits |
$ | 734 | $ | 1,588 | $ | 2,703 | $ | 5,565 | $ | 10,590 | ||||||||||
| Chocolate |
743 | 1,901 | 4,840 | 255 | 7,739 | |||||||||||||||
| Gum & Candy |
938 | 953 | 916 | 1,140 | 3,947 | |||||||||||||||
| Beverages |
657 | 611 | 177 | – | 1,445 | |||||||||||||||
| Cheese & Grocery |
320 | 763 | 1,119 | – | 2,202 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total net revenues |
$ | 3,392 | $ | 5,816 | $ | 9,755 | $ | 6,960 | $ | 25,923 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| For the Year Ended December 31, 2015 | ||||||||||||||||||||
| Latin | North | |||||||||||||||||||
| America (1) | AMEA | Europe (3) | America | Total (1) | ||||||||||||||||
| (in millions) | ||||||||||||||||||||
| Biscuits |
$ | 1,605 | $ | 1,539 | $ | 2,680 | $ | 5,569 | $ | 11,393 | ||||||||||
| Chocolate |
840 | 1,928 | 5,050 | 256 | 8,074 | |||||||||||||||
| Gum & Candy |
1,091 | 1,003 | 1,015 | 1,149 | 4,258 | |||||||||||||||
| Beverages (2) |
767 | 730 | 1,763 | – | 3,260 | |||||||||||||||
| Cheese & Grocery |
685 | 802 | 1,164 | – | 2,651 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total net revenues |
$ | 4,988 | $ | 6,002 | $ | 11,672 | $ | 6,974 | $ | 29,636 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| For the Year Ended December 31, 2014 | ||||||||||||||||||||
| Latin | North | |||||||||||||||||||
| America (1) | AMEA | Europe (3) | America | Total (1) | ||||||||||||||||
| (in millions) | ||||||||||||||||||||
| Biscuits |
$ | 1,322 | $ | 1,442 | $ | 3,259 | $ | 5,486 | $ | 11,509 | ||||||||||
| Chocolate |
1,054 | 2,073 | 5,997 | 296 | 9,420 | |||||||||||||||
| Gum & Candy |
1,176 | 1,098 | 1,232 | 1,154 | 4,660 | |||||||||||||||
| Beverages (2) |
940 | 836 | 3,902 | – | 5,678 | |||||||||||||||
| Cheese & Grocery |
661 | 918 | 1,398 | – | 2,977 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total net revenues |
$ | 5,153 | $ | 6,367 | $ | 15,788 | $ | 6,936 | $ | 34,244 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| (1) | In 2015 and 2014, our consolidated net revenues included Venezuela net revenues of $763 million in biscuits, $340 million in cheese & grocery, $66 million in gum & candy and $48 million in beverages and 2014 Venezuela net revenues of $422 million in biscuits, $216 million in cheese & grocery, $91 million in beverages and $30 million in gum & candy. Following the deconsolidation of our Venezuela operations at the end of 2015, in 2016 our consolidated net revenues no longer include the net revenues of our Venezuelan subsidiaries. Refer to Note 1, Summary of Significant Accounting Policies – Currency Translation and Highly Inflationary Accounting: Venezuela, for more information. |
| (2) | On July 2, 2015, we contributed our global coffee businesses primarily from our Europe and AMEA segment beverage categories. Net revenues of our global coffee business were $1,561 million in Europe and $66 million in AMEA for the year ended December 31, 2015. Refer to Note 2, Divestitures and Acquisitions – JDE Coffee Business Transactions, for more information. |
| (3) | During 2016, we realigned some of our products across product categories primarily within our Europe segment and as such, we reclassified the product category net revenues on a basis consistent with the 2016 presentation. |
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Note 17. Quarterly Financial Data (Unaudited)
Our summarized operating results by quarter are detailed below.
| 2016 Quarters | ||||||||||||||||
| First | Second | Third | Fourth | |||||||||||||
| (in millions, except per share data) | ||||||||||||||||
| Net revenues |
$ | 6,455 | $ | 6,302 | $ | 6,396 | $ | 6,770 | ||||||||
| Gross profit |
2,535 | 2,516 | 2,488 | 2,589 | ||||||||||||
| Provision for income taxes |
(49 | ) | (118 | ) | (40 | ) | 78 | |||||||||
| Gain on equity method investment exchange |
43 | – | – | – | ||||||||||||
| Equity method investment net earnings (1) |
85 | 102 | 31 | 83 | ||||||||||||
| Net earnings (2) |
$ | 557 | $ | 471 | $ | 548 | $ | 93 | ||||||||
| Noncontrolling interest |
(3 | ) | (7 | ) | – | – | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net earnings attributable to Mondelēz International |
$ | 554 | $ | 464 | $ | 548 | $ | 93 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Weighted-average shares for basic EPS |
1,569 | 1,557 | 1,557 | 1,540 | ||||||||||||
| Plus incremental shares from assumed conversions of |
18 | 19 | 19 | 19 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Weighted-average shares for diluted EPS |
1,587 | 1,576 | 1,576 | 1,559 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Per share data: |
||||||||||||||||
| Basic EPS attributable to Mondelēz International: |
$ | 0.35 | $ | 0.30 | $ | 0.35 | $ | 0.06 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Diluted EPS attributable to Mondelēz International: |
$ | 0.35 | $ | 0.29 | $ | 0.35 | $ | 0.06 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Dividends declared |
$ | 0.17 | $ | 0.17 | $ | 0.19 | $ | 0.19 | ||||||||
| Market price - high |
$ | 44.45 | $ | 45.75 | $ | 46.36 | $ | 46.40 | ||||||||
|
- low |
$ | 35.88 | $ | 39.53 | $ | 41.96 | $ | 40.50 | ||||||||
| 2015 Quarters | ||||||||||||||||
| First | Second | Third | Fourth | |||||||||||||
| (in millions, except per share data) | ||||||||||||||||
| Net revenues |
$ | 7,762 | $ | 7,661 | $ | 6,849 | $ | 7,364 | ||||||||
| Gross profit |
2,941 | 3,066 | 2,670 | 2,835 | ||||||||||||
| Provision for income taxes |
113 | 100 | 348 | 32 | ||||||||||||
| Equity method investment net (losses) / earnings (2) |
– | – | (72 | ) | 72 | |||||||||||
| Net earnings / (loss) (1) |
$ | 312 | $ | 427 | $ | 7,268 | $ | (716 | ) | |||||||
| Noncontrolling interest |
12 | (21 | ) | (2 | ) | (13 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Net earnings / (loss) attributable to Mondelēz International |
$ | 324 | $ | 406 | $ | 7,266 | $ | (729 | ) | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Weighted-average shares for basic EPS |
1,648 | 1,625 | 1,609 | 1,589 | ||||||||||||
| Plus incremental shares from assumed conversions of |
17 | 18 | 20 | 21 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Weighted-average shares for diluted EPS |
1,665 | 1,643 | 1,629 | 1,610 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Per share data: |
||||||||||||||||
| Basic EPS attributable to Mondelēz International: |
$ | 0.20 | $ | 0.25 | $ | 4.52 | $ | (0.46 | ) | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Diluted EPS attributable to Mondelēz International (3): |
$ | 0.19 | $ | 0.25 | $ | 4.46 | $ | (0.46 | ) | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Dividends declared |
$ | 0.15 | $ | 0.15 | $ | 0.17 | $ | 0.17 | ||||||||
| Market price - high |
$ | 37.88 | $ | 41.81 | $ | 48.58 | $ | 47.42 | ||||||||
|
- low |
$ | 33.97 | $ | 35.93 | $ | 38.91 | $ | 41.55 | ||||||||
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| (1) | Historically, we have recorded income from equity method investments within our operating income as these investments operated as extensions of our base business. Beginning in the third quarter of 2015, to align with the accounting for JDE earnings, we began to record the earnings from our equity method investments in after-tax equity method investment earnings outside of operating income. As the after-tax equity method investment net earnings for the six months ended December 31, 2015 was less than $1 million, this line item is not shown on our consolidated statement of earnings. Pre-tax earnings from equity method investments recorded within segment operating income were $56 million for the six months ended July 2, 2015. See Note 1, Summary of Significant Accounting Policies – Principles of Consolidation, for additional information. Equity method investment net earnings were lower in the third quarter of 2016 due to the JDE unfavorable tax expense disclosed in Note 2, Divestitures and Acquisitions – JDE Tax Matter Resolution. |
| (2) | See the following table for significant items that affected the comparability of earnings each quarter. |
| (3) | In the fourth quarter of 2015, we recorded a net loss, primarily due to the loss on deconsolidation of Venezuela and coffee business transaction final sales price adjustment. In accordance with U.S. GAAP, due to the net loss in the quarter, diluted EPS was equal to basic EPS. |
Basic and diluted EPS are computed independently for each of the periods presented. Accordingly, the sum of the quarterly EPS amounts may not equal the total for the year.
During 2016 and 2015, we recorded the following pre-tax (charges) / gains in earnings from continuing operations:
| 2016 Quarters | ||||||||||||||||
| First | Second | Third | Fourth | |||||||||||||
| (in millions) | ||||||||||||||||
| Asset impairment and exit costs |
$ | (154 | ) | $ | (166 | ) | $ | (190 | ) | $ | (342 | ) | ||||
| Loss related to interest rate swaps |
(97 | ) | – | – | – | |||||||||||
| Divestiture-related costs |
– | (84 | ) | – | (2 | ) | ||||||||||
| Loss on early extinguishment of |
– | – | – | (427 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | (251 | ) | $ | (250 | ) | $ | (190 | ) | $ | (771 | ) | |||||
|
|
|
|
|
|
|
|
|
|||||||||
| 2015 Quarters | ||||||||||||||||
| First | Second | Third | Fourth | |||||||||||||
| (in millions) | ||||||||||||||||
| Asset impairment and exit costs |
$ | (160 | ) | $ | (231 | ) | $ | (155 | ) | $ | (355 | ) | ||||
| Remeasurement of net monetary assets |
(11 | ) | – | – | – | |||||||||||
| Loss on deconsolidation of Venezuela |
– | – | – | (778 | ) | |||||||||||
| Gains / (loss) on JDE coffee business |
– | 13 | 7,122 | (313 | ) | |||||||||||
|
JDE coffee business transactions currency- |
551 | (144 | ) | 29 | – | |||||||||||
| Loss related to interest rate swaps |
(34 | ) | ||||||||||||||
| Loss on early extinguishment of |
(713 | ) | – | – | (40 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | (367 | ) | $ | (362 | ) | $ | 6,996 | $ | (1,486 | ) | ||||||
|
|
|
|
|
|
|
|
|
|||||||||
Items impacting our operating results are discussed in Note 1, Summary of Significant Accounting Policies, including the Venezuela deconsolidation and currency devaluations, Note 2, Divestitures and Acquisitions, including the JDE coffee business transactions, Note 5, Goodwill and Intangible Assets, Note 6, Restructuring Programs, and Note 7, Debt and Borrowing Arrangements.
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We have established disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate to allow timely decisions regarding required disclosure. Management, together with our CEO and CFO, evaluated the effectiveness of the Company’s disclosure controls and procedures as of December 31, 2016. Based on this evaluation, the CEO and CFO concluded that our disclosure controls and procedures were effective as of December 31, 2016.
Report of Management on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed by, or under the supervision of, our CEO and CFO, or persons performing similar functions, and effected by the Company’s Board of Directors, management and other personnel 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. Our internal control over financial reporting includes those written policies and procedures that:
| • | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets; |
| • | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles; |
| • | provide reasonable assurance that receipts and expenditures are being made only in accordance with management and director authorization; and |
| • | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the consolidated financial statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2016. Management based this assessment on criteria for effective internal control over financial reporting described in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
Based on this assessment, management concluded that the Company’s internal control over financial reporting is effective as of December 31, 2016, based on the criteria in Internal Control-Integrated Framework issued by the COSO.
PricewaterhouseCoopers LLP, an independent registered public accounting firm, has audited the effectiveness of our internal control over financial reporting as of December 31, 2016, as stated in their report that appears under Item 8.
February 24, 2017
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Changes in Internal Control Over Financial Reporting
Management, together with our CEO and CFO, evaluated the changes in our internal control over financial reporting during the quarter ended December 31, 2016. During the year ended December 31, 2016, we worked with outsourced partners to further simplify and standardize processes and focus on scalable, transactional processes across all regions. Specifically during the fourth quarter of 2016, we continued to migrate some of our procurement administration functions for Middle East, Africa and Turkey to an outsourced partner. Additionally, we continued to transition some of our transactional data processing as well as financial and local tax reporting for a number of countries in all regions (including order-to-cash in our Europe and AMEA regions) to three outsourced partners. Pursuant to our service agreements, the controls previously established around these accounting functions will be maintained by our outsourced partners or by us, and they are subject to management’s internal control testing. There were no other changes in our internal control over financial reporting during the quarter ended December 31, 2016, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
None.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Information required by this Item 10 is included under the heading “Executive Officers of the Registrant” in Part I, Item 1 of this Form 10-K, as well as under the headings “Election of Directors,” “Corporate Governance - Governance Guidelines,” “Corporate Governance - Codes of Conduct,” “Board Committees and Membership - Audit Committee” and “Ownership of Equity Securities - Section 16(a) Beneficial Ownership Reporting Compliance” in our definitive Proxy Statement for our Annual Meeting of Shareholders scheduled to be held on May 17, 2017 (“2017 Proxy Statement”). All of this information from the 2017 Proxy Statement is incorporated by reference into this Annual Report.
The information on our web site is not, and shall not be deemed to be, a part of this Annual Report or incorporated into any other filings we make with the SEC.
Item 11. Executive Compensation.
Information required by this Item 11 is included under the headings “Board Committees and Membership - Human Resources and Compensation Committee,” “Compensation of Non-Employee Directors,” “Compensation Discussion and Analysis,” “Executive Compensation Tables” and “Human Resources and Compensation Committee Report for the Year Ended December 31, 2016” in our 2017 Proxy Statement. All of this information is incorporated by reference into this Annual Report.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The number of shares to be issued upon exercise or vesting of grants issued under, and the number of shares remaining available for future issuance under, our equity compensation plans at December 31, 2016 were:
Equity Compensation Plan Information
| Number of Securities | ||||||||||||
| Remaining Available for | ||||||||||||
| Number of Securities to | Future Issuance under | |||||||||||
| be Issued Upon Exercise | Weighted Average | Equity Compensation | ||||||||||
| of Outstanding | Exercise Price of | Plans (excluding | ||||||||||
| Options, Warrants | Outstanding Options, | securities reflected | ||||||||||
| and Rights (1) | Warrants and Rights (2) | in column (a)) (3) | ||||||||||
| (a) | (b) | (c) | ||||||||||
| Equity compensation plans |
60,270,666 | $ | 28.02 | 74,184,262 | ||||||||
|
|
|
|
|
|
|
|||||||
| (1) | Includes outstanding options, deferred stock and performance share units and excludes restricted stock. |
| (2) | Weighted average exercise price of outstanding options only. |
| (3) | Shares available for grant under our Amended and Restated 2005 Performance Incentive Plan. |
Information related to the security ownership of certain beneficial owners and management is included in our 2017 Proxy Statement under the heading “Ownership of Equity Securities” and is incorporated by reference into this Annual Report.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Information required by this Item 13 is included under the headings “Corporate Governance – Director Independence” and “Corporate Governance - Review of Transactions with Related Persons” in our 2017 Proxy Statement. All of this information is incorporated by reference into this Annual Report.
Item 14. Principal Accountant Fees and Services.
Information required by this Item 14 is included under the heading “Board Committees and Membership - Audit Committee” in our 2017 Proxy Statement. All of this information is incorporated by reference into this Annual Report.
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PART IV
Item 15. Exhibits and Financial Statement Schedules.
| (a) | Index to Consolidated Financial Statements and Schedules |
Schedules other than those listed above have been omitted either because such schedules are not required or are not applicable.
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| (b) | The following exhibits are filed as part of, or incorporated by reference into, this Annual Report: |
| 2.1 | Separation and Distribution Agreement between the Registrant and Kraft Foods Group, Inc., dated as of September 27, 2012 (incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on October 1, 2012).* | |
| 2.2 | Canadian Asset Transfer Agreement, by and between Mondelez Canada Inc. and Kraft Canada Inc., dated as of September 29, 2012 (incorporated by reference to Exhibit 2.3 to the Registrant’s Annual Report on Form 10-K filed with the SEC on February 25, 2013).* | |
| 2.3 | Master Ownership and License Agreement Regarding Patents, Trade Secrets and Related Intellectual Property, among Kraft Foods Global Brands LLC, Kraft Foods Group Brands LLC, Kraft Foods UK Ltd. and Kraft Foods R&D Inc., dated as of October 1, 2012 (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed with the SEC on October 1, 2012).* | |
| 2.4 | Master Ownership and License Agreement Regarding Trademarks and Related Intellectual Property, by and between Kraft Foods Global Brands LLC and Kraft Foods Group Brands LLC., dated as of September 27, 2012 (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed with the SEC on October 1, 2012).* | |
| 2.5 | First Amendment to the Master Ownerships and License Agreement Regarding Trademarks and Related Intellectual Property, among Intercontinental Great Brands LLC and Kraft Foods Group Brands LLC, dated as of July 15, 2013 (incorporated by reference to Exhibit 2.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on April 30, 2015).* | |
| 2.6 | Second Amendment to the Master Ownership and License Agreement Regarding Trademarks and Related Intellectual Property, among Intercontinental Great Brands LLC and Kraft Foods Group Brands LLC, dated as of October 1, 2014 (incorporated by reference to Exhibit 2.2 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on April 30, 2015).* | |
| 3.1 | Amended and Restated Articles of Incorporation of the Registrant, effective March 14, 2013 (incorporated by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 8, 2013). | |
| 3.2 | Amended and Restated By-Laws of the Registrant, effective as of October 9, 2015 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on October 7, 2015). | |
| 4.1 | The Registrant agrees to furnish to the SEC upon request copies of any instruments defining the rights of holders of long-term debt of the Registrant and its consolidated subsidiaries that does not exceed 10 percent of the total assets of the Registrant and its consolidated subsidiaries. | |
| 4.2 | Indenture, by and between the Registrant and Deutsche Bank Trust Company Americas (as successor trustee to The Bank of New York and The Chase Manhattan Bank), dated as of October 17, 2001 (incorporated by reference to Exhibit 4.1 to the Registrant’s Registration Statement on Form S-3 (Reg. No. 333-86478) filed with the SEC on April 18, 2002). | |
| 4.3 | Supplemental Indenture, by and between the Registrant and Deutsche Bank Trust Company Americas, Deutsche Bank AG, London Branch and Deutsche Bank Luxembourg S.A., dated as of December 11, 2013 (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 11, 2013). | |
| 4.4 | Indenture between the Registrant and Deutsche Bank Trust Company Americas, as trustee, dated as of March 6, 2015. | |
| 4.5 | Indenture, by and between Mondelez International Holdings Netherlands B.V, the Registrant and Deutsche Bank Trust Company Americas, dated as of October 28, 2016 (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on October 28, 2016). | |
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| 10.1 | $4.5 Billion Amended and Restated Five-Year Revolving Credit Agreement, by and among the Registrant, the initial lenders named therein, and JPMorgan Chase Bank, N.A. as administrative agent, dated October 14, 2016. | |
| 10.2 | $1.5 Billion Term Loan Agreement, by and among Mondelēz International Holdings Netherlands B.V., the Registrant, the lenders named therein and JPMorgan Chase Bank, N.A., as administrative agent, dated October 14, 2016. | |
| 10.3 | Tax Sharing and Indemnity Agreement, by and between the Registrant and Kraft Foods Group, Inc., dated as of September 27, 2012 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on October 1, 2012). | |
| 10.4 | Global Contribution Agreement by and among Mondelēz International Holdings, LLC, Acorn Holdings B.V., Charger Top HoldCo B.V. and Charger OpCo B.V., dated May 7, 2014 (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on August 8, 2014).** | |
| 10.5 | Amendment Agreement to Global Contribution Agreement by and among Mondelēz International Holdings LLC, Acorn Holdings B.V., Jacobs Douwe Egberts B.V. (formerly Charger Top HoldCo B.V.) and Jacobs Douwe Egberts International B.V. (formerly Charger OpCo B.V.), dated July 28, 2015 (incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on July 31, 2015).** | |
| 10.6 | Amended and Restated Shareholders’ Agreement Relating to Charger Top Holdco B.V. by and among Delta Charger Holdco B.V., JDE Minority Holdings B.V., Mondelēz Coffee Holdco B.V. and Jacobs Douwe Egberts B.V., dated March 7, 2016 (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on April 28, 2016).** | |
| 10.7 | Shareholders’ Agreement Relating to Maple Parent Holdings Corp. by and among Maple Holdings II B.V., Mondelēz International Holdings LLC and Maple Parent Holdings Corp., dated March 27, 2016 (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on April 28, 2016).** | |
| 10.8 | Settlement Agreement, between the Registrant and Kraft Foods Group, Inc., dated June 22, 2015 (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on July 31, 2015). | |
| 10.9 | Mondelēz International, Inc. Amended and Restated 2005 Performance Incentive Plan, amended and restated as of March 15, 2016 (incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on April 28, 2016).+ | |
| 10.10 | Form of Mondelēz International, Inc. Amended and Restated 2005 Performance Incentive Plan Global Deferred Stock Unit Agreement (incorporated by reference to Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on April 28, 2016).+ | |
| 10.11 | Form of Mondelēz International, Inc. Amended and Restated 2005 Performance Incentive Plan Non-Qualified Global Stock Option Agreement (incorporated by reference to Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on April 28, 2016).+ | |
| 10.12 | Form of Mondelēz International, Inc. Amended and Restated 2005 Performance Incentive Plan Global Long-Term Incentive Grant Agreement (incorporated by reference to Exhibit 10.7 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on April 28, 2016).+ | |
| 10.13 | Mondelēz International, Inc. Long-Term Incentive Plan, restated as of October 2, 2012 (incorporated by reference to Exhibit 10.9 to the Registrant’s Annual Report on Form 10-K filed with the SEC on February 25, 2013).+ | |
| 10.14 | Mondelēz Global LLC Supplemental Benefits Plan I, effective as of September 1, 2012 (incorporated by reference to Exhibit 10.10 to the Registrant’s Annual Report on Form 10-K filed with the SEC on February 25, 2013).+ | |
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| 10.15 | Mondelēz Global LLC Supplemental Benefits Plan II, effective as of September 1, 2012 (incorporated by reference to Exhibit 10.11 to the Registrant’s Annual Report on Form 10-K filed with the SEC on February 25, 2013).+ | |
| 10.16 | Form of Mondelēz Global LLC Amended and Restated Cash Enrollment Agreement (incorporated by reference to Exhibit 10.12 to the Registrant’s Annual Report on Form 10-K filed with the SEC on February 25, 2013).+ | |
| 10.17 | Form of Mondelēz Global LLC Amended and Restated Employee Grantor Trust Enrollment Agreement (incorporated by reference to Exhibit 10.13 to the Registrant’s Annual Report on Form 10-K filed with the SEC on February 25, 2013).+ | |
| 10.18 | Mondelēz International, Inc. Amended and Restated 2006 Stock Compensation Plan for Non-Employee Directors, amended and restated as of October 1, 2012 (incorporated by reference to Exhibit 10.14 to the Registrant’s Annual Report on Form 10-K filed with the SEC on February 25, 2013).+ | |
| 10.19 | Mondelēz International, Inc. 2001 Compensation Plan for Non-Employee Directors, amended as of December 31, 2008 and restated as of January 1, 2013 (incorporated by reference to Exhibit 10.15 to the Registrant’s Annual Report on Form 10-K filed with the SEC on February 25, 2013).+ | |
| 10.20 | Mondelēz International, Inc. Change in Control Plan for Key Executives, amended February 22, 2016 (incorporated by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on April 28, 2016).+ | |
| 10.21 | Mondelēz Global LLC Executive Deferred Compensation Plan, effective as of October 1, 2012 (incorporated by reference to Exhibit 10.17 to the Registrant’s Annual Report on Form 10-K filed with the SEC on February 25, 2013).+ | |
| 10.22 | Mondelēz Global LLC Executive Deferred Compensation Plan Adoption Agreement, effective as of October 1, 2012 (incorporated by reference to Exhibit 10.18 to the Registrant’s Annual Report on Form 10-K filed with the SEC on February 25, 2013).+ | |
| 10.23 | Deferred Compensation Plan Trust Document, by and between Mondelēz Global LLC and Wilmington Trust Retirement and Institutional Services Company, dated as of September 18, 2012 (incorporated by reference to Exhibit 10.19 to the Registrant’s Annual Report on Form 10-K filed with the SEC on February 25, 2013).+ | |
| 10.24 | Offer of Employment Letter, between the Registrant and Irene B. Rosenfeld, dated June 22, 2006 (incorporated by reference to Exhibit 10.29 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on August 8, 2006).+ | |
| 10.25 | Amendment to Offer of Employment Letter, between the Registrant and Irene B. Rosenfeld, amended as of December 31, 2008 (incorporated by reference to Exhibit 10.20 to the Registrant’s Annual Report on Form 10-K filed with the SEC on February 27, 2009).+ | |
| 10.26 | Offer of Employment Letter, between the Registrant and Daniel P. Myers, dated June 20, 2011 (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on November 4, 2011).+ | |
| 10.27 | Offer of Employment Letter, between Mondelēz Global LLC and Brian T. Gladden, dated September 26, 2014 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on October 9, 2014).+ | |
| 10.28 | Offer of Employment Letter, between Mondelēz Global LLC and Roberto de Oliveira Marques, dated February 20, 2015 (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on April 30, 2015).+ | |
| 10.29 | Retirement Agreement and General Release, between Mondelēz Global LLC and David Brearton, dated December 15, 2015 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 18, 2015).+ | |
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| 10.30 | Retirement Agreement and General Release, between Mondelēz International Holdings LLC and Gustavo H. Abelenda, dated as of December 31, 2016.+ | |
| 10.31 | Form of Indemnification Agreement for Non-Employee Directors (incorporated by reference to 10.28 to the Registrant’s Annual Report on Form 10-K filed with the SEC on February 27, 2009).+ | |
| 10.32 | Indemnification Agreement between the Registrant and Irene B. Rosenfeld, dated January 27, 2009 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on February 2, 2009).+ | |
| 12.1 | Computation of Ratios of Earnings to Fixed Charges. | |
| 21.1 | Subsidiaries of the Registrant. | |
| 23.1 | Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm. | |
| 31.1 | Certification of the Registrant’s Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 31.2 | Certification of the Registrant’s Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 32.1 | Certifications of the Registrant’s Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 101.1 | The following materials from Mondelēz International’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Statements of Earnings, (ii) the Consolidated Statements of Comprehensive Earnings, (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Equity, (v) the Consolidated Statements of Cash Flows and (vi) Notes to Consolidated Financial Statements. | |
| * | Upon request, Mondelēz International, Inc. agrees to furnish to the U.S. Securities and Exchange Commission, on a supplemental basis, a copy of any omitted schedule or exhibit to such agreement. |
| ** | Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request for confidential treatment and have been separately filed with the SEC. |
| + | Indicates a management contract or compensatory plan or arrangement. |
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Pursuant to the requirements of Section 13 or 15(d) 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.
| MONDELĒZ INTERNATIONAL, INC. | ||
| By: | /s/ BRIAN T. GLADDEN | |
| (Brian T. Gladden | ||
| Executive Vice President | ||
| and Chief Financial Officer) | ||
Date: February 24, 2017
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
| Signature |
Title |
Date | ||
| /s/ IRENE B. ROSENFELD |
Director, Chairman and Chief Executive Officer |
February 24, 2017 | ||
| (Irene B. Rosenfeld) | ||||
| /s/ BRIAN T. GLADDEN |
Executive Vice President and Chief Financial Officer |
February 24, 2017 | ||
| (Brian T. Gladden) | ||||
| /s/ NELSON URDANETA (Nelson Urdaneta) |
Vice President, Corporate Controller and Chief Accounting Officer |
February 24, 2017 | ||
| /s/ LEWIS W.K. BOOTH |
Director |
February 24, 2017 | ||
| (Lewis W.K. Booth) | ||||
| /s/ CHARLES E. BUNCH |
Director |
February 24, 2017 | ||
| (Charles E. Bunch) | ||||
| /s/ LOIS D. JULIBER |
Director |
February 24, 2017 | ||
| (Lois D. Juliber) | ||||
| /s/ MARK D. KETCHUM |
Director |
February 24, 2017 | ||
| (Mark D. Ketchum) | ||||
| /s/ JORGE S. MESQUITA (Jorge S. Mesquita) |
Director |
February 24, 2017 | ||
| /s/ JOSEPH NEUBAUER |
Director |
February 24, 2017 | ||
| (Joseph Neubauer) | ||||
| /s/ NELSON PELTZ |
Director |
February 24, 2017 | ||
| (Nelson Peltz) | ||||
| /s/ FREDRIC G. REYNOLDS |
Director |
February 24, 2017 | ||
| (Fredric G. Reynolds) | ||||
| /s/ CHRISTIANA S. SHI |
Director |
February 24, 2017 | ||
| (Christiana S. Shi) | ||||
| /s/ PATRICK T. SIEWERT |
Director |
February 24, 2017 | ||
| (Patrick T. Siewert) | ||||
| /s/ RUTH J. SIMMONS |
Director |
February 24, 2017 | ||
| (Ruth J. Simmons | ||||
| /s/ JEAN-FRANÇOIS M. L. VAN BOXMEER |
Director |
February 24, 2017 | ||
| (Jean-François M. L. van Boxmeer) | ||||
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of Mondelēz International, Inc.:
Our audits of the consolidated financial statements and of the effectiveness of internal control over financial reporting referred to in our report dated February 24, 2017 appearing in this Annual Report on Form 10-K of Mondelēz International, Inc. also included an audit of the financial statement schedule listed in Item 15(a) of this Form 10-K. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.
/s/ PRICEWATERHOUSECOOPERS LLP
Chicago, Illinois
February 24, 2017
S-1
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Mondelēz International, Inc. and Subsidiaries
Valuation and Qualifying Accounts
For the Years Ended December 31, 2016, 2015 and 2014
(in millions)
| Col. A |
Col. B | Col. C | Col. D | Col. E | ||||||||||||||||
| Additions | ||||||||||||||||||||
| Description |
Balance at Beginning of Period |
Charged to Costs and Expenses |
Charged to Other Accounts |
Deductions | Balance at End of Period |
|||||||||||||||
| (a) | (b) | |||||||||||||||||||
| 2016: |
||||||||||||||||||||
| Allowance for trade receivables |
$ | 54 | $ | 18 | $ | (1 | ) | $ | 13 | $ | 58 | |||||||||
| Allowance for other current receivables |
109 | (2 | ) | (13 | ) | 1 | 93 | |||||||||||||
| Allowance for long-term receivables |
16 | 1 | 3 | – | 20 | |||||||||||||||
| Allowance for deferred taxes |
303 | 67 | (28 | ) | 32 | 310 | ||||||||||||||
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|||||||||||
| $ | 482 | $ | 84 | $ | (39 | ) | $ | 46 | $ | 481 | ||||||||||
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| 2015: |
||||||||||||||||||||
| Allowance for trade receivables |
$ | 66 | $ | 14 | $ | (11 | ) | $ | 15 | $ | 54 | |||||||||
| Allowance for other current receivables |
91 | 12 | 7 | 1 | 109 | |||||||||||||||
| Allowance for long-term receivables |
14 | 5 | (3 | ) | – | 16 | ||||||||||||||
| Allowance for deferred taxes |
345 | 46 | (35 | ) | 53 | 303 | ||||||||||||||
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|
|||||||||||
| $ | 516 | $ | 77 | $ | (42 | ) | $ | 69 | $ | 482 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| 2014: |
||||||||||||||||||||
| Allowance for trade receivables |
$ | 86 | $ | 9 | $ | (10 | ) | $ | 19 | $ | 66 | |||||||||
| Allowance for other current receivables |
73 | 39 | (13 | ) | 8 | 91 | ||||||||||||||
| Allowance for long-term receivables |
16 | 1 | (2 | ) | 1 | 14 | ||||||||||||||
| Allowance for deferred taxes |
335 | 61 | (25 | ) | 26 | 345 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| $ | 510 | $ | 110 | $ | (50 | ) | $ | 54 | $ | 516 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Notes:
| (a) | Primarily related to divestitures, acquisitions and currency translation. |
| (b) | Represents charges for which allowances were created. |
S-2
Exhibit 4.4
MONDELĒZ INTERNATIONAL, INC.
and
DEUTSCHE BANK TRUST COMPANY AMERICAS,
Trustee
INDENTURE
Dated as of March 6, 2015
Debt Securities
MONDELĒZ INTERNATIONAL, INC.
Reconciliation and tie showing the location in the Indenture of the provisions inserted pursuant to Sections 310 to 318(a), inclusive, of the Trust Indenture Act of 1939, as amended.
| Trust Indenture Act |
Indenture Section | |||
| SECTION 310 | (a) (1) | 609 | ||
| (a) (2) | 609 | |||
| (a) (3) | Not Applicable | |||
| (a) (4) | Not Applicable | |||
| (b) | 608, 610 (d) | |||
| (c) | Not Applicable | |||
| SECTION 311 | (a) | 613 | ||
| (b) | 613 | |||
| (c) | Not Applicable | |||
| SECTION 312 | (a) | 701, 702 (a) | ||
| (b) | 702 (b) | |||
| (c) | 702 (c) | |||
| SECTION 313 | (a) | 703 (a) | ||
| (b) | 703 (b) | |||
| (c) | 703 (a) | |||
| (d) | 703 (b) | |||
| SECTION 314 | (a) | 704 and 1005 | ||
| (b) | Not Applicable | |||
| (c) | 102 | |||
| (c) (1) | 102 | |||
| (c) (2) | 102 | |||
| (c) (3) | Not Applicable | |||
| (d) | Not Applicable | |||
| (e) | 102 | |||
| SECTION 315 | (a) | 601 (a) | ||
| (b) | 602, 703 (a) and 106 | |||
| (c) | 601 (b) | |||
| (d) | 601 (c) | |||
| (d) (1) | 601 (a) (1) | |||
| (d) (2) | 601 (a) (2) | |||
| (d) (3) | 601 (c) (3) | |||
| (e) | 514 | |||
| SECTION 316 | (a) | 101 | ||
| (a) (1) (A) | 502 and 512 | |||
| (a) (1) (B) | 513 | |||
| (a) (2) | Not Applicable | |||
| (b) | 508 | |||
| (c) | Not Applicable | |||
i
| SECTION 317 | (a) (1) | 503 | ||
| (a) (2) | 504 | |||
| (b) | 1003 | |||
| SECTION 318 | (a) | 107 |
NOTE: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture.
ii
TABLE OF CONTENTS
| Page | ||||||
| ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION |
1 | |||||
| SECTION 101. |
Definitions |
1 | ||||
| SECTION 102. |
Compliance Certificates and Opinions |
7 | ||||
| SECTION 103. |
Form of Documents Delivered to Trustee |
7 | ||||
| SECTION 104. |
Acts of Holders |
8 | ||||
| SECTION 105. |
Notices, Etc., to Trustee and the Company |
8 | ||||
| SECTION 106. |
Notice to Holders; Waiver |
9 | ||||
| SECTION 107. |
Conflict with Trust Indenture Act |
9 | ||||
| SECTION 108. |
Effect of Headings and Table of Contents |
9 | ||||
| SECTION 109. |
Successors and Assigns |
9 | ||||
| SECTION 110. |
Separability Clause |
9 | ||||
| SECTION 111. |
Benefits of Indenture |
9 | ||||
| SECTION 112. |
Governing Law, Waiver of Jury Trial |
9 | ||||
| SECTION 113. |
Non-Business Day |
9 | ||||
| SECTION 114. |
Immunity of Incorporators, Stockholders, Officers and Directors |
10 | ||||
| SECTION 115. |
Certain Matters Relating to Currencies |
10 | ||||
| SECTION 116. |
Language of Notices, Etc. |
10 | ||||
| SECTION 117. |
Force Majeure |
10 | ||||
| SECTION 118. |
U.S.A. Patriot Act |
10 | ||||
| SECTION 119. |
Execution in Counterparts |
10 | ||||
| ARTICLE TWO SECURITY FORMS |
11 | |||||
| SECTION 201. |
Forms of Securities |
11 | ||||
| SECTION 202. |
Form of Trustee’s Certificate of Authentication |
11 | ||||
| SECTION 203. |
Securities in Global Form |
11 | ||||
| ARTICLE THREE THE SECURITIES |
12 | |||||
| SECTION 301. |
Title; Payment and Terms |
12 | ||||
| SECTION 302. |
Denominations and Currencies |
14 | ||||
| SECTION 303. |
Execution, Authentication, Delivery and Dating |
14 | ||||
| SECTION 304. |
Temporary Securities and Exchange of Securities |
14 | ||||
| SECTION 305. |
Registration, Registration of Transfer and Exchange |
16 | ||||
| SECTION 306. |
Mutilated, Destroyed, Lost and Stolen Securities |
18 | ||||
| SECTION 307. |
Payment of Interest; Interest Rights Preserved |
18 | ||||
| SECTION 308. |
Persons Deemed Owners |
19 | ||||
| SECTION 309. |
Cancellation |
19 | ||||
| SECTION 310. |
Computation of Interest |
20 | ||||
| SECTION 311. |
Currency and Manner of Payments in Respect of Securities |
20 | ||||
| SECTION 312. |
Appointment and Resignation of Currency Determination Agent |
21 | ||||
| SECTION 313. |
CUSIP Numbers |
21 | ||||
iii
TABLE OF CONTENTS
(continued)
| Page | ||||||
| ARTICLE FOUR SATISFACTION AND DISCHARGE |
22 | |||||
| SECTION 401. |
Option to Effect Legal Defeasance or Covenant Defeasance |
22 | ||||
| SECTION 402. |
Legal Defeasance and Discharge |
22 | ||||
| SECTION 403. |
Covenant Defeasance |
22 | ||||
| SECTION 404. |
Conditions to Legal or Covenant Defeasance |
22 | ||||
| SECTION 405. |
Satisfaction and Discharge of Indenture |
23 | ||||
| SECTION 406. |
Survival of Certain Obligations |
23 | ||||
| SECTION 407. |
Acknowledgment of Discharge by Trustee |
24 | ||||
| SECTION 408. |
Application of Trust Moneys |
24 | ||||
| SECTION 409. |
Repayment to the Company; Unclaimed Money |
24 | ||||
| SECTION 410. |
Reinstatement |
24 | ||||
| ARTICLE FIVE REMEDIES |
25 | |||||
| SECTION 501. |
Events of Default |
25 | ||||
| SECTION 502. |
Acceleration of Maturity; Rescission and Annulment |
25 | ||||
| SECTION 503. |
Collection of Indebtedness and Suits for Enforcement by Trustee |
26 | ||||
| SECTION 504. |
Trustee May File Proofs of Claim |
27 | ||||
| SECTION 505. |
Trustee May Enforce Claims Without Possession of Securities |
27 | ||||
| SECTION 506. |
Application of Money Collected |
27 | ||||
| SECTION 507. |
Limitation on Suits |
28 | ||||
| SECTION 508. |
Unconditional Right of Holders to Receive Principal, Premium, if any, and Interest, if any |
28 | ||||
| SECTION 509. |
Restoration of Rights and Remedies |
28 | ||||
| SECTION 510. |
Rights and Remedies Cumulative |
29 | ||||
| SECTION 511. |
Delay or Omission Not Waiver |
29 | ||||
| SECTION 512. |
Control by Holders |
29 | ||||
| SECTION 513. |
Waiver of Past Defaults |
29 | ||||
| SECTION 514. |
Undertaking for Costs |
29 | ||||
| SECTION 515. |
Waiver of Stay or Extension Laws |
29 | ||||
| SECTION 516. |
Judgment Currency |
30 | ||||
| ARTICLE SIX THE TRUSTEE |
30 | |||||
| SECTION 601. |
Certain Duties and Responsibilities |
30 | ||||
| SECTION 602. |
Notice of Defaults |
31 | ||||
| SECTION 603. |
Certain Rights of Trustee |
31 | ||||
| SECTION 604. |
Not Responsible for Recitals or Issuance of Securities |
32 | ||||
| SECTION 605. |
May Hold Securities |
32 | ||||
| SECTION 606. |
Money Held in Trust |
32 | ||||
| SECTION 607. |
Compensation and Reimbursement |
32 | ||||
iv
TABLE OF CONTENTS
(continued)
| Page | ||||||
| SECTION 608. |
Disqualification; Conflicting Interests |
33 | ||||
| SECTION 609. |
Corporate Trustee Required; Different Trustees for Different Series; Eligibility |
33 | ||||
| SECTION 610. |
Resignation and Removal; Appointment of Successor |
33 | ||||
| SECTION 611. |
Acceptance of Appointment by Successor |
34 | ||||
| SECTION 612. |
Merger, Conversion, Consolidation or Succession to Business |
35 | ||||
| SECTION 613. |
Preferential Collection of Claims Against Company |
35 | ||||
| SECTION 614. |
Authenticating Agents |
35 | ||||
| ARTICLE SEVEN HOLDERS’ LISTS AND REPORTS BY TRUSTEE AND COMPANY |
36 | |||||
| SECTION 701. |
Company to Furnish Trustee Names and Addresses of Holders |
36 | ||||
| SECTION 702. |
Preservation of Information; Communications to Holders |
36 | ||||
| SECTION 703. |
Reports by Trustee |
37 | ||||
| SECTION 704. |
Reports by Company |
37 | ||||
| ARTICLE EIGHT CONSOLIDATION, MERGER, CONVEYANCE OR TRANSFER |
38 | |||||
| SECTION 801. |
Company May Consolidate, Etc., Only on Certain Terms |
38 | ||||
| SECTION 802. |
Successor Corporation Substituted |
38 | ||||
| ARTICLE NINE SUPPLEMENTAL INDENTURES |
38 | |||||
| SECTION 901. |
Supplemental Indentures Without Consent of Holders |
38 | ||||
| SECTION 902. |
Supplemental Indentures With Consent of Holders |
39 | ||||
| SECTION 903. |
Execution of Supplemental Indentures |
40 | ||||
| SECTION 904. |
Effect of Supplemental Indentures |
40 | ||||
| SECTION 905. |
Conformity With Trust Indenture Act |
40 | ||||
| SECTION 906. |
Reference in Securities to Supplemental Indentures |
40 | ||||
| ARTICLE TEN COVENANTS |
41 | |||||
| SECTION 1001. |
Payment of Principal, Premium, if any, and Interest, if any |
41 | ||||
| SECTION 1002. |
Maintenance of Office or Agency |
41 | ||||
| SECTION 1003. |
Money for Securities Payments To Be Held in Trust |
41 | ||||
| SECTION 1004. |
Payment of Taxes and Other Claims |
42 | ||||
| SECTION 1005. |
Statements as to Compliance |
42 | ||||
| SECTION 1006. |
Corporate Existence |
42 | ||||
| SECTION 1007. |
Limitations on Liens |
42 | ||||
| SECTION 1008. |
Sale and Leaseback Transactions |
43 | ||||
| SECTION 1009. |
Waiver of Certain Covenants |
43 | ||||
| SECTION 1010. |
Payment of Additional Amounts |
43 | ||||
| SECTION 1011. |
Calculation of Original Issue Discount |
45 | ||||
v
TABLE OF CONTENTS
(continued)
| Page | ||||||
| ARTICLE ELEVEN REDEMPTION OF SECURITIES |
45 | |||||
| SECTION 1101. |
Applicability of This Article |
45 | ||||
| SECTION 1102. |
Election to Redeem; Notice to Trustee |
45 | ||||
| SECTION 1103. |
Selection by Trustee of Securities to Be Redeemed |
46 | ||||
| SECTION 1104. |
Notice of Redemption |
46 | ||||
| SECTION 1105. |
Deposit of Redemption Price |
46 | ||||
| SECTION 1106. |
Securities Payable on Redemption Date |
47 | ||||
| SECTION 1107. |
Securities Redeemed in Part |
47 | ||||
| SECTION 1108. |
Tax Redemption; Special Tax Redemption |
47 | ||||
| ARTICLE TWELVE SINKING FUNDS |
47 | |||||
| SECTION 1201. |
Applicability of This Article |
47 | ||||
| SECTION 1202. |
Satisfaction of Sinking Fund Payments With Securities |
48 | ||||
| SECTION 1203. |
Redemption of Securities for Sinking Fund |
48 | ||||
| ARTICLE THIRTEEN MEETINGS OF HOLDERS OF SECURITIES |
48 | |||||
| SECTION 1301. |
Purposes for Which Meetings May Be Called |
48 | ||||
| SECTION 1302. |
Call, Notice and Place of Meetings |
48 | ||||
| SECTION 1303. |
Persons Entitled to Vote at Meetings |
48 | ||||
| SECTION 1304. |
Quorum; Action |
49 | ||||
| SECTION 1305. |
Determination of Voting Rights; Conduct and Adjournment of Meetings |
49 | ||||
| SECTION 1306. |
Counting Votes and Recording Action of Meetings |
49 | ||||
| ARTICLE FOURTEEN GUARANTEES |
50 | |||||
| SECTION 1401. |
Guarantee |
50 | ||||
| SECTION 1402. |
Limitation on Guarantor Liability |
51 | ||||
| SECTION 1403. |
Execution and Delivery |
51 | ||||
| SECTION 1404. |
Subrogation |
51 | ||||
| SECTION 1405. |
Benefits Acknowledged |
51 | ||||
| SECTION 1406. |
Release of Guarantees |
52 | ||||
vi
DEFINED TERMS
vii
This is an INDENTURE dated as of March 6, 2015 between Mondelēz International, Inc., a corporation duly incorporated and existing under the laws of the Commonwealth of Virginia and having its principal office at Three Parkway North, Deerfield, Illinois 60015 (hereinafter called the “Company”), and Deutsche Bank Trust Company Americas, a New York banking corporation organized and existing under the laws of the State of New York, as Trustee (hereinafter called the “Trustee”).
RECITALS OF THE COMPANY
The Company deems it desirable to issue from time to time for its lawful purposes securities (hereinafter called the “Securities”) evidencing its unsecured indebtedness and has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of the Securities, unlimited as to principal amount, to have such titles, to bear such rates of interest, to mature at such time or times and to have such other provisions as shall be fixed as hereinafter provided.
All things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done, and the Company proposes to do all things necessary to make the Securities, when executed by the Company and authenticated and delivered by the Trustee hereunder and duly issued by the Company, the valid obligations of the Company as hereinafter provided.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities or series thereof, as follows:
Article One
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions.
For all purposes of this Indenture and all Securities issued hereunder, except as otherwise expressly provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein;
(3) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles in the United States, and the term “generally accepted accounting principles” with respect to any computation required or permitted hereunder shall mean such accounting principles as are generally accepted in the United States at the date or time of such computation; and
(4) the words “herein”, “hereof” and “hereunder” and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision.
Certain terms, used principally in Article Three and Article Six, are defined in those Articles.
“Act”, when used with respect to any Holder, has the meaning specified in Section 104.
“Affected Security” has the meaning specified Section 1108.
“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, “control”, when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.
“Authenticating Agent” means any Person authorized to authenticate and deliver Securities on behalf of the Trustee for the Securities of any series pursuant to Section 614.
1
“Board of Directors” means the board of directors of the Company or any duly authorized committee of that board or any director or directors and/or officer or officers of the Company to whom that board or committee shall have duly delegated its authority.
“Board Resolution” means (1) a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, or (2) a certificate signed by the director or directors or officer or officers to whom the Board of Directors shall have duly delegated its authority, and delivered to the Trustee for the Securities of any series.
“Business Day” means any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which commercial banks are authorized or required by law, regulation or executive order to close in The City of New York; provided, however, that, with respect to Securities not denominated in Dollars, the day is also not a day on which commercial banks are authorized or required by law, regulation or executive order to close in the Principal Financial Center of the country issuing the Foreign Currency or currency unit or, if the Foreign Currency or currency unit is Euro, the day is also a day on which the Trans-European Automated Real-time Gross Settlement Express Transfer (TARGET) System is open; provided, further, that, with respect to LIBOR Securities, the day is also a London Business Day.
“Capital Stock” of any Person means shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) the equity of such Person, including any preferred stock, but excluding any debt securities convertible into such equity.
“Certificate of a Firm of Independent Public Accountants” means a certificate signed by any firm of independent public accountants of recognized standing selected by the Company. The term “independent” when used with respect to any specified firm of public accountants means such a firm which (1) is in fact independent within the meaning of the Securities Act of 1933, as amended, and the applicable published rules and regulations thereunder, (2) does not have any direct financial interest or any material indirect financial interest in the Company or in any other obligor upon the Securities of any series or in any Affiliate of the Company or of such other obligor, and (3) is not connected with the Company or such other obligor or any Affiliate of the Company or of such other obligor, as an officer, employee, promoter, underwriter, trustee, partner, director or person performing similar functions, but such firm may be the regular independent accountants employed by the Company. Whenever it is herein provided that any Certificate of a Firm of Independent Public Accountants shall be furnished to the Trustee for Securities of any series, such Certificate shall state that the signer has read this definition and that the signer is independent within the meaning hereof.
“Clearstream” means Clearstream Banking societe anonyme, Luxembourg.
“Code” means the Internal Revenue Code of 1986, as amended, and the regulations thereunder.
“Commission” means the Securities and Exchange Commission, as from time to time constituted, created under the Securities Exchange Act of 1934, or if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties on such date.
“Company” means the Person named as the “Company” in the first paragraph of this instrument until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter “Company” shall mean such successor Person.
“Company Request” and “Company Order” mean, respectively, a written request or order signed in the name of the Company by (1) a Chairman of the Board, a Vice Chairman of the Board, a President or a Vice President and by the Treasurer, an Assistant Treasurer, the Controller, an Assistant Controller, the Secretary or an Assistant Secretary of the Company, or (2) by any two Persons designated in a Company Order previously delivered to the Trustee for Securities of any series by any two of the foregoing officers and delivered to the Trustee for Securities of any series.
“Component Currency” has the meaning specified in Section 311(e).
“Consolidated Capitalization” means the total of all of the assets appearing on the most recent quarterly or annual consolidated balance sheet of the Company and its consolidated Subsidiaries, less the following:
(a) current liabilities, including liabilities for indebtedness maturing more than 12 months from the date of the original creation thereof, but maturing within 12 months from the date of such consolidated balance sheet; and
(b) deferred income tax liabilities appearing on such consolidated balance sheet.
2
“Consolidated Net Tangible Assets” means the excess over current liabilities of all assets appearing on the most recent quarterly or annual consolidated balance sheet of the Company and its consolidated Subsidiaries less goodwill and other intangible assets and the minority interests of others in Subsidiaries, all as appearing on such balance sheet.
“Conversion Event” means the unavailability of any Foreign Currency or currency unit due to the imposition of exchange controls or other circumstances beyond the Company’s control.
“Corporate Trust Office” means the office of the Trustee for Securities of any series at which at any particular time its corporate trust business shall be principally administered, which office of Deutsche Bank Trust Company Americas, at the date of the execution of this Indenture, is located at Deutsche Bank Trust Company Americas, 60 Wall Street, 16th Floor, MS: NYC60-1630 New York NY 10005, Attention: Corporates Team / Mondelēz International, Inc. (in addition, copies of correspondence are to be sent to Deutsche Bank National Trust Company for Deutsche Bank Trust Company Americas, Trust & Securities Services, 100 Plaza One, 6th Floor – MS JCY03-0699, Jersey City, NJ 07311-3901, Attention: Corporates Team / Mondelēz International, Inc.), or such other address as the Trustee may designate from time to time by notice to the Holders and the Company, or the principal corporate trust office of any successor Trustee (or such other address as such successor Trustee may designate from time to time by notice to the Holders and the Company).
“corporation” includes corporations, limited liability companies, companies and business trusts.
“Currency Determination Agent”, with respect to Securities of any series, means, unless otherwise specified in the Securities of any series, a New York Clearing House bank designated pursuant to Section 301 or Section 312.
“Defaulted Interest” has the meaning specified in Section 307.
“Depositary” means, with respect to the Securities of any series issuable or issued in the form of a Global Security, the Person designated as Depositary by the Company pursuant to Section 301 until a successor Depositary shall have become such pursuant to the applicable provisions of this Indenture, and thereafter “Depositary” shall mean or include each Person who is then a Depositary hereunder, and if at any time there is more than one such Person, “Depositary” as used with respect to the Securities of any such series shall mean the Depositary with respect to the Securities of that series.
“Determination Notice” has the meaning specified in Section 1108(b).
“Dollars” and the sign “$” mean the currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts.
“Election Date” has the meaning specified in Section 311(e).
“Euro” means the single currency of the participating member states of the European Union as defined under EC Regulation 1103/97 adopted under Article 235 of the Treaty on European Union and under EC Regulation 974/98 adopted under Article 1091(4) of the Treaty on European Union or any successor European legislation from time to time.
“Euroclear” means Euroclear Bank S.A./N.A., as operator of the Euroclear System.
“Event of Default” has the meaning specified in Section 501.
“Exchange Date” has the meaning specified in Section 304.
“Foreign Currency” means a currency issued and actively maintained as a country’s recognized unit of domestic exchange by the government of any country other than the United States, and such term shall include the Euro.
“Global Exchange Agent” has the meaning specified in Section 304.
“Global Securities” means Securities in global form.
“Government Obligations” means securities which are (i) direct obligations of the government which issued the currency in which the Securities of a particular series are payable (except as provided in Section 311(b) and 311(d) in which case with respect to Securities for which an election has occurred pursuant to Section 311(b), or a Conversion Event has occurred as provided in Section 311(d), such obligations shall be issued in the currency or currency unit in which such Securities are payable as a result of such election or Conversion Event) or (ii) obligations of a Person controlled or supervised by or acting as an agency or instrumentality of the government which issued the currency in which the Securities of such series are payable (except as provided in Section 311(b) and 311(d), in which case with respect to Securities for which an election has occurred pursuant to Section 311(b), or a Conversion Event has occurred as provided in Section 311(d), such obligations shall be issued in the currency or currency unit in which such Securities are payable as a result of such election or Conversion Event), the payment of which is unconditionally guaranteed by such government, which, in either case, are full faith and credit obligations of such government payable in such currency and are not callable or redeemable at the option of the issuer thereof.
3
“Guarantee” means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Securities of any other Person and any obligation, direct or indirect, contingent or otherwise, of such Person:
(1) to purchase or pay (or advance or supply funds for the purchase or payment of) such Securities of such other Person (whether arising by virtue of partnership arrangements, or by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise), or
(2) entered into for purposes of assuring in any other manner the obligee of such Securities of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part);
provided, however, that the term “Guarantee” shall not include endorsements for collection or deposit in the ordinary course of business. The term “Guarantee” used as a verb has a corresponding meaning. The term “Guarantor” shall mean any Person Guaranteeing any obligation.
“Holder”, when used with respect to any Security, means the Person in whose name a Security is registered in the Security Register.
“Indenture” means this instrument as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof and shall include the terms of a particular series of Securities established as contemplated by Section 301.
“Indexed Security” means any Security as to which the amount of payments of principal, premium, if any, and/or interest, if any, due thereon is determined with reference to the rate of exchange between the currency or currency unit in which the Security is denominated and any other specified currency or currency unit, to the relationship between two or more currencies or currency units, to the price of one or more specified securities or commodities, to one or more securities or commodities exchange indices or other indices or by other similar methods or formulas, all as specified in accordance with Section 301.
“interest”, when used with respect to any Security which by its terms bears interest only after Maturity, means interest payable after Maturity.
“Interest Payment Date”, when used with respect to any Security, means the Stated Maturity of an installment of interest on such Security.
“Issue Date” means the date on which the Securities of a particular series are originally issued under this Indenture.
“Judgment Date” has the meaning specified in Section 516.
“LIBOR” means, with respect to any LIBOR Security, the rate specified as LIBOR for such series of Securities in accordance with Section 301.
“LIBOR Currency” means the currency specified pursuant to Section 301 as to which LIBOR will be calculated or, if no currency is specified pursuant to Section 301, Dollars.
“LIBOR Security” means any Security which bears interest at a floating rate calculated with reference to LIBOR.
“London Business Day” means, with respect to any LIBOR Security, a day on which commercial banks are open for business, including dealings in the LIBOR Currency, in London.
“Luxembourg Stock Exchange”, unless specified with respect to any particular series of Securities, means the Luxembourg Stock Exchange.
“Market Exchange Rate” with respect to any Foreign Currency or currency unit on any date means, unless otherwise specified in accordance with Section 301, the noon buying rate in The City of New York for cable transfers in such Foreign Currency or currency unit as certified for customs purposes by the Federal Reserve Bank of New York for such Foreign Currency or currency unit.
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“Maturity”, when used with respect to any Security, means the date on which the principal (or, if the context so requires, in the case of an OID Security, a lesser amount or, in the case of an Indexed Security, an amount determined in accordance with the specified terms of that Security) of that Security becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption, request for redemption, repayment at the option of the holder, pursuant to any sinking fund or otherwise.
“Notice of Default” has the meaning specified in Section 501(3).
“Officers’ Certificate” means a certificate signed by any Chairman of the Board, Vice Chairman of the Board, Chief Executive Officer, President or Vice President (any reference to a Vice President of the Company herein shall be deemed to include any Vice President of the Company whether or not designated by a number or a word or words added before or after the title “Vice President”), and by the Treasurer, an Assistant Treasurer, the Controller, an Assistant Controller, the Secretary or an Assistant Secretary of the Company, and delivered to the Trustee for the Securities of any series.
“OID Security” means a Security which provides for an amount (excluding any amounts attributable to accrued but unpaid interest thereon) less than the principal amount thereof to be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 502.
“Opinion of Counsel” means, for purposes of Section 1108, a written opinion of independent legal counsel of recognized standing and, for all other purposes hereof, means a written opinion of counsel, who may be an employee of or counsel to the Company.
“Outstanding”, when used with respect to Securities, means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except:
(1) Securities theretofore canceled by the Trustee for such Securities or delivered to such Trustee for cancellation;
(2) Securities or portions thereof for whose payment or redemption money in the necessary amount and in the required currency or currency unit has been theretofore deposited with the Trustee for such Securities or any Paying Agent (other than the Company or any other obligor upon the Securities) in trust or set aside and segregated in trust by the Company or any other obligor upon the Securities (if the Company or any other obligor upon the Securities shall act as its own Paying Agent) for the Holders of such Securities; provided, however, that, if such Securities or portions thereof are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture, or provision therefor satisfactory to such Trustee has been made; and
(3) Securities which have been paid pursuant to Section 306 or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented proof satisfactory to the Trustee for such Securities that any such Securities are held by bona fide holders in due course;
provided, however, that in determining whether the Holders of the requisite principal amount of Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, (a) Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee for such Securities shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which a Responsible Officer of such Trustee actually knows to be so owned shall be so disregarded; Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of such Trustee the pledgee’s right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor; (b) the principal amount of an OID Security that shall be deemed to be Outstanding for such purposes shall be the amount of the principal thereof that would be due and payable as of the date of such determination upon a declaration of acceleration pursuant to Section 502; and (c) the principal amount of a Security denominated in a Foreign Currency or currency unit that shall be deemed to be outstanding for such purposes shall be determined in accordance with Section 115.
“Paying Agent” means the Trustee or any other Person authorized by the Company to pay the principal of, and premium, if any, and interest, if any, on any Securities of any series on behalf of the Company.
“Person” means any individual, firm, corporation, partnership, association, joint venture, tribunal, trust, government or political subdivision or agency or instrumentality thereof, or any other entity or organization.
“Place of Payment”, when used with respect to the Securities of any particular series, means the place or places where the principal of, premium, if any, and interest, if any, on the Securities of that series are payable, as contemplated by Section 301.
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“Predecessor Security” of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by that particular Security, and, for the purposes of this definition, any Security authenticated and delivered under Section 306 in lieu of a mutilated, destroyed, lost or stolen Security.
“Principal Facility” has the meaning specified in Section 1007.
“Principal Financial Center” means, unless otherwise specified in accordance with Section 301:
(1) the capital city of the country issuing the Foreign Currency or currency unit, except that with respect to Dollars, Australian dollars, Canadian dollars, South African rand and Swiss francs, the “Principal Financial Center” will be The City of New York, Sydney and Melbourne, Toronto, Johannesburg and Zurich, respectively; or
(2) the capital city of the country to which the LIBOR Currency relates, except that with respect to Dollars, Canadian dollars, South African rand and Swiss francs, the “Principal Financial Center” will be The City of New York, Toronto, Johannesburg and Zurich, respectively.
“Redemption Date”, when used with respect to any Security to be redeemed in whole or in part, means the date fixed for such redemption by or pursuant to this Indenture.
“Redemption Price”, when used with respect to any Security to be redeemed, means, unless otherwise specified in such Security an amount, in the currency or currency unit in which such Security is denominated or which is otherwise provided for pursuant hereto, equal to the principal amount thereof and premium, if any, thereon, together with accrued interest, if any, to the Redemption Date.
“Registered Security” means any Security established pursuant to Section 201 which is registered in the Security Register.
“Regular Record Date” for the interest payable on any Interest Payment Date on the Registered Securities of any series, means the date, if any, specified for that purpose as contemplated by Section 301.
“Responsible Officer”, when used with respect to the Trustee for any series of Securities, means any officer within the corporate trust department of the Trustee, including any vice president, assistant vice president, assistant secretary, assistant treasurer, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such person’s knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of this Indenture.
“Securities” means securities evidencing unsecured indebtedness of the Company authenticated and delivered under this Indenture.
“Security Register” and “Security Registrar” have the respective meanings specified in Section 305.
A “series” of Securities means all Securities denoted as part of the same series authorized by or pursuant to a particular Board Resolution.
“Special Record Date” for the payment of any Defaulted Interest on the Registered Securities of any series means a date fixed by the Trustee for such series pursuant to Section 307.
“Stated Maturity”, when used with respect to any Security or any installment of principal thereof or interest thereon, means the date specified in such Security.
“Subsidiary” means any corporation of which at least a majority of all outstanding stock or other interests having ordinary voting power in the election of directors, managers or trustees (without regard to the occurrence of any contingency) thereof is at the time, directly or indirectly, owned or controlled by the Company or by one or more Subsidiaries or by the Company and one or more Subsidiaries.
“Substitute Date” has the meaning specified in Section 516.
“Trust Indenture Act” means the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990, as in force at the date as of which this Indenture was executed, provided, however, that in the event the Trust Indenture Act is amended after such date, “Trust Indenture Act” means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended.
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“Trustee” means the Person named as the “Trustee” in the first paragraph of this instrument and, subject to the provisions of Article Six hereof, shall also include its successors and assigns as Trustee hereunder. If there shall be at one time more than one Trustee hereunder, “Trustee” shall mean each such Trustee and shall apply to each such Trustee only with respect to those series of Securities with respect to which it is serving as Trustee.
“United States” means, unless otherwise specified with respect to Securities of any series, the United States of America (including the States and the District of Columbia), its territories, its possessions and other areas subject to its jurisdiction (including the Commonwealth of Puerto Rico).
“United States Alien” has the meaning specified in Section 1010.
“Western Europe” means, unless otherwise specified with respect to Securities of any series, any of the member states of the European Union as of the date hereof and Switzerland, Norway, Poland, Hungary, the Czech Republic and the Slovak Republic (and “Western European” shall have a meaning correlative to the foregoing).
“Yield to Maturity”, when used with respect to any OID Security, means the yield to maturity, if any, set forth on the face thereof.
SECTION 102. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee for any series of Securities to take any action under any provision of this Indenture, the Company shall furnish to such Trustee an Officers’ Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with, and an Opinion of Counsel stating that in the opinion of such counsel such action is authorized or permitted by this Indenture and that all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished.
Every certificate (other than certificates provided pursuant to Section 1005) or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include:
(1) a statement that each individual signing such certificate or opinion has read such condition or covenant and the definitions herein relating thereto;
(2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such condition or covenant has been complied with; and
(4) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to matters upon which his certificate or opinion is based are erroneous.
Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.
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SECTION 104. Acts of Holders.
(a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by one or more agents duly appointed in writing.
The Company may at its discretion set a record date for purposes of determining the identity of Holders of Registered Securities entitled to vote or consent to any action by vote or consent authorized or permitted under this Indenture, but the Company shall have no obligation to do so. If not set by the Company prior to the first solicitation of Holders of Registered Securities of a particular series made by any Person in respect of any such action or, in the case of any such vote, prior to such vote, the record date for any such action or vote shall be 30 days prior to the first solicitation of such vote or consent. Upon the fixing of such a record date those Persons who were Holders of Registered Securities at such record date (or their duly designated proxies), and only those Persons, shall be entitled with respect to such Registered Securities to take such action by vote or consent or to revoke any vote or consent previously given, whether or not such Persons continue to be Holders after such record date.
(b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by the certificate of any notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by an officer of a corporation or association or a member of a partnership, or an official of a public or governmental body, on behalf of such corporation, association, partnership or public or governmental body or by a fiduciary, such certificate or affidavit shall also constitute sufficient proof of his authority.
(c) The fact and date of the execution by any Person of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee for the appropriate series of Securities deems sufficient.
(d) The principal amount and serial numbers of Registered Securities held by any Person, and the date of holding the same, shall be proved by the Security Register.
(e) Reserved.
(f) Subject to Section 115, in determining whether the Holders of the requisite principal amount of Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver under this Indenture, the principal amount of an OID Security that may be counted in making such determination and that shall be deemed to be Outstanding for such purposes shall be equal to the amount of the principal thereof that would be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 502 at the time the taking of such action by the Holders of such requisite principal amount is evidenced to the Trustee for such Securities.
(g) Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee for such Securities, the Security Registrar, any Paying Agent or the Company in reliance thereon, whether or not notation of such action is made upon such Security.
SECTION 105. Notices, Etc., to Trustee and the Company.
Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other documents provided or permitted by this Indenture to be made upon, given or furnished to, or filed with,
(a) the Trustee for a series of Securities by any Holder or by the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing, to or with such Trustee at its Corporate Trust Office, Attention: Corporates Team/ Mondelēz International, Inc., or if sent by facsimile transmission or email in PDF format, to a facsimile number or email address, as the case may be, provided by the Trustee, with a copy sent, first class postage prepaid, to the Trustee addressed to it as provided above, or
(b) the Company by such Trustee or by any Holder shall be sufficient for every purpose hereunder (except as provided in paragraphs (3), (4) and (5) of Section 501) if furnished in writing and sent, first class postage prepaid, addressed to the Company at the address of its principal office specified in the first paragraph of this instrument or at any other address previously furnished in writing to such Trustee by the Company, or if sent by facsimile transmission or email in PDF format, to a facsimile number or email address, as the case may be, provided to the Trustee by the Company, with a copy sent, first class postage prepaid, to the Company addressed to it as provided above.
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SECTION 106. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) to Holders of Registered Securities if in writing and sent, first class postage prepaid, or by email in PDF format to each Holder affected by such event, at his physical address or email address as it appears in the Security Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice.
In any case where notice to Holders of Registered Securities is given by mail, neither the failure to send such notice, nor any defect in any notice so mailed, to any particular Holder of a Registered Security shall affect the sufficiency of such notice with respect to other Holders of Registered Securities. Any notice sent in the manner prescribed by this Indenture shall be deemed to have been given whether or not received by any particular Holder. In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice to Holders of Registered Securities by mail, then such notification as shall be made with the approval of the Trustee for such Securities shall constitute sufficient notice to such Holders.
Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee for such Securities, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver.
SECTION 107. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with the duties imposed by any of Sections 310 through 317, inclusive, of the Trust Indenture Act through the operation of Section 318(c) thereof, such imposed duties shall control.
SECTION 108. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.
SECTION 109. Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall bind its successors and assigns, whether so expressed or not.
SECTION 110. Separability Clause.
If any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 111. Benefits of Indenture.
Nothing in this Indenture or in the Securities, expressed or implied, shall give to any Person, other than the parties hereto, any Paying Agent, any Security Registrar and their successors hereunder and the Holders of Securities, any benefit or any legal or equitable right, remedy or claim under this Indenture.
SECTION 112. Governing Law; Waiver of Jury Trial.
This Indenture and the Securities shall be governed by and construed in accordance with the laws of the State of New York.
EACH OF THE COMPANY AND THE TRUSTEE HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE, THE SECURITIES OR THE TRANSACTION CONTEMPLATED HEREBY.
SECTION 113. Non-Business Day.
Unless otherwise stated with respect to Securities of any series, in any case where any Interest Payment Date, Redemption Date or Stated Maturity of a Security of any particular series shall not be a Business Day at any Place of Payment with respect to Securities of that series, then (notwithstanding any other provision of this Indenture or of the Securities) payment of principal, and premium, if any, and interest, if any, with respect to such Security need not be made at such Place of Payment on such date, but may be made on the next succeeding Business Day at such Place of Payment with the same force and effect as if made on the Interest Payment Date or Redemption Date, or at the Stated Maturity, provided that no interest shall accrue with respect to such payment for the period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be.
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SECTION 114. Immunity of Incorporators, Stockholders, Officers and Directors.
No recourse shall be had for the payment of principal of, or premium, if any, or interest, if any, on any Security of any series, or for any claim based thereon, or upon any obligation, covenant or agreement of this Indenture, against any incorporator, stockholder, officer or director, as such, past, present or future, of the Company or of any successor corporation, either directly or indirectly through the Company or any successor corporation, whether by virtue of any constitution, statute or rule of law or by the enforcement of any assessment of penalty or otherwise; it being expressly agreed and understood that this Indenture and all the Securities of each series are solely corporate obligations, and that no personal liability whatever shall attach to, or is incurred by, any incorporator, stockholder, officer or director, past, present or future, of the Company or of any successor corporation, either directly or indirectly through the Company or any successor corporation, because of the incurring of the indebtedness hereby authorized or under or by reason of any of the obligations, covenants or agreements contained in this Indenture or in any of the Securities of any series, or to be implied herefrom or therefrom; and that all such personal liability is hereby expressly released and waived as a condition of, and as part of the consideration for, the execution of this Indenture and the issuance of the Securities of each series.
SECTION 115. Certain Matters Relating to Currencies.
Subject to Section 311, each reference to any currency or currency unit in any Security, or in the Board Resolution or supplemental indenture relating thereto, shall mean only the referenced currency or currency unit and no other currency or currency unit. The Trustee shall segregate moneys, funds and accounts held by the Trustee in one currency or currency unit from any moneys, funds or accounts held in any other currencies or currency units, notwithstanding any provision herein which would otherwise permit the Trustee to commingle such amounts. Whenever any action or Act is to be taken hereunder by the Holders of Securities denominated in a Foreign Currency or currency unit, then for purposes of determining the principal amount of Securities held by such Holders, the aggregate principal amount of the Securities denominated in a Foreign Currency or currency unit shall be deemed to be that amount of Dollars that could be obtained for such principal amount on the basis of a spot rate of exchange specified to the Trustee for such series in an Officers’ Certificate for such Foreign Currency or currency unit into Dollars as of the date the taking of such action or Act by the Holders of the requisite percentage in principal amount of the Securities is evidenced to such Trustee.
SECTION 116. Language of Notices, Etc.
Any request, demand, authorization, direction, notice, consent or waiver required or permitted under this Indenture shall be in the English language, and any published notice may also be in an official language of the country of publication.
SECTION 117. Force Majeure.
The Trustee, Security Registrar and Paying Agent shall not incur any liability for not performing any act or fulfilling any duty, obligation or responsibility hereunder by reason of any occurrence beyond the control of the Trustee, Security Registrar or Paying Agent (including but not limited to any act or provision of any present or future law or regulation or governmental authority, any act of God or war, civil unrest, local or national disturbance or disaster, any act of terrorism, or the unavailability of the Federal Reserve Bank wire or facsimile or other wire or communication facility).
SECTION 118. USA Patriot Act.
The parties hereto acknowledge that in order to help the United States government fight the funding of terrorism and money laundering activities, pursuant to Federal regulations that became effective on October 1, 2003 (Section 326 of the USA PATRIOT Act) requires all financial institutions to obtain, verify, record and update information that identifies each person establishing a relationship or opening an account. The parties to this Agreement agree that they will provide to Deutsche Bank Trust Company Americas such information as it may request, from time to time, in order for Deutsche Bank Trust Company Americas to satisfy the requirements of the USA PATRIOT Act, including but not limited to the name, address, tax identification number and other information that will allow it to identify the individual or entity who is establishing the relationship or opening the account and may also ask for formation documents such as articles of incorporation or other identifying documents to be provided.
SECTION 119. Execution in Counterparts.
This Indenture may be executed in two or more counterparts, which when so executed shall constitute one and the same agreement. The exchange of copies of this Indenture and of signature pages by facsimile or PDF transmission shall constitute effective execution and delivery of this Indenture as to the parties hereto and may be used in lieu of the original Indenture for all purposes. Signatures of the parties hereto transmitted by facsimile or PDF shall be deemed to be their original signatures for all purposes.
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Article Two
SECURITY FORMS
SECTION 201. Forms of Securities.
The Registered Securities of each series shall be in such form or forms (including global form) as shall be established by or pursuant to a Board Resolution, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture or any indenture supplemental hereto and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with any law, with any rule or regulation made pursuant thereto, with any rules of any securities exchange, automated quotation system or clearing agency or to conform to usage, as may, consistently herewith, be determined by the officers executing such Securities, as evidenced by their execution of such Securities. If temporary Securities of any series are issued in global form as permitted by Section 304, the form thereof shall be established as provided in the preceding sentence.
Prior to the delivery of a Security of any series in any such form to the Trustee for the Securities of such series for authentication, the Company shall deliver to such Trustee the following:
(a) The Board Resolution by or pursuant to which such form of Security has been approved and, if applicable, the supplemental indenture by or pursuant to which such form of Security has been approved;
(b) An Officers’ Certificate dated the date such Certificate is delivered to such Trustee stating that all conditions precedent provided for in this Indenture relating to the authentication and delivery of Securities in such form have been complied with; and
(c) An Opinion of Counsel stating that (A), the Securities in such form have been established by a supplemental indenture or by or pursuant to a resolution of the Board of Directors in accordance with this Article 2 and in conformity with the provisions of this Indenture; (B) that the terms of such Securities have been established in accordance with Article 2 and in conformity with the other provisions of this Indenture; (C) that all laws and requirements in respect of the execution and delivery by the Company of such Securities have been complied with; and (D) Securities in such form, when (i) completed by appropriate insertions and executed and delivered by the Company to such Trustee for authentication in accordance with this Indenture, (ii) authenticated and delivered by such Trustee in accordance with this Indenture within the authorization as to aggregate principal amount established from time to time by the Board of Directors, and (iii) sold in the manner specified in such Opinion of Counsel, will be the legal, valid and binding obligations of the Company enforceable in accordance with their terms, subject to the effects of applicable bankruptcy, reorganization, fraudulent conveyance, moratorium, insolvency and other similar laws generally affecting creditors’ rights, to general equitable principles, to an implied covenant of good faith and fair dealing and to such other qualifications as such counsel shall conclude do not materially affect the rights of Holders of such Securities. The definitive Securities, if any, shall be printed, lithographed or engraved or produced by any combination of these methods on a steel engraved border or steel engraved borders or may be produced in any other manner, all as determined by the officers executing such Securities, as evidenced by their execution thereof.
(d) The Trustee shall have the right to decline to authenticate and deliver any Securities under this Section 201 if the Trustee, being advised by counsel, determines that such action may not lawfully be taken or if the Trustee in good faith shall determine that such action would expose the Trustee to personal liability to existing Holders.
SECTION 202. Form of Trustee’s Certificate of Authentication.
The Certificate of Authentication on all Securities shall be in substantially the following form: “This is one of the Securities of the series designated therein described in the within-mentioned Indenture.
| DEUTSCHE BANK TRUST COMPANY AMERICAS, as Trustee | ||
| By: |
| |
| Authorized Signatory | ||
SECTION 203. Securities in Global Form.
If any Security of a series is issuable in global form, such Security may provide that it shall represent the aggregate amount of Outstanding Securities from time to time endorsed thereon and may also provide that the aggregate amount of Outstanding Securities represented thereby may from time to time be reduced to reflect exchanges. Any endorsement of a Security in global form to reflect the amount, or any increase or decrease in the amount, of Outstanding Securities represented thereby shall be made by the Trustee and in such manner as shall be specified in such Security. Any instructions by the Company with respect to a Security in global form, after its initial issuance, shall be in writing but need not comply with Section 102. Global Securities shall be issued in registered form and in either temporary or permanent form.
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Article Three
THE SECURITIES
SECTION 301. Title; Payment and Terms.
The aggregate principal amount of Securities which may be authenticated and delivered and Outstanding under this Indenture is unlimited. The Securities may be issued up to the aggregate principal amount of Securities from time to time authorized by or pursuant to a Board Resolution.
The Securities may be issued in one or more series, each of which shall be issued pursuant to a Board Resolution or pursuant to a supplemental indenture hereto. There shall be established in one or more Board Resolutions or pursuant to one or more Board Resolutions or in one or more supplemental indentures or pursuant to one or more supplemental indentures and, subject to Section 303, set forth in, or determined in the manner provided in an Officers’ Certificate of the Company, prior to the issuance of Securities of any series all or any of the following, as applicable (each of which, if so provided, may be determined from time to time by the Company with respect to unissued Securities of that series and set forth in the Securities of that series when issued from time to time):
(1) the title of the Securities of that series (which shall distinguish the Securities of that series from all other series of Securities);
(2) any limit upon the aggregate principal amount of the Securities of that series which may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of that series pursuant to Sections 304, 305, 306, 906 or 1107);
(3) whether Securities of that series are to be issuable as Registered Securities and any restrictions on the exchange of one form of Securities for another and on the offer, sale and delivery of the Securities in such form;
(4) the date or dates (or manner of determining the same) on which the principal of the Securities of that series is payable (which, if so provided in such Board Resolution, may be determined by the Company from time to time and set forth in the Securities of the series issued from time to time);
(5) the rate or rates (or the manner of calculation thereof) at which the Securities of that series shall bear interest (if any), the date or dates from which such interest shall accrue, the Interest Payment Dates on which such interest shall be payable (or manner of determining the same) and the Regular Record Date for the interest payable on any Registered Securities on any Interest Payment Date and the extent to which, or the manner in which, any interest payable on a temporary Global Security on an Interest Payment Date will be paid if other than in the manner provided in Section 307;
(6) the place or places where, subject to the provisions of Section 1002, the principal of, and premium, if any, and interest, if any, on Securities of that series shall be payable, any Registered Securities of that series may be surrendered for registration of transfer, any Securities of that series may be surrendered for exchange, and notices and demands to or upon the Company in respect of the Securities of that series and this Indenture may be served;
(7) the period or periods within which (or manner of determining the same), the price or prices at which (or manner of determining the same), the currency or currency unit in which, and the terms and conditions upon which Securities of that series may be redeemed, in whole or in part, at the option of the Company, and any remarketing arrangements with respect to the Securities of that series;
(8) the obligation, if any, of the Company to redeem, repay or purchase Securities of that series pursuant to any sinking fund or analogous provisions or at the option of a Holder thereof, and the period or periods within which (or manner of determining the same), the price or prices at which (or manner of determining the same), the currency or currency unit in which, and the terms and conditions upon which, Securities of that series shall be redeemed or purchased, in whole or in part, pursuant to such obligation;
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(9) if the currency in which the Securities of that series shall be issuable is Dollars, the denominations in which any Registered Securities of that series shall be issuable, if other than denominations of $1,000 and any integral multiple thereof;
(10) if other than the principal amount thereof, the portion of the principal amount of Securities of that series which shall be payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 502;
(11) any Events of Default and covenants of the Company with respect to the Securities of that series, whether or not such Events of Default or covenants are consistent with the Events of Default or covenants set forth herein;
(12) if a Person other than Deutsche Bank Trust Company Americas is to act as Trustee for the Securities of that series, the name and location of the Corporate Trust Office of such Trustee;
(13) if other than Dollars, the currency or currency unit in which payment of the principal of, and premium, if any, and interest, if any, on the Securities of that series shall be made or in which the Securities of that series shall be denominated and the particular provisions applicable thereto in accordance with, in addition to or in lieu of the provisions of Section 311;
(14) if the principal of, and premium, if any, and interest, if any, on the Securities of that series are to be payable, at the election of the Company or a Holder thereof, in a currency or currency unit other than that in which such Securities are denominated or stated to be payable, in accordance with provisions in addition to or in lieu of, or in accordance with, the provisions of Section 311, the period or periods within which (including the Election Date), and the terms and conditions upon which, such election may be made, and the time and manner of determining the exchange rate between the currency or currency unit in which such Securities are denominated or stated to be payable and the currency or currency unit in which such Securities are to be so payable;
(15) the designation of the original Currency Determination Agent, if any;
(16) if the Securities of such series are issuable as Indexed Securities, the manner in which the amount of payments of principal of, and premium, if any, and interest, if any, on that series shall be determined;
(17) if the Securities of that series do not bear interest, the applicable dates for purposes of Section 701;
(18) if other than as set forth in Article Four, provisions for the satisfaction and discharge of this Indenture with respect to the Securities of that series;
(19) the date as of which any Global Security representing Outstanding Securities of that series shall be dated if other than the date of original issuance of the first Security of that series to be issued;
(20) the application, if any, of Section 1010 to the Securities of that series;
(21) whether the Securities of the series shall be issued in whole or in part in the form of a Global Security or Securities and, in such case, the Depositary and Global Exchange Agent, if any, for such Global Security or Securities, whether such global form shall be permanent or temporary and, if applicable, the Exchange Date;
(22) if Securities of the series are to be issuable initially in the form of a temporary Global Security, the circumstances under which the temporary Global Security can be exchanged for definitive Securities and whether the definitive Securities will be Registered Securities and will be in global form and whether interest in respect of any portion of such Global Security payable in respect of an Interest Payment Date prior to the Exchange Date shall be paid to any clearing organization with respect to a portion of such Global Security held for its account and, in such event, the terms and conditions (including any certification requirements) upon which any such interest payment received by a clearing organization will be credited to the Persons entitled to interest payable on such Interest Payment Date if other than as provided in this Article Three;
(23) whether the Securities of the series will be convertible or exchangeable into other securities of the Company or another Person, and if so, the terms and conditions upon which such Securities will be so convertible or exchangeable, including the conversion price or exchange rate and the conversion or exchange period, and any additions or changes to the Indenture with respect to the Securities of such series to permit or facilitate such conversion or exchange;
(24) the form of the Securities of the series;
(25) whether the Securities shall be issued with Guarantees and, if so, the terms, if any, of any Guarantee of the payment of principal and interest, if any, with respect to Securities of the Series and any corresponding changes to the provisions of this Indenture as then in effect; and
(26) any other terms of that series (which terms shall not be inconsistent with the provisions of this Indenture).
All Securities of any particular series shall be substantially identical except as to denomination, rate of interest, Stated Maturity and the date from which interest, if any, shall accrue, and except as may otherwise be provided in or pursuant to such Board Resolution relating thereto. The terms of such Securities, as set forth above, may be determined by the Company from time to time if so provided in or established pursuant to the authority granted in a Board Resolution. All Securities of any one series need not be issued at the same time, and unless otherwise provided, a series may be reopened for issuance of additional Securities of such series.
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SECTION 302. Denominations and Currencies.
Unless otherwise provided with respect to any series of Securities as contemplated by Section 301, any Registered Securities of a series shall be issuable in denominations of $1,000 and any integral multiple thereof, or the equivalent amounts thereof in the case of Registered Securities denominated in a Foreign Currency or currency unit.
SECTION 303. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its Chairman of the Board, a Vice Chairman of the Board, or one or more of its Presidents or Vice Presidents. The Securities shall be so executed and attested to by its Secretary or any one of its Assistant Secretaries. The signature of any of these officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities of any series, executed by the Company to the Trustee for the Securities of such series for authentication, together with a Company Order for the authentication and delivery of such Securities, and such Trustee, in accordance with the Company Order, shall authenticate and deliver such Securities. If any Security shall be represented by a permanent Global Security, then, for purposes of this Section and Section 304, the notation of a beneficial owner’s interest therein upon original issuance of such Security or upon exchange of a portion of a temporary Global Security shall be deemed to be delivery in connection with the original issuance of such beneficial owner’s interest in such permanent Global Security. If all the Securities of any one series are not to be issued at one time and if a Board Resolution relating to such Securities shall so permit, such Company Order may set forth procedures acceptable to the Trustee for the issuance of such Securities, including, without limitation, procedures with respect to interest rate, Stated Maturity, date of issuance and date from which interest, if any, shall accrue.
Notwithstanding any contrary provision herein, if all Securities of a series are not to be originally issued at one time, it shall not be necessary to deliver the Board Resolution, Officers’ Certificate and Opinion of Counsel otherwise required pursuant to Sections 102 and 201 at or prior to the time of authentication of each Security of such series if such documents are delivered at or prior to the authentication upon original issuance of the first Security of such series to be issued.
Each Registered Security shall be dated the date of its authentication. No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein manually executed by the Trustee for such Security or on its behalf pursuant to Section 614, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder.
Each Depositary designated pursuant to Section 301 for a Global Security in registered form must, at the time of its designation and at all times while it serves as Depositary, be a clearing agency registered under the Securities Exchange Act of 1934, as amended, and any other applicable statute or regulation.
In case any Securities shall have been authenticated, but not delivered, by the Trustee or the Authenticating Agent for such series then in office, any successor by merger, conversion or consolidation to such Trustee, or any successor Authenticating Agent, as the case may be, may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee or successor Authentication Agent had itself authenticated such Securities.
SECTION 304. Temporary Securities and Exchange of Securities.
Pending the preparation of definitive Securities of any particular series, the Company may execute, and upon Company Order the Trustee for the Securities of such series shall authenticate and deliver, in the manner specified in Section 303, temporary Securities which are printed, lithographed, typewritten, photocopied or otherwise produced, in any denomination, with like terms and conditions as the definitive Securities of like series in lieu of which they are issued in registered form and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as evidenced by their execution of such Securities. Any such temporary Securities may be in global form, representing such of the Outstanding Securities of such series as shall be specified therein.
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Except in the case of temporary Securities in global form (which shall be exchanged only in accordance with the provisions of the following paragraphs), if temporary Securities of any particular series are issued, the Company will cause definitive Securities of that series to be prepared without unreasonable delay. After the preparation of such definitive Securities, the temporary Securities of such series shall be exchangeable for such definitive Securities and of a like Stated Maturity and with like terms and provisions upon surrender of the temporary Securities of such series, at the office or agency of the Company in a Place of Payment for that series, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities of any particular series, the Company shall execute and (in accordance with a Company Order delivered at or prior to the authentication of the first definitive Security of such series) the Trustee for the Securities of such series or the Global Exchange Agent shall authenticate and deliver in exchange therefor a like principal amount of definitive Securities of authorized denominations of the same series and of a like Stated Maturity and with like terms and provisions. Until exchanged as hereinabove provided, the temporary Securities of any series shall in all respects be entitled to the same benefits under this Indenture as definitive Securities of the same series and with like terms and conditions, except as to payment of interest, if any, authenticated and delivered hereunder.
Any temporary Global Security and any permanent Global Security shall, unless otherwise provided therein, be delivered to a Depositary designated pursuant to Section 301.
Without unnecessary delay but in any event not later than the date specified in or determined pursuant to the terms of any such temporary Global Security (the “Exchange Date”), the Securities represented by any temporary Global Security may be exchanged for definitive Securities (subject to the second succeeding paragraph) or Securities to be represented thereafter by one or more permanent Global Securities. On or after the Exchange Date such temporary Global Security shall be surrendered by the Depositary to the Trustee for such Security, as the Company’s agent for such purpose, or the agent appointed by the Company pursuant to Section 301 to effect the exchange of the temporary Global Security for definitive Securities (the “Global Exchange Agent”), and following such surrender, such Trustee or the Global Exchange Agent (as appointed by the Trustee as an Authenticating Agent pursuant to Section 614) shall (1) endorse the temporary Global Security to reflect the reduction of its principal amount by an equal aggregate principal amount of such Security, (2) endorse the applicable permanent Global Security, if any, to reflect the initial amount, or an increase in the amount of Securities represented thereby, (3) manually authenticate such definitive Securities or such permanent Global Security, as the case may be, (4) subject to Section 303, deliver such definitive Securities to the Holder thereof or, as the case may be, deliver such permanent Global Security to the Depositary to be held outside the United States for the accounts of Euroclear and Clearstream, for credit to the respective accounts at Euroclear and Clearstream, designated by or on behalf of the beneficial owners of such Securities (or to such other accounts as they may direct) and (5) redeliver such temporary Global Security to the Depositary, unless such temporary Global Security shall have been canceled in accordance with Section 309 hereof; provided, however, that, unless otherwise specified in such temporary Global Security, upon such presentation by the Depositary, such temporary Global Security shall be accompanied by a certificate dated the Exchange Date or a subsequent date and signed by Euroclear as to the portion of such temporary Global Security held for its account then to be exchanged for definitive Securities or one or more permanent Global Securities, as the case may be, and a certificate dated the Exchange Date or a subsequent date and signed by Clearstream, as to the portion of such temporary Global Security held for its account then to be exchanged for definitive Securities or one or more permanent Global Securities, as the case may be, each substantially in the form set forth in Exhibit B to this Indenture. Each certificate substantially in the form of Exhibit B hereto of Euroclear or Clearstream, as the case may be, shall be based on certificates of the account holders listed in the records of Euroclear or Clearstream, as the case may be, as being entitled to all or any portion of the applicable temporary Global Security. An account holder of Euroclear or Clearstream, as the case may be, desiring to effect the exchange of interest in a temporary Global Security for an interest in definitive Securities or one or more permanent Global Securities shall instruct Euroclear or Clearstream, as the case may be, to request such exchange on its behalf and shall deliver to Euroclear or Clearstream, as the case may be, a certificate substantially in the form of Exhibit A hereto and dated no earlier than 15 days prior to the Exchange Date. Until so exchanged, temporary Global Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Securities and permanent Global Securities of the same series authenticated and delivered hereunder, except as provided in the fourth succeeding paragraph.
The delivery to the Trustee for the Securities of the appropriate series or the Global Exchange Agent by Euroclear or Clearstream of any certificate substantially in the form of Exhibit B hereto may be relied upon by the Company and such Trustee or the Global Exchange Agent as conclusive evidence that a corresponding certificate or certificates has or have been delivered to Euroclear or to Clearstream, as the case may be, pursuant to the terms of this Indenture.
On or prior to the Exchange Date, the Company shall deliver to the Trustee for the Securities of the appropriate series or the Global Exchange Agent definitive Securities in aggregate principal amount equal to the principal amount of such temporary Global Security, executed by the Company. At any time, on or after the Exchange Date, upon 30 days’ notice to the Trustee for the Securities of the appropriate series or the Global Exchange Agent by Euroclear or Clearstream, as the case may be, acting at the request of or on behalf of the beneficial owner, a Security represented by a temporary Global Security or a permanent Global Security, as the case may be, may be exchanged, in whole or from time to time in part, for definitive Securities without charge and such Trustee or the Global Exchange Agent shall authenticate and deliver, in exchange for each portion of such temporary Global Security or such permanent Global Security, an equal aggregate principal amount of definitive Securities of the same series of authorized denominations and with like terms and provisions as the portion of such temporary Global Security or such permanent Global Security to be exchanged, which, shall be in the form of Registered Securities. On or prior to the thirtieth day following receipt by the Trustee for the Securities of the appropriate series or the Global Exchange Agent of such notice with respect to a Security, or, if such day is not a Business Day, the next succeeding Business Day, the temporary Global Security or the permanent Global Security, as the case may be, shall be surrendered by the Depositary to such Trustee, as the Company’s agent for such purpose, or the Global Exchange Agent to be exchanged in whole, or from time to time in part, for definitive Securities without charge following such surrender, upon the request of Euroclear or Clearstream, as the case may be, and such Trustee or the Global Exchange Agent shall (1) endorse the applicable temporary Global Security or the permanent Global Security to reflect the reduction of its principal amount by the aggregate principal amount of such Security, (2) in accordance with procedures acceptable to the Trustee cause the terms of such Security to be entered on a definitive Security, and (3) manually authenticate such definitive Security.
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Unless otherwise specified in such temporary Global Security or permanent Global Security, any such exchange shall be made free of charge to the beneficial owners of such temporary Global Security or permanent Global Security, except that a Person receiving definitive Securities must bear the cost of insurance, postage, transportation and the like in the event that such Person does not take delivery of such definitive Securities in person at the offices of Euroclear or Clearstream.
Until exchanged in full as hereinabove provided, any temporary Global Security or permanent Global Security shall in all respects be entitled to the same benefits under this Indenture as definitive Securities of the same series and with like terms and conditions, except as to payment of interest, if any, authenticated and delivered hereunder. Unless otherwise specified as contemplated by Section 301, interest payable on such temporary Global Security on an Interest Payment Date for Securities of such series shall be payable to Euroclear and Clearstream on such Interest Payment Date upon delivery by Euroclear and Clearstream to the Trustee for the Securities of the appropriate series or the Global Exchange Agent in the case of payment of interest on a temporary Global Security with respect to an Interest Payment Date occurring prior to the applicable Exchange Date of a certificate or certificates substantially in the form set forth in Exhibit C to this Indenture, for credit without further interest on or after such Interest Payment Date to the respective accounts of the Persons who are the beneficial owners of such Global Security on such Interest Payment Date and who have, in the case of payment of interest on a temporary Global Security with respect to an Interest Payment Date occurring prior to the applicable Exchange Date, each delivered to Euroclear or Clearstream, as the case may be, a certificate substantially in the form set forth in Exhibit D to this Indenture.
With respect to Exhibits A, B, C and D to this Indenture, the Company may, in its discretion and if required or desirable under applicable law, substitute one or more other forms of such exhibits for such exhibits, eliminate the requirement that any or all certificates be provided, or change the time that any certificate may be required, provided that such substitute form or forms or notice of elimination or change of such certification requirement have theretofore been delivered to the Trustee with a Company Request and such form or forms, elimination or change is reasonably acceptable to the Trustee.
SECTION 305. Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office of the Trustee for the Securities of each series a register (the register maintained in such office being herein sometimes referred to as the “Security Register”) in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Registered Securities and of transfers of Registered Securities. The Trustee for the Securities of each series is hereby initially appointed “Security Registrar” for the purpose of registering Registered Securities and transfers of Registered Securities of such series as herein provided.
Upon surrender for registration of transfer of any Registered Security of any particular series at the office or agency of the Company in a Place of Payment for that series, the Company shall execute, and the Trustee for the Securities of each series shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Registered Securities of any authorized denominations, and of a like Stated Maturity and of a like series and aggregate principal amount and with like terms and conditions.
Except as set forth below, at the option of the Holder, Registered Securities of any particular series may be exchanged for other Registered Securities of any authorized denominations, and of a like Stated Maturity and of a like series and aggregate principal amount and with like terms and conditions, upon surrender of the Registered Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee for such Securities shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive.
Notwithstanding any other provision of this Section or Section 304, unless and until it is exchanged in whole or in part for Registered Securities in definitive form, a Global Security representing all or a portion of the Registered Securities of a series may not be transferred except as a whole by the Depositary for such series to a nominee of such Depositary or by a nominee of such Depositary to such Depositary or another nominee of such Depositary or by such Depositary or any such nominee to a successor Depositary for such series or a nominee of such successor Depositary. Neither the Trustee nor any Agent shall have any responsibility or liability for any actions taken or not taken by the Depositary.
Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee for such Securities shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive.
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If at any time the Depositary for Securities of a series in registered form notifies the Company that it is unwilling or unable to continue as Depositary for the Securities of such series or if at any time the Depositary for the Securities of such series shall no longer be eligible under Section 303, the Company shall appoint a successor Depositary with respect to the Securities for such series. If (i) a successor Depositary for the Securities of such series is not appointed by the Company within 90 days after the Company receives such notice or becomes aware of such ineligibility, (ii) the Company delivers to the Trustee for Securities of such series in registered form a Company Order stating that the Securities of such series shall be exchangeable, or (iii) an Event of Default under Section 501 hereof has occurred and is continuing with respect to the Securities of such series, the Company’s election pursuant to Section 301 shall no longer be effective with respect to the Securities for such series and the Company will execute, and the Trustee, upon receipt of a Company Order for the authentication and delivery of definitive Securities of such series, will authenticate and deliver Securities of such series in definitive form in an aggregate principal amount equal to the principal amount of the Global Security or Securities representing such series in exchange for such Global Security or Securities.
The Company may at any time and in its sole discretion determine that the Registered Securities of any series issued in the form of one or more Global Securities shall no longer be represented by such Global Security or Securities. In such event the Company will execute, and the Trustee, upon receipt of a Company Order for the authentication and delivery of definitive Registered Securities of such series, will authenticate and deliver, Registered Securities of such series in definitive form and in an aggregate principal amount equal to the principal amount of the Global Security or Securities representing such series in exchange for such Global Security or Securities. If specified by the Company pursuant to Section 301 with respect to a series of Securities in registered form, the Depositary for such series of Securities may surrender a Global Security for such series of Securities in exchange in whole or in part for Securities of such series of like tenor and terms and in definitive form on such terms as are acceptable to the Company and such Depositary. Thereupon the Company shall execute, and the Trustee shall authenticate and deliver, without service charge, (i) to each Person specified by such Depositary a new Security or Securities of the same series, of like tenor and terms and of any authorized denomination as requested by such Person in aggregate principal amount equal to and in exchange for such Person’s beneficial interest in the Global Security and (ii) to such Depositary a new Global Security of like tenor and terms and in a denomination equal to the difference, if any, between the principal amount of the surrendered Global Security and the aggregate principal amount of Securities delivered to Holders thereof.
Upon the exchange of a Global Security for Securities in definitive form, such Global Security shall be canceled by the Trustee. Registered Securities issued in exchange for a Global Security pursuant to this Section shall be registered in such names and in such authorized denominations as the Depositary for such Global Security, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee in writing. The Trustee shall deliver such Registered Security to the persons in whose names such Securities are so registered.
All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer or exchange shall (if so required by the Company or the Trustee for such Security) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar for such series duly executed, by the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or exchange of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 304, 906 or 1107 not involving any transfer.
The Company shall not be required (i) to issue, register the transfer of or exchange Securities of any series during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of Securities of that series selected for redemption under Section 1104 and ending at the close of business on the day of the mailing of the relevant notice of redemption, or (ii) to register the transfer of or exchange any Registered Security so selected for redemption as a whole or in part, except the unredeemed portion of any Security being redeemed in part.
Furthermore, notwithstanding any other provision of this Section 305, the Company will not be required to exchange any Securities if, as a result of the exchange, the Company would suffer adverse consequences under any United States law or regulation.
The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Security (including any transfers between or among Depositary participants or beneficial owners of interests in any Global Security) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by the terms of, this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof.
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SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities.
If (i) any mutilated Security is surrendered to the Trustee for such Security or the Company and the Trustee for a Security receive evidence to their satisfaction of the destruction, loss or theft of any Security, and (ii) there is delivered to the Company and such Trustee such security or indemnity as may be required by them to save each of them and any agent of either of them harmless, then, in the absence of written notice to the Company or such Trustee that such Security has been acquired by a protected purchaser (as defined in Article 8 of the New York Uniform Commercial Code), the Company shall execute and upon its written request such Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security or in exchange for such mutilated Security.
In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security (without surrender thereof except in the case of a mutilated Security) if the applicant for such payment shall furnish to the Company and the Trustee for such Security such security or indemnity as may be required by them to save each of them harmless, and in case of destruction, loss or theft, evidence satisfactory to the Company and such Trustee and any agent of either of them of the destruction, loss or theft of such Security and the ownership thereof.
Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including all fees and expenses of the Trustee for such Security) connected therewith.
Every new Security of any series issued pursuant to this Section in lieu of any destroyed, lost or stolen Security or in exchange for any mutilated Security shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and each such new Security shall be at any time enforceable by anyone, and each such new Security shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities of the same series, duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 307. Payment of Interest; Interest Rights Preserved.
Interest on any Registered Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall, if so provided in such Security, be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest payment.
Unless otherwise provided with respect to the Securities of any series, payment of interest may be made at the option of the Company by check mailed or delivered to the address of the Person entitled thereto as such address shall appear in the Security Register or by transfer to an account maintained by the payee with a bank located inside the United States.
Notwithstanding the foregoing, a Holder of $1,000,000 or more in aggregate principal amount of Securities of any series in definitive form, whether having identical or different terms and provisions, having the same Interest Payment Dates will, at the option of the Company, be entitled to receive interest payments, other than at Maturity, by wire transfer of immediately available funds if appropriate wire transfer instructions have been received in writing by the Trustee for the Securities of such series at least 15 days prior to the applicable Interest Payment Date. Any wire instructions received by the Trustee for the Securities of such series shall remain in effect until revoked by the Holder.
Unless otherwise provided or contemplated by Section 301, every permanent Global Security will provide that interest, if any, payable on any Interest Payment Date will be paid to each of Euroclear and Clearstream with respect to that portion of such permanent Global Security held for its account by the Depositary. Each of Euroclear and Clearstream will in such circumstances credit the interest received by it in respect of such permanent Global Security to the accounts of the beneficial owners thereof.
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Any interest on any Registered Security of any particular series which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called “Defaulted Interest”) shall forthwith cease to be payable to the registered Holder on the relevant Regular Record Date by virtue of having been such Holder; and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Registered Securities of that series (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee for the Registered Securities of such series in writing in the form of an Officers’ Certificate of the amount of Defaulted Interest proposed to be paid on each Registered Security of that series and the date of the proposed payment, and at the same time the Company shall deposit with such Trustee an amount of money in the currency or currency unit in which the Securities of such series are payable (except as otherwise specified pursuant to Section 301 for the Securities of such series and except as provided in Sections 311(b) and 311(d)), equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to such Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Company shall fix a Special Record Date for the payment of such Defaulted Interest which shall not be more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the written notice of the proposed payment. The Company shall promptly notify the Trustee in writing of such Special Record Date and, in the name and at the expense of the Company, the Trustee shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder of Registered Securities of that series at his address as it appears in the Security Register not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been mailed as aforesaid, such Defaulted Interest shall be paid to the Persons in whose names the Registered Securities of that series (or their respective Predecessor Securities) are registered on such Special Record Date and shall no longer be payable pursuant to the following clause (2);
(2) The Company may make payment of any Defaulted Interest on Registered Securities of any particular series in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Registered Securities may be listed, and upon such notice as may be required by such exchange, if, after written notice is given by the Company to the Trustee for the Securities of such series of the proposed manner of payment pursuant to this clause, such manner of payment shall be deemed practicable by such Trustee. Subject to the foregoing provisions of this Section and Section 305, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. The Trustee shall not at any time be under any duty or responsibility to any Holder to determine the Defaulted Interest, or with respect to the nature, extent, or calculation of the amount of Defaulted Interest owed, or with respect to the method employed in such calculation of the Defaulted Interest.
SECTION 308. Persons Deemed Owners.
Prior to due presentment of a Registered Security for registration of transfer, the Company, the Trustee for such Security and any agent of the Company or such Trustee may treat the Person in whose name any such Security is registered as the owner of such Security for the purpose of receiving payment of principal of, and premium, if any, and (subject to Section 307) interest, if any, on such Security and for all other purposes whatsoever, whether or not such Security be overdue, and none of the Company, such Trustee or any agent of the Company or such Trustee shall be affected by notice to the contrary.
None of the Company, the Trustee, any Paying Agent or the Security Registrar will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of a Global Security or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.
SECTION 309. Cancellation.
All Securities surrendered for payment, redemption, registration of transfer or exchange, or delivered in satisfaction of any sinking fund payment, shall, if surrendered to any Person other than the Trustee for such Securities, be delivered to such Trustee and, in the case of Registered Securities, shall be promptly canceled by it in accordance with its applicable procedures. The Company may at any time deliver to the Trustee for Securities of a series for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly canceled by such Trustee. Notwithstanding any other provision of this Indenture to the contrary, in the case of a series, all the Securities of which are not to be originally issued at one time, a Security of such series shall not be deemed to have been Outstanding at any time hereunder if and to the extent that, subsequent to the authentication and delivery thereof, such Security is delivered to the Trustee for such Security for cancellation by the Company or any agent thereof upon the failure of the original purchaser thereof to make payment therefor against delivery thereof, and any Security so delivered to such Trustee shall be promptly canceled by it. No Securities shall be authenticated in lieu of or in exchange for any Securities canceled as provided in this Section, except as expressly permitted by this Indenture. All canceled Securities held by the Trustee for such Securities shall be cancelled by such Trustee in accordance with its standard procedures and, upon the Company’s written request, a certificate of cancellation evidencing such disposition of Securities shall be provided to the Company by such Trustee. In the case of any temporary Global Security, which shall be disposed of if the entire aggregate principal amount of the Securities represented thereby has been exchanged, the certificate of disposition shall state that all certificates required pursuant to Section 304 hereof, substantially in the form of Exhibit B hereto (or in the form of any substitute exhibit as provided in the last paragraph of Section 304), to be given by Euroclear or Clearstream, have been duly presented to the Trustee for such Securities by Euroclear or Clearstream, as the case may be. Permanent Global Securities shall not be disposed of until exchanged in full for definitive Securities or until payment thereon is made in full.
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SECTION 310. Computation of Interest.
Except as otherwise specified as contemplated by Section 301 for Securities of any particular series, interest on the Securities of each series shall be computed on the basis of a 360-day year of twelve 30-day months.
SECTION 311. Currency and Manner of Payments in Respect of Securities.
Unless otherwise specified in accordance with Section 301 with respect to any series of Securities, the following provisions shall apply:
(a) Except as provided in paragraphs (b) and (d) below, principal of, and premium, if any, and interest on Securities of any series denominated in a Foreign Currency or currency unit will be payable by the Company in Dollars based on the equivalent of that Foreign Currency or currency unit converted into Dollars in the manner described in paragraph (c) below.
(b) It may be provided pursuant to Section 301 with respect to Registered Securities of any series denominated in a Foreign Currency or currency unit that Holders shall have the option, subject to paragraph (d) below, to receive payments of principal of, and premium, if any, and interest on such Registered Securities in such Foreign Currency or currency unit by delivering to the Trustee (or to any duly appointed Paying Agent) for the Registered Securities of that series a written election, to be in form and substance satisfactory to such Trustee (or to any such Paying Agent), not later than the close of business on the Election Date immediately preceding the applicable payment date. If a Holder so elects to receive such payments in such Foreign Currency or currency unit, such election will remain in effect for such Holder until changed by such Holder by written notice to the Trustee (or to any such Paying Agent) for the Registered Securities of that series; provided, however, that any such change must be made not later than the close of business on the Election Date immediately preceding the next payment date to be effective for the payment to be made on such payment date; and provided, further, that no such change or election may be made with respect to payments to be made on any Registered Security of such series with respect to which an Event of Default has occurred, the Company has exercised any defeasance, satisfaction or discharge options pursuant to Article Four or notice of redemption has been given by the Company pursuant to Article Eleven. If any Holder makes any such election, such election will not be effective as to any transferee of such Holder and such transferee shall be paid in Dollars unless such transferee makes an election as specified above; provided, however, that such election, if in effect while funds are on deposit with respect to the Registered Securities of such series as described in Section 404 or 405, will be effective on any transferee of such Holder unless otherwise specified pursuant to Section 301 for such Registered Securities. Any Holder of any such Registered Security who shall not have delivered any such election to the Trustee (or to any duly appointed Paying Agent) for the Registered Securities of such series not later than the close of business on the applicable Election Date will be paid the amount due on the applicable payment date in Dollars.
(c) With respect to any Registered Securities of any series denominated in a Foreign Currency or currency unit and payable in Dollars, the amount of Dollars so payable will be determined by the Currency Determination Agent based on the indicative quotation in The City of New York selected by the Currency Determination Agent at approximately 11:00 a.m., New York City time, on the second Business Day preceding the applicable payment date that yields the largest number of Dollars on conversion of Foreign Currency or currency units. Such selection shall be made from among the quotations appearing on the bank composite or multi-contributor pages of the Reuters Monitor Foreign Exchange Service or, if not available, the Bridge Telerate Monitor Foreign Exchange Service, for three (or two if three are not available) major banks in The City of New York. The first three (or two) such banks selected by the Currency Determination Agent which are offering quotes on the Reuters Foreign Exchange Service, as the case may be, shall be used. If such quotations are unavailable from either such foreign exchange service, such selection shall be made from the quotations received by the Currency Determination Agent from no more than three nor less than two recognized foreign exchange dealers in The City of New York selected by the Currency Determination Agent and approved by the Company (one of which may be the Currency Determination Agent) for the purchase by the quoting dealer, for settlement on such payment date, of the aggregate amount of the Foreign Currency or currency unit payable on such payment date in respect of all Registered Securities denominated in such Foreign Currency or currency unit and for which the applicable dealer commits to execute a contract. If fewer than two such bid quotations are available at 11:00 a.m., New York City time, on the second Business Day preceding the applicable payment date, such payment will be based on the Market Exchange Rate as of the second Business Day preceding the applicable payment date. If the Market Exchange Rate for such date is not then available, payments shall be made in the Foreign Currency or currency unit.
(d) If a Conversion Event occurs with respect to a Foreign Currency or currency unit in which Registered Securities of any series are payable, then with respect to each date for the payment of principal of, and premium, if any, and interest on the Registered Securities of that series occurring after the last date on which such Foreign Currency or currency unit was used, the Company may make such payment in Dollars. The Dollar amount to be paid by the Company to the Trustee for the Registered Securities of such series and by such Trustee or any Paying Agent for the Registered Securities of such series to the Holders of such Registered Securities with respect to such payment date shall be determined by the Currency Determination Agent on the basis of the Market Exchange Rate as of the second Business Day preceding the applicable payment date or, if such Market Exchange Rate is not then available, on the basis of the most recently available Market Exchange Rate, or as otherwise established pursuant to Section 301 with respect to such Notes. Any payment in respect of such Registered Security made under such circumstances in Dollars will not constitute an Event of Default hereunder.
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(e) For purposes of this Indenture the following terms shall have the following meanings:
A “Component Currency” shall mean any currency which is a component of any unit.
“Election Date” shall mean, for the Registered Securities of any series, the date specified pursuant to Section 301(14).
(f) Notwithstanding any other provisions of this Section 311, the following shall apply: (i) if the official unit of any Component Currency is altered by way of combination or subdivision, the number of units of that currency as a component shall be divided or multiplied in the same proportion, (ii) if two or more Component Currencies are consolidated into a single currency, the amounts of those currencies as components shall be replaced by an amount in such single currency equal to the sum of the amounts of the consolidated Component Currencies expressed in such a single currency, (iii) if any Component Currency is divided into two or more currencies, the amount of that original Component Currency as a component shall be replaced by the amounts of such two or more currencies having an aggregate value on the date of division equal to the amount of the former Component Currency immediately before such division, and (iv) in the event of an official redenomination of any currency (including, without limitation, a currency unit), the obligations of the Company to make payments in or with reference to such currency on the Registered Securities of any series shall, in all cases, be deemed immediately following such redenomination to be obligations to make payments in or with reference to that amount of redenominated currency representing the amount of such currency immediately before such redenomination.
(g) All determinations referred to in this Section 311 made by the Currency Determination Agent shall be in its sole discretion and shall, in the absence of manifest error, be conclusive for all purposes and irrevocably binding upon the Holders of the applicable Securities. The Currency Determination Agent shall promptly give written notice to the Trustee for the Securities of such series of any such decision or determination. The Currency Determination Agent shall promptly give written notice to the Trustee of any such decision or determination. The Currency Determination Agent shall have no liability for any determinations referred to in this Section 311 made by it in the absence of willful misconduct or gross negligence.
(h) The Trustee for the Securities of a particular series shall be fully justified and protected in relying and acting upon information received by it from the Company and the Currency Determination Agent with respect to any of the matters addressed in or contemplated by this Section 311 and shall not otherwise have any duty, responsibility or obligation to determine such information independently.
SECTION 312. Appointment and Resignation of Currency Determination Agent.
(a) If and so long as the Securities of any series (i) are denominated in a currency unit or a currency other than Dollars, or (ii) may be payable in a currency unit or a currency other than Dollars, or so long as it is required under any other provision of this Indenture, then the Company shall maintain with respect to each such series of Securities, or as so required, a Currency Determination Agent. The Company shall cause the Currency Determination Agent to make the necessary foreign exchange determinations at the time and in the manner specified pursuant to Section 301 for the purpose of determining the applicable rate of exchange and for the purpose of converting the issued currency or currency unit into the applicable payment currency or currency unit for the payment of principal, and premium, if any, and interest, if any, pursuant to Section 311.
(b) No resignation of the Currency Determination Agent and no appointment of a successor Currency Determination Agent pursuant to this Section shall become effective until the acceptance of appointment by the successor Currency Determination Agent as evidenced by a written instrument delivered to the Company and the Trustee of the appropriate series of Securities accepting such appointment executed by the successor Currency Determination Agent.
(c) If the Currency Determination Agent shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of the Currency Determination Agent for any cause, with respect to the Securities of one or more series, the Company, by a Board Resolution, shall promptly appoint a successor Currency Determination Agent or Currency Determination Agents with respect to the Securities of that or those series (it being understood that any such successor Currency Determination Agent may be appointed with respect to the Securities of one or more or all of such series and that at any time there shall only be one Currency Determination Agent with respect to the Securities of any particular series).
SECTION 313. CUSIP Numbers.
The Company in issuing the Securities may use “CUSIP” numbers (if then generally in use), and, if so, the Trustee shall use “CUSIP” numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company will promptly notify the Trustee in writing of any change in the “CUSIP” numbers.
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Article Four
SATISFACTION AND DISCHARGE
SECTION 401. Option to Effect Legal Defeasance or Covenant Defeasance.
The Company may, at the option of its Board of Directors evidenced by a Board Resolution, at any time, with respect to the Securities of any series, unless otherwise specified pursuant to Section 301 with respect to a particular series of Securities, elect to have either Section 402 or 403 be applied to all of the Outstanding Securities of that series upon compliance with the conditions set forth below in this Article Four.
SECTION 402. Legal Defeasance and Discharge.
Upon the Company’s exercise under Section 401 of the option applicable to this Section 402, the Company shall be deemed to have been discharged from its obligations with respect to all Outstanding Securities of the particular series on the date the conditions set forth below are satisfied (hereinafter, “Legal Defeasance”). For this purpose, such Legal Defeasance means that the Company shall be deemed to have paid and discharged all the obligations relating to the Outstanding Securities of that series and the Securities of that series shall thereafter be deemed to be “outstanding” only for the purposes of Section 406, Section 408 and the other Sections of this Indenture referred to below in this Section 402, and to have satisfied all of its other obligations under such Securities and this Indenture and cured all then existing Events of Default (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of outstanding Securities of the particular series to receive payments in respect of principal of, and premium, if any, and interest, if any, on such Securities when such payments are due or on the Redemption Date solely out of the trust created pursuant to this Indenture; (b) the Company’s obligations with respect to such Securities concerning issuing temporary Securities of that series, or, where relevant, registration of such Securities, mutilated, destroyed, lost or stolen Securities of that series and the maintenance of an office or agency for payment and money for Security payments held in trust; (c) the rights, powers, trusts, duties and immunities of the Trustee for the Securities of that series, and the Company’s obligations in connection therewith; and (d) this Article Four and the obligations set forth in Section 406 hereof. Subject to compliance with this Article Four, the Company may exercise its option under Section 402 notwithstanding the prior exercise of its option under Section 403 with respect to the Securities of a particular series.
SECTION 403. Covenant Defeasance.
Upon the Company’s exercise under Section 401 of the option applicable to this Section 403, the Company shall be released from any obligations under the covenants contained in Sections 704, 801, 1007 and 1008 hereof with respect to the Outstanding Securities of the particular series on and after the date the conditions set forth below are satisfied (hereinafter, “Covenant Defeasance”), and the Securities of that series shall thereafter be deemed not “Outstanding” for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed “Outstanding” for all other purposes hereunder (it being understood that such Securities shall not be deemed outstanding for accounting purposes). For this purpose, such Covenant Defeasance means that, with respect to the Outstanding Securities of that series, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a default or Event of Default under subsection 501(3) but, except as specified above, the remainder of this Indenture and the Securities of that series shall be unaffected thereby.
SECTION 404. Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of either Section 402 or Section 403 to the outstanding Securities of a particular series:
(a) the Company must irrevocably deposit, or cause to be irrevocably deposited, with the Trustee for the Securities of that series, in trust, for the benefit of the Holders of the Securities of that series, cash in the currency or currency unit in which the Securities of that series are payable (except as otherwise specified pursuant to Section 301 for the Securities of that series and except as provided in Sections 311(b) and 311(d), in which case the deposit to be made with respect to Securities for which an election has occurred pursuant to Section 311(b), or a Conversion Event has occurred as provided in Section 311(d), shall be made in the currency or currency unit in which the Securities of that series are payable as a result of such election or Conversion Event), Government Obligations or a combination thereof in such amounts as will be sufficient, in the opinion of an internationally recognized firm of independent public accountants, to pay principal, and premium, if any, and interest, if any, due on the outstanding Securities of that series at the Stated Maturity, or on the applicable Redemption Date, as the case may be, with respect to the outstanding Securities of that series;
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(b) in the case of Legal Defeasance, the Company shall have delivered to the Trustee for the Securities of that series an Opinion of Counsel in the United States reasonably acceptable to such Trustee confirming that, subject to customary assumptions and exclusions, (1) the Company has received from, or there has been published by, the U.S. Internal Revenue Service a ruling or (2) since the Issue Date, there has been a change in the applicable U.S. federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel in the United States shall confirm that, subject to customary assumptions and exclusions, the Holders of the Outstanding Securities of that series will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Legal Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;
(c) in the case of Covenant Defeasance, the Company shall have delivered to the Trustee for the Securities of that series an Opinion of Counsel in the United States reasonably acceptable to such Trustee confirming that, subject to customary assumptions and exclusions, the Holders of the Outstanding Securities of that series will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Covenant Defeasance and will be subject to such tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;
(d) no Event of Default or event which with the giving of notice or the lapse of time, or both, would become an Event of Default with respect to the Securities of that series shall have occurred and be continuing on the date of such deposit after giving effect to such Legal Defeasance or Covenant Defeasance and no Event of Default under Section 501(4) or Section 501(5) shall have occurred and be continuing on the 123rd day after such date;
(e) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under any material agreement or instrument to which the Company is a party or by which the Company is bound; and
(f) the Company shall have delivered to the Trustee for the Securities of that series an Officers’ Certificate and an Opinion of Counsel in the United States (which Opinion of Counsel may be subject to customary assumptions and exclusions) each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance, as the case may be, have been complied with.
SECTION 405. Satisfaction and Discharge of Indenture.
This Indenture will be discharged and will cease to be of further effect as to all Securities of any particular series issued hereunder when either (i) all Securities of that series theretofore authenticated and delivered (except (A) lost, stolen or destroyed Securities of such series which have been replaced or paid as provided in Section 306, and (B) Securities of such series for whose payment money has theretofore been deposited in trust and thereafter repaid to the Company or discharged from such trust, as provided in the last paragraph of Section 1003) have been delivered to the Trustee for the Securities of that series for cancellation or (ii) (A) all Securities of that series not theretofore delivered to Trustee for cancellation are due and payable by their terms within one year or have become due and payable by reason of the making of a notice of redemption and the Company has irrevocably deposited or caused to be deposited with such Trustee as trust funds in trust an amount of cash in any combination of currency or currency unit in which the Securities of such series are payable (except as otherwise specified pursuant to Section 301 for the Securities of such series and except as provided in Sections 311(b) and 311(d), in which case the deposit to be made with respect to Securities for which an election has occurred pursuant to Section 311(b) or a Conversion Event has occurred as provided in Section 311(d), shall be made in the currency or currency unit in which such Securities are payable as a result of such election or Conversion Event) sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for the Securities of that series for cancellation of principal, and premium, if any, and accrued and unpaid interest, if any, to the Stated Maturity or Redemption Date, as the case may be; (B) no Event of Default or event which with the giving of notice or the lapse of time, or both, would become an Event of Default shall have occurred and be continuing on the date of such deposit after giving effect thereto and no Event of Default under Section 501(4) or Section 501(5) shall have occurred and be continuing on the 123rd day after such date; (C) the Company has paid, or caused to be paid, all sums payable by it under this Indenture; and (D) the Company has delivered irrevocable written instructions to the Trustee for the Securities of that series under this Indenture to apply the deposited money toward the payment of such Securities at the Stated Maturity or the Redemption Date, as the case may be. In addition, the Company must deliver an Officers’ Certificate and an Opinion of Counsel to the Trustee for the Securities of that series stating that all conditions precedent to satisfaction and discharge have been satisfied.
SECTION 406. Survival of Certain Obligations.
Notwithstanding the satisfaction and discharge of this Indenture and of the Securities of a particular series referred to in Sections 401, 402, 404, or 405, the respective obligations of the Company and the Trustee for the Securities of a particular series under Sections 303, 304, 305, 307, 309, 407, 408, 409, 410, and 508, Article Six, and Sections 701, 702, 1002, 1003, 1004 and 1006, shall survive with respect to Securities of that series until the Securities of that series are no longer outstanding, and thereafter the obligations of the Company and the Trustee for the Securities of a particular series with respect to that series under Sections 407, 408, 409, 410 and 607 shall survive. Nothing contained in this Article Four shall abrogate any of the obligations or duties of the Trustee of any series of Securities under this Indenture.
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Notwithstanding the satisfaction of the conditions set forth in Sections 404 or 405 with respect to all the Securities of any series not payable in Dollars, upon the happening of any Conversion Event the Company shall be obligated to make the payments in Dollars required by Section 311(d) to the extent that the Trustee is unable to convert any Foreign Currency or currency unit or currency unit in its possession pursuant to Sections 404 or 405 into the Dollar equivalent of such Foreign Currency or currency unit, as the case may be. If, after the deposits referred to in Sections 404 or 405 have been made, (x) the Holder of a Security is entitled to, and does, elect pursuant to Section 311(b) to receive payment in a currency or currency unit other than that in which the deposit pursuant to Sections 404 or 405 was made, or (y) a Conversion Event occurs as contemplated in Section 311(d), then the indebtedness represented by such Security shall be fully discharged to the extent that the deposit made with respect to such Security shall be converted into the currency or currency unit in which such Security is payable. The Trustee shall return to the Company any non-converted funds or securities in its possession after such payments have been made.
SECTION 407. Acknowledgment of Discharge by Trustee.
Subject to Section 410, after (i) the conditions of Section 404 or 405 have been satisfied with respect to the Securities of a particular series, (ii) the Company has paid or caused to be paid all other sums payable hereunder by the Company, and (iii) the Company has delivered to the Trustee for the Securities of that series an Officers’ Certificate and an Opinion of Counsel, each stating that all conditions precedent referred to in clause (i) above relating to the satisfaction and discharge of this Indenture have been complied with, the Trustee for the Securities of that series upon written request shall acknowledge in writing the discharge of all of the Company’s obligations under this Indenture with respect to the applicable series of Securities except for those surviving obligations specified in this Article Four.
SECTION 408. Application of Trust Moneys.
All money and Government Obligations deposited with the Trustee for the Securities of a particular series pursuant to Section 404 or 405 in respect of the Securities of that series shall be held in trust and applied by it, in accordance with the provisions of such Securities and this Indenture, to the payment, either directly or through any Paying Agent as the Trustee may determine, to the Holders of the Securities of all sums due and to become due thereon for principal, and premium, if any, and interest, if any, but such money need not be segregated from other funds except to the extent required by law. The Company shall pay and indemnify the Trustee for the Securities of a particular series against any tax, fee or other charge imposed on or assessed against the Government Obligations deposited pursuant to Section 404 or 405 with respect to the Securities of that series or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of outstanding Securities of that series.
SECTION 409. Repayment to the Company; Unclaimed Money.
The Trustee and any Paying Agent for a series of Securities shall promptly pay or return to the Company upon Company Order any cash or Government Obligations held by them at any time that are not required for the payment of principal of, and premium, if any, and interest, if any, on the Securities for which cash or Government Obligations have been deposited pursuant to Section 404 or 405. Any money deposited with the Trustee or any Paying Agent for the Securities of any series, or then held by the Company, in trust for the payment of principal of, and premium, if any, and interest, if any, on any Security of any particular series and remaining unclaimed for two years after such principal and premium, if any, and interest, if any, has become due and payable shall, unless otherwise required by mandatory provisions of applicable escheat, or abandoned or unclaimed property law, be paid to the Company on Company Request or (if then held by the Company) shall be discharged from such trusts; and the Holder of such Security shall, thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of such Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that such Trustee or such Paying Agent, before being required to make any such repayment may give written notice to the Holder of such Security in the manner set forth in Section 106, that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will, unless otherwise required by mandatory provisions of applicable escheat, or abandoned or unclaimed property law, be repaid to the Company, as the case may be.
SECTION 410. Reinstatement.
If the Trustee or Paying Agent for a series of Securities is unable to apply any cash or Government Obligations, as applicable, in accordance with Section 402, 403, 404 or 405 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company’s obligations under this Indenture and the Securities of that series shall be revived and reinstated as though no deposit had occurred pursuant to Section 402, 403, 404 or 405 until such time as the Trustee or Paying Agent for that series is permitted to apply all such cash or Government Obligations in accordance with Section 402, 403, 404 or 405; provided, however, that if the Company has made any payment of principal of, and premium, if any, and interest, if any, on any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the cash or Government Obligations, as applicable, held by such Trustee or Paying Agent.
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Article Five
REMEDIES
SECTION 501. Events of Default.
(a) “Event of Default” wherever used herein with respect to any particular series of Securities means any one of the following events and such other events as may be established with respect to the Securities of such series as contemplated by Section 301 (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):
(1) default in the payment of any installment of interest upon any Security of that series when it becomes due and payable, and continuance of such default for a period of 30 days; or
(2) default in the payment of principal of, or premium, if any, on any Security of that series at its Maturity or default in the deposit of any sinking fund payment when and as due by the terms of any Security of that series; or
(3) default in the performance of, or breach of, any covenant or warranty of the Company in respect of any Security of that series contained in this Indenture or in such Securities (other than a covenant or warranty a default in whose performance or whose breach is elsewhere in this Section specifically dealt with) or in the applicable Board Resolution under which such series is issued as contemplated by Section 301 and continuance of such default or breach for a period of 90 days after there has been given, by registered or certified mail, to the Company by the Trustee for the Securities of such series or to the Company and such Trustee by the Holders of at least 25% in principal amount of the Outstanding Securities of that series a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a “Notice of Default” hereunder; or
(4) the Company shall commence any case or proceeding seeking to have an order for relief entered on its behalf as debtor or to adjudicate it as bankrupt or insolvent or seeking reorganization, liquidation, dissolution, winding-up, arrangement, composition or readjustment of its debts or any other relief under any bankruptcy, insolvency, reorganization, liquidation, dissolution, arrangement, composition, readjustment of debt or other similar act or law of any jurisdiction, domestic or foreign, now or hereafter existing; or the Company shall apply for a receiver, custodian or trustee (other than any trustee appointed as a mortgagee or secured party in connection with the issuance of indebtedness for borrowed money of the Company) of it or for all or a substantial part of its property; or the Company shall make a general assignment for the benefit of creditors; or the Company shall take any corporate action in furtherance of any of the foregoing; or
(5) an involuntary case or other proceeding shall be commenced against the Company with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect seeking the appointment of a trustee, receiver, liquidator, custodian or similar official of it or any substantial part of its property; and such case or other proceeding (A) results in the entry of an order for relief or a similar order against it or (B) shall continue unstayed and in effect for a period of 60 consecutive days; or
(6) any other Event of Default provided in the Security or the Board Resolution with respect to Securities of that series.
(b) So long as any of the Notes are outstanding, the Company will deliver to the Trustee within 30 days of any Officer becoming aware of any Default or Event of Default, an Officers’ Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto.
SECTION 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default with respect to any particular series of Securities and is continuing (other than an Event of Default described in Section 501(4) or 501(5)), then and in every such case either the Trustee for the Securities of such series or the Holders of not less than 25% in principal amount of the Outstanding Securities of that series may declare the entire principal amount (or, in the case of (i) OID Securities, such lesser amount as may be provided for in the terms of that series or (ii) Indexed Securities, the amount determined in accordance with the specified terms of those Securities) of all the Securities of that series to be due and payable immediately, by a notice in writing to the Company (and to such Trustee if given by Holders), and upon any such declaration of acceleration such principal or such lesser amount, as the case may be, together with accrued interest and all other amounts owing hereunder, shall become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived.
If any Event of Default specified in Section 501(4) or 501(5) occurs with respect to the Company, all of the unpaid principal amount (or, if the Securities of any series then outstanding are (i) OID Securities, such lesser amount as may be provided for in the terms of that series or (ii) Indexed Securities, the amount determined in accordance with the specified terms of those Securities) and accrued interest on all Securities of each series then outstanding shall ipso facto become and be immediately due and payable without any declaration or other act by the Trustee or any Holder.
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At any time after such a declaration of acceleration has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee for the Securities of any series as hereinafter in this Article provided, the Holders of a majority in principal amount of the Outstanding Securities of that series, by written notice to the Company and such Trustee, may rescind and annul such declaration and its consequences if:
(1) the Company has paid or deposited with such Trustee a sum sufficient to pay in the currency or currency unit in which the Securities of such series are payable (except as otherwise specified pursuant to Section 301 for the Securities of such series and except as provided in Sections 311(b) and 311(d)):
(A) all overdue interest on all Securities of that series;
(B) the principal of, and premium, if any, on any Securities of that series which have become due otherwise than by such declaration of acceleration and interest thereon from the date such principal became due at a rate per annum equal to the rate borne by the Securities of such series (or, in the case of (i) OID Securities, the Securities’ Yield to Maturity or (ii) Indexed Securities, the rate determined in accordance with the specified terms of those Securities), to the extent that the payment of such interest shall be legally enforceable;
(C) to the extent that payment of such interest is lawful, interest upon overdue interest at a rate per annum equal to the rate borne by the Securities of such series (or, in the case of (i) OID Securities, the Securities’ Yield to Maturity or (ii) Indexed Securities, the rate determined in accordance with the specified terms of those Securities); and
(D) all sums paid or advanced by such Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of such Trustee, its agents and counsel and all other amounts due to such Trustee under Section 607;
and
(2) all Events of Default with respect to the Securities of such series, other than the nonpayment of the principal of Securities of that series which has become due solely by such acceleration, have been cured or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right consequent thereon.
SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee.
The Company covenants that if:
(1) default is made in the payment of any interest upon any Security of any series when such interest becomes due and payable and such default continues for a period of 30 days; or
(2) default is made in the payment of principal of, or premium, if any, on any Security of any series at its Maturity;
the Company will, upon demand of the Trustee for the Securities of such series, pay to it, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal, premium, if any, and interest, if any, with interest upon the overdue principal and premium, if any, and, to the extent that payment of such interest shall be legally enforceable, upon any overdue installments of interest at a rate per annum equal to the rate borne by such Securities (or, in the case of (i) OID Securities, the Securities’ Yield to Maturity or (ii) Indexed Securities, the rate determined in accordance with the specified terms of those Securities); and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of such Trustee, its agents and counsel and all other amounts due to such Trustee under Section 607.
If the Company fails to pay such amounts forthwith upon such demand, such Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding against the Company for the collection of the sums so due and unpaid, and may prosecute such proceedings to judgment or final decree, and may enforce the same against the Company or any other obligor upon the Securities and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon the Securities, wherever situated.
If an Event of Default with respect to Securities of any particular series occurs and is continuing, the Trustee for the Securities of such series may proceed to protect and enforce its rights and the rights of the Holders of Securities of that series by such appropriate judicial proceedings as such Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy.
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SECTION 504. Trustee May File Proofs of Claim.
In case of any judicial proceeding relative to the Company (or any other obligor upon the Securities of any series), its property or its creditors, the Trustee for the Securities of such series irrespective of whether the principal (or, if the Securities of such series are (i) OID Securities or (ii) Indexed Securities, such amount as may be due and payable with respect to such Securities pursuant to a declaration in accordance with Section 502) on any Security of such series shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether such Trustee shall have made any demand on the Company for the payment of overdue principal or interest shall be entitled and empowered, by intervention in such proceeding or otherwise:
(i) to file and prove a claim for the whole amount of principal (or, if the Securities of such series are (i) OID Securities or (ii) Indexed Securities, such amount as may be due and payable with respect to such Securities pursuant to a declaration in accordance with Section 502), premium, if any, and interest, if any, owing and unpaid in respect of the Securities of such series and to file such other papers or documents as may be necessary or advisable in order to have the claims of such Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of such Trustee, its agents and counsel and all other amounts due to such Trustee under Section 607) and of the Holders of the Securities of such series allowed in such judicial proceeding;
(ii) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and
(iii) unless prohibited by law or applicable regulations, to vote on behalf of the Holders of the Securities of such series in any election of a trustee in bankruptcy or other person performing similar functions;
and any receiver, assignee, trustee, liquidator, sequestrator (or other similar official) in any such judicial proceeding is hereby authorized by each Holder of Securities to make such payments to such Trustee, and in the event that such Trustee shall consent to the making of such payments directly to the Holders of Securities, to pay to such Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of such Trustee, its agents and counsel, and any other amounts due such Trustee under Section 607. Nothing herein contained shall be deemed to authorize the Trustee for the Securities of any series to authorize or consent to or accept or adopt on behalf of any Holder of a Security any plan of reorganization, arrangement, adjustment or composition affecting the Securities of such series or the rights of any Holder thereof, or to authorize the Trustee for the Securities of any series to vote in respect of the claim of any Holder in any such proceeding, except as aforesaid, for the election of a trustee in bankruptcy or other person performing similar functions.
SECTION 505. Trustee May Enforce Claims Without Possession of Securities.
All rights of action and claims under this Indenture or the Securities of any series may be prosecuted and enforced by the Trustee for the Securities of any series without the possession of any of the Securities of such series or the production thereof in any proceeding relating thereto, and any such proceeding instituted by such Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of such Trustee, its agents and counsel and all other amounts due to such Trustee under Section 607, be for the ratable benefit of the Holders of the Securities of such series in respect of which such judgment has been recovered.
SECTION 506. Application of Money Collected.
Any money collected by the Trustee for the Securities of any series pursuant to this Article with respect to the Securities of such series shall be applied in the following order, at the date or dates fixed by such Trustee and, in case of the distribution of such money on account of principal or premium, if any, or interest, if any, upon presentation of the Securities of such series, or both, as the case may be, and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid:
First: to the payment of all amounts due such Trustee and its agents under Section 607;
Second: to the payment of the amounts then due and unpaid upon the Securities of such series for principal of, and premium, if any, and interest, if any, on such Securities in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal, and premium, if any, and interest, if any, respectively; and
Third: the balance, if any, to the Person or Persons entitled thereto.
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SECTION 507. Limitation on Suits.
No Holder of any Security of any particular series shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless:
(1) an Event of Default with respect to that series shall have occurred and be continuing and such Holder shall have previously given written notice to the Trustee for the Securities of such series of such default and the continuance thereof;
(2) the Holders of not less than 25% in principal amount of the Outstanding Securities of that series shall have made written request to the Trustee for the Securities of such series to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to such Trustee indemnity or security satisfactory to it against the costs, expenses and liabilities to be incurred in compliance with such request;
(4) such Trustee for 60 days after its receipt of such notice, request and offer of indemnity or security has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been given to such Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Securities of that series; it being understood and intended and being expressly covenanted by the taker and holder of every Security, with every other taker and holder with the Trustee that no one or more Holders of Securities of that series shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders of Securities of that series, or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all the Holders of Securities of that series (it being understood that the Trustee does not have an affirmative duty to ascertain whether or not such actions or forbearances are unduly prejudicial to such Holders).
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium, if any, and Interest, if any.
Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right which is absolute and unconditional to receive payment of principal of, and premium, if any, and (subject to Section 307) interest, if any, on such Security on the respective Stated Maturities expressed in such Security (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such right shall not be impaired without the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies.
If the Trustee for the Securities of any series or any Holder of a Security has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to such Trustee or to such Holder, then and in every such case the Company, such Trustee and the Holders of Securities shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of such Trustee and such Holders shall continue as though no such proceeding had been instituted.
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SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last paragraph of Section 306, no right or remedy herein conferred upon or reserved to the Trustee for the Securities of any series or to the Holders of Securities is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee for the Securities of any series or of any Holder of any Security of such series to exercise any right or remedy accruing upon any Event of Default with respect to the Securities of such series shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to such Trustee for the Securities of any series or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by such Trustee or by the Holders, as the case may be.
SECTION 512. Control by Holders.
The Holders of not less than a majority in principal amount of the Outstanding Securities of any particular series shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee for the Securities of such series with respect to the Securities of that series or exercising any trust or power conferred on such Trustee with respect to such Securities, provided that:
(1) such direction shall not be in conflict with any rule of law or with this Indenture and could not involve the Trustee in personal liability; and
(2) such Trustee may take any other action deemed proper by such Trustee which is not inconsistent with such direction.
SECTION 513. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of the Outstanding Securities of any particular series may on behalf of the Holders of all the Securities of that series waive any past default hereunder with respect to that series and its consequences, except:
(1) a default in the payment of principal of, or premium, if any, or interest, if any, on any Security of that series; or
(2) a default with respect to a covenant or provision hereof which under Article Nine cannot be modified or amended without the consent of the Holder of each Outstanding Security of that series affected.
Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon.
SECTION 514. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Security by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for the Securities of any series for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable and documented attorneys’ fees and expenses, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Trustee for the Securities of any series, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of the Outstanding Securities of any particular series or to any suit instituted by any Holder of any Security for the enforcement of the payment of principal of, or premium, if any, or interest, if any, on any Security of such series.
SECTION 515. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee for any series of Securities, but will suffer and permit the execution of every such power as though no such law had been enacted.
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SECTION 516. Judgment Currency.
If, for the purpose of obtaining a judgment in any court with respect to any obligation of the Company hereunder or under any Security, it shall become necessary to convert any amount in the currency or currency unit due hereunder or under such Security into any other currency or currency unit, then such conversion shall be made by the Currency Determination Agent at the Market Exchange Rate as in effect on the date of entry of the judgment (the “Judgment Date”). If pursuant to any such judgment, conversion shall be made on a date (the “Substitute Date”) other than the Judgment Date and there shall occur a change between the Market Exchange Rate as in effect on the Judgment Date and the Market Exchange Rate as in effect on the Substitute Date, the Company agrees to pay such additional amounts (if any) as may be necessary to ensure that the amount paid is equal to the amount in such other currency or currency unit which, when converted at the Market Exchange Rate as in effect on the Judgment Date, is the amount due hereunder or under such Security. Any amount due from the Company under this Section 516 shall be due as a separate debt and is not to be affected by or merged into any judgment being obtained for any other sums due hereunder or in respect of any Security. In no event, however, shall the Company be required to pay more in the currency or currency unit due hereunder or under such Security at the Market Exchange Rate as in effect on the Judgment Date than the amount of currency or currency unit stated to be due hereunder or under such Security so that in any event the Company’s obligations hereunder or under such Security will be effectively maintained as obligations in such currency or currency unit, and the Company shall be entitled to withhold (or be reimbursed for, as the case may be) any excess of the amount actually realized upon any such conversion on the Substitute Date over the amount due and payable on the Judgment Date.
Article Six
THE TRUSTEE
SECTION 601. Certain Duties and Responsibilities.
(a) Except during the continuance of an Event of Default with respect to the Securities of any series for which the Trustee is serving as such,
(1) such Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against such Trustee; and
(2) in the absence of gross negligence or willful misconduct on its part, such Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to such Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by any provisions hereof are specifically required to be furnished to such Trustee, such Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein).
(b) In case an Event of Default with respect to a series of Securities has occurred and is continuing, the Trustee for the Securities of such series shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs.
(c) No provision of this Indenture shall be construed to relieve the Trustee for Securities of any series from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:
(1) this Subsection shall not be construed to limit the effect of Subsection (a) of this Section;
(2) such Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts;
(3) such Trustee shall not be liable with respect to any action taken, suffered or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a majority in principal amount of the Outstanding Securities of any particular series, determined as provided in Sections 104 and 512, relating to the time, method and place of conducting any proceeding for any remedy available to such Trustee, or exercising any trust or power conferred upon such Trustee, under this Indenture with respect to the Securities of that series; and
(4) no provision of this Indenture shall require the Trustee for any series of Securities to expend or risk its own funds or otherwise incur any liability, financial or otherwise, in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.
(d) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee for any series of Securities shall be subject to the provisions of this Section.
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SECTION 602. Notice of Defaults.
Within 90 days after the occurrence of any default hereunder with respect to Securities of any particular series, the Trustee for the Securities of such series shall give to Holders of Securities of that series, in the manner set forth in Section 106, notice of such default actually known to a Responsible Officer of such Trustee, unless such default shall have been cured or waived; provided, however, that, except in the case of a default in the payment of principal of, or premium, if any, or interest, if any, on any Security of that series, or in the deposit of any sinking fund payment with respect to Securities of that series, such Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors or Responsible Officers of such Trustee in good faith determines that the withholding of such notice is in the interest of the Holders of Securities of that series; and provided, further, that in the case of any default of the character specified in Section 501(3) with respect to Securities of that series no such notice to Holders shall be given until at least 30 days after the occurrence thereof. For the purpose of this Section, the term “default” means any event which is, or after notice or lapse of time or both would become, an Event of Default with respect to Securities of that series.
SECTION 603. Certain Rights of Trustee.
Except as otherwise provided in Section 601:
(a) the Trustee for any series of Security may conclusively rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, discretion, consent, order, bond, debenture or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture such Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, such Trustee (unless other evidence be herein specifically prescribed) may, in the absence of gross negligence or willful misconduct on its part, conclusively rely upon an Officers’ Certificate;
(d) such Trustee may consult with counsel of its selection and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon;
(e) such Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders of Securities of any series pursuant to this Indenture for which it is acting as Trustee, unless such Holders shall have offered to such Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction;
(f) such Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, discretion, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but such Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters at it may see fit, and, if such Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney at the sole cost of the Company and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation;
(g) such Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and such Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder;
(h) the Trustee shall not be charged with knowledge of any default or Event of Default with respect to the Securities unless either (1) a Responsible Officer shall have actual knowledge of such default or Event of Default or (2) written notice of such default or Event of Default shall have been given to the Trustee, at the Corporate Trust Office of the Trustee, by the Company or by any Holder of the Securities, and such notice references the Securities and the Indenture. Notwithstanding the foregoing, the Trustee should be deemed to have knowledge of any default or Event of Default with respect to matters set forth in Sections 501(1) and 501(2);
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(i) the Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture;
(j) in no event shall the Trustee be responsible or liable for special, indirect, punitive or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit) irrespective of whether the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action;
(k) the rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and each agent, custodian and other Person employed to act hereunder;
(l) the Trustee shall not be required to give any bond or surety in respect of the performance of its powers and duties hereunder; and
(m) the Trustee may request that the Company deliver a certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture.
SECTION 604. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except the Trustee’s certificates of authentication thereof, and neither the Trustee for any series of Securities, nor any Authenticating Agent assumes any responsibility for their correctness. The Trustee for any series of Securities makes no representations as to the validity or sufficiency of this Indenture or of the Securities of any series. Neither the Trustee for any series of Securities nor any Authenticating Agent shall be accountable for the use or application by the Company of Securities or the proceeds thereof.
SECTION 605. May Hold Securities.
The Trustee for any series of Securities, any Authenticating Agent, Paying Agent, Security Registrar or any other agent of the Company or such Trustee, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to Sections 608 and 613, may otherwise deal with the Company with the same rights it would have if it were not such Trustee, Authenticating Agent, Paying Agent, Security Registrar or such other agent.
SECTION 606. Money Held in Trust.
Money held by the Trustee for any series of Securities in trust hereunder need not be segregated from other funds except as provided in Section 115 and except to the extent required by law. The Trustee for any series of Securities shall be under no liability for interest on any money received by it hereunder except as otherwise agreed in writing with the Company.
SECTION 607. Compensation and Reimbursement.
The Company agrees:
(1) to pay to the Trustee for any series of Securities from time to time such compensation as the Company and the Trustee shall from time to time agree in writing for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to reimburse the Trustee for any series of Securities in Dollars upon its request for all reasonable expenses, disbursements and advances incurred or made by such Trustee in accordance with any provision of this Indenture (including the compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its gross negligence or willful misconduct; and
(3) to indemnify such Trustee or any predecessor Trustee and their agents in Dollars for, and to hold them harmless against, any loss, damage, claims, liability or expense, including taxes (other than taxes based upon, measured by or determined by the income of the Trustee) incurred without gross negligence or willful misconduct on their part, arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending themselves against any claim (whether or not asserted by the Company, or any Holder or any other Person) or liability in connection with the exercise or performance of any of their powers or duties hereunder; or in connection with enforcing the provisions of this Section.
As security for the performance of the obligations of the Company under this Section the Trustee for any series of Securities shall have a lien prior to the Securities upon all property and funds held or collected by such Trustee as such, except funds held in trust for the payment of principal of, or premium, if any, or interest, if any, on particular Securities.
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When the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 501(4) or (5), the expenses (including the reasonable and documented fees and expenses of its counsel) and the compensation for the services are intended to constitute expenses of administration under any bankruptcy law.
The Company’s obligations under this Section 607 and any lien arising hereunder shall survive the resignation or removal of the Trustee, the discharge of the Company’s obligations pursuant to Article Four of this Indenture and/or the termination of this Indenture.
SECTION 608. Disqualification; Conflicting Interests.
The Trustee for the Securities shall be subject to the provisions of Section 310(b) of the Trust Indenture Act during the period of time required thereby. Nothing herein shall prevent the Trustee from filing with the Commission the application referred to in the penultimate paragraph of Section 310(b) of the Trust Indenture Act. In determining whether the Trustee has a conflicting interest as defined in Section 310(b) of the Trust Indenture Act with respect to the Securities of any series, there shall be excluded Securities of any particular series of Securities other than that series.
SECTION 609. Corporate Trustee Required; Different Trustees for Different Series; Eligibility.
There shall at all times be a Trustee hereunder which shall be
(i) a corporation organized and doing business under the laws of the United States of America, any State thereof, or the District of Columbia, authorized under such laws to exercise corporate trust powers, and subject to supervision or examination by federal or State authority, or
(ii) a corporation or other Person organized and doing business under the laws of a foreign government that is permitted to act as Trustee pursuant to a rule, regulation, or other order of the Commission, authorized under such laws to exercise corporate trust powers, and subject to supervision or examination by authority of such foreign government or a political subdivision thereof substantially equivalent to supervision or examination applicable to United States institutional trustees,
having a combined capital and surplus of at least $50,000,000. If such corporation publishes reports of condition at least annually, pursuant to law or to requirements of the aforesaid supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. Neither the Company nor any Person directly or indirectly controlling, controlled by, or under the common control with the Company shall serve as Trustee for the Securities. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereunder specified in this Article.
A different Trustee may be appointed by the Company for each series of Securities prior to the issuance of such Securities. If the initial Trustee for any series of Securities is to be other than Deutsche Bank Trust Company Americas, the Company and such Trustee shall, prior to the issuance of such Securities, execute and deliver an indenture supplemental hereto, which shall provide for the appointment of such Trustee as Trustee for the Securities of such series and shall add to or change any of the provisions of this Indenture as shall be necessary to facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees co-trustees of the same trust and that each such Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee.
SECTION 610. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee for the Securities of any series and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 611.
(b) The Trustee for the Securities of any series may resign at any time with respect to the Securities of such series by giving written notice thereof to the Company. If the instrument of acceptance by a successor Trustee required by Section 611 shall not have been delivered to the Trustee for the Securities of such series within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction, at the expense of the Company, for the appointment of a successor Trustee with respect to the Securities of such series.
(c) The Trustee for the Securities of any series may be removed at any time with respect to the Securities of such series by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series, delivered to such Trustee and to the Company. If the instrument of acceptance by a successor Trustee required by Section 611 shall not have been delivered to the Trustee for the Securities of such series within 30 days after the giving of such notice of removal, the Trustee being removed may petition any court of competent jurisdiction, at the expense of the Company, for the appointment of a successor Trustee with respect to the Securities of such series.
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(d) If at any time:
(1) the Trustee for the Securities of any series shall fail to comply with Section 310(b) of the Trust Indenture Act pursuant to Section 608 hereof after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security of such series for at least six months, unless the Trustee’s duty to resign is stayed in accordance with the provisions of Section 310(b) of the Trust Indenture Act, or
(2) such Trustee shall cease to be eligible under Section 609 and shall fail to resign after written request therefor by the Company or by any such Holder, or
(3) such Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of such Trustee or of its property shall be appointed or any public officer shall take charge or control of such Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove such Trustee or (ii) subject to Section 514, any Holder who has been a bona fide Holder of a Security of such series for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of such Trustee and the appointment of a successor Trustee.
(e) If the Trustee for the Securities of any series shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for the Securities of any series for any cause, the Company, by a Board Resolution, shall promptly appoint a successor Trustee with respect to the Securities of such series and shall comply with the applicable requirements of Section 611. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee with respect to the Securities of such series shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with the applicable requirements of Section 611, become the successor Trustee for the Securities of such series and supersede the successor Trustee appointed by the Company. If no successor Trustee for the Securities of such series shall have been so appointed by the Company or the Holders and shall have accepted appointment in the manner required by Section 611, and if such Trustee is still incapable of acting, any Holder who has been a bona fide Holder of a Security of such series for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series.
(f) The Company shall give notice of each resignation and each removal of the Trustee with respect to the Securities of any series and each appointment of a successor Trustee with respect to the Securities of any series in the manner and to the extent provided in Section 106. Each notice shall include the name of the successor Trustee with respect to the Securities of that series and the address of its Corporate Trust Office.
SECTION 611. Acceptance of Appointment by Successor.
(a) Every such successor Trustee appointed hereunder with respect to the Securities of any series shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the written request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder.
(b) In case of the appointment hereunder of a successor Trustee with respect to the Securities of one or more (but not all) series, the Company, the retiring Trustee and each successor Trustee with respect to the Securities of one or more series shall execute and deliver an indenture supplemental hereto wherein each successor Trustee shall accept such appointment and which (1) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates, (2) if the retiring Trustee is not retiring with respect to all Securities, shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee and (3) shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees co-trustees of the same trust and each such Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee; and upon the execution and delivery of such supplemental indenture the resignation or removal of the retiring Trustee shall become effective to the extent provided therein and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates; but, on written request of the Company or any successor Trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder with respect to the Securities of that or those series to which the appointment of such successor Trustee relates.
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(c) Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts referred to in Subsections (a) or (b) of this Section, as the case may be.
(d) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee for the Securities of any series shall be qualified and eligible under this Article.
SECTION 612. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee for the Securities of any series may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of such Trustee, shall be the successor of such Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee or the Authenticating Agent for such series then in office, any successor by merger, conversion or consolidation to such authenticating Trustee or Authenticating Agent, as the case may be, may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee or successor Authenticating Agent had itself authenticated such Securities.
SECTION 613. Preferential Collection of Claims Against Company.
If and when the Trustee shall be or shall become a creditor, directly or indirectly, secured or unsecured, of the Company (or any other obligor upon the Debt Securities), the Trustee shall be subject to the provisions of the Trust Indenture Act regarding collection of claims against the Company (or any such other obligor). A Trustee who has resigned or been removed shall be subject to Section 311(a) of the Trust Indenture Act to the extent indicated.
SECTION 614. Authenticating Agents.
From time to time the Trustee for the Securities of any series may appoint one or more Authenticating Agents with respect to the Securities of such series, which may include the Company or any Affiliate of the Company, with power to act on the Trustee’s behalf in the authentication and delivery of Securities of such series in connection with transfers and exchanges under Sections 304, 305 and 1107 as fully to all intents and purposes as though such Authenticating Agent had been expressly authorized by those Sections of this Indenture to authenticate and deliver Securities of such series. For all purposes of this Indenture, the authentication and delivery of Securities of such series by an Authenticating Agent for such Securities pursuant to this Section shall be deemed to be authentication and delivery of such Securities “by the Trustee” for the Securities of such series. Any such Authenticating Agent shall at all times be a corporation organized and doing business under the laws of the United States or of any State, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $50,000,000 and subject to supervision or examination by federal or State authority. If such Authenticating Agent publishes reports of condition at least annually pursuant to law or the requirements of such supervising or examining authority, then for the purposes of this Section the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent for any series of Securities shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section.
Any corporation into which any Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, consolidation or conversion to which any Authenticating Agent shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of any Authenticating Agent, shall be the successor of such Authenticating Agent hereunder, if such successor corporation is otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the parties hereto or the Authenticating Agent or such successor corporation.
Any Authenticating Agent for any series of Securities may resign at any time by giving written notice of resignation to the Trustee for such series and to the Company. The Trustee for any series of Securities may at any time terminate the agency of any Authenticating Agent by giving written notice of termination to such Authenticating Agent and to the Company in the manner set forth in Section 105. Upon receiving such a notice of resignation or upon such a termination, or in case at any time any Authenticating Agent for any series of Securities shall cease to be eligible under this Section, the Trustee for such series may appoint a successor Authenticating Agent, shall give written notice of such appointment to the Company and shall give written notice of such appointment to all Holders of Securities of such series in the manner set forth in Section 106. Any successor Authenticating Agent, upon acceptance of its appointment hereunder, shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section.
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The Company agrees to pay to any Authenticating Agent for such series from time to time reasonable compensation for its services. If an appointment with respect to one or more series of Securities is made pursuant to this Section, the Securities of such series may have endorsed thereon, in addition to the Trustee’s certification of authentication, an alternate certificate of authentication in the following form:
“This is one of the Securities of the series designated therein described in the within-mentioned Indenture.”
| DEUTSCHE BANK TRUST COMPANY AMERICAS, as Trustee | ||
| By: |
| |
| As Authenticating Agent | ||
| By: |
| |
| [Authorized Signatory] | ||
Article Seven
HOLDERS’ LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Company to Furnish Trustee Names and Addresses of Holders.
With respect to each particular series of Securities, the Company will furnish or cause to be furnished to the Trustee for the Securities of such series,
(a) semiannually, not more than 15 days after each Regular Record Date relating to that series (or, if there is no Regular Record Date relating to that series, on June 30 and December 31), a list, in such form as such Trustee may reasonably require, containing all the information in the possession or control of the Company or any of its Paying Agents other than such Trustee as to the names and addresses of the Holders of that series as of such dates,
(b) on semi-annual dates on each year to be determined pursuant to Section 301 if the Securities of such series do not bear interest, a list of similar form and content, and
(c) at such other times as such Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished,
excluding from any such list names and addresses received by such Trustee in its capacity as Security Registrar for the Securities of such series, if so acting.
SECTION 702. Preservation of Information; Communications to Holders.
(a) The Trustee for each series of Securities shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders of the Securities of such series contained in the most recent lists furnished to such Trustee as provided in Section 701 and the names and addresses of Holders of the Securities of such series received by such Trustee in its capacity as Security Registrar for such series, if so acting. The Trustee for each series of Securities may destroy any list relating to such series of Securities furnished to it as provided in Section 701 upon receipt of a new list relating to such series so furnished.
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(b) If three or more Holders of Securities of any particular series (hereinafter referred to as “applicants”) apply in writing to the Trustee for the Securities of any such series, and furnish to such Trustee reasonable proof that each such applicant has owned a Security of that series for a period of at least six months preceding the date of such application, and such application states that the applicants desire to communicate with other Holders of Securities of that series with respect to their rights under this Indenture or under the Securities of that series and is accompanied by a copy of the form of proxy or other communication which such applicants propose to transmit, then such Trustee shall, within five Business Days after the receipt of such application, at its election, either
(i) afford such applicants access to the information preserved at the time by such Trustee in accordance with Section 702(a), or
(ii) inform such applicants as to the approximate number of Holders of Securities of that series whose names and addresses appear in the information preserved at the time by such Trustee in accordance with Section 702(a), and as to the approximate cost of mailing to such Holders the form of proxy or other communication, if any, specified in such application.
If any such Trustee shall elect not to afford such applicants access to that information, such Trustee shall, upon the written request of such applicants, mail to each Holder of Securities of that series whose name and address appears in the information preserved at the time by such Trustee in accordance with Section 702(a), a copy of the form of proxy or other communication which is specified in such request, with reasonable promptness after a tender to such Trustee of the material to be mailed and of payment, or provision for the payment, of the reasonable expenses of mailing, unless within five days after such tender, such Trustee shall mail to such applicants and file with the Commission, together with a copy of the material to be mailed, a written statement to the effect that, in the opinion of such Trustee, such mailing would be contrary to the best interests of the Holders of Securities of that series or would be in violation of applicable law. Such written statement shall specify the basis of such opinion. If the Commission, after opportunity for a hearing upon the objections specified in the written statement so filed, shall enter an order refusing to sustain any of such objections or if, after the entry of an order sustaining one or more of such objections, the Commission shall find, after notice and opportunity for hearing, that all the objections so sustained have been met and shall enter an order so declaring, such Trustee shall mail copies of such material to all such Holders with reasonable promptness after the entry of such order and the renewal of such tender; otherwise such Trustee shall be relieved of any obligation or duty to such applicants respecting their application.
(c) Every Holder of Securities of each series, by receiving and holding the same, agrees with the Company and the Trustee for the Securities of such series that neither the Company nor such Trustee, nor any agent of either of them shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Holders of the Securities of such series in accordance with Section 702(b), regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under Section 702(b).
SECTION 703. Reports by Trustee.
(a) Within 60 days after May 15 of each year, the Trustee for the Securities of each series shall send to each Holder of the Securities of such series entitled to receive reports pursuant to Section 704(3), a brief report dated as of such date that complies with Section 313(a) of the Trust Indenture Act. The Trustee for the Securities of each series shall also comply with Sections 313(b), 313(c) and 313(d) of the Trust Indenture Act.
(b) At the time that the Trustee for the Securities of each series mails such a report to the Holders of Securities of such series, each such Trustee shall file a copy of that report with the Commission and with each stock exchange on which the Securities of that series are listed. The Company shall provide prompt written notice to the appropriate Trustee when the Securities of any series are listed on any stock exchange and of any delisting thereof.
SECTION 704. Reports by Company.
The Company will:
(1) file with the Trustee for the Securities of such series, within 15 days after the Company is required to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) which the Company may be required to file with the Commission pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934; or, if the Company is not required to file information, documents or reports pursuant to either of said Sections, then it will file with such Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such of the supplementary and periodic information, documents and reports which may be required pursuant to Section 13 of the Securities Exchange Act of 1934 in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations;
(2) file with the Trustee for the Securities of such series and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such additional information, documents, and reports with respect to compliance by the Company with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations; and
(3) transmit by mail to all Holders of Securities of each series, as provided in Section 703(a), within 30 days after the filing thereof with the Trustee for the Securities of such series, such summaries of any information, documents and reports required to be filed by the Company pursuant to paragraphs (1) and (2) of this Section as may be required by rules and regulations prescribed from time to time by the Commission.
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With respect to the foregoing clauses (1) and (2), the Company may file all information, documents and reports required by this Section 704 by email in PDF format; provided, however, that upon the Trustee’s written request, the Company shall provide the Trustee with physical copies of such information, documents or reports.
Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee’s receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company’s compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers’ Certificates).
Article Eight
CONSOLIDATION, MERGER, CONVEYANCE OR TRANSFER
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms.
The Company shall not consolidate with or merge into any other corporation or convey or transfer its properties and assets substantially as an entirety to any Person unless:
(1) the corporation formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or transfer the properties and assets of the Company substantially as an entirety shall be a corporation organized and existing under the laws of the United States of America, any State thereof or the District of Columbia, and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee for each series of Securities, in form satisfactory to each such Trustee, the due and punctual payment of principal of, and premium, if any, and interest, if any, (including all additional amounts, if any, payable pursuant to Sections 516 or 1010) on all the Securities and the performance of every covenant of this Indenture on the part of the Company to be performed or observed;
(2) immediately after giving effect to such transaction, no Event of Default with respect to any series of Securities, and no event which, after notice or lapse of time, or both, would become an Event of Default with respect to any series of Securities, shall have happened and be continuing; and
(3) the Company has delivered to the Trustee for each series of Securities an Officers’ Certificate and an Opinion of Counsel each stating that such consolidation, merger, conveyance or transfer and such supplemental indenture comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with.
SECTION 802. Successor Corporation Substituted.
Upon any consolidation or merger, or any conveyance or transfer of the properties and assets of the Company substantially as an entirety in accordance with Section 801, the successor corporation formed by such consolidation or into which the Company is merged or to which such conveyance or transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor corporation had been named as the Company herein and thereafter the predecessor corporation shall be relieved of all obligations and covenants under this Indenture, the Securities and, in the event of any such consolidation, merger, conveyance or transfer, the Company as the predecessor corporation may thereupon or at any time thereafter be dissolved, wound up, or liquidated.
Article Nine
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders of Securities, the Company, when authorized by a Board Resolution, and the Trustee for the Securities of any or all series, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to such Trustee, for any of the following purposes:
(1) to evidence the succession of another corporation to the Company, and the assumption by any such successor of the covenants of the Company herein and in the Securities; or
(2) to add to the covenants of the Company, for the benefit of the Holders of all or any particular series of Securities (and, if such covenants are to be for the benefit of fewer than all series of Securities, stating that such covenants are being included solely for the benefit of such series), or to surrender any right or power herein conferred upon the Company; or
(3) to add any additional Events of Default with respect to any or all series of Securities (and, if any such Event of Default applies to fewer than all series of Securities, stating each series to which such Event of Default applies); or
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(4) to add to or to change any of the provisions of this Indenture to provide for the issuance of uncertificated Securities of any series in addition to or in place of any certificated Securities and to make all appropriate changes for such purposes; provided, however, that any such action shall not adversely affect the interests of the Holders of Securities of any series in any material respect; or
(5) to change or eliminate any of the provisions of this Indenture; provided, however, that any such change or elimination shall become effective only when there is no Security Outstanding of any series created prior to the execution of such supplemental indenture which is entitled to the benefit of such provision; or
(6) to evidence and provide for the acceptance of appointment hereunder of a Trustee other than Deutsche Bank Trust Company Americas as Trustee for a series of Securities and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, pursuant to the requirements of Section 609; or
(7) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Securities of one or more series and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, pursuant to the requirements of Section 611(b); or
(8) to add to the conditions, limitations and restrictions on the authorized amount, form, terms or purposes of issue, authentication and delivery of Securities, as herein set forth, other conditions, limitations and restrictions thereafter to be observed; or
(9) to supplement any of the provisions of this Indenture to such extent as shall be necessary to permit or facilitate the defeasance and discharge of any series of Securities pursuant to Section 401; provided, however, that any such action shall not adversely affect the interests of the Holders of Securities of such series or any other series of Securities in any material respect; or
(10) to add to or change or eliminate any provisions of this Indenture as shall be necessary or desirable in accordance with any amendments to the Trust Indenture Act; or
(11) to establish the form and terms of any series of Securities;
(12) to add Guarantees with respect to the Securities of such series or to confirm and evidence the release, termination or discharge of any such Guarantee when such release, termination or discharge is permitted under this Indenture; or
(13) to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein, to convey, transfer, assign, mortgage or pledge any property to or with the Trustee for the Securities of any series or to surrender any right or power herein conferred upon the Company, or to make any other provisions with respect to matters or questions arising under this Indenture, provided such action shall not adversely affect the interests of the Holders of Securities of any particular series in any material respect.
SECTION 902. Supplemental Indentures With Consent of Holders.
The Company, when authorized by a Board Resolution, and the Trustee for the Securities of any or all series may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of such Securities under this Indenture, but only with the consent of the Holders of more than 50% in aggregate principal amount of the Outstanding Securities of each series of Securities then Outstanding affected thereby, in each case by Act of said Holders of Securities of each such series delivered to the Company and the Trustee for Securities of each such series; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security affected thereby:
(1) change the Stated Maturity of the principal of, or any installment of principal of or interest on, any Security, or reduce the principal amount thereof or the rate of interest thereon, if any (or, in the case of OID Securities, reduce the rate of accretion of original issue discount), or any premium payable upon the redemption thereof, or change any obligation of the Company to pay additional amounts pursuant to Section 1010 (except as contemplated by Section 801(1) and permitted by Section 901(1)) or reduce the amount of the principal of an OID Security that would be due and payable upon a declaration of acceleration of the Maturity thereof, or provable in bankruptcy, or, in the case of Indexed Securities, reduce the amount payable in accordance with the terms of those Securities upon a declaration of acceleration of the Maturity thereof, or provable in bankruptcy, pursuant to Section 502, or change the Place of Payment, or the currency or currency unit in which any Security or the principal or interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date); or impair any right of Holders of Securities hereunder to repay or purchase Securities at their option; reduce or alter the method of computation of any amount payable upon redemption, repayment or purchase of any Securities by the Issuer (or the time when such redemption, repayment or purchase may be made) or adversely affect the right to convert or exchange any Security into other securities of the Company or another Person as may be provided pursuant to Section 301;
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(2) reduce the percentage in principal amount of the Outstanding Securities of any particular series, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture; or
(3) modify any of the provisions of this Section or Section 513 or 1009, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Security affected thereby; provided, however, that this clause shall not be deemed to require the consent of any Holder of a Security with respect to changes in the references to “the Trustee” and concomitant changes in this Section and Section 1009, or the deletion of this proviso, in accordance with the requirements of Sections 609, 61l(b), 901(6) and 901(7).
A supplemental indenture which changes or eliminates any covenant or other provision of this Indenture which has expressly been included solely for the benefit of one or more particular series of Securities, or which modifies the rights of the Holders of Securities of such series with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture of the Holders of Securities of any other series.
It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof.
SECTION 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee for any series of Securities shall receive, and (subject to Section 601) shall be fully protected in conclusively relying upon, an Officers’ Certificate and an Opinion of Counsel that includes the requirements of Section 102 of this Indenture and states that the execution of such supplemental indenture is authorized or permitted by this Indenture and that such supplemental indenture is the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms. The Trustee for any series of Securities may, but shall not be obligated to, enter into any such supplemental indenture which affects such Trustee’s own rights, liabilities, duties or immunities under this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby.
SECTION 905. Conformity With Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 906. Reference in Securities to Supplemental Indentures.
Securities of any particular series authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee for the Securities of such series, bear a notation in form approved by such Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities of any series so modified as to conform, in the opinion of the Trustee for the Securities of such series and the Board of Directors, to any such supplemental indenture may be prepared and executed by the Company and such Securities may be authenticated and delivered by such Trustee in exchange for Outstanding Securities of such series.
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Article Ten
COVENANTS
SECTION 1001. Payment of Principal, Premium, if any, and Interest, if any.
The Company agrees, for the benefit of each particular series of Securities, that it will duly and punctually pay in the currency or currency unit in which the Securities of such series are payable (except as otherwise specified pursuant to Section 301 for the Securities of such series and except as provided in Sections 311(b) and 311(d)) principal of, and premium, if any, and interest, if any, on that series of Securities in accordance with the terms of the Securities of such series, and this Indenture. On or before 10:00 a.m., New York City time, on the applicable payment date, the Company shall deposit with the Paying Agent money sufficient to pay the principal of and interest, if any, on the Securities of each Series in accordance with the terms of such Securities and this Indenture. The interest, if any, due in respect of any temporary or permanent Global Security, together with any additional amounts payable in respect thereof, as provided in the terms and conditions of such Security, shall be payable, subject to the conditions set forth in Section 1010, only upon presentation of such Security to the Trustee thereof for notation thereon of the payment of such interest.
SECTION 1002. Maintenance of Office or Agency.
If Securities of a series are issuable only as Registered Securities the Company will maintain in each Place of Payment for that series an office or agency where Securities of that series may be presented or surrendered for payment, an office or agency where Securities of that series may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company with respect to the Securities of that series and this Indenture may be served.
The Company may also from time to time designate one or more other offices or agencies (in or outside the Place of Payment) where the Securities of one or more series may be presented or surrendered for any or all of the purposes specified above in this Section and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in each Place of Payment for such purpose. The Company will give prompt written notice to the Trustee for the Securities of each series so affected of any such designation or rescission and of any change in the location of any such office or agency.
If and so long as the Securities of any series (i) are denominated in a currency other than Dollars or (ii) may be payable in a currency other than Dollars, or so long as it is required under any other provision of the Indenture, then the Company will maintain with respect to each such series of Securities, or as so required, a Currency Determination Agent.
SECTION 1003. Money for Securities Payments To Be Held in Trust.
If the Company shall at any time act as its own Paying Agent with respect to any particular series of Securities, it will, on or before each due date of principal of, and premium, if any, or interest, if any, on any of the Securities of that series, segregate and hold in trust for the benefit of the Persons entitled thereto a sum in the currency or currency unit in which the Securities of such series are payable (except as otherwise specified pursuant to Section 301 for the Securities of such series and except as provided in Sections 311(b) and 311(d)) sufficient to pay the principal, premium, if any, and interest, if any, so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided, and will promptly notify the Trustee for the Securities of such series in writing of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for any particular series of Securities, it will, on or before each due date of principal of, or premium, if any, or interest, if any, on any such Securities, deposit with a Paying Agent for the Securities of such series a sum (in the currency or currency unit described in the preceding paragraph) sufficient to pay the principal, premium, if any, and interest, if any, so becoming due, such sum to be held in trust for the benefit of the Persons entitled thereto, and (unless such Paying Agent is the Trustee for the Securities of such series) the Company will promptly notify such Trustee in writing of its action or failure so to act.
The Company will cause each Paying Agent for any particular series of Securities other than the Trustee for the Securities of such series to execute and deliver to such Trustee an instrument in which such Paying Agent shall agree with such Trustee, subject to the provisions of this Section, that such Paying Agent will:
(1) hold all sums held by it for the payment of principal of, or premium, if any, or interest, if any, on Securities of that series in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided;
(2) give such Trustee written notice of any default by the Company (or any other obligor upon the Securities) in the making of any payment of principal of, and premium, if any, and interest, if any, on Securities of that series; and
(3) at any time during the continuation of any such default, upon the written request of such Trustee, forthwith pay to such Trustee all sums so held in trust by such Paying Agent.
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The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee for the Securities of any series all sums held in trust by the Company or such Paying Agent, such sums to be held by such Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to such Trustee, such Paying Agent shall be released from all further liability with respect to such money.
SECTION 1004. Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (1) all taxes, assessments and governmental charges levied or imposed upon it or upon its income, profits or property, and (2) all lawful claims for labor, materials and supplies which, if unpaid, might by law become a lien upon its property; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings.
SECTION 1005. Statements as to Compliance.
The Company will deliver to the Trustee for each series of Securities, within 120 days after the end of each fiscal year of the Company, a written statement signed by the principal executive officer, principal financial officer or principal accounting officer of the Company complying with Section 314(a)(4) of the Trust Indenture Act stating that:
(1) a review of the activities of the Company during such year and of performance under this Indenture has been made under his supervision; and
(2) to the best of his knowledge, based on such review, the Company is in compliance with all conditions and covenants under this Indenture.
For purposes of this Section, such compliance shall be determined without regard to any period of grace or requirement of notice provided under this Indenture.
SECTION 1006. Corporate Existence.
Subject to Article Eight, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, rights (charter and statutory) and franchises; provided, however, that the Company shall not be required to preserve any right or franchise if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and that the loss thereof is not disadvantageous in any material respect to the Holders.
SECTION 1007. Limitations on Liens.
(a) Except as expressly provided in Subsection (b) of this Section 1007, the Company will not, and will not permit any Subsidiary to, create, assume, incur or suffer to be created, assumed or incurred, any mortgage, pledge, lien, security interest, charge or encumbrance (all of the foregoing being hereinafter referred to as “liens”) to secure any indebtedness for borrowed money (i) upon any shares of Capital Stock issued by any Subsidiary that owns any Principal Facility (as hereinafter defined) to the extent such shares are owned by the Company or one or more Subsidiaries or (ii) upon any Principal Facility, in either case without making effective provision whereby all the Securities shall be directly secured equally and ratably with the indebtedness secured by such lien, so long as any such indebtedness shall be so secured; provided, however, that this Section 1007 shall not be applicable to the following:
(1) in the case of a Principal Facility, liens incurred in connection with the issuance by a state or political subdivision thereof of any securities the interest on which is exempt from federal income taxes by virtue of Section 103 of the Code or any other laws or regulations in effect at the time of such issuance;
(2) liens existing on the date hereof;
(3) liens on property or shares of Capital Stock existing when acquired by the Company or any Subsidiary (including acquisition through merger, share exchange or consolidation) or securing the payment of all or part of the purchase price, construction or improvement thereof incurred prior to, at the time of, or within 180 days after the later of the acquisition, completion of construction or improvement or commencement of full operation of such property for the purpose of financing all or a portion of such purchase or construction or improvement; or
(4) liens for the sole purpose of extending, renewing or replacing in whole or in part the indebtedness secured by any lien referred to in the foregoing clauses (1) through (3) or in this clause (4); provided, however, that the principal amount of indebtedness secured thereby shall not exceed the principal amount of indebtedness so secured at the time of such extension, renewal or replacement, and that such extension, renewal or replacement shall be limited to all or a part of the property which secured the lien so extended, renewed or replaced (plus improvements on such property).
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(b) The Company and/or any Subsidiary may create, assume or incur, or suffer to be created, assumed or incurred, liens which would otherwise be prohibited by Subsection (a) of this Section 1007, provided that the indebtedness secured thereby, plus the aggregate value of the Sale and Leaseback Transactions permitted by the provisions of Subsection (b) of Section 1008, does not at the time exceed the greater of 10% of Consolidated Capitalization or 10% of Consolidated Net Tangible Assets.
(c) The term “Principal Facility” shall mean all real property located within the United States and constituting part of any manufacturing plant or distribution facility owned and operated by the Company or any Subsidiary, together with such manufacturing plant or distribution facility, including all plumbing, electrical, ventilating, heating, cooling, lighting and other utility systems, ducts and pipes attached to or constituting a part thereof; provided, however, that such term shall not include trade fixtures (unless such trade fixtures are attached to the manufacturing plant or distribution facility in a manner that does not permit removal therefrom without causing substantial damage thereto), business machinery, equipment, motorized vehicles, tools, supplies and materials, security systems, cameras, inventory and other personal property and materials, and provided further, however, that such term shall not include any particular manufacturing plant or distribution facility as of any particular date unless the net book value thereof included in the most recent quarterly or annual consolidated balance sheet of the Company and its consolidated Subsidiaries exceeds 0.25% of Consolidated Capitalization.
(d) The Certificate of a Firm of Independent Public Accountants shall be conclusive evidence as to the amount, at the date specified in such Certificate, of net book value of any particular manufacturing plant or distribution facility, Consolidated Net Tangible Assets or Consolidated Capitalization, as the case may be.
SECTION 1008. Sale and Leaseback Transactions.
(a) Neither the Company nor any Subsidiary will sell or transfer a Principal Facility now owned or hereafter acquired with the intention of taking back a lease of such property, except a lease for a temporary period of less than 3 years, including renewals, with the intent that the use by the Company or a Subsidiary will be discontinued on or before the expiration of such period (any transaction subject to the provisions of this Section 1008 being herein referred to as a “Sale and Leaseback Transaction”) unless the Company shall apply an amount equal to the value of the property so leased to the retirement (other than any mandatory retirement), within 180 days of the effective date of any such arrangement, of non-subordinated indebtedness for money borrowed by the Company which had a stated maturity of more than one year from the date of its creation.
(b) The Company or a Subsidiary may enter into a Sale and Leaseback Transaction which would otherwise be prohibited by Subsection (a) of this Section 1008, provided that the value thereof plus the aggregate indebtedness permitted to be secured under the provisions of Subsection (b) of Section 1007 does not at the time exceed the greater of 10% of Consolidated Capitalization or 10% of Consolidated Net Tangible Assets.
(c) The term “value” shall, for the purpose of this Section 1008 and Section 1007(b), mean, with respect to a Sale and Leaseback Transaction, as of any particular time, the amount equal to the greater of (i) the net proceeds of the sale of the property leased pursuant to such Sale and Leaseback Transaction or (ii) the fair value of such property at the time of entering into such Sale and Leaseback Transaction, as determined by the Board of Directors, in each such case divided first by the number of full years of the term of the lease and then multiplied by the number of full years of such term remaining at the time of determination, without regard to any renewal or extension options contained in the lease.
(d) The Certificate of a Firm of Independent Public Accountants shall be conclusive evidence as to the amount, at the date specified in such Certificate, of the net book value of any particular manufacturing plant or distribution facility, Consolidated Net Tangible Assets or Consolidated Capitalization, as the case may be.
SECTION 1009. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any covenant or condition set forth in Sections 1004 to 1008, inclusive, if before or after the time for such compliance the Holders of more than 50% in principal amount of the Outstanding Securities of each series of Securities affected by the omission shall, in each case by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such covenant or condition, but no such waiver shall extend to or affect such covenant or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee for the Securities of each series with respect to any such covenant or condition shall remain in full force and effect.
SECTION 1010. Payment of Additional Amounts.
If specified pursuant to Section 301, the provisions of this Section 1010 shall be applicable to Securities of any series.
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The Company will, subject to the exceptions and limitations set forth below, pay to the Holder of any Security who is a United States Alien such additional amounts as may be necessary so that every net payment on such Security, after deduction or withholding by the Company or any of its Paying Agents for or on account of any present or future tax, assessment or other governmental charge imposed upon or as a result of such payment by the United States (or any political subdivision or taxing authority thereof or therein), will not be less than the amount provided in such Security to be then due and payable. However, the Company will not make any payment of additional amounts if the Holder is subject to taxation solely for reasons other than its ownership of the Security, nor will the Company make any payment of additional amounts for or on account of:
(a) any tax, assessment or other governmental charge that is imposed or withheld solely by reason of the existence of any present or former connection (other than the mere fact of being a Holder of a Security) between such Holder (or between a fiduciary, settlor, beneficiary or person holding a power over such Holder, if such Holder is an estate or trust, or a member or shareholder of such Holder, if such Holder is a partnership or corporation) and the United States, including, without limitation, such Holder (or such fiduciary, settlor, beneficiary, person holding a power, member or shareholder) being or having been a citizen, resident of the United States or treated as a resident thereof;
(b) any tax, assessment or other governmental charge that is imposed or withheld solely by reason of the Holder (or a fiduciary, settlor, beneficiary or person holding a power over such Holder, if such Holder is an estate or trust, or a member or shareholder of such Holder, if such Holder is a partnership or corporation) (i) being or having been present in, or engaged in a trade or business in, the United States, (ii) being treated as having been present in, or engaged in a trade or business in, the United States, or (iii) having or having had a permanent establishment in the United States;
(c) any tax, assessment or other governmental charge that is imposed or withheld solely by reason of the Holder (or a fiduciary, settlor, beneficiary or person holding a power over such Holder, if such Holder is an estate or trust, or a member or shareholder of such Holder, if such Holder is a partnership or corporation) being or having been with respect to the United States a personal holding company, a controlled foreign corporation, a foreign personal holding company, a passive foreign investment company, or a foreign private foundation or other foreign tax-exempt organization, or being a corporation that accumulates earnings to avoid United States federal income tax;
(d) any tax, assessment or other governmental charge imposed on a Holder that actually or constructively owns 10% or more of the total combined voting power of all classes of stock of the Company entitled to vote within the meaning of Section 871(h)(3) of the Code;
(e) any tax, assessment or other governmental charge which would not have been so imposed but for the presentation by the Holder for payment on a date more than 30 days after the date on which such payment became due and payable or the date on which payment thereof is duly provided for, whichever occurs later;
(f) any tax, assessment or other governmental charge that is payable by any method other than withholding or deduction by the Company or any Paying Agent from payments in respect of such Security;
(g) any gift, estate, inheritance, sales, transfer, personal property or excise tax or any similar tax, assessment or other governmental charge;
(h) any tax, assessment or other governmental charge required to be withheld by any Paying Agent from any payment in respect of any Security if such payment can be made without such withholding by at least one other Paying Agent;
(i) any tax, assessment or other governmental charge that is imposed or withheld by reason of a change in law, regulation or administrative or judicial interpretation that becomes effective more than 15 days after the payment becomes due or is duly provided for, whichever occurs later;
(j) any tax, assessment or other governmental charge imposed as a result of the failure to comply with applicable certification, information, documentation or other reporting requirements concerning the nationality, residence, identity or connection with the United States of the Holder or beneficial owner of a Security, if such compliance is required by statute or by regulation of the United States, as a precondition to relief or exemption from such tax, assessment or other governmental charge;
(k) any tax, assessment or other governmental charge imposed with respect to payments on any Registered Security by reason of the failure of the Holder to fulfill the statement requirement of Sections 871(h) or 881(c) of the Code; or
(l) any combination of items (a), (b), (c), (d), (e), (f), (g), (h), (i), (j) and (k).
In addition, the Company will not pay additional amounts to a beneficial owner of a Security that is a fiduciary, partnership, limited liability company or other fiscally transparent entity, or to a beneficial owner of a Security that is not the sole beneficial owner of such Security, as the case may be. This exception, however, will apply only to the extent that a beneficiary or settlor with respect to the fiduciary, or a beneficial owner or member of the partnership, limited liability company or other fiscally transparent entity, would not have been entitled to the payment of an additional amount had the beneficiary, settlor, beneficial owner or member received directly its beneficial or distributive share of the payment.
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As used herein, the term “United States Alien” means a person that is not a United States person. The term “United States person” means a citizen or resident of the United States or a corporation or partnership created or organized in or under the laws of the United States or any political subdivision thereof, an estate the income of which is subject to United States federal income taxation regardless of its source, a trust subject to the supervision of a court within the United States and the control of the United States person as described in Section 7701(a)(30) of the Code, or a trust that existed on August 20, 1996, and elected to continue its treatment as a domestic trust. “United States” means the United States of America (including the States and the District of Columbia), its territories, its possessions and other areas subject to its jurisdiction (including the Commonwealth of Puerto Rico).
Whenever in this Indenture there is mentioned, in any context, the payment of principal of, and premium, if any, and interest, if any, on any Security of any series, such mention shall be deemed to include mention of the payment of additional amounts provided for in the terms of such Securities and this Section to the extent that, in such context, additional amounts are, were or would be payable in respect thereof pursuant to the provisions of this Section and express mention of the payment of additional amounts (if applicable) in any provisions hereof shall not be construed as excluding additional amounts in those provisions hereof where such express mention is not made.
If the Securities of a series provide for the payment of additional amounts as contemplated by Section 301(20), at least 10 days prior to the first Interest Payment Date with respect to that series of Securities (or if the Securities of that series will not bear interest prior to maturity, the first day on which a payment of principal and any premium is made), and at least 10 days prior to each date of payment of principal, premium, if any, and interest, if any, if there has been any change with respect to the matters set forth in the below mentioned Officers’ Certificate, the Company will furnish the Trustee for that series of Securities and the Company’s principal Paying Agent or Paying Agents, if other than such Trustee, with an Officers’ Certificate instructing such Trustee and such Paying Agent or Paying Agents whether such payment of principal of, and premium, if any, and interest, if any, on the Securities of that series shall be made to Holders of Securities of that series who are United States Aliens without withholding for or on account of any tax, assessment or other governmental charge referred to above or described in the Securities of that series. If any such withholding shall be required, then such Officers’ Certificate shall specify by country the amount, if any, required to be withheld on such payments to such Holders of Securities and the Company will pay to the Trustee for such series of Securities or such Paying Agent such additional amounts as may be required pursuant to the terms applicable to such series. The Company covenants to indemnify the Trustee for such series of Securities and any Paying Agent for, and to hold them harmless against, any loss, liability or expense reasonably incurred without gross negligence or willful misconduct on their part arising out of or in connection with actions taken or omitted by any of them in reliance on any Officers’ Certificate furnished pursuant to this Section 1010. For the avoidance of doubt, the Trustee shall not at any time be under any duty or responsibility to any Holder to determine the additional amounts, or with respect to the nature, extent, or calculation of the amount of any additional amounts owed, or with respect to the method employed in such calculation of any additional amounts.
SECTION 1011. Calculation of Original Issue Discount.
The Company shall file with the Trustee promptly at the end of each calendar year (i) a written notice specifying the amount of original issue discount (including daily rates and accrual periods) accrued on Outstanding Securities as of the end of such year and (ii) such other specific information relating to such original issue discount as may then be relevant under the Internal Revenue Code of 1986, as amended from time to time.
Article Eleven
REDEMPTION OF SECURITIES
SECTION 1101. Applicability of This Article.
Redemption of Securities of any series (whether by operation of a sinking fund or otherwise) as permitted or required by any form of Security issued pursuant to this Indenture shall be made in accordance with such form of Security and this Article; provided, however, that if any provision of any such form of Security shall conflict with any provision of this Article, the provision of such form of Security shall govern.
SECTION 1102. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities of any series shall be evidenced by or pursuant to a Board Resolution. In case of any redemption at the election of the Company of the Securities of any particular series, the Company shall, at least 60 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee for the Securities of such series) notify such Trustee by Company Request of such Redemption Date and of the principal amount of Securities of that series to be redeemed and shall deliver to such Trustee such documentation and records as shall enable such Trustee to select the Securities to be redeemed pursuant to Section 1103. In the case of any redemption of Securities of any series prior to the expiration of any restriction on such redemption provided in the terms of such Securities or elsewhere in this Indenture, the Company shall furnish the Trustee for Securities of such series with an Officers’ Certificate evidencing compliance with such restriction.
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SECTION 1103. Selection by Trustee of Securities to Be Redeemed.
If less than all the Securities are to be redeemed, the Company may select the series to be redeemed, and if less than all the Securities of any series are to be redeemed, the particular Securities of that series to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee for the Securities of such series, from the Outstanding Securities of that series not previously called for redemption, by such method as such Trustee shall deem fair and appropriate by lot, or pro rata, in each case in accordance with the applicable procedures of the Depositary and which may provide for the selection for redemption of portions (equal to the minimum authorized denomination for Securities of that series, or any integral multiple thereof) of the principal amount of Securities of that series of a denomination larger than the minimum authorized denomination for Securities of that series pursuant to Section 302 in the currency or currency unit in which the Securities of such series are denominated.
The Trustee for the Securities of any series to be redeemed shall promptly notify the Company in writing of the Securities of such series selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Security redeemed or to be redeemed only in part, to the portion of the principal amount of such Securities which has been or is to be redeemed.
SECTION 1104. Notice of Redemption.
Notice of redemption shall be given in the manner provided in Section 106 not later than the thirtieth day and not earlier than the sixtieth day prior to the Redemption Date, to each Holder of Securities to be redeemed.
All notices of redemption shall identify the Securities (including the CUSIP numbers) and shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all Outstanding Securities of a particular series are to be redeemed, the identification (and, in the case of partial redemption, the respective principal amounts) of the particular Securities to be redeemed, including the CUSIP number of such Securities,
(4) that on the Redemption Date the Redemption Price will become due and payable upon each such Security or portion thereof, and that interest thereon, if any (or in the case of OID Securities, original issue discount), shall cease to accrue on and after said date,
(5) the place or places where such Securities maturing after the Redemption Date are to be surrendered for payment of the Redemption Price, and
(6) that the redemption is for a sinking fund, if such is the case.
(7) Reserved.
(8) Reserved.
Notice of redemption of Securities to be redeemed at the election of the Company shall be given by the Company or, at the Company’s written request, by the Trustee for such Securities in the name and at the expense of the Company.
SECTION 1105. Deposit of Redemption Price.
Prior to 10:00am New York City time, on any Redemption Date, the Company shall deposit with the Trustee for the Securities to be redeemed or with a Paying Agent for such Securities (or, if the Company is acting as its own Paying Agent for such Securities, segregate and hold in trust as provided in Section 1003) an amount of money in the currency or currency unit in which the Securities of such series are payable (except as otherwise specified pursuant to Section 301 for the Securities of such Series and except as provided in Sections 311(b) and 311(d)) sufficient to pay the principal of, and premium, if any, thereon), and (except if the Redemption Date shall be an Interest Payment Date) any accrued interest on, all the Securities which are to be redeemed on that date.
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SECTION 1106. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified in the currency or currency unit in which the Securities of such series are payable (except as otherwise provided pursuant to Section 301 for the Securities of such series and except as provided in Sections 311(b) and 311(d)) and from and after such date (unless the Company shall default in the payment of the Redemption Price) such Securities shall cease to bear interest. Upon surrender of such Security for redemption in accordance with said notice, such Security or specified portions thereof shall be paid by the Company at the Redemption Price; provided, however, that unless otherwise specified as contemplated by Section 301, installments of interest on Registered Securities whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant record dates according to their terms and the provisions of Section 307.
If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal thereof and premium, if any, thereon shall, until paid, bear interest from the Redemption Date at a rate per annum equal to the rate borne by the Security (or, in the case of (i) OID Securities, the Security’s Yield to Maturity or (ii) Indexed Securities, the rate determined in accordance with the specified terms of those Securities).
SECTION 1107. Securities Redeemed in Part.
Any Registered Security which is to be redeemed only in part shall be surrendered at the Place of Payment (with, if the Company or the Trustee for such Security so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Security Registrar for such Security duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Company shall execute and such Trustee shall authenticate and deliver to the Holder of such Security without service charge, a new Registered Security or Securities, of any authorized denomination as requested by such Holder, of the same series and having the same terms and provisions and in an aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Registered Security so surrendered. In the case of a Global Note, the aggregate principal amount of such Global Note shall be reduced in accordance with the applicable procedures of the Trustee and the Depositary.
SECTION 1108. Tax Redemption; Special Tax Redemption.
(a) Unless otherwise specified pursuant to Section 301, Securities of any series may be redeemed at the option of the Company in whole, but not in part, on not more than 60 days’ and not less than 30 days’ notice, on any Redemption Date at the Redemption Price specified pursuant to Section 301, if the Company determines that (A) as a result of any change in or amendment to the laws (or any regulations or rulings promulgated thereunder) of the United States or of any political subdivision or taxing authority thereof or therein affecting taxation, or any change in official position regarding application or interpretation of such laws, regulations or rulings (including a holding by a court of competent jurisdiction in the United States), which change or amendment is announced or becomes effective on or after a date specified in Section 301 with respect to any Security of such series, the Company has or will become obligated to pay additional amounts pursuant to Section 1010 with respect to any Security of such series or (B) on or after a date specified in Section 301 with respect to any Security of such series, any action has been taken by any taxing authority of, or any decision has been rendered by a court of competent jurisdiction in, the United States or any political subdivision or taxing authority thereof or therein, including any of those actions specified in (A) above, whether or not such action was taken or decision was rendered with respect to the Company, or any change, amendment, application or interpretation shall be officially proposed, which, in any such case, in the Opinion of Counsel to the Company will result in a material probability that the Company will become obligated to pay additional amounts with respect to any Security of such series, and (C) in any such case specified in (A) or (B) above the Company, in its business judgment, determines that such obligation cannot be avoided by the use of reasonable measures available to the Company. Any such redemption shall comply with the provisions of Section 1104 hereof.
(b) Reserved.
Article Twelve
SINKING FUNDS
SECTION 1201. Applicability of This Article.
Redemption of Securities through operation of a sinking fund as permitted or required by any form of Security issued pursuant to this Indenture shall be made in accordance with such form of Security and this Article; provided, however, that if any provision of any such form of Security shall conflict with any provision of this Article, the provision of such form of Security shall govern.
The minimum amount of any sinking fund payment provided for by the terms of Securities of any particular series is herein referred to as a “mandatory sinking fund payment”, and any payment in excess of such minimum amount provided for by the terms of Securities of any particular series is herein referred to as an “optional sinking fund payment”. If provided for by the terms of Securities of any particular series, the cash amount of any sinking fund payment may be subject to reduction as provided in Section 1202. Each sinking fund payment shall be applied to the redemption of Securities of any particular series as provided for by the terms of Securities of that series.
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SECTION 1202. Satisfaction of Sinking Fund Payments With Securities.
The Company (1) may deliver Outstanding Securities of a series (other than any previously called for redemption), and (2) may apply as a credit Securities of a series which have been redeemed either at the election of the Company pursuant to the terms of such Securities or through the application of permitted optional sinking fund payments pursuant to the terms of such Securities, in each case in satisfaction of all or any part of any sinking fund payment with respect to the Securities of such series required to be made pursuant to the terms of such Securities as provided for by the terms of such series; provided, however, that such Securities have not been previously so credited. Such Securities shall be received and credited for such purpose by the Trustee for such Securities at the principal amount thereof and the amount of such sinking fund payment shall be reduced accordingly.
SECTION 1203. Redemption of Securities for Sinking Fund.
Not less than 60 days prior to each sinking fund payment date for any particular series of Securities, the Company will deliver to the Trustee for the Securities of such series an Officers’ Certificate specifying the amount of the next ensuing mandatory sinking fund payment for that series pursuant to the terms of that series, the portion thereof, if any, which is to be satisfied by payment of cash in the currency or currency unit in which the Securities of that series are payable (except as otherwise specified pursuant to Section 301 for the Securities of that series and except as provided in Sections 311(b) and 311(d)) and the portion thereof, if any, which is to be satisfied by delivering and crediting Securities of that series pursuant to Section 1202 and shall state the basis for such credit and that such Securities have not previously been so credited and will also deliver to such Trustee any Securities to be so delivered. Such Trustee shall select the Securities to be redeemed upon such sinking fund payment date in the manner specified in Section 1103 and cause notice of the redemption thereof to be given in the name of and at the expense of the Company in the manner provided in Section 1104. Such notice having been duly given, the redemption of such Securities shall be made upon the terms and in the manner stated in Sections 1106 and 1107.
Article Thirteen
MEETINGS OF HOLDERS OF SECURITIES
SECTION 1301. Purposes for Which Meetings May Be Called.
A meeting of Holders of Securities of such series may be called at any time and from time to time pursuant to this Article to make, give or take any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be made, given or taken by Holders of Securities of such series.
SECTION 1302. Call, Notice and Place of Meetings.
(a) The Trustee for any series of Securities, may at any time call a meeting of the Holders of Securities of such series for any purpose specified in Section 1301, to be held at such time and at such place in the Borough of Manhattan, The City of New York, or in London, as such Trustee shall determine. Notice of every meeting of Holders of Securities of such series, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting, shall be given, in the manner provided in Section 106, not less than 20 nor more than 180 days prior to the date fixed for the meeting.
(b) In case at any time the Company, pursuant to a Board Resolution, or the Holders of at least 10% in principal amount of the Outstanding Securities of any such series shall have requested the Trustee for any such series to call a meeting of the Holders of Securities of such series for any purpose specified in Section 1301, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and such Trustee shall not have made the first publication of the notice of such meeting within 30 days after receipt of such request or shall not thereafter proceed to cause the meeting to be held as provided herein, then the Company or the Holders of Securities of such series in the amount above specified, as the case may be, may determine the time and the place in the Borough of Manhattan, The City of New York, or in London, for such meeting and may call such meeting for such purposes by giving notice thereof as provided in subsection (a) of this Section.
SECTION 1303. Persons Entitled to Vote at Meetings.
To be entitled to vote at any meeting of Holders of Securities of any series, a Person shall be (1) a Holder of one or more Outstanding Securities of such series, or (2) a Person appointed by an instrument in writing as proxy for a Holder or Holders of one or more Outstanding Securities of such series by such Holder or Holders. The only Persons who shall be entitled to be present or to speak at any meeting of Holders of Securities of any series shall be the Persons entitled to vote at such meeting and their counsel, any representatives of the Trustee for such series and its counsel and any representatives of the Company and its counsel.
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SECTION 1304. Quorum; Action.
The Persons entitled to vote a majority in principal amount of the Outstanding Securities of a series shall constitute a quorum for a meeting of Holders of Securities of such series. In the absence of a quorum within 30 minutes of the time appointed for any such meeting, the meeting shall, if convened at the request of Holders of Securities of such series, be dissolved. In any other case the meeting may be adjourned for a period of not less than 10 days as determined by the chairman of the meeting prior to the adjournment of such meeting. In the absence of a quorum at any such adjourned meeting, such adjourned meeting may be further adjourned for a period of not less than 10 days as determined by the chairman of the meeting prior to the adjournment of such adjourned meeting. Subject to Section 1305(d), notice of the reconvening of any adjourned meeting shall be given as provided in Section 1302(a), except that such notice need be given only once not less than five days prior to the date on which the meeting is scheduled to be reconvened. Notice of the reconvening of an adjourned meeting shall state expressly that Persons entitled to vote a majority in principal amount of the Outstanding Securities of such series shall constitute a quorum.
Except as limited by the proviso to Section 902, any resolution presented to a meeting or adjourned meeting duly reconvened at which a quorum is present as aforesaid may be adopted by the affirmative vote of the Holders of a majority in principal amount of the Outstanding Securities of that series; provided, however, that except as limited by the proviso to Section 902, any resolution with respect to any request, demand, authorization, direction, notice, consent, waiver or other action which this Indenture expressly provides may be made, given or taken by the Holders of a specified percentage which is less than a majority in principal amount of the Outstanding Securities of a series may be adopted at a meeting or an adjourned meeting duly reconvened and at which a quorum is present as aforesaid by the affirmative vote of the Holders of such specified percentage in principal amount of the Outstanding Securities of that series. Any resolution passed or decision taken at any meeting of Holders of Securities of any series duly held in accordance with this Section shall be binding on all the Holders of Securities of such series and the related coupons, whether or not present or represented at the meeting.
SECTION 1305. Determination of Voting Rights; Conduct and Adjournment of Meetings.
(a) Notwithstanding any other provision of this Indenture, the Trustee for any series of Securities may make such reasonable regulations as it may deem advisable for any meeting of Holders of Securities of such series in regard to proof of the holding of Securities of such series and of the appointment of proxies and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall deem appropriate.
(b) The Trustee for any series of Securities shall, by an instrument in writing, appoint a temporary chairman of the meeting, unless the meeting shall have been called by the Company or by Holders of Securities as provided in Section 1302(b), in which case the Company or the Holders of Securities of the series calling the meeting, as the case may be, shall in like manner appoint a temporary chairman. A permanent chairman and a permanent secretary of the meeting shall be elected by vote of the Persons entitled to vote a majority in principal amount of the Outstanding Securities of such series represented at the meeting.
(c) At any meeting each Holder of a Security of such series or proxy shall be entitled to one vote for each $1,000 principal amount of Securities of such series held or represented by him as determined in accordance with Section 115; provided, however, that no vote shall be cast or counted at any meeting in respect of any Security challenged as not Outstanding and ruled by the chairman of the meeting to be not Outstanding. The chairman of the meeting shall have no right to vote, except as a Holder of a Security of such series or proxy.
(d) Any meeting of Holders of Securities of any series duly called pursuant to Section 1302 at which a quorum is present may be adjourned from time to time by Persons entitled to vote a majority in principal amount of the Outstanding Securities of such series represented at the meeting; and the meeting may be held as so adjourned without further notice.
SECTION 1306. Counting Votes and Recording Action of Meetings.
The vote upon any resolution submitted to any meeting of Holders of Securities of any series shall be by written ballots on which shall be subscribed the signatures of the Holders of Securities of such series or of their representatives by proxy and the principal amounts and serial numbers of the Outstanding Securities of such series held or represented by them. The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in triplicate of all votes cast at the meeting. A record, at least in duplicate, of the proceedings of each meeting of Holders of Securities of any series shall be prepared by the secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more persons having knowledge of the facts setting forth a copy of the notice of the meeting and showing that said notice was given as provided in Section 1302 and, if applicable, Section 1304. Each copy shall be signed and verified by the affidavits of the permanent chairman and secretary of the meeting and one such copy shall be delivered to the Company, and another to the Trustee for such series of Securities to be preserved by such Trustee, the latter to have attached thereto the ballots voted at the meeting. Any record so signed and verified shall be conclusive evidence of the matters therein stated.
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Article Fourteen
GUARANTEES
SECTION 1401. Guarantee.
(a) Subject to this Article 14, to the extent provided for in any series of Securities under the Indenture, each of the Guarantors hereby will, jointly and severally, irrevocably and unconditionally guarantee, on a senior unsecured basis, to each Holder and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of this Indenture, such series of Securities or the obligations of the Company hereunder or thereunder, that: (1) the principal, premium, if any, and interest on the Security shall be promptly paid in full when due, whether at Stated Maturity, by acceleration, redemption or otherwise, and interest on the overdue principal and interest on the Securities, if any, if lawful, and all other obligations of the Company to the Holders or the Trustee hereunder or under the Securities shall be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (2) in case of any extension of time of payment or renewal of any Securities or any of such other obligations, that same shall be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at Stated Maturity, by acceleration or otherwise. Failing payment by the Company when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors shall be jointly and severally obligated to pay the same immediately. Each Guarantor agrees that this is a guarantee of payment and not a guarantee of collection.
(b) The Guarantors hereby agree that their obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Securities or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. Each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenants that this Guarantee shall not be discharged except by complete performance of the obligations contained in the Securities and this Indenture, or pursuant to Section 1406.
(c) Each of the Guarantors also agrees, jointly and severally, to pay any and all costs and expenses (including reasonable and documented attorneys’ fees and expenses) incurred by the Trustee or any Holder in enforcing any rights under this Section 1401.
(d) If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors or any custodian, trustee, liquidator or other similar official acting in relation to the Company or the Guarantors, any amount paid either to the Trustee or such Holder, this Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect.
(e) Each Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Guarantor further agrees that, as between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (1) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 5 for the purposes of this Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (2) in the event of any declaration of acceleration of such obligations as provided in Article 5, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of this Guarantee. The Guarantors shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Guarantees.
50
(f) Each Guarantee shall remain in full force and effect and continue to be effective should any petition be filed by or against the Company for liquidation or reorganization, should the Company become insolvent or make an assignment for the benefit of creditors or should a receiver or trustee be appointed for all or any significant part of the Company’s assets, and shall, to the fullest extent permitted by law, continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Securities are, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee on the Securities or the Guarantees, whether as a “voidable preference”, “fraudulent transfer” or otherwise, all as though such payment or performance had not been made. In the event that any payment or any part thereof, is rescinded, reduced, restored or returned, the Securities shall, to the fullest extent permitted by law, be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.
(g) In case any provision of any Guarantee shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.
(h) Each payment to be made by a Guarantor in respect of its Guarantee shall be made without set-off, counterclaim, reduction or diminution of any kind or nature.
SECTION 1402. Limitation on Guarantor Liability.
Each Guarantor, and by its acceptance of Securities, each Holder, hereby confirms that it is the intention of all such parties that the Guarantee of such Guarantor not constitute a fraudulent conveyance or a fraudulent transfer for purposes of bankruptcy law in the United States, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law to the extent applicable to any Guarantee. To effectuate the foregoing intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree that the obligations of each Guarantor shall be limited to the maximum amount as will, after giving effect to such maximum amount and all other contingent and fixed liabilities of such Guarantor that are relevant under such laws and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under this Article 14, result in the obligations of such Guarantor under its Guarantee not constituting a fraudulent conveyance or fraudulent transfer under applicable law. Each Guarantor that makes a payment under its Guarantee shall be entitled upon payment in full of all Guaranteed obligations under this Indenture to a contribution from each other Guarantor in an amount equal to such other Guarantor’s pro rata portion of such payment based on the respective net assets of all the Guarantors at the time of such payment determined in accordance with generally accepted accounting principles in the United States.
SECTION 1403. Execution and Delivery.
(a) To evidence its Guarantee set forth in Section 1401, each Guarantor hereby agrees that a supplemental indenture to this Indenture shall be executed on behalf of such Guarantor by an Officer or person holding an equivalent title.
(b) Each Guarantor shall in such supplemental indenture agree that its Guarantee set forth in Section 1401 shall remain in full force and effect notwithstanding the absence of the endorsement of any notation of such Guarantee on the Securities.
(c) If an Officer whose signature is on this Indenture or a supplemental indenture no longer holds that office at the time the Trustee authenticates the Security, the Guarantees shall be valid nevertheless.
(d) The delivery of any Security by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Guarantee set forth in this Indenture or supplemental indenture on behalf of the Guarantors.
SECTION 1404. Subrogation.
Each Guarantor shall be subrogated to all rights of Holders against the Company in respect of any amounts paid by any Guarantor pursuant to the provisions of Section 1401; provided that, if an Event of Default has occurred and is continuing, no Guarantor shall be entitled to enforce or receive any payments arising out of, or based upon, such right of subrogation until all amounts then due and payable by the Company under this Indenture or the Securities shall have been paid in full.
SECTION 1405. Benefits Acknowledged.
Each Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by this Indenture and that the guarantee and waivers made by it pursuant to its Guarantee are knowingly made in contemplation of such benefits.
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SECTION 1406. Release of Guarantees.
(a) A Guarantee by a Guarantor shall be automatically and unconditionally released and discharged, and no further action by such Guarantor, the Company or the trustee shall be required for the release of such Guarantor’s Guarantee, upon:
| (1) | (A) the Company’s exercise of its Legal Defeasance option or, except in the case of a Guarantee of any direct or indirect parent of the Company, Covenant Defeasance option in accordance with Article 4 or the Company’s obligations under this Indenture being discharged in accordance with the terms of this Indenture; or |
| (B) | as specified in a supplemental indenture to this Indenture; and |
| (2) | such Guarantor delivering to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for in this Indenture relating to such transaction and/or release have been complied with. |
At the written request of the Company, the Trustee shall execute and deliver any documents reasonably required in order to evidence such release, discharge and termination in respect of the applicable Guarantee.
52
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, all as of the day and year first above written.
| MONDELĒZ INTERNATIONAL, INC. | ||
| By: | /s/ Barbara L Brasier | |
| Name: | Barbara L. Brasier | |
| Title: | Senior Vice President and Treasurer | |
| DEUTSCHE BANK TRUST COMPANY AMERICAS, as Trustee | ||
| By: | Deutsche Bank National Trust Company | |
| By: | /s/ Carol Ng | |
| Name: | Carol Ng | |
| Title: | Vice President | |
| By: | /s/ Anthony D’Amato | |
| Name: | Anthony D’Amato | |
| Title: | Associate | |
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Exhibit 10.1
EXECUTION VERSION
U.S. $4,500,000,000
AMENDED AND RESTATED FIVE-YEAR REVOLVING CREDIT AGREEMENT
Dated as of October 14, 2016
Among
MONDELĒZ INTERNATIONAL, INC.
and
THE INITIAL LENDERS NAMED HEREIN
and
JPMORGAN CHASE BANK, N.A.,
as Administrative Agent
JPMORGAN CHASE BANK, N.A.,
CITIGROUP GLOBAL MARKETS INC.,
CREDIT SUISSE SECURITIES (USA) LLC,
HSBC SECURITIES (USA) INC.
and
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,
as Joint Lead Arrangers and Joint Bookrunners
BANK OF AMERICA, N.A.,
CITIBANK, N.A.,
CREDIT SUISSE SECURITIES (USA) LLC
and
HSBC SECURITIES (USA) INC.,
as Co-Syndication Agents
TABLE OF CONTENTS
| Page | ||||||
| ARTICLE I | ||||||
| Definitions and Accounting Terms | ||||||
| SECTION 1.01 |
Certain Defined Terms |
1 | ||||
| SECTION 1.02 |
Computation of Time Periods |
14 | ||||
| SECTION 1.03 |
Accounting Terms |
14 | ||||
| ARTICLE II | ||||||
| Amounts and Terms of the Advances | ||||||
| SECTION 2.01 |
The Pro Rata Advances |
15 | ||||
| SECTION 2.02 |
Making the Pro Rata Advances |
15 | ||||
| SECTION 2.03 |
Repayment of Pro Rata Advances |
17 | ||||
| SECTION 2.04 |
Interest on Pro Rata Advances |
17 | ||||
| SECTION 2.05 |
Additional Interest on LIBO Rate Advances |
18 | ||||
| SECTION 2.06 |
Conversion of Pro Rata Advances |
18 | ||||
| SECTION 2.07 |
The Competitive Bid Advances |
19 | ||||
| SECTION 2.08 |
LIBO Rate Determination |
23 | ||||
| SECTION 2.09 |
Fees |
23 | ||||
| SECTION 2.10 |
Optional Termination or Reduction of Commitments and Extension of Termination Date |
24 | ||||
| SECTION 2.11 |
Optional Prepayments of Pro Rata Advances |
26 | ||||
| SECTION 2.12 |
Increased Costs |
26 | ||||
| SECTION 2.13 |
Illegality |
27 | ||||
| SECTION 2.14 |
Payments and Computations |
28 | ||||
| SECTION 2.15 |
Taxes |
29 | ||||
| SECTION 2.16 |
Sharing of Payments, Etc. |
32 | ||||
| SECTION 2.17 |
Evidence of Debt |
32 | ||||
| SECTION 2.18 |
Commitment Increases |
33 | ||||
| SECTION 2.19 |
Use of Proceeds |
34 | ||||
| SECTION 2.20 |
Defaulting Lenders |
34 | ||||
| ARTICLE III | ||||||
| Conditions to Effectiveness and Lending | ||||||
| SECTION 3.01 |
Conditions Precedent to Effectiveness |
35 | ||||
| SECTION 3.02 |
Initial Advance to Each Designated Subsidiary |
36 | ||||
| SECTION 3.03 |
Conditions Precedent to Each Pro Rata Borrowing |
37 | ||||
| SECTION 3.04 |
Conditions Precedent to Each Competitive Bid Borrowing |
38 | ||||
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| Page | ||||||
| ARTICLE IV | ||||||
| Representations and Warranties | ||||||
| SECTION 4.01 |
Representations and Warranties of Mondelēz |
38 | ||||
| ARTICLE V | ||||||
| Covenants of Mondelēz | ||||||
| SECTION 5.01 |
Affirmative Covenants |
40 | ||||
| SECTION 5.02 |
Negative Covenants |
41 | ||||
| ARTICLE VI | ||||||
| Events of Default | ||||||
| SECTION 6.01 |
Events of Default |
43 | ||||
| SECTION 6.02 |
Lenders’ Rights upon Event of Default |
44 | ||||
| ARTICLE VII | ||||||
| The Administrative Agent | ||||||
| SECTION 7.01 |
Authorization and Action |
45 | ||||
| SECTION 7.02 |
Administrative Agent’s Reliance, Etc. |
46 | ||||
| SECTION 7.03 |
The Administrative Agent and Affiliates |
46 | ||||
| SECTION 7.04 |
Lender Credit Decision |
47 | ||||
| SECTION 7.05 |
Indemnification |
47 | ||||
| SECTION 7.06 |
Successor Administrative Agent |
47 | ||||
| SECTION 7.07 |
Administrative Agent, Joint Bookrunners, Joint Lead Arrangers and Co-Syndication Agents |
48 | ||||
| SECTION 7.08 |
Withholding Tax |
48 | ||||
| ARTICLE VIII | ||||||
| Guaranty | ||||||
| SECTION 8.01 |
Guaranty |
49 | ||||
| SECTION 8.02 |
Guaranty Absolute |
49 | ||||
| SECTION 8.03 |
Waivers |
49 | ||||
| SECTION 8.04 |
Continuing Guaranty |
50 | ||||
-ii-
| Page | ||||||
| ARTICLE IX | ||||||
| Miscellaneous | ||||||
| SECTION 9.01 |
Amendments, Etc. |
51 | ||||
| SECTION 9.02 |
Notices, Etc. |
51 | ||||
| SECTION 9.03 |
No Waiver; Remedies |
53 | ||||
| SECTION 9.04 |
Costs and Expenses |
53 | ||||
| SECTION 9.05 |
Right of Set-Off |
54 | ||||
| SECTION 9.06 |
Binding Effect |
55 | ||||
| SECTION 9.07 |
Assignments and Participations |
55 | ||||
| SECTION 9.08 |
Designated Subsidiaries |
59 | ||||
| SECTION 9.09 |
Governing Law |
59 | ||||
| SECTION 9.10 |
Execution in Counterparts |
60 | ||||
| SECTION 9.11 |
Jurisdiction, Etc. |
60 | ||||
| SECTION 9.12 |
Confidentiality |
62 | ||||
| SECTION 9.13 |
No Fiduciary Relationship |
62 | ||||
| SECTION 9.14 |
Integration |
62 | ||||
| SECTION 9.15 |
USA Patriot Act Notice |
63 | ||||
| SECTION 9.16 |
Acknowledgment and Consent to Bail-In of EEA Financial Institutions |
63 | ||||
| SCHEDULES |
||||
| Schedule I |
— | List of Lenders and Commitments | ||
| Schedule II |
— | List of Applicable Lending Offices | ||
| EXHIBITS |
||||
| Exhibit A-1 |
— | Form of Pro Rata Note | ||
| Exhibit A-2 |
— | Form of Competitive Bid Note | ||
| Exhibit B-1 |
— | Form of Notice of Pro Rata Borrowing | ||
| Exhibit B-2 |
— | Form of Notice of Competitive Bid Borrowing | ||
| Exhibit C |
— | Form of Assignment and Acceptance | ||
| Exhibit D |
— | Form of Designation Agreement | ||
| Exhibit E-1 |
— | Form of Opinion of Special Counsel for Mondelēz | ||
| Exhibit E-2 |
— | Form of Opinion of Special Local Counsel for Mondelēz | ||
| Exhibit E-3 |
— | Form of Opinion of Internal Counsel for Mondelēz | ||
| Exhibit F |
— | Form of Opinion of Counsel for Designated Subsidiary | ||
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AMENDED AND RESTATED FIVE-YEAR REVOLVING CREDIT AGREEMENT (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, this “Agreement”) dated as of October 14, 2016, among MONDELĒZ INTERNATIONAL, INC., a Virginia corporation (“Mondelēz”); the BANKS, FINANCIAL INSTITUTIONS and OTHER INSTITUTIONAL LENDERS listed on the signature pages hereof (the “Initial Lenders”) and JPMORGAN CHASE BANK, N.A. (“JPMorgan”), as administrative agent (in such capacity, the “Administrative Agent”).
Mondelēz, certain of the Lenders and the Administrative Agent are party to the Existing Credit Agreement (as defined below). The Initial Lenders are willing to amend and restate the Existing Credit Agreement in the form hereof and to extend such credit to Mondelēz and the other Borrowers (as defined below) pursuant hereto, in each case, on the terms and subject to the conditions herein set forth. Accordingly, the parties hereto agree as follows:
ARTICLE I
Definitions and Accounting Terms
SECTION 1.01 Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):
“Administrative Agent” has the meaning specified in the preamble.
“Administrative Agent Account” means (a) the account of the Administrative Agent, maintained by the Administrative Agent, at its office at JPMorgan Chase Bank, N.A., JPMorgan Loan Services, Loan & Agency, 500 Stanton Christiana Road, Op2, Floor 3, Newark, DE, 19713-2107, United States. Attention: Jane Dreisbach, jane.dreisbach@jpmorgan.com, 302-634-4733 (facsimile), or (b) such other account of the Administrative Agent as is designated in writing from time to time by the Administrative Agent to Mondelēz and the Lenders for such purpose.
“Advance” means a Pro Rata Advance or a Competitive Bid Advance.
“Agents” means the Administrative Agent, each Co-Syndication Agent, each Joint Bookrunner and each Joint Lead Arranger.
“Anti-Corruption Laws” means all laws, rules, and regulations of the United States from time to time concerning or relating to bribery or corruption and the UK Bribery Act.
“Applicable Facility Fee Rate” means, for any date, a percentage per annum equal to the percentage set forth below determined by reference to the higher of (i) the rating of Mondelēz’s long-term senior unsecured Debt from Standard & Poor’s (or, if there shall be no outstanding rated long-term senior unsecured Debt of Mondelēz, the long-term company, issuer or similar rating established by Standard & Poor’s for Mondelēz) and (ii) the rating of Mondelēz’s long-term senior unsecured Debt from Moody’s (or, if there shall be no outstanding rated long-term senior unsecured Debt of Mondelēz, the long-term company, issuer or similar rating established by Moody’s for Mondelēz), in each case on such date:
| Rating |
Applicable Facility Fee Rate | |||
| A or higher by Standard & Poor’s A2 or higher by Moody’s |
0.070 | % | ||
| A- by Standard & Poor’s A3 by Moody’s |
0.080 | % | ||
| BBB+ by Standard & Poor’s Baa1 by Moody’s |
0.095 | % | ||
| BBB by Standard & Poor’s Baa2 by Moody’s |
0.110 | % | ||
| Lower than BBB by Standard & Poor’s Lower than Baa2 by Moody’s |
0.125 | % | ||
provided that if on any date of determination (x) a rating is available on such date from only one of Standard & Poor’s and Moody’s but not the other, the Applicable Facility Fee Rate shall be determined by reference to the then available rating; (y) no rating is available from either of Standard & Poor’s or Moody’s, the Applicable Facility Fee Rate shall be determined by reference to the rating of any other nationally recognized statistical rating organization designated by Mondelēz and approved in writing by the Required Lenders and (z) no rating is available from any of Standard & Poor’s, Moody’s or any other nationally recognized statistical rating organization designated by Mondelēz and approved in writing by the Required Lenders, the Applicable Facility Fee Rate shall be 0.125%.
“Applicable Interest Rate Margin” means (a) as to any Base Rate Advance, the applicable rate per annum set forth below under the caption “Base Rate Spread” and (b) as to any LIBO Rate Advance, the applicable rate per annum set forth below under the caption “LIBO Rate Spread”, determined by reference to the higher of (i) the rating of Mondelēz’s long-term senior unsecured Debt from Standard & Poor’s (or, if there shall be no outstanding rated long-term senior unsecured Debt of Mondelēz, the long-term company, issuer or similar rating established by Standard & Poor’s for Mondelēz) and (ii) the rating of Mondelēz’s long-term senior unsecured Debt from Moody’s (or, if there shall be no outstanding rated long-term senior unsecured Debt of Mondelēz, the long-term company, issuer or similar rating established by Moody’s for Mondelēz), in each case on such date:
| Rating |
Base Rate Spread | LIBO Rate Spread | ||||||
| A or higher by Standard & Poor’s A2 or higher by Moody’s |
0.000 | % | 0.805 | % | ||||
| A- by Standard & Poor’s A3 by Moody’s |
0.000 | % | 0.920 | % | ||||
| BBB+ by Standard & Poor’s Baa1 by Moody’s |
0.030 | % | 1.030 | % | ||||
| BBB by Standard & Poor’s Baa2 by Moody’s |
0.140 | % | 1.140 | % | ||||
| Lower than BBB by Standard & Poor’s Lower than Baa2 by Moody’s |
0.250 | % | 1.250 | % | ||||
-2-
provided that if on any date of determination (x) a rating is available on such date from only one of Standard & Poor’s and Moody’s but not the other, the Applicable Interest Rate Margin shall be determined by reference to the then available rating; (y) no rating is available from either of Standard & Poor’s or Moody’s, the Applicable Interest Rate Margin shall be determined by reference to the rating of any other nationally recognized statistical rating organization designated by Mondelēz and approved in writing by the Required Lenders and (z) no rating is available from any of Standard & Poor’s, Moody’s or any other nationally recognized statistical rating organization designated by Mondelēz and approved in writing by the Required Lenders, the Applicable Interest Rate Margin shall be 0.250% as to any Base Rate Advance and 1.250% as to any LIBO Rate Advance.
“Applicable Lending Office” means, with respect to each Lender, such Lender’s Domestic Lending Office in the case of a Pro Rata Advance and, in the case of a Competitive Bid Advance, the office of such Lender notified by such Lender to the Administrative Agent as its Applicable Lending Office with respect to such Competitive Bid Advance.
“Assignment and Acceptance” means an assignment and acceptance entered into by a Lender and an Eligible Assignee, and accepted by the Administrative Agent in substantially the form of Exhibit C hereto.
“Augmenting Lender” has the meaning assigned to such term in Section 2.18(a).
“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable EEA Resolution Authority in respect of any liability of an EEA Financial Institution.
“Bail-In Legislation” means, with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule.
“Base Rate” means a fluctuating interest rate per annum in effect from time to time, which rate per annum shall at all times be equal to the highest of:
(i) the rate of interest announced publicly by the Administrative Agent in New York, New York, from time to time, as the Administrative Agent’s prime rate;
(ii) 1/2 of one percent per annum above the Federal Funds Effective Rate; and
(iii) the LIBO Rate for Dollars for a one month Interest Period appearing on Reuters Screen LIBOR01 on such day (or if such day is not a Business Day, the immediately preceding Business Day) plus 1% per annum;
provided that in no event shall the Base Rate be less than zero.
-3-
“Base Rate Advance” means a Pro Rata Advance that bears interest as provided in Section 2.04(a)(i).
“Board” means the Board of Governors of the Federal Reserve System of the United States (or any successor).
“Borrower Agent” means agents of Mondelēz acting in capacity with, or benefitting from, this Agreement or the proceeds of any Advance.
“Borrowers” means, collectively, Mondelēz and each Designated Subsidiary that shall become a party to this Agreement pursuant to Section 9.08.
“Borrowing” means a Pro Rata Borrowing or a Competitive Bid Borrowing.
“Business Day” means a day of the year on which banks are not required or authorized by law to close in New York City and, if the applicable Business Day relates to any LIBO Rate Advances or Floating Rate Bid Advances, on which dealings are carried on in the London interbank market and banks are open for business in London.
“Commission” means the United States Securities and Exchange Commission.
“Commitment” means as to any Lender (i) the Dollar amount set forth opposite such Lender’s name on Schedule I hereto, (ii) if such Lender has entered into an Assignment and Acceptance, the Dollar amount set forth for such Lender in the Register maintained by the Administrative Agent, pursuant to Section 9.07(d), or (iii) if such Lender becomes a Lender pursuant to a Commitment Increase Amendment, the Dollar amount set forth for such Lender in such Commitment Increase Amendment, in each case as such amount may be increased pursuant to Section 2.18 or reduced pursuant to Section 2.10.
“Commitment Increase” has the meaning assigned to such term in Section 2.18(a).
“Commitment Increase Amendment” has the meaning assigned to such term in Section 2.18(a).
“Competitive Bid Advance” means an advance by a Lender to any Borrower as part of a Competitive Bid Borrowing resulting from the competitive bidding procedure described in Section 2.07 and refers to a Fixed Rate Bid Advance or a Floating Rate Bid Advance.
“Competitive Bid Borrowing” means a borrowing consisting of simultaneous Competitive Bid Advances from each of the Lenders whose offer to make one or more Competitive Bid Advances as part of such borrowing has been accepted under the competitive bidding procedure described in Section 2.07.
“Competitive Bid Note” means a promissory note of any Borrower payable to any Lender (or its registered assigns), in substantially the form of Exhibit A-2 hereto, evidencing the indebtedness of such Borrower to such Lender resulting from a Competitive Bid Advance made by such Lender to such Borrower.
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“Competitive Bid Reduction” has the meaning specified in Section 2.01.
“Consolidated Tangible Assets” means the total assets appearing on a consolidated balance sheet of Mondelēz and its Subsidiaries, less goodwill and other intangible assets and the minority interests of other Persons in such Subsidiaries, all as determined in accordance with GAAP.
“Convert,” “Conversion” and “Converted” each refers to a conversion of Pro Rata Advances of one Type into Pro Rata Advances of the other Type pursuant to Section 2.06, 2.08 or 2.13.
“Co-Syndication Agents” means Bank of America, N.A., Citibank, N.A., Credit Suisse Securities (USA) LLC and HSBC Securities (USA) Inc.
“Debt” means (i) indebtedness for borrowed money or for the deferred purchase price of property or services, whether or not evidenced by bonds, debentures, notes or similar instruments, (ii) obligations as lessee under leases that, in accordance with accounting principles generally accepted in the United States, are recorded as capital leases, and (iii) obligations under direct or indirect guaranties in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or obligations of any other Person of the kinds referred to in clause (i) or (ii) above.
“Default” means any event specified in Section 6.01 that would constitute an Event of Default but for the requirement that notice be given or time elapse or both.
“Defaulting Lender” means any Lender, as reasonably determined by the Administrative Agent, that has (a) failed to fund any portion of its Advances within three Business Days of the date required to be funded by it hereunder, unless such Lender notifies the Administrative Agent and the Borrower in writing that such failure is the result of such Lender’s determination that one or more conditions precedent to the funding has not been satisfied, (b) notified any Borrower, the Administrative Agent or any Lender in writing that it does not intend to comply with any of its funding obligations under this Agreement or has made a public statement to the effect that it does not intend to comply with its funding obligations under this Agreement or generally under other agreements in which it commits to extend credit, (c) failed, within three Business Days after written request by the Administrative Agent, to confirm that it will comply with the terms of this Agreement relating to its obligations to fund prospective Advances, provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon the Administrative Agent’s receipt of such confirmation in form and substance satisfactory to the Administrative Agent, (d) otherwise failed to pay over to the Administrative Agent or any other Lender any other amount required to be paid by it hereunder within three Business Days of the date when due, or (e) become the subject of a bankruptcy, insolvency proceeding or Bail-In Action, or has had a receiver, conservator, trustee or custodian appointed for it, or has taken any action in furtherance of, or indicating its consent to, approval of or acquiescence in any such proceeding or appointment or has a parent company that has become the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee or custodian appointed for it, or has taken any action in furtherance of, or indicating its consent to, approval of or acquiescence in any such proceeding or appointment, in the case of clauses (a) through (d) unless the subject of a good faith dispute and such Lender has notified the Administrative Agent in writing of such; provided that, for the avoidance of doubt, a Lender shall not be a Defaulting Lender solely by virtue of (i) the ownership or acquisition of any ownership interest in such Lender or a parent company thereof or the exercise of control over a Lender or parent company thereof by a Governmental Authority or instrumentality thereof or (ii) in the case of a solvent Lender or parent company thereof, as the case may be, the precautionary appointment of an administrator, guardian, custodian or other similar official by a Governmental Authority under or based on the law of the country where such Person is subject to home jurisdiction supervision if applicable law requires that such appointment not be publicly disclosed in any such case, where such action does not result in or provide such Lender with immunity from the jurisdiction of the courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or Governmental Authority or instrumentality) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender.
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“Designated Subsidiary” means any wholly-owned Subsidiary of Mondelēz designated for borrowing privileges under this Agreement pursuant to Section 9.08.
“Designation Agreement” means, with respect to any Designated Subsidiary, an agreement in the form of Exhibit D hereto signed by such Designated Subsidiary and Mondelēz.
“Dollars” and the “$” sign each means lawful currency of the United States of America.
“Domestic Lending Office” means, with respect to any Lender, the office of such Lender specified as its “Domestic Lending Office” opposite its name on Schedule II hereto or in the Assignment and Acceptance pursuant to which it became a Lender, or such other office of such Lender as such Lender may from time to time specify to Mondelēz and the Administrative Agent.
“EEA Financial Institution” means (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent;
“EEA Member Country” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.
“EEA Resolution Authority” means any public administrative authority or any person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.
“Effective Date” has the meaning specified in Section 3.01.
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“Eligible Assignee” means (i) a commercial bank organized under the laws of the United States, or any State thereof, and having total assets in excess of $5,000,000,000; (ii) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development (or any successor) (“OECD”), or a political subdivision of any such country, and having total assets in excess of $5,000,000,000, provided that such bank is acting through a branch or agency located in the country in which it is organized or another country which is also a member of the OECD or the Cayman Islands; (iii) the central bank of any country which is a member of the OECD; (iv) a commercial finance company or finance Subsidiary of a corporation organized under the laws of the United States, or any State thereof, and having total assets in excess of $3,000,000,000; (v) an insurance company organized under the laws of the United States, or any State thereof, and having total assets in excess of $5,000,000,000; (vi) any Lender; (vii) an affiliate of any Lender; and (viii) any other bank, commercial finance company, insurance company or other Person approved in writing by Mondelēz (such approval not to be unreasonably withheld, delayed or conditioned), which approval shall be notified to the Administrative Agent; provided, that none of Mondelēz or its Subsidiaries, a Defaulting Lender or a natural person shall be permitted to be an Eligible Assignee.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder.
“ERISA Affiliate” means any Person that for purposes of Title IV of ERISA is a member of any Borrower’s controlled group, or under common control with any Borrower, within the meaning of Section 414 of the Internal Revenue Code.
“ERISA Event” means (a) (i) the occurrence with respect to a Plan of a reportable event, within the meaning of Section 4043 of ERISA, unless the 30-day notice requirement with respect thereto has been waived by the Pension Benefit Guaranty Corporation (or any successor) (“PBGC”), or (ii) the requirements of subsection (1) of Section 4043(b) of ERISA (without regard to subsection (2) of such section) are met with respect to a contributing sponsor, as defined in Section 4001(a)(13) of ERISA, of a Plan, and an event described in paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA is reasonably expected to occur with respect to such Plan within the following 30 days; (b) the application for a minimum funding waiver with respect to a Plan; (c) the provision by the administrator of any Plan of a notice of intent to terminate such Plan, pursuant to Section 4041(a)(2) of ERISA (including any such notice with respect to a plan amendment referred to in Section 4041(e) of ERISA); (d) the cessation of operations at a facility of any Borrower or any of their ERISA Affiliates in the circumstances described in Section 4062(e) of ERISA; (e) the conditions set forth in Section 303(k)(1)(A) and (B) of ERISA to the creation of a lien upon property or rights to property of any Borrower or any of their ERISA Affiliates for failure to make a required payment to a Plan are satisfied; or (f) the termination of a Plan by the PBGC pursuant to Section 4042 of ERISA, or the occurrence of any event or condition described in Section 4042 of ERISA that constitutes grounds for the termination of, or the appointment of a trustee to administer, a Plan.
“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor person), as in effect from time to time.
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“Eurocurrency Lending Office” means, with respect to any Lender, the office of such Lender specified as its “Eurocurrency Lending Office” opposite its name on Schedule II hereto or in the Assignment and Acceptance pursuant to which it became a Lender (or, if no such office is specified, its Domestic Lending Office), or such other office of such Lender as such Lender may from time to time specify to Mondelēz and the Administrative Agent.
“Eurocurrency Liabilities” has the meaning assigned to that term in Regulation D of the Board, as in effect from time to time.
“Eurocurrency Rate Reserve Percentage” for any Interest Period, for all LIBO Rate Advances or Floating Rate Bid Advances comprising part of the same Borrowing owing to a Lender which is a member of the Federal Reserve System, means the reserve percentage applicable for such Lender two Business Days before the first day of such Interest Period under regulations issued from time to time by the Board for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for a member bank of the Federal Reserve System in New York City with respect to liabilities or assets consisting of or including Eurocurrency Liabilities (or with respect to any other category of liabilities that includes deposits by reference to which the interest rate on LIBO Rate Advances or Floating Rate Bid Advances is determined) having a term equal to such Interest Period.
“Event of Default” has the meaning specified in Section 6.01.
“Existing Credit Agreement” means Mondelēz’s existing U.S. $4,500,000,000 5-Year Revolving Credit Agreement dated as of October 10, 2013, as amended, restated, supplemented or otherwise modified in accordance with its terms, as in effect immediately prior to the amendment and restatement pursuant to the terms hereof.
“Extending Lender” has the meaning specified in Section 2.10(b).
“Extension Date” has the meaning specified in Section 2.10(b).
“Facility Fee” has the meaning specified in Section 2.09(a).
“FATCA” means Sections 1471 through 1474 of the Internal Revenue Code as enacted as of the date hereof or any amended or successor version that is substantively comparable and not materially more onerous to comply with, and, in each case, regulations promulgated thereunder or official interpretations thereof, any agreements entered into pursuant to Section 1471(b)(1) of the Internal Revenue Code as of the date hereof (or any amended or successor version described above), and any intergovernmental agreement between the United States and another jurisdiction implementing the foregoing (or any law, regulation or other official administrative interpretation implementing such an intergovernmental agreement).
“FCPA” means the United States Foreign Corrupt Practices Act of 1977.
“Federal Bankruptcy Code” means the Bankruptcy Reform Act of 1978, as amended from time to time.
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“Federal Funds Effective Rate” means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.
“Fee Letter” means the administrative agent fee letter, dated as of September 28, 2016, between Mondelēz and the Administrative Agent.
“Fixed Rate Bid Advance” means a Competitive Bid Advance bearing interest based on a fixed rate per annum as specified in the relevant Notice of Competitive Bid Borrowing.
“Floating Rate Bid Advance” means a Competitive Bid Advance bearing interest at a rate of interest quoted as a margin over the LIBO Rate as specified in the relevant Notice of Competitive Bid Borrowing.
“Foreign Subsidiary” means, with respect to any Person, each Subsidiary of such Person that is not organized under the laws of the United States of America, any state thereof or the District of Columbia.
“GAAP” has the meaning specified in Section 1.03.
“Governmental Authority” means any nation or government and any state or other political subdivision thereof, and any agency, authority, instrumentality, regulatory body, court, administrative tribunal, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national body exercising such powers or functions, such as the European Union or the European Central Bank).
“Guaranty” has the meaning specified in Section 8.01.
“Historical Screen Rate” means, in relation to any LIBO Rate Advance or Floating Rate Bid Advance, the most recent applicable Screen Rate for Dollars for a period equal in length to the Interest Period of that Advance and which is as of a day which is no more than two (2) Business Days before the start of the applicable Interest Period.
“Home Jurisdiction Non-U.S. Withholding Taxes” means in the case of a Designated Subsidiary that is not a “United States person” within the meaning of Section 7701(a)(30) of the Internal Revenue Code, withholding taxes imposed by the jurisdiction under the laws of which such Designated Subsidiary is organized, resident or doing business or any political subdivision thereof.
“Home Jurisdiction U.S. Withholding Taxes” means, in the case of Mondelēz and a Designated Subsidiary that is a “United States person” within the meaning of Section 7701(a)(30) of the Internal Revenue Code, withholding for United States federal income taxes and United States federal back-up withholding taxes.
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“Interest Period” means, for each LIBO Rate Advance comprising part of the same Pro Rata Borrowing and each Floating Rate Bid Advance comprising part of the same Competitive Bid Borrowing, the period commencing on the date of such LIBO Rate Advance or Floating Rate Bid Advance or the date of Conversion of any Base Rate Advance into such LIBO Rate Advance and ending on the last day of the period selected by the Borrower requesting such Borrowing pursuant to the provisions below. The duration of each such Interest Period shall be one (or less than one month if available to all Lenders), two, three or six months or, if available to all Lenders, twelve months, as such Borrower may select upon notice received by the Administrative Agent not later than 11:00 a.m. (New York City time) on the third Business Day prior to the first day of such Interest Period; provided, however, that:
(a) such Borrower may not select any Interest Period that ends after the Termination Date, subject to Section 2.10(b);
(b) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day, provided that if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the immediately preceding Business Day; and
(c) whenever the first day of any Interest Period occurs on a day of an initial calendar month for which there is no numerically corresponding day in the calendar month that succeeds such initial calendar month by the number of months equal to the number of months in such Interest Period, such Interest Period shall end on the last Business Day of such succeeding calendar month.
“Internal Revenue Code” means the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and the rulings issued thereunder.
“Interpolated Historical Screen Rate” means, at any time, for any Interest Period, the rate per annum (rounded to the same number of decimal places as the relevant Historical Screen Rate) determined by the Administrative Agent (which determination shall be conclusive and binding absent manifest error) to be equal to the rate that results from interpolating on a linear basis between: (a) the applicable Historical Screen Rate (for the longest period for which the applicable Historical Screen Rate is available for Dollars) that is shorter than the applicable Interest Period and (b) the applicable Historical Screen Rate (for the shortest period for which the applicable Historical Screen Rate is available for Dollars) that exceeds the applicable Interest Period.
“Interpolated Rate” means, at any time, for any Interest Period, the rate per annum (rounded to the same number of decimal places as the relevant Screen Rate) determined by the Administrative Agent (which determination shall be conclusive and binding absent manifest error) to be equal to the rate that results from interpolating on a linear basis between: (a) the applicable Screen Rate (for the longest period for which the applicable Screen Rate is available for Dollars) that is shorter than the applicable Interest Period and (b) the applicable Screen Rate (for the shortest period for which the applicable Screen Rate is available for Dollars) that exceeds the applicable Interest Period.
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“Joint Bookrunners” means JPMorgan Chase Bank, N.A., Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, HSBC Securities (USA) Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated.
“Joint Lead Arrangers” means JPMorgan Chase Bank, N.A., Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, HSBC Securities (USA) Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated.
“Lenders” means the Initial Lenders, any New Lender, any Augmenting Lender and their respective successors and permitted assignees.
“LIBO Rate” means, with respect to any LIBO Rate Advance or Floating Rate Bid Advance for any Interest Period, an interest rate per annum equal to either:
(a) the Screen Rate as of 11:00 a.m. (London time) two Business Days before the first day of such Interest Period; or
(b) if the Screen Rate shall not be available at the applicable time for the applicable Interest Period, then the LIBO Rate for such Interest Period shall be the Interpolated Rate as of 11:00 a.m. (London time) two Business Days before the first day of such Interest Period; or
(c) if the Interpolated Rate shall not be available at the applicable time for the applicable Interest Period, then the LIBO Rate for such Interest Period shall be the Historical Screen Rate; or
(d) if the Historical Screen Rate shall not be available at the applicable time for the applicable Interest Period, then the LIBO Rate for such Interest Period shall be the Interpolated Historical Screen Rate;
provided that in no event shall the LIBO Rate be less than 0% for the purposes of this Agreement.
“LIBO Rate Advance” means a Pro Rata Advance that bears interest as provided in Section 2.04(a)(ii).
“Lien” has the meaning specified in Section 5.02(a).
“Major Subsidiary” means any Subsidiary of Mondelēz (a) more than 50% of the voting securities of which is owned directly or indirectly by Mondelēz, (b) which is organized and existing under, or has its principal place of business in, the United States or any political subdivision thereof, Canada or any political subdivision thereof, any country which is a member of the European Union on the date hereof or any political subdivision thereof, or Switzerland, Norway or Australia or any of their respective political subdivisions, and (c) which has at any time total assets (after intercompany eliminations) exceeding $1,000,000,000.
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“Margin Stock” means margin stock, as defined in Regulation U.
“Minimum Shareholders’ Equity” means Total Shareholders’ Equity of not less than $24,600,000,000.
“Mondelēz” has the meaning specified in the preamble.
“Moody’s” means Moody’s Investors Service, Inc. and any successor thereto.
“Multiemployer Plan” means a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to which any Borrower or any ERISA Affiliate is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions, such plan being maintained pursuant to one or more collective bargaining agreements.
“Multiple Employer Plan” means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of any Borrower or any ERISA Affiliate and at least one Person other than such Borrower and the ERISA Affiliates or (b) was so maintained and in respect of which such Borrower or any ERISA Affiliate could have liability under Section 4064 or 4069 of ERISA in the event such plan has been or were to be terminated.
“New Lender” has the meaning specified in Section 2.10(b).
“Non-Extending Lender” has the meaning specified in Section 2.10(b).
“Non-U.S. Lender” means, with respect to a Borrower that is a “United States person” within the meaning of Section 7701(a)(30) of the Internal Revenue Code, any Lender that is not a “United States person” within the meaning of Section 7701(a)(30) of the Internal Revenue Code.
“Note” means a Pro Rata Note or a Competitive Bid Note.
“Notice of Competitive Bid Borrowing” has the meaning specified in Section 2.07(b).
“Notice of Pro Rata Borrowing” has the meaning specified in Section 2.02(a).
“Obligations” has the meaning specified in Section 8.01.
“Other Taxes” has the meaning specified in Section 2.15(b).
“Participant Register” has the meaning specified in Section 9.07(e).
“Patriot Act” has the meaning specified in Section 9.14.
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“Person” means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture, limited liability company or other entity, or a government or any political subdivision or agency thereof.
“Plan” means a Single Employer Plan or a Multiple Employer Plan.
“Process Agent” has the meaning specified in Section 9.11(a).
“Pro Rata Advance” means an advance by a Lender to any Borrower as part of a Pro Rata Borrowing and refers to a Base Rate Advance or a LIBO Rate Advance (each of which shall be a “Type” of Pro Rata Advance).
“Pro Rata Borrowing” means a borrowing consisting of simultaneous Pro Rata Advances of the same Type made by each of the Lenders pursuant to Section 2.01.
“Pro Rata Note” means a promissory note of any Borrower payable to any Lender (or its registered assigns), delivered pursuant to a request made under Section 2.17 in substantially the form of Exhibit A-1 hereto, evidencing the aggregate indebtedness of such Borrower to such Lender resulting from the Pro Rata Advances made by such Lender to such Borrower.
“Register” has the meaning specified in Section 9.07(d).
“Regulation A” means Regulation A of the Board, as in effect from time to time.
“Regulation U” means Regulation U of the Board, as in effect from time to time.
“Required Lenders” means at any time Lenders having Pro Rata Advances representing more than 50% of the aggregate outstanding Pro Rata Advances at such time, or, if no Pro Rata Advances are then outstanding, Lenders having Commitments representing more than 50% of the aggregate Commitments at such time.
“Sanctions” means economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by (a) the U.S. government, including those administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury or the U.S. Department of State, or (b) the United Nations Security Council, the European Union or Her Majesty’s Treasury of the United Kingdom.
“Sanctioned Person” shall mean, at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury or the U.S. Department of State or (b) any Person controlled by any such Person or Persons described in the foregoing clause (a).
“Screen Rate” means the London interbank offered rate as administered by ICE Benchmark Administration (or any other Person that takes over the administration of such rate for Dollars for a period equal in length to such Interest Period as displayed on page LIBOR01 of the Reuters screen that displays such rate) or, in the event such rate does not appear on a Reuters page or screen, on any successor or substitute page on such screen that displays such rate, or on the appropriate page of such other information service that publishes such rate from time to time as selected by the Administrative Agent in its reasonable discretion.
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“Single Employer Plan” means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of any Borrower or any ERISA Affiliate and no Person other than such Borrower and the ERISA Affiliates or (b) was so maintained and in respect of which such Borrower or any ERISA Affiliate could have liability under Section 4069 of ERISA in the event such plan has been or were to be terminated.
“Standard & Poor’s” means Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business, and any successor thereto.
“Subsidiary” of any Person means any Person of which (or in which) more than 50% of the outstanding capital stock having voting power to elect a majority of the Board of Directors of such Person (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person’s other Subsidiaries.
“Taxes” has the meaning specified in Section 2.15(a).
“Termination Date” means the earlier of October 14, 2021, subject to the extension thereof pursuant to Section 2.10(b), and the date of termination in whole of the Commitments pursuant to Section 2.10(a) or 6.02.
“Total Shareholders’ Equity” means total shareholders’ equity, as reflected on the consolidated balance sheet of Mondelēz and its Subsidiaries (excluding (a) accumulated other comprehensive income or losses, (b) the cumulative effects of any changes in accounting principles, including in connection with any adoption of “mark-to-market” accounting in respect of pension and other retirement plans of Mondelēz and its Subsidiaries, and (c) if “mark-to-market” accounting in respect of such pension and other retirement plans is so adopted, any income or losses recognized in connection with the ongoing application thereof).
“Write-Down and Conversion Powers” means, with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule.
SECTION 1.02 Computation of Time Periods. In this Agreement in the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including” and the words “to” and “until” each mean “to but excluding.”
SECTION 1.03 Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with accounting principles generally accepted in the United States of America (subject to the exceptions set forth in this Section 1.03, “GAAP”), except that if there has been a material change in an accounting principle affecting the definition of an accounting term as compared to that applied in the preparation of the financial statements of Mondelēz as of and for the year ended December 31, 2015, then such new accounting principle shall not be used in the determination of the amount associated with that accounting term. A material change in an accounting principle is one that, in the year of its adoption, changes the amount associated with the relevant accounting term for any quarter in such year by more than 10%.
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ARTICLE II
Amounts and Terms of the Advances
SECTION 2.01 The Pro Rata Advances.
(a) Obligation To Make Pro Rata Advances. Each Lender severally agrees, on the terms and conditions hereinafter set forth, to make Pro Rata Advances to any Borrower in Dollars from time to time on any Business Day during the period from the Effective Date until the Termination Date in an aggregate amount not to exceed at any time outstanding such Lender’s Commitment; provided, however, that the aggregate amount of the Commitments of the Lenders shall be deemed used from time to time to the extent of the aggregate amount of the Competitive Bid Advances then outstanding and such deemed use of the aggregate amount of the Commitments shall be allocated among the Lenders ratably according to their respective Commitments (such deemed use of the aggregate amount of the Commitments being a “Competitive Bid Reduction”).
(b) Amount of Pro Rata Borrowings. Each Pro Rata Borrowing shall be in an aggregate amount of no less than $50,000,000 or an integral multiple of $1,000,000 in excess thereof.
(c) Type of Pro Rata Advances. Each Pro Rata Borrowing shall consist of Pro Rata Advances of the same Type made on the same day by the Lenders ratably according to their respective Commitments. Within the limits of each Lender’s Commitment and subject to this Section 2.01, any Borrower may borrow under this Section 2.01, prepay pursuant to Section 2.11 or repay pursuant to Section 2.03 and reborrow under this Section 2.01.
SECTION 2.02 Making the Pro Rata Advances.
(a) Notice of Pro Rata Borrowing. Each Pro Rata Borrowing shall be made on notice, given not later than (x) 11:00 a.m. (New York City time) on the third Business Day prior to the date of the proposed Pro Rata Borrowing in the case of a Pro Rata Borrowing consisting of LIBO Rate Advances, or (y) 9:00 a.m. (New York City time) on the Business Day of the proposed Pro Rata Borrowing in the case of a Pro Rata Borrowing consisting of Base Rate Advances, by the Borrower to the Administrative Agent, which shall give to each Lender prompt notice thereof by telecopier. Each such notice of a Pro Rata Borrowing (a “Notice of Pro Rata Borrowing”) shall be by telephone, confirmed immediately in writing, by registered mail, email or telecopier in substantially the form of Exhibit B-1 hereto, specifying therein the requested:
(i) date of such Pro Rata Borrowing,
(ii) Type of Advances comprising such Pro Rata Borrowing,
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(iii) aggregate amount of such Pro Rata Borrowing, and
(iv) in the case of a Pro Rata Borrowing consisting of LIBO Rate Advances, the initial Interest Period for each such Pro Rata Advance. Notwithstanding anything herein to the contrary, no Borrower may select LIBO Rate Advances for any Pro Rata Borrowing if the obligation of the Lenders to make LIBO Rate Advances shall then be suspended pursuant to Section 2.06(b), 2.08(c) or 2.13.
(b) Funding Pro Rata Advances. Each Lender shall, before 11:00 a.m. (New York City time) on the date of such Pro Rata Borrowing, make available for the account of its Applicable Lending Office to the Administrative Agent at the Administrative Agent Account, in same day funds, such Lender’s ratable portion of such Pro Rata Borrowing. Promptly after receipt of such funds by the Administrative Agent, and upon fulfillment of the applicable conditions set forth in Article III, the Administrative Agent will make such funds available to the relevant Borrower at the address of the Administrative Agent referred to in Section 9.02.
(c) Irrevocable Notice. Each Notice of Pro Rata Borrowing of any Borrower shall be irrevocable and binding on such Borrower. In the case of any Pro Rata Borrowing that the related Notice of Pro Rata Borrowing specifies is to be comprised of LIBO Rate Advances, the Borrower requesting such Pro Rata Borrowing shall indemnify each Lender against any loss, cost or expense incurred by such Lender as a result of any failure to fulfill on or before the date specified in such Notice of Pro Rata Borrowing for such Pro Rata Borrowing the applicable conditions set forth in Article III, including, without limitation, any loss (excluding loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the Pro Rata Advance to be made by such Lender as part of such Pro Rata Borrowing when such Pro Rata Advance, as a result of such failure, is not made on such date.
(d) Lender’s Ratable Portion. Unless the Administrative Agent shall have received notice from a Lender prior to 11:00 a.m. (New York City time) on the day of any Pro Rata Borrowing that such Lender will not make available to the Administrative Agent such Lender’s ratable portion of such Pro Rata Borrowing, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the date of such Pro Rata Borrowing in accordance with Section 2.02(b) and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower proposing such Pro Rata Borrowing on such date a corresponding amount. If and to the extent that such Lender shall not have so made such ratable portion available to the Administrative Agent, such Lender and such Borrower severally agree to repay to the Administrative Agent, forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to such Borrower until the date such amount is repaid to the Administrative Agent, at:
(i) in the case of such Borrower, the higher of (A) the interest rate applicable at the time to Pro Rata Advances comprising such Pro Rata Borrowing and (B) the cost of funds incurred by the Administrative Agent, in respect of such amount, and
(ii) in the case of such Lender, the Federal Funds Effective Rate.
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If such Lender shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Lender’s Pro Rata Advance as part of such Pro Rata Borrowing for purposes of this Agreement.
(e) Independent Lender Obligations. The failure of any Lender to make the Pro Rata Advance to be made by it as part of any Pro Rata Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Pro Rata Advance on the date of such Pro Rata Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Pro Rata Advance to be made by such other Lender on the date of any Pro Rata Borrowing.
SECTION 2.03 Repayment of Pro Rata Advances. Each Borrower shall repay to the Administrative Agent for the ratable account of each Lender on the Termination Date applicable to such Lender the unpaid principal amount of the Pro Rata Advances of such Lender then outstanding.
SECTION 2.04 Interest on Pro Rata Advances.
(a) Scheduled Interest. Each Borrower shall pay interest on the unpaid principal amount of each Pro Rata Advance owing by such Borrower to each Lender from the date of such Pro Rata Advance until such principal amount shall be paid in full, at the following rates per annum:
(i) Base Rate Advances. During such periods as such Pro Rata Advance is a Base Rate Advance, a rate per annum equal at all times to the sum of (1) the Base Rate in effect from time to time plus (2) the Applicable Interest Rate Margin in effect from time to time, payable in arrears quarterly on the last Business Day of each March, June, September and December, and on the date such Base Rate Advance shall be Converted or paid in full either prior to or on the Termination Date.
(ii) LIBO Rate Advances. During such periods as such Pro Rata Advance is a LIBO Rate Advance, a rate per annum equal at all times during each Interest Period for such Pro Rata Advance to the sum of (x) the LIBO Rate for such Interest Period for such Pro Rata Advance plus (y) the Applicable Interest Rate Margin in effect from time to time, payable in arrears on the last day of such Interest Period and, if such Interest Period has a duration of more than three months, on each day that occurs during such Interest Period every three months from the first day of such Interest Period, and on the date such LIBO Rate Advance shall be Converted or paid in full either prior to or on the Termination Date.
(b) Default Interest. If any principal of or interest on any Pro Rata Advance or any fee or other amount payable by a Borrower hereunder (other than principal of or interest on any Competitive Bid Advance) is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, payable in arrears on the dates referred to in Section 2.04(a)(i) or Section 2.04(a)(ii), as applicable, at a rate per annum equal at all times to (i) in the case of overdue principal of any Pro Rata Advance, 1% per annum above the rate per annum otherwise required to be paid on such Pro Rata Advance as provided in Section 2.04(a) or (ii) in the case of any other amount, 1% per annum plus the rate applicable to Base Rate Advances as provided in Section 2.04(a)(i).
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SECTION 2.05 Additional Interest on LIBO Rate Advances. Each Borrower shall pay to each Lender, so long as such Lender shall be required under regulations of the Board to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency Liabilities, additional interest on the unpaid principal amount of each LIBO Rate Advance of such Lender to such Borrower, from the date of such Advance until such principal amount is paid in full, at an interest rate per annum equal at all times to the remainder obtained by subtracting (i) the LIBO Rate for the Interest Period for such Advance from (ii) the rate obtained by dividing such LIBO Rate by a percentage equal to 100% minus the Eurocurrency Rate Reserve Percentage of such Lender for such Interest Period, payable on each date on which interest is payable on such Advance. Such additional interest shall be determined by such Lender and notified to Mondelēz through the Administrative Agent.
SECTION 2.06 Conversion of Pro Rata Advances.
(a) Conversion upon Absence of Interest Period. If any Borrower (or Mondelēz on behalf of any other Borrower) shall fail to select the duration of any Interest Period for any LIBO Rate Advances in accordance with the provisions contained in the definition of the term “Interest Period,” the Administrative Agent will forthwith so notify such Borrower and the Lenders and such Advances will automatically, on the last day of the then existing Interest Period therefor, Convert into Base Rate Advances.
(b) Conversion upon Event of Default. Upon the occurrence and during the continuance of any Event of Default under Section 6.01(a), the Administrative Agent or the Required Lenders may elect that (i) each LIBO Rate Advance be, on the last day of the then existing Interest Period therefor, Converted into Base Rate Advances and (ii) the obligation of the Lenders to make, or to Convert Advances into LIBO Rate Advances be suspended.
(c) Voluntary Conversion. Subject to the provisions of Sections 2.06(b), 2.08(c) and 2.13, any Borrower may Convert all of its Pro Rata Advances of one Type constituting the same Pro Rata Borrowing into Advances of the other Type on any Business Day, upon notice given to the Administrative Agent not later than 11:00 a.m. (New York City time) on the third Business Day prior to the date of the proposed Conversion; provided, however, that the Conversion of a LIBO Rate Advance into a Base Rate Advance may be made on, and only on, the last day of an Interest Period for such LIBO Rate Advance. Each such notice of a Conversion shall, within the restrictions specified above, specify
(i) the date of such Conversion;
(ii) the Pro Rata Advances to be Converted; and
(iii) if such Conversion is into LIBO Rate Advances, the duration of the Interest Period for each such Pro Rata Advance.
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SECTION 2.07 The Competitive Bid Advances.
(a) Competitive Bid Advances’ Impact on Commitments. Each Lender severally agrees that any Borrower may make Competitive Bid Borrowings under this Section 2.07 from time to time on any Business Day during the period from the Effective Date until the Termination Date in the manner set forth below; provided that, following the making of each Competitive Bid Borrowing, the aggregate amount of the Advances then outstanding shall not exceed the aggregate amount of the Commitments of the Lenders. As provided in Section 2.01, the aggregate amount of the Commitments of the Lenders shall be deemed used from time to time to the extent of the aggregate amount of the Competitive Bid Advances then outstanding, and such deemed use of the aggregate amount of the Commitments shall be applied to the Lenders ratably according to their respective Commitments; provided, however, that any Lender’s Competitive Bid Advances shall not otherwise reduce that Lender’s obligation to lend its pro rata share of the remaining available Commitments.
(b) Notice of Competitive Bid Borrowing. Any Borrower may request a Competitive Bid Borrowing under this Section 2.07 by delivering to the Administrative Agent, by email or telecopier, a notice of a Competitive Bid Borrowing (a “Notice of Competitive Bid Borrowing”), in substantially the form of Exhibit B-2 hereto, specifying therein the following:
(i) date of such proposed Competitive Bid Borrowing;
(ii) aggregate amount of such proposed Competitive Bid Borrowing;
(iii) interest rate basis and day count convention to be offered by the Lenders;
(iv) in the case of a Competitive Bid Borrowing consisting of Floating Rate Bid Advances, Interest Period, or in the case of a Competitive Bid Borrowing consisting of Fixed Rate Bid Advances, maturity date for repayment of each Fixed Rate Bid Advance to be made as part of such Competitive Bid Borrowing (which maturity date may not be earlier than the date occurring seven days after the date of such Competitive Bid Borrowing or later than the earlier of (A) 360 days after the date of such Competitive Bid Borrowing and (B) the Termination Date);
(v) interest payment date or dates relating thereto; location of such Borrower’s account to which funds are to be advanced; and
(vi) other terms (if any) to be applicable to such Competitive Bid Borrowing.
A Borrower requesting a Competitive Bid Borrowing shall deliver a Notice of Competitive Bid Borrowing to the Administrative Agent not later than 10:00 a.m. (New York City time) (x) at least two Business Days prior to the date of the proposed Competitive Bid Borrowing, if such Borrower shall specify in the Notice of Competitive Bid Borrowing that the Competitive Bid Borrowing shall be Fixed Rate Bid Advances, or (y) at least four Business Days prior to the date of the proposed Competitive Bid Borrowing, if such Borrower shall specify in the Notice of Competitive Bid Borrowing that the Competitive Bid Borrowing shall be Floating Rate Bid Advances. Each Notice of Competitive Bid Borrowing shall be irrevocable and binding on such Borrower. The Administrative Agent shall in turn promptly notify each Lender of each request for a Competitive Bid Borrowing received by it from such Borrower by sending such Lender a copy of the related Notice of Competitive Bid Borrowing.
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(c) Discretion as to Competitive Bid Advances. Each Lender may, in its sole discretion, elect to irrevocably offer to make one or more Competitive Bid Advances to the applicable Borrower as part of such proposed Competitive Bid Borrowing at a rate or rates of interest specified by such Lender in its sole discretion, by notifying the Administrative Agent (which shall give prompt notice thereof to such Borrower), before 9:30 a.m. (New York City time) (A) on the Business Day prior to the date of such proposed Competitive Bid Borrowing, in the case of a Competitive Bid Borrowing consisting of Fixed Rate Bid Advances, and (B) on the third Business Day prior to the date of such proposed Competitive Bid Borrowing, in the case of a Competitive Bid Borrowing consisting of Floating Rate Bid Advances; provided that, if the Administrative Agent in its capacity as a Lender shall, in its sole discretion, elect to make any such offer, it shall notify such Borrower of such offer at least 30 minutes before the time and on the date on which notice of such election is to be given by any other Lender to the Administrative Agent. In such notice, the Lender shall specify the following:
(i) the minimum amount and maximum amount of each Competitive Bid Advance which such Lender would be willing to make as part of such proposed Competitive Bid Borrowing (which amounts may, subject to the proviso to the first sentence of Section 2.07(a), exceed such Lender’s Commitment);
(ii) the rate or rates of interest therefor; and
(iii) such Lender’s Applicable Lending Office with respect to such Competitive Bid Advance.
If any Lender shall elect not to make such an offer, such Lender shall so notify the Administrative Agent before 9:30 a.m. (New York City time) on the date on which notice of such election is to be given to the Administrative Agent by the other Lenders, and such Lender shall not be obligated to, and shall not, make any Competitive Bid Advance as part of such Competitive Bid Borrowing; provided further that the failure by any Lender to give such notice shall not cause such Lender to be obligated to make any Competitive Bid Advance as part of such proposed Competitive Bid Borrowing.
(d) Selection of Lender Bids. The Borrower proposing the Competitive Bid Borrowing shall, in turn, (A) before 12:00 noon (New York City time) on the Business Day prior to the date of such proposed Competitive Bid Borrowing, in the case of a Competitive Bid Borrowing consisting of Fixed Rate Bid Advances and (B) before 12:00 noon (New York City time) on the third Business Day prior to the date of such proposed Competitive Bid Borrowing, in the case of a Competitive Bid Borrowing consisting of Floating Rate Bid Advances, either:
(i) cancel such Competitive Bid Borrowing by giving the Administrative Agent notice to that effect, or
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(ii) accept, in its sole discretion, one or more of the offers made by any Lender or Lenders pursuant to Section 2.07(c), by giving notice to the Administrative Agent of the amount of each Competitive Bid Advance (which amount shall be equal to or greater than the minimum amount, and equal to or less than the maximum amount, notified to such Borrower by the Administrative Agent on behalf of such Lender, for such Competitive Bid Advance pursuant to Section 2.07(c) to be made by each Lender as part of such Competitive Bid Borrowing) and reject any remaining offers made by Lenders pursuant to Section 2.07(c) by giving the Administrative Agent notice to that effect. Such Borrower shall accept the offers made by any Lender or Lenders to make Competitive Bid Advances in order of the lowest to the highest rates of interest offered by such Lenders. If two or more Lenders have offered the same interest rate, the amount to be borrowed at such interest rate will be allocated among such Lenders in proportion to the maximum amount that each such Lender offered at such interest rate.
If the Borrower proposing such Competitive Bid Borrowing notifies the Administrative Agent that such Competitive Bid Borrowing is canceled pursuant to Section 2.07(d)(i), or if such Borrower fails to give timely notice in accordance with Section 2.07(d), the Administrative Agent shall give prompt notice thereof to the Lenders and such Competitive Bid Borrowing shall not be made.
(e) Competitive Bid Borrowing. If the Borrower proposing such Competitive Bid Borrowing accepts one or more of the offers made by any Lender or Lenders pursuant to Section 2.07(d)(ii), the Administrative Agent shall in turn promptly notify:
(i) each Lender that has made an offer as described in Section 2.07(c), whether or not any offer or offers made by such Lender pursuant to Section 2.07(c) have been accepted by such Borrower;
(ii) each Lender that is to make a Competitive Bid Advance as part of such Competitive Bid Borrowing, of the date and amount of each Competitive Bid Advance to be made by such Lender as part of such Competitive Bid Borrowing; and
(iii) each Lender that is to make a Competitive Bid Advance as part of such Competitive Bid Borrowing, upon receipt, that the Administrative Agent has received forms of documents appearing to fulfill the applicable conditions set forth in Article III.
When each Lender that is to make a Competitive Bid Advance as part of such Competitive Bid Borrowing has received notice pursuant to Section 2.07(e)(iii), such Lender shall, before 11:00 a.m. (New York City time), on the date of such Competitive Bid Borrowing specified in the notice received from the Administrative Agent pursuant to Section 2.07(e)(i), make available for the account of its Applicable Lending Office to the Administrative Agent, at its address referred to in Section 9.02, in same day funds, such Lender’s portion of such Competitive Bid Borrowing. Upon fulfillment of the applicable conditions set forth in Article III and after receipt by the Administrative Agent of such funds, the Administrative Agent will make such funds available to such Borrower at the location specified by such Borrower in its Notice of Competitive Bid Borrowing. Promptly after each Competitive Bid Borrowing, the Administrative Agent will notify each Lender of the amount of the Competitive Bid Borrowing, the consequent Competitive Bid Reduction and the dates upon which such Competitive Bid Reduction commenced and will terminate.
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(f) Irrevocable Notice. If the Borrower proposing such Competitive Bid Borrowing notifies the Administrative Agent that it accepts one or more of the offers made by any Lender or Lenders pursuant to Section 2.07(c), such notice of acceptance shall be irrevocable and binding on such Borrower. Such Borrower shall indemnify each Lender against any loss, cost or expense incurred by such Lender as a result of any failure to fulfill on or before the date specified in the related Notice of Competitive Bid Borrowing for such Competitive Bid Borrowing the applicable conditions set forth in Article III, including, without limitation, any loss (excluding loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the Competitive Bid Advance to be made by such Lender as part of such Competitive Bid Borrowing when such Competitive Bid Advance, as a result of such failure, is not made on such date.
(g) Amount of Competitive Bid Borrowings; Competitive Bid Notes. Each Competitive Bid Borrowing shall be in an aggregate amount of $50,000,000 or an integral multiple of $1,000,000 in excess thereof and, following the making of each Competitive Bid Borrowing, the aggregate amount of Advances then outstanding shall not exceed the aggregate amount of the Commitments of the Lenders. Within the limits and on the conditions set forth in this Section 2.07, any Borrower may from time to time borrow under this Section 2.07, prepay pursuant to Section 2.11 or repay pursuant to Section 2.07(h), and reborrow under this Section 2.07; provided that a Competitive Bid Borrowing shall not be made within two Business Days of the date of any other Competitive Bid Borrowing. The indebtedness of any Borrower resulting from each Competitive Bid Advance made to such Borrower as part of a Competitive Bid Borrowing shall be evidenced by a separate Competitive Bid Note of such Borrower payable to the Lender (or its registered assigns) making such Competitive Bid Advance.
(h) Repayment of Competitive Bid Advances. On the maturity date of each Competitive Bid Advance provided in the Competitive Bid Note evidencing such Competitive Bid Advance, the Borrower shall repay to the Administrative Agent for the account of each Lender that has made a Competitive Bid Advance the then unpaid principal amount of such Competitive Bid Advance. No Borrower shall have any right to prepay any principal amount of any Competitive Bid Advance unless, and then only on the terms set forth in the Competitive Bid Note evidencing such Competitive Bid Advance.
(i) Interest on Competitive Bid Advances. Each Borrower that has borrowed through a Competitive Bid Borrowing shall pay interest on the unpaid principal amount of each Competitive Bid Advance from the date of such Competitive Bid Advance to the date the principal amount of such Competitive Bid Advance is repaid in full, at the rate of interest for such Competitive Bid Advance and on the interest payment date or dates set forth in the Competitive Bid Note evidencing such Competitive Bid Advance. If any principal of or interest on any Competitive Bid Advance payable by a Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, payable in arrears on the date or dates interest is payable on such Competitive Bid Advance, at a rate per annum equal at all times to 1% per annum above the rate per annum required to be paid on such Competitive Bid Advance under the terms of the Competitive Bid Note evidencing such Competitive Bid Advance unless otherwise agreed in such Competitive Bid Note.
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SECTION 2.08 LIBO Rate Determination.
(a) Methods to Determine LIBO Rate. The Administrative Agent shall determine the LIBO Rate by using the methods described in the definition of the term “LIBO Rate,” and shall give prompt notice to Mondelēz and the applicable Borrowers and Lenders of each such LIBO Rate.
(b) Inability to Determine LIBO Rate. In the event that the LIBO Rate cannot be determined by the methods described in clause (a), (b), (c) or (d) of the definition of “LIBO Rate,” then:
(i) the Administrative Agent shall forthwith notify Mondelēz and the Lenders that the interest rate cannot be determined for such LIBO Rate Advance or Floating Rate Bid Advances, as the case may be;
(ii) with respect to each LIBO Rate Advance, such Advance will, on the last day of the then existing Interest Period therefor, be prepaid by the Borrower or be automatically Converted into a Base Rate Advance; and
(iii) the obligation of the Lenders to make LIBO Rate Advances or Floating Rate Bid Advances or to Convert Base Rate Advances into LIBO Rate Advances shall be suspended until the Administrative Agent shall notify Mondelēz and the Lenders that the circumstances causing such suspension no longer exist.
(c) Inadequate LIBO Rate. If, with respect to any LIBO Rate Advances, the Required Lenders notify the Administrative Agent that (i) they are unable to obtain matching deposits in the London interbank market at or about 11:00 a.m. (London time) on the second Business Day before the making of a Borrowing in sufficient amounts to fund their respective LIBO Rate Advances as a part of such Borrowing during the Interest Period therefor or (ii) the LIBO Rate for any Interest Period for such Advances will not adequately reflect the cost to such Required Lenders of making, funding or maintaining their respective LIBO Rate Advances for such Interest Period, the Administrative Agent shall forthwith so notify Mondelēz and the Lenders, whereupon (A) the Borrower of such LIBO Rate Advances will, on the last day of the then existing Interest Period therefor, either (x) prepay such Advances or (y) Convert such Advances into Base Rate Advances and (B) the obligation of the Lenders to make, or to Convert Base Rate Advances into, LIBO Rate Advances shall be suspended until the Administrative Agent shall notify Mondelēz and the Lenders that the circumstances causing such suspension no longer exist. In the case of clause (ii) above, each such Lender shall certify its cost of funds for each Interest Period to the Administrative Agent and Mondelēz as soon as practicable but in any event not later than 10 Business Days after the last day of such Interest Period.
SECTION 2.09 Fees.
(a) Facility Fee. Mondelēz agrees to pay to the Administrative Agent for the account of each Lender a facility fee (the “Facility Fee”) on the aggregate amount of such Lender’s Commitment (whether drawn or undrawn) from the date hereof in the case of each Initial Lender and from the effective date specified in the Assignment and Acceptance pursuant to which it became a Lender in the case of each other Lender until the Termination Date at the Applicable Facility Fee Rate, in each case payable on the last Business Day of each March, June, September and December until the Termination Date and on the Termination Date.
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(b) Other Fees. Mondelēz shall pay to the Administrative Agent for its own account or for the accounts of the Joint Lead Arrangers or Lenders, as applicable, such fees, and at such times, as shall have been separately agreed between Mondelēz and the Administrative Agent or the Joint Lead Arrangers.
SECTION 2.10 Optional Termination or Reduction of Commitments and Extension of Termination Date.
(a) Optional Termination or Reduction of Commitments. Mondelēz shall have the right, upon at least three Business Days’ notice to the Administrative Agent, to terminate in whole or reduce ratably in part the unused portions of the respective Commitments of the Lenders; provided that each partial reduction shall be in the aggregate amount of no less than $50,000,000 or the remaining balance if less than $50,000,000; and provided further that the aggregate amount of the Commitments of the Lenders shall not be reduced to an amount that is less than the aggregate principal amount of the Competitive Bid Advances then outstanding.
(b) Extension of Termination Date. (i) At least 30 days but not more than 60 days prior to each anniversary of the Effective Date (any such applicable anniversary of the Effective Date, the “Extension Date”), Mondelēz, by written notice to the Administrative Agent, may request that each Lender extend the Termination Date for such Lender’s Commitment for an additional one-year period.
(ii) The Administrative Agent shall promptly notify each Lender of such request and each Lender shall then, in its sole discretion, notify Mondelēz and the Administrative Agent in writing no later than 20 days prior to the Extension Date whether such Lender will consent to the extension (each such Lender consenting to the extension, an “Extending Lender”). The failure of any Lender to notify the Administrative Agent of its intent to consent to any extension shall be deemed a rejection by such Lender.
(iii) Subject to satisfaction of the conditions in Section 3.03(a) and (b) as of the Extension Date, the Termination Date in effect at such time shall be extended for an additional one-year period; provided, however, that (A) no such extension shall be effective (1) unless the Required Lenders agree thereto and (2) as to any Lender that does not agree to such extension (any such Lender, a “Non-Extending Lender”) and (B) Mondelēz may only request an extension of the Termination Date on the first two anniversaries of the Effective Date.
(iv) To the extent that there are Non-Extending Lenders, the Administrative Agent shall promptly so notify the Extending Lenders, and each Extending Lender may, in its sole discretion, give written notice to Mondelēz and the Administrative Agent no later than 15 days prior to the Extension Date of the amount of the Commitments of the Non-Extending Lenders that it is willing to assume.
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(v) Mondelēz shall be permitted to replace any Lender that is a Non-Extending Lender with a replacement financial institution or other entity (each, a “New Lender”); provided that (A) the New Lender shall purchase, at par, all Advances and other amounts owing to such replaced Lender on or prior to the date of replacement, (B) the Borrower shall be liable to such replaced Lender under Section 9.04(b) if any LIBO Rate Advance or Floating Rate Bid Advance owing to such replaced Lender shall be purchased other than on the last day of the Interest Period relating thereto, (C) the replaced Lender shall be obligated to assign its Commitment and Advances to the applicable replacement Lender or Lenders in accordance with the provisions of Section 9.07 (provided that Mondelēz shall be obligated to pay the processing and recordation fee referred to therein), (D) until such time as such replacement shall be consummated, the Borrower shall pay all additional amounts (if any) required pursuant to Section 2.12 or 2.15(a), as the case may be and (E) any such replacement shall not be deemed to be a waiver of any rights that Mondelēz, the Borrower, the Administrative Agent or any other Lender shall have against the replaced Lender.
(vi) If the Extending Lenders and the New Lenders are willing to commit amounts that, in an aggregate, exceed the amount of the Commitments of the Non-Extending Lenders, Mondelēz and the Administrative Agent shall allocate the Commitments of the Non-Extending Lenders among them.
(vii) If any financial institution or other entity becomes a New Lender or any Extending Lender’s Commitment is increased pursuant to this Section 2.10(b), (x) Pro Rata Advances made on or after the applicable Extension Date shall be made in accordance with the pro rata provisions of Section 2.01 based on the respective Commitments in effect on and after the applicable Extension Date and (y) if, on the date of such joinder or increase, there are any Pro Rata Advances outstanding, such Pro Rata Advances shall on or prior to such date be prepaid from the proceeds of new Pro Rata Advances made hereunder (reflecting such additional Lender or increase), which prepayment shall be accompanied by accrued interest on the Pro Rata Advances being prepaid and any costs incurred by any Lender in accordance with Section 9.04(b).
(viii) In connection herewith, the Administrative Agent shall enter in the Register (A) the names of any New Lenders, (B) the respective allocations of any Extending Lenders and New Lenders effective as of each Extension Date and (C) the Termination Date applicable to each Lender.
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SECTION 2.11 Optional Prepayments of Pro Rata Advances. Each Borrower may, in the case of any LIBO Rate Advance, upon at least three Business Days’ notice to the Administrative Agent or, in the case of any Base Rate Advance, upon notice given to the Administrative Agent not later than 9:00 a.m. (New York City time) on the date of the proposed prepayment, in each case stating the proposed date and aggregate principal amount of the prepayment, and if such notice is given such Borrower shall, prepay the outstanding principal amount of the Pro Rata Advances comprising part of the same Pro Rata Borrowing in whole or ratably in part, together with accrued interest to the date of such prepayment on the principal amount prepaid; provided, however, that (x) each partial prepayment shall be in an aggregate principal amount of no less than $50,000,000 or the remaining balance if less than $50,000,000 and (y) in the event of any such prepayment of a LIBO Rate Advance, such Borrower shall be obligated to reimburse the Lenders in respect thereof pursuant to Section 9.04(b).
SECTION 2.12 Increased Costs.
(a) Costs from Change in Law or Authorities. If, due to either (i) the introduction after the date hereof of or any change (other than any change by way of imposition or increase of reserve requirements to the extent such change is included in the Eurocurrency Rate Reserve Percentage) in or in the interpretation, application or administration of any law or regulation or (ii) the compliance with any guideline or request promulgated after the date hereof from any central bank or other Governmental Authority (whether or not having the force of law), there shall be any increase in the cost to any Lender of agreeing to make or making, funding or maintaining LIBO Rate Advances or Floating Rate Bid Advances (excluding for purposes of this Section 2.12 any such increased costs resulting from (i) Taxes or Other Taxes (as to which Section 2.15 shall govern) or (ii) taxes referred to in Section 2.15(a)(i), (ii), (iii), (iv), (v) or (vi)), then the Borrower of the affected Advances shall within twenty (20) Business Days after receipt by the Borrower of demand by such Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender additional amounts sufficient to compensate such Lender for such increased cost; provided, however, that before making any such demand, each Lender agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different Applicable Lending Office if the making of such a designation would avoid the need for, or reduce the amount of, such increased cost and would not, in the reasonable judgment of such Lender be otherwise disadvantageous to such Lender. A certificate as to the amount of such increased cost, submitted to Mondelēz, such Borrower and the Administrative Agent by such Lender shall be conclusive and binding upon all parties hereto for all purposes, absent manifest error.
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(b) Reduction in Lender’s Rate of Return. In the event that, after the date hereof, the implementation of or any change in any law or regulation, or any guideline or directive (whether or not having the force of law) or the interpretation, application or administration thereof by any Governmental Authority charged with the administration thereof, imposes, modifies or deems applicable any capital adequacy, liquidity or similar requirement (including, without limitation, a request or requirement which affects the manner in which any Lender or its parent company allocates capital resources to its Commitments, including its obligations hereunder) and as a result thereof, in the sole opinion of such Lender, the rate of return on such Lender’s or its parent company’s capital as a consequence of its obligations hereunder is reduced to a level below that which such Lender could have achieved but for such circumstances, but reduced to the extent that Borrowings are outstanding from time to time, then in each such case, upon demand from time to time Mondelēz shall pay to such Lender such additional amount or amounts as shall compensate such Lender for such reduction in rate of return. A certificate of such Lender as to any such additional amount or amounts shall be conclusive and binding for all purposes, absent manifest error. Except as provided below, in determining any such amount or amounts each Lender may use any reasonable averaging and attribution methods. Notwithstanding the foregoing, each Lender shall take all reasonable actions to avoid the imposition of, or reduce the amounts of, such increased costs, provided that such actions, in the reasonable judgment of such Lender will not be otherwise disadvantageous to such Lender and, to the extent possible, each Lender will calculate such increased costs based upon the capital requirements for its Advances and unused Commitment hereunder and not upon the average or general capital requirements imposed upon such Lender.
(c) Dodd-Frank Wall Street Reform and Consumer Protection Act; Basel III. Notwithstanding anything herein to the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (ii) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall, in each case be deemed to be a change in law or regulation after the date hereof regardless of the date enacted, adopted or issued.
SECTION 2.13 Illegality. Notwithstanding any other provision of this Agreement, if any Lender shall notify the Administrative Agent that the introduction of or any change in, or in the interpretation of, any law or regulation makes it unlawful, or any central bank or other Governmental Authority asserts that it is unlawful, for any Lender or its Eurocurrency Lending Office to perform its obligations hereunder to make LIBO Rate Advances or Floating Rate Bid Advances or to fund or maintain LIBO Rate Advances or Floating Rate Bid Advances, (a) each LIBO Rate Advance or Floating Rate Bid Advances, as the case may be, of such Lender will automatically, upon such demand, be Converted into a Base Rate Advance or an Advance that bears interest at the rate set forth in Section 2.04(a)(i), as the case may be, and (b) the obligation of the Lenders to make LIBO Rate Advances or Floating Rate Bid Advances or to Convert Base Rate Advances into LIBO Rate Advances shall be suspended, in each case, until the Administrative Agent shall notify Mondelēz and the Lenders that the circumstances causing such suspension no longer exist, in each case, subject to Section 9.04(b) hereof; provided, however, that before making any such demand, each Lender agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different Eurocurrency Lending Office if the making of such a designation would allow such Lender or its Eurocurrency Lending Office to continue to perform its obligations to make LIBO Rate Advances or Floating Rate Bid Advances or to continue to fund or maintain LIBO Rate Advances or Floating Rate Bid Advances, as the case may be, and would not, in the judgment of such Lender, be otherwise disadvantageous to such Lender.
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SECTION 2.14 Payments and Computations.
(a) Time and Distribution of Payments. Mondelēz and each Borrower shall make each payment hereunder, without set-off or counterclaim, not later than 11:00 a.m. (New York City time) on the day when due to the Administrative Agent at the Administrative Agent Account in same day funds. The Administrative Agent will promptly thereafter cause to be distributed like funds relating to the payment of principal or interest or Facility Fees ratably (other than amounts payable pursuant to Section 2.07, 2.12, 2.15 or 9.04(b)) to the Lenders for the accounts of their respective Applicable Lending Offices, and like funds relating to the payment of any other amount payable to any Lender to such Lender for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. From and after the effective date of an Assignment and Acceptance pursuant to Section 9.07, the Administrative Agent shall make all payments hereunder in respect of the interest assigned thereby to the Lender assignee thereunder, and the parties to such Assignment and Acceptance shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves.
(b) Computation of Interest and Fees. All computations of interest based on the Administrative Agent’s prime rate shall be made by the Administrative Agent on the basis of a year of 365 or 366 days, as the case may be. All computations of interest based on the LIBO Rate or the Federal Funds Effective Rate and of Facility Fees shall be made by the Administrative Agent and all computations of interest pursuant to Section 2.05 shall be made by the applicable Lender, on the basis of a year of 360 days. All computations of interest in respect of Competitive Bid Advances shall be made by the Administrative Agent on the basis of a year of 360 days in the case of Floating Rate Bid Advances and on the basis of a year of 365 or 366 days in the case of Fixed Rate Bid Advances, as specified in the applicable Notice of Competitive Bid Notice. Computations of interest or Facility Fees shall in each case be made for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or Facility Fees are payable. Each determination by the Administrative Agent (or, in the case of Section 2.05 by a Lender), of an interest rate hereunder shall be conclusive and binding for all purposes, absent manifest error.
(c) Payment Due Dates. Whenever any payment hereunder shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or Facility Fees, as the case may be; provided, however, that if such extension would cause payment of interest on or principal of LIBO Rate Advances or Floating Rate Bid Advances to be made in the next following calendar month, such payment shall be made on the immediately preceding Business Day.
(d) Presumption of Borrower Payment. Unless the Administrative Agent receives notice from any Borrower prior to the date on which any payment is due to the Lenders hereunder that such Borrower will not make such payment in full, the Administrative Agent may assume that such Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent such Borrower has not made such payment in full to the Administrative Agent, each Lender shall repay to the Administrative Agent forthwith on demand such amount distributed to such Lender together with interest thereon, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Administrative Agent at the Federal Funds Effective Rate.
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SECTION 2.15 Taxes.
(a) Any and all payments by each Borrower and Mondelēz hereunder or under any Note shall be made, in accordance with Section 2.14, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities (including penalties, interest, additions to taxes and expenses) with respect thereto, excluding, (i) in the case of each Lender and the Administrative Agent, taxes imposed on or measured by its net income, and franchise taxes and branch profits taxes imposed on it, in each case, as a result of such Lender or the Administrative Agent (as the case may be) being organized under the laws of the taxing jurisdiction, (ii) in the case of each Lender, taxes imposed on or measured by its net income, and franchise taxes and branch profits taxes imposed on it, in each case, as a result of such Lender having its Applicable Lending Office in the taxing jurisdiction, (iii) in the case of each Lender and the Administrative Agent, taxes imposed on or measured by its net income, franchise taxes and branch profits taxes imposed on it, and any tax imposed by means of withholding, in each case, to the extent such tax is imposed solely as a result of a present or former connection (other than a connection arising from such Lender or the Administrative Agent having executed, delivered, enforced, become a party to, performed its obligations, received payments, received or perfected a security interest under, and/or engaged in any other transaction pursuant to this Agreement or a Note) between the Lender or the Administrative Agent, as the case may be, and the taxing jurisdiction, (iv) in the case of each Lender and the Administrative Agent, any U.S. federal withholding taxes imposed pursuant to FATCA, (v) in the case of each Lender and the Administrative Agent, any Home Jurisdiction U.S. Withholding Tax to the extent that such tax is imposed with respect to any payments pursuant to any law in effect at the time such Lender becomes a party hereto (or changes its Applicable Lending Office), except (A) to the extent of the additional amounts in respect of such taxes under this Section 2.15 to which such Lender’s assignor (if any) or such Lender’s prior Applicable Lending Office (if any) was entitled, immediately prior to such assignment or change in its Applicable Lending Office or (B) if such Lender becomes a party hereto pursuant to an Assignment and Acceptance upon the demand of Mondelēz, and (vi) taxes attributable to a Lender’s or the Administrative Agent’s (as applicable) failure to comply with Sections 2.15(e), (f), and (g) (all such taxes, levies, imposts, deductions, charges, withholdings and liabilities in respect of payments by each Borrower and Mondelēz hereunder or under any Note, other than taxes referred to in this Section 2.15(a)(i), (ii), (iii), (iv), (v), or (vi), are referred to herein as “Taxes”). If any applicable withholding agent shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note to any Lender or the Administrative Agent, (i) the sum payable by Mondelēz or the applicable Borrower shall be increased as may be necessary so that after all required deductions (including deductions applicable to additional sums payable under this Section 2.15) have been made, such Lender (or the Administrative Agent where the Administrative Agent receives payments for its own account) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the applicable withholding agent shall make such deductions and (iii) the applicable withholding agent shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law.
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(b) In addition, each Borrower or Mondelēz shall pay any present or future stamp or documentary taxes or any other excise or property taxes, charges, irrecoverable value-added tax or similar levies (other than Taxes, or taxes referred to in Section 2.15(a)(i) to (v)) that arise from any payment made hereunder or from the execution, delivery or registration of, performing under, or otherwise with respect to, this Agreement or a Note other than any such taxes imposed by reason of an Assignment and Acceptance (hereinafter referred to as “Other Taxes”).
(c) Each Borrower and Mondelēz shall indemnify each Lender and the Administrative Agent for and hold it harmless against the full amount of Taxes or Other Taxes (including, without limitation, Taxes and Other Taxes imposed by any jurisdiction on amounts payable under this Section 2.15) payable by such Lender or the Administrative Agent (as the case may be), and any liability (including penalties, interest, additions to taxes and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. This indemnification shall be made within 30 days from the date such Lender or the Administrative Agent (as the case may be), makes written demand therefor.
(d) As soon as practicable after the date of any payment of Taxes or Other Taxes, each Borrower and Mondelēz shall furnish to the Administrative Agent, at its address referred to in Section 9.02, the original or a certified copy of a receipt evidencing such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.
(e) Each Lender, on or prior to the date of its execution and delivery of this Agreement in the case of each Initial Lender and on the date of the Assignment and Acceptance pursuant to which it becomes a Lender in the case of each other Lender, shall provide each of the Administrative Agent, Mondelēz and each applicable Borrower with any form or certificate that is required by any U.S. federal taxing authority to certify such Lender’s entitlement to any applicable exemption from or reduction in, Home Jurisdiction U.S. Withholding Tax in respect of any payments hereunder or under any Note (including, if applicable, two original Internal Revenue Service Forms W-9, W-8BEN, W-8BEN-E or W-8ECI, as appropriate, or any successor or other form prescribed by the Internal Revenue Service or to the extent a Non-U.S. Lender is not the beneficial owner (for example, where the Non-U.S. Lender is a partnership or participating Lender granting a participation in accordance with the provisions of Section 9.07(e)), two original Internal Revenue Service Form W-8IMY, accompanied by any applicable certification documents from each beneficial owner) and any other documentation reasonably requested by Mondelēz, the applicable Borrower or the Administrative Agent. Thereafter, each such Lender shall provide additional forms or certificates (i) to the extent a form or certificate previously provided has become inaccurate or invalid or has otherwise ceased to be effective or (ii) as requested in writing by Mondelēz, the Administrative Agent or such Borrower or, if such Lender no longer qualifies for the applicable exemption from or reduction in, Home Jurisdiction U.S. Withholding Tax, promptly notify the Administrative Agent and Mondelēz or such Borrower of its inability to do so. Unless such Borrower, Mondelēz and the Administrative Agent have received forms or other documents from each Lender satisfactory to them indicating that payments hereunder or under any Note are not subject to Home Jurisdiction U.S. Withholding Taxes or are subject to Home Jurisdiction U.S. Withholding Taxes at a rate reduced by an applicable tax treaty, such Borrower, Mondelēz or the Administrative Agent shall withhold such Home Jurisdiction U.S. Withholding Taxes from such payments at the applicable statutory rate in the case of payments to or for such Lender and such Borrower or Mondelēz shall pay additional amounts to the extent required by paragraph (a) of this Section 2.15 (subject to the exceptions contained in this Section 2.15).
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(f) If a payment made to a Lender hereunder or under any Note would be subject to U.S. federal withholding tax imposed pursuant to FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Sections 1471(b) or 1472(b) of the Internal Revenue Code, as applicable), such Lender shall provide each of the Administrative Agent, Mondelēz and each applicable Borrower, at the time or times prescribed by law and as reasonably requested by the Administrative Agent, Mondelēz or the applicable Borrower, such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Internal Revenue Code) and such additional documentation reasonably requested by the Administrative Agent, Mondelēz or the applicable Borrower as may be necessary for the Administrative Agent, Mondelēz or the applicable Borrower to comply with their obligations under FATCA and to determine whether such Lender has complied with such Lender’s obligations under FATCA and the amount, if any, to deduct and withhold from such payment. Thereafter, each such Lender shall provide additional documentation (i) to the extent documentation previously provided has become inaccurate or invalid or has otherwise ceased to be effective or (ii) as reasonably requested by the Administrative Agent, Mondelēz or the applicable Borrower. Solely for purposes of this paragraph (f), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.
(g) In the event that a Designated Subsidiary is a Foreign Subsidiary of Mondelēz, each Lender shall promptly complete and deliver to such Borrower and the Administrative Agent, or, at their request, to the applicable taxing authority, so long as such Lender is legally eligible to do so, any certificate or form reasonably requested in writing by such Borrower or the Administrative Agent and required by applicable law in order to secure any applicable exemption from, or reduction in the rate of, deduction or withholding of the applicable Home Jurisdiction Non-U.S. Withholding Taxes for which such Borrower is required to pay additional amounts pursuant to this Section 2.15.
(h) Any Lender claiming any additional amounts payable pursuant to this Section 2.15 agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to select or change the jurisdiction of its Applicable Lending Office if the making of such a selection or change would avoid the need for, or reduce the amount of, any such additional amounts that may thereafter accrue and would not, in the reasonable judgment of such Lender be otherwise materially economically disadvantageous to such Lender.
(i) From and after the Effective Date, solely for purposes of FATCA, the Borrowers and the Administrative Agent shall treat, and the Lenders hereby authorize the Borrowers and the Administrative Agent to treat, the Agreement and all advances made hereunder (including any Loans made under this Agreement or the Existing Credit Agreement) as not qualifying as “grandfathered obligations” within the meaning of Treasury Regulation section 1.1471-2(b)(2)(i).
(j) Each Lender hereby authorizes the Administrative Agent to deliver to a Borrower and Mondelēz and to any successor Administrative Agent any documentation provided by such Lender to the Administrative Agent pursuant to paragraph (e), (f) or (g) of this Section 2.15.
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(k) If any Lender or the Administrative Agent, as the case may be, obtains a refund of any Tax for which payment has been made pursuant to this Section 2.15, or, in lieu of obtaining such refund, such Lender or the Administrative Agent applies the amount that would otherwise have been refunded as a credit against payment of a liability in respect of taxes, which refund or credit in the good faith judgment of such Lender or the Administrative Agent, as the case may be, (and without any obligation to disclose its tax records) is allocable to such payment made under this Section 2.15, the amount of such refund or credit (together with any interest received thereon and reduced by reasonable out-of-pocket costs incurred in obtaining such refund or credit and by any applicable taxes) promptly shall be paid to the applicable Borrower to the extent payment has been made in full by such Borrower pursuant to this Section 2.15.
SECTION 2.16 Sharing of Payments, Etc. If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the Pro Rata Advances owing to it (other than pursuant to Section 2.12, 2.15 or 9.04(b) or (c)) in excess of its ratable share of payments on account of the Pro Rata Advances obtained by all the Lenders, such Lender shall forthwith purchase from the other Lenders such participations in the Pro Rata Advances made by them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and such Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery together with an amount equal to such Lender’s ratable share (according to the proportion of (i) the amount of such Lender’s required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. Each Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 2.16 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of such Borrower in the amount of such participation.
SECTION 2.17 Evidence of Debt.
(a) Lender Records; Pro Rata Notes. Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of each Borrower to such Lender resulting from each Pro Rata Advance owing to such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder in respect of Pro Rata Advances. Each Borrower shall, upon notice by any Lender to such Borrower (with a copy of such notice to the Administrative Agent) to the effect that a Pro Rata Note is required or appropriate in order for such Lender to evidence (whether for purposes of pledge, enforcement or otherwise) the Pro Rata Advances owing to, or to be made by, such Lender, promptly execute and deliver to such Lender a Pro Rata Note payable to such Lender (or its registered assigns) in a principal amount up to the Commitment of such Lender.
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(b) Record of Borrowings, Payables and Payments. The Register maintained by the Administrative Agent pursuant to Section 9.07(d) shall include a control account, and a subsidiary account for each Lender, in which accounts (taken together) shall be recorded as follows:
(i) the date and amount of each Borrowing made hereunder, the Type of Advances comprising such Borrowing and, if appropriate, the Interest Period applicable thereto;
(ii) the terms of each Assignment and Acceptance delivered to and accepted by it;
(iii) the amount of any principal or interest due and payable or to become due and payable from each Borrower to each Lender hereunder and the Termination Date applicable thereto; and
(iv) the amount of any sum received by the Administrative Agent from the Borrowers hereunder and each Lender’s share thereof.
(c) Evidence of Payment Obligations. Entries made in good faith by the Administrative Agent in the Register pursuant to Section 2.17(b), and by each Lender in its account or accounts pursuant to Section 2.17(a), shall be prima facie evidence of the amount of principal and interest due and payable or to become due and payable from each Borrower to, in the case of the Register, each Lender and, in the case of such account or accounts, such Lender, under this Agreement, absent manifest error; provided, however, that the failure of the Administrative Agent or such Lender to make an entry, or any finding that an entry is incorrect, in the Register or such account or accounts shall not limit or otherwise affect the obligations of any Borrower under this Agreement.
SECTION 2.18 Commitment Increases.
(a) Mondelēz may from time to time (but not more than three times in any calendar year), by written notice to the Administrative Agent (which shall promptly deliver a copy to each of the Lenders), executed by Mondelēz and one or more financial institutions (any such financial institution referred to in this Section 2.18 being called an “Augmenting Lender”), which may include any Lender, cause new Commitments to be extended by the Augmenting Lenders or cause the existing Commitments of the Augmenting Lenders to be increased, as the case may be (the aggregate amount of such increase for all Augmenting Lenders on any single occasion being referred to as a “Commitment Increase”), in an amount for each Augmenting Lender set forth in such notice; provided that (i) the amount of each Commitment Increase shall be not less than $25,000,000, except to the extent necessary to utilize the remaining unused amount of increase permitted under this Section 2.18(a), and (ii) the aggregate amount of the Commitment Increases shall not exceed $500,000,000; provided further that, each Lender may, in its sole discretion, elect to participate or decline to participate in any Commitment Increase. Each Augmenting Lender (if not then a Lender) shall be subject to the approval of the Administrative Agent (which approval shall not be unreasonably withheld or delayed) and shall not be subject to the approval of any other Lenders, and Mondelēz and each Augmenting Lender shall execute all such documentation as the Administrative Agent shall reasonably specify to evidence the Commitment of such Augmenting Lender and/or its status as a Lender hereunder (such documentation in respect of any Commitment Increase together with the notice of such Commitment Increase being referred to collectively as the “Commitment Increase Amendment” in respect of such Commitment Increase). The Commitment Increase Amendment may, without the consent of any other Lenders, effect such amendments to this Agreement as may be necessary or appropriate, in the reasonable opinion of the Administrative Agent, to effect the provisions of this Section 2.18.
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(b) Upon each Commitment Increase pursuant to this Section 2.18, if, on the date of such Commitment Increase, there are any Pro Rata Advances outstanding, such Pro Rata Advances shall on or prior to the effectiveness of such Commitment Increase be prepaid from the proceeds of new Pro Rata Advances made hereunder (reflecting such Commitment Increase), which prepayment shall be accompanied by accrued interest on the Pro Rata Advances being prepaid and any costs incurred by any Lender in accordance with Section 9.04(b). The Administrative Agent and the Lenders hereby agree that the minimum borrowing, pro rata borrowing and pro rata payment requirements contained elsewhere in this Agreement shall not apply to the transactions effected pursuant to the immediately preceding sentence.
(c) Commitment Increases and new Commitments created pursuant to this Section 2.18 shall become effective on the date specified in the notice delivered by Mondelēz pursuant to the first sentence of paragraph (a) above or on such other date as shall be agreed upon by Mondelēz, the Administrative Agent and the applicable Augmenting Lenders.
(d) Notwithstanding the foregoing, no increase in the Commitments (or in any Commitment of any Lender) or addition of an Augmenting Lender shall become effective under this Section 2.18 unless on the date of such increase, the conditions set forth in Section 3.03 shall be satisfied as of such date (as though the effectiveness of such increase were a Borrowing) and the Administrative Agent shall have received a certificate of Mondelēz to that effect dated such date.
SECTION 2.19 Use of Proceeds. The proceeds of the Advances shall be available (and each Borrower agrees that it shall use such proceeds) for general corporate purposes of Mondelēz and its Subsidiaries.
SECTION 2.20 Defaulting Lenders. Notwithstanding any provision of this Agreement to the contrary, if any Lender becomes a Defaulting Lender, then the following provisions shall apply:
(a) fees shall cease to accrue on the Commitment of such Defaulting Lender pursuant to Section 2.09(a); and
(b) the Commitment and Advances of such Defaulting Lender shall not be included in determining whether the Required Lenders have taken or may take any action hereunder (including any consent to any amendment, waiver or modification of this Agreement pursuant to Section 9.01); provided that any amendment, waiver or modification requiring the consent of all Lenders or each affected Lender shall require the consent of such Defaulting Lender.
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In the event that each of the Administrative Agent and Mondelēz agree that a Defaulting Lender has adequately remedied all matters that caused such Lender to be a Defaulting Lender, then such Lender shall purchase at par such of the Pro Rata Advances of the other Lenders as the Administrative Agent shall determine may be necessary in order for such Lender to hold such Pro Rata Advances in accordance with its pro rata portion of the total Commitments and clauses (a) and (b) above shall cease to apply.
ARTICLE III
Conditions to Effectiveness and Lending
SECTION 3.01 Conditions Precedent to Effectiveness. The amendment and restatement of the Existing Credit Agreement shall become effective on and as of the first date (the “Effective Date”) on which the following conditions precedent have been satisfied, or waived in accordance with Section 9.01:
(a) Mondelēz shall have notified each Lender and the Administrative Agent in writing as to the proposed Effective Date.
(b) On the Effective Date, the following statements shall be true and the Administrative Agent shall have received for the account of each Lender a certificate signed by a duly authorized officer of Mondelēz, dated the Effective Date, stating that:
(i) the representations and warranties contained in Section 4.01 are correct on and as of the Effective Date, and
(ii) no event has occurred and is continuing on and as of the Effective Date that constitutes a Default or Event of Default.
(c) [Reserved.]
(d) [Reserved.]
(e) The Administrative Agent shall have received on or before the Effective Date the following, each dated such day, in form and substance satisfactory to the Administrative Agent:
(i) Certified copies of the resolutions of the Board of Directors of Mondelēz approving this Agreement, and of all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Agreement.
(ii) A certificate of the Secretary or an Assistant Secretary of Mondelēz certifying the names and true signatures of the officers of Mondelēz authorized to sign this Agreement and the other documents to be delivered hereunder.
(iii) Favorable opinions of (A) Gibson, Dunn & Crutcher LLP, special New York counsel to Mondelēz, substantially in the form of Exhibit E-1 hereto, (B) Hunton & Williams LLP, special Virginia counsel to Mondelēz, substantially in the form of Exhibit E-2 hereto and (C) internal counsel for Mondelēz, substantially in the form of Exhibit E-3 hereto.
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(iv) A certificate of the chief financial officer or treasurer of Mondelēz certifying that as of December 31, 2015, (A) the aggregate amount of Debt, payment of which is secured by any Lien referred to in clause (iii) of Section 5.02(a), does not exceed $400,000,000, and (B) the aggregate amount of Debt, payment of which is secured by any Lien referred to in clause (iv) of Section 5.02(a), does not exceed $200,000,000.
(f) This Agreement shall have been executed by Mondelēz and the Administrative Agent and the Administrative Agent shall have been notified by each Initial Lender that such Initial Lender has executed this Agreement.
(g) The Agents and the Lenders shall have received payment in full in cash of all fees and expenses due to them pursuant to the Fee Letter (including the reasonable fees and out-of-pocket disbursements of Cahill Gordon & Reindel LLP as counsel to the Administrative Agent).
(h) The Administrative Agent and the Lenders shall have received from the Borrower, in form and substance satisfactory to the Administrative Agent or such Lenders, as applicable, all documentation and other information required by regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations that has been reasonably requested by the Administrative Agent and the Lenders.
The Administrative Agent shall notify Mondelēz and the Initial Lenders of the date which is the Effective Date upon satisfaction or waiver of all of the conditions precedent set forth in this Section 3.01. For purposes of determining compliance with the conditions specified in this Section 3.01, each Lender shall be deemed to have consented to, approved or accepted or to be satisfied with each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to the Lenders unless an officer of the Administrative Agent responsible for the transactions contemplated by this Agreement shall have received notice from such Lender prior to the date that Mondelēz, by notice to the Lenders, designates as the proposed Effective Date, specifying its objection thereto.
SECTION 3.02 Initial Advance to Each Designated Subsidiary. The obligation of each Lender to make an initial Advance to each Designated Subsidiary following any designation of such Designated Subsidiary as a Borrower hereunder pursuant to Section 9.08 is subject to the receipt by the Administrative Agent on or before the date of such initial Advance of each of the following, in form and substance satisfactory to the Administrative Agent and dated such date, and in sufficient copies for each Lender:
(a) Certified copies of the resolutions of the Board of Directors of such Designated Subsidiary (with a certified English translation if the original thereof is not in English) approving this Agreement, and of all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Agreement.
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(b) A certificate of a proper officer of such Designated Subsidiary certifying the names and true signatures of the officers of such Designated Subsidiary authorized to sign this Agreement and the other documents to be delivered hereunder.
(c) A certificate signed by a duly authorized officer of the Designated Subsidiary, dated as of the date of such initial Advance, certifying that such Designated Subsidiary shall have obtained all governmental and third party authorizations, consents, approvals (including exchange control approvals) and licenses required under applicable laws and regulations necessary for such Designated Subsidiary to execute and deliver this Agreement and to perform its obligations thereunder.
(d) The Designation Agreement of such Designated Subsidiary, substantially in the form of Exhibit D hereto.
(e) A favorable opinion of counsel (which may be in-house counsel) to such Designated Subsidiary, dated the date of such initial Advance, covering, to the extent customary and appropriate for the relevant jurisdiction, the opinions outlined on Exhibit F hereto.
(f) All information relating to any such Designated Subsidiary reasonably requested by any Lender through the Administrative Agent not later than two Business Days after such Lender shall have been notified of the designation of such Designated Subsidiary under Section 9.08 in order to allow such Lender to comply with “know your customer” regulations or any similar rules or regulations under applicable foreign laws.
(g) Such other approvals, opinions or documents as any Lender, through the Administrative Agent, may reasonably request.
SECTION 3.03 Conditions Precedent to Each Pro Rata Borrowing. The obligation of each Lender to make a Pro Rata Advance on the occasion of each Pro Rata Borrowing is subject to the conditions precedent that the Effective Date shall have occurred and on the date of such Pro Rata Borrowing the following statements shall be true, and the acceptance by the applicable Borrower of the proceeds of such Pro Rata Borrowing shall be a representation by such Borrower or Mondelēz, as the case may be, that:
(a) the representations and warranties contained in Section 4.01 (except the representations set forth in the last sentence of subsection (e) and in subsection (f) thereof (other than clause (i) thereof)) are correct on and as of the date of such Pro Rata Borrowing, before and after giving effect to such Pro Rata Borrowing and to the application of the proceeds therefrom, as though made on and as of such date, and, if such Pro Rata Borrowing shall have been requested by a Designated Subsidiary, the representations and warranties of such Designated Subsidiary contained in its Designation Agreement are correct on and as of the date of such Pro Rata Borrowing, before and after giving effect to such Pro Rata Borrowing and to the application of the proceeds therefrom, as though made on and as of such date; and
(b) before and after giving effect to the application of the proceeds of all Borrowings on such date (together with any other resources of the Borrower applied together therewith), no event has occurred and is continuing, or would result from such Pro Rata Borrowing, that constitutes a Default or Event of Default.
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SECTION 3.04 Conditions Precedent to Each Competitive Bid Borrowing. The obligation of each Lender that is to make a Competitive Bid Advance on the occasion of a Competitive Bid Borrowing is subject to the conditions precedent that (i) the Administrative Agent shall have received the written confirmatory Notice of Competitive Bid Borrowing with respect thereto, (ii) on or before the date of such Competitive Bid Borrowing, but prior to such Competitive Bid Borrowing, the Administrative Agent shall have received a Competitive Bid Note payable to such Lender (or its registered assigns) for each of the one or more Competitive Bid Advances to be made by such Lender as part of such Competitive Bid Borrowing, in a principal amount equal to the principal amount of the Competitive Bid Advance to be evidenced thereby and otherwise on such terms as were agreed to for such Competitive Bid Advance in accordance with Section 2.07, and (iii) on the date of such Competitive Bid Borrowing the following statements shall be true, and the acceptance by the applicable Borrower of the proceeds of such Competitive Bid Borrowing shall be a representation by such Borrower or Mondelēz, as the case may be, that:
(a) the representations and warranties contained in Section 4.01 are correct on and as of the date of such Competitive Bid Borrowing, before and after giving effect to such Competitive Bid Borrowing and to the application of the proceeds therefrom, as though made on and as of such date, and, if such Competitive Bid Borrowing shall have been requested by a Designated Subsidiary, the representations and warranties of such Designated Subsidiary contained in its Designation Agreement are correct on and as of the date of such Competitive Bid Borrowing, before and after giving effect to such Competitive Bid Borrowing and to the application of the proceeds therefrom, as though made on and as of such date; and
(b) after giving effect to the application of the proceeds of all Borrowings on such date (together with any other resources of the Borrower applied together therewith), no event has occurred and is continuing, or would result from such Competitive Bid Borrowing that constitutes a Default or Event of Default.
ARTICLE IV
Representations and Warranties
SECTION 4.01 Representations and Warranties of Mondelēz. Mondelēz represents and warrants as to itself and, as applicable, its Subsidiaries as follows:
(a) Mondelēz is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation.
(b) The execution, delivery and performance of this Agreement and the Notes to be delivered by it are within the corporate powers of Mondelēz, have been duly authorized by all necessary corporate action on the part of Mondelēz and do not contravene (i) the charter or by-laws of Mondelēz or (ii) in any material respect, any law, rule, regulation or order of any court or governmental agency or any contractual restriction binding on Mondelēz.
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(c) No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority or regulatory body is required for the due execution, delivery and performance by Mondelēz of this Agreement or the Notes to be delivered by it.
(d) This Agreement is, and each of the Notes to be delivered by Mondelēz when delivered hereunder will be, a legal, valid and binding obligation of Mondelēz enforceable against Mondelēz in accordance with its terms, subject to the effect of any applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other laws affecting creditors’ rights generally and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing.
(e) As reported in Mondelēz’s Annual Report on Form 10-K for the year ended December 31, 2015, the consolidated balance sheets of Mondelēz and its Subsidiaries as of December 31, 2015 and the consolidated statements of earnings of Mondelēz and its Subsidiaries for the year then ended fairly present, in all material respects, the consolidated financial position of Mondelēz and its Subsidiaries as at such date and the consolidated results of the operations of Mondelēz and its Subsidiaries for the year ended on such date, all in accordance with accounting principles generally accepted in the United States. Except as disclosed in Mondelēz’s Annual Report on Form 10-K for the year ended December 31, 2015, or in any Quarterly Report on Form 10-Q or Current Report on Form 8-K filed subsequent to December 31, 2015, or any amendment to the foregoing subsequent to December 31, 2015, but prior to the date hereof, since December 31, 2015, there has been no material adverse change in such position or operations.
(f) There is no action or proceeding pending or, to the knowledge of Mondelēz, threatened against Mondelēz or any of its Subsidiaries before any court, governmental agency or arbitrator (a “Proceeding”) (i) that purports to affect the legality, validity or enforceability of this Agreement or (ii) except for Proceedings disclosed in Mondelēz’s Annual Report on Form 10-K for the year ended December 31, 2015, or in any Quarterly Report on Form 10-Q or Current Report on Form 8-K filed subsequent to December 31, 2015, or any amendment to the foregoing subsequent to December 31, 2015, but prior to the date hereof, and, with respect to Proceedings commenced after the date of the most recent such document but prior to the date hereof, a certificate delivered to the Lenders, that may materially adversely affect the financial position or results of operations of Mondelēz and its Subsidiaries taken as a whole.
(g) Mondelēz owns directly or indirectly 100% of the capital stock of each other Borrower.
(h) None of the proceeds of any Advance will be used, directly or indirectly, for any purpose that would result in a violation of Regulation U.
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(i) Mondelēz has implemented and maintains in effect policies and procedures reasonably designed to ensure compliance by Mondelēz and each of its Subsidiaries and their respective directors, officers, employees and agents (acting in their capacity as such) with FCPA and other applicable Anti-Corruption Laws and applicable Sanctions. None of (i) Mondelēz or any of its Subsidiaries or (ii) to the knowledge of Mondelēz, any director, officer, employee or Borrower Agent of Mondelēz or its Subsidiaries, is a Sanctioned Person.
(j) No Borrower is an EEA Financial Institution.
(k) No Borrower is or is required to be registered as an “investment company” under the Investment Company Act of 1940.
ARTICLE V
Covenants of Mondelēz
SECTION 5.01 Affirmative Covenants. So long as any Advance shall remain unpaid or any Lender shall have any Commitment hereunder, Mondelēz will:
(a) Compliance with Laws, Etc. Comply, and cause each Major Subsidiary to comply, in all material respects, with all applicable laws, rules, regulations and orders (such compliance to include, without limitation, complying with ERISA and paying before the same become delinquent all taxes, assessments and governmental charges imposed upon it or upon its property except to the extent contested in good faith), noncompliance with which would materially adversely affect the financial condition or operations of Mondelēz and its Subsidiaries taken as a whole.
(b) Maintenance of Total Shareholders’ Equity. Maintain Total Shareholders’ Equity of not less than the Minimum Shareholders’ Equity.
(c) Reporting Requirements. Furnish to the Lenders:
(i) as soon as available and in any event within 5 days after the due date for Mondelēz to have filed its Quarterly Report on Form 10-Q with the Commission for the first three quarters of each fiscal year, an unaudited interim condensed consolidated balance sheet of Mondelēz and its Subsidiaries as of the end of such quarter and unaudited interim condensed consolidated statements of earnings of Mondelēz and its Subsidiaries for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, certified by the chief financial officer of Mondelēz;
(ii) as soon as available and in any event within 15 days after the due date for Mondelēz to have filed its Annual Report on Form 10-K with the Commission for each fiscal year, a copy of the consolidated financial statements for such year for Mondelēz and its Subsidiaries, audited by PricewaterhouseCoopers LLP (or other independent auditors which, as of the date of this Agreement, are one of the “big four” accounting firms);
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(iii) all reports which Mondelēz sends to any of its shareholders, and copies of all reports on Form 8-K (or any successor forms adopted by the Commission) which Mondelēz files with the Commission;
(iv) as soon as possible and in any event within five days after the occurrence of each Event of Default and each event which, with the giving of notice or lapse of time, or both, would constitute an Event of Default, continuing on the date of such statement, a statement of the chief financial officer or treasurer of Mondelēz setting forth details of such Event of Default or event and the action which Mondelēz has taken and proposes to take with respect thereto; and
(v) such other information respecting the condition or operations, financial or otherwise, of Mondelēz or any Major Subsidiary as any Lender through the Administrative Agent may from time to time reasonably request.
In lieu of furnishing the Lenders the items referred to in clauses (i), (ii) and (iii) above, Mondelēz may make such items available on the Internet at www.mondelezinternational.com (which website includes an option to subscribe to a free service alerting subscribers by e-mail of new Commission filings) or any successor or replacement website thereof, or by similar electronic means.
(d) Ranking. Each Advance made to Mondelēz and each Guaranty by Mondelēz of an Advance made to another Borrower hereunder shall at all times constitute senior Debt of Mondelēz ranking equally in right of payment with all existing and future senior Debt of Mondelēz and senior in right of payment to all existing and future subordinated Debt of Mondelēz.
(e) Anti-Corruption Laws and Sanctions. Mondelēz will maintain in effect policies and procedures reasonably designed to ensure that no Borrowing will be made, and no proceeds of any Borrowing will be used, (a) for the purpose of funding payments to any officer or employee of a Governmental Authority or of a Person controlled by a Governmental Authority, to any Person acting in an official capacity for or on behalf of any Governmental Authority or Person controlled by a Governmental Authority, or to any political party, official of a political party, or candidate for political office, in each case in violation of the FCPA, (b) for the purpose of funding payments in violation of other applicable Anti-Corruption Laws, (c) for the purpose of financing the activities of any Sanctioned Person in violation of applicable Anti-Corruption Laws or Sanctions or (d) in any manner that would result in the violation of applicable Sanctions by any party hereto.
SECTION 5.02 Negative Covenants. So long as any Advance shall remain unpaid or any Lender shall have any Commitment hereunder, Mondelēz will not:
(a) Liens, Etc. Create or suffer to exist, or permit any Major Subsidiary to create or suffer to exist, any lien, security interest or other charge or encumbrance (other than operating leases and licensed intellectual property), or any other type of preferential arrangement (“Liens”), upon or with respect to any of its properties, whether now owned or hereafter acquired, or assign, or permit any Major Subsidiary to assign, any right to receive income, in each case to secure or provide for the payment of any Debt of any Person, other than:
(i) Liens upon or in property acquired or held by it or any Major Subsidiary in the ordinary course of business to secure the purchase price of such property or to secure indebtedness incurred solely for the purpose of financing the acquisition of such property;
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(ii) Liens existing on property at the time of its acquisition (other than any such lien or security interest created in contemplation of such acquisition);
(iii) Liens existing on the date hereof securing Debt;
(iv) Liens on property financed through the issuance of industrial revenue bonds in favor of the holders of such bonds or any agent or trustee therefor;
(v) Liens existing on property of any Person acquired by Mondelēz or any Major Subsidiary;
(vi) Liens securing Debt in an aggregate amount not in excess of 15% of Consolidated Tangible Assets;
(vii) Liens upon or with respect to Margin Stock;
(viii) Liens in favor of Mondelēz or any Major Subsidiary;
(ix) precautionary Liens provided by Mondelēz or any Major Subsidiary in connection with the sale, assignment, transfer or other disposition of assets by Mondelēz or such Major Subsidiary which transaction is determined by the Board of Directors of Mondelēz or such Major Subsidiary to constitute a “sale” under accounting principles generally accepted in the United States; and
(x) any extension, renewal or replacement of the foregoing, provided that (A) such Lien does not extend to any additional assets (other than a substitution of like assets), and (B) the amount of Debt secured by any such Lien is not increased.
(b) Mergers, Etc. Consolidate with or merge into (or permit any Designated Subsidiary to consolidate or merge into), or convey or transfer, or permit one or more of its Subsidiaries to convey or transfer, the properties and assets of Mondelēz and its Subsidiaries substantially as an entirety to, any Person unless, immediately before and after giving effect thereto, no Default or Event of Default would exist and, in the case of any merger or consolidation to which Mondelēz is a party, the surviving corporation is organized and existing under the laws of the United States of America or any State thereof or the District of Columbia and assumes all of Mondelēz’s obligations under this Agreement (including without limitation the covenants set forth in Article V) by the execution and delivery of an instrument in form and substance satisfactory to the Required Lenders.
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ARTICLE VI
Events of Default
SECTION 6.01 Events of Default. Each of the following events (each an “Event of Default”) shall constitute an Event of Default:
(a) Any Borrower or Mondelēz shall fail to pay any principal of any Advance when the same becomes due and payable; or any Borrower or Mondelēz shall fail to pay interest on any Advance, or Mondelēz shall fail to pay any fees payable under Section 2.09, within ten days after the same becomes due and payable (or after notice from the Administrative Agent in the case of fees referred to in Section 2.09(b)); or
(b) Any representation or warranty made or deemed to have been made by any Borrower or Mondelēz herein or by any Borrower or Mondelēz (or any of their respective officers) in connection with this Agreement shall prove to have been incorrect in any material respect when made or deemed to have been made; or
(c) Any Borrower or Mondelēz shall fail to perform or observe (i) any term, covenant or agreement contained in Section 5.01(b) or 5.02(b), (ii) any term, covenant or agreement contained in Section 5.02(a) if such failure shall remain unremedied for 15 days after written notice thereof shall have been given to Mondelēz by the Administrative Agent or any Lender or (iii) any other term, covenant or agreement contained in this Agreement on its part to be performed or observed if such failure shall remain unremedied for 30 days after written notice thereof shall have been given to Mondelēz by the Administrative Agent or any Lender; or
(d) Any Borrower or Mondelēz or any Major Subsidiary shall fail to pay any principal of or premium or interest on any Debt which is outstanding in a principal amount of at least $100,000,000 in the aggregate (but excluding Debt arising under this Agreement) of such Borrower or Mondelēz or such Major Subsidiary (as the case may be), when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt unless adequate provision for any such payment has been made in form and substance satisfactory to the Required Lenders; or any Debt of any Borrower or Mondelēz or any Major Subsidiary which is outstanding in a principal amount of at least $100,000,000 in the aggregate (but excluding Debt arising under this Agreement) shall be declared to be due and payable, or required to be prepaid (other than by a scheduled required prepayment), redeemed, purchased or defeased, or an offer to prepay, redeem, purchase or defease such Debt shall be required to be made, in each case prior to the stated maturity thereof as a result of a breach by such Borrower, Mondelēz or such Major Subsidiary (as the case may be) of the agreement or instrument relating to such Debt unless adequate provision for the payment of such Debt has been made in form and substance satisfactory to the Required Lenders; or
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(e) Any Borrower or Mondelēz or any Major Subsidiary shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against any Borrower or Mondelēz or any Major Subsidiary seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property, and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of 60 days or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against it or the appointment of a receiver, trustee, custodian or other similar official for it or for any of its property constituting a substantial part of the property of Mondelēz and its Subsidiaries taken as a whole) shall occur; or any Borrower or Mondelēz or any Major Subsidiary shall take any corporate action to authorize any of the actions set forth above in this subsection (e); or
(f) Any judgment or order for the payment of money in excess of $100,000,000 shall be rendered against any Borrower or Mondelēz or any Major Subsidiary and there shall be any period of 60 consecutive days during which a stay of enforcement of such unsatisfied judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or
(g) Any Borrower, Mondelēz or any ERISA Affiliate shall incur, or shall be reasonably likely to incur, liability as a result of one or more of the following: (i) the occurrence of any ERISA Event; (ii) the partial or complete withdrawal of any Borrower, Mondelēz or any ERISA Affiliate from a Multiemployer Plan; or (iii) the reorganization or termination of a Multiemployer Plan, in each case that would, individually or in the aggregate, materially adversely affect the financial condition or operations of Mondelēz and its Subsidiaries taken as a whole; provided, however, that no Default or Event of Default under this Section 6.01(g) shall be deemed to have occurred if the Borrower, Mondelēz or any ERISA Affiliate shall have made arrangements satisfactory to the PBGC or the Required Lenders to discharge or otherwise satisfy such liability (including the posting of a bond or other security); or
(h) So long as any Subsidiary of Mondelēz is a Designated Subsidiary, the Guaranty provided by Mondelēz under Article VIII hereof shall for any reason cease (other than in accordance with the provisions of Article VIII) to be valid and binding on Mondelēz or Mondelēz shall so state in writing.
SECTION 6.02 Lenders’ Rights upon Event of Default. If an Event of Default occurs and is continuing, then the Administrative Agent shall at the request, or may with the consent, of the Required Lenders, by notice to Mondelēz:
(a) declare the obligation of each Lender to make further Advances to be terminated, whereupon the same shall forthwith terminate, and
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(b) declare all the Advances then outstanding, all interest thereon and all other amounts payable under this Agreement to be forthwith due and payable, whereupon the Advances then outstanding, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrowers; provided, however, that in the event of an actual or deemed entry of an order for relief with respect to any Borrower or Mondelēz under the Federal Bankruptcy Code or any equivalent bankruptcy or insolvency laws of any state or foreign jurisdiction, (i) the obligation of each Lender to make Advances shall automatically be terminated and (ii) the Advances then outstanding, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrowers.
ARTICLE VII
The Administrative Agent
SECTION 7.01 Authorization and Action. Each Lender hereby appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers and discretion under this Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers and discretion as are reasonably incidental thereto. As to any matters not expressly provided for by this Agreement (including, without limitation, enforcement or collection of the Notes), the Administrative Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Lenders, and such instructions shall be binding upon all Lenders and all holders of Notes; provided, however, that the Administrative Agent shall not be required to take any action that exposes the Administrative Agent to personal liability or that is contrary to this Agreement or applicable law. The Administrative Agent agrees to give to each Lender prompt notice of each notice given to it by Mondelēz or any Borrower as required by the terms of this Agreement or at the request of Mondelēz or such Borrower, and any notice provided pursuant to Section 5.01(c)(iv). Notwithstanding any provision to the contrary contained elsewhere herein, no Agent shall have any duties or responsibilities, except those expressly set forth herein, nor shall any Agent have or be deemed to have any fiduciary relationship with any Lender or participant, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist against any Agent. Without limiting the generality of the foregoing sentence, the use of the term “agent” herein with reference to any Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties.
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SECTION 7.02 Administrative Agent’s Reliance, Etc. Neither the Administrative Agent nor any of its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement, except for its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, the Administrative Agent:
(a) may treat the Lender that made any Advance as the holder of the Debt resulting therefrom until the Administrative Agent receives and accepts an Assignment and Acceptance entered into by such Lender, as assignor, and an Eligible Assignee, as assignee, as provided in Section 9.07;
(b) may consult with legal counsel (including counsel for Mondelēz or any Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts;
(c) makes no warranty or representation to any Lender and shall not be responsible to any Lender for any statements, warranties or representations (whether written or oral) made in or in connection with this Agreement by Mondelēz or any Borrower;
(d) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement on the part of Mondelēz or any Borrower or to inspect the property (including the books and records) of Mondelēz or such Borrower other than items or payments expressly required to be delivered or made to the Administrative Agent hereunder;
(e) shall not be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; and
(f) shall incur no liability under or in respect of this Agreement by acting upon any notice, consent, certificate or other instrument or writing (which may be by telecopier, telegram, telex, registered mail or, for the purposes of Section 2.02(a) or 2.07(b), email) believed by it to be genuine and signed or sent by the proper party or parties.
SECTION 7.03 The Administrative Agent and Affiliates. With respect to its Commitment and the Advances made by it, the Administrative Agent shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not the Administrative Agent; and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated, include the Administrative Agent in its individual capacity. The Administrative Agent and its affiliates may accept deposits from, lend money to, act as trustee under indentures of, accept investment banking engagements from and generally engage in any kind of business with, Mondelēz, any Borrower, any of their respective Subsidiaries and any Person who may do business with or own securities of Mondelēz, any Borrower or any such Subsidiary, all as if the Administrative Agent were not the Administrative Agent and without any duty to account therefor to the Lenders.
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SECTION 7.04 Lender Credit Decision. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent, any Joint Bookrunner or Joint Lead Arranger, or any other Lender and based on the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent any Joint Bookrunner or Joint Lead Arranger, or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement.
SECTION 7.05 Indemnification. The Lenders agree to indemnify the Administrative Agent (to the extent not reimbursed by Mondelēz or the Borrowers), ratably according to the respective principal amounts of the Pro Rata Advances then owing to each of them (or if no Pro Rata Advances are at the time outstanding, ratably according to the respective amounts of their Commitments), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against the Administrative Agent in any way relating to or arising out of this Agreement or any action taken or omitted by the Administrative Agent under this Agreement, in each case, to the extent relating to the Administrative Agent in its capacity as such (collectively, the “Indemnified Costs”), provided that no Lender shall be liable for any portion of the Indemnified Costs resulting from the Administrative Agent’s gross negligence or willful misconduct. Without limitation of the foregoing, each Lender agrees to reimburse the Administrative Agent promptly upon demand for its ratable share of any out-of-pocket expenses (including counsel fees) incurred by the Administrative Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, to the extent that the Administrative Agent is not reimbursed for such expenses by Mondelēz or the Borrowers. In the case of any investigation, litigation or proceeding giving rise to any Indemnified Costs, this Section 7.05 applies whether any such investigation, litigation or proceeding is brought by the Administrative Agent, any Lender or a third party.
SECTION 7.06 Successor Administrative Agent. The Administrative Agent may resign at any time by giving written notice thereof to the Lenders and Mondelēz and may be removed at any time with or without cause by the Required Lenders. Upon the resignation or removal of the Administrative Agent, the Required Lenders shall have the right to appoint a successor Administrative Agent (with the consent of Mondelēz so long as no Event of Default shall have occurred and be continuing). If no successor Administrative Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent’s giving of notice of resignation or the Required Lenders’ removal of the retiring Administrative Agent, then the retiring Administrative Agent may (with the consent of Mondelēz so long as no Event of Default shall have occurred and be continuing), on behalf of the Lenders, appoint a successor Administrative Agent, which shall be (a) a Lender and (b) a commercial bank organized under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, discretion, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement; provided that should the Administrative Agent for any reason not appoint a successor Administrative Agent, which it is under no obligation to do, then the rights, powers, discretion, privileges and duties referred to in this Section 7.06 shall be vested in the Required Lenders until a successor Administrative Agent has been appointed. After any retiring Administrative Agent’s resignation or removal hereunder as Administrative Agent, the provisions of this Article VII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement.
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SECTION 7.07 Administrative Agent, Joint Bookrunners, Joint Lead Arrangers and Co-Syndication Agents. (i) JPMorgan Chase Bank, N.A. has been designated as Administrative Agent under this Agreement, (ii) JPMorgan Chase Bank, N.A., Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, HSBC Securities (USA) Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated have been designated as Joint Bookrunners under this Agreement, (iii) JPMorgan Chase Bank, N.A., Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, HSBC Securities (USA) Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated have been designated as Joint Lead Arrangers under this Agreement and (iv) Bank of America, N.A., Citibank, N.A., Credit Suisse Securities (USA) LLC and HSBC Securities (USA) Inc. have been designated as Co-Syndication Agents under this Agreement, but the use of the aforementioned titles does not impose on any of them any duties or obligations greater than those of any other Lender.
SECTION 7.08 Withholding Tax. To the extent required by any applicable law, the Administrative Agent may withhold from any payment to any Lender an amount equivalent to any applicable withholding tax. Without limiting or expanding the provisions of Section 2.15(a) or (c), each Lender shall, and does hereby, indemnify the Administrative Agent against, and shall make payable in respect thereof within 30 days after demand therefor, any and all Taxes and any and all related losses, claims, liabilities and expenses (including fees, charges and disbursements of any counsel for the Administrative Agent) incurred by or asserted against the Administrative Agent by the Internal Revenue Service or any other Governmental Authority as a result of the failure of the Administrative Agent to properly withhold tax from amounts paid to or for the account of such Lender for any reason (including, without limitation, because the appropriate form was not delivered or not properly executed, or because such Lender failed to notify the Administrative Agent of a change in circumstance that rendered the exemption from, or reduction of withholding tax ineffective). A certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error. Each Lender hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender under this Agreement or any Note against any amount due the Administrative Agent under this Section 7.08. The agreements in this Section 7.08 shall survive the resignation and/or replacement of the Administrative Agent, any assignment of rights by, or the replacement of, a Lender, the termination of the Agreement and the repayment, satisfaction or discharge of all other Obligations.
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ARTICLE VIII
Guaranty
SECTION 8.01 Guaranty. Mondelēz hereby unconditionally and irrevocably guarantees (the undertaking of Mondelēz contained in this Article VIII being the “Guaranty”) the punctual payment when due, whether at stated maturity, by acceleration or otherwise, of all obligations of each other Borrower now or hereafter existing under this Agreement, whether for principal, interest, fees, expenses or otherwise (such obligations being the “Obligations”), and any and all expenses (including counsel fees and expenses) incurred by the Administrative Agent or the Lenders in enforcing any rights under the Guaranty.
SECTION 8.02 Guaranty Absolute. Mondelēz guarantees that the Obligations will be paid strictly in accordance with the terms of this Agreement, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Administrative Agent or the Lenders with respect thereto. The liability of Mondelēz under this Guaranty shall be absolute and unconditional irrespective of:
(a) any lack of validity, enforceability or genuineness of any provision of this Agreement or any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to departure from this Agreement;
(c) any exchange, release or non-perfection of any collateral, or any release or amendment or waiver of or consent to departure from any other guaranty, for all or any of the Obligations;
(d) any law or regulation of any jurisdiction or any other event affecting any term of a guaranteed Obligation; or
(e) any other circumstance which might otherwise constitute a defense available to, or a discharge of, a Borrower or Mondelēz.
This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Obligations is rescinded or must otherwise be returned by the Administrative Agent or any Lender upon the insolvency, bankruptcy or reorganization of a Borrower or otherwise, all as though such payment had not been made.
SECTION 8.03 Waivers.
(a) Mondelēz hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Obligations and this Guaranty and any requirement that the Administrative Agent or any Lender protect, secure, perfect or insure any security interest or lien or any property subject thereto or exhaust any right or take any action against a Borrower or any other Person or any collateral.
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(b) Mondelēz hereby irrevocably subordinates any claims or other rights that it may now or hereafter acquire against any Borrower that arise from the existence, payment, performance or enforcement of Mondelēz’s obligations under this Guaranty or this Agreement, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of the Administrative Agent or any Lender against such Borrower or any collateral, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from such Borrower, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim, remedy or right, in each case to the claims and rights of the Administrative Agent and the Lenders in respect of the cash payment in full of the Obligations and all other amounts payable under this Guaranty relating to such Borrower (the “Payment in Full”) and Mondelēz agrees not to enforce any such claim for payment against any such Borrower until the Payment in Full has occurred. If any amount shall be paid to Mondelēz in violation of the preceding sentence at any time prior to the later of the Payment in Full and the Termination Date, such amount shall be held in trust for the benefit of the Administrative Agent and the Lenders and shall forthwith be paid to the Administrative Agent to be credited and applied to the Obligations and all other amounts payable under this Guaranty, whether matured or unmatured, in accordance with the terms of this Agreement and this Guaranty, or to be held as collateral for any Obligations or other amounts payable under this Guaranty thereafter arising. Mondelēz acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by this Agreement and this Guaranty and that the agreements set forth in this Section 8.03(b) are knowingly made in contemplation of such benefits. Notwithstanding the foregoing provisions of this Section 8.03(b), Mondelēz shall be permitted to charge, and any Borrower shall be permitted to pay, a guaranty fee in connection with the entry by Mondelēz into this Guaranty, as may be agreed by Mondelēz and such Borrower.
SECTION 8.04 Continuing Guaranty. This Guaranty is a continuing guaranty and shall (a) remain in full force and effect until payment in full of the Obligations (including any and all Obligations which remain outstanding after the Termination Date) and all other amounts payable under this Guaranty, (b) be binding upon Mondelēz, its successors and assigns, and (c) inure to the benefit of and be enforceable by the Lenders, the Administrative Agent and their respective successors, transferees and assigns.
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ARTICLE IX
Miscellaneous
SECTION 9.01 Amendments, Etc. No amendment or waiver of any provision of this Agreement, nor consent to any departure by any Borrower or Mondelēz therefrom, shall in any event be effective unless the same shall be in writing and signed by the Required Lenders and Mondelēz, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, waiver or consent shall, unless in writing and signed by all the Lenders (including Defaulting Lenders) affected thereby and Mondelēz, do any of the following: (a) waive any of the conditions specified in Sections 3.01, 3.02 or 3.03 (it being understood and agreed that any waiver or amendment of a representation, warranty, covenant, Default or Event of Default shall not constitute a waiver of any condition specified in Section 3.01, 3.02 or 3.03 unless the amendment or waiver so provides), (b) increase the Commitments of the Lenders or subject the Lenders to any additional obligations, (c) reduce the principal of, or the amount or rate of interest on, the Pro Rata Advances or any fees or other amounts payable hereunder, (d) postpone any date fixed for any payment of principal of, or interest on, the Pro Rata Advances or any fees or other amounts payable hereunder, (e) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Pro Rata Advances, or the number of Lenders, that shall be required for the Lenders or any of them to take any action hereunder (including any such change to the definition of “Required Lenders”), (f) release Mondelēz from any of its obligations under Article VIII, (g) change Section 2.16 in a manner that would alter the pro rata sharing of payments required thereby (other than to extend the Termination Date applicable to the Advances and Commitments of consenting Lenders and to compensate such Lenders for consenting to such extension; provided that (i) no amendment permitted by this parenthetical shall reduce the amount of or defer any payment of principal, interest or fees to non-extending Lenders or otherwise adversely affect the rights of non-extending Lenders under this Agreement and (ii) the opportunity to agree to such extension and receive such compensation shall be offered on equal terms to all the Lenders) or (h) amend this Section 9.01; provided further that no waiver of the conditions specified in Section 3.04 in connection with any Competitive Bid Borrowing shall be effective unless consented to by all Lenders making Competitive Bid Advances as part of such Competitive Bid Borrowing; and provided further that (x) no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required above to take such action, affect the rights or duties of the Administrative Agent under this Agreement and (y) this Agreement may be amended with the written consent of the Administrative Agent, Mondelēz and the Augmenting Lenders pursuant to Section 2.18.
SECTION 9.02 Notices, Etc.
(a) Addresses. All notices and other communications provided for hereunder shall be in writing (including telecopier communication) and mailed, telecopied, or delivered (or in the case of any Notice of Borrowing or Notice of Competitive Bid Borrowing, emailed), as follows:
if to Mondelēz or any other Borrower:
c/o Mondelēz International, Inc.
Three Parkway North
Deerfield, Illinois 60015
Attention: Executive Vice President and
Chief Financial Officer
with copies to:
c/o Mondelēz International, Inc.
Three Parkway North
Deerfield, Illinois 60015
Attention: Treasurer
Fax number: (847) 943-4903;
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and
c/o Mondelēz International, Inc.
Three Parkway North
Deerfield, Illinois 60015
Attention: Assistant Treasurer
Fax number: (847) 943-4903;
if to Mondelēz, as guarantor:
Mondelēz International, Inc.
Three Parkway North
Deerfield, Illinois 60015
Attention: Vice President and Corporate Secretary
Fax number: (570) 235-3005;
if to any Initial Lender, at its Domestic Lending Office specified opposite its name on Schedule II hereto;
if to any other Lender, at its Domestic Lending Office specified in the Assignment and Acceptance pursuant to which it became a Lender;
if to the Administrative Agent:
c/o JPMorgan Chase Bank, N.A.
383 Madison Avenue, 24th Floor
New York, NY 10179
Attention: Courtney Eng
Email: courtney.c.eng@jpmorgan.com
with a copy to:
JPMorgan Loan Services
Loan & Agency
500 Stanton Christiana Road, Ops2, Floor 3
Newark, DE 19713-2107
Attention: Amanda Collins
Email: jane.dreisbach@jpmorgan.com
Fax number: (302) 634-4733;
or, as to any Borrower, Mondelēz or the Administrative Agent, at such other address as shall be designated by such party in a written notice to the other parties and, as to each other party, at such other address as shall be designated by such party in a written notice to Mondelēz and the Administrative Agent.
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(b) Effectiveness of Notices. All such notices and communications shall, when mailed, telecopied or emailed, be effective when deposited in the mail, telecopied or emailed, respectively, except that notices and communications to the Administrative Agent, pursuant to Article II, III or VII shall not be effective until received by the Administrative Agent, or if the date of receipt is not a Business Day, as of 9:00 a.m. (New York City time) on the next succeeding Business Day. Delivery by telecopier or email of an executed counterpart of any amendment or waiver of any provision of this Agreement or of any Exhibit hereto to be executed and delivered hereunder shall be effective as delivery of a manually executed counterpart thereof.
SECTION 9.03 No Waiver; Remedies. No failure on the part of any Lender or the Administrative Agent to exercise, and no delay in exercising, any right hereunder or under any Note shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.
SECTION 9.04 Costs and Expenses.
(a) Administrative Agent; Enforcement. Mondelēz agrees to pay on demand all reasonable costs and expenses in connection with the preparation, execution, delivery, administration (excluding any cost or expenses for administration related to the overhead of the Administrative Agent), modification and amendment of this Agreement and the documents to be delivered hereunder, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Administrative Agent and the Joint Bookrunners with respect thereto and with respect to advising the Administrative Agent as to its rights and responsibilities under this Agreement (which, insofar as such costs and expenses relate to the preparation, execution and delivery of this Agreement and the closing hereunder, shall be limited to the reasonable fees and expenses of Cahill, Gordon & Reindel LLP), and all costs and expenses of the Lenders and the Administrative Agent, if any (including, without limitation, reasonable counsel fees and expenses of the Lenders and the Administrative Agent), in connection with the enforcement (whether through negotiations, legal proceedings or otherwise) of this Agreement and the other documents to be delivered hereunder.
(b) Prepayment of LIBO Rate Advances or Floating Rate Bid Advances. If any payment of principal of LIBO Rate Advance or Floating Rate Bid Advance is made other than on the last day of the Interest Period for such Advance or at its maturity, as a result of a payment pursuant to Section 2.11, acceleration of the maturity of the Advances pursuant to Section 6.02, an assignment made as a result of a demand by Mondelēz pursuant to Section 9.07(a) or for any other reason, Mondelēz shall, upon demand by any Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender any amounts required to compensate such Lender for any additional losses, costs or expenses which it may reasonably incur as a result of such payment, including, without limitation, any loss (excluding loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by any Lender to fund or maintain such Advance. Without prejudice to the survival of any other agreement of any Borrower or Mondelēz hereunder, the agreements and obligations of each Borrower and Mondelēz contained in Section 2.02(c), 2.05, 2.12, 2.15, this Section 9.04(b) and Section 9.04(c) shall survive the payment in full of principal and interest hereunder.
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(c) Indemnification. Each Borrower and Mondelēz jointly and severally agrees to indemnify and hold harmless each Agent and each Lender and each of their respective affiliates, control persons, directors, officers, employees, attorneys and agents (each, an “Indemnified Party”) from and against any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and disbursements of counsel) which may be incurred by or asserted against any Indemnified Party, in each case in connection with or arising out of, or in connection with the preparation for or defense of, any investigation, litigation, or proceeding (i) related to this Agreement or any of the other documents delivered hereunder, the Advances or any transaction or proposed transaction (whether or not consummated) in which any proceeds of any Borrowing are applied or proposed to be applied, directly or indirectly, by any Borrower, whether or not such Indemnified Party is a party to such transaction, or (ii) related to any Borrower’s or Mondelēz’s consummation of any transaction or proposed transaction contemplated hereby (whether or not consummated) or entering into this Agreement, or to any actions or omissions of any Borrower or Mondelēz, any of their respective Subsidiaries or affiliates or any of its or their respective officers, directors, employees or agents in connection therewith, in each case whether or not an Indemnified Party is a party thereto and whether or not such investigation, litigation or proceeding is brought by Mondelēz or any Borrower or any other Person; provided, however, that neither any Borrower nor Mondelēz shall be required to indemnify an Indemnified Party from or against any portion of such claims, damages, losses, liabilities or expenses that is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from the gross negligence, bad faith or willful misconduct of such Indemnified Party.
SECTION 9.05 Right of Set-Off. Upon (i) the occurrence and during the continuance of any Event of Default and (ii) the making of the request or the granting of the consent specified by Section 6.02 to authorize the Administrative Agent to declare the Advances due and payable pursuant to the provisions of Section 6.02, each Lender is hereby authorized at any time and from time to time after providing written notice to the Administrative Agent of its intention to do so, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender or any of its affiliates to or for the credit or the account of Mondelēz or any Borrower against any and all of the obligations of any Borrower or Mondelēz now or hereafter existing under this Agreement, whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. Each Lender shall promptly notify the appropriate Borrower or Mondelēz, as the case may be, after any such set-off and application, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender and its affiliates under this Section 9.05 are in addition to other rights and remedies (including, without limitation, other rights of set-off) that such Lender and its affiliates may have.
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SECTION 9.06 Binding Effect. This Agreement shall be binding upon and inure to the benefit of Mondelēz, each of the Borrowers, the Administrative Agent and each Lender and their respective successors and assigns, except that neither any Borrower nor Mondelēz shall have the right to assign its rights hereunder or any interest herein without the prior written consent of each of the Lenders.
SECTION 9.07 Assignments and Participations.
(a) Assignment of Lender Obligations. Each Lender may assign to one or more Persons all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment and the Pro Rata Advances owing to it), subject to the following:
(i) each such assignment shall be of a constant, and not a varying, percentage of all rights and obligations under this Agreement (other than, except in the case of an assignment made pursuant to Section 9.07(h), any Competitive Bid Advances owing to such Lender or any Competitive Bid Notes held by it);
(ii) the amount of the Commitment of the assigning Lender being assigned pursuant to each such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event, other than with respect to assignments to other Lenders, or affiliates of Lenders, or assignment of the entire Commitment amount held by such Lender or the entire amount of Pro Rata Advances owing to such Lender, be less than $10,000,000, subject in each case to reduction at the sole discretion of Mondelēz, and shall be an integral multiple of $1,000,000;
(iii) each such assignment shall be to an Eligible Assignee;
(iv) each such assignment shall require the prior written consent of (x) the Administrative Agent, and (y) unless an Event of Default under Sections 6.01(a) or (e) has occurred and is continuing, Mondelēz (such consents not to be unreasonably withheld or delayed and such consents by Mondelēz shall be deemed given if no objection is received by the assigning Lender and the Administrative Agent from Mondelēz within twenty (20) Business Days after written notice of such proposed assignment has been delivered to Mondelēz); provided, that no consent of the Administrative Agent or Mondelēz shall be required for an assignment to another Lender or an affiliate of a Lender; and
(v) the parties to each such assignment shall execute and deliver to the Administrative Agent for its acceptance and recording in the Register, an Assignment and Acceptance, together with a processing and recordation fee of $3,500 (unless such assignment is made to an affiliate of the transferring Lender) provided, that, if such assignment is made pursuant to Section 9.07(h), Mondelēz shall pay or cause to be paid such $3,500 fee.
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Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, (x) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender hereunder and (y) the assigning Lender thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights (other than those provided under Section 9.04 and, with respect to the period during which it is a Lender, Sections 2.12 and 2.15) and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto), other than Section 9.12.
(b) Assignment and Acceptance. By executing and delivering an Assignment and Acceptance, the assigning Lender thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; (ii) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Borrower or Mondelēz or the performance or observance by any Borrower or Mondelēz of any of its obligations under this Agreement or any other instrument or document furnished pursuant hereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon the Administrative Agent such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi) such assignee represents that (A) the source of any funds it is using to acquire the assigning Lender’s interest or to make any Advance is not and will not be plan assets as defined under the regulations of the Department of Labor of any Plan subject to Title I of ERISA or Section 4975 of the Internal Revenue Code or (B) the assignment or Advance is not and will not be a non-exempt prohibited transaction as defined in Section 406 of ERISA; (vii) such assignee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers and discretion under this Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers and discretion as are reasonably incidental thereto; and (viii) such assignee agrees that it will perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it as a Lender.
(c) Agent’s Acceptance. Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an assignee representing that it is an Eligible Assignee, together with any Pro Rata Note or Notes subject to such assignment, the Administrative Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit C hereto, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to Mondelēz.
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(d) Register. The Administrative Agent shall maintain at its address referred to in Section 9.02 a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and the Commitment of, and principal and interest amounts of the Advances owing to, each Lender from time to time (the “Register”). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and Mondelēz, the Borrowers, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement, notwithstanding any notice to the contrary. The Register shall be available for inspection by Mondelēz, any Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice.
(e) Sale of Participation. Each Lender may sell participations to one or more banks or other entities in or to all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment, the Advances owing to it and any Note or Notes held by it), subject to the following:
(i) such Lender’s obligations under this Agreement (including, without limitation, its Commitment to Mondelēz hereunder) shall remain unchanged,
(ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations,
(iii) Mondelēz, the other Borrowers, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement,
(iv) each participant shall be entitled to the benefits of Sections 2.12 and 2.15 (subject to the limitations and requirements of those Sections, including the requirements to provide forms and/or certificates pursuant to Section 2.15(e), (f) or (g)) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (e) of this Section,
(v) no participant under any such participation shall have any right to approve any amendment or waiver of any provision of this Agreement, or any consent to any departure by any Borrower or Mondelēz therefrom, except to the extent that such amendment, waiver or consent would reduce the principal of, or interest on, the Advances or any fees or other amounts payable hereunder, in each case to the extent subject to such participation, or postpone any date fixed for any payment of principal of, or interest on, the Advances or any fees or other amounts payable hereunder, in each case to the extent subject to such participation, and
(vi) a participant shall not be entitled to receive any greater payment under Sections 2.12 and 2.15 than the applicable Lender would have been entitled to receive with respect to the participation sold to such participant, unless the sale of the participation to such participant is made with Mondelēz or the relevant Borrower’s prior written consent (not to be unreasonably withheld or delayed).
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Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the relevant Borrower, maintain a register on which it enters the name and address of each participant and the principal and interest amounts of each participant’s interest in the Advances or other obligations under this Agreement (the “Participant Register”). The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. No Lender shall have any obligation to disclose all or any portion of a Participant Register to any Person (including the identity of any Participant or any information relating to a Participant’s interest in any Commitments, Advances or its other Obligations under this Agreement) except to the extent that such disclosure is necessary to establish that such Commitment, Advance or other Obligation is in registered form under Section 5f.103(c) of the United States Treasury Regulations or, if different, under Sections 871(h) or 881(c) of the Code.
(f) Disclosure of Information. Any Lender may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 9.07, disclose to the assignee or participant or proposed assignee or participant, any information relating to Mondelēz or any Borrower furnished to such Lender by or on behalf of Mondelēz or any Borrower; provided that, prior to any such disclosure, the assignee or participant or proposed assignee or participant shall agree to preserve the confidentiality of any confidential information relating to Mondelēz or any Borrower or any of their respective Subsidiaries received by it from such Lender.
(g) Regulation A Security Interest. Notwithstanding any other provision set forth in this Agreement, any Lender may at any time create a security interest in all or any portion of its rights under this Agreement (including, without limitation, the Advances owing to it and any Note or Notes held by it) in favor of any Federal Reserve Bank or central bank performing similar functions in accordance with applicable law.
(h) Replacement of Lenders. In the event that (i) any Lender shall have delivered a notice pursuant to Section 2.13, (ii) any Borrower shall be required to make additional payments to or for the account of any Lender under Section 2.12 or 2.15, (iii) any Lender (a “Non-Consenting Lender”) shall withhold its consent to any amendment that requires the consent of all the Lenders and that has been consented to by the Required Lenders or (iv) any Lender shall become a Defaulting Lender, Mondelēz shall have the right, at its own expense, upon notice to such Lender and the Administrative Agent, (A) to terminate the Commitment of such Lender or (B) to require such Lender to transfer and assign at par and without recourse (in accordance with and subject to the restrictions contained in Section 9.07) all its interests, rights and obligations under this Agreement to one or more other financial institutions acceptable to Mondelēz and approved by the Administrative Agent (such approval not to be unreasonably withheld or delayed), which shall assume such obligations; provided, that (x) in the case of any replacement of a Non-Consenting Lender, each assignee shall have consented to the relevant amendment, (y) no such termination or assignment shall conflict with any law or any rule, regulation or order of any Governmental Authority and (z) the Borrowers or the assignee (or assignees), as the case may be, shall pay to each affected Lender in immediately available funds on the date of such termination or assignment the principal of and interest accrued to the date of payment on the Advances made by it hereunder and all other amounts accrued for its account or owed to it hereunder. Mondelēz will not have the right to terminate the commitment of any Lender, or to require any Lender to assign its rights and interests hereunder, if, prior to such termination or assignment, as a result of a waiver by such Lender or otherwise, the circumstances entitling Mondelēz to require such termination or assignment cease to apply. Each Lender agrees that, if Mondelēz elects to replace such Lender in accordance with this Section 9.07, it shall promptly execute and deliver to the Administrative Agent an Assignment and Acceptance to evidence the assignment and shall deliver to the Administrative Agent any Note (if Notes have been issued in respect of such Lender’s Advances) subject to such Assignment and Acceptance; provided that the failure of any such Lender to execute an Assignment and Acceptance shall not render such assignment invalid and such assignment shall be recorded in the Register.
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SECTION 9.08 Designated Subsidiaries.
(a) Designation. Mondelēz may at any time, and from time to time after the Effective Date, by delivery to the Administrative Agent of a Designation Agreement duly executed by Mondelēz and the respective Subsidiary and substantially in the form of Exhibit D hereto, designate such Subsidiary as a “Designated Subsidiary” for purposes of this Agreement and such Subsidiary shall thereupon become a “Designated Subsidiary” for purposes of this Agreement and, as such, shall have all of the rights and obligations of a Borrower hereunder. The Administrative Agent shall promptly notify each Lender of each such designation by Mondelēz and the identity of the respective Subsidiary.
Notwithstanding the foregoing, no Lender shall be required to make Advances to a Designated Subsidiary in the event that the making of such Advances would or could reasonably be expected to breach, violate or otherwise be inconsistent with any internal policy (other than with respect to Designated Subsidiaries formed under the laws of any nation that is a member of the Organization for Economic Cooperation and Development as of the date hereof), law or regulation to which such Lender is, or would be upon the making of such Advance, subject. In addition, each Lender shall have the right to make any Advances to any Designated Subsidiary that is a Foreign Subsidiary of Mondelēz through an affiliate or non-U.S. branch of such Lender designated by such Lender at its sole option; provided such designation and Advance does not, in and of itself, subject the Borrowers to greater costs pursuant to Section 2.12 or 2.15 than would have been payable if such Lender made such Advance directly.
(b) Termination. Upon the payment and performance in full of all of the indebtedness, liabilities and obligations under this Agreement of any Designated Subsidiary then, so long as at the time no Notice of Pro Rata Borrowing or Notice of Competitive Bid Borrowing in respect of such Designated Subsidiary is outstanding, such Subsidiary’s status as a “Designated Subsidiary” shall terminate upon notice to such effect from the Administrative Agent to the Lenders (which notice the Administrative Agent shall give promptly, upon and only upon its receipt of a request therefor from Mondelēz). Thereafter, the Lenders shall be under no further obligation to make any Advance hereunder to such former Designated Subsidiary until such time as it has been redesignated a Designated Subsidiary by Mondelēz pursuant to Section 9.08(a).
SECTION 9.09 Governing Law. This Agreement and the Notes shall be governed by, and construed in accordance with, the substantive laws of the State of New York without regard to choice of law doctrines.
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SECTION 9.10 Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by telecopier or email shall be effective as delivery of a manually executed counterpart of this Agreement.
SECTION 9.11 Jurisdiction, Etc.
(a) Submission to Jurisdiction; Service of Process. Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the United States District Court of the Southern District of New York, and any appellate court thereof, in any action or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in any such court. Each of Mondelēz and each Borrower hereby agrees that service of process in any such action or proceeding brought in any such court may be made upon the process agent appointed pursuant to Section 9.11(b) (the “Process Agent”) and each Designated Subsidiary hereby irrevocably appoints the Process Agent its authorized agent to accept such service of process, and agrees that the failure of the Process Agent to give any notice of any such service shall not impair or affect the validity of such service or of any judgment rendered in any action or proceeding based thereon. Each of Mondelēz and each Borrower hereby further irrevocably consents to the service of process in any such action or proceeding in any such court by the mailing thereof by any parties hereto by registered or certified mail, postage prepaid, to Mondelēz or such Borrower, as applicable, at its address specified pursuant to Section 9.02. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that any party may otherwise have to serve legal process in any other manner permitted by law.
(b) Appointment of Process Agent. Mondelēz agrees to appoint a Process Agent from the Effective Date through the repayment in full of all Obligations hereunder (i) to receive on behalf of Mondelēz, each Borrower and each Designated Subsidiary and their respective property service of copies of the summons and complaint and any other process which may be served in any action or proceeding in any New York State or Federal court sitting in New York City arising out of or relating to this Agreement and (ii) to forward forthwith to Mondelēz, each Borrower and each Designated Subsidiary at their respective addresses copies of any summons, complaint and other process which such Process Agent receives in connection with its appointment. Mondelēz will give the Administrative Agent prompt notice of such Process Agent’s address.
(c) Waivers.
(i) Each of the parties hereto irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the Notes in any New York state or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.
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(ii) To the extent permitted by applicable law, each of the Borrowers, Mondelēz and the Lenders shall not assert and hereby waives, any claim against any other party hereto or any of their respective affiliates, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) (whether or not the claim therefor is based on contract, tort or duty imposed by any applicable legal requirement) arising out of, in connection with, as a result of, or in any way related to this Agreement or any related document or any agreement or instrument contemplated hereby or thereby or referred to herein or therein, the transactions contemplated hereby or thereby, any Advance or the use of the proceeds thereof or any act or omission or event occurring in connection therewith, and each of the parties hereto hereby waives, releases and agrees not to sue upon any such claim or any such damages, whether or not accrued and whether or not known or suspected to exist in its favor. For the avoidance of doubt, the waiver of claims for such damages against each Borrower and Mondelēz shall not limit the indemnity obligations set forth in Section 9.04(c).
(iii) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING HEREUNDER OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS AGREEMENT, AND THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN ITS RELATED FUTURE DEALINGS. EACH PARTY HERETO FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SECTION 9.11(C) AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS HERETO OR ANY OF THE OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE ADVANCES MADE HEREUNDER. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
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SECTION 9.12 Confidentiality. None of the Agents nor any Lender shall disclose any confidential information relating to Mondelēz or any Borrower to any other Person without the consent of Mondelēz, other than (a) to such Agent’s or such Lender’s affiliates and their officers, directors, employees, agents, advisors, insurers and re-insurers, rating agencies, market data collectors, credit insurance providers, any direct, indirect, actual or prospective counterparty (and its advisor) to any swap, derivative or securitization transaction related to the obligations under this Agreement and, as contemplated by Section 9.07(f), to actual or prospective assignees and participants, and then, in each such case, only on a confidential basis; provided, however, that such actual or prospective assignee or participant shall have been made aware of this Section 9.12 and shall have agreed to be bound by its provisions as if it were a party to this Agreement, (b) as required by any law, rule or regulation or judicial process, (c) as requested or required by any state, federal or foreign authority or examiner regulating banks or banking or other financial institutions, including in connection with the creation of security interests as contemplated by Section 9.07(g) and (d) in connection with enforcing or administering this Agreement.
SECTION 9.13 No Fiduciary Relationship. Each Borrower acknowledges and agrees that (a) no fiduciary, advisory or agency relationship between the Borrowers, on the one hand, and any Agent or any Lender, on the other hand, is intended to be or has been created in respect of any of the financing transactions contemplated by this Agreement, irrespective of whether any Agent or any Lender has advised or is advising Mondelēz on other matters (it being understood and agreed that nothing in this provision will relieve any Agent or any Lender of any advisory or fiduciary responsibilities it may have in connection with other transactions) and (b) each Agent and each Lender may have economic interests that conflict with those of the Borrowers and the transactions contemplated by this Agreement (including the exercise of rights and remedies hereunder and thereunder) are arm’s-length commercial transactions between the Agents and the Lenders, on the one hand, and the Borrowers, on the other. Each Borrower acknowledges and agrees that it has consulted its own legal and financial advisors in connection with the transactions contemplated hereby to the extent it deemed appropriate and that it is responsible for making its own independent judgment with respect to such transactions and the process leading thereto. Each Borrower agrees that it will not claim that any Lender has rendered advisory services of any nature or respect, or owes a fiduciary or similar duty to such Borrower, in connection with such transaction or the process leading thereto.
SECTION 9.14 Integration. This Agreement and the Notes represent the agreement of Mondelēz, the other Borrowers, the Administrative Agent and the Lenders with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by the Administrative Agent, Mondelēz, the other Borrowers or any Lender relative to the subject matter hereof not expressly set forth or referred to herein or in the Notes other than the matters referred to in Sections 2.09(b) and 9.04(a), the Fee Letter and any other fee letters entered into among Mondelēz and the Joint Bookrunners, if any, and except for any confidentiality agreements entered into by Lenders in connection with this Agreement or the transactions contemplated hereby. The amendment and restatement of the Existing Credit Agreement effected hereby will not constitute a novation of the obligations of Mondelēz or the other Borrowers under the Existing Credit Agreement, which shall (except as paid or discharged in connection with the effectiveness hereof) continue as obligations of Mondelēz or the other Borrowers hereunder.
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SECTION 9.15 USA Patriot Act Notice. The Administrative Agent and each Lender hereby notifies the Borrowers that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Patriot Act”), it is required to obtain, verify and record information that identifies the Borrowers, which information includes the name and address of each Borrower and other information that will allow such Lender to identify such Borrower in accordance with the Patriot Act.
SECTION 9.16 Acknowledgment and Consent to Bail-In of EEA Financial Institutions. Notwithstanding anything to the contrary in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any EEA Financial Institution arising under this Agreement or any other documents or agreements relating to the Loans made hereunder, to the extent such liability is unsecured, may be subject to the write-down and conversion powers of an EEA Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:
(a) the application of any Write-Down and Conversion Powers by an EEA Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an EEA Financial Institution; and
(b) the effects of any Bail-in Action on any such liability, including, if applicable:
(i) a reduction in full or in part or cancellation of any such liability;
(ii) a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such EEA Financial Institution, its parent undertaking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other documents or agreements relating to the Loans made hereunder; and
(iii) the variation of the terms of such liability in connection with the exercise of the write-down and conversion powers of any EEA Resolution Authority.
[Remainder of Page Left Blank Intentionally]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.
| MONDELĒZ INTERNATIONAL, INC. | ||
| By: | /s/ Luca Zaramella | |
| Name: | Luca Zaramella | |
| Title: | SVP Corporate Finance, CFO Commercial and Treasurer | |
[Mondelēz Credit Agreement]
| JPMORGAN CHASE BANK, N.A., as Administrative Agent and Lender | ||
| By | /s/ Tony Yung | |
| Name: | Tony Yung | |
| Title: | Executive Director | |
[Mondelēz Credit Agreement]
| BANK OF AMERICA N.A., as Lender | ||
| By | /s/ Kyle Lewis | |
| Name: | Kyle Lewis | |
| Title: | Associate | |
[Mondelēz Credit Agreement]
| CITIBANK, N.A., as Syndication Agent and Lender | ||
| By | /s/ Carolyn Kee | |
| Name: | Carolyn Kee | |
| Title: | Vice President | |
[Mondelēz Credit Agreement]
| CREDIT SUISSE AG, | ||
| CAYMAN ISLANDS BRANCH, as Lender | ||
| By | /s/ Vipul Dhadda | |
| Name: | Vipul Dhadda | |
| Title: | Authorized Signatory | |
| By | /s/ Karim Rahimtoola | |
| Name: | Karim Rahimtoola | |
| Title: | Authorized Signatory | |
[Mondelēz Credit Agreement]
| HSBC BANK USA, NATIONAL ASSOCIATION, as Lender | ||
| By | /s/ Robert Devir | |
| Name: | Robert Devir | |
| Title: | Managing Director | |
[Mondelēz Credit Agreement]
| THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., as Lender | ||
| By | /s/ Harumi Kambara | |
| Name: | Harumi Kambara | |
| Title: | Authorized Signatory | |
[Mondelēz Credit Agreement]
| BARCLAYS BANK PLC, as Lender | ||
| By | /s/ Christopher Aitkin | |
| Name: | Christopher Aitkin | |
| Title: | Assistant Vice President | |
[Mondelēz Credit Agreement]
| BNP PARIBAS, as Lender | ||
| By | /s/ Tony Baratta | |
| Name: | Tony Baratta | |
| Title: | Managing Director | |
| By | /s/ Todd Grossnickle | |
| Name: | Todd Grossnickle | |
| Title: | Director | |
[Mondelēz Credit Agreement]
| DEUTSCHE BANK AG NEW YORK BRANCH, as Lender | ||
| By | /s/ Ming K. Chu | |
| Name: | Ming K. Chu | |
| Title: | Director | |
| By | /s/ Virginia Cosenza | |
| Name: | Virginia Cosenza | |
| Title: | Vice President | |
[Mondelēz Credit Agreement]
| GOLDMAN SACHS BANK USA, as Lender | ||
| By | /s/ Annie Carr | |
| Name: | Annie Carr | |
| Title: | Authorized Signatory | |
[Mondelēz Credit Agreement]
| MIZUHO BANK, LTD., as Lender | ||
| By | /s/ Tracy Rahn | |
| Name: | Tracy Rahn | |
| Title: | Authorized Signatory | |
[Mondelēz Credit Agreement]
| SOCIETE GENERALE, as Lender | ||
| By | /s/ Shelley Yu | |
| Name: | Shelley Yu | |
| Title: | Director | |
[Mondelēz Credit Agreement]
| WELLS FARGO BANK, N.A., as Lender | ||
| By | /s/ James Travagline | |
| Name: | James Travagline | |
| Title: | Director | |
[Mondelēz Credit Agreement]
| The Toronto-Dominion Bank, New York Branch as Lender | ||
| By | /s/ Annie Dorval | |
| Name: | Annie Dorval | |
| Title: | Authorized Signatory | |
[Mondelēz Credit Agreement]
| BANCO BILBAO VIZCAYA ARGENTARIA, S.A. NEW YORK BRANCH, as Lender | ||
| By | /s/ Brian Crowley | |
| Name: | Brian Crowley | |
| Title: | Managing Director | |
| By | /s/ Cara Younger | |
| Name: | Cara Younger | |
| Title: | Director | |
[Mondelēz Credit Agreement]
| BANCO SANTANDER, S.A., as Lender | ||
| By | /s/ Federico Robin | |
| Name: | Federico Robin | |
| Title: | Executive Director | |
| By | /s/ Isabel Pastor | |
| Name: | Isabel Pastor | |
| Title: | Associate | |
[Mondelēz Credit Agreement]
| COMMERZBANK AG, NEW YORK BRANCH, as Lender | ||
| By | /s/ Ignacio Campillo | |
| Name: | Ignacio Campillo | |
| Title: | Managing Director | |
| By | /s/ Justin Hull | |
| Name: | Justin Hull | |
| Title: | Associate | |
[Mondelēz Credit Agreement]
| CREDIT AGRICOLE CORPORATE AND INVESTMENT BANK, as Lender | ||
| By | /s/ Kaye Ea | |
| Name: | Kaye Ea | |
| Title: | Managing Director | |
| By | /s/ Gordon Yip | |
| Name: | Gordon Yip | |
| Title: | Director | |
[Mondelēz Credit Agreement]
| Intesa Sanpaolo S.p.A. as Lender | ||
| By | /s/ Jordan Schweon | |
| Name: | Jordan Schweon | |
| Title: | Global Relationship Manager | |
| By | /s/ Francesco Di Mario | |
| Name: | Francesco Di Mario | |
| Title: | Head of Credit – NY Branch | |
[Mondelēz Credit Agreement]
| SUMITOMO MITSUI BANKING CORP., as Lender | ||
| By | /s/ David Kee | |
| Name: | David Kee | |
| Title: | Managing Director | |
[Mondelēz Credit Agreement]
| WESTPAC BANKING CORPORATION, as Lender | ||
| By | /s/ Stuart Brown | |
| Name: | Stuart Brown | |
| Title: | Director | |
[Mondelēz Credit Agreement]
| BANCO BRADESCO S.A., NEW YORK BRANCH, as Lender | ||
| By | /s/ Adrian A. G. Costa | |
| Name: | Adrian A. G. Costa | |
| Title: | Manager | |
| By | /s/ Mauro Lopez | |
| Name: | Mauro Lopez | |
| Title: | Manager | |
[Mondelēz Credit Agreement]
| DBS BANK LTD., as Lender | ||
| By | /s/ Jacqueline Tan | |
| Name: | Jacqueline Tan | |
| Title: | Senior Vice President | |
[Mondelēz Credit Agreement]
| THE NORTHERN TRUST COMPANY, as Lender | ||
| By | /s/ Lisa DeCristofaro | |
| Name: | Lisa DeCristofaro | |
| Title: | SVP | |
[Mondelēz Credit Agreement]
| STANDARD CHARTERED BANK, as Lender | ||
| By | /s/ Steven Aloupis | |
| Name: | Steven Aloupis | |
| Title: | Managing Director – Loan Syndications | |
[Mondelēz Credit Agreement]
| U.S. BANK NATIONAL ASSOCIATION, as Lender | ||
| By | /s/ Mary Ann Hawley | |
| Name: | Mary Ann Hawley | |
| Title: | Vice President | |
[Mondelēz Credit Agreement]
Exhibit 10.2
EXECUTION VERSION
$1,500,000,000 TERM LOAN AGREEMENT
Dated as of October 14, 2016
Among
MONDELEZ INTERNATIONAL HOLDINGS NETHERLANDS B.V.,
as Borrower
MONDELĒZ INTERNATIONAL, INC.,
as Guarantor
and
THE LENDERS NAMED HEREIN
and
JPMORGAN CHASE BANK, N.A.,
as Administrative Agent
JPMORGAN CHASE BANK, N.A.,
THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.,
CREDIT SUISSE SECURITIES (USA) LLC,
GOLDMAN SACHS BANK USA,
HSBC SECURITIES (USA) INC.,
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
and
MIZUHO BANK, LTD.,
as Joint Lead Arrangers and Joint Bookrunners
BANK OF AMERICA, N.A., THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.,
CREDIT SUISSE SECURITIES (USA) LLC, GOLDMAN SACHS BANK USA., HSBC
SECURITIES (USA) INC.
and
MIZUHO BANK, LTD.,
as Co-Syndication Agents
TABLE OF CONTENTS
| Page | ||||||
| ARTICLE I | ||||||
| Definitions and Accounting Terms | ||||||
| SECTION 1.01 |
Certain Defined Terms |
1 | ||||
| SECTION 1.02 |
Computation of Time Periods |
14 | ||||
| SECTION 1.03 |
Accounting Terms |
14 | ||||
| ARTICLE II | ||||||
| Amounts and Terms of the Loans | ||||||
| SECTION 2.01 |
The Loans |
15 | ||||
| SECTION 2.02 |
Making the Loans |
15 | ||||
| SECTION 2.03 |
Repayment of Loans |
17 | ||||
| SECTION 2.04 |
Interest on Loans |
17 | ||||
| SECTION 2.05 |
Additional Interest on LIBO Rate Loans |
17 | ||||
| SECTION 2.06 |
Conversion of Loans |
18 | ||||
| SECTION 2.07 |
[Reserved] |
18 | ||||
| SECTION 2.08 |
LIBO Rate Determination |
18 | ||||
| SECTION 2.09 |
Fees |
19 | ||||
| SECTION 2.10 |
Optional Termination or Reduction of Commitments |
20 | ||||
| SECTION 2.11 |
Optional Prepayments of Loans |
20 | ||||
| SECTION 2.12 |
Increased Costs |
20 | ||||
| SECTION 2.13 |
Illegality |
21 | ||||
| SECTION 2.14 |
Payments and Computations |
22 | ||||
| SECTION 2.15 |
Taxes |
23 | ||||
| SECTION 2.16 |
Sharing of Payments, Etc. |
26 | ||||
| SECTION 2.17 |
Evidence of Debt |
26 | ||||
| SECTION 2.18 |
[Reserved] |
27 | ||||
| SECTION 2.19 |
Use of Proceeds |
27 | ||||
| SECTION 2.20 |
Defaulting Lenders |
27 | ||||
| ARTICLE III | ||||||
| Conditions to Effectiveness and Lending | ||||||
| SECTION 3.01 |
Conditions Precedent to Effectiveness |
28 | ||||
| SECTION 3.02 |
[Reserved] |
30 | ||||
| SECTION 3.03 |
Conditions Precedent to Each Borrowing |
30 | ||||
-i-
| Page | ||||||
| ARTICLE IV | ||||||
| Representations and Warranties | ||||||
| SECTION 4.01 |
Representations and Warranties |
30 | ||||
| ARTICLE V | ||||||
| Covenants of Mondelēz | ||||||
| SECTION 5.01 |
Affirmative Covenants |
32 | ||||
| SECTION 5.02 |
Negative Covenants |
34 | ||||
| ARTICLE VI | ||||||
| Events of Default | ||||||
| SECTION 6.01 |
Events of Default |
35 | ||||
| SECTION 6.02 |
Lenders’ Rights upon Event of Default |
37 | ||||
| ARTICLE VII | ||||||
| The Administrative Agent | ||||||
| SECTION 7.01 |
Authorization and Action |
38 | ||||
| SECTION 7.02 |
Administrative Agent’s Reliance, Etc. |
38 | ||||
| SECTION 7.03 |
The Administrative Agent and Affiliates |
39 | ||||
| SECTION 7.04 |
Lender Credit Decision |
39 | ||||
| SECTION 7.05 |
Indemnification |
40 | ||||
| SECTION 7.06 |
Successor Administrative Agent |
40 | ||||
| SECTION 7.07 |
Administrative Agent, Joint Bookrunners, Joint Lead Arrangers and Co-Syndication Agents |
40 | ||||
| SECTION 7.08 |
Withholding Tax |
41 | ||||
| ARTICLE VIII | ||||||
| Guaranty | ||||||
| SECTION 8.01 |
Guaranty |
41 | ||||
| SECTION 8.02 |
Guaranty Absolute |
41 | ||||
| SECTION 8.03 |
Waivers |
42 | ||||
| SECTION 8.04 |
Continuing Guaranty |
43 | ||||
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| Page | ||||||
| ARTICLE IX | ||||||
| Miscellaneous | ||||||
| SECTION 9.01 |
Amendments, Etc. |
43 | ||||
| SECTION 9.02 |
Notices, Etc. |
44 | ||||
| SECTION 9.03 |
No Waiver; Remedies |
45 | ||||
| SECTION 9.04 |
Costs and Expenses |
46 | ||||
| SECTION 9.05 |
Right of Set-Off |
47 | ||||
| SECTION 9.06 |
Binding Effect |
47 | ||||
| SECTION 9.07 |
Assignments and Participations |
47 | ||||
| SECTION 9.08 |
[Reserved] |
52 | ||||
| SECTION 9.09 |
Governing Law |
52 | ||||
| SECTION 9.10 |
Execution in Counterparts |
52 | ||||
| SECTION 9.11 |
Jurisdiction, Etc. |
52 | ||||
| SECTION 9.12 |
Confidentiality |
54 | ||||
| SECTION 9.13 |
No Fiduciary Relationship |
54 | ||||
| SECTION 9.14 |
Integration |
55 | ||||
| SECTION 9.15 |
USA Patriot Act Notice |
55 | ||||
| SECTION 9.16 |
Acknowledgment and Consent to Bail-In of EEA Financial Institutions |
55 | ||||
| SECTION 9.17 |
Certain Terms |
55 | ||||
| SCHEDULES |
||||
| Schedule I |
— | List of Lenders and Commitments | ||
| Schedule II |
— | List of Domestic Lending Offices | ||
| EXHIBITS |
||||
| Exhibit A-1 |
— | Form of Five-Year Note | ||
| Exhibit A-2 |
— | Form of Three-Year Note | ||
| Exhibit B |
— | Form of Notice of Borrowing | ||
| Exhibit C |
— | Form of Assignment and Acceptance | ||
| Exhibit D |
— | [Intentionally Omitted.] | ||
| Exhibit E-1 |
— | Form of Opinion of Special Counsel for Mondelēz and Borrower | ||
| Exhibit E-2 |
— | Form of Opinion of Special Local Counsel for Mondelēz | ||
| Exhibit E-3 |
— | Form of Opinion of Internal Counsel for Mondelēz | ||
| Exhibit E-4 |
— | Form of Opinion of Special Local Counsel for Borrower | ||
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TERM LOAN AGREEMENT (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, this “Agreement”) dated as of October 14, 2016, among MONDELEZ INTERNATIONAL HOLDINGS NETHERLANDS B.V., having its official seat (statutaire zetel) in Oosterhout, the Netherlands, registered with the Dutch trade register under number 66713994 (the “Borrower”); MONDELĒZ INTERNATIONAL, INC., a Virginia corporation (“Mondelēz”); the BANKS, FINANCIAL INSTITUTIONS and OTHER INSTITUTIONAL LENDERS listed on the signature pages hereof (the “Initial Lenders”) and JPMORGAN CHASE BANK, N.A. (“JPMorgan”), as administrative agent (in such capacity, the “Administrative Agent”).
The parties hereto agree as follows:
ARTICLE I
Definitions and Accounting Terms
SECTION 1.01 Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):
“Administrative Agent” has the meaning specified in the preamble.
“Administrative Agent Account” means (a) the account of the Administrative Agent, maintained by the Administrative Agent, at its office at JPMorgan Chase Bank, N.A., JPMorgan Loan Services, Loan & Agency, 500 Stanton Christiana Road, Op2, Floor 3, Newark, DE, 19713-2107, United States. Attention: Jane Dreisbach, jane.dreisbach@jpmorgan.com, 302-634-4733 (facsimile), or (b) such other account of the Administrative Agent as is designated in writing from time to time by the Administrative Agent to Mondelēz and the Lenders for such purpose.
“Agents” means the Administrative Agent, each Co-Syndication Agent, each Joint Bookrunner and each Joint Lead Arranger.
“Anti-Corruption Laws” means all laws, rules, and regulations of the United States from time to time concerning or relating to bribery or corruption, the UK Bribery Act and any similar laws, rules and regulations of any other European jurisdiction to the extent applicable to the Borrower.
“Applicable Commitment Fee Rate” means, for any date, a percentage per annum equal to the percentage set forth below determined by reference to the higher of (i) the rating of Mondelēz’s long-term senior unsecured Debt from Standard & Poor’s (or, if there shall be no outstanding rated long-term senior unsecured Debt of Mondelēz, the long-term company, issuer or similar rating established by Standard & Poor’s for Mondelēz) and (ii) the rating of Mondelēz’s long-term senior unsecured Debt from Moody’s (or, if there shall be no outstanding rated long-term senior unsecured Debt of Mondelēz, the long-term company, issuer or similar rating established by Moody’s for Mondelēz), in each case on such date:
| Rating |
Applicable Commitment Fee Rate |
|||
| A or higher by Standard & Poor’s A2 or higher by Moody’s |
0.070 | % | ||
| A- by Standard & Poor’s A3 by Moody’s |
0.080 | % | ||
| BBB+ by Standard & Poor’s Baa1 by Moody’s |
0.095 | % | ||
| BBB by Standard & Poor’s Baa2 by Moody’s |
0.110 | % | ||
| Lower than BBB by Standard & Poor’s Lower than Baa2 by Moody’s |
0.125 | % | ||
provided that if on any date of determination (x) a rating is available on such date from only one of Standard & Poor’s and Moody’s but not the other, the Applicable Commitment Fee Rate shall be determined by reference to the then available rating; (y) no rating is available from either of Standard & Poor’s or Moody’s, the Applicable Commitment Fee Rate shall be determined by reference to the rating of any other nationally recognized statistical rating organization designated by Mondelēz and approved in writing by the Required Lenders and (z) no rating is available from any of Standard & Poor’s, Moody’s or any other nationally recognized statistical rating organization designated by Mondelēz and approved in writing by the Required Lenders, the Applicable Commitment Fee Rate shall be 0.095%.
“Applicable Interest Rate Margin” means (a)(i) as to any Three-Year Loan that is a Base Rate Loan, 0.000% and (ii) as to any Five-Year Loan that is a Base Rate Loan, the applicable rate per annum set forth below under the caption “Five-Year Base Rate Spread” and (b) (i) as to any Three-Year Loan that is a LIBO Rate Loan, the applicable rate per annum set forth below under the caption “Three-Year LIBO Rate Spread”, and (ii) as to any Five-Year Loan that is a LIBO Rate Loan, the applicable rate per annum set forth below under the caption “Five-Year LIBO Rate Spread”, in each case, with respect to clauses (b)(i) and (b)(ii), determined by reference to the higher of (i) the rating of Mondelēz’s long-term senior unsecured Debt from Standard & Poor’s (or, if there shall be no outstanding rated long-term senior unsecured Debt of Mondelēz, the long-term company, issuer or similar rating established by Standard & Poor’s for Mondelēz) and (ii) the rating of Mondelēz’s long-term senior unsecured Debt from Moody’s (or, if there shall be no outstanding rated long-term senior unsecured Debt of Mondelēz, the long-term company, issuer or similar rating established by Moody’s for Mondelēz), in each case on such date:
| Rating |
Five-Year Base Rate Spread |
Three-Year LIBO Rate Spread |
Five-Year LIBO Rate Spread |
|||||||||
| A or higher by Standard & Poor’s A2 or higher by Moody’s |
0.000 | % | 0.600 | % | 0.650 | % | ||||||
| A- by Standard & Poor’s A3 by Moody’s |
0.000 | % | 0.675 | % | 0.750 | % | ||||||
| BBB+ by Standard & Poor’s Baa1 by Moody’s |
0.000 | % | 0.750 | % | 0.850 | % | ||||||
| BBB by Standard & Poor’s Baa2 by Moody’s |
0.000 | % | 0.825 | % | 0.950 | % | ||||||
| Lower than BBB by Standard & Poor’s Lower than Baa2 by Moody’s |
0.050 | % | 0.900 | % | 1.050 | % | ||||||
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provided that if on any date of determination (x) a rating is available on such date from only one of Standard & Poor’s and Moody’s but not the other, the Applicable Interest Rate Margin shall be determined by reference to the then available rating; (y) no rating is available from either of Standard & Poor’s or Moody’s, the Applicable Interest Rate Margin shall be determined by reference to the rating of any other nationally recognized statistical rating organization designated by Mondelēz and approved in writing by the Required Lenders and (z) no rating is available from any of Standard & Poor’s, Moody’s or any other nationally recognized statistical rating organization designated by Mondelēz and approved in writing by the Required Lenders, (i) with respect to Five-Year Loans, the Applicable Interest Rate Margin shall be 0.050% as to any Base Rate Loan, (ii) with respect to Three-Year Loans, the Applicable Interest Rate Margin shall be 0.900% as to any LIBO Rate Loan and (iii) with respect to Five-Year Loans, the Applicable Interest Rate Margin shall be 1.050% as to any LIBO Rate Loan.
“Assignment and Acceptance” means an assignment and acceptance entered into by a Lender and an Eligible Assignee, and accepted by the Administrative Agent in substantially the form of Exhibit C hereto.
“Availability Period” means the date commencing on the Effective Date and ending on the date that is sixty (60) days thereafter.
“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable EEA Resolution Authority in respect of any liability of an EEA Financial Institution.
“Bail-In Legislation” means, with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule.
“Base Rate” means a fluctuating interest rate per annum in effect from time to time, which rate per annum shall at all times be equal to the highest of:
(i) the rate of interest announced publicly by the Administrative Agent in New York, New York, from time to time, as the Administrative Agent’s prime rate;
(ii) 1/2 of one percent per annum above the Federal Funds Effective Rate; and
(iii) the LIBO Rate for Dollars for a one month Interest Period appearing on Reuters Screen LIBOR01 on such day (or if such day is not a Business Day, the immediately preceding Business Day) plus 1% per annum;
provided that in no event shall the Base Rate be less than zero.
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“Base Rate Loan” means a Loan that bears interest as provided in Section 2.04(a)(i).
“Board” means the Board of Governors of the Federal Reserve System of the United States (or any successor).
“Borrower Agent” means agents of Mondelēz or the Borrower acting in capacity with, or benefitting from, this Agreement or the proceeds of any Loan.
“Borrower” has the meaning specified in the preamble hereto.
“Borrowing” means a group of Three-Year Loans or Five-Year Loans, as the case may be, of the same Type, made, converted or continued on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect.
“Business Day” means a day of the year on which banks are not required or authorized by law to close in New York City and, if the applicable Business Day relates to any LIBO Rate Loans, on which dealings are carried on in the London interbank market and banks are open for business in London.
“Commission” means the United States Securities and Exchange Commission.
“Commitment” means as to any Lender, such Lender’s Three-Year Loan Commitment and such Lender’s Five-Year Loan Commitment (or any combination thereof, as the context may require).
“Commitment Fees” has the meaning specified in Section 2.09(a).
“Consolidated Tangible Assets” means the total assets appearing on a consolidated balance sheet of Mondelēz and its Subsidiaries, less goodwill and other intangible assets and the minority interests of other Persons in such Subsidiaries, all as determined in accordance with GAAP.
“Convert,” “Conversion” and “Converted” each refers to a conversion of Loans of one Type into Loans of the other Type pursuant to Section 2.06, 2.08 or 2.13.
“Co-Syndication Agents” means Bank of America, N.A., The Bank of Tokyo-Mitsubishi UFJ, Ltd., Credit Suisse Securities (USA) LLC, Goldman Sachs Bank USA, HSBC Securities (USA) Inc. and Mizuho Bank, Ltd.
“Debt” means (i) indebtedness for borrowed money or for the deferred purchase price of property or services, whether or not evidenced by bonds, debentures, notes or similar instruments, (ii) obligations as lessee under leases that, in accordance with accounting principles generally accepted in the United States, are recorded as capital leases, and (iii) obligations under direct or indirect guaranties in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or obligations of any other Person of the kinds referred to in clause (i) or (ii) above.
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“Default” means any event specified in Section 6.01 that would constitute an Event of Default but for the requirement that notice be given or time elapse or both.
“Defaulting Lender” means any Lender, as reasonably determined by the Administrative Agent, that has (a) failed to fund any portion of its Loans within three Business Days of the date required to be funded by it hereunder, unless such Lender notifies the Administrative Agent and the Borrower in writing that such failure is the result of such Lender’s determination that one or more conditions precedent to funding has not been satisfied, (b) notified any Obligor, the Administrative Agent or any Lender in writing that it does not intend to comply with any of its funding obligations under this Agreement or has made a public statement to the effect that it does not intend to comply with its funding obligations under this Agreement or generally under other agreements in which it commits to extend credit, (c) failed, within three Business Days after written request by the Administrative Agent, to confirm that it will comply with the terms of this Agreement relating to its obligations to fund prospective Loans, provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon the Administrative Agent’s receipt of such confirmation in form and substance satisfactory to the Administrative Agent, (d) otherwise failed to pay over to the Administrative Agent or any other Lender any other amount required to be paid by it hereunder within three Business Days of the date when due, or (e) become the subject of a bankruptcy, insolvency proceeding or Bail-In Action, or has had a receiver, conservator, trustee or custodian appointed for it, or has taken any action in furtherance of, or indicating its consent to, approval of or acquiescence in any such proceeding or appointment or has a parent company that has become the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee or custodian appointed for it, or has taken any action in furtherance of, or indicating its consent to, approval of or acquiescence in any such proceeding or appointment, in the case of clauses (a) through (d) unless the subject of a good faith dispute and such Lender has notified the Administrative Agent in writing of such; provided that, for the avoidance of doubt, a Lender shall not be a Defaulting Lender solely by virtue of (i) the ownership or acquisition of any ownership interest in such Lender or a parent company thereof or the exercise of control over a Lender or parent company thereof by a Governmental Authority or instrumentality thereof or (ii) in the case of a solvent Lender or parent company thereof, as the case may be, the precautionary appointment of an administrator, guardian, custodian or other similar official by a Governmental Authority under or based on the law of the country where such Person is subject to home jurisdiction supervision if applicable law requires that such appointment not be publicly disclosed in any such case, where such action does not result in or provide such Lender with immunity from the jurisdiction of the courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or Governmental Authority or instrumentality) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender.
“Dollars” and the “$” sign each means lawful currency of the United States of America.
“Domestic Lending Office” means, with respect to any Lender, the office of such Lender specified as its “Domestic Lending Office” opposite its name on Schedule II hereto or in the Assignment and Acceptance pursuant to which it became a Lender, or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Administrative Agent.
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“EEA Financial Institution” means (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent;
“EEA Member Country” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.
“EEA Resolution Authority” means any public administrative authority or any person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.
“Effective Date” has the meaning specified in Section 3.01.
“Eligible Assignee” means (i) a commercial bank organized under the laws of the United States, or any State thereof, and having total assets in excess of $5,000,000,000; (ii) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development (or any successor) (“OECD”), or a political subdivision of any such country, and having total assets in excess of $5,000,000,000, provided that such bank is acting through a branch or agency located in the country in which it is organized or another country which is also a member of the OECD or the Cayman Islands; (iii) the central bank of any country which is a member of the OECD; (iv) a commercial finance company or finance Subsidiary of a corporation organized under the laws of the United States, or any State thereof, and having total assets in excess of $3,000,000,000; (v) an insurance company organized under the laws of the United States, or any State thereof, and having total assets in excess of $5,000,000,000; (vi) any Lender; (vii) an affiliate of any Lender; and (viii) any other bank, commercial finance company, insurance company or other Person approved in writing by Mondelēz (such approval not to be unreasonably withheld, delayed or conditioned), which approval shall be notified to the Administrative Agent; provided, that none of Mondelēz or its Subsidiaries, a Defaulting Lender or a natural person shall be permitted to be an Eligible Assignee.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder.
“ERISA Affiliate” means any Person that for purposes of Title IV of ERISA is a member of any Obligor’s controlled group, or under common control with any Obligor, within the meaning of Section 414 of the Internal Revenue Code.
-6-
“ERISA Event” means (a) (i) the occurrence with respect to a Plan of a reportable event, within the meaning of Section 4043 of ERISA, unless the 30-day notice requirement with respect thereto has been waived by the Pension Benefit Guaranty Corporation (or any successor) (“PBGC”), or (ii) the requirements of subsection (1) of Section 4043(b) of ERISA (without regard to subsection (2) of such section) are met with respect to a contributing sponsor, as defined in Section 4001(a)(13) of ERISA, of a Plan, and an event described in paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA is reasonably expected to occur with respect to such Plan within the following 30 days; (b) the application for a minimum funding waiver with respect to a Plan; (c) the provision by the administrator of any Plan of a notice of intent to terminate such Plan, pursuant to Section 4041(a)(2) of ERISA (including any such notice with respect to a plan amendment referred to in Section 4041(e) of ERISA); (d) the cessation of operations at a facility of any Obligor or any of their ERISA Affiliates in the circumstances described in Section 4062(e) of ERISA; (e) the conditions set forth in Section 303(k)(1)(A) and (B) of ERISA to the creation of a lien upon property or rights to property of any Obligor or any of their ERISA Affiliates for failure to make a required payment to a Plan are satisfied; or (f) the termination of a Plan by the PBGC pursuant to Section 4042 of ERISA, or the occurrence of any event or condition described in Section 4042 of ERISA that constitutes grounds for the termination of, or the appointment of a trustee to administer, a Plan.
“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor person), as in effect from time to time.
“Eurocurrency Lending Office” means, with respect to any Lender, the office of such Lender specified as its “Eurocurrency Lending Office” opposite its name on Schedule II hereto or in the Assignment and Acceptance pursuant to which it became a Lender (or, if no such office is specified, its Domestic Lending Office), or such other office of such Lender as such Lender may from time to time specify to Mondelēz and the Administrative Agent.
“Eurocurrency Liabilities” has the meaning assigned to that term in Regulation D of the Board, as in effect from time to time.
“Eurocurrency Rate Reserve Percentage” for any Interest Period, for all LIBO Rate Loans comprising part of the same Borrowing owing to a Lender which is a member of the Federal Reserve System, means the reserve percentage applicable for such Lender two Business Days before the first day of such Interest Period under regulations issued from time to time by the Board for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for a member bank of the Federal Reserve System in New York City with respect to liabilities or assets consisting of or including Eurocurrency Liabilities (or with respect to any other category of liabilities that includes deposits by reference to which the interest rate on LIBO Rate Loans is determined) having a term equal to such Interest Period.
“European Union” means the region comprised of member states of the European Union pursuant to the Treaty establishing the European Community (signed in Rome on 25 March 1967) as amended by the Treaty on the European Union (signed in Maastricht on 7 February 1992).
“Event of Default” has the meaning specified in Section 6.01.
“Extending Lender” has the meaning specified in Section 2.10(b).
“Extension Date” has the meaning specified in Section 2.10(b).
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“FATCA” means Sections 1471 through 1474 of the Internal Revenue Code as enacted as of the date hereof or any amended or successor version that is substantively comparable and not materially more onerous to comply with, and, in each case, regulations promulgated thereunder or official interpretations thereof, any agreements entered into pursuant to Section 1471(b)(1) of the Internal Revenue Code as of the date hereof (or any amended or successor version described above), and any intergovernmental agreement between the United States and another jurisdiction implementing the foregoing (or any law, regulation or other official administrative interpretation implementing such an intergovernmental agreement).
“FCPA” means the United States Foreign Corrupt Practices Act of 1977.
“Federal Bankruptcy Code” means the Bankruptcy Reform Act of 1978, as amended from time to time.
“Federal Funds Effective Rate” means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.
“Fee Letter” means the administrative agent fee letter, dated as of September 28, 2016, between Mondelēz and the Administrative Agent.
“Five-Year Commitment” means as to any Lender (i) the Dollar amount set forth opposite such Lender’s name on Schedule I hereto under the heading Five-Year Commitment, or (ii) if such Lender has entered into an Assignment and Acceptance, the Dollar amount set forth for such Lender as such Lender’s Five-Year Commitment in the Register maintained by the Administrative Agent, pursuant to Section 9.07(d), in each case as such amount may be reduced pursuant to Section 2.10.
“Five-Year Funding Date” has the meaning specified in Section 2.01(a).
“Five-Year Loans” means loans borrowed hereunder maturing on the Five-Year Termination Date.
“Five-Year Maturity Date” means the date that is the fifth anniversary of the Five-Year Funding Date.
“Five-Year Note” a promissory note of the Borrower payable to any Lender (or its registered assigns), delivered pursuant to a request made under Section 2.17 in substantially the form of Exhibit A-1 hereto, evidencing the aggregate indebtedness of the Borrower to such Lender resulting from the Five-Year Loans made by such Lender to the Borrower.
“Foreign Subsidiary” means, with respect to any Person, each Subsidiary of such Person that is not organized under the laws of the United States of America, any state thereof or the District of Columbia.
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“Funding Date” means the Three-Year Funding Date and the Five-Year Funding Date.
“GAAP” has the meaning specified in Section 1.03.
“Governmental Authority” means any nation or government and any state or other political subdivision thereof, and any agency, authority, instrumentality, regulatory body, court, administrative tribunal, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national body exercising such powers or functions, such as the European Union or the European Central Bank).
“Guaranty” has the meaning specified in Section 8.01.
“Historical Screen Rate” means, in relation to any LIBO Rate Loan, the most recent applicable Screen Rate for Dollars for a period equal in length to the Interest Period of that Loan and which is as of a day which is no more than two (2) Business Days before the start of the applicable Interest Period.
“Home Jurisdiction Withholding Tax” means United States federal backup withholding tax under Section 3406 of the Internal Revenue Code.
“Interest Period” means, for each LIBO Rate Loan comprising part of the same Borrowing, the period commencing on the date of Borrowing of such LIBO Rate Loan or the date of Conversion of any Base Rate Loan into such LIBO Rate Loan and ending on the last day of the period selected by the Borrower requesting such Borrowing pursuant to the provisions below. The duration of each such Interest Period shall be one (or less than one month if available to all Lenders), two, three or six months or, if available to all Lenders, twelve months, as the Borrower may select upon notice received by the Administrative Agent not later than 11:00 a.m. (New York City time) on the third Business Day prior to the first day of such Interest Period; provided, however, that:
(a) the Borrower may not select any Interest Period that ends after the applicable Maturity Date for any Loan
(b) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day, provided that if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the immediately preceding Business Day; and
(c) whenever the first day of any Interest Period occurs on a day of an initial calendar month for which there is no numerically corresponding day in the calendar month that succeeds such initial calendar month by the number of months equal to the number of months in such Interest Period, such Interest Period shall end on the last Business Day of such succeeding calendar month.
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“Internal Revenue Code” means the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and the rulings issued thereunder.
“Interpolated Historical Screen Rate” means, at any time, for any Interest Period, the rate per annum (rounded to the same number of decimal places as the relevant Historical Screen Rate) determined by the Administrative Agent (which determination shall be conclusive and binding absent manifest error) to be equal to the rate that results from interpolating on a linear basis between: (a) the applicable Historical Screen Rate (for the longest period for which the applicable Historical Screen Rate is available for Dollars) that is shorter than the applicable Interest Period and (b) the applicable Historical Screen Rate (for the shortest period for which the applicable Historical Screen Rate is available for Dollars) that exceeds the applicable Interest Period.
“Interpolated Rate” means, at any time, for any Interest Period, the rate per annum (rounded to the same number of decimal places as the relevant Screen Rate) determined by the Administrative Agent (which determination shall be conclusive and binding absent manifest error) to be equal to the rate that results from interpolating on a linear basis between: (a) the applicable Screen Rate (for the longest period for which the applicable Screen Rate is available for Dollars) that is shorter than the applicable Interest Period and (b) the applicable Screen Rate (for the shortest period for which the applicable Screen Rate is available for Dollars) that exceeds the applicable Interest Period.
“Joint Bookrunners” means JPMorgan Chase Bank, N.A., The Bank of Tokyo-Mitsubishi UFJ, Ltd., Credit Suisse Securities (USA) LLC, Goldman Sachs Bank USA, HSBC Securities (USA) Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Mizuho Bank, Ltd.
“Joint Lead Arrangers” means JPMorgan Chase Bank, N.A., The Bank of Tokyo-Mitsubishi UFJ, Ltd., Credit Suisse Securities (USA) LLC, Goldman Sachs Bank USA, HSBC Securities (USA) Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Mizuho Bank, Ltd.
“Lenders” means the Initial Lenders and their respective successors and permitted assignees.
“LIBO Rate” means, with respect to any LIBO Rate Loan for any Interest Period, an interest rate per annum equal to either:
(a) the Screen Rate as of 11:00 a.m. (London time) two Business Days before the first day of such Interest Period; or
(b) if the Screen Rate shall not be available at the applicable time for the applicable Interest Period, then the LIBO Rate for such Interest Period shall be the Interpolated Rate as of 11:00 a.m. (London time) two Business Days before the first day of such Interest Period; or
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(c) if the Interpolated Rate shall not be available at the applicable time for the applicable Interest Period, then the LIBO Rate for such Interest Period shall be the Historical Screen Rate; or
(d) if the Historical Screen Rate shall not be available at the applicable time for the applicable Interest Period, then the LIBO Rate for such Interest Period shall be the Interpolated Historical Screen Rate;
provided that in no event shall the LIBO Rate be less than 0% for the purposes of this Agreement.
“LIBO Rate Loan” means a Loan that bears interest as provided in Section 2.04(a)(ii).
“Lien” has the meaning specified in Section 5.02(a).
“Loans” means the Five-Year Loans and the Three-Year Loans, collectively.
“Major Subsidiary” means any Subsidiary of Mondelēz (a) more than 50% of the voting securities of which is owned directly or indirectly by Mondelēz, (b) which is organized and existing under, or has its principal place of business in, the United States or any political subdivision thereof, Canada or any political subdivision thereof, any country which is a member of the European Union on the date hereof or any political subdivision thereof, or Switzerland, Norway or Australia or any of their respective political subdivisions, and (c) which has at any time total assets (after intercompany eliminations) exceeding $1,000,000,000.
“Margin Stock” means margin stock, as defined in Regulation U.
“Maturity Date” means the Three-Year Maturity Date and the Five-Year Maturity Date.
“Minimum Shareholders’ Equity” means Total Shareholders’ Equity of not less than $24,600,000,000.
“Mondelēz” has the meaning specified in the preamble.
“Moody’s” means Moody’s Investors Service, Inc. and any successor thereto.
“Multiemployer Plan” means a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to which any Obligor or any ERISA Affiliate is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions, such plan being maintained pursuant to one or more collective bargaining agreements.
“Multiple Employer Plan” means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of any Obligor or any ERISA Affiliate and at least one Person other than such Obligor and the ERISA Affiliates or (b) was so maintained and in respect of which such Obligor or any ERISA Affiliate could have liability under Section 4064 or 4069 of ERISA in the event such plan has been or were to be terminated.
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“Netherlands” means the Kingdom of the Netherlands.
“Non-U.S. Lender” means any Lender that is not a “United States person” within the meaning of Section 7701(a)(30) of the Internal Revenue Code.
“Note” means a Five-Year Note or a Three-Year Note, as applicable.
“Obligations” has the meaning specified in Section 8.01.
“Obligors” means the Borrower and Mondelēz, collectively.
“Other Taxes” has the meaning specified in Section 2.15(b).
“Participant Register” has the meaning specified in Section 9.07(e).
“Patriot Act” has the meaning specified in Section 9.14.
“Person” means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture, limited liability company or other entity, or a government or any political subdivision or agency thereof.
“Plan” means a Single Employer Plan or a Multiple Employer Plan.
“Process Agent” has the meaning specified in Section 9.11(a).
“Register” has the meaning specified in Section 9.07(d).
“Regulation A” means Regulation A of the Board, as in effect from time to time.
“Regulation U” means Regulation U of the Board, as in effect from time to time.
“Required Five-Year Loan Lenders” means at any time Lenders having Five-Year Loans representing more than 50% of the aggregate outstanding Five-Year Loans at such time, or, if no Five-Year Loans are then outstanding, Lenders having Five-Year Commitments representing more than 50% of the aggregate Five-Year Commitments at such time.
“Required Lenders” means at any time Lenders having Loans and/or Commitments representing more than 50% of the aggregate Loans and Commitments outstanding at such time.
“Required Three-Year Loan Lenders” means at any time Lenders having Three-Year Loans representing more than 50% of the aggregate outstanding Three-Year Loans at such time, or, if no Loans are then outstanding, Lenders having Three-Year Commitments representing more than 50% of the aggregate Three-Year Commitments at such time.
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“Sanctions” means economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by (a) the U.S. government, including those administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury or the U.S. Department of State, or (b) the United Nations Security Council, the European Union or Her Majesty’s Treasury of the United Kingdom.
“Sanctioned Person” shall mean, at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury, the U.S. Department of State, or by the United Nations Security Council, the European Union or any European Union member state or (b) any Person controlled by any such Person or Persons described in the foregoing clause (a).
“Screen Rate” means the London interbank offered rate as administered by ICE Benchmark Administration (or any other Person that takes over the administration of such rate for Dollars for a period equal in length to such Interest Period as displayed on page LIBOR01 of the Reuters screen that displays such rate) or, in the event such rate does not appear on a Reuters page or screen, on any successor or substitute page on such screen that displays such rate, or on the appropriate page of such other information service that publishes such rate from time to time as selected by the Administrative Agent in its reasonable discretion.
“Single Employer Plan” means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of any Obligor or any ERISA Affiliate and no Person other than such Obligor and the ERISA Affiliates or (b) was so maintained and in respect of which such Obligor or any ERISA Affiliate could have liability under Section 4069 of ERISA in the event such plan has been or were to be terminated.
“Standard & Poor’s” means Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business, and any successor thereto.
“Subsidiary” of any Person means any Person of which (or in which) more than 50% of the outstanding capital stock having voting power to elect a majority of the Board of Directors of such Person (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person’s other Subsidiaries.
“Taxes” has the meaning specified in Section 2.15(a).
“Three-Year Commitment” means as to any Lender (i) the Dollar amount set forth opposite such Lender’s name on Schedule I hereto under the heading Three-Year Commitment, or (ii) if such Lender has entered into an Assignment and Acceptance, the Dollar amount set forth for such Lender as such Lender’s Three-Year Commitment in the Register maintained by the Administrative Agent, pursuant to Section 9.07(d), in each case as such amount may be reduced pursuant to Section 2.10.
“Three-Year Funding Date” has the meaning specified in Section 2.01(a).
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“Three-Year Loans” means loans borrowed hereunder maturing on the Three-Year Maturity Date.
“Three-Year Maturity Date” means the date that is the third anniversary of the Three-Year Funding Date.
“Three-Year Note” a promissory note of the Borrower payable to any Lender (or its registered assigns), delivered pursuant to a request made under Section 2.17 in substantially the form of Exhibit A-2 hereto, evidencing the aggregate indebtedness of the Borrower to such Lender resulting from the Three-Year Loans made by such Lender to the Borrower.
“Total Shareholders’ Equity” means total shareholders’ equity, as reflected on the consolidated balance sheet of Mondelēz and its Subsidiaries (excluding (a) accumulated other comprehensive income or losses, (b) the cumulative effects of any changes in accounting principles, including in connection with any adoption of “mark-to-market” accounting in respect of pension and other retirement plans of Mondelēz and its Subsidiaries, and (c) if “mark-to-market” accounting in respect of such pension and other retirement plans is so adopted, any income or losses recognized in connection with the ongoing application thereof).
“Type” with respect to any Loan, refers to whether such Loan is a Base Rate Loan or a LIBO Rate Loan.
“VAT” means (a) any tax imposed in compliance with the Council Directive of November 28, 2006 on the common system of value added tax (EC Directive 2006/112) and (b) any other tax of similar nature, whether imposed in a member state of the European Union in substitution for, or levied in addition to, such tax referred to in clause (a) above, or imposed elsewhere.
“Write-Down and Conversion Powers” means, with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule.
SECTION 1.02 Computation of Time Periods. In this Agreement in the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including” and the words “to” and “until” each mean “to but excluding.”
SECTION 1.03 Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with accounting principles generally accepted in the United States of America (subject to the exceptions set forth in this Section 1.03, “GAAP”), except that if there has been a material change in an accounting principle affecting the definition of an accounting term as compared to that applied in the preparation of the financial statements of Mondelēz as of and for the year ended December 31, 2015, then such new accounting principle shall not be used in the determination of the amount associated with that accounting term. A material change in an accounting principle is one that, in the year of its adoption, changes the amount associated with the relevant accounting term for any quarter in such year by more than 10%.
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ARTICLE II
Amounts and Terms of the Loans
SECTION 2.01 The Loans.
(a) Obligation To Make Loans. Each Lender severally agrees, on the terms and conditions hereinafter set forth, (i) to make Three-Year Loans to the Borrower on a single Business Day during the Availability Period (the “Three-Year Funding Date”) in an aggregate amount not to exceed such Lender’s Three-Year Commitment, if any and (ii) to make Five-Year Loans to the Borrower on a single Business Day during the Availability Period (the “Five-Year Funding Date”) in an aggregate amount not to exceed such Lender’s Five-Year Commitment, if any; provided that any Three-Year Commitments that are not drawn on the Three-Year Funding Date and any Five-Year Commitments that are not drawn on the Five-Year Funding Date are deemed automatically cancelled as of such date, as the case may be.
(b) [Reserved]
(c) Type of Loans. Each Borrowing shall consist of Three-Year Loans or Five-Year Loans of the same Type made on the same day by the Lenders ratably according to their respective Commitments.
SECTION 2.02 Making the Loans.
(a) Notice of Borrowing. Each Borrowing shall be made on notice, given not later than (x) 11:00 a.m. (New York City time) on the third Business Day prior to the relevant Funding Date in the case of a Borrowing consisting of LIBO Rate Loans, or (y) 9:00 a.m. (New York City time) on the relevant Funding Date in the case of a Borrowing consisting of Base Rate Loans, by the Borrower to the Administrative Agent, which shall give to each Lender prompt notice thereof by telecopier. Each such notice of a Borrowing (a “Notice of Borrowing”) shall be by telephone, confirmed immediately in writing, by registered mail, email or telecopier in substantially the form of Exhibit B-1 hereto, specifying therein the requested:
(i) Funding Date for such Borrowing,
(ii) type of Loans comprising such Borrowing,
(iii) amount of Three-Year Loans and/or amount of Five-Year Loans
(iv) aggregate amount of such Borrowing, and
(v) in the case of a Borrowing consisting of LIBO Rate Loans, the initial Interest Period for such Loan. Notwithstanding anything herein to the contrary, no Borrower may select LIBO Rate Loans for any Borrowing if the obligation of the Lenders to make LIBO Rate Loans shall then be suspended pursuant to Section 2.06(b), 2.08(c) or 2.13.
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(b) Funding Loans. Each applicable Lender shall, before 11:00 a.m. (New York City time) on the relevant Funding Date, make available for the account of its Domestic Lending Office to the Administrative Agent at the Administrative Agent Account, in same day funds, such Lender’s ratable portion of such Borrowing. Promptly after receipt of such funds by the Administrative Agent, and upon fulfillment of the applicable conditions set forth in Article III, the Administrative Agent will make such funds available to the Borrower at the address of the Administrative Agent referred to in Section 9.02.
(c) Irrevocable Notice. Each Notice of Borrowing of the Borrower shall be irrevocable and binding on the Borrower. In the case of any Borrowing that the related Notice of Borrowing specifies is to be comprised of LIBO Rate Loans, the Borrower shall indemnify each Lender against any loss, cost or expense incurred by such Lender as a result of any failure to fulfill on or before the date specified in such Notice of Borrowing for such Borrowing the applicable conditions set forth in Article III, including, without limitation, any loss (excluding loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the Loan to be made by such Lender as part of such Borrowing when such Loan, as a result of such failure, is not made on such date.
(d) Lender’s Ratable Portion. Unless the Administrative Agent shall have received notice from a Lender prior to 11:00 a.m. (New York City time) on the relevant Funding Date that such Lender will not make available to the Administrative Agent such Lender’s ratable portion of such Borrowing, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the relevant Funding Date in accordance with Section 2.02(b) and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower proposing such Borrowing on such date a corresponding amount. If and to the extent that such Lender shall not have so made such ratable portion available to the Administrative Agent, such Lender and the Borrower severally agree to repay to the Administrative Agent, forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent, at:
(i) in the case of the Borrower, the higher of (A) the interest rate applicable at the time to Loans comprising such Borrowing and (B) the cost of funds incurred by the Administrative Agent, in respect of such amount, and
(ii) in the case of such Lender, the Federal Funds Effective Rate.
If such Lender shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Lender’s Loan as part of such Borrowing for purposes of this Agreement.
(e) Independent Lender Obligations. The failure of any Lender to make the Loan to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Loan on the date of such Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Loan to be made by such other Lender on the date of any Borrowing.
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SECTION 2.03 Repayment of Loans. The Borrower shall repay to the Administrative Agent for the ratable account of each applicable Lender on the Three-Year Maturity Date the unpaid principal amount of the Three-Year Loans of such Lender then outstanding. The Borrower shall repay to the Administrative Agent for the ratable account of each applicable Lender on the Five-Year Maturity Date the unpaid principal amount of the Five-Year Loans of such Lender then outstanding.
SECTION 2.04 Interest on Loans.
(a) Scheduled Interest. The Borrower shall pay interest on the unpaid principal amount of each Loan owing by the Borrower to each Lender from the date of such Loan until such principal amount shall be paid in full, at the following rates per annum:
(i) Base Rate Loans. During such periods as such Loan is a Base Rate Loan, a rate per annum equal at all times to the sum of (1) the Base Rate in effect from time to time plus (2) the Applicable Interest Rate Margin in effect from time to time, payable in arrears quarterly on the last Business Day of each March, June, September and December, and on the date such Base Rate Loan shall be Converted or paid in full either prior to or on the applicable Maturity Date.
(ii) LIBO Rate Loans. During such periods as such Loan is a LIBO Rate Loan, a rate per annum equal at all times during each Interest Period for such Loan to the sum of (x) the LIBO Rate for such Interest Period for such Loan plus (y) the Applicable Interest Rate Margin in effect from time to time, payable in arrears on the last day of such Interest Period and, if such Interest Period has a duration of more than three months, on each day that occurs during such Interest Period every three months from the first day of such Interest Period, and on the date such LIBO Rate Loan shall be Converted or paid in full either prior to or on the applicable Maturity Date.
(b) Default Interest. If any principal of or interest on any Loan or any fee or other amount payable by the Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, payable in arrears on the dates referred to in Section 2.04(a)(i) or Section 2.04(a)(ii), as applicable, at a rate per annum equal at all times to (i) in the case of overdue principal of any Loan, 1% per annum above the rate per annum otherwise required to be paid on such Loan as provided in Section 2.04(a) or (ii) in the case of any other amount, 1% per annum plus the rate applicable to Base Rate Loans as provided in Section 2.04(a)(i).
SECTION 2.05 Additional Interest on LIBO Rate Loans. The Borrower shall pay to each Lender, so long as such Lender shall be required under regulations of the Board to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency Liabilities, additional interest on the unpaid principal amount of each LIBO Rate Loan of such Lender to the Borrower, from the date of such Loan until such principal amount is paid in full, at an interest rate per annum equal at all times to the remainder obtained by subtracting (i) the LIBO Rate for the Interest Period for such Loan from (ii) the rate obtained by dividing such LIBO Rate by a percentage equal to 100% minus the Eurocurrency Rate Reserve Percentage of such Lender for such Interest Period, payable on each date on which interest is payable on such Loan. Such additional interest shall be determined by such Lender and notified to Mondelēz through the Administrative Agent.
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SECTION 2.06 Conversion of Loans.
(a) Conversion upon Absence of Interest Period. If the Borrower shall fail to select the duration of any Interest Period for any LIBO Rate Loans in accordance with the provisions contained in the definition of the term “Interest Period,” the Administrative Agent will forthwith so notify the Borrower and the Lenders and such Loans will automatically, on the last day of the then existing Interest Period therefor, Convert into Base Rate Loans.
(b) Conversion upon Event of Default. Upon the occurrence and during the continuance of any Event of Default under Section 6.01(a), the Administrative Agent or the Required Lenders may elect that (i) each LIBO Rate Loan be, on the last day of the then existing Interest Period therefor, Converted into Base Rate Loans and (ii) the obligation of the Lenders to make, or to Convert Loans into LIBO Rate Loans be suspended.
(c) Voluntary Conversion. Subject to the provisions of Sections 2.06(b), 2.08(c) and 2.13, the Borrower may Convert all of its Loans of one Type constituting the same Borrowing into Loans of the other Type on any Business Day, upon notice given to the Administrative Agent not later than 11:00 a.m. (New York City time) on the third Business Day prior to the date of the proposed Conversion; provided, however, that the Conversion of a LIBO Rate Loan into a Base Rate Loan may be made on, and only on, the last day of an Interest Period for such LIBO Rate Loan. Each such notice of a Conversion shall, within the restrictions specified above, specify
(i) the date of such Conversion;
(ii) the Loans to be Converted; and
(iii) if such Conversion is into LIBO Rate Loans, the duration of the Interest Period for each such Loan.
SECTION 2.07 [Reserved]
SECTION 2.08 LIBO Rate Determination.
(a) Methods to Determine LIBO Rate. The Administrative Agent shall determine the LIBO Rate by using the methods described in the definition of the term “LIBO Rate,” and shall give prompt notice to the Borrower and Lenders of each such LIBO Rate.
(b) Inability to Determine LIBO Rate. In the event that the LIBO Rate cannot be determined by the methods described in clause (a), (b), (c) or (d) of the definition of “LIBO Rate,” then:
(i) the Administrative Agent shall forthwith notify the Borrower and the Lenders that the interest rate cannot be determined for such LIBO Rate Loan;
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(ii) with respect to each LIBO Rate Loan, such Loan will, on the last day of the then existing Interest Period therefor, be prepaid by the Borrower or be automatically Converted into a Base Rate Loan; and
(iii) the obligation of the Lenders to make LIBO Rate Loans or to Convert Base Rate Loans into LIBO Rate Loans shall be suspended until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist.
(c) Inadequate LIBO Rate. If, with respect to any LIBO Rate Loans, the Required Lenders notify the Administrative Agent that (i) they are unable to obtain matching deposits in the London interbank market at or about 11:00 a.m. (London time) on the second Business Day before the making of a Borrowing in sufficient amounts to fund their respective LIBO Rate Loans as a part of such Borrowing during the Interest Period therefor or (ii) the LIBO Rate for any Interest Period for such Loans will not adequately reflect the cost to such Required Lenders of making, funding or maintaining their respective LIBO Rate Loans for such Interest Period, the Administrative Agent shall forthwith so notify the Borrower and the Lenders, whereupon (A) the Borrower of such LIBO Rate Loans will, on the last day of the then existing Interest Period therefor, either (x) prepay such Loans or (y) Convert such Loans into Base Rate Loans and (B) the obligation of the Lenders to make, or to Convert Base Rate Loans into, LIBO Rate Loans shall be suspended until the Administrative Agent shall notify Mondelēz and the Lenders that the circumstances causing such suspension no longer exist. In the case of clause (ii) above, each such Lender shall certify its cost of funds for each Interest Period to the Administrative Agent and Borrower as soon as practicable but in any event not later than 10 Business Days after the last day of such Interest Period.
SECTION 2.09 Fees.
(a) Commitment Fees.
(i) Three-Year Commitments. The Borrower agrees to pay to the Administrative Agent for the account of each Lender with a Three-Year Commitment a commitment fee (the “Three-Year Commitment Fee”) on the aggregate amount of such Lender’s Three-Year Commitment from the date hereof in the case of each Initial Lender and from the effective date specified in the Assignment and Acceptance pursuant to which it became a Lender in the case of each other Lender until the earlier of (i) the Three-Year Funding Date, (ii) the last day of the Availability Period and (iii) the date of termination of the Three-Year Commitments by the Borrower hereunder, at the Applicable Commitment Fee Rate, and payable on such earliest date.
(ii) Five-Year Commitments. The Borrower agrees to pay to the Administrative Agent for the account of each Lender with a Five-Year Commitment a commitment fee (the “Five-Year Commitment Fee”, and together with the Three-Year Commitment Fee, the “Commitment Fees”) on the aggregate amount of such Lender’s Five-Year Commitment from the date hereof in the case of each Initial Lender and from the effective date specified in the Assignment and Acceptance pursuant to which it became a Lender in the case of each other Lender until the earlier of (i) the Five-Year Funding Date, (ii) the last day of the Availability Period and (iii) the date of termination of the Five-Year Commitments by the Borrower hereunder, at the Applicable Commitment Fee Rate and payable on such earliest date.
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(b) Other Fees. The Borrower shall pay to the Administrative Agent for its own account or for the accounts of the Joint Lead Arrangers or Lenders, as applicable, such fees, and at such times, as shall have been separately agreed between the Borrower and the Administrative Agent or the Joint Lead Arrangers.
SECTION 2.10 Optional Termination or Reduction of Commitments. The Borrower shall have the right, upon at least three Business Days’ notice to the Administrative Agent, to terminate in whole or reduce ratably in part the respective Three-Year Commitments or Five-Year Commitments of the Lenders; provided that each partial reduction shall be in the aggregate amount of no less than $50,000,000 or the remaining balance if less than $50,000,000.
SECTION 2.11 Optional Prepayments of Loans. The Borrower may, in the case of any LIBO Rate Loan, upon at least three Business Days’ notice to the Administrative Agent or, in the case of any Base Rate Loan, upon notice given to the Administrative Agent not later than 9:00 a.m. (New York City time) on the date of the proposed prepayment, in each case stating the proposed date and aggregate principal amount of the prepayment, and if such notice is given the Borrower shall, prepay the outstanding principal amount of such Loans in whole or ratably in part, together with accrued interest to the date of such prepayment on the principal amount prepaid; provided, however, that (x) each partial prepayment shall be in an aggregate principal amount of no less than $50,000,000 or the remaining balance if less than $50,000,000 and (y) in the event of any such prepayment of a LIBO Rate Loan, the Borrower shall be obligated to reimburse the Lenders in respect thereof pursuant to Section 9.04(b).
SECTION 2.12 Increased Costs.
(a) Costs from Change in Law or Authorities. If, due to either (i) the introduction after the date hereof of or any change (other than any change by way of imposition or increase of reserve requirements to the extent such change is included in the Eurocurrency Rate Reserve Percentage) in or in the interpretation, application or administration of any law or regulation or (ii) the compliance with any guideline or request promulgated after the date hereof from any central bank or other Governmental Authority (whether or not having the force of law), there shall be any increase in the cost to any Lender of agreeing to make or making, funding or maintaining LIBO Rate Loans (excluding for purposes of this Section 2.12 any such increased costs resulting from (i) Taxes or Other Taxes (as to which Section 2.15 shall govern) or (ii) taxes referred to in Section 2.15(a)(i), (ii), (iii), (iv), (v) or (vi)), then the Borrower shall within twenty (20) Business Days after receipt by the Borrower of demand by such Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender additional amounts sufficient to compensate such Lender for such increased cost; provided, however, that before making any such demand, each Lender agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different Domestic Lending Office if the making of such a designation would avoid the need for, or reduce the amount of, such increased cost and would not, in the reasonable judgment of such Lender be otherwise disadvantageous to such Lender. A certificate as to the amount of such increased cost, submitted to Mondelēz, the Borrower and the Administrative Agent by such Lender shall be conclusive and binding upon all parties hereto for all purposes, absent manifest error.
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(b) Reduction in Lender’s Rate of Return. In the event that, after the date hereof, the implementation of or any change in any law or regulation, or any guideline or directive (whether or not having the force of law) or the interpretation, application or administration thereof by any Governmental Authority charged with the administration thereof, imposes, modifies or deems applicable any capital adequacy, liquidity or similar requirement (including, without limitation, a request or requirement which affects the manner in which any Lender or its parent company allocates capital resources to its Commitments, including its obligations hereunder) and as a result thereof, in the sole opinion of such Lender, the rate of return on such Lender’s or its parent company’s capital as a consequence of its obligations hereunder is reduced to a level below that which such Lender could have achieved but for such circumstances, but reduced to the extent that Borrowings are outstanding from time to time, then in each such case, upon demand from time to time the Borrower shall pay to such Lender such additional amount or amounts as shall compensate such Lender for such reduction in rate of return. A certificate of such Lender as to any such additional amount or amounts shall be conclusive and binding for all purposes, absent manifest error. Except as provided below, in determining any such amount or amounts each Lender may use any reasonable averaging and attribution methods. Notwithstanding the foregoing, each Lender shall take all reasonable actions to avoid the imposition of, or reduce the amounts of, such increased costs, provided that such actions, in the reasonable judgment of such Lender will not be otherwise disadvantageous to such Lender and, to the extent possible, each Lender will calculate such increased costs based upon the capital requirements for its Loans and unused Commitment hereunder and not upon the average or general capital requirements imposed upon such Lender.
(c) Dodd-Frank Wall Street Reform and Consumer Protection Act; Basel III. Notwithstanding anything herein to the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (ii) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall, in each case be deemed to be a change in law or regulation after the date hereof regardless of the date enacted, adopted or issued.
SECTION 2.13 Illegality. Notwithstanding any other provision of this Agreement, if any Lender shall notify the Administrative Agent that the introduction of or any change in, or in the interpretation of, any law or regulation makes it unlawful, or any central bank or other Governmental Authority asserts that it is unlawful, for any Lender or its Eurocurrency Lending Office to perform its obligations hereunder to make LIBO Rate Loans or to fund or maintain LIBO Rate Loans, (a) each LIBO Rate Loan of such Lender will automatically, upon such demand, be Converted into a Base Rate Loan or an Loan that bears interest at the rate set forth in Section 2.04(a)(i), as the case may be, and (b) the obligation of the Lenders to make LIBO Rate Loans or to Convert Base Rate Loans into LIBO Rate Loans shall be suspended, in each case, until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist, in each case, subject to Section 9.04(b) hereof; provided, however, that before making any such demand, each Lender agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different Eurocurrency Lending Office if the making of such a designation would allow such Lender or its Eurocurrency Lending Office to continue to perform its obligations to make LIBO Rate Loans or to continue to fund or maintain LIBO Rate Loans and would not, in the judgment of such Lender, be otherwise disadvantageous to such Lender.
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SECTION 2.14 Payments and Computations.
(a) Time and Distribution of Payments. The Borrower shall make each payment hereunder, without set-off or counterclaim, not later than 11:00 a.m. (New York City time) on the day when due to the Administrative Agent at the Administrative Agent Account in same day funds. The Administrative Agent will promptly thereafter cause to be distributed like funds relating to the payment of principal or interest or Commitment Fees ratably (other than amounts payable pursuant to Section 2.07, 2.12, 2.15 or 9.04(b)) to the Lenders for the accounts of their respective Domestic Lending Offices, and like funds relating to the payment of any other amount payable to any Lender to such Lender for the account of its Domestic Lending Office, in each case to be applied in accordance with the terms of this Agreement. From and after the effective date of an Assignment and Acceptance pursuant to Section 9.07, the Administrative Agent shall make all payments hereunder in respect of the interest assigned thereby to the Lender assignee thereunder, and the parties to such Assignment and Acceptance shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves.
(b) Computation of Interest and Fees. All computations of interest based on the Administrative Agent’s prime rate shall be made by the Administrative Agent on the basis of a year of 365 or 366 days, as the case may be. All computations of interest based on the LIBO Rate or the Federal Funds Effective Rate and of Commitment Fees shall be made by the Administrative Agent and all computations of interest pursuant to Section 2.05 shall be made by the applicable Lender, on the basis of a year of 360 days. Computations of interest or Commitment Fees shall in each case be made for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or Commitment Fees are payable. Each determination by the Administrative Agent (or, in the case of Section 2.05 by a Lender), of an interest rate hereunder shall be conclusive and binding for all purposes, absent manifest error.
(c) Payment Due Dates. Whenever any payment hereunder shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or Commitment Fees, as the case may be; provided, however, that if such extension would cause payment of interest on or principal of LIBO Rate Loans to be made in the next following calendar month, such payment shall be made on the immediately preceding Business Day.
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(d) Presumption of Borrower Payment. Unless the Administrative Agent receives notice from the Borrower prior to the date on which any payment is due to the Lenders hereunder that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent the Borrower has not made such payment in full to the Administrative Agent, each Lender shall repay to the Administrative Agent forthwith on demand such amount distributed to such Lender together with interest thereon, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Administrative Agent at the Federal Funds Effective Rate.
SECTION 2.15 Taxes.
(a) Any and all payments by the Borrower and Mondelēz hereunder or under any Note shall be made, in accordance with Section 2.14, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities (including penalties, interest, additions to taxes and expenses) with respect thereto, excluding, (i) in the case of each Lender and the Administrative Agent, taxes imposed on or measured by its net income, and franchise taxes and branch profits taxes imposed on it, in each case, as a result of such Lender or the Administrative Agent (as the case may be) being organized under the laws of the taxing jurisdiction, (ii) in the case of each Lender, taxes imposed on or measured by its net income, and franchise taxes and branch profits taxes imposed on it, in each case, as a result of such Lender having its Domestic Lending Office in the taxing jurisdiction, (iii) in the case of each Lender and the Administrative Agent, taxes imposed on or measured by its net income, franchise taxes and branch profits taxes imposed on it, and any tax imposed by means of withholding, in each case, to the extent such tax is imposed solely as a result of a present or former connection (other than a connection arising from such Lender or the Administrative Agent having executed, delivered, enforced, become a party to, performed its obligations, received payments, received or perfected a security interest under, and/or engaged in any other transaction pursuant to this Agreement or a Note) between the Lender or the Administrative Agent, as the case may be, and the taxing jurisdiction, (iv) in the case of each Lender and the Administrative Agent, any U.S. federal withholding taxes imposed pursuant to FATCA, (v) in the case of each Lender and the Administrative Agent, any Home Jurisdiction Withholding Tax and (vi) taxes attributable to a Lender’s or the Administrative Agent’s (as applicable) failure to comply with Sections 2.15(e), (f), and (g) (all such taxes, levies, imposts, deductions, charges, withholdings and liabilities in respect of payments by the Borrower and Mondelēz hereunder or under any Note, other than taxes referred to in this Section 2.15(a)(i), (ii), (iii), (iv), (v), or (vi), are referred to herein as “Taxes”). If any applicable withholding agent shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note to any Lender or the Administrative Agent, (i) the sum payable by Mondelēz or the Borrower shall be increased as may be necessary so that after all required deductions (including deductions applicable to additional sums payable under this Section 2.15) have been made, such Lender (or the Administrative Agent where the Administrative Agent receives payments for its own account) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the applicable withholding agent shall make such deductions and (iii) the applicable withholding agent shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law.
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(b) In addition, the Borrower or Mondelēz shall pay any present or future stamp or documentary taxes or any other excise or property taxes, charges, irrecoverable value-added tax or similar levies (other than Taxes, or taxes referred to in Section 2.15(a)(i) to (v)) that arise from any payment made hereunder or from the execution, delivery or registration of, performing under, or otherwise with respect to, this Agreement or a Note other than any such taxes imposed by reason of an Assignment and Acceptance (hereinafter referred to as “Other Taxes”).
(c) The Borrower or Mondelēz, as applicable, shall indemnify each Lender and the Administrative Agent for and hold it harmless against the full amount of Taxes or Other Taxes (including, without limitation, Taxes and Other Taxes imposed by any jurisdiction on amounts payable under this Section 2.15) payable by such Lender or the Administrative Agent (as the case may be), and any liability (including penalties, interest, additions to taxes and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. This indemnification shall be made within 30 days from the date such Lender or the Administrative Agent (as the case may be), makes written demand therefor.
(d) As soon as practicable after the date of any payment of Taxes or Other Taxes, the Borrower or Mondelēz, as applicable, shall furnish to the Administrative Agent, at its address referred to in Section 9.02, the original or a certified copy of a receipt evidencing such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.
(e) Each Lender, on or prior to the date of its execution and delivery of this Agreement in the case of each Initial Lender and on the date of the Assignment and Acceptance pursuant to which it becomes a Lender in the case of each other Lender, shall provide each of the Administrative Agent, Mondelēz and the Borrower with any form or certificate that is required by any U.S. federal taxing authority to certify such Lender’s entitlement to any applicable exemption from or reduction in, U.S. federal withholding tax in respect of any payments hereunder or under any Note (including, if applicable, two original Internal Revenue Service Forms W-9, W-8BEN, W-8BEN-E or W-8ECI, as appropriate, or any successor or other form prescribed by the Internal Revenue Service or to the extent a Non-U.S. Lender is not the beneficial owner (for example, where the Non-U.S. Lender is a partnership or participating Lender granting a participation in accordance with the provisions of Section 9.07(e)), two original Internal Revenue Service Form W-8IMY, accompanied by any applicable certification documents from each beneficial owner) and any other documentation reasonably requested by Mondelēz, the Borrower or the Administrative Agent. Thereafter, each such Lender shall provide additional forms or certificates (i) to the extent a form or certificate previously provided has become inaccurate or invalid or has otherwise ceased to be effective or (ii) as requested in writing by Mondelēz, the Borrower or the Administrative Agent or, if such Lender no longer qualifies for the applicable exemption from or reduction in, U.S. federal withholding tax, promptly notify the Administrative Agent and the Borrower of its inability to do so. Unless the Borrower, Mondelēz and the Administrative Agent have received forms or other documents from each Lender satisfactory to them indicating that payments hereunder or under any Note are not subject to U.S. federal withholding tax or are subject to U.S. federal withholding tax at a rate reduced by an applicable tax treaty, the Borrower, Mondelēz or the Administrative Agent shall withhold such U.S. federal withholding tax from such payments at the applicable statutory rate in the case of payments to or for such Lender and the Borrower or Mondelēz, as applicable, shall pay additional amounts to the extent required by paragraph (a) of this Section 2.15 (subject to the exceptions contained in this Section 2.15).
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(f) If a payment made to a Lender hereunder or under any Note would be subject to U.S. federal withholding tax imposed pursuant to FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Sections 1471(b) or 1472(b) of the Internal Revenue Code, as applicable), such Lender shall provide each of the Administrative Agent, Mondelēz and the Borrower, at the time or times prescribed by law and as reasonably requested by the Administrative Agent, Mondelēz or the Borrower, such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Internal Revenue Code) and such additional documentation reasonably requested by the Administrative Agent, Mondelēz or the Borrower as may be necessary for the Administrative Agent, Mondelēz or the Borrower to comply with their obligations under FATCA and to determine whether such Lender has complied with such Lender’s obligations under FATCA and the amount, if any, to deduct and withhold from such payment. Thereafter, each such Lender shall provide additional documentation (i) to the extent documentation previously provided has become inaccurate or invalid or has otherwise ceased to be effective or (ii) as reasonably requested by the Administrative Agent, Mondelēz or the Borrower. Solely for purposes of this paragraph (f), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.
(g) Each Lender shall promptly complete and deliver to the Borrower and the Administrative Agent, or, at their request, to the applicable taxing authority, so long as such Lender is legally eligible to do so, any certificate or form reasonably requested in writing by the Borrower or the Administrative Agent and required by applicable law in order to secure any applicable exemption from, or reduction in the rate of, any withholding taxes imposed by the Netherlands for which the Borrower or Mondelēz is required (or would otherwise be required) to pay additional amounts pursuant to this Section 2.15.
(h) Any Lender claiming any additional amounts payable pursuant to this Section 2.15 agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to select or change the jurisdiction of its Domestic Lending Office if the making of such a selection or change would avoid the need for, or reduce the amount of, any such additional amounts that may thereafter accrue and would not, in the reasonable judgment of such Lender be otherwise materially economically disadvantageous to such Lender.
(i) Each Lender hereby authorizes the Administrative Agent to deliver to the Borrower and Mondelēz and to any successor Administrative Agent any documentation provided by such Lender to the Administrative Agent pursuant to paragraph (e), (f) or (g) of this Section 2.15.
(j) If any Lender or the Administrative Agent, as the case may be, obtains a refund of any Tax for which payment has been made pursuant to this Section 2.15, or, in lieu of obtaining such refund, such Lender or the Administrative Agent applies the amount that would otherwise have been refunded as a credit against payment of a liability in respect of taxes, which refund or credit in the good faith judgment of such Lender or the Administrative Agent, as the case may be, (and without any obligation to disclose its tax records) is allocable to such payment made under this Section 2.15, the amount of such refund or credit (together with any interest received thereon and reduced by reasonable out-of-pocket costs incurred in obtaining such refund or credit and by any applicable taxes) promptly shall be paid to the Borrower to the extent payment has been made in full by the Borrower pursuant to this Section 2.15.
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(k) All amounts payable by the Borrower and Mondelēz hereunder or under any Note to any Lender or the Administrative Agent which (in whole or in part) constitute the consideration for a supply or supplies for VAT purposes shall be deemed to be exclusive of any VAT which is chargeable on such supply or supplies, and accordingly, if VAT is or becomes chargeable on any supply made by any Lender or the Administrative Agent under this Agreement or any Note and such Lender or the Administrative Agent is required to account to the relevant tax authority for the VAT, the Borrower or Mondelēz shall pay to such Lender or the Administrative Agent (in addition to and at the same time as paying any other consideration for such supply) an amount equal to the amount of such VAT, and such Lender or the Administrative Agent shall correctly and timely issue an appropriate VAT invoice that meets all EU requirements to the Borrower or Mondelēz, unless such VAT is owed by the Borrower or Mondelēz to the relevant taxing authority under a reverse charge mechanism.
SECTION 2.16 Sharing of Payments, Etc. If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the Loans owing to it (other than pursuant to Section 2.12, 2.15 or 9.04(b) or (c)) in excess of its ratable share of payments on account of the Loans obtained by all the applicable Lenders, such Lender shall forthwith purchase from the other Lenders such participations in the Loans made by them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and such Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery together with an amount equal to such Lender’s ratable share (according to the proportion of (i) the amount of such Lender’s required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 2.16 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation.
SECTION 2.17 Evidence of Debt.
(a) Lender Records; Notes. Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan owing to such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder in respect of Loans. The Borrower shall, upon notice by any Lender to the Borrower (with a copy of such notice to the Administrative Agent) to the effect that a Note is required or appropriate in order for such Lender to evidence (whether for purposes of pledge, enforcement or otherwise) the Loans owing to, or to be made by, such Lender, promptly execute and deliver to such Lender a Note, in the case of any Five-Year Loans, in the form of Exhibit A-1 hereto and in the case of any Three-Year Loans, in the form of Exhibit A-2 hereto, in each case payable to such Lender (or its registered assigns) in a principal amount up to the Commitment or Loan of such Lender.
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(b) Record of Borrowings, Payables and Payments. The Register maintained by the Administrative Agent pursuant to Section 9.07(d) shall include a control account, and a subsidiary account for each Lender, in which accounts (taken together) shall be recorded as follows:
(i) the date and amount of each Borrowing made hereunder, the Type of Loans comprising such Borrowing and, if appropriate, the Interest Period applicable thereto;
(ii) the terms of each Assignment and Acceptance delivered to and accepted by it;
(iii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and the Maturity Date(s) applicable thereto; and
(iv) the amount of any sum received by the Administrative Agent from the Borrower hereunder and each Lender’s share thereof.
(c) Evidence of Payment Obligations. Entries made in good faith by the Administrative Agent in the Register pursuant to Section 2.17(b), and by each Lender in its account or accounts pursuant to Section 2.17(a), shall be prima facie evidence of the amount of principal and interest due and payable or to become due and payable from the Borrower to, in the case of the Register, each Lender and, in the case of such account or accounts, such Lender, under this Agreement, absent manifest error; provided, however, that the failure of the Administrative Agent or such Lender to make an entry, or any finding that an entry is incorrect, in the Register or such account or accounts shall not limit or otherwise affect the obligations of the Borrower under this Agreement.
SECTION 2.18 [Reserved]
SECTION 2.19 Use of Proceeds. The proceeds of the Loans shall be available (and the Borrower agrees that it shall use such proceeds) for general corporate purposes, including for dividends, capital reductions or intercompany loans and/or for the repayment of indebtedness.
SECTION 2.20 Defaulting Lenders. Notwithstanding any provision of this Agreement to the contrary, if any Lender becomes a Defaulting Lender, then the following provisions shall apply:
(a) Commitment Fees shall cease to accrue on the Commitment of such Defaulting Lender pursuant to Section 2.09(a); and
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(b) the Commitment and Loans of such Defaulting Lender shall not be included in determining whether the Required Lenders, Required Three-Year Lenders or Required Five-Year Lenders have taken or may take any action hereunder (including any consent to any amendment, waiver or modification of this Agreement pursuant to Section 9.01); provided that any amendment, waiver or modification requiring the consent of all Lenders or each affected Lender shall require the consent of such Defaulting Lender.
In the event that each of the Administrative Agent and Mondelēz agree that a Defaulting Lender has adequately remedied all matters that caused such Lender to be a Defaulting Lender, then such Lender shall purchase at par such of the Loans of the other Lenders as the Administrative Agent shall determine may be necessary in order for such Lender to hold such Loans in accordance with its pro rata portion of the total Commitments and clauses (a) and (b) above shall cease to apply.
ARTICLE III
Conditions to Effectiveness and Lending
SECTION 3.01 Conditions Precedent to Effectiveness. This Agreement and the obligations of the Lenders to make Loans shall become effective on and as of the first date (the “Effective Date”) on which the following conditions precedent have been satisfied, or waived in accordance with Section 9.01:
(a) the Borrower shall have notified each Lender and the Administrative Agent in writing as to the proposed Effective Date.
(b) On the Effective Date, the following statements shall be true and the Administrative Agent shall have received for the account of each Lender a certificate signed by a duly authorized officer of the Borrower, dated the Effective Date, stating that:
(i) the representations and warranties contained in Section 4.01 are correct on and as of the Effective Date, and
(ii) no event has occurred and is continuing on and as of the Effective Date that constitutes a Default or Event of Default.
(c) [reserved.].
(d) [reserved.].
(e) The Administrative Agent shall have received on or before the Effective Date the following, each dated such day, in form and substance satisfactory to the Administrative Agent:
(i) Certified copies of (x) the resolutions of the Board of Directors of Mondelēz and (y) (1) a copy of the constitutional documents of the Borrower and (2) a copy of a resolution of the board of directors of the Borrower approving the terms of, and the transactions contemplated by, this Agreement, in each case approving this Agreement, and of all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Agreement.
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(ii) (1) A certificate of the Secretary or an Assistant Secretary of Mondelēz certifying the names and true signatures of the officers of Mondelēz authorized to sign this Agreement and the other documents to be delivered hereunder and (2) a certificate of the managing director of the Borrower (x) attaching a specimen of the signature of each person authorised to sign this Agreement and the other documents to be delivered hereunder on behalf of the Borrower and (y) certifying that each copy document relating to it specified in this Section 3.01 is correct, complete and in full force and affect and has not been amended or superseded as at the date of this Agreement.
(iii) Favorable opinions of (A) Gibson, Dunn & Crutcher LLP, special New York counsel to Mondelēz and the Borrower, substantially in the form of Exhibit E-1 hereto, (B) Hunton & Williams LLP, special Virginia counsel to Mondelēz, substantially in the form of Exhibit E-2 hereto, (C) internal counsel for Mondelēz, substantially in the form of Exhibit E-3 hereto and (D) Loyens & Loeff N.V., special Netherlands counsel to the Borrower, substantially in the form of Exhibit E-4 hereto.
(iv) A certificate of the chief financial officer or treasurer of Mondelēz certifying that as of December 31, 2015, (A) the aggregate amount of Debt, payment of which is secured by any Lien referred to in clause (iii) of Section 5.02(a), does not exceed $400,000,000, and (B) the aggregate amount of Debt, payment of which is secured by any Lien referred to in clause (iv) of Section 5.02(a), does not exceed $200,000,000.
(f) This Agreement shall have been executed by each Obligor and the Administrative Agent and the Administrative Agent shall have been notified by each Initial Lender that such Initial Lender has executed this Agreement.
(g) The Agents and the Lenders shall have received payment in full in cash of all fees and expenses due to them pursuant to the Fee Letter (including the reasonable fees and out-of-pocket disbursements of Cahill Gordon & Reindel LLP and Nauta Dutilh New York P.C. as counsel to the Administrative Agent).
(h) The Administrative Agent shall have received evidence that, prior to or contemporaneously with the Effective Date, the equity interests of Kraft Foods International Biscuit Holdings LLC shall have been contributed to the Borrower.
(i) The Administrative Agent and the Lenders shall have received from the Borrower and Mondelēz, in form and substance satisfactory to the Administrative Agent or such Lenders, as applicable, all documentation and other information required by regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations that has been reasonably requested by the Administrative Agent and the Lenders.
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The Administrative Agent shall notify Borrower and the Initial Lenders of the date which is the Effective Date upon satisfaction or waiver of all of the conditions precedent set forth in this Section 3.01. For purposes of determining compliance with the conditions specified in this Section 3.01, each Lender shall be deemed to have consented to, approved or accepted or to be satisfied with each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to the Lenders unless an officer of the Administrative Agent responsible for the transactions contemplated by this Agreement shall have received notice from such Lender prior to the date that the Borrower, by notice to the Lenders, designates as the proposed Effective Date, specifying its objection thereto.
SECTION 3.02 [Reserved]
SECTION 3.03 Conditions Precedent to Each Borrowing. The obligation of each Lender to make a Loan on each Funding Date is subject to the conditions precedent that the Effective Date shall have occurred and on such Funding Date the following statements shall be true, and the acceptance by the Borrower of the proceeds of such Borrowing shall be a representation by the Borrower or Mondelēz, as the case may be, that:
(a) the representations and warranties contained in Section 4.01 (except the representations set forth in the last sentence of subsection (e) and in subsection (f) thereof (other than clause (i) thereof)) are correct on and as of such Funding Date, before and after giving effect to such Borrowing and to the application of the proceeds therefrom, as though made on and as of such date; and
(b) before and after giving effect to the application of the proceeds of all Borrowings on such date (together with any other resources of the Borrower applied together therewith), no event has occurred and is continuing, or would result from such Borrowing, that constitutes a Default or Event of Default.
ARTICLE IV
Representations and Warranties
SECTION 4.01 Representations and Warranties. Each of Mondelēz and the Borrower, as applicable, represents and warrants as to itself and, as applicable, its Subsidiaries as follows:
(a) (i) Mondelēz is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation and (ii) the Borrower is a private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid) duly organized, validly existing and in good standing under the laws of its jurisdiction of organization.
(b) (i) The execution, delivery and performance of this Agreement are within the corporate powers of Mondelēz, have been duly authorized by all necessary corporate action on the part of Mondelēz and do not contravene (x) the charter or by-laws of Mondelēz or (y) in any material respect, any law, rule, regulation or order of any court or governmental agency or any contractual restriction binding on Mondelēz and (ii) the execution, delivery and performance of this Agreement are within the powers of the Borrower, have been duly authorized by all necessary action on the part of the Borrower and do not contravene (x) the articles of association or any by-law (directiereglement) of the Borrower or (y) in any material respect, any law, rule, regulation or order of any court or governmental agency or any contractual restriction binding on the Borrower.
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(c) No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority or regulatory body is required for the due execution, delivery and performance by either Obligor of this Agreement or the due execution, delivery and performance by the Borrower of the Notes to be delivered by the Borrower.
(d) This Agreement is, and each of the Notes to be delivered by the Borrower when delivered hereunder will be, a legal, valid and binding obligation of each Obligor, or of the Borrower, as applicable, enforceable against such Obligor in accordance with its terms, subject to the effect of any applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other laws affecting creditors’ rights generally, including suspension of payments (surseance verleend), emergency regulations (noodregeling) as provided for in the Act on financial supervision (Wet op het financieel toezicht), bankruptcy (failliet verklaard) or any other insolvency proceedings listed in Annex A or winding up proceedings listed in Annex B of Council Regulation (EC) No 1346/2000 on insolvency proceedings of 29 May 2000 and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing.
(e) As reported in Mondelēz’s Annual Report on Form 10-K for the year ended December 31, 2015, the consolidated balance sheets of Mondelēz and its Subsidiaries as of December 31, 2015 and the consolidated statements of earnings of Mondelēz and its Subsidiaries for the year then ended fairly present, in all material respects, the consolidated financial position of Mondelēz and its Subsidiaries as at such date and the consolidated results of the operations of Mondelēz and its Subsidiaries for the year ended on such date, all in accordance with accounting principles generally accepted in the United States. Except as disclosed in Mondelēz’s Annual Report on Form 10-K for the year ended December 31, 2015, or in any Quarterly Report on Form 10-Q or Current Report on Form 8-K filed subsequent to December 31, 2015, or any amendment to the foregoing subsequent to December 31, 2015, but prior to the date hereof, since December 31, 2015, there has been no material adverse change in such position or operations.
(f) There is no action or proceeding pending or, to the knowledge of Mondelēz, threatened against Mondelēz or any of its Subsidiaries before any court, governmental agency or arbitrator (a “Proceeding”) (i) that purports to affect the legality, validity or enforceability of this Agreement or (ii) except for Proceedings disclosed in Mondelēz’s Annual Report on Form 10-K for the year ended December 31, 2015, or in any Quarterly Report on Form 10-Q or Current Report on Form 8-K filed subsequent to December 31, 2015, or any amendment to the foregoing subsequent to December 31, 2015, but prior to the date hereof, and, with respect to Proceedings commenced after the date of the most recent such document but prior to the date hereof, a certificate delivered to the Lenders, that may materially adversely affect the financial position or results of operations of Mondelēz and its Subsidiaries taken as a whole.
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(g) Mondelēz owns directly or indirectly 100% of the capital stock of the Borrower.
(h) None of the proceeds of any Loan will be used, directly or indirectly, for any purpose that would result in a violation of Regulation U.
(i) Mondelēz has implemented and maintains in effect policies and procedures reasonably designed to ensure compliance by Mondelēz and each of its Subsidiaries and their respective directors, officers, employees and agents (acting in their capacity as such) with FCPA and other applicable Anti-Corruption Laws and applicable Sanctions. None of (i) Mondelēz, the Borrower or any other Subsidiary of Mondelēz or (ii) to the knowledge of Mondelēz, any director, officer, employee or Borrower Agent of Mondelēz, the Borrower or any other Subsidiary of Mondelēz, is a Sanctioned Person.
(j) No Obligor is an EEA Financial Institution.
(k) No Obligor is or is required to be registered as an “investment company” under the Investment Company Act of 1940.
ARTICLE V
Covenants of Mondelēz
SECTION 5.01 Affirmative Covenants. So long as any Loan shall remain unpaid or any Lender shall have any Commitment hereunder, each Obligor (or, as specified below, the relevant Obligor) will:
(a) Compliance with Laws, Etc. Comply, and, in the case of Mondelēz, cause each Major Subsidiary to comply, in all material respects, with all applicable laws, rules, regulations and orders (such compliance to include, without limitation, complying with Anti-Corruption Laws, applicable Sanctions, ERISA and paying before the same become delinquent all taxes, assessments and governmental charges imposed upon it or upon its property except to the extent contested in good faith), noncompliance with which would materially adversely affect the financial condition or operations of Mondelēz and its Subsidiaries taken as a whole.
(b) Maintenance of Total Shareholders’ Equity. In the case of Mondelēz, maintain Total Shareholders’ Equity of not less than the Minimum Shareholders’ Equity.
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(c) Reporting Requirements. In the case of Mondelēz, for clauses (i), (ii) and (iii) below, or either Obligor, in the case of clauses (iv) and (v) below, furnish to the Lenders:
(i) as soon as available and in any event within 5 days after the due date for Mondelēz to have filed its Quarterly Report on Form 10-Q with the Commission for the first three quarters of each fiscal year, an unaudited interim condensed consolidated balance sheet of Mondelēz and its Subsidiaries as of the end of such quarter and unaudited interim condensed consolidated statements of earnings of Mondelēz and its Subsidiaries for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, certified by the chief financial officer of Mondelēz;
(ii) as soon as available and in any event within 15 days after the due date for Mondelēz to have filed its Annual Report on Form 10-K with the Commission for each fiscal year, a copy of the consolidated financial statements for such year for Mondelēz and its Subsidiaries, audited by PricewaterhouseCoopers LLP (or other independent auditors which, as of the date of this Agreement, are one of the “big four” accounting firms);
(iii) all reports which Mondelēz sends to any of its shareholders, and copies of all reports on Form 8-K (or any successor forms adopted by the Commission) which Mondelēz files with the Commission;
(iv) as soon as possible and in any event within five days after the occurrence of each Event of Default and each event which, with the giving of notice or lapse of time, or both, would constitute an Event of Default, continuing on the date of such statement, a statement of the chief financial officer or treasurer of Mondelēz, or of a managing director of the Borrower, setting forth details of such Event of Default or event and the action which the Obligors, or the relevant Obligor, has taken and proposes to take with respect thereto; and
(v) such other information respecting the condition or operations, financial or otherwise, of Mondelēz, the Borrower or any Major Subsidiary as any Lender through the Administrative Agent may from time to time reasonably request.
In lieu of furnishing the Lenders the items referred to in clauses (i), (ii) and (iii) above, Mondelēz may make such items available on the Internet at www.mondelezinternational.com (which website includes an option to subscribe to a free service alerting subscribers by e-mail of new Commission filings) or any successor or replacement website thereof, or by similar electronic means.
(d) Ranking. Each Loan made to the Borrower and each Guaranty by Mondelēz of a Loan made to the Borrower hereunder shall at all times constitute senior Debt of the Borrower and Mondelēz, as applicable, ranking equally in right of payment with all existing and future senior Debt of the Borrower and Mondelēz, as applicable and senior in right of payment to all existing and future subordinated Debt of the Borrower and Mondelēz, as applicable.
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(e) Anti-Corruption Laws and Sanctions. Mondelēz will maintain in effect policies and procedures reasonably designed to ensure that no Borrowing will be made, and no proceeds of any Borrowing will be used, (a) for the purpose of funding payments to any officer or employee of a Governmental Authority or of a Person controlled by a Governmental Authority, to any Person acting in an official capacity for or on behalf of any Governmental Authority or Person controlled by a Governmental Authority, or to any political party, official of a political party, or candidate for political office, in each case in violation of the FCPA, (b) for the purpose of funding payments in violation of other applicable Anti-Corruption Laws, (c) for the purpose of financing the activities of any Sanctioned Person in violation of applicable Anti-Corruption Laws or Sanctions or (d) in any manner that would result in the violation of applicable Sanctions by any party hereto.
SECTION 5.02 Negative Covenants. So long as any Loan shall remain unpaid or any Lender shall have any Commitment hereunder, Mondelēz will not:
(a) Liens, Etc. Create or suffer to exist, or permit the Borrower or any Major Subsidiary to create or suffer to exist, any lien, security interest or other charge or encumbrance (other than operating leases and licensed intellectual property), or any other type of preferential arrangement (“Liens”), upon or with respect to any of its properties, whether now owned or hereafter acquired, or assign, or permit the Borrower or any Major Subsidiary to assign, any right to receive income, in each case to secure or provide for the payment of any Debt of any Person, other than:
(i) Liens upon or in property acquired or held by it or by the Borrower or any Major Subsidiary in the ordinary course of business to secure the purchase price of such property or to secure indebtedness incurred solely for the purpose of financing the acquisition of such property;
(ii) Liens existing on property at the time of its acquisition (other than any such lien or security interest created in contemplation of such acquisition);
(iii) Liens existing on the date hereof securing Debt;
(iv) Liens on property financed through the issuance of industrial revenue bonds in favor of the holders of such bonds or any agent or trustee therefor;
(v) Liens existing on property of any Person acquired by Mondelēz, the Borrower or any Major Subsidiary;
(vi) Liens securing Debt in an aggregate amount not in excess of 15% of Consolidated Tangible Assets;
(vii) Liens upon or with respect to Margin Stock;
(viii) Liens in favor of Mondelēz, the Borrower or any Major Subsidiary;
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(ix) precautionary Liens provided by Mondelēz, the Borrower or any Major Subsidiary in connection with the sale, assignment, transfer or other disposition of assets by Mondelēz, the Borrower or such Major Subsidiary which transaction is determined by the Board of Directors of Mondelēz, the Borrower or such Major Subsidiary to constitute a “sale” under accounting principles generally accepted in the United States; and
(x) any extension, renewal or replacement of the foregoing, provided that (A) such Lien does not extend to any additional assets (other than a substitution of like assets), and (B) the amount of Debt secured by any such Lien is not increased.
(b) Mergers, Etc. (i) In the case of Mondelēz, consolidate with or merge into, or convey or transfer, or permit one or more of its Subsidiaries to convey or transfer, the properties and assets of Mondelēz and its Subsidiaries substantially as an entirety to, any Person unless, immediately before and after giving effect thereto, no Default or Event of Default would exist and, in the case of any merger or consolidation to which Mondelēz is a party, the surviving corporation is organized and existing under the laws of the United States of America or any State thereof or the District of Columbia and assumes all of Mondelēz’s obligations under this Agreement (including without limitation the covenants set forth in Article V) by the execution and delivery of an instrument in form and substance satisfactory to the Required Lenders; and (ii) in the case of the Borrower, consolidate with or merge into, or convey or transfer, or permit one or more of its Subsidiaries to convey or transfer, the properties and assets of the Borrower and its Subsidiaries substantially as an entirety to, any Person unless, immediately before and after giving effect thereto, no Default or Event of Default would exist and, in the case of any merger or consolidation to which the Borrower is a party, the surviving Person is organized and existing under the laws of the Netherlands or of a jurisdiction in the United States and assumes all of the Borrower’s obligations under this Agreement and Mondelēz provides confirmation of its continuing guaranty hereunder (including without limitation the covenants set forth in Article V) by the execution and delivery of an instrument in form and substance satisfactory to the Required Lenders.
(c) Ownership. Permit the Borrower to cease to be wholly-owned, directly or indirectly, by Mondelēz (other than with respect to directors’ qualifying shares and nominal investments by foreign nationals to the extent mandated by applicable law).
ARTICLE VI
Events of Default
SECTION 6.01 Events of Default. Each of the following events (each an “Event of Default”) shall constitute an Event of Default:
(a) The Borrower shall fail to pay any principal of any Loan when the same becomes due and payable; or the Borrower shall fail to pay interest on any Loan, or the Borrower shall fail to pay any fees payable under Section 2.09, within ten days after the same becomes due and payable (or after notice from the Administrative Agent in the case of fees referred to in Section 2.09(b)); or
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(b) Any representation or warranty made or deemed to have been made by the Borrower or Mondelēz herein or by the Borrower or Mondelēz (or any of their respective officers) in connection with this Agreement shall prove to have been incorrect in any material respect when made or deemed to have been made; or
(c) The Borrower or Mondelēz shall fail to perform or observe (i) any term, covenant or agreement contained in Section 5.01(b) or 5.02(b) , (ii) any term, covenant or agreement contained in Section 5.02(a) if such failure shall remain unremedied for 15 days after written notice thereof shall have been given to the Obligors by the Administrative Agent or any Lender or (iii) any other term, covenant or agreement contained in this Agreement on its part to be performed or observed if such failure shall remain unremedied for 30 days after written notice thereof shall have been given to the Obligors by the Administrative Agent or any Lender; or
(d) The Borrower or Mondelēz or any Major Subsidiary shall fail to pay any principal of or premium or interest on any Debt which is outstanding in a principal amount of at least $100,000,000 in the aggregate (but excluding Debt arising under this Agreement) of the Borrower or Mondelēz or such Major Subsidiary (as the case may be), when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt unless adequate provision for any such payment has been made in form and substance satisfactory to the Required Lenders; or any Debt of the Borrower or Mondelēz or any Major Subsidiary which is outstanding in a principal amount of at least $100,000,000 in the aggregate (but excluding Debt arising under this Agreement) shall be declared to be due and payable, or required to be prepaid (other than by a scheduled required prepayment), redeemed, purchased or defeased, or an offer to prepay, redeem, purchase or defease such Debt shall be required to be made, in each case prior to the stated maturity thereof as a result of a breach by the Borrower, Mondelēz or such Major Subsidiary (as the case may be) of the agreement or instrument relating to such Debt unless adequate provision for the payment of such Debt has been made in form and substance satisfactory to the Required Lenders; or
(e) The Borrower or Mondelēz or any Major Subsidiary shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Borrower or Mondelēz or any Major Subsidiary seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property, and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of 60 days or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against it or the appointment of a receiver, trustee, custodian or other similar official for it or for any of its property constituting a substantial part of the property of Mondelēz and its Subsidiaries taken as a whole or the Borrower and its Subsidiaries taken as a whole) shall occur; or the Borrower or Mondelēz or any Major Subsidiary shall take any corporate action to authorize any of the actions set forth above in this subsection (e); or
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(f) Any judgment or order for the payment of money in excess of $100,000,000 shall be rendered against the Borrower or Mondelēz or any Major Subsidiary and there shall be any period of 60 consecutive days during which a stay of enforcement of such unsatisfied judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or
(g) the Borrower, Mondelēz or any ERISA Affiliate shall incur, or shall be reasonably likely to incur, liability as a result of one or more of the following: (i) the occurrence of any ERISA Event; (ii) the partial or complete withdrawal of the Borrower, Mondelēz or any ERISA Affiliate from a Multiemployer Plan; or (iii) the reorganization or termination of a Multiemployer Plan, in each case that would, individually or in the aggregate, materially adversely affect the financial condition or operations of Mondelēz and its Subsidiaries taken as a whole; provided, however, that no Default or Event of Default under this Section 6.01(g) shall be deemed to have occurred if the Borrower, Mondelēz or any ERISA Affiliate shall have made arrangements satisfactory to the PBGC or the Required Lenders to discharge or otherwise satisfy such liability (including the posting of a bond or other security); or
(h) the Guaranty provided by Mondelēz under Article VIII hereof shall for any reason cease (other than in accordance with the provisions of Article VIII) to be valid and binding on Mondelēz or Mondelēz shall so state in writing.
SECTION 6.02 Lenders’ Rights upon Event of Default. If an Event of Default occurs and is continuing, then the Administrative Agent shall at the request, or may with the consent, of the Required Lenders, by notice to the Obligors:
(a) to the extent outstanding, terminate the Commitments, whereupon the same shall forthwith terminate, and
(b) declare all the Loans then outstanding, all interest thereon and all other amounts payable under this Agreement to be forthwith due and payable, whereupon the Loans then outstanding, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower; provided, however, that in the event of an actual or deemed entry of an order for relief with respect to the Borrower or Mondelēz under the Federal Bankruptcy Code or any equivalent bankruptcy or insolvency laws of any state or foreign jurisdiction, (i) to the extent outstanding, the Commitments shall automatically be terminated and (ii) the Loans then outstanding, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower.
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ARTICLE VII
The Administrative Agent
SECTION 7.01 Authorization and Action. Each Lender hereby appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers and discretion under this Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers and discretion as are reasonably incidental thereto. As to any matters not expressly provided for by this Agreement (including, without limitation, enforcement or collection of the Notes), the Administrative Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Lenders, and such instructions shall be binding upon all Lenders and all holders of Notes; provided, however, that the Administrative Agent shall not be required to take any action that exposes the Administrative Agent to personal liability or that is contrary to this Agreement or applicable law. The Administrative Agent agrees to give to each Lender prompt notice of each notice given to it by Mondelēz or the Borrower as required by the terms of this Agreement or at the request of Mondelēz or the Borrower, and any notice provided pursuant to Section 5.01(c)(iv). Notwithstanding any provision to the contrary contained elsewhere herein, no Agent shall have any duties or responsibilities, except those expressly set forth herein, nor shall any Agent have or be deemed to have any fiduciary relationship with any Lender or participant, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist against any Agent. Without limiting the generality of the foregoing sentence, the use of the term “agent” herein with reference to any Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties.
SECTION 7.02 Administrative Agent’s Reliance, Etc. Neither the Administrative Agent nor any of its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement, except for its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, the Administrative Agent:
(a) may treat the Lender that made any Loan as the holder of the Debt resulting therefrom until the Administrative Agent receives and accepts an Assignment and Acceptance entered into by such Lender, as assignor, and an Eligible Assignee, as assignee, as provided in Section 9.07;
(b) may consult with legal counsel (including counsel for Mondelēz or the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts;
(c) makes no warranty or representation to any Lender and shall not be responsible to any Lender for any statements, warranties or representations (whether written or oral) made in or in connection with this Agreement by Mondelēz or the Borrower;
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(d) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement on the part of Mondelēz or the Borrower or to inspect the property (including the books and records) of Mondelēz or the Borrower other than items or payments expressly required to be delivered or made to the Administrative Agent hereunder;
(e) shall not be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; and
(f) shall incur no liability under or in respect of this Agreement by acting upon any notice, consent, certificate or other instrument or writing (which may be by telecopier, telegram, telex, registered mail or, for the purposes of Section 2.02(a) or 2.07(b), email) believed by it to be genuine and signed or sent by the proper party or parties.
SECTION 7.03 The Administrative Agent and Affiliates. With respect to its Commitment and the Loans made by it, the Administrative Agent shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not the Administrative Agent; and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated, include the Administrative Agent in its individual capacity. The Administrative Agent and its affiliates may accept deposits from, lend money to, act as trustee under indentures of, accept investment banking engagements from and generally engage in any kind of business with, Mondelēz, the Borrower, any of their respective Subsidiaries and any Person who may do business with or own securities of Mondelēz, the Borrower or any such Subsidiary, all as if the Administrative Agent were not the Administrative Agent and without any duty to account therefor to the Lenders.
SECTION 7.04 Lender Credit Decision. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent, any Joint Bookrunner or Joint Lead Arranger, or any other Lender and based on the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent any Joint Bookrunner or Joint Lead Arranger, or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement.
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SECTION 7.05 Indemnification. The Lenders agree to indemnify the Administrative Agent (to the extent not reimbursed by Mondelēz or the Borrower), ratably according to the respective principal amounts of the Loans then owing to each of them (or if no Loans are at the time outstanding, ratably according to the respective amounts of their Commitments), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against the Administrative Agent in any way relating to or arising out of this Agreement or any action taken or omitted by the Administrative Agent under this Agreement, in each case, to the extent relating to the Administrative Agent in its capacity as such (collectively, the “Indemnified Costs”), provided that no Lender shall be liable for any portion of the Indemnified Costs resulting from the Administrative Agent’s gross negligence or willful misconduct. Without limitation of the foregoing, each Lender agrees to reimburse the Administrative Agent promptly upon demand for its ratable share of any out-of-pocket expenses (including counsel fees) incurred by the Administrative Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, to the extent that the Administrative Agent is not reimbursed for such expenses by Mondelēz or the Borrower. In the case of any investigation, litigation or proceeding giving rise to any Indemnified Costs, this Section 7.05 applies whether any such investigation, litigation or proceeding is brought by the Administrative Agent, any Lender or a third party.
SECTION 7.06 Successor Administrative Agent. The Administrative Agent may resign at any time by giving written notice thereof to the Lenders and Mondelēz and may be removed at any time with or without cause by the Required Lenders. Upon the resignation or removal of the Administrative Agent, the Required Lenders shall have the right to appoint a successor Administrative Agent (with the consent of Mondelēz so long as no Event of Default shall have occurred and be continuing). If no successor Administrative Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent’s giving of notice of resignation or the Required Lenders’ removal of the retiring Administrative Agent, then the retiring Administrative Agent may (with the consent of Mondelēz so long as no Event of Default shall have occurred and be continuing), on behalf of the Lenders, appoint a successor Administrative Agent, which shall be (a) a Lender and (b) a commercial bank organized under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, discretion, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement; provided that should the Administrative Agent for any reason not appoint a successor Administrative Agent, which it is under no obligation to do, then the rights, powers, discretion, privileges and duties referred to in this Section 7.06 shall be vested in the Required Lenders until a successor Administrative Agent has been appointed. After any retiring Administrative Agent’s resignation or removal hereunder as Administrative Agent, the provisions of this Article VII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement.
SECTION 7.07 Administrative Agent, Joint Bookrunners, Joint Lead Arrangers and Co-Syndication Agents. (i) JPMorgan Chase Bank, N.A. has been designated as Administrative Agent under this Agreement, (ii) JPMorgan Chase Bank, N.A., The Bank of Tokyo-Mitsubishi UFJ, Ltd., Credit Suisse Securities (USA) LLC, Goldman Sachs Bank USA, HSBC Securities (USA) Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated have been designated as Joint Lead Arrangers and Joint Bookrunners under this Agreement and (iii) Bank of America, N.A., The Bank of Tokyo-Mitsubishi UFJ, Ltd., Credit Suisse Securities (USA) LLC, Goldman Sachs Bank USA and HSBC Securities (USA) Inc. have been designated as Co-Syndication Agents under this Agreement, but the use of the aforementioned titles does not impose on any of them any duties or obligations greater than those of any other Lender.
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SECTION 7.08 Withholding Tax. To the extent required by any applicable law, the Administrative Agent may withhold from any payment to any Lender an amount equivalent to any applicable withholding tax. Without limiting or expanding the provisions of Section 2.15(a) or (c), each Lender shall, and does hereby, indemnify the Administrative Agent against, and shall make payable in respect thereof within 30 days after demand therefor, any and all Taxes and any and all related losses, claims, liabilities and expenses (including fees, charges and disbursements of any counsel for the Administrative Agent) incurred by or asserted against the Administrative Agent by the Internal Revenue Service or any other Governmental Authority as a result of the failure of the Administrative Agent to properly withhold tax from amounts paid to or for the account of such Lender for any reason (including, without limitation, because the appropriate form was not delivered or not properly executed, or because such Lender failed to notify the Administrative Agent of a change in circumstance that rendered the exemption from, or reduction of withholding tax ineffective). A certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error. Each Lender hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender under this Agreement or any Note against any amount due the Administrative Agent under this Section 7.08. The agreements in this Section 7.08 shall survive the resignation and/or replacement of the Administrative Agent, any assignment of rights by, or the replacement of, a Lender, the termination of the Agreement and the repayment, satisfaction or discharge of all other Obligations.
ARTICLE VIII
Guaranty
SECTION 8.01 Guaranty. Mondelēz hereby unconditionally and irrevocably guarantees (the undertaking of Mondelēz contained in this Article VIII being the “Guaranty”) the punctual payment when due, whether at stated maturity, by acceleration or otherwise, of all obligations of the Borrower now or hereafter existing under this Agreement, whether for principal, interest, fees, expenses or otherwise (such obligations being the “Obligations”), and any and all expenses (including counsel fees and expenses) incurred by the Administrative Agent or the Lenders in enforcing any rights under the Guaranty.
SECTION 8.02 Guaranty Absolute. Mondelēz guarantees that the Obligations will be paid strictly in accordance with the terms of this Agreement, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Administrative Agent or the Lenders with respect thereto. The liability of Mondelēz under this Guaranty shall be absolute and unconditional irrespective of:
(a) any lack of validity, enforceability or genuineness of any provision of this Agreement or any other agreement or instrument relating thereto;
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(b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to departure from this Agreement;
(c) any exchange, release or non-perfection of any collateral, or any release or amendment or waiver of or consent to departure from any other guaranty, for all or any of the Obligations;
(d) any law or regulation of any jurisdiction or any other event affecting any term of a guaranteed Obligation; or
(e) any other circumstance which might otherwise constitute a defense available to, or a discharge of, the Borrower or Mondelēz.
This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Obligations is rescinded or must otherwise be returned by the Administrative Agent or any Lender upon the insolvency, bankruptcy or reorganization of the Borrower or otherwise, all as though such payment had not been made.
SECTION 8.03 Waivers.
(a) Mondelēz hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Obligations and this Guaranty and any requirement that the Administrative Agent or any Lender protect, secure, perfect or insure any security interest or lien or any property subject thereto or exhaust any right or take any action against the Borrower or any other Person or any collateral.
(b) Mondelēz hereby irrevocably subordinates any claims or other rights that it may now or hereafter acquire against the Borrower that arise from the existence, payment, performance or enforcement of Mondelēz’s obligations under this Guaranty or this Agreement, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of the Administrative Agent or any Lender against the Borrower or any collateral, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from the Borrower, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim, remedy or right, in each case to the claims and rights of the Administrative Agent and the Lenders in respect of the cash payment in full of the Obligations and all other amounts payable under this Guaranty (the “Payment in Full”), and Mondelēz agrees not to enforce any such claim for payment against the Borrower until the Payment in Full has occurred. If any amount shall be paid to Mondelēz in violation of the preceding sentence at any time prior to the Payment in Full, such amount shall be held in trust for the benefit of the Administrative Agent and the Lenders and shall forthwith be paid to the Administrative Agent to be credited and applied to the Obligations and all other amounts payable under this Guaranty, whether matured or unmatured, in accordance with the terms of this Agreement and this Guaranty, or to be held as collateral for any Obligations or other amounts payable under this Guaranty thereafter arising. Mondelēz acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by this Agreement and this Guaranty and that the agreements set forth in this Section 8.03(b) are knowingly made in contemplation of such benefits. Notwithstanding the foregoing provisions of this Section 8.03(b), Mondelēz shall be permitted to charge, and the Borrower shall be permitted to pay, a guaranty fee in connection with the entry by Mondelēz into this Guaranty, as may be agreed by Mondelēz and the Borrower.
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SECTION 8.04 Continuing Guaranty. This Guaranty is a continuing guaranty and shall (a) remain in full force and effect until payment in full of the Obligations (including any and all Obligations which remain outstanding after the applicable Maturity Date) and all other amounts payable under this Guaranty, (b) be binding upon Mondelēz, its successors and assigns, and (c) inure to the benefit of and be enforceable by the Lenders, the Administrative Agent and their respective successors, transferees and assigns.
ARTICLE IX
Miscellaneous
SECTION 9.01 Amendments, Etc. No amendment or waiver of any provision of this Agreement, nor consent to any departure by the Borrower or Mondelēz therefrom, shall in any event be effective unless the same shall be in writing and signed by the Required Lenders (and for the avoidance of doubt, if an amendment or waiver of any provision under this Agreement affects only the Three-Year Lenders or the Five Year Lenders, as the case may be, then such amendment or waiver shall only require the written consent of the Required Three-Year Loan Lenders or Required Five-Year Loan Lenders, as applicable), the Borrower and Mondelēz, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, waiver or consent shall, unless in writing and signed by all the Lenders (including Defaulting Lenders) affected thereby ,the Borrower and Mondelēz, do any of the following: (a) waive any of the conditions specified in Sections 3.01, 3.02 or 3.03 (it being understood and agreed that any waiver or amendment of a representation, warranty, covenant, Default or Event of Default shall not constitute a waiver of any condition specified in Section 3.01, 3.02 or 3.03 unless the amendment or waiver so provides), (b) increase the Commitments of the Lenders or subject the Lenders to any additional obligations, (c) reduce the principal of, or the amount or rate of interest on, the Loans or any fees or other amounts payable hereunder, (d) postpone any date fixed for any payment of principal of, or interest on, the Loans or any fees or other amounts payable hereunder, (e) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Loans, or the number of Lenders, that shall be required for the Lenders or any of them to take any action hereunder (including any such change to the definition of “Required Lenders”), (f) release Mondelēz from any of its obligations under Article VIII, (g) change Section 2.16 in a manner that would alter the pro rata sharing of payments required thereby (other than to extend the applicable Maturity Date with respect to the Three-Year Loans or Five-Year Loans of consenting Lenders and to compensate such Lenders for consenting to such extension; provided that (i) no amendment permitted by this parenthetical shall reduce the amount of or defer any payment of principal, interest or fees to non-extending Lenders or otherwise adversely affect the rights of non-extending Lenders under this Agreement and (ii) the opportunity to agree to such extension and receive such compensation shall be offered on equal terms to all relevant Lenders) or (h) amend this Section 9.01; and provided further that no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required above to take such action, affect the rights or duties of the Administrative Agent under this Agreement.
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SECTION 9.02 Notices, Etc.
(a) Addresses. All notices and other communications provided for hereunder shall be in writing (including telecopier communication) and mailed, telecopied, or delivered (or in the case of any Notice of Borrowing, emailed), as follows:
if to the Borrower:
Mondelez International Holdings Netherlands B.V.
Wilhelminakanaal Zuid 110
4903RA Oosterhout, the Netherlands
Attention: P.J. Merkus
Tel no.: (+31) 0162-474000
Fax no.: (+31) 0162-474099
with copies to:
Mondelēz International, Inc.
Three Parkway North
Deerfield, Illinois 60015
Attention: Executive Vice President and
Chief Financial Officer
c/o Mondelēz International, Inc.
Three Parkway North
Deerfield, Illinois 60015
Attention: Treasurer
Fax number: (847) 943-4903;
and
c/o Mondelēz International, Inc.
Three Parkway North
Deerfield, Illinois 60015
Attention: Assistant Treasurer
Fax number: (847) 943-4903;
if to Mondelēz, as guarantor:
Mondelēz International, Inc.
Three Parkway North
Deerfield, Illinois 60015
Attention: Vice President and Corporate Secretary
Fax number: (570) 235-3005;
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if to any Initial Lender, at its Domestic Lending Office specified opposite its name on Schedule II hereto;
if to any other Lender, at its Domestic Lending Office specified in the Assignment and Acceptance pursuant to which it became a Lender;
if to the Administrative Agent:
c/o JPMorgan Chase Bank, N.A.
383 Madison Avenue, 24th Floor
New York, NY 10179
Attention: Courtney Eng
Email: courtney.c.eng@jpmorgan.com
with a copy to:
JPMorgan Loan Services
Loan & Agency
500 Stanton Christiana Road, Ops2, Floor 3
Newark, DE 19713-2107
Attention: Amanda Collins
Email: jane.dreisbach@jpmorgan.com
Fax number: (302) 634-4733;
or, as to the Borrower, Mondelēz or the Administrative Agent, at such other address as shall be designated by such party in a written notice to the other parties and, as to each other party, at such other address as shall be designated by such party in a written notice to Mondelēz and the Administrative Agent.
(b) Effectiveness of Notices. All such notices and communications shall, when mailed, telecopied or emailed, be effective when deposited in the mail, telecopied or emailed, respectively, except that notices and communications to the Administrative Agent, pursuant to Article II, III or VII shall not be effective until received by the Administrative Agent, or if the date of receipt is not a Business Day, as of 9:00 a.m. (New York City time) on the next succeeding Business Day. Delivery by telecopier or email of an executed counterpart of any amendment or waiver of any provision of this Agreement or of any Exhibit hereto to be executed and delivered hereunder shall be effective as delivery of a manually executed counterpart thereof.
SECTION 9.03 No Waiver; Remedies. No failure on the part of any Lender or the Administrative Agent to exercise, and no delay in exercising, any right hereunder or under any Note shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.
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SECTION 9.04 Costs and Expenses.
(a) Administrative Agent; Enforcement. The Borrower agrees to pay on demand all reasonable costs and expenses in connection with the preparation, execution, delivery, administration (excluding any cost or expenses for administration related to the overhead of the Administrative Agent), modification and amendment of this Agreement and the documents to be delivered hereunder, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Administrative Agent and the Joint Bookrunners with respect thereto and with respect to advising the Administrative Agent as to its rights and responsibilities under this Agreement (which, insofar as such costs and expenses relate to the preparation, execution and delivery of this Agreement and the closing hereunder, shall be limited to the reasonable fees and expenses of Cahill, Gordon & Reindel LLP and NautaDutilh), and all costs and expenses of the Lenders and the Administrative Agent, if any (including, without limitation, reasonable counsel fees and expenses of the Lenders and the Administrative Agent), in connection with the enforcement (whether through negotiations, legal proceedings or otherwise) of this Agreement and the other documents to be delivered hereunder.
(b) Prepayment of LIBO Rate Loans. If any payment of principal of LIBO Rate Loan is made other than on the last day of the Interest Period for such Loan or at its maturity, as a result of a payment pursuant to Section 2.11, acceleration of the maturity of the Loans pursuant to Section 6.02, an assignment made as a result of a demand by the Borrower pursuant to Section 9.07(a) or for any other reason, the Borrower shall, upon demand by any Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender any amounts required to compensate such Lender for any additional losses, costs or expenses which it may reasonably incur as a result of such payment, including, without limitation, any loss (excluding loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by any Lender to fund or maintain such Loan. Without prejudice to the survival of any other agreement of the Borrower or Mondelēz hereunder, the agreements and obligations of the Borrower and Mondelēz contained in Section 2.02(c), 2.05, 2.12, 2.15, this Section 9.04(b) and Section 9.04(c) shall survive the payment in full of principal and interest hereunder.
(c) Indemnification. The Borrower agrees to indemnify and hold harmless each Agent and each Lender and each of their respective affiliates, control persons, directors, officers, employees, attorneys and agents (each, an “Indemnified Party”) from and against any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and disbursements of counsel) which may be incurred by or asserted against any Indemnified Party, in each case in connection with or arising out of, or in connection with the preparation for or defense of, any investigation, litigation, or proceeding (i) related to this Agreement or any of the other documents delivered hereunder, the Loans or any transaction or proposed transaction (whether or not consummated) in which any proceeds of any Borrowing are applied or proposed to be applied, directly or indirectly, by the Borrower, whether or not such Indemnified Party is a party to such transaction, or (ii) related to the Borrower’s or Mondelēz’s consummation of any transaction or proposed transaction contemplated hereby (whether or not consummated) or entering into this Agreement, or to any actions or omissions of the Borrower or Mondelēz, any of their respective Subsidiaries or affiliates or any of its or their respective officers, directors, employees or agents in connection therewith, in each case whether or not an Indemnified Party is a party thereto and whether or not such investigation, litigation or proceeding is brought by Mondelēz or the Borrower or any other Person; provided, however, that neither the Borrower nor Mondelēz shall be required to indemnify an Indemnified Party from or against any portion of such claims, damages, losses, liabilities or expenses that is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from the gross negligence, bad faith or willful misconduct of such Indemnified Party.
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SECTION 9.05 Right of Set-Off. Upon (i) the occurrence and during the continuance of any Event of Default and (ii) the making of the request or the granting of the consent specified by Section 6.02 to authorize the Administrative Agent to declare the Loans due and payable pursuant to the provisions of Section 6.02, each Lender is hereby authorized at any time and from time to time after providing written notice to the Administrative Agent of its intention to do so, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender or any of its affiliates to or for the credit or the account of Mondelēz or the Borrower against any and all of the obligations of the Borrower or Mondelēz now or hereafter existing under this Agreement, whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. Each Lender shall promptly notify the appropriate Borrower or Mondelēz, as the case may be, after any such set-off and application, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender and its affiliates under this Section 9.05 are in addition to other rights and remedies (including, without limitation, other rights of set-off) that such Lender and its affiliates may have.
SECTION 9.06 Binding Effect. This Agreement shall be binding upon and inure to the benefit of Mondelēz, the Borrower, the Administrative Agent and each Lender and their respective successors and assigns, except that neither the Borrower nor Mondelēz shall have the right to assign its rights hereunder or any interest herein without the prior written consent of each of the Lenders.
SECTION 9.07 Assignments and Participations.
(a) Assignment of Lender Obligations. Each Lender may assign to one or more Persons all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Three-Year Commitment, Five-Year Commitment , Three-Year Loans and/or Five-Year Loans owing to it, as the case may be), subject to the following:
(i) the amount of the Commitment of the assigning Lender being assigned pursuant to each such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event, other than with respect to assignments to other Lenders, or affiliates of Lenders, or assignment of the entire Commitment or Loan amount held by such Lender, be less than $5,000,000, subject in each case to reduction at the sole discretion of Mondelēz, and shall be an integral multiple of $1,000,000;
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(ii) each such assignment shall be to an Eligible Assignee;
(iii) each such assignment shall require the prior written consent of (x) the Administrative Agent, and (y) unless an Event of Default under Sections 6.01(a) or (e) has occurred and is continuing, the Borrower (such consents not to be unreasonably withheld or delayed and such consents by the Borrower shall be deemed given if no objection is received by the assigning Lender and the Administrative Agent from the Borrower within twenty (20) Business Days after written notice of such proposed assignment has been delivered to the Borrower); provided, that no consent of the Administrative Agent or the Borrower shall be required for an assignment to another Lender or an affiliate of a Lender; and
(iv) the parties to each such assignment shall execute and deliver to the Administrative Agent for its acceptance and recording in the Register, an Assignment and Acceptance, together with a processing and recordation fee of $3,500 (unless such assignment is made to an affiliate of the transferring Lender) provided, that, if such assignment is made pursuant to Section 9.07(h), Mondelēz shall pay or cause to be paid such $3,500 fee.
Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, (x) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender hereunder and (y) the assigning Lender thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights (other than those provided under Section 9.04 and, with respect to the period during which it is a Lender, Sections 2.12 and 2.15) and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto), other than Section 9.12. Notwithstanding the foregoing, an assignment, sale, transfer, delegation or other disposition under this Section 9.07 may only be made to a person who is a “Non-Public Lender” (as defined below). For the purpose of this Section 9.07, “Non-Public Lender” means (i) until the publication of an interpretation of “public” as referred to in the CRR by the competent authority/ies: an entity which (x) assumes rights and/or obligations vis-à-vis a Borrower, the value of which is at least EUR 100,000 (or its equivalent in another currency), (y) provides repayable funds for an initial amount of at least EUR 100,000 (or its equivalent in another currency) or (z) otherwise qualifies as not forming part of the public and (ii) as soon as the interpretation of the term “public” as referred to in the CRR has been published by the competent authority/ies: an entity which is not considered to form part of the public on the basis of such interpretation. “CRR” means the Regulation (EU) No. 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No. 648/2012.
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(b) Assignment and Acceptance. By executing and delivering an Assignment and Acceptance, the assigning Lender thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; (ii) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or Mondelēz or the performance or observance by the Borrower or Mondelēz of any of its obligations under this Agreement or any other instrument or document furnished pursuant hereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon the Administrative Agent such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi) such assignee represents that (A) the source of any funds it is using to acquire the assigning Lender’s interest or to make any Loan is not and will not be plan assets as defined under the regulations of the Department of Labor of any Plan subject to Title I of ERISA or Section 4975 of the Internal Revenue Code or (B) the assignment or Loan is not and will not be a non-exempt prohibited transaction as defined in Section 406 of ERISA; (vii) such assignee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers and discretion under this Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers and discretion as are reasonably incidental thereto; and (viii) such assignee agrees that it will perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it as a Lender.
(c) Agent’s Acceptance. Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an assignee representing that it is an Eligible Assignee, together with any Notes subject to such assignment, the Administrative Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit C hereto, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Borrower.
(d) Register. The Administrative Agent shall maintain at its address referred to in Section 9.02 a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and the Commitment of, and principal and interest amounts of the Loans owing to, each Lender from time to time (the “Register”). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and Mondelēz, the Borrower, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement, notwithstanding any notice to the contrary. The Register shall be available for inspection by Mondelēz, the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice.
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(e) Sale of Participation. Each Lender may sell participations to one or more banks or other entities in or to all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment, the Loans owing to it and any Note or Notes held by it), subject to the following:
(i) such Lender’s obligations under this Agreement (including, without limitation, its Commitment to the Borrower hereunder) shall remain unchanged,
(ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations,
(iii) Mondelēz, the Borrower, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement,
(iv) each participant shall be entitled to the benefits of Sections 2.12 and 2.15 (subject to the limitations and requirements of those Sections, including the requirements to provide forms and/or certificates pursuant to Section 2.15(e), (f) or (g)) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (e) of this Section,
(v) no participant under any such participation shall have any right to approve any amendment or waiver of any provision of this Agreement, or any consent to any departure by the Borrower or Mondelēz therefrom, except to the extent that such amendment, waiver or consent would reduce the principal of, or interest on, the Loans or any fees or other amounts payable hereunder, in each case to the extent subject to such participation, or postpone any date fixed for any payment of principal of, or interest on, the Loans or any fees or other amounts payable hereunder, in each case to the extent subject to such participation, and
(vi) a participant shall not be entitled to receive any greater payment under Sections 2.12 and 2.15 than the applicable Lender would have been entitled to receive with respect to the participation sold to such participant, unless the sale of the participation to such participant is made with the Borrower’s prior written consent (not to be unreasonably withheld or delayed).
Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, maintain a register on which it enters the name and address of each participant and the principal and interest amounts of each participant’s interest in the Loans or other obligations under this Agreement (the “Participant Register”). The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. No Lender shall have any obligation to disclose all or any portion of a Participant Register to any Person (including the identity of any Participant or any information relating to a Participant’s interest in any Commitments, Loans or its other Obligations under this Agreement) except to the extent that such disclosure is necessary to establish that such Commitment, Loan or other Obligation is in registered form under Section 5f.103(c) of the United States Treasury Regulations or, if different, under Sections 871(h) or 881(c) of the Code.
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(f) Disclosure of Information. Any Lender may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 9.07, disclose to the assignee or participant or proposed assignee or participant, any information relating to Mondelēz or the Borrower furnished to such Lender by or on behalf of Mondelēz or the Borrower; provided that, prior to any such disclosure, the assignee or participant or proposed assignee or participant shall agree to preserve the confidentiality of any confidential information relating to Mondelēz or the Borrower or any of their respective Subsidiaries received by it from such Lender.
(g) Regulation A Security Interest. Notwithstanding any other provision set forth in this Agreement, any Lender may at any time create a security interest in all or any portion of its rights under this Agreement (including, without limitation, the Loans owing to it and any Note or Notes held by it) in favor of any Federal Reserve Bank or central bank performing similar functions in accordance with applicable law.
(h) Replacement of Lenders. In the event that (i) any Lender shall have delivered a notice pursuant to Section 2.13, (ii) the Borrower shall be required to make additional payments to or for the account of any Lender under Section 2.12 or 2.15, (iii) any Lender (a “Non-Consenting Lender”) shall withhold its consent to any amendment that requires the consent of all the Lenders and that has been consented to by the Required Lenders or (iv) any Lender shall become a Defaulting Lender, the Borrower shall have the right, at its own expense, upon notice to such Lender and the Administrative Agent, (A) if applicable, to terminate the Commitment of such Lender or (B) to require such Lender to transfer and assign at par and without recourse (in accordance with and subject to the restrictions contained in Section 9.07) all its interests, rights and obligations under this Agreement to one or more other financial institutions acceptable to the Borrower and approved by the Administrative Agent (such approval not to be unreasonably withheld or delayed), which shall assume such obligations; provided, that (x) in the case of any replacement of a Non-Consenting Lender, each assignee shall have consented to the relevant amendment, (y) no such termination or assignment shall conflict with any law or any rule, regulation or order of any Governmental Authority and (z) the Borrower or the assignee (or assignees), as the case may be, shall pay to each affected Lender in immediately available funds on the date of such termination or assignment the principal of and interest accrued to the date of payment on the Loans made by it hereunder and all other amounts accrued for its account or owed to it hereunder. The Borrower will not have the right to terminate the commitment of any Lender, or to require any Lender to assign its rights and interests hereunder, if, prior to such termination or assignment, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such termination or assignment cease to apply. Each Lender agrees that, if the Borrower elects to replace such Lender in accordance with this Section 9.07, it shall promptly execute and deliver to the Administrative Agent an Assignment and Acceptance to evidence the assignment and shall deliver to the Administrative Agent any Note (if Notes have been issued in respect of such Lender’s Loans) subject to such Assignment and Acceptance; provided that the failure of any such Lender to execute an Assignment and Acceptance shall not render such assignment invalid and such assignment shall be recorded in the Register.
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SECTION 9.08 [Reserved]
SECTION 9.09 Governing Law. This Agreement and the Notes shall be governed by, and construed in accordance with, the substantive laws of the State of New York without regard to choice of law doctrines. If any Obligor incorporated under the laws of the Netherlands is represented by any attorney in connection with the signing and/or execution of this Agreement (including by way of accession to this Agreement) or any other agreement, deed or document referred to in or made pursuant to this Agreement, it is hereby expressly acknowledged and accepted by the other parties to this Agreement that the existence and extent of the attorney’s authority and the effects of the attorney’s exercise or purported exercise of his or her authority shall be governed by the laws of the Netherlands.
SECTION 9.10 Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by telecopier or email shall be effective as delivery of a manually executed counterpart of this Agreement.
SECTION 9.11 Jurisdiction, Etc.
(a) Submission to Jurisdiction; Service of Process. Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the United States District Court of the Southern District of New York, and any appellate court thereof, in any action or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in any such court. Each of Mondelēz and the Borrower hereby agrees that service of process in any such action or proceeding brought in any such court may be made upon the process agent appointed pursuant to Section 9.11(b) (the “Process Agent”). Each of Mondelēz and the Borrower hereby further irrevocably consents to the service of process in any such action or proceeding in any such court by the mailing thereof by any parties hereto by registered or certified mail, postage prepaid, to Mondelēz or the Borrower, as applicable, at its address specified pursuant to Section 9.02. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that any party may otherwise have to serve legal process in any other manner permitted by law.
(b) Appointment of Process Agent. Each of Mondelēz and the Borrower agrees to appoint a Process Agent from the Effective Date through the repayment in full of all Obligations hereunder (i) to receive on behalf of Mondelēz and the Borrower and their respective property service of copies of the summons and complaint and any other process which may be served in any action or proceeding in any New York State or Federal court sitting in New York City arising out of or relating to this Agreement and (ii) to forward forthwith to Mondelēz and the Borrower at their respective addresses copies of any summons, complaint and other process which such Process Agent receives in connection with its appointment. Each of Mondelēz and the Borrower will give the Administrative Agent prompt notice of such Process Agent’s address.
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(c) Waivers.
(i) Each of the parties hereto irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the Notes in any New York state or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.
(ii) To the extent permitted by applicable law, each of the Borrower, Mondelēz and the Lenders shall not assert and hereby waives, any claim against any other party hereto or any of their respective affiliates, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) (whether or not the claim therefor is based on contract, tort or duty imposed by any applicable legal requirement) arising out of, in connection with, as a result of, or in any way related to this Agreement or any related document or any agreement or instrument contemplated hereby or thereby or referred to herein or therein, the transactions contemplated hereby or thereby, any Loan or the use of the proceeds thereof or any act or omission or event occurring in connection therewith, and each of the parties hereto hereby waives, releases and agrees not to sue upon any such claim or any such damages, whether or not accrued and whether or not known or suspected to exist in its favor. For the avoidance of doubt, the waiver of claims for such damages against the Borrower and Mondelēz shall not limit the indemnity obligations set forth in Section 9.04(c).
(iii) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING HEREUNDER OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS AGREEMENT, AND THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN ITS RELATED FUTURE DEALINGS. EACH PARTY HERETO FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SECTION 9.11(C) AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS HERETO OR ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS MADE HEREUNDER. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
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SECTION 9.12 Confidentiality. None of the Agents nor any Lender shall disclose any confidential information relating to Mondelēz or the Borrower to any other Person without the consent of the Borrower, other than (a) to such Agent’s or such Lender’s affiliates and their officers, directors, employees, agents, advisors, insurers and reinsurers, rating agencies, market data collectors, credit insurance providers, any direct, indirect, actual or prospective counterparty (and its advisor) to any swap, derivative or securitization transaction related to the obligations under this Agreement and, as contemplated by Section 9.07(f), to actual or prospective assignees and participants, and then, in each such case, only on a confidential basis; provided, however, that such actual or prospective assignee or participant shall have been made aware of this Section 9.12 and shall have agreed to be bound by its provisions as if it were a party to this Agreement, (b) as required by any law, rule or regulation or judicial process, (c) as requested or required by any state, federal or foreign authority or examiner regulating banks or banking or other financial institutions, including in connection with the creation of security interests as contemplated by Section 9.07(g) and (d) in connection with enforcing or administering this Agreement.
SECTION 9.13 No Fiduciary Relationship. The Borrower acknowledges and agrees that (a) no fiduciary, advisory or agency relationship between the Borrower, on the one hand, and any Agent or any Lender, on the other hand, is intended to be or has been created in respect of any of the financing transactions contemplated by this Agreement, irrespective of whether any Agent or any Lender has advised or is advising Mondelēz on other matters (it being understood and agreed that nothing in this provision will relieve any Agent or any Lender of any advisory or fiduciary responsibilities it may have in connection with other transactions) and (b) each Agent and each Lender may have economic interests that conflict with those of the Obligors and the transactions contemplated by this Agreement (including the exercise of rights and remedies hereunder and thereunder) are arm’s-length commercial transactions between the Agents and the Lenders, on the one hand, and the Obligors, on the other. Each Obligor acknowledges and agrees that it has consulted its own legal and financial advisors in connection with the transactions contemplated hereby to the extent it deemed appropriate and that it is responsible for making its own independent judgment with respect to such transactions and the process leading thereto. Each Obligor agrees that it will not claim that any Lender has rendered advisory services of any nature or respect, or owes a fiduciary or similar duty to such Obligor, in connection with such transaction or the process leading thereto.
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SECTION 9.14 Integration. This Agreement and the Notes represent the agreement of Mondelēz, the Borrower, the Administrative Agent and the Lenders with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by the Administrative Agent, Mondelēz, the Borrower or any Lender relative to the subject matter hereof not expressly set forth or referred to herein or in the Notes other than the matters referred to in Sections 2.09(b) and 9.04(a), the Fee Letter and any other fee letters entered into among Mondelēz and the Joint Bookrunners, if any, and except for any confidentiality agreements entered into by Lenders in connection with this Agreement or the transactions contemplated hereby.
SECTION 9.15 USA Patriot Act Notice. The Administrative Agent and each Lender hereby notifies the Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Patriot Act”), it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Lender to identify the Borrower in accordance with the Patriot Act.
SECTION 9.16 Acknowledgment and Consent to Bail-In of EEA Financial Institutions. Notwithstanding anything to the contrary in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any EEA Financial Institution arising under this Agreement or any other documents or agreements relating to the Loans made hereunder, to the extent such liability is unsecured, may be subject to the write-down and conversion powers of an EEA Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:
(a) the application of any Write-Down and Conversion Powers by an EEA Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an EEA Financial Institution; and
(b) the effects of any Bail-in Action on any such liability, including, if applicable:
(i) a reduction in full or in part or cancellation of any such liability;
(ii) a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such EEA Financial Institution, its parent undertaking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other documents or agreements relating to the Loans made hereunder; and
(iii) the variation of the terms of such liability in connection with the exercise of the write-down and conversion powers of any EEA Resolution Authority.
SECTION 9.17 Certain Terms. In this Agreement, where it relates to an Obligor incorporated in the Netherlands or having its centre of main interests in the Netherlands, a reference to:
(a) a “necessary action to authorize” where applicable, includes without limitation:
(i) any action required to comply with the Works Councils Act of the Netherlands (Wet op de ondernemingsraden); and
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(ii) obtaining an unconditional positive advice (advies) from the competent works council(s) if a positive advice is required pursuant to the Works Councils Act of the Netherlands (Wet op de ondernemingsraden);
(b) a “security interest” includes any mortgage (hypotheek), pledge (pandrecht), retention of title arrangement (eigendomsvoorbehoud), right of retention (recht van retentie), right to reclaim goods (recht van reclame), and, in general, any right in rem (beperkt recht), created for the purpose of granting security (goederenrechtelijk zekerheidsrecht);
(c) a “winding-up”, “administration” or “dissolution” includes a bankruptcy (faillissement) or dissolution (ontbinding);
(d) a “moratorium” includes surseance van betaling and “a moratorium is declared” or “occurs” includes surseance verleend;
(e) any “step” or “procedure” taken in connection with insolvency proceedings includes a Dutch entity having filed a notice under section 36 of the Tax Collection Act of the Netherlands (Invorderingswet 1990);
(f) a “liquidator” includes a curator;
(g) an “administrator” includes a bewindvoerder;
(h) an “attachment” includes a beslag;
(i) “gross negligence” means grove schuld; and
(j) “wilful misconduct” means opzet.
English language words used in this Agreement to describe Dutch law concepts intend to describe such concepts only and the consequences of the use of those words in English law or any other foreign law are to be disregarded.
[Remainder of Page Left Blank Intentionally]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.
| MONDELEZ INTERNATIONAL HOLDINGS NETHERLANDS B.V. | ||
| By: | /s/ Luca Zaramella | |
| Name: | Luca Zaramella | |
| Title: | Authorized Signatory | |
| MONDELĒZ INTERNATIONAL, INC. | ||
| By: | s/ Luca Zaramella | |
| Name: | Luca Zaramella | |
| Title: | SVP Corporate Finance, CFO Commercial and Treasurer | |
[Mondelez International Holdings Netherlands BV Term Loan Agreement]
| JPMORGAN CHASE BANK, N.A., as Administrative Agent and Lender | ||
| By: | /s/ Tony Yung | |
| Name: | Tony Yung | |
| Title: | Executive Director | |
[Mondelez International Holdings Netherlands BV Term Loan Agreement]
| BANK OF AMERICA N.A., as Lender | ||
| By: | /s/ Kyle Lewis | |
| Name: | Kyle Lewis | |
| Title: | Associate | |
[Mondelez International Holdings Netherlands BV Term Loan Agreement]
| THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., as Lender | ||
| By: | /s/ Harumi Kambara | |
| Name: | Harumi Kambara | |
| Title: | Authorized Signatory | |
[Mondelez International Holdings Netherlands BV Term Loan Agreement]
| CREDIT SUISSE AG, | ||
| CAYMAN ISLANDS BRANCH, as Lender | ||
| By: | /s/ Vipul Dhadda | |
| Name: | Vipul Dhadda | |
| Title: | Authorized Signatory | |
| By: | /s/ Karim Rahimtoola | |
| Name: | Karim Rahimtoola | |
| Title: | Authorized Signatory | |
[Mondelez International Holdings Netherlands BV Term Loan Agreement]
| GOLDMAN SACHS BANK USA, as Lender | ||
| By: | /s/ Annie Carr | |
| Name: | Annie Carr | |
| Title: | Authorized Signatory | |
[Mondelez International Holdings Netherlands BV Term Loan Agreement]
| HSBC BANK PLC, as Lender | ||
| By: | /s/ Colette Pithie | |
| Name: | Colette Pithie | |
| Title: | Associate Director | |
[Mondelez International Holdings Netherlands BV Term Loan Agreement]
| MIZUHO BANK, LTD., as Lender | ||
| By: | /s/ Mark Ralston | |
| Name: | Mark Ralston | |
| Title: | Senior Director | |
[Mondelez International Holdings Netherlands BV Term Loan Agreement]
| BARCLAYS BANK PLC, as Lender | ||
| By: | /s/ Christopher Aitkin | |
| Name: | Christopher Aitkin | |
| Title: | Assistant Vice President | |
[Mondelez International Holdings Netherlands BV Term Loan Agreement]
| BNP PARIBAS, as Lender | ||
| By: | /s/ Tony Baratta | |
| Name: | Tony Baratta | |
| Title: | Managing Director | |
| By: | /s/ Todd Grossnickle | |
| Name: | Todd Grossnickle | |
| Title: | Director | |
[Mondelez International Holdings Netherlands BV Term Loan Agreement]
| DEUTSCHE BANK AG NEW YORK BRANCH, as Lender | ||
| By: | /s/ Ming K. Chu | |
| Name: | Ming K. Chu | |
| Title: | Director | |
| By: | /s/ Virginia Cosenza | |
| Name: | Virginia Cosenza | |
| Title: | Vice President | |
[Mondelez International Holdings Netherlands BV Term Loan Agreement]
| SOCIETE GENERALE, as Lender | ||
| By: | /s/ Shelley Yu | |
| Name: | Shelley Yu | |
| Title: | Director | |
[Mondelez International Holdings Netherlands BV Term Loan Agreement]
| WELLS FARGO BANK, N.A., as Lender | ||
| By: | /s/ James Travagline | |
| Name: | James Travagline | |
| Title: | Director | |
[Mondelez International Holdings Netherlands BV Term Loan Agreement]
| BANCO BILBAO VIZCAYA ARGENTARIA, S.A. NEW YORK BRANCH, as Lender | ||
| By: | /s/ Brian Crowley | |
| Name: | Brian Crowley | |
| Title: | Managing Director | |
| By: | /s/ Cara Younger | |
| Name: | Cara Younger | |
| Title: | Director | |
[Mondelez International Holdings Netherlands BV Term Loan Agreement]
| BANCO SANTANDER, S.A., as Lender | ||
| By: | /s/ Federico Robin | |
| Name: | Federico Robin | |
| Title: | Executive Director | |
| By: | /s/ Isabel Pastor | |
| Name: | Isabel Pastor | |
| Title: | Associate | |
[Mondelez International Holdings Netherlands BV Term Loan Agreement]
| COMMERZBANK AG, NEW YORK BRANCH, as Lender | ||
| By: | /s/ Ignacio Campillo | |
| Name: | Ignacio Campillo | |
| Title: | Managing Director | |
| By: | /s/ Justin Hull | |
| Name: | Justin Hull | |
| Title: | Associate | |
[Mondelez International Holdings Netherlands BV Term Loan Agreement]
| CREDIT AGRICOLE CORPORATE AND INVESTMENT BANK, as Lender | ||
| By: | /s/ Kaye Ea | |
| Name: | Kaye Ea | |
| Title: | Managing Director | |
| By: | /s/ Gordon Yip | |
| Name: | Gordon Yip | |
| Title: | Director | |
[Mondelez International Holdings Netherlands BV Term Loan Agreement]
| The Toronto-Dominion Bank, New York Branch, as Lender | ||
| By: | /s/ Annie Dorval | |
| Name: | Annie Dorval | |
| Title: | Authorized Signatory | |
[Mondelez International Holdings Netherlands BV Term Loan Agreement]
| WESTPAC BANKING CORPORATION, as Lender | ||
| By: | /s/ Stuart Brown | |
| Name: | Stuart Brown | |
| Title: | Director | |
[Mondelez International Holdings Netherlands BV Term Loan Agreement]
Exhibit 10.30
RETIREMENT AGREEMENT AND GENERAL RELEASE
This Retirement Agreement and General Release (“Agreement”) is made between Mondelēz International Holdings LLC (and any currently or previously-affiliated companies, parent companies, successors or predecessors, including Mondelēz International, Inc., Mondelēz Global LLC, Kraft Foods Inc., Kraft Foods Group, Inc., and Kraft Foods Global, Inc., hereafter, collectively referred to herein as, “MIH” or the “Employer”) and Gustavo Abelenda (“Abelenda” or the “Employee”) (the Employer and Employee are collectively referred to herein as the “Parties”).
Abelenda has been employed by MIH as in various capacities, and most recently as EVP and President, Latin America. Since Abelenda’s employment relationship with MIH is ending, MIH has offered Abelenda benefits as set forth in this Agreement certain of which are benefits greater than what Abelenda is entitled to otherwise receive, and Abelenda has decided to accept MIH’s offer. Therefore, Abelenda and MIH both agree and promise as follows:
1. Employment Termination: Abelenda’s last day of employment with MIH is December 31, 2016 (“Last Day Worked” or “Termination Date”). Abelenda’s Retirement Date is January 1, 2017. Abelenda will be paid for any accrued, unused 2016 PTO days, less applicable deductions, at the next normal payday following the Termination Date. After the Termination Date, Abelenda will not represent himself as being an employee, officer, attorney, agent or representative of MIH for any purpose.
2. Sufficiency of Consideration: Abelenda understands, acknowledges and agrees that the payment of benefits described in this Agreement, including payments and benefits described in Section 3 herein, are conditioned upon his execution of this Agreement and are, in significant and substantial part, in addition to those benefits to which he is otherwise entitled. Abelenda acknowledges and agrees that MIH has – apart from this Agreement – paid him for all wages that were due to him.
3. Consideration: In exchange for the promises and releases in this Agreement, and provided Abelenda does not revoke the Agreement as permitted in Section 12 below, MIH will provide Abelenda with the following benefits and payments:
a) Abelenda will receive a full 2016 Management Incentive Plan (“MIP”) award based on the number of days worked from January 1, 2016 through the Last Day Worked, to be paid at target performance for the individual performance component and actual performance for the Company performance component. This payment, less applicable deductions, will be made no later than March 15, 2017, at the same time 2016 MIP awards are paid to employees generally. Abelenda will not be eligible to receive any other MIP payments.
b) For stock option purposes, Abelenda will be considered early retirement eligible and, therefore, will be treated as an early retiree. Abelenda will have until the original expiration date to exercise outstanding vested and unexercised stock options. Any unvested stock options granted prior to January 1, 2017 will continue to vest per the normal vesting schedule. With respect to any restricted stock (or deferred stock units), Abelenda’s entire 2014 restricted stock (or deferred stock units) award will vest following the Last Day Worked. Applicable tax withholding (and any other withholding payroll taxes) will be satisfied by deducting the number of shares equal in value to the amount of the withholding requirements from Abelenda’s stock awards; therefore, the number of shares deposited into Abelenda’s account on the vesting date will be net of the shares used to satisfy applicable withholding taxes (rounded up to the nearest whole share). The administrative time it takes to complete these transactions may be up to 8 weeks from the Last Day Worked. Abelenda will forfeit all other unvested restricted stock (or deferred stock unit) grants.
c) Abelenda will be eligible to receive his entire award of performance share units subject to the 2014-2016 performance cycle (the “2014 PSUs”) and 2015-2017 performance cycle (the “2015 PSUs”) based on actual Company performance and a pro-rated award (if any), based on actual Company performance, for his performance share units subject to the 2016-2018 performance cycle (the “2016 PSUs”). If such performance share units satisfy the minimum performance thresholds for an award, then Abelenda will receive shares, less required deductions, based on nineteen (19) months (out of a total of thirty-six (36) months) of participation from the beginning of the performance cycle for the 2016 PSUs, at the actual business rating as determined by the Human Resources and Compensation Committee of the Board of Directors. Such shares (if any) net of required withholding shall be issued after the conclusion of the applicable performance period, and no later than March 15, 2017 for the 2014 PSUs, March 15, 2018 for the 2015 PSUs, and March 15, 2019 for the 2016 PSUs. All other outstanding performance share unit grants will be canceled and forfeited immediately following the Last Day Worked.
d) Subject to the underlying terms and conditions of the applicable plans, Abelenda will receive compensation and benefits as provided for under MIH’s retirement and benefits plans available to employees generally. Abelenda will not be entitled to any other compensation or benefits not provided in this Agreement, nor is Abelenda entitled to any severance under the Mondelēz Global LLC Severance Pay Plan for Salaried Exempt Employees. Abelenda understands, acknowledges and agrees that the payment of benefits described in this Agreement, including payments and benefits described in Section 3 herein, are conditioned upon his execution of this Agreement. Abelenda acknowledges and agrees that the sums and benefits to be provided under the terms of this Agreement are, in significant and substantial part, in addition to those benefits to which he is otherwise entitled. Abelenda may revoke this Agreement within seven (7) days after he signs it by giving written notice to MIH. To be effective, this revocation must be received by the close of business on the 7th calendar day after Abelenda signs this Agreement. If Abelenda revokes this Agreement, he understands that he will not receive the benefits that are conditioned upon his execution of the Agreement. This Agreement will not become effective or enforceable unless and until the seven-day revocation period has expired without Abelenda revoking it.
ABELENDA RETIREMENT AGREEMENT
Page 2 of 9
4. Complete Release and Waiver of Claims:
a) Abelenda is aware of his legal rights concerning his employment with MIH. In exchange for the promises of MIH above, Abelenda agrees to irrevocably and unconditionally release (i.e. give up) any and all claims he may now have against MIH and agrees not to sue MIH and any currently or previously-affiliated companies, parent companies, successors or predecessors, and their officers, directors, agents and employees, arising out of the employment relationship between Abelenda and MIH (the “Release”). This Release includes, but is not limited to, all claims under Title VII of the Civil Rights Acts of 1964 and 1991, the Americans with Disabilities Act, the Age Discrimination in Employment Act, the Family and Medical Leave Act, the Fair Labor Standards Act, the Sarbanes-Oxley Act of 2002, the Employee Retirement Income Security Act, the Florida Civil Rights Act (Fla. Stat. §§ 760.01-760.11), Florida Whistleblower Protection Act (Fla. Stat. §§ 448.101-448.105), Florida Workers Compensation Retaliation provision (Fla. Stat. §§ 440.205), Florida Minimum Wage Act (Fla. Stat. §§ 448.110), Florida Constitution, Florida Fair Housing Act (Fla. Stat. §§ 760.20-760.37), Miami-Dade County Code, Chapter 11A, Broward County Human Rights Act, Palm Beach County Code, Article VI , and any other federal, state or local law dealing with employment discrimination, as well as any claims for breach of contract, wrongful discharge, and tort claims; claims for wages, benefits or severance pay; claims for attorneys’ fees; and any other claim or action whatsoever. This general release and waiver does not contain a waiver of rights or claims that may arise after the date the Agreement is executed by Abelenda and also excludes any claims which cannot be waived by law. Nor shall this Agreement preclude Abelenda from bringing a charge or suit to challenge the validity or enforceability of this Agreement under the Age Discrimination in Employment Act (29 U.S.C. § 620 et seq.) as amended by the Older Worker’s Benefit Protection Act.
b) Specific Release of ADEA Claims: In further consideration of the payments and benefits provided to the Employee in this Agreement, Abelenda hereby irrevocably and unconditionally fully and forever waives, releases and discharges MIH from any and all Claims, whether known or unknown, from the beginning of time to the date of Abelenda’s execution of this Agreement, arising under the Age Discrimination in Employment Act (ADEA), as amended, and its implementing regulations.
5. Right to Participate in Agency Proceedings: Nothing in this Agreement is intended to limit or impair in any way Abelenda’s right to file a charge with the U.S. Equal Employment Opportunity Commission (EEOC) or comparable state and local fair employment practices agencies (FEPAs), or Abelenda’s right to participate in any such charge filed with such agencies and to recover any appropriate relief in any such action.
6. Restrictive Covenants:
(a) Non-Competition: Abelenda understands and agrees that the nature of his position with MIH gave him access to and knowledge of highly confidential information and placed him in a position of trust and confidence with MIH. Because of MIH’s legitimate business interests and in consideration for MIH’s payment to Abelenda of the separation pay provided in Section 3 above, Abelenda agrees that he will not engage in Prohibited Conduct for the twelve (12)-month period following the Termination Date, or through December 30, 2017 (“Restricted Period”).
ABELENDA RETIREMENT AGREEMENT
Page 3 of 9
(i) For purposes of this non-compete clause, “Prohibited Conduct” is conduct in which Abelenda contributes his knowledge of confidential or proprietary information obtained during his employment with MIH, directly or indirectly, in whole or in part, as an employee, employer, owner, operator, manager, advisor, consultant, agent, partner, director, officer, volunteer, intern or any other similar capacity to a Listed Competitor without the written consent of MIH’s Executive Vice President Global Human Resources, or designee, such consent to be provided by MIH at its sole and absolute discretion, except that such consent shall not unreasonably be withheld.
(ii) For purposes of this non-compete clause, Listed Competitors include, but are not limited to, the following companies: PepsiCo, Inc., Campbell Soup Company, The Coca-Cola Company, Kellogg Company, Mars, Inc., Nestle S.A., Ferrero Rocher, General Mills, Inc., The Hershey Company, Groupe Danone, Perfetti Van Melle, Arcor, Unilever Group, Lindt & Sprungli AG, and Yildiz Holding A.S., or any subsidiaries, affiliates or subsequent parent or merger partner, if any of these companies are acquired or become part of a merger. For purposes of this Agreement, “affiliate” of a specified person or entity means a person or entity that directly or indirectly controls, is controlled by, or is under common control with, the person or entity specified. Nothing contained herein shall preclude Abelenda from working for a company that provides consulting or financial advisory services whose clients include companies named above so long as Abelenda does not provide specific advice or services, derived from confidential or proprietary information obtained during his employment with MIH, directly to the Listed Competitors.
(b) Non-Solicitation of Employees: Abelenda understands and acknowledges that MIH has expended and continues to expend significant time and expense recruiting and training its employees and that the loss of employees would cause significant and irreparable harm to MIH. Abelenda agrees and covenants not to directly or indirectly solicit, hire, recruit, attempt to hire or recruit, or induce the termination of employment of any employee of MIH during the Restricted Period. The foregoing shall not be violated by general advertising not targeted at MIH employees or by serving as a reference upon request.
(c) Restrictive Covenant Remedies: Should Abelenda engage in Prohibited Conduct at any time during the Restricted Period, or solicit employees during the Restricted Period, he will be obligated to pay back to MIH all payments received pursuant to this Agreement and MIH will not be obligated to make any future payments pursuant to this Agreement that are otherwise owed. This will be in addition to any other remedy that MIH may have in respect of such Prohibited Conduct. MIH and Abelenda acknowledge and agree that MIH will or would suffer irreparable injury in the event of a breach or violation or threatened breach or violation of the provisions set forth in Sections 6, 7, 8 and 9 and agree that in the event of a breach or violation of such provisions MIH will be awarded injunctive relief by a Court of competent jurisdiction to prohibit any such breach or violation, and that such right to injunctive relief will be in addition to any other remedy which may be ordered by the Court or an arbitrator. The aforementioned equitable relief shall be in addition to, not in lieu of, legal remedies, monetary damages or any other available forms of relief.
ABELENDA RETIREMENT AGREEMENT
Page 4 of 9
(d) Judicial Amendment: Abelenda and MIH acknowledge the reasonableness of the agreements set forth in this Section 6 and the specifically acknowledge the reasonableness of the geographic area, duration of time and subject matter that are part of the covenant not to compete contained in Section 6(a)(i)-(ii). Abelenda further acknowledges that Abelenda’s skills are such that Abelenda can be gainfully employed in noncompetitive employment and that the parties’ agreement not to compete will in no manner prevent Abelenda from earning a living. Notwithstanding the foregoing, in the event it is judicially determined that any of the limitations contained in this Section 6 are unreasonable, illegal or offensive under any applicable law and may not be enforced as agreed herein, the parties agree that the unreasonable, illegal or offensive portions of this Section 6, whether they relate to duration, area or subject matter, shall be and hereby are revised to conform with all applicable laws and that this Agreement, as modified, shall remain in full force and effect and shall not be rendered void or illegal.
7. This Agreement to Be Kept Confidential: Abelenda understands that this Agreement is unique to him and he agrees that it is confidential and that he will not disclose this Agreement or its terms to anyone other than (a) his legal or tax advisor, (b) his immediate family, (c) in a legal action to enforce the terms of this Agreement, (d) the EEOC or similar state or local FEPA in connection with the filing or investigation of a charge, or (e) as ordered or required by law. Abelenda further agrees that if he discloses the existence of terms of this Agreement to anyone under (a) or (b) above, he will inform them of the confidentiality requirements of this Section and require that they agree to be bound by such requirements. Nothing in this Agreement shall be construed to prohibit Abelenda from reporting conduct to, providing truthful information to or participating in any investigation or proceeding conducted by any federal, state or local government agency or self-regulatory organization.
8. No Disparagement or Harm: Abelenda agrees that, in discussing his relationship with MIH and its affiliated and parent companies and their business and affairs, he will not disparage, discredit or otherwise treat in a detrimental manner MIH, its affiliated and parent companies or their officers, directors and employees. This Section does not, in any way, restrict or impede Abelenda from exercising protected rights including the right to communicate with any federal, state, or local agency or self-regulatory organization, including any with which a charge has been filed, to the extent that such rights cannot be waived by agreement, or from complying with any applicable law or regulation or a valid order of a court of competent jurisdiction or an authorized government agency, provided that such compliance does not exceed that required by the law, regulation or order. Abelenda shall promptly provide written notice of any such order to MIH’s legal department.
ABELENDA RETIREMENT AGREEMENT
Page 5 of 9
9. Continuing Confidentiality Obligation: Abelenda acknowledges that during the course of his employment with MIH, he has had access to, learned about and was entrusted with certain confidential and secret sales, marketing, strategy, financial, product, personnel, manufacturing, labor relations, technical and other proprietary information and material (“Confidential Information”) which are the property of MIH. Abelenda understands that the above list is not exhaustive, and that Confidential Information also includes other information that is marked or otherwise identified as confidential or proprietary, or that would otherwise appear to a reasonable person to be confidential or proprietary in the context and circumstances in which the information is known or used. Abelenda further understands and acknowledges that this Confidential Information and MIH’s ability to reserve it for the exclusive knowledge and use of MIH is of great competitive importance and commercial value to MIH, and that improper use or disclosure of the Confidential Information by Abelenda might cause MIH to incur financial costs, loss of business advantage, liability under confidentiality agreements with third parties, civil damages and criminal penalties. Abelenda agrees that, from the date he is presented with this Agreement and following the Terminate Date, he will not communicate or disclose to any third party, or use for his own account, without the written consent of MIH, any of the aforementioned information or material.
If MIH becomes aware of a situation where it appears that its trade secrets are being used and/or disclosed by Abelenda, it will enforce its rights to the fullest degree allowed by law, including Federal or State trade secret law. An individual 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 to a Federal, State, or local government official or to an attorney solely for the purpose of reporting or investigating a suspected violation of law. An individual 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 a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. An individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual files any document containing the trade secret under seal; and does not disclose the trade secret, except pursuant to court order.
10. Return of Company Property: Abelenda agrees to return all Company property in his possession, including documents, manuals, identification cards or badges, laptops, computers, telephones, mobile phones, hand-held electronic devices, credit cards, electronically stored documents or files, physical files, handbooks, notes, keys and any other articles he has used in the course of his employment and any other Company property in his possession, no later than the Last Day Worked.
ABELENDA RETIREMENT AGREEMENT
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11. Arbitration of Claims: In the event either Abelenda or MIH contests the interpretation or application of any of the terms of this Agreement, the complaining party shall notify the other in writing of the provision that is being contested. If the Parties cannot satisfactorily resolve the dispute within thirty (30) days, the matter will be submitted to arbitration with JAMS (f.k.a. Judicial Arbitration and Mediation Services, Inc.). The arbitration will be conducted, and an arbitrator will be chosen, pursuant to the JAMS Employment Arbitration Rules and Procedures. The arbitrator’s fees and expenses and filing fees shall be borne by the losing (non-prevailing) Party. The hearing shall be held at a mutually agreeable location and the arbitrator shall issue a written award which shall be final and binding upon the Parties. Abelenda agrees to waive the right to a jury trial. Notwithstanding anything contained in this Section 11 or Section 6(c) to the contrary, MIH shall each have the right to institute judicial proceedings against Abelenda or anyone acting by, through or under Abelenda, in order to enforce its rights under Sections 6, 7, 8 or 9 through specific performance, injunction, or similar equitable relief. Claims not covered by arbitration are those claims seeking injunctive and other relief due to unfair competition, due to the use or unauthorized disclosure of trade secrets or confidential information set forth in Sections 7 or 9, or breach of restrictive covenants set forth in Section 6.
12. Review and Revocation: Abelenda acknowledges that, before signing this Agreement, he was given a period of twenty-one (21) days in which to consider it. Abelenda further acknowledges that: (a) he took advantage of this period to consider this Agreement before signing it; (b) he has carefully read this Agreement, and each of its provisions; (c) if he initially did not think any representation he is making in this Agreement was true, or if he initially was uncomfortable making it, he resolved all of his doubts and concerns before signing this Agreement; (d) Abelenda fully understands what the Agreement, and each of its provisions, means; and (e) he is entering into the Agreement, and each of its provisions, knowingly and voluntarily. MIH encourages Abelenda to discuss this Agreement, and each of its provisions, with an attorney (at his own expense) before signing it. Abelenda acknowledges that he sought such advice to the extent he deemed appropriate. If Abelenda signs this Agreement before the end of the twenty-one (21) day period, it will be his voluntary decision to do so because he has decided that he does not need any additional time to decide whether to sign this Agreement. Abelenda also understands that he does not have more than twenty-one (21) days to sign this Agreement. If Abelenda does not sign this Agreement by the end of the twenty-one (21) day period, he understands that it will become null and void. Abelenda also acknowledges and understands that MIH would not have given him the special payments or benefits he is getting in exchange for this Agreement but for his promises and representations he made by signing it. Further, by signing below, Abelenda acknowledges that he may revoke this Agreement at any time within seven (7) days of the date on which he signed it as described above in Section 3(g).
13. Entire Agreement and Severability: This is the entire agreement between Abelenda and MIH on the subject matter of this Agreement. This Agreement may not be modified or canceled in any manner except by a writing signed by both Abelenda and an authorized Company official. Abelenda acknowledges that MIH has made no representations or promises to him, other than those in this Agreement. If any provision in this Agreement is found to be unenforceable, all other provisions will remain fully enforceable. The covenants set forth in this Agreement shall be considered and construed as separate and independent covenants. Should any part or provision of any provision of this Agreement be held invalid, void or unenforceable in any court of competent jurisdiction, such invalidity, voidness or unenforceability shall not render invalid, void or unenforceable any other part or provision of this Agreement. If the release and waiver of claims provisions of this Agreement are held to be unenforceable, the parties agree to enter into a release and waiver agreement that is enforceable.
ABELENDA RETIREMENT AGREEMENT
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14. Governing Law: This Agreement, for all purposes, shall be governed under and construed in accordance with the laws of the State of Florida without giving effect to any choice of law or conflict of law provision or rule that would cause the application of the laws of any jurisdiction other than Florida. Any action or proceeding by either of the Parties to enforce this Agreement shall be brought only in a State or Federal court located in the State of Florida. The Parties consent to the personal jurisdiction of such courts and agrees not to claim that any such courts are inconvenient or otherwise inappropriate.
15. Section 409A: This Agreement is intended to comply with Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”) or an exemption thereunder and shall be construed and administered in accordance with Section 409A. Notwithstanding any other provision of this Agreement, payments provided under this Agreement may only be made upon an event and in a manner that complies with Section 409A or an applicable exemption. Any payments under this Agreement that may be excluded from Section 409A either as separation pay due to an involuntary separation from service or as a short-term deferral shall be excluded from Section 409A to the maximum extent possible. For purposes of Section 409A, each installment payment provided under this Agreement shall be treated as a separate payment. Any payments to be made under this Agreement upon a termination of employment shall only be made upon a “separation from service” under Section 409A. Abelenda will be deemed to have incurred a separation from service under Section 409A immediately following his Last Day Worked on December 31, 2016.
Given that Abelenda is a “specified employee” within the meaning of Section 409A, to the extent required in order to comply with Section 409A, any amounts or benefits to be paid or provided to Abelenda pursuant to this Agreement or otherwise that are considered nonqualified deferred compensation under Section 409A will be delayed six (6) months to the first business day on which such amounts and benefits may be paid in compliance with said Section 409A.
Notwithstanding the foregoing, the Employer makes no representations that the payments and benefits provided under this Agreement comply with Section 409A and in no event shall the Employer be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by the Employee on account of non-compliance with Section 409A.
[SIGNATURE PAGE FOLLOWS]
ABELENDA RETIREMENT AGREEMENT
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TAKE THIS AGREEMENT HOME, READ IT, AND CAREFULLY CONSIDER ALL OF ITS PROVISIONS BEFORE SIGNING IT: IT INCLUDES A RELEASE OF KNOWN AND UNKNOWN CLAIMS. IF YOU WISH, YOU SHOULD TAKE ADVANTAGE OF THE FULL CONSIDERATION PERIOD AFFORDED BY SECTION 12 AND YOU SHOULD CONSULT WITH AN ATTORNEY PRIOR TO EXECUTING THIS AGREEMENT.
| MONDELēZ INTERNATIONAL HOLDINGS LLC: | ||
| By: | /s/ David Pendleton | |
| Title: | SVP Total Rewards and Human Resources Solutions | |
| Date: | December 31, 2016 | |
| GUSTAVO ABELENDA: | ||
| Signature: | /s/ Gustavo Abelenda | |
| Print Name: | Gustavo Abelenda | |
| Date: | December 29, 2016 | |
ABELENDA RETIREMENT AGREEMENT
Page 9 of 9
EXHIBIT 12.1
Mondelēz International, Inc. and Subsidiaries
Computation of Ratios of Earnings to Fixed Charges
(in millions of dollars, except ratio)
| Years Ended December 31, | ||||||||||||||||||||
| 2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||
| Earnings from continuing operations before income taxes |
$ | 1,454 | $ | 7,884 | $ | 2,554 | $ | 2,392 | $ | 1,774 | ||||||||||
| Add / (Deduct): |
||||||||||||||||||||
| Equity in net earnings of less than 50% owned affiliates (1) |
– | (56 | ) | (112 | ) | (107 | ) | (106 | ) | |||||||||||
| Distributed income from less than 50% owned affiliates |
75 | 58 | 61 | 66 | 63 | |||||||||||||||
| Fixed charges |
721 | 825 | 965 | 1,145 | 2,323 | |||||||||||||||
| Interest capitalized, net of amortization |
(6 | ) | (7 | ) | (3 | ) | (2 | ) | (1 | ) | ||||||||||
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| Earnings available for fixed charges |
$ | 2,244 | $ | 8,704 | $ | 3,465 | $ | 3,494 | $ | 4,053 | ||||||||||
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| Fixed charges: |
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| Interest incurred: |
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| Interest expense (2) |
$ | 609 | $ | 714 | $ | 882 | $ | 1,031 | $ | 2,206 | ||||||||||
| Capitalized interest |
6 | 7 | 3 | 2 | 3 | |||||||||||||||
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| 615 | 721 | 885 | 1,033 | 2,209 | ||||||||||||||||
| Portion of rent expense deemed to represent interest factor |
106 | 104 | 80 | 112 | 114 | |||||||||||||||
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| Fixed charges |
$ | 721 | $ | 825 | $ | 965 | $ | 1,145 | $ | 2,323 | ||||||||||
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| Ratio of earnings to fixed charges |
3.1 | 10.6 | 3.6 | 3.1 | 1.7 | |||||||||||||||
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Notes:
| (1) | With the deconsolidation of our global coffee businesses on July 2, 2015, we began to recognize predominantly coffee-related equity method investment earnings outside of pre-tax earnings within earnings from continuing operations after income taxes. Refer to Note 1, Summary of Significant Accounting Policies – Principles of Consolidation. |
| (2) | Excludes interest related to uncertain tax positions, which is recorded in our tax provision. |
Exhibit 21.1
Mondelēz International, Inc.
Subsidiaries - 2016
| Entity Name |
Country | |
| LU Algerie S.p.A. | Algeria | |
| Cadbury Bebidas De Argentina S.A. | Argentina | |
| Mondelez Argentina S.A. | Argentina | |
| Nabisco Inversiones S.R.L. | Argentina | |
| Van Mar SA | Argentina | |
| Cadbury Marketing Services Pty Limited | Australia | |
| General Foods Pty. Ltd. | Australia | |
| KF (Australia) Pty. Ltd. | Australia | |
| Kraft Jacobs Suchard (Australia) Pty. Ltd. | Australia | |
| Lanes Biscuits Pty. Ltd. | Australia | |
| Lanes Food (Australia) Pty. Ltd. | Australia | |
| MacRobertson Pty Limited | Australia | |
| Mondelez Australia (Foods) Ltd | Australia | |
| Mondelez Australia Group Co Pty Ltd | Australia | |
| Mondelez Australia Group Investments LP | Australia | |
| Mondelez Australia Holdings Pty. Ltd. | Australia | |
| Mondelez Australia Investments Pty Ltd | Australia | |
| Mondelez Australia Pty. Ltd. | Australia | |
| Mondelez Australia Services Pty. Ltd. | Australia | |
| Mondelez New Zealand Holdings (Australia) Pty. Ltd. | Australia | |
| Recaldent Pty Ltd | Australia | |
| The Natural Confectionery Co. Pty Ltd | Australia | |
| Mirabell Salzburger Confiserie-und Bisquit GmbH | Austria | |
| Mondelez Eastern Europe Middle East & Africa GmbH (fka Kraft Foods CEEMA GmbH) |
Austria | |
| Mondelez Oesterreich GmbH | Austria | |
| Mondelez Oesterreich Production GmbH | Austria | |
| Salzburger Suesswarenfabrik K.G. | Austria | |
| Fulmer Corporation Limited | Bahamas | |
| Mondelez Bahrain Biscuits WLL | Bahrain | |
| Mondelez Bahrain W.L.L. | Bahrain | |
| OOO Mondelez International Bel | Belarus | |
| Confibel SPRL | Belgium | |
| Kraft Foods Belgium Intellectual Property | Belgium | |
| Mondelez Belgium Biscuits Production NV | Belgium | |
| Mondelez Belgium BVBA | Belgium | |
| Mondelez Belgium Chocolate Production BVBA | Belgium | |
| Mondelez Belgium Manufacturing Services BVBA | Belgium | |
| Mondelez Belgium Production BVBA | Belgium | |
| Mondelez Belgium Services BVBA | Belgium | |
| Mondelez Namur Production SPRL | Belgium | |
| Mondelez de Alimentos Bolivia S.R.L. | Bolivia | |
| Cadbury Botswana (Proprietary) Limited | Botswana | |
| Cadbury Confy (Proprietary) Limited | Botswana | |
| Mondelez Brasil Ltda. | Brazil | |
| Mondelez Brasil Norte Nordeste Ltda. | Brazil | |
| Mondelez Bulgaria EOOD | Bulgaria | |
| Mondelez Bulgaria Holding AD | Bulgaria | |
| Mondelez Bulgaria Production EOOD | Bulgaria | |
| 152999 Canada Inc. | Canada |
| 3072440 Nova Scotia Company |
Canada | |
| MCI Finance Inc. |
Canada | |
| Mondelez Asia Pacific (Alberta) GP ULC |
Canada | |
| Mondelez Canada Holdings Two ULC |
Canada | |
| Mondelez Canada Holdings ULC |
Canada | |
| Mondelez Canada Inc. |
Canada | |
| TCI Realty Holdings Inc. |
Canada | |
| Mondelez Chile S.A. |
Chile | |
| Cadbury Confectionery (Guangzhou) Co., Limited |
China | |
| Cadbury Food Co. Limited China |
China | |
| Cadbury Marketing Services Co Ltd Shanghai |
China | |
| Mondelez Beijing Food Co., Ltd. |
China | |
| Mondelez China Co., Ltd |
China | |
| Mondelez Jiangmen Food Co., Ltd. |
China | |
| Mondelez Shanghai Business Services Co., Ltd. |
China | |
| Mondelez Shanghai Food Co., Ltd. |
China | |
| Mondelez Shanghai Foods Corporate Management Co., Ltd. |
China | |
| Mondelez Suzhou Food Co., Ltd. |
China | |
| Nabisco Food (Suzhou) Co. Ltd. |
China | |
| Mondelez Colombia S.A.S. |
Colombia | |
| Servicios Comerciales Colombia SAS |
Colombia | |
| El Gallito Industrial, S.A. |
Costa Rica | |
| Mondelez Business Services Costa Rica Limitada |
Costa Rica | |
| Mondelez Costa Rica Limitada |
Costa Rica | |
| Mondelez Zagreb d.o.o. |
Croatia | |
| Mondelez CR Biscuit Production s.r.o. |
Czech Republic | |
| Mondelez Czech Republic s.r.o. |
Czech Republic | |
| Opavia Lu s.r.o. |
Czech Republic | |
| Kraft Foods Danmark Intellectual Property ApS |
Denmark | |
| Mondelez Danmark ApS |
Denmark | |
| Mondelez Dominicana, S.A. |
Dominican Republic | |
| Mondelez Ecuador Cia. Ltda. |
Ecuador | |
| Mondelez Egypt Foods S.A.E. |
Egypt | |
| Mondelez Egypt Trading LLC |
Egypt | |
| Mondelez El Salvador, Ltda. de C.V. |
El Salvador | |
| Mondelez Eesti Osauhing |
Estonia | |
| Kraft Foods Finland Production Oy |
Finland | |
| Mondelez Finland OY |
Finland | |
| Carambar and Co |
France | |
| CPK Services |
France | |
| Generale Biscuit Glico France |
France | |
| Generale Biscuit SAS |
France | |
| Kraft Foods France Biscuit S.A.S. |
France | |
| Kraft Foods France Intellectual Property S.A.S. |
France | |
| Mondelez France Antilles Guyane Distribution SAS |
France | |
| Mondelez France Biscuit Distribution SAS |
France | |
| Mondelez France Biscuits Production SAS |
France | |
| Mondelez France Confectionery Production SAS |
France | |
| Mondelez France Ocean Indien Distribution SAS |
France | |
| Mondelez France R&D SAS |
France | |
| Mondelez France S.A.S. |
France | |
| Mondelez Strasbourg Production S.A.S. |
France | |
| Mondelez Toulouse Confectionery Production SAS |
France | |
| Mondelez Georgia LLC |
Georgia | |
| Carlton Lebensmittel Vertriebs GmbH |
Germany |
| Don Snack Foods Handelsgesellschaft GmbH |
Germany | |
| Kraft Foods Deutschland Biscuits Grundstuecksverwaltungs GmbH & Co. KG |
Germany | |
| Kraft Foods Deutschland Holding Grundstuecksverwaltungs GmbH & Co. KG |
Germany | |
| Kraft Foods Deutschland Production Grundstuecksverwaltungs GmbH & Co. KG |
Germany | |
| Marabou GmbH |
Germany | |
| Mondelez Deutschland Biscuits Production GmbH |
Germany | |
| Mondelez Deutschland GmbH |
Germany | |
| Mondelez Deutschland R&D GmbH |
Germany | |
| Mondelez Deutschland Services GmbH & Co. KG |
Germany | |
| Mondelez Deutschland Snacks Production GmbH & Co. KG |
Germany | |
| Suchard GmbH |
Germany | |
| Tobler GmbH |
Germany | |
| Cadbury Ghana Limited |
Ghana | |
| Lapworth Commodities Limited |
Ghana | |
| Mondelez Hellas Production S.A. |
Greece | |
| Mondelez Hellas S.A. |
Greece | |
| Mondelez Korinthos Production S.A. |
Greece | |
| Mondelez Guatemala, Ltda. |
Guatemala | |
| Landers Centro Americana, Fabricantes de Molinos Marca “Corona” S.A. de C.V. |
Honduras | |
| Mondelez Honduras, S. de R.L. |
Honduras | |
| Cadbury Trading Hong Kong Ltd. |
Hong Kong | |
| Mondelez Hong Kong Limited |
Hong Kong | |
| Gyori Keksz Kft SARL |
Hungary | |
| Mondelez Hungaria IP Kft |
Hungary | |
| Mondelez Hungaria Kft |
Hungary | |
| C S Business Services (India) Pvt. Limited |
India | |
| Induri Farm Limited |
India | |
| KJS India Private Limited |
India | |
| Mondelez India Foods Private Limited |
India | |
| P.T. Cadbury Indonesia |
Indonesia | |
| P.T. Cipta Manis Makmur |
Indonesia | |
| P.T. Kraft Symphoni Indonesia |
Indonesia | |
| P.T. Kraft Ultrajaya Indonesia |
Indonesia | |
| P.T. Mondelez Indonesia |
Indonesia | |
| P.T. Mondelez Indonesia Manufacturing |
Indonesia | |
| P.T. Mondelez Indonesia Trading |
Indonesia | |
| Alreford DAC (fka Alreford Limited) |
Ireland | |
| Berkeley Re DAC (fka Berkeley Re Limited) |
Ireland | |
| Cadbury Schweppes Ireland Limited |
Ireland | |
| Cadbury Schweppes Treasury America |
Ireland | |
| Cadbury Schweppes Treasury International |
Ireland | |
| Cadbury Schweppes Treasury Services |
Ireland | |
| Kraft Foods Ireland Intellectual Property Ltd |
Ireland | |
| Mondelez Ireland Insurance Holdings Ltd. |
Ireland | |
| Mondelez Ireland Limited |
Ireland | |
| Mondelez Ireland Production Limited |
Ireland | |
| Trebor (Dublin) Limited |
Ireland | |
| Trebor Ireland Limited |
Ireland | |
| Greencastle Drinks |
Ireland | |
| Cote d’Or Italia S.r.l. |
Italy | |
| Fattorie Osella S.p.A. |
Italy | |
| Kraft Foods Italia Intellectual Property S.r.l. |
Italy | |
| Mondelez Italia Biscuits Production S.p.A |
Italy | |
| Mondelez Italia S.r.l. |
Italy | |
| Mondelez Italia Services S.r.l. |
Italy |
| Kraft Foods Jamaica Limited | Jamaica | |
| Kraft Foods Japan K.K. | Japan | |
| Meito Adams Company Limited | Japan | |
| Mondelez Japan Ltd | Japan | |
| Mondelez Japan Services GK | Japan | |
| Mondelez Kazakhstan LLP | Kazakhstan | |
| Cadbury Kenya Limited | Kenya | |
| Dong Suh Foods Corporation | Korea | |
| Migabang Limited Company | Korea | |
| SIA Mondelez Latvija | Latvia | |
| Cadbury Adams Middle East Offshore S.A.L. | Lebanon | |
| Cadbury Adams Middle East S.A.L. | Lebanon | |
| AB Kraft Foods Lietuva | Lithuania | |
| UAB Mondelez Baltic | Lithuania | |
| UAB Mondelez Lietuva Production | Lithuania | |
| Adams Marketing (M) Sdn Bhd | Malaysia | |
| Cadbury Confectionery Malaysia Sdn. Bhd. | Malaysia | |
| Cadbury Confectionery Sales (M) Sdn. Bhd. | Malaysia | |
| Mondelez Malaysia Sales Sdn. Bhd. | Malaysia | |
| Mondelez Malaysia Sdn. Bhd. | Malaysia | |
| Cadbury Mauritius Ltd | Mauritius | |
| Corporativo Mondelez, S. en N.C. de C.V. | Mexico | |
| Mondelez Holding, S. de R.L. de C.V. | Mexico | |
| Mondelez Mexico, S. de R.L. de C.V. | Mexico | |
| Productos Mondelez, S. de R.L. de C.V. | Mexico | |
| Servicios Integrales Mondelez, S. de R.L. de C.V. | Mexico | |
| Servicios Mondelez, S. de R.L. de C.V. | Mexico | |
| Mondelez Maroc SA | Morocco | |
| STE Immobiliere Ibrahim D’Ain Sebaa | Morocco | |
| Springer Schokoladenfabrik (Pty) Limited | Namibia | |
| Abades B.V. | Netherlands | |
| Aztecanana BV | Netherlands | |
| Cadbury CIS B.V. | Netherlands | |
| Cadbury Enterprises Holdings B.V. | Netherlands | |
| Cadbury Holdings B.V. | Netherlands | |
| Cadbury Netherlands International Holdings B.V. | Netherlands | |
| Gernika, B.V. | Netherlands | |
| Kraft Foods Central & Eastern Europe Service B.V. | Netherlands | |
| Kraft Foods Česko Holdings BV | Netherlands | |
| Kraft Foods Entity Holdings B.V. | Netherlands | |
| Kraft Foods Holland Holding BV | Netherlands | |
| Kraft Foods Intercontinental Netherlands C.V. | Netherlands | |
| Kraft Foods LA MB Holding B.V. | Netherlands | |
| Kraft Foods LA MC B.V. | Netherlands | |
| Kraft Foods LA NMB B.V. | Netherlands | |
| Kraft Foods LA NVA B.V. | Netherlands | |
| Kraft Foods LA VA Holding B.V. | Netherlands | |
| Kraft Foods Nederland Biscuit C.V. | Netherlands | |
| Kraft Foods Nederland Intellectual Property BV | Netherlands | |
| Kraft Foods North America and Asia B.V. | Netherlands | |
| KTL S. de R.L. de C.V. | Netherlands | |
| Mondelez Coffee Holdco BV | Netherlands | |
| Mondelez Espana Biscuits Holdings B.V. | Netherlands | |
| Mondelez International Holdings Netherlands B.V. | Netherlands | |
| Mondelez Nederland B.V. | Netherlands |
| Mondelez Nederland Services B.V. | Netherlands | |
| Mondelez Netherlands RUS Holdings B.V. | Netherlands | |
| Mondelez New Zealand | New Zealand | |
| Mondelez New Zealand Investments | New Zealand | |
| Mondelez Nicaragua, S.A. | Nicaragua | |
| Cadbury Nigeria PLC | Nigeria | |
| Freia A/S | Norway | |
| Kraft Foods Norge Intellectual Property AS | Norway | |
| Mondelez Norge A/S | Norway | |
| Mondelez Norge Production AS | Norway | |
| Mondelez Pakistan Limited | Pakistan | |
| Mondelez Panama, S. de R.L. | Panama | |
| Mondelez Peru S.A. | Peru | |
| Mondelez Philippines, Inc. | Philippines | |
| Nabisco Philippines Inc. | Philippines | |
| Lu Polska Sp. z.o.o. | Poland | |
| Mondelez International RD&Q Sp. z.o.o. | Poland | |
| Mondelez Polska Production sp. z.o.o. | Poland | |
| Mondelez Polska Sp. z.o.o. | Poland | |
| Mondelez Portugal Iberia Production, S.A. | Portugal | |
| Mondelez Puerto Rico LLC | Puerto Rico | |
| Mondelez Romania S.A. | Romania | |
| Mon’delez Rus LLC | Russia | |
| Mondelez Arabia for Trading LLC | Saudi Arabia | |
| Nabisco Arabia Co. Ltd. | Saudi Arabia | |
| Mondelez d.o.o. Beograd | Serbia | |
| Mondelez Procurement d.o.o. Beograd | Serbia | |
| Kraft Foods Holdings Singapore Pte. Ltd. | Singapore | |
| Kraft Foods Trading Singapore Pte. Ltd. | Singapore | |
| Kraft Helix Singapore Pte. Ltd. | Singapore | |
| Kuan Enterprises Pte. Ltd. | Singapore | |
| Mondelez Asia Pacific Pte. Ltd. | Singapore | |
| Mondelez Business Services AP Pte Ltd | Singapore | |
| Mondelez International AMEA PTE. Ltd. (fka Cadbury Enterprises Pte. Ltd.) |
Singapore | |
| Mondelez Singapore Pte. Ltd. | Singapore | |
| Symphony Biscuits Holdings Pte. Ltd. | Singapore | |
| Mondelez European Business Services Centre s.r.o. | Slovakia | |
| Mondelez Slovakia Holding a.s. | Slovakia | |
| Mondelez Slovakia Intellectual Property s.r.o. | Slovakia | |
| Mondelez Slovakia s.r.o. | Slovakia | |
| Mondelez SR Production s.r.o. | Slovakia | |
| Mondelez, trgovska druzba, d.o.o, Ljubjana | Slovenia | |
| Cadbury South Africa (Pty) Limited | South Africa | |
| Chapelat-Humphries Investments (Pty) Limited | South Africa | |
| Kraft Foods Services South Africa (Pty) Ltd. | South Africa | |
| Mondelez South Africa (Pty) Ltd. | South Africa | |
| South Africa LP | South Africa | |
| Kraft Foods Espana Holdings S.L.U. | Spain | |
| Kraft Foods Espana Intellectual Property SLU | Spain | |
| Mondelez Espana Commercial, S.L.U. | Spain | |
| Mondelez Espana Confectionery Production, SLU | Spain | |
| Mondelez Espana Galletas Production, S.L.U. | Spain | |
| Mondelez Espana Postres Production, S.A.U. | Spain | |
| Mondelez Espana Production, S.L.U. | Spain | |
| Mondelez Espana Services, S.L.U. | Spain |
| Mondelez Iberia Holdings, S.L.U. | Spain | |
| Mondelez Iberia Snacking Holdings, S.L.U. | Spain | |
| Chapelat Swaziland (Proprietary) Limited | Swaziland | |
| Cadbury (Swaziland) (Pty) Limited | Swaziland | |
| Kraft Foods Sverige Holding AB | Sweden | |
| Kraft Foods Sverige Intellectual Property AB | Sweden | |
| Mondelez Sverige AB | Sweden | |
| Mondelez Sverige Production AB | Sweden | |
| Kraft Foods Biscuits Holding GmbH | Switzerland | |
| Kraft Foods Holding (Europa) GmbH | Switzerland | |
| Kraft Foods Schweiz Holding GmbH | Switzerland | |
| Mondelez CPTS Schweiz GmbH | Switzerland | |
| Mondelez Europe GmbH | Switzerland | |
| Mondelez Europe Procurement GmbH | Switzerland | |
| Mondelez Europe Services GmbH | Switzerland | |
| Mondelez International Finance AG | Switzerland | |
| Mondelez Schweiz GmbH | Switzerland | |
| Mondelez Schweiz Holding GmbH | Switzerland | |
| Mondelez Schweiz Production GmbH | Switzerland | |
| Mondelez World Travel Retail GmbH | Switzerland | |
| Taloca GmbH | Switzerland | |
| Mondelez Taiwan Limited | Taiwan | |
| Mondelez (Thailand) Co., Ltd. | Thailand | |
| Mondelez International (Thailand) Co., Ltd | Thailand | |
| Kraft Foods (Trinidad) Unlimited | Trinidad | |
| Kent Gida Maddeleri Sanayii ve Ticaret Anonim Sirketi | Turkey | |
| Cadbury South Africa (Holdings) | United Kingdom | |
| LLC Chipsy LYUKS | Ukraine | |
| Private Joint Stock Company “Mondelez Ukraina” | Ukraine | |
| Mondelez Eastern Europe Middle East & Africa FZE |
United Arab Emirates | |
| Brentwick Limited | United Kingdom | |
| Cadbury Eight LLP | United Kingdom | |
| Cadbury Financial Services | United Kingdom | |
| Cadbury Four LLP | United Kingdom | |
| Cadbury International Limited | United Kingdom | |
| Cadbury Limited | United Kingdom | |
| Cadbury Nine LLP | United Kingdom | |
| Cadbury Nominees Limited | United Kingdom | |
| Cadbury Russia Limited | United Kingdom | |
| Cadbury Russia Two Ltd | United Kingdom | |
| Cadbury Schweppes Finance Limited | United Kingdom | |
| Cadbury Schweppes Investments Ltd | United Kingdom | |
| Cadbury Schweppes Overseas Limited | United Kingdom | |
| Cadbury Seven LLP | United Kingdom | |
| Cadbury Six LLP | United Kingdom | |
| Cadbury Ten LLP | United Kingdom | |
| Cadbury Three LLP | United Kingdom | |
| Cadbury Two LLP | United Kingdom | |
| Cadbury UK Limited | United Kingdom | |
| Cadbury US Holdings Limited | United Kingdom | |
| Chromium Acquisitions Limited | United Kingdom | |
| Chromium Assets Limited | United Kingdom | |
| Chromium Suchex LLP | United Kingdom | |
| Chromium Suchex No. 3 LLP | United Kingdom | |
| Craven Keiller | United Kingdom |
| Ernest Jackson & Co Limited | United Kingdom | |
| Galactogen Products Limited | United Kingdom | |
| Green & Black’s Limited | United Kingdom | |
| Hesdin Investments Limited | United Kingdom | |
| Kraft Foods Investment Holdings UK Limited | United Kingdom | |
| Kraft Foods UK Intellectual Property Limited | United Kingdom | |
| Kraft Foods UK IP & Production Holdings Ltd. | United Kingdom | |
| Kraft Russia Limited | United Kingdom | |
| L. Rose & Co., Limited | United Kingdom | |
| Mondelez UK Biscuit Financing Ltd | United Kingdom | |
| Mondelez UK Confectionery Production Limited | United Kingdom | |
| Mondelez UK Finance Company Limited | United Kingdom | |
| Mondelez UK Holdings & Services Limited | United Kingdom | |
| Mondelez UK Limited | United Kingdom | |
| Mondelez UK Production Limited | United Kingdom | |
| Mondelez UK R&D Limited | United Kingdom | |
| Reading Scientific Services Limited | United Kingdom | |
| Schweppes Limited | United Kingdom | |
| Somerdale Limited | United Kingdom | |
| Speedy Assetco Limited | United Kingdom | |
| The Old Leo Company Limited | United Kingdom | |
| Trebor Bassett Limited | United Kingdom | |
| Trebor International Limited | United Kingdom | |
| Vantas International Limited | United Kingdom | |
| Back to Nature Food Company, LLC | United States | |
| Enjoy Life Natural Brands, LLC | United States | |
| Intercontinental Brands LLC | United States | |
| Intercontinental Great Brands LLC | United States | |
| KFI-USLLC IX | United States | |
| KFI-USLLC VII | United States | |
| KFI-USLLC VIII | United States | |
| KFI-USLLC XI | United States | |
| KFI-USLLC XIII | United States | |
| KFI-USLLC XIV | United States | |
| KFI-USLLC XVI | United States | |
| Kraft Foods Asia Pacific Services LLC | United States | |
| Kraft Foods Biscuit Brands Kuan LLC | United States | |
| Kraft Foods Holdings LLC | United States | |
| Kraft Foods International Beverages LLC | United States | |
| Kraft Foods International Biscuit Holdings LLC | United States | |
| Kraft Foods International Europe Holdings LLC | United States | |
| Kraft Foods International Holdings Delaware LLC | United States | |
| Kraft Foods International Services LLC | United States | |
| Kraft Foods Latin America Holding LLC | United States | |
| Kraft Foods R & D, Inc. | United States | |
| Mondelēz BTN Holdings LLC | United States | |
| Mondelēz Global LLC | United States | |
| Mondelez International Delaware LLC | United States | |
| Mondelez International Financing Delaware LLC | United States | |
| Mondelēz International Holdings LLC | United States | |
| Mondelēz International Service Holdings LLC | United States | |
| Mondelēz International Service LLC | United States | |
| Mondelez International SM, LLC | United States | |
| Mondelēz International, Inc. | United States | |
| Mondelez Suchex Holdings LLC | United States |
| Redbird Services LLC | United States | |
| Suchex IV LLC | United States | |
| C.A.S. Uruguay S.A. | Uruguay | |
| Mondelez Uruguay S.A. | Uruguay | |
| Cadbury Adams, S.A. | Venezuela | |
| Cadbury Beverages de Venezuela CA | Venezuela | |
| Compania Venezolana de Conservas C.A. | Venezuela | |
| Covenco Holding C.A. | Venezuela | |
| Kraft Foods Venezuela, C. A. | Venezuela | |
| Promotora Cadbury Adams, C.A. | Venezuela | |
| Tevalca Holdings C.A. | Venezuela | |
| Mondelez Kinh Do Vietnam JSC (fka Binh Doung Kinh Do Corporation) |
Vietnam | |
| North Kinh Do One Member Company Limited | Vietnam | |
| Cadbury Schweppes Zimbabwe (Private) Limited | Zimbabwe |
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (File No. 333-194330) and Form S-8 (Nos. 333-197088, 333-184178, 333-183993, 333-182066, 333-174665, 333-165736, 333-133559 and 333-125992) of Mondelēz International, Inc. of our reports dated February 24, 2017 relating to the consolidated financial statements, financial statement schedule and the effectiveness of internal control over financial reporting, which appear in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
Chicago, Illinois
February 24, 2017
EXHIBIT 31.1
Certifications
I, Irene B. Rosenfeld, certify that:
| 1. | I have reviewed this annual report on Form 10-K of Mondelēz International, Inc.; |
| 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(s) 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 control over financial reporting, or caused such internal control 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(s) 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. |
Date: February 24, 2017
| /s/ IRENE B. ROSENFELD |
| Irene B. Rosenfeld Chairman and Chief Executive Officer |
EXHIBIT 31.2
Certifications
I, Brian T. Gladden, certify that:
| 1. | I have reviewed this annual report on Form 10-K of Mondelēz International, Inc.; |
| 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(s) 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 control over financial reporting, or caused such internal control 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(s) 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. |
Date: February 24, 2017
| /s/ BRIAN T. GLADDEN |
| Brian T. Gladden |
| Executive Vice President and |
| Chief Financial Officer |
EXHIBIT 32.1
CERTIFICATIONS OF
CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
I, Irene B. Rosenfeld, Chairman and Chief Executive Officer of Mondelēz International, Inc. (“Mondelēz International”), certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that Mondelēz International’s Annual Report on Form 10-K for the period ended December 31, 2016, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in Mondelēz International’s Annual Report on Form 10-K fairly presents in all material respects Mondelēz International’s financial condition and results of operations.
| /s/ IRENE B. ROSENFELD |
| Irene B. Rosenfeld |
| Chairman and Chief Executive Officer |
| February 24, 2017 |
I, Brian T. Gladden, Executive Vice President and Chief Financial Officer of Mondelēz International, Inc. (“Mondelēz International”), certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that Mondelēz International’s Annual Report on Form 10-K for the period ended December 31, 2016, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in Mondelēz International’s Annual Report on Form 10-K fairly presents in all material respects Mondelēz International’s financial condition and results of operations.
| /s/ BRIAN T. GLADDEN |
| Brian T. Gladden |
| Executive Vice President and |
| Chief Financial Officer |
| February 24, 2017 |
A signed original of these written statements 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 Mondelēz International, Inc. and will be retained by Mondelēz International, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.