Performance results were converted to “payout multipliers” (interpolating between each award level, as appropriate) for each metric, and then multiplied together to determineImportant Notice Regarding the final payout. The KGM Q4 STIP awards were calculated and paid after the endAvailability of the quarter in March 2019 in a single payment (net of any taxes withheld).
|
| | | | | | | | | | | | | | |
| | | | | KGM Q4 STIP Metric Category | | | | |
| | | Annualized | | Growth (Pod Vol.) | | Profit (EBIT) | | Net Working Capital | | | | |
| NEO | | Target % of Base | | Result (Good) | | Result (Acceptable) | | Result (Excellent) | | Total Payout Multiplier | | KGM Q4 STIP Total Payout ($) |
| Robert Gamgort | | 125% | | 8.6% Growth (Payout multiplier: 1.57) | | 11.0% Growth (Payout multiplier: 1.57) | | 524 bps (Payout multiplier: 1.26) | | 3.1 | | $ | 1,453,125 |
|
| Ozan Dokmecioglu | | 80% | | | 3.1 | | $ | 496,000 |
|
DPS 2018 MIP:
Plan Design
In accordance with the merger agreement governing the DPS Merger, the DPS 2018 MIP payout was bifurcated into two segments:
The first segment, covering the pre-merger portion of the year (January 1, 2018 through July 8, 2018), represented a pro-rata payout at the greater of target or actual performanceProxy Materials for the pre-merger period.
Annual Meeting: The second segment, covering the post-merger portion of the year (July 9, 2018 through December 31, 2018), represented a pro-rata payout based on actual performance for the full fiscal year 2018 performance. Payout for both segments was madeAnnual Report, Notice & Proxy Statement are available at the same time in March 2019 following the end of the fiscal year.
Performance payouts for both segments of the DPS 2018 MIP were based on the same metrics: Consolidated Net Sales and Consolidated Income from Operations. For Messrs. Collins and Johnston an additional metric of their respective business unit segment’s Standard Operating Profit also applied.
|
| | | | | | | | | | |
| | | | | | | DPS 2018 MIP Plan Metrics |
NEO | | Target as % of Base Salary | | Payout Opportunity | | Consolidated Net Sales | | Consolidated Income from Operations | | Business Segment Standard Operating Profit |
| James Baldwin | | 70% | | 0-200% | | 40% | | 60% | | N/A |
| Rodger Collins | | 85% | | 0-200% | | 40% | | 30% | | 30% |
| James Trebilcock | | 75% | | 0-200% | | 40% | | 60% | | N/A |
| Larry Young | | 150% | | 0-200% | | 40% | | 60% | | N/A |
| Martin Ellen | | 90% | | 0-200% | | 40% | | 60% | | N/A |
| James Johnston | | 85% | | 0-200% | | 40% | | 30% | | 30% |
|
| | | | | | | | | | | | | | |
| | | | | DPS 2018 MIP Pre-Merger Plan Metrics | | | | |
| NEO | | Target as % of Base Salary | | Consolidated Net Sales | | Consolidated Income from Operations | | Business Segment Standard Operating Profit | | Pre-Merger Payout Percent | | FY 2018 Pre-Merger Pro-rata Payout ($) |
| James Baldwin | | 70% | | 159.2% | | 104.7% | | N/A | | 126.45% | |
| $227,562 |
|
| Rodger Collins | | 85% | | 159.2% | | 104.7% | | 0% | | 100%(1) | | $275,962(2) |
|
| James Trebilcock | | 75% | | 159.2% | | 104.7% | | N/A | | 126.45% | | $254,865(2) |
|
| Larry Young | | 150% | | 159.2% | | 104.7% | | N/A | | 126.45% | | $1,129,476(3) |
|
| Martin Ellen | | 90% | | 159.2% | | 104.7% | | N/A | | 126.45% | | $367,718(3) |
|
| James Johnston | | 85% | | 159.2% | | 104.7% | | 200% | | 155.06% | |
| $427,899 |
|
| |
(1) | Actual pre-merger MIP performance for Mr. Collins was 95.06%; however, the merger agreement governing the DPS Merger stipulated that the payout for the pre-merger segment of the DPS 2018 MIP would be no less than 100% target payout. |
| |
(2) | Both Mr. Collins and Mr. Trebilcock were previously eligible for the DPS Change in Control Plan and received a cash payout under such plan equal to $3,211,271 and $2,056,927, respectively, which included the payout of the pre-merger segment 2018 MIP at 100% target payout. Mr. Trebilcock was paid the balance of the pre-DPS Merger pro-rata DPS 2018 MIP calculated as the difference between the 126.45% actual payout and the 100% target payout. |
| |
(3) | Mr. Young and Mr. Ellen were paid out the pre-DPS Merger DPS 2018 MIP earned, prorated up to their last day worked, July 8, 2018. |
|
| | | | | | | | | | | | | | |
| | | | | DPS 2018 MIP Post-Merger Plan Metrics | | | | |
| NEO | | Target % of Base | | Consolidated Net Sales | | Consolidated Income from Operations | | Business Segment Standard Operating Profit | | Post-Merger Payout Percent | | FY 2018 Post-Merger Pro-rata Payout ($) |
| James Baldwin | | 70% | | 107.5% | | 93.0% | | N/A | | 98.83% | | $ | 165,628 |
|
| Rodger Collins | | 85% | | 107.5% | | 93.0% | | 0.0% | | 70.92% | | $ | 182,259 |
|
| James Trebilcock | | 75% | | 107.5% | | 93.0% | | N/A | | 98.83% | | $ | 185,501 |
|
James Johnston (1) | | 85% | | 107.5% | | 93.0% | | 157.6% | | 118.19% | | $ | 32,818 |
|
| |
(1) | Mr. Johnston’s post-DPS Merger payout was prorated from July 9, 2018 to his last day worked, July 27, 2018. |
Long-Term Incentive Compensation Awards
We strongly believe in encouraging stock ownership by our NEOs. We have designed certain equity compensation programs to promote stock ownership and investment in the Company in order to align the interests of our executives with those of our stockholders.
We believe equity awards further focus our executives on increasing stockholder value. Generally, annual equity awards under the LTIP and Matching RSUs are subject to five-year cliff vesting tied to continued employment with the Company. Matching RSUs under Elite are also subject to ownership of a minimum amount of KDP shares of Common Stock by the end of the applicable investment period. Our equity compensation programs encourage retention of and long-term focus by our NEOs by giving them an ownership stake in our future growth and financial success. The programs also provide a direct link between the interests of our stockholders and our NEOs and other eligible leadership employees.
Annual Equity Awards under the LTIP
Awards under the LTIP recognize strong collective financial performance and align each NEO’s interests with our organizational goals and our stockholders’ long-term financial interests. Annual long-term equity awards granted under the LTIP are generally awarded in March; however due to the timing of the DPS Merger announcement, the awards for legacy-KGM executives were delayed until the closing of the DPS Merger and were subsequently granted in the form of RSUs in August 2018. In light of the delayed grant of the awards to legacy-KGM executives and the nature of the cliff-vesting conditions, the RemCo approved reducing the vesting period of the LTIP grants made in August 2018 by a corresponding 5 months. As a result, the LTIP award granted to Mr. Dokmecioglu in the form of 111,159 RSUs in August 2018 has a 4 year and 7 month cliff-vesting period. Mr. Gamgort did not receive an annual LTIP grant following the closing of the DPS Merger.
Separately, pursuant to the terms of the merger agreement governing the DPS Merger, annual LTIP awards for legacy-DPS executives were granted in March 2018, according to the historical schedule and target amounts set forth below.
|
| | |
NEO | | RSUs (#) |
Larry D. Young | | 51,617 |
Martin M. Ellen | | 13,420 |
Rodger L. Collins | | 12,474 |
James L. Baldwin | | 9,033 |
James J. Johnston | | 12,474 |
James Trebilcock | | 9,033— — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — |
Accordingly, Messrs. Baldwin, Collins, Ellen, Johnston, Trebilcock and Young were granted annual LTIP awards in March 2018. These awards were granted as 100% time-based RSUs. However, pursuant to the termsKEURIG DR PEPPER INC.
Annual Meeting of the DPS Merger these RSUs were fully accelerated and converted to shares of KDP Common Stock on a one-for-one basis, along with a special cash dividend of $103.75 per share.
Please see “—Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table” for additional information on our long-term equity program and actual awards granted in fiscal 2018.
Investment Programs
The primary way we encourage stock ownershipStockholdersJune 9, 2022 10:00 AM ET
This proxy is solicited by our NEOs and executives is through participation in Elite. Under Elite, certain executives commit to a certain level of investment (within a minimum and maximum range) in KDP Common Stock (the “Commitment Amount”) according to their job level and business scope (the “Investment Target Range”). The opportunity to participate in Elite is a one-time opportunity upon achieving eligibility, although participants who experience a promotion into a higher level of the Elite program are given an opportunity to increase their investment to the level commensurate with their new title. For each share of KDP Common Stock purchased (each, an “Elite Share”) up to the Commitment Amount, the executive receives one Matching RSU, which award is made upon the executive’s entry into Elite and is subject to a five-year cliff vesting period subject to the executive’s ongoing employment with the Company and the ongoing ownership of the Commitment Amount. Each executive has a one-year investment period (the “Investment Period”) to purchase Elite Shares to meet his or her Commitment Amount. At the end of the Investment Period, if the executive has purchased Elite Shares equivalent to his or her Commitment Amount, and continues to hold the Elite Shares for the remainder of the vesting period, the executive will retain (and is eligible to vest in), the full number of Matching RSUs awarded. However, if the executive has achieved less than the minimum of his or her Investment Target Range, all Matching RSUs are immediately cancelled and forfeited. If the executive has achieved at least the minimum of his or her Investment Target Range but less than their Commitment Amount, Matching RSUs are reduced to match the actual investment level with the balance immediately cancelled and forfeited.
In 2018, Messrs Baldwin and Trebilcock were offered the opportunity and participated in Elite, each receiving a grant of Matching RSUs with a value of $3,000,000 to match their Commitment Amount. Messrs. Gamgort and Dokmecioglu participated in Elite prior to the DPS Merger as part of the KGM investment program and were therefore not eligible to participate again. Mr. Collins was also not eligible to participate in Elite based on the compensation arrangements entered into with Mr. Collins at the time of the DPS Merger, as more fully described in this Proxy Statement below under Additional Payments for Certain NEOs.
When benchmarking the value of long-term incentive awards as part of our executives’ compensation, the RemCo takes into account twenty percent (20%) of the Matching RSUs awarded to such executive.
Certain Payments Made to NEOs Upon the Closing of the DPS Merger
DPS Equity Conversions
At the time of the closing of the DPS Merger and in accordance with the terms of the merger agreement, all unvested and outstanding stock awards were converted as follows:
Performance Share Units (PSUs) were fully accelerated at target and converted to shares of KDP Common Stock on a one-for-one basis along with a special cash dividend of $103.75 per share;
Restricted Stock Units (RSUs) were fully accelerated and converted to shares of KDP Common Stock on a one-for-one basis, along with a special cash dividend of $103.75 per share; and
In general, stock options were fully accelerated and cashed out for $103.75 less the strike price of each option, and converted to shares of KDP Common Stock on a one-for-one basis. However, holders of stock options who elected not to have their stock options accelerated had the strike price and the number of options adjusted to preserve the economic value of the option on the closing date.
Refer to the Option Exercises and Stock Award Vesting table for further details.
Additional payments for certain NEOs
At the time of the closing of the DPS Merger, Mr. Trebilcock and Mr. Collins each received a one-time cash payment (less applicable withholding) of $2,056,927, and $3,211,271, respectively, in exchange for forfeiting rights to future payments under DPS severance and change in control plans which existed at the time of the DPS Merger, and in lieu of future severance payments by KDP.
Other Benefits and Perquisites
General
Our NEOs participate in the same benefit plans generally available to our employees. These benefit plans include health insurance, life insurance and disability coverage. NEOs receive the same coverage as the rest of our employees, with the exception of legacy-DPS NEOs who were eligible for executive disability coverage.
Perquisites
We provide NEOs with reasonable perquisites on an individual basis. For Legacy-DPS NEOs, these perquisites generally included car allowance, service allowance, executive disability, and executive physicals. Neither Mr. Gamgort nor Mr. Dokmecioglu received these perquisites in fiscal 2018 and they have been discontinued for all executives beginning in 2019. Perquisites generally do not make up a significant part of each NEO’s total compensation. All perquisites with an aggregate value of at least $10,000 received by an NEO are detailed in the footnotes to the Summary Compensation Table.
Retirement Plans
We provide retirement benefits to our NEOs through our legacy retirement plans, as further described in “--Pensions.”
Potential Payments upon Termination of Employment
The employment agreements with our NEOs and our compensation plans provide for certain payments and incremental benefits if an NEO’s employment is terminated under certain circumstances. There are no tax gross-ups provided in connection with these payments or incremental benefits. These payments and incremental benefits are discussed in “—Potential Payments upon Termination or Change in Control.”
Tax and Accounting Implications
Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), imposes an annual limit of $1 million per person on the corporate tax deduction for compensation paid by a company to certain of its executive officers. Until 2018, the limit did not apply to a company’s chief financial officer, or to certain performance-based compensation that met specific exemption requirements. The Tax Cuts and Jobs Act, signed into law in December 2017 (“Tax Reform Act”), substantially modified Section 162(m) of the Code by, among other things, applying the $1 million limit on deductibility to chief financial officers and eliminating the exemption for performance-based compensation. As a result, beginning in 2018, compensation paid to each of our NEOs in excess of $1 million will generally be nondeductible, whether or not it is performance-based.
Prior to the Tax Reform Act, the DPS Compensation Committee had generally intended most components of executive compensation to qualify as tax deductible for federal income tax purposes, to the extent practicable in particular hiring and compensation decisions, and consistent with the objectives and underlying philosophy of its executive compensation program. The RemCo intends to continue to maintain flexibility and the ability to pay competitive compensation by not requiring all compensation to be deductible. The Tax Reform Act also includes a transition rule under which the changes to Section 162(m) of the Code described above will not apply to compensation payable pursuant to a written binding contract that was in effect on November 2, 2017 and is not subsequently materially modified. To the extent applicable to our existing contracts and awards, the RemCo may choose to avail itself of the transition rule.
REPORT OF THE REMUNERATION AND NOMINATION COMMITTEE
In fulfilling its responsibilities, the RemCo reviewed and discussed with management the Compensation Discussion and Analysis set forth in this Proxy Statement.
In reliance on the review and discussions referred to above, the RemCo recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement and the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 (through incorporation by reference to this Proxy Statement).
|
| |
| The Remuneration and Nomination Committee |
| Peter Harf, Chair
Genevieve Hovde
Paul Michaels
Dirk Van de Put
|
Historical Executive Compensation Information
The executive compensation disclosure contained in this section reflects compensation information for 2018 for our NEOs.
Summary Compensation Table
The following table sets forth information regarding the compensation earned by our NEOs in fiscal years 2018, 2017 and 2016.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name and
Principal Position | | Year | | Salary | | Bonus | | Stock
Awards(1) | | Option Award(2) | | Non-Equity
Incentive Plan
Compensation(3) | | Change In
Pension Value
And
Nonqualified
Deferred
Compensation
Earnings(4) | | All Other
Compensation(5) | | Total |
Robert J. Gamgort(6) President & CEO | | 2018 | | $ | 721,154 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 3,496,875 |
| | $ | — |
| | $ | 29,403 |
| | $ | 4,247,432 |
|
Larry D. Young(7) Former President & CEO | | 2018 | | 623,654 |
| | — |
| | 6,159,966 |
| | — |
| | 1,129,476 |
| | 2,525 |
| | 25,566,037 |
| | 33,481,658 |
|
| | 2017 | | 1,150,000 |
| | — |
| | 4,922,265 |
| | 1,199,997 |
| | 1,126,598 |
| | 37,356 |
| | 484,931 |
| | 8,921,147 |
|
| | 2016 | | 1,132,692 |
| | — |
| | 4,799,884 |
| | 1,199,993 |
| | 2,314,605 |
| | 16,052 |
| | 468,404 |
| | 9,931,631 |
|
Ozan Dokmecioglu(8) Chief Financial Officer | | 2018 | | 384,615 |
| | — |
| | 2,600,009 |
| | — |
| | 1,193,600 |
| | — |
| | 4,195 |
| | 4,182,419 |
|
Martin M. Ellen(7 Former Chief Financial Officer | | 2018 | | 338,400 |
| | — |
| | 1,559,941 |
| | — |
| | 367,718 |
| | — |
| | 7,614,507 |
| | 9,880,566 |
|
| | 2017 | | 620,635 |
| | — |
| | 1,279,761 |
| | 311,998 |
| | 366,781 |
| | — |
| | 135,121 |
| | 2,714,296 |
|
| | 2016 | | 604,808 |
| | — |
| | 1,223,058 |
| | 305,793 |
| | 738,460 |
| | — |
| | 146,618 |
| | 3,018,737 |
|
Rodger L. Collins Pres. Direct Store Delivery | | 2018 | | 627,000 |
| | | | 1,449,978 |
| | — |
| | 458,221 |
| | — |
| | 7,037,879 |
| | 9,573,078 |
|
| | 2017 | | 622,731 |
| | — |
| | 1,189,522 |
| | 289,991 |
| | 264,610 |
| | — |
| | 128,079 |
| | 2,494,933 |
|
| | 2016 | | 604,462 |
| | — |
| | 1,159,960 |
| | 290,000 |
| | 663,134 |
| | — |
| | 128,192 |
| | 2,845,747 |
|
James L. Baldwin(9)
Chief Legal Officer, General Counsel and Secretary | | 2018 | | 496,500 |
| | — |
| | 4,197,392 |
| | — |
| | 393,190 |
| | — |
| | 2,968,650 |
| | 8,055,732 |
|
James J. Johnston(7)
Former Pres. Beverage
Concentrates & Latin America Beverages | | 2018 | | 373,789 |
| | — |
| | 1,449,978 |
| | — |
| | 460,717 |
| | — |
| | 7,071,966 |
| | 9,356,450 |
|
| | 2017 | | 622,019 |
| | — |
| | 1,189,522 |
| | 289,991 |
| | 498,629 |
| | 93,897 |
| | 210,860 |
| | 2,904,918 |
|
| | 2016 | | 604,462 |
| | — |
| | 1,159,960 |
| | 290,000 |
| | 714,546 |
| | 43,553 |
| | 201,500 |
| | 3,014,020 |
|
James Trebilcock(10) Chief Concentrate and International Officer | | 2018 | | 519,000 |
| | — |
| | 4,197,392 |
| | — |
| | 440,366 |
| | — |
| | 4,736,005 |
| | 9,892,763 |
|
| |
(1) | The amounts reported in the Stock Awards column reflect the grant date fair value associated with awards of RSUs to each of the NEOs (amounts do not include any RSUs that have been paid as dividend equivalents subsequent to the date of the award). Any PSUs granted and outstanding prior to the DPS Merger vested at closing at target performance levels or at such higher performance levels as was required pursuant to the applicable terms of a DPS benefit plan, and were settled in exchange for (i) a number of shares of KDP Common Stock equal to the number of shares underlying such PSU and (ii) an amount in cash equal to the number of shares underlying such PSU multiplied by $103.75, the special cash dividend per share amount. Any RSUs granted and outstanding prior to the DPS Merger were settled at closing in exchange for (i) a number of shares of KDP Common Stock equal to the number of shares underlying such RSU, and (ii) an amount in cash equal to the number of shares underlying such RSU multiplied by $103.75, the special cash dividend per share amount. RSUs granted following the closing of the DPS Merger vest on the fifth anniversary of the date of grant. For Messrs. Baldwin and Trebilcock, the amounts reported in the Stock Awards column include the grant date fair value of the Matching RSUs which such NEOs received on September 13, 2018 pursuant to the Elite program. Awards pursuant to the Elite program were issued, in each case, pursuant to the NEO attaining a minimum ownership level in shares of KDP Common Stock by September 5, 2019. Assumptions used to calculate these amounts (disregarding forfeiture assumptions) are included in Note 10 “Stock-Based Compensation,” to our Consolidated Financial Statements, which are included in our Annual Report on Form 10-K for the year ended December 31, 2018 (the “2018 Form 10-K”). For further information on the stock awards granted in fiscal year 2018, see “—Grants of Plan-Based Awards” beginning on page 43. |
| |
(2) | The amounts reported in the Option Awards column represent the grant date fair value associated with option grants to each of the NEOs. Even though the awards may be forfeited, the amounts do not reflect this contingency. Assumptions used to calculate these amounts (disregarding forfeiture assumptions) are included in Note 10 “Stock-Based Compensation” to our Consolidated Financial Statements, which are included in our 2018 Form 10-K. No stock option grants were awarded in fiscal year 2018. |
| |
(3) | The amounts reported in the Non-Equity Incentive Plan Compensation column reflect the amounts earned by (i) each of Messrs. Young, Ellen, Collins, Baldwin, Johnston, and Trebilcock under the DPS 2018 MIP, and (ii) each of Messrs. Gamgort and Dokmecioglu, under the KGM 2018 STIP and KGM Q4 2018 STIP. In fiscal year 2018, the amount shown for each of Messrs. Gamgort and Dokmecioglu reflects five quarters, as a result of the fiscal year for KGM’s parent company, Maple, changing following the DPS Merger from the last Saturday in September to the last Saturday of December. |
| |
(4) | The amounts reported in the Nonqualified Deferred Compensation Earnings column represent an estimate of the aggregate annual change in the actuarial present value of accumulated benefits under the Personal Pension Account Plan and the Pension Equalization Plan (as applicable), as described in more detail in “ — Pension Benefits” beginning on page 46. The change in the actuarial present value of the accumulated benefits under the plans was determined in accordance with GAAP. Assumptions used to calculate these amounts are included in Note 7 “Employee Benefit Plans” to our Consolidated Financial Statements, which are included in our 2018 Form 10-K. The change in the actuarial present value of pension benefits is shown as $0 when negative. The actual change for applicable participants is as follows: $(8,472) for Mr. Johnston; $(21,963) for Mr. Baldwin; and $(116,242) for Mr. Trebilcock. |
| |
(5) | Amounts reported in the All Other Compensation column reflect other compensation for each NEO, including, but not limited to, (i) the incremental cost to the Company of all perquisites and other personal benefits, (ii) the amount of any tax reimbursements, (iii) the amounts contributed by the Company to the tax-qualified defined contribution plans and non-tax qualified contribution plans and (iv) the amount of any insurance premiums paid by the Company. See the table below under “All Other Compensation” for additional details around these amounts. |
| |
(6) | Mr. Gamgort became President and Chief Executive Officer of the Company on July 9, 2018 following the DPS Merger. As Mr. Gamgort was not an NEO in 2017 or 2016, in accordance with SEC disclosure requirements, Mr. Gamgort’s compensation disclosure is provided only for the year in which he was a NEO. Amounts reported for Mr. Gamgort reflect compensation paid to him by the Company during the portion of 2018 for which he was employed by the Company. |
| |
(7) | Messrs. Young and Ellen ceased employment with the Company on July 9, 2018, and Mr. Johnston ceased employment with the Company on July 27, 2018, in each case in connection with the closing of the DPS Merger. Mr. Young remained on the Board following the closing of the DPS Merger as a non-executive director. Amounts reported for each Messrs. Young, Ellen, and Johnston reflect compensation paid to each by the Company during the portion of 2018 for which each was employed by the Company. |
| |
(8) | Mr. Dokmecioglu became Chief Financial Officer of the Company on July 9, 2018 following the DPS Merger. As Mr. Dokmecioglu was not an NEO in 2017 or 2016, in accordance with the SEC disclosure requirements, Mr. Dokmecioglu’s compensation disclosure is provided only for the year in which he was a NEO. Amounts reported for Mr. Dokmecioglu reflect compensation paid to him by the Company during the portion of 2018 for which he was employed by the Company. |
| |
(9) | Mr. Baldwin was not an NEO in 2017 or 2016. In accordance with the SEC disclosure requirements, Mr. Baldwin’s compensation disclosure is provided only for the year in which he was a NEO. |
| |
(10) | Mr. Trebilcock was not an NEO in 2017 or 2016. In accordance with the SEC disclosure requirements, Mr. Trebilcock’s compensation disclosure is provided only for the year in which he was a NEO. |
“All Other Compensation” for fiscal year 2018 is summarized as follows:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name | | Automobile
Allowance(a) | | Service
Allowance | | Corporate
Aircraft(b) | | Executive
Physicals(c) | | Relocation Assistance(d) | | Disability
Income
Premiums(e) | | Company Contributions(f) | | CIC Lump Sum Payout(g) | | CIC Severance Lump Sum in Lieu of Future Payouts(h) | | Merger Cash Payout(i) |
| Robert J. Gamgort | | $ | — |
| | $ | — |
| | $ | 29,403 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Larry D. Young | | 20,250 |
| | 12,000 |
| | 51,299 |
| | — |
| | — |
| | 7,421 |
| | 338,269 |
| | 8,625,000 |
| | — |
| | 16,511,798 |
|
| Ozan Dokmecioglu | | — |
| | — |
| | — |
| | — |
| | 4,195 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Martin M. Ellen | | 18,000 |
| | 10,000 |
| | — |
| | 3,698 |
| | — |
| | 10,460 |
| | 48,582 |
| | 3,260,400 |
| | — |
| | 4,263,367 |
|
| Rodger L. Collins | | 28,600 |
| | 19,000 |
| | 521 |
| | 3,711 |
| | — |
| | 8,608 |
| | 51,836 |
| | — |
| | 2,935,305 |
| | 3,990,297 |
|
| James L. Baldwin | | 24,700 |
| | 14,000 |
| | — |
| | — |
| | — |
| | 4,496 |
| | 83,643 |
| | — |
| | — |
| | 2,841,810 |
|
| James J. Johnston | | 17,600 |
| | 9,500 |
| | — |
| | — |
| | — |
| | — |
| | 154,694 |
| | 2,899,875 |
| | — |
| | 3,990,297 |
|
| James Trebilcock | | 24,700 |
| | 14,000 |
| | — |
| | 3,293 |
| | — |
| | 3,023 |
| | 88,866 |
| | — |
| | 1,855,370 |
| | 2,746,753 |
|
| |
(a) | Legacy-DPS NEOs received an automobile allowance in 2018. Automobile allowances were phased out in 2019. |
| |
(b) | For SEC purposes, the cost of personal use of a corporate aircraft is calculated based on the aggregate incremental cost to the Company. We calculated the aggregate incremental cost using estimated variable costs of operating the aircraft. Fixed costs which do not change based on usage, such as pilot salaries, depreciation of aircraft and cost of maintenance are excluded. |
| |
(c) | Messrs. Ellen, Collins and Trebilcock received executive physicals in 2018. Executive physicals ceased to be offered in 2019. |
| |
(d) | Represents a payment made to Mr. Dokmecioglu in 2018 pursuant the terms of his employment agreement to assist with his 2016 relocation to Burlington, MA, where Company headquarters are based. |
| |
(e) | Includes the gross-up for taxes to be paid by the NEO on the premium that was included in the NEO’s income. |
| |
(f) | The amounts reported in the Company Contributions column represent our contributions to the tax-qualified defined contribution plans and non-tax qualified defined contribution plans. The contributions to the tax qualified defined contribution plans for 2018 are as follows: $0 for Mr. Gamgort; $37,078 for Mr. Young; $0 for Mr. Dokmecioglu; $29,182 for Mr. Ellen; $37,078 for Mr. Baldwin; $19,400 for Mr. Collins; $37,078 for Mr. Johnston; $37,077 for Mr. Trebilcock. The contributions to the non-tax qualified defined contributions plans for 2018 are as follows: $301,191 for Mr. Young, $29,183 for Mr. Ellen; $46,566 for Mr. Baldwin; $32,436 for Mr. Collins; $117,616 for Mr. Johnson; $51,788 for Mr. Trebilcock. |
| |
(g) | The amounts set forth in this column comprise cash compensation paid to our NEOs in connection with the DPS Merger and a simultaneous termination of employment, consisting of lump-sum cash severance payments equal to the following multiples of each NEO's total base salary and target annual bonus: Mr. Young, 3.0x; Mr. Ellen, 2.75x; and Mr. Johnston 2.5x. |
| |
(h) | At the time of the closing of the DPS Merger, Mr. Trebilcock and Mr. Collins each received a one-time cash payment (less applicable withholding) of $1,855,370, and $2,935,305, respectively, in exchange for forfeiting rights to future payments under DPS severance and change in control plans which existed at the time of the DPS Merger, and in lieu of future severance payments by KDP. These amounts were in addition to the DPS 2018 MIP payments made to Mr. Trebilcock and Mr. Collins for the pre-DPS Merger closing period. |
| |
(i) | The amounts set forth in this column comprise the aggregate value of the cash which the NEOs received with respect to the acceleration upon the DPS Merger of the vesting of PSUs, RSUs and stock options as provided in the merger agreement. |
Grants of Plan-Based Awards
The following table sets forth information regarding equity plan awards and non-equity incentive plan awards by us to our NEOs in fiscal year 2018. For a discussion of the material terms of these awards, see "Compensation Discussion and Analysis — Long-Term Incentive Compensation Awards" beginning on page 37 and "Summary Compensation Table" beginning on page 41.
|
| | | | | | | | | | | | | | | | | | | | | |
| Name | | Grant
Date | | Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards(1) | | All Other Stock Awards: Number of Shares of Stock or Units
(#)(2) | | Grant Date Fair Value of Stock and Option Awards ($) |
| | Threshold
($) | | Target
($) | | Maximum
($) | |
| Robert J. Gamgort | | | | $ | — |
| | $ | 2,343,750 |
| | $ | 7,265,625 |
| | | | |
| Larry Young | | | | 1,101,164 |
| | 1,725,000 |
| | 3,450,000 |
| | | | |
| | | 3/2/2018 | | | | | | | | 51,617 |
| | $ | 5,999,960 |
|
| | | 9/13/2018 | | | | | | | | 6,631 |
| | 160,006 |
|
| Ozan Dokmecioglu | | | | — |
| | 800,000 |
| | 2,480,000 |
| | | | |
| | | 8/24/2018 | | | | | | | | 111,159 |
| | 2,600,009 |
|
| Martin Ellen | | | | 358,501 |
| | 561,600 |
| | 1,123,200 |
| | | | |
| | | 3/2/2018 | | | | | | | | 13,420 |
| | 1,559,941 |
|
| James L. Baldwin | | | | 221,861 |
| | 347,550 |
| | 695,100 |
| | | | |
| | | 3/2/2018 | | | | | | | | 9,033 |
| | 1,049,996 |
|
| | | 9/13/2018 | | | | | | | | 130,435 |
| | 3,147,397 |
|
| Rodger Collins | | | | 340,212 |
| | 532,950 |
| | 1,065,900 |
| | | | |
| | | 3/2/2018 | | | | | | | | 12,474 |
| | 1,449,978 |
|
| James Johnston | | | | 340,212 |
| | 532,950 |
| | 1,065,900 |
| | | | |
| | | 3/2/2018 | | | | | | | | 12,474 |
| | 1,449,978 |
|
| James Trebilcock | | | | 248,480 |
| | 389,250 |
| | 778,500 |
| | | | |
| | | 3/2/2018 | | | | | | | | 9,033 |
| | 1,049,996 |
|
| | | 9/13/2018 | | | | | | | | 130,435 |
| | 3,147,397 |
|
| |
(1) | The amounts reported in the Estimated Future Payouts Under Non-Equity Incentive Plan Awards column represent the potential payouts of annual cash incentive awards granted to our NEOs in fiscal year 2018 under the KGM STIP, for Messrs. Gamgort and Dokmecioglu, and the DPS MIP, for Messrs. Young, Ellen, Baldwin, Collins, Johnston, and Trebilcock, in each case subject to the achievement of certain performance measures. The actual amount of the awards made to the NEOs and paid in cash is included in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table. |
| |
(2) | Represents the number of shares subject to RSU awards made in fiscal year 2018 under the Omnibus Stock Incentive Plan of 2009. The RSU awards granted on March 2, 2018 were scheduled to vest three years from the grant date; however, upon the closing of the DPS Merger these RSUs were accelerated and vested in exchange for one share of KDP common stock and the special cash dividend of $103.75. The RSU awards granted on August 24, 2018 to Mr. Dokmecioglu vest four years and seven months from the grant date, and the Elite Matching RSU awards granted on September 13, 2018 to Messrs. Baldwin and Trebilcock vest five years from the grant date. |
Outstanding Equity Awards
The following table sets forth information regarding exercisable and unexercisable stock options and vested and unvested equity awards held by each NEO as of December 31, 2018. All such awards relate to shares of our common stock.
|
| | | | | | | | | |
| | | Stock Awards |
| Name | | Grant Date | | Number of Shares or Units of Stock That Have Not Vested (#) | | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) |
| Robert J. Gamgort | | 9/15/2016 | | 2,409,995(2) |
| | $ | 61,792,272 |
|
| | | 9/15/2016 | | 530,199(2) |
| | 13,594,302 |
|
| | | 9/15/2016 | | 530,199(2) |
| | 13,594,302 |
|
| | | 7/2/2018 | | 248,808(3) |
| | 6,379,437 |
|
| | | 7/2/2018 | | 248,808(3) |
| | 6,379,437 |
|
Larry Young(4) | | 9/13/2018 | | 6,631 |
| | 170,019 |
|
| Ozan Dokmecioglu | | 9/15/2016 | | 1,060,398(2) |
| | 27,188,605 |
|
| | | 9/15/2016 | | 250,640(2) |
| | 6,426,410 |
|
| | | 9/15/2016 | | 250,640(2) |
| | 6,426,410 |
|
| | | 8/24/2018 | | 111,159(5) |
| | 2,850,117 |
|
Marty Ellen(6) | | — | | — |
| | — |
|
| James Baldwin | | 9/13/2018 | | 130,435 |
| | 3,344,353 |
|
Roger Collins(6) | | — | | — |
| | — |
|
James Johnston(6) | | — | | — |
| | — |
|
| James Trebilcock | | 9/13/2018 | | 130,435 |
| | 3,344,353 |
|
| |
(1) | Market value is determined by multiplying the total number of shares or other rights awarded under an equity incentive plan that have not vested times $25.64, the closing price of a share of our common stock on the NYSE on December 31, 2018. |
| |
(2) | Represents RSUs which vest on the four year and six month anniversary of the date of grant. |
| |
(3) | Represents RSUs which vest on the fifth anniversary of the grant date. |
| |
(4) | Mr. Young received a grant of RSUs in in connection with his service on our Board as a non-employee director following the closing of the DPS Merger, as disclosed in “—Director Compensation” beginning on page 20. |
| |
(5) | Represents RSUs granted to Mr. Dokmecioglu which vest on the four year and seven month anniversary of the date of grant. |
| |
(6) | None of Messrs. Collins, Ellen or Johnston has any outstanding stock awards as of December 31, 2018. |
Options Exercised and Stock Vested
The following table sets forth information regarding stock options that were exercised by our NEOs and stock awards made to our NEOs that have vested during fiscal year 2018. This includes the following treatment based on the merger agreement governing the DPS Merger that was applied to all outstanding equity awards. No equity awards of Maple Parent Holdings Corp., the equity owned by legacy-employees of KGM prior to the DPS Merger, were vested as a result of the merger, or at any other time during 2018. At the closing of the DPS Merger, each outstanding Maple RSU was converted to 96.4 RSUs, with the same terms and conditions as were applicable under such Maple RSU immediately prior to the effective time, including the vesting schedule.
As of immediately prior to the effective time, each outstanding legacy-DPS stock option, RSU and PSU vested, with PSUs vesting at target performance levels or at such higher performance levels as may be required pursuant to the applicable terms of a DPS benefit plan. Prior to the record date for the special cash dividend, the Board of DPS caused the following treatment to apply as of the effective time (less applicable tax withholding):
Each outstanding stock option was converted into a right of the holder of such stock option to receive (i) a number of shares of KDP Common Stock equal to the number of shares underlying such stock optionDirectorswww.virtualshareholdermeeting.com/KDP2022
The stockholder(s) hereby appoint(s) Robert Gamgort, Anthony Shoemaker, and (ii) an amount in cash equal to the number of shares underlying such stock option multiplied by the difference between the special cash dividend per share amount ($103.75) and the exercise price per share of such stock option as of immediately prior to the record date for the special cash dividend. If the Company was unable to obtain option holder consent to the stock option treatment described above, then the DPS Board adjusted each stock option in a manner that preserved its intrinsic value after taking into account the special cash dividend.
Each outstanding RSU was settled in exchange for (i) a number of shares of KDP Common Stock equal to the number of shares underlying such RSU, and (ii) an amount in cash equal to the number of shares underlying such RSU multiplied by $103.75, the special cash dividend per share amount.
Each outstanding PSU (with PSUs vesting at target performance levels or at such higher performance levels as may be required pursuant to the applicable terms of a DPS benefit plan) were settled in exchange for (i) a number of shares of KDP Common Stock equal to the number of shares underlying such PSU and (ii) an amount in cash equal to the number of shares underlying such PSU multiplied by $103.75, the special cash dividend per share amount.
|
| | | | | | | | | | | | | | |
| | | Option Awards | | Stock Awards |
| Name | | Number of Shares Acquired on Exercise
(#) | | Value Realized on Exercise
($) | | Number of Shares Acquired on Vesting
(#)(1) | | Value Realized
on Vesting
($)(2) |
| Robert J. Gamgort | | — |
| | $ | — |
| | — |
| | $ | — |
|
| Larry Young | | 130,151 |
| | 5,786,513 |
| | 24,409 |
| | 2,837,302 |
|
| | | 120,889 |
| | 3,829,764 |
| | 20,632 |
| | 410,783 |
|
| | | 120,616 |
| | 3,502,689 |
| | 19,599 |
| | 390,216 |
|
| | | | | | | 51,854 |
| | 1,032,612 |
|
| | | | | | | 33,054 |
| | 3,832,942 |
|
| | | | | | | 34,387 |
| | 684,645 |
|
| | | | | | | 32,666 |
| | 650,380 |
|
| Ozan Dokmecioglu | | — |
| | — |
| | — |
| | — |
|
| Martin Ellen | | 29,224 |
| | 2,103,544 |
| | 5,924 |
| | 688,606 |
|
| | | 31,588 |
| | 1,404,402 |
| | 5,256 |
| | 104,647 |
|
| | | 30,806 |
| | 975,934 |
| | 5,095 |
| | 101,441 |
|
| | | 31,360 |
| | 910,694 |
| | 13,484 |
| | 268,466 |
|
| | | | | | | 8,022 |
| | 930,231 |
|
| | | | | | | 8,762 |
| | 174,451 |
|
| | | | | | | 8,492 |
| | 169,076 |
|
| James Baldwin | | 6,876 |
| | 305,707 |
| | 3,868 |
| | 449,616 |
|
| | | 20,148 |
| | 638,289 |
| | 3,438 |
| | 68,451 |
|
| | | 21,107 |
| | 612,947 |
| | 3,429 |
| | 68,271 |
|
| | | | | | | 9,076 |
| | 180,703 |
|
| | | | | | | 5,238 |
| | 607,398 |
|
| | | | | | | 5,730 |
| | 114,084 |
|
| | | | | | | 5,716 |
| | 113,806 |
|
| Rodger Collins | | 46,551 |
| | 3,350,741 |
| | 5,491 |
| | 638,274 |
|
| | | 29,284 |
| | 1,301,967 |
| | 4,985 |
| | 99,251 |
|
| | | 29,215 |
| | 925,531 |
| | 4,736 |
| | 94,294 |
|
| | | 29,148 |
| | 846,458 |
| | 12,533 |
| | 249,532 |
|
| | | | | | | 7,436 |
| | 862,279 |
|
| | | | | | | 8,310 |
| | 165,452 |
|
| | | | | | | 7,894 |
| | 157,170 |
|
| James Johnston | | 46,551 |
| | 3,350,741 |
| | 5,491 |
| | 638,274 |
|
| | | 29,284 |
| | 1,301,967 |
| | 4,985 |
| | 99,251 |
|
| | | 29,215 |
| | 925,531 |
| | 4,736 |
| | 94,294 |
|
| | | 29,148 |
| | 846,458 |
| | 12,533 |
| | 249,532 |
|
| | | | | | | 7,436 |
| | 862,279 |
|
| | | | | | | 8,310 |
| | 165,452 |
|
| | | | | | | 7,894 |
| | 157,170 |
|
| James Trebilcock | | 8,275 |
| | 595,635 |
| | 3,184 |
| | 370,108 |
|
| | | 16,984 |
| | 755,109 |
| | 3,094 |
| | 61,602 |
|
| | | 18,133 |
| | 574,453 |
| | 3,429 |
| | 68,271 |
|
| | | 21,107 |
| | 612,947 |
| | 9,076 |
| | 180,703 |
|
| | | | | | | 4,313 |
| | 500,135 |
|
| | | | | | | 5,157 |
| | 102,676 |
|
| | | | | | | 5,716 |
| | 113,806 |
|
| |
(1) | Represents the shares vested on the vesting date. Shares were withheld from issuance to cover taxes. |
| |
(2) | Excludes the value of the special cash dividend of $103.75 per share, which is disclosed in the "All Other Compensation" column of the Summary Compensation Table. |
Pension Benefits
The following table sets forth information regarding pension benefits accrued by each NEO who participates in our defined benefit plans and supplemental contractual arrangements for 2018.
|
| | | | | | | | | | | | |
| Name | | Plan Name | | Number of Years of Credited Service
(#)(1) | | Present Value of Accumulated Benefit
($)(2) | | Payments During
Last Fiscal Year
($) |
| Larry Young | | Personal Pension Account Plan | | 2.67 | | $ | 62,579 |
| | $ | — |
|
| | | Pension Equalization Plan | | 2.67 | | 461,170 |
| | — |
|
| James Baldwin | | Personal Pension Account Plan | | 11.81 | | 333,398 |
| | — |
|
| | | Pension Equalization Plan | | 11.81 | | 375,293 |
| | — |
|
| James Johnston | | Personal Pension Account Plan | | 16.09 | | 504,290 |
| | — |
|
| | | Pension Equalization Plan | | 16.09 | | 617,038 |
| | — |
|
| James Trebilcock | | Personal Pension Account Plan | | 21.46 | | 1,088,875 |
| | — |
|
| | | Pension Equalization Plan | | 21.46 | | 947,476 |
| | — |
|
| |
(1) | Pay and future service credits were frozen as of December 31, 2008 for our personal pension account plan (the “PPA Plan”) and our pension equalization plan (the “PEP”). For further information, see “—Personal Pension Account Plan (“PPA Plan”)” beginning on page 46 and “—Pension Equalization Plan (“PEP”)” on page 46. Each of Messrs. Young, Baldwin, Johnston and Trebilcock’s years of service with us prior to the date the PPA Plan and the PEP were frozen is the same as the number of years of credited service under each of the PPA Plan and the PEP. |
| |
(2) | The actuarial present value of benefits accumulated under the respective plans is calculated in accordance with the assumptions included in Note 7 “Employee Benefit Plans,” to our audited Consolidated Financial Statements, which are included in our 2018 Form 10-K. These amounts assume that each NEO retires at age 65. The discount rate used to determine the present value of accumulated benefits is 4.25%. The present values assume no pre-retirement mortality and utilize the RP2014 healthy white collar male and female tables, with generational projection using Scale MP-2018. |
Personal Pension Account Plan ("PPA Plan")
NEOs, other than Mr. Gamgort, Mr. Dokmecioglu, Mr. Ellen and Mr. Collins are provided with retirement benefits under the PPA Plan, a tax-qualified defined benefit pension plan covering full-time and part-time employees with at least one year of service who were actively employed by DPS (other than employees of a predecessor company) as of December 31, 2006. The PPA Plan was closed to employees who were hired after December 31, 2006. Further, as of December 31, 2008, all future pay and service credits to the PPA Plan have been frozen. However, the PPA Plan does provide a minimum annual interest credit on individual account balances of 5%.
Participants fully vest in their retirement benefits after three years of service or upon attaining age 65. Participants are also eligible for early retirement benefits if they separate from service on or after attaining age 55 with 10 years of service. Participants who leave the Company before they are fully vested in their retirement benefit forfeit their accrued benefit under the PPA Plan.
The Code places limitations on compensation and pension benefits for tax-qualified defined benefit plans such as the PPA Plan. We have established a non-qualified supplemental defined benefit pension program (our Pension Equalization Plan), as discussed below, to restore some of the pension benefits limited by the Code.
Pension Equalization Plan ("PEP")
We sponsor the PEP, an unfunded, non-tax qualified excess defined benefit plan covering key employees who were actively employed by DPS as of December 31, 2006 and whose base salary exceeded certain statutory limits imposed by the Code. As with the PPA Plan, the PEP was closed to employees who were hired after December 31, 2006 and as of December 31, 2008, all future pay and service credits to the PEP have been frozen. However, the PEP does provide a minimum annual interest credit on individual account balances of 5%.
The purpose of the PEP is to restore to PEP participants any PPA Plan benefits that are limited by statutory restrictions imposed by the Code that are taken into consideration when determining their PPA Plan benefits. Participants fully vest in their benefits under the PEP after three years of service. Participants who voluntarily resign from service before they are vested in their benefits under the PEP forfeit their unvested accrued benefit. Participants who are terminated without "cause" or resign for "good reason" are entitled to have their unvested accrued benefits under the PEP automatically vested.
In addition, pursuant to the terms of the executive employment agreements, if any NEO is terminated without "cause" or resigns for "good reason" and is not vested in his accrued benefit under the PPA Plan, such NEO will be entitled to have his accrued and unvested benefits under the PPA Plan paid under the PEP. As of December 31, 2009, all NEOs (other than Messrs. Gamgort, Dokmecioglu, Ellen and Collins who do not participate in the PPA Plan) have vested in their accrued benefits under the PPA Plan. Since Messrs. Gamgort, Dokmecioglu, Ellen and Collins are not participants in the PPA Plan, they receive no benefits under the PEP.
Nonqualified Deferred Compensation
Per the DPS Merger agreement, all employees of legacy-DPS were to be provided with employee benefits (other than base salary, cash bonus and other short term incentives, long term incentive awards and severance benefits which were to each remain no less favorable than prior to the merger for one year following the DPS Merger) through December 31, 2018 that are no less favorable in the aggregate to the employee than the benefits provided to such legacy-DPS employee immediately prior to the DPS Merger. The following deferred compensation benefits programs apply to legacy-DPS NEOs. Mr. Gamgort and Mr. Dokmecioglu were eligible to participate in a 401(k) plan only.
Qualified 401(k) Plans
For legacy DPS NEOs, the Savings Incentive Plan (“SIP”) is a tax-qualified 401(k) defined contribution plan, which permits participants to contribute up to 75% of their base salary in the SIP within certain statutory limitations under the Code and we match 100% of the first 4% of base salary, on a per paycheck basis, that is contributed to the SIP by a participant. Employees participating in the SIP are always fully vested in the amounts both they and the Company contribute to the plan. Participants self-direct the investment of their account balances among various mutual funds. In 2018, all of our NEOs participated in the SIP.
Also as part of the SIP, we offer an enhanced defined contribution component (the “EDC”) on a tax-qualified basis to the SIP plan account. The EDC provides a contribution equal to 3% of eligible compensation to individual accounts annually. EDC contributions are 100% vested after three years of service with the Company.
Mr. Gamgort and Mr. Dokmecioglu were eligible for, and participated in, a 401(k) program which provided a 100% company match on the first 1% of employee contributions, and 60% on the next 5% of employee contributions within certain statutory limitations under the Code.
The Supplemental Savings Plan (the “SSP”)
SSP is a nonqualified deferred compensation plan sponsored by the Company for our employees, and is a non-tax qualified defined contribution plan. The SSP is for legacy-DPS employees who are actively enrolled in the SIP and whose deferrals under the SIP are limited by Code compensation limitations. Employees may elect to defer up to 75% of their base salary over the Code compensation limit to the SSP, and we match 100% of the first 4% of base salary, on a per paycheck basis, that is contributed by these employees. Employees participating in the SSP are always fully vested in the amount they and the Company contribute to the plan. Participants self-direct the investment of their account balances among various mutual funds. In 2018, Messrs. Young, Ellen, Collins and Johnston participated in the SSP.
Also as part of the SSP, we offer an enhanced defined contribution component (the “Non-qualified EDC”) on a non-tax qualified basis to the SSP plan account. The Non-qualified EDC provides a contribution equal to 3% of eligible compensation over statutory pay limits to individual accounts annually. The Non-qualified EDC contributions are 100% vested after three years of service with the Company or prior affiliates.
The SSP also offers our employees the opportunity to defer up to 100% of their annual bonus. Participants will make yearly elections on payout options of bonus deferrals under the plan. Vesting is immediate and the participant has multiple distribution options available during each annual enrollment period. Participants self-direct the investment of their account balances among various mutual funds.
The SSP is unfunded with respect to the Company's obligation to pay any balances in the SSP. A participant's rights to receive any payment from the SSP shall be no greater than the rights of an unsecured general creditor of the Company.
The following table sets forth information regarding the nonqualified deferred compensation under the SSP for each NEO in fiscal year 2018.
|
| | | | | | | | | | | | | | | | | | | | |
| Name | | Executive Contributions In Last Fiscal Year(1) | | Registrant Contributions In Last Fiscal Year(2) | | Aggregate Earnings In Last Fiscal Year(3) | | Aggregate Withdrawals/ Distributions | | Aggregate Balance At Last Fiscal Year End(4) |
| Robert J. Gamgort | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Larry Young | | 1,179,824 |
| | 301,191 |
| | 1,145,521 |
| | — |
| | 13,569,587 |
|
| Ozan Dokmecioglu | | — |
| | — |
| | — |
| | — |
| | — |
|
| Martin Ellen | | 183,396 |
| | 29,182 |
| | 40,854 |
| | — |
| | 1,788,284 |
|
| James Baldwin | | — |
| | 46,566 |
| | 68,162 |
| | — |
| | 1,059,311 |
|
| Rodger Collins | | 310,534 |
| | 32,436 |
| | 240,829 |
| | — |
| | 4,578,207 |
|
| James Johnston | | 287,540 |
| | 117,616 |
| | 225,581 |
| | — |
| | 2,958,924 |
|
| James Trebilcock | | — |
| | 51,788 |
| | 101,855 |
| | — |
| | 1,345,601 |
|
| |
(1) | Aggregate amount of contributions made by our NEOs to the SSP in fiscal year 2018. |
| |
(2) | Aggregate amount of the Company’s contributions to the NEOs’ accounts under the SSP in fiscal year 2018. The amounts reported in this column are included in executive compensation of the NEO reported in the Summary Compensation Table. |
| |
(3) | Aggregate amount of earnings credited to the NEOs’ accounts under the SSP in fiscal year 2018. The amounts reported in this column are not included in executive compensation of the NEO reported in the Summary Compensation Table. For Mr. Collins amount reported also include earnings ($5,713) under a legacy Cadbury deferred compensation plan, frozen to new entrants and benefit accrual in 2006. |
| |
(4) | The amounts in this column that were reported as executive compensation in the Summary Compensation Table for fiscal years prior to (and not including) 2018 were as follows: $2,093,431 for Mr. Young; $199,685 for Mr. Ellen; $321,756 for Mr. Collins; and $752,804 for Mr. Johnston. Messrs. Gamgort, Dokmecioglu, Baldwin, and Trebilcock were not NEOs in certain of those prior years and the amounts reflected in this footnote do not reflect any executive compensation that would have been included in the Summary Compensation Table if they had been an NEO in those prior years in which they were not an NEO. For Mr. Collins the amount reported also includes a balance ($190,060) under a legacy Cadbury defined contribution plan, frozen to new entrants and benefit accrual in 2006. |
Not included in the table above are the Non-qualified EDC Contributions funded in February 2019, which are as follows:
|
| | | |
| Larry Young | $ | 279,938 |
|
| Martin Ellen | 24,867 |
|
| James Baldwin | 46,566 |
|
| Rodger Collins | 18,348 |
|
| James Johnston | 108,799 |
|
| James Trebilcock | 51,788 |
|
Post-Termination Compensation
Employment Agreements with Mr. Gamgort and Mr. Dokmecioglu
Mr. Gamgort and Mr. Dokmecioglu each have employment agreements with the Company. Mr. Gamgort’s agreement provides for a term ending as of May 2, 2021; however, it will be automatically extended for successive one year periods unless either the Company or Mr. Gamgort gives notice to the other party not later than three (3) months prior to any such automatic extension that it or he does not want the term to be so extended. Mr. Dokmecioglu’s agreement may be terminated with ninety (90) days’ prior notice by either party. Each agreement includes non-competition and non-solicitation provisions, which provide that the executive will not, for a period of two years after termination of employment, (i) become engaged with companies that are in competition with us, including, but not limited to, a predetermined list of companies or (ii) solicit or attempt to entice away any of our employees or customers.
Termination without “Cause” or Termination for “Good Reason” Prior to a Change of Control
The executive employment agreements of Mr. Gamgort and Mr. Dokmecioglu each provide that severance payments occur and salary and benefits continue if termination of employment occurs without "cause" or if the executive resigns for "good reason."
In the event the Company terminates Mr. Gamgort's employment "without cause" or he resigns for "good reason," during the employment term, he is entitled to receive:
any outstanding salary earned but not yet paid,
solely in the case of the annual RSUs granted to Mr. Gamgort on September 15, 2016, if his employment is terminated by the Company without cause or by Mr. Gamgort for good reason (A) prior to May 2, 2019, vesting of a pro rata portion of such RSUs based on service completed from May 2, 2016 through the date of termination, or (B) on or after May 2, 2019, full vesting of all such RSUs;
the pro-rated cash incentive bonus payment for the year in which the termination occurs, paid based on actual performance and at the same time as the annual bonus is paid to other executives;
a cash severance benefit equal to the product of two (2) times the sum of Mr. Gamgort’s base salary and target annual cash incentive bonus for the year in which his termination of employment occurs. This severance benefit will be payable in 24 approximately equal monthly installments, except that, if the severance benefit is payable due to a termination of employment occurring within 24 months following a Change of Control that constitutes a change in control under Section 409A of the Code, the severance benefit will be payable in a lump sum within 30 days of the date of such termination of employment; and
payment by the Company of Mr. Gamgort’s cost to continue participation in the Company’s medical plans under COBRA until the earlier of (A) the expiration of Mr. Gamgort’s COBRA continuation period, (B) the last month during which the severance benefit is payable, and (C) such time as Mr. Gamgort is eligible to receive comparable welfare benefits from a subsequent employer.
In the event the Company terminates Mr. Dokmecioglu's employment "without cause" or he resigns for "good reason", he is entitled to receive:
any outstanding salary earned but not yet paid;
solely in the case of the annual RSUs granted to Mr. Dokmecioglu on September 15, 2016, if his employment is terminated by the Company without cause or by Mr. Dokemcioglu for good reason full vesting of all such RSUs;
a pro-rated cash incentive bonus for the year in which the termination occurs, paid at actual performance and at the same time as the annual bonus is paid to other executives,
a cash severance benefit equal to the product of two (2) times the sum of Mr. Dokmecioglu’s base salary and target bonus for the year in which his termination of employment occurs. This severance benefit will be payable in 24 approximately equal monthly installments, except that, if the severance benefit is payable due to a termination of employment occurring within 24 months following a Change of Control that constitutes a change in control under Section 409A of the Code, the severance benefit will be payable in a lump sum within 30 days of the date of such termination of employment; and
payment by the Company of Mr. Dokmecioglu’s cost to continue participation in the Company’s medical plans under COBRA until the earlier of (A) the expiration of Mr. Dokmecioglu’s COBRA continuation period, (B) the last month during which the severance benefit is payable and (C) such time as Mr. Dokmecioglu is eligible to receive comparable welfare benefits from a subsequent employer.
Termination Following a Change of Control
In the event the Company terminates Mr. Gamgort’s employment "without cause" or he resigns for "good reason" within twenty-four (24) months following a Change of Control, he is entitled to receive:
all of the benefits described above if his employment is terminated “without cause” or he resigns for “good reason,” except that if the termination occurs six months prior to or twenty-four (24) months following a Change of Control the cash severance benefit will be equal to the product of three (3) times the sum of Mr. Gamgort’s base salary and target annual cash incentive bonus for the year in which his termination of employment occurs; and
all unvested RSUs (including Matching RSUs) shall become fully vested and payable, subject to Section 409A of the Code.
In the event the Company terminates Mr. Dokmecioglu’s employment “without cause” or he resigns for “good reason” within twelve (12) months following a Change of Control, he is entitled to receive:
all of the benefits described above if his employment is terminated “without cause” or he resigns for “good reason”,, except that if the termination occurs six months prior to or twenty-four (24) months following a Change of Control the cash severance benefit will be equal to the product of three (3) times the sum of Mr. Dokmecioglu’s base salary and target annual cash incentive bonus for the year in which his termination of employment occurs; and
all unvested RSUs (including Matching RSUs) shall become fully vested and payable, subject to Section 409A of the Code.
Under the executive employment agreements "cause" is defined as termination of the executive's employment for his:
intentional and continued failure substantially to perform his duties under the agreement (other than as a result of total or partial incapacity due to physical or mental illness or as a result of termination) which failure continues for more than 30 days after receipt by the executive of written notice setting forth the facts and circumstances identified by the Company as constituting adequate grounds for termination under this clause;
any intentional act or omission by executive constituting fraud or other serious malfeasance which in any such case is materially injurious to the financial condition of the Company or materially injurious to the business reputation of the CompanyMark Jackson, or any of its affiliates;
indictment for a felony or the substantial equivalent thereof under the laws of the United States, any state or political subdivision thereof or any other jurisdiction in which the Company conducts business, or
executive’s material breach of the non-compete and non-solicit provisions of his agreement, which breach is not cured by executive within 10 days following receipt of a written notice from the Company identifying in reasonable detail the actions, failure or omissions alleged to have constituted such breach.
Prior to a Change of Control (defined below), “good reason” means:
the executive’s removal from, or the Company’s failure to reelect or reappoint him to, the position of chief executive officer of the Company for Mr. Gamgort, and chief financial officer of the Company for Mr. Dokmecioglu;
the Company’s demand for relocation of the executive’s principal workplaces without his consent to a location more than 25 miles distant from their initial principal workplace location;
a material breach by the Company of any of its obligations under the employment agreement; or
a material diminution in (or elimination of) the executive’s titles, positions, duties or responsibilities, or the assignment to executive of duties that are inconsistent, in a material respect,them, as proxy holders, each with the scope of dutiespower to appoint his substitute, and responsibilities associated with the positions specified above.
Following a Change of Control, “good reason” also means, in addition to the events described above under “good reason” under the Section titled, “Employment Agreements with Mr. Gamgort and Mr. Dokmecioglu -- Termination without “Cause” or Termination for “Good Reason” Prior to a Change of Control”, the failure of the Company to continue executive’s participation in the STIP, LTIP and EOP (or any similar plan or successor to any such plan) on a basis that is commensurate with his position.
A “Change of Control” is defined in each of Mr. Gamgort’s and Mr. Dokmecioglu’s agreements to mean:
any “person” or “group” other than JAB is or becomes the “beneficial owner”, directly or indirectly, of securities representing 50% or more of the combined voting power of the Company’s then outstanding securities; or
JAB enters into any joint venture, joint operating arrangement, partnership, standstill agreement or other arrangement similar to any of the foregoing with any other person or group, pursuant to which such person or group assumes effective operational or managerial control of the Company; or
a plan or agreement is consummated providing (1) for a merger or consolidation of the Company, other than with a wholly-owned subsidiary, that would result in the voting securities of the Company outstanding immediately prior thereto no longer continuinghereby authorizes them to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 51 % of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or (2) for a sale, exchange or other disposition of all or substantially all of the business or assets of the Company.
Equity Treatment Upon Other Termination Scenarios
Double-Trigger Equity Vesting Upon a Change of Control
In the event of a Change of Control, all outstanding RSUs and Matching RSUs, including those held by our NEOs, have double-trigger protection which means that no accelerated vesting of outstanding RSUs will occur unless both (1) a Change of Control occurs, and (2) the executive is terminated within 24 months (or, in the case of Mr. Dokmecioglu, within 12 months) of such Change of Control.
Death or Disability
In the event of an executive’s termination due to death or disability, all outstanding RSUs and Matching RSUs become fully vested and payable.
Retirement
In the event of an executive’s retirement (generally definedvote, as attaining the age of 60 and completion of 10 years of service), outstanding RSUs and Matching RSUs provide for pro-rated vesting.
Letters of Understanding with Other NEOs
When we hire a new executive or a current executive is promoted, the executive will receive an offer letter which we refer to as a "letter of understanding." The letters of understanding have no term.
In the event Mr. Baldwin’s employment is involuntarily terminated, he is entitled to receive severance benefits under our Severance Pay Plan for salaried employees ("Severance Pay Plan"), which benefits include:
a lump sum severance payment equal to 1.5 times his annual base salary plus target bonus; and
a lump sum cash payment equal to his annual cash incentive plan payment, pro-rated through the employment termination date and baseddesignated on the actual performance targets achieved for the year in which such termination of employment occurred and payable when such awards are paid under the plan to all employees.
Under the Severance Pay Plan, Mr. Baldwin is also entitled to outplacement services and certain payments under the qualified and non-qualified savings plans and pension plans. See discussion of pension benefits to be paid under the PPA Plan under "Historical Executive Compensation Information — Pension Benefits — Personal Pension Account Plan" beginning on page 46 and the PEP under "Historical Executive Compensation Information — Pension Benefits — Pension Equalization Plan" on page 46.
Mr. Baldwin would not be eligible for severance under the Severance Pay Plan if he were terminated: (i) for cause, (ii) because of inadequate or unsatisfactory performance, (iii) as the result of misconduct (including mismanagement of a position of employment by action or inaction, neglect that jeopardizes the life or property of another, intentional wrongdoing or malfeasance, intentional violation of a law, or violation of a policy or rule adopted to ensure the orderly work and the safety of employees), (iv) for gross neglect in job performance, or (v) because his position is eliminated and he refuses to accept another position, with generally comparable base salary and incentive compensation, that is located no more than 50 miles from his former office, or it does not cause a significant detrimental impact to the executives that commute. (These items are hereinafter referred to as "Disqualifying Conditions.")
At the time of the closing of the DPS Merger, Mr. Collins and Mr. Trebilcock each received a one-time cash payment (less applicable withholding) of $2,056.927, and $3,211,271, respectively, in exchange for forfeiting rights to future payments under DPS severance and change in control plans which existed at the time of the DPS Merger, and in lieu of future severance payments by KDP. As a result, Mr. Collins and Mr. Trebilcock are not eligible for any cash severance benefits for termination without cause or for good reason, with the exception that they would be eligible to participate in the Company’s medical, dental and vision benefits for a period of two (2) years beyond the applicable termination date with employee premiums paid by the Company at the rate of similarly situated active employees.
Mr. Baldwin, Mr. Collins and Mr. Trebilcock have each signed a non-compete agreement, which provides each will not, for a period of one year after termination of employment, (i) become engaged with companies that are in competition with us, including, but not limited to, a predetermined list of companies or (ii) solicit or attempt to entice away any of our employees or customers.
Messrs. Young and Ellen ceased employment with the Company on July 9, 2018 and Mr. Johnston ceased employment with the Company on July 27, 2018. Each of Messrs. Young, Ellen and Johnston were entitled to receive certain severance payments and benefits in connection with their separations as participants in the legacy-DPS Change in Control Severance Plan (the “CIC Plan”). The CIC Plan, subject to certain exceptions, provided that termination payments and benefits would be paid to a plan participant if there was a change in control of the Company and, within two years after the change in control, the participant’s employment was terminated or the participant voluntarily terminated his employment under certain adverse circumstances (a termination for “good reason,” as defined in the CIC Plan), including a significant adverse change in responsibilities of his position. The DPS Merger constituted a change in control under the CIC Plan. The payments and benefits received by each of Messrs. Young, Ellen and Johnston upon termination under the CIC Plan are follows:
Mr. Young was entitled to a payment equal to 3.0 times the sum of his base salary plus his target annual bonus (DPS MIP);
Mr. Ellen was entitled to a payment equal to 2.75 times the sum of his base salary plus his target annual bonus (DPS MIP); and
Mr. Johnston was entitled to a payment equal to 2.5 times the sum of his base salary plus his target annual bonus (DPS MIP).
In addition, each of Messrs. Young, Ellen and Johnston also received other benefits, including payment of their MIP at target prorated to the date of termination, benefit continuation for the number of years equal to their payment multiplier, payment of unvested and vested qualified and non-qualified pension benefits and outplacement services.
Tables of Potential Payments and Assumptions
Messrs. Young, Ellen or Johnston received the following amounts in connection with their respective separations on July 9, 2018:
Mr. Young received an amount equal to $8,625,000, representing 3.0 times the sum of his base salary plus his target annual bonus, and the accelerated vesting of equity awards with a value of $16,287,602;
Mr. Ellen received an amount equal to $3,260,400, representing 2.75 times the sum of his base salary plus his target annual bonus, and the accelerated vesting of equity awards with a value of $6,212,656; and
Mr. Johnston received an amount equal to $2,899,875, representing 2.5 times the sum of his base salary plus his target annual bonus, and the accelerated vesting of equity awards with a value of $7,190,396.
The following tables outline the potential payments to Messrs. Baldwin, Collins, Dokmecioglu, Gamgort and Trebilcock upon the occurrence of various termination events, including “termination without cause” or “for good reason” or “termination due to death or disability” or “retirement,” The following tables also reflect potential payments related to change-in-control and subsequent qualified termination within a specified window for Messrs. Baldwin, Collins, Dokmecioglu, Gamgort and Trebilcock.
With respect to Messrs. Baldwin, Collins, Dokmecioglu, Gamgort and Trebilcock, the following assumptions apply with respect to the tables below and any termination of employment:
the tables include estimates of amounts that would have been paid to NEOs in the event their employment is terminated involuntarily without Disqualifying Conditions on December 31, 2018. The employment of these NEOs did not actually terminate on December 31, 2018, and as a result, the NEOs did not receive any of the amounts shown in the tables below. The actual amounts to be paid to a NEO in connection with a termination event can only be determined at the time of such termination event;
the tables assume that the price of a share of our common stock is $25.64 per share, the closing market price per share on the NYSE on December 31, 2018;
each NEO is entitled to receive amounts earned during the term of his employment regardless of the manner of termination. These amounts include accrued base salary, accrued vacation time and other employee benefits to which the NEO was entitled on the date of termination, and are not shown in the tables below:
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| Name | | Compensation Element | | Retirement | | Death | | Disability | | Termination
Without Cause or For Good Reason | | Termination Without Cause or For Good Reason Following CIC |
| Robert J. Gamgort | | Severance Payments | | $ | — |
| | $ | — |
| | $ | — |
| | $ | 5,250,000 |
| | $ | 7,125,000 |
|
| | | Lump Sum 2018 STIP Payment | | — |
| | 1,453,125 |
| | 1,453,125 |
| | 1,453,125 |
| | 1,453,125 |
|
| | | Medical, Dental and Vision Benefits Continuation | | — |
| | — |
| | — |
| | 47,709 |
| | 1,988 |
|
| | | Outplacement Services | | — |
| | — |
| | — |
| | — |
| | — |
|
| | | Accelerated Equity Payments: | | — |
| | 101,739,751 |
| | 101,739,751 |
| | 47,134,558 |
| | 101,739,751 |
|
| | | TOTAL | | $ | — |
| | $ | 103,192,876 |
| | $ | 103,192,876 |
| | $ | 53,885,392 |
| | $ | 110,319,864 |
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| | | | | | | | | | | | | | | | | | | | | | |
| Name | | Compensation Element | | Retirement ($) | | Death ($) | | Disability ($) | | Termination
Without Cause or For Good Reason ($) | | Termination Without Cause or For Good Reason Following CIC ($) |
| Ozan Dokmecioglu | | Severance Payments | | $ | — |
| | $ | — |
| | $ | — |
| | $ | 2,080,000 |
| | $ | 2,720,000 |
|
| | | Lump Sum 2018 STIP Payment | | — |
| | 496,000 |
| | 496,000 |
| | 496,000 |
| | 496,000 |
|
| | | Medical, Dental and Vision Benefits Continuation | | — |
| | — |
| | — |
| | 47,709 |
| | 1,988 |
|
| | | Outplacement Services | | — |
| | — |
| | — |
| | — |
| | — |
|
| | | Accelerated Equity Payments: | | — |
| | 42,891,541 |
| | 42,891,541 |
| | 12,852,819 |
| | 42,891,541 |
|
| | | TOTAL | | $ | — |
| | $ | 43,387,541 |
| | $ | 43,387,541 |
| | $ | 15,476,528 |
| | $ | 46,109,529 |
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| | | | | | | | | | | | | | | | | | | | | | |
| Name | | Compensation Element | | Retirement ($) | | Death ($) | | Disability ($) | | Termination
Without Cause or For Good Reason ($) | | Termination Without Cause or For Good Reason Following CIC ($) |
| James L. Baldwin | | Severance Payments | | $ | — |
| | $ | — |
| | $ | — |
| | $ | 1,266,075 |
| | $ | 1,266,075 |
|
| | | Lump Sum 2018 MIP Payment | | 393,190 |
| | 347,550 |
| | 393,190 |
| | 393,190 |
| | 347,550 |
|
| | | Medical, Dental and Vision Benefits Continuation | | — |
| | — |
| | — |
| | 24,601 |
| | 24,601 |
|
| | | Outplacement Services | | — |
| | — |
| | — |
| | 6,700 |
| | 6,700 |
|
| | | Accelerated Equity Payments: | | — |
| | 3,344,353 |
| | 3,344,353 |
| | — |
| | 3,344,353 |
|
| | | TOTAL | | $ | 393,190 |
| | $ | 3,691,904 |
| | $ | 3,737,543 |
| | $ | 1,690,566 |
| | $ | 4,989,280 |
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| Name | | Compensation Element | | Retirement ($) | | Death ($) | | Disability ($) | | Termination
Without Cause or For Good Reason ($) | | Termination Without Cause or For Good Reason Following CIC ($) |
| Rodger Collins | | Severance Payments | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| | | Lump Sum 2018 MIP Payment | | 182,256 |
| | 256,984 |
| | 182,256 |
| | 182,256 |
| | 256,984 |
|
| | | Medical, Dental and Vision Benefits Continuation | | — |
| | — |
| | — |
| | 17,547 |
| | 29,246 |
|
| | | Outplacement Services | | — |
| | — |
| | — |
| | 6,700 |
| | 6,700 |
|
| | | Accelerated Equity Payments: | | — |
| | — |
| | — |
| | — |
| | — |
|
| | | TOTAL | | $ | 182,256 |
| | $ | 256,984 |
| | $ | 182,256 |
| | $ | 206,503 |
| | $ | 292,930 |
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| | | | | | | | | | | | | | | | | | | | | | |
| Name | | Compensation Element | | Retirement ($) | | Death ($) | | Disability ($) | | Termination
Without Cause or For Good Reason ($) | | Termination Without Cause or For Good Reason Following CIC ($) |
| James Trebilcock | | Severance Payments | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| | | Lump Sum 2018 MIP Payment | | 185,497 |
| | 187,693 |
| | 185,497 |
| | 185,497 |
| | 187,693 |
|
| | | Medical, Dental and Vision Benefits Continuation | | — |
| | — |
| | — |
| | 24,601 |
| | 32,801 |
|
| | | Outplacement Services | | — |
| | — |
| | — |
| | 6,700 |
| | 6,700 |
|
| | | Accelerated Equity Payments: | | 167,218 |
| | 3,344,353 |
| | 3,344,353 |
| | — |
| | 3,344,353 |
|
| | | TOTAL | | $ | 352,715 |
| | $ | 3,532,047 |
| | $ | 3,529,851 |
| | $ | 216,798 |
| | $ | 3,571,548 |
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CEO Pay Ratio
As required by Section 953(b) of the Dodd-Frank Act, we are providing disclosure regarding the ratio of the annual total compensation of our CEO, Mr. Gamgort, to that of our median employee. Mr. Gamgort became our CEO on July 9, 2018 in connection with the closing of the DPS Merger.
As a multi-national organization, we have employees operating in several countries. Our objective is to provide competitive compensation commensurate with an employee’s position and geographic location, while also linking compensation to Company and individual performance.
To provide context for this disclosure, it is important to understand the scope of our operations. Approximately twenty percent of our employees are located in Mexico where the cost of living is significantly below the United States. The compensation elements and pay levels of our employees can vary dramatically from country to country based on market trends, cost of living, and cost of labor. These factors, along with fluctuations in currency exchange rates, impact the median employee compensation and the resulting ratio.
Our CEO to median employee pay ratio was calculated in accordance with Item 402(u) of Regulation S-K, and represents a reasonable estimate. We identified our median employee (“Median Employee”) by using 2018 base salaries, our consistently applied compensation measure, for all individuals who were employed by us on December 31, 2018, excluding our CEO, annualized for any employees who joined the Company during 2018. To identify the compensation of our Median Employee, we determined the total compensation paid for each of our employees without applying any cost-of-living adjustments. For an employee paid in a currency other than U.S. dollars, we converted annual compensation into U.S. dollars. Based on this data and process, we determined that our Median Employee was an hourly employee with annual total compensation of $44,840.
Because we had two CEOs in 2018, for purposes of calculating the annual total compensation of Mr. Gamgort, our current CEO, we annualized Mr. Gamgort’s compensation by utilizing his 2018 annual base salary and other compensation. To align the elements of compensation used in calculating Mr. Gamgort’s total compensation with those used in calculating the Median Employee’s total compensation, we then added to this annual base salary and other compensation figure Mr. Gamgort’s non-equity incentive plan compensation received for 2018, which as discussed above, reflected fifteen (15) months of bonus opportunity due to the change in Maple’s fiscal year. Using this methodology, Mr. Gamgort’s adjusted annualized compensation was $5,064,427. Therefore, the ratio of our CEO’s annual total compensation to the Median Employee’s annual total compensation in 2018 was 113 to 1.
This calculated amount differs from the amount reported for Mr. Gamgort in the “Total” column of our 2018 Summary Compensation Table included in this Proxy Statement because the amount in the “Total” column reflects his compensation only for the period of time in 2018 for which he was employed by the Company, while his annualized total compensation for purposes of the pay ratio as described above assumes that he was employed by us for an entire year. The pay ratio as described above involves a degree of imprecision due to the use of estimates and assumptions, but is a reasonable estimate that we calculated in a manner consistent with Item 402(u) of Regulation S-K.
Securities Authorized for Issuance Under Equity Compensation Plans
The following table summarizes certain information related to our equity award plans as of December 31, 2018.
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| | | | | | |
| Plan Category | | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (#) | | Weighted Average Exercise Price of Outstanding Options, Warrants and Rights ($) | | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Initial Column) (#) |
Equity Compensation Plans approved by stockholders – Omnibus Stock Incentive Plan of 2009(1) | | 4,166,792 | | $12.54 | | 4,512,751(2) |
Equity Compensation Plans not approved by security holders(3) | | 16,042,217 | | — | | 8,518,683 |
| Total | | 20,209,009 | | $12.54 | | 13,031,434 |
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(1) | Net of cancellations, 3,130,233 RSUs have been granted under the Omnibus Stock Incentive Plan of 2009 since the closing of the DPS Merger. There are currently options to purchase 1,036,559 shares of KDP Common Stock outstanding with a weighted average exercise price of $12.54 per share and weighted average remaining contractual term of 6.62 years. RSUs have no exercise price, thus reducing the weighted average exercise price presented above. |
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(2) | Represents awards authorized for future grants under the Omnibus Stock Incentive Plan of 2009. |
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(3) | In connection with the DPS Merger, the Company assumed the Keurig Green Mountain, Inc. Long-Term Incentive Plan and the Keurig Green Mountain, Inc. Executive Ownership Plan, in each case effective August 11, 2016, and the RSUs outstanding thereunder and the authorized but unissued share pool with respect thereto (the “Keurig Award Pool”) (as adjusted pursuant to the “Exchange Ratio”, as defined in the DPS Merger agreement). The Company may grant awards to legacy-Keurig employees and other employees of KDP who were not employed by DPS upon the closing of the DPS Merger out of the Keurig Award Pool. The Keurig Green Mountain, Inc. Long-Term Incentive Plan is the legacy-equity plan of KGM pursuant to which legacy-KGM employees were granted their annual long-term equity incentive awards in the form of Maple RSUs. The Keurig Green Mountain, Inc. Executive Ownership Plan is the legacy-investment program of KGM pursuant to which legacy-KGM employees participated in the Elite and Platinum investment programs through the purchase of Maple shares of common stock. |
PROPOSAL 4 —2019 OMNIBUS STOCK INCENTIVE PLAN
Our Board adopted the Omnibus Stock Incentive Plan of 2019 (the "2019 Omnibus Incentive Plan") on February 14, 2019, subject to stockholder approval. The 2019 Omnibus Incentive Plan is intended to replace our Omnibus Stock Incentive Plan of 2009 (the "2009 Stock Plan"), which originally was approved by our stockholders in May 2009. At the time our Board approved the 2019 Omnibus Incentive Plan, the Board determined that, if the 2019 Omnibus Incentive Plan was approved by the stockholders, then no new grants would be made under the 2009 Stock Plan. Pursuant to the terms of the 2009 Stock Plan, any award already granted under the 2009 Stock Plan as of June 7, 2019 shall remain in full force and effect, as if the 2009 Stock Plan had not been amended or terminated. The 2019 Omnibus Incentive Plan is designed to attract and retain employees and consultants of the Company and its subsidiaries, to attract and retain qualified non-employee directors of the Company, to encourage the sense of proprietorship of such employees, consultants and non-employee directors and to stimulate the active interest of such persons in the development and financial success of the Company and its subsidiaries.
General Summary of Terms of the 2019 Omnibus Incentive Plan
The following is a summary of the material terms of the 2019 Omnibus Incentive Plan. The full text of the 2019 Omnibus Incentive Plan is attached to this Proxy Statement as Appendix I. Please refer to Appendix I for a more complete description of the terms of the 2019 Omnibus Incentive Plan. Capitalized terms not otherwise defined herein shall have the meaning assigned to them in the 2019 Omnibus Incentive Plan.
Eligibility. Any officers, employees, non-employee directors or consultants who perform services for us or our subsidiaries who are selected by our RemCo may participate in the 2019 Omnibus Incentive Plan. As of December 31, 2018, the Company had approximately 26,270 employees, 11 of whom are officers of the Company and 11 non-employee directors who are eligible for selection by the RemCo to participate in the 2019 Omnibus Incentive Plan. The RemCo’s selection of eligible participants in the 2019 Omnibus Incentive Plan is generally based upon the RemCo’s evaluation of, among other considerations, retention, reward and incentive needs to stimulate the active interest of such persons in the development and financial success of the Company and its subsidiaries.
Common Stock Available for Awards. Under the 2019 Omnibus Incentive Plan, there are an aggregate of number of shares of common stock equal to the sum of (i) 25,000,000 (all of which may be granted, in the sole discretion of the RemCo, as Incentive Options), plus (ii) the number of shares that remain available for grant under the 2009 Stock Plan as of June 7, 2019 (the “Effective Date”), plus (iii) the number of shares that are subject to or underlie awards which expire or for any reason are cancelled, terminated, forfeited, fail to vest, or for any other reason are not paid or delivered in shares under the 2009 Stock Plan following the Effective Date, except for the shares surrendered or withheld as payment of either the exercise price of an award and/or withholding taxes in respect of such an award. Shares of our common stock underlying Awards granted through the assumption of, or in substitution for, outstanding Awards previously granted to individuals who become employees of the Company as a result of a merger, consolidation, acquisition or other corporate transaction involving the Company shall not, unless required by law or regulation, count against the reserve of shares available for issuance. Awards valued by reference to common stock that may be settled in equivalent cash value will count as shares of common stock delivered to the same extent as if the Award were settled in shares of common stock.
Administration. The 2019 Omnibus Incentive Plan will be administered by the RemCo, which will have full and final authority to select persons to receive Awards and establish the terms of such Awards, unless such authority is specifically reserved by our Board in the 2019 Omnibus Incentive Plan or to such other committee of the Board as may be designated by the Board. Subject to that limitation and certain other limitations in the 2019 Omnibus Incentive Plan, the RemCo shall have the power to:
select the officers, employees, non-employee directors and consultants to be granted Awards under the 2019 Omnibus Incentive Plan;
determine the terms of Awards to be made to each participant;
determine the time when Awards are to be granted and any conditions that must be satisfied before an Award is granted;
establish objectives and conditions for earning Awards;
determine the terms and conditions of Award agreements (which shall not be inconsistent with the 2019 Omnibus Incentive Plan) and who must sign each Award agreement;
determine whether the conditions for earning an Award have been met and whether a performance Award will be paid at the end of an applicable performance period;
modify the terms of Awards;
determine if, when and under what conditions payment of all or any part of an Award may be deferred;
determine whether the amount or payment of an Award should be reduced or eliminated; and
determine the guidelines and/or procedures for the payment or exercise of Awards.
The RemCo may also delegate its authority under the 2019 Omnibus Incentive Plan to the chairman of the Board, the chief executive officer, the chief human resources officer, or other senior officers of the Company, its duties under the 2019 Omnibus Incentive Plan pursuant to such conditions or limitations as the RemCo may establish.
Prohibition on Repricing of Awards. The terms of outstanding Awards may not be amended to reduce the exercise price of outstanding Options or Stock Appreciation Rights nor may outstanding Options or Stock Appreciation Rights be cancelled, exchanged, substituted, bought out or surrendered in exchange for cash, other awards or Options or Stock Appreciation Rights with an exercise price that is less than the exercise price of the original Options or Stock Appreciation Rights, unless (i) approved by the stockholders or (ii) in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, or exchange of shares).
Effective Date; Plan Termination. The 2019 Omnibus Incentive Plan will become effective as of June 7, 2019. No Award may be granted under the 2019 Omnibus Incentive Plan more than 10 years after the date it becomes effective.
Clawback. All Awards under the 2019 Omnibus Incentive Plan will be subject to any clawback or recoupment policies of the Company, as may be in effect from time to time, or as otherwise required by law.
Awards. Each award (an “Award”) shall be embodied in an Award agreement, which shall contain such terms, conditions and limitations as shall be determined by the RemCo in its sole discretion. Under the 2019 Omnibus Incentive Plan, the following Awards may be granted:
Option. An Option awarded pursuant to the 2019 Omnibus Incentive Plan may consist of an Incentive Option or a Nonqualified Option. Incentive Options may not be awarded to non-employee directors. The price at which shares of common stock may be purchased upon the exercise of an Option shall be not less than the fair market value of the common stock on the date of grant. The term of an Option shall not exceed ten years from the date of grant.
Stock Appreciation Right. The strike price for a Stock Appreciation Right awarded pursuant to the 2019 Omnibus Incentive Plan shall not be less than the fair market value of the common stock on the date on which the Stock Appreciation Right is granted. The term of a Stock Appreciation Right shall not exceed ten years from the date of grant.
Stock Award. Any Stock Award awarded pursuant to the 2019 Omnibus Incentive Plan which is not a Performance Award shall have a minimum restriction period of one year from the date of grant, provided that (i) the RemCo may provide for earlier vesting following a change of control or other specified event involving the Company or upon an employee’s termination of employment, and (ii) such one-year minimum restricted period shall not apply to a Stock Award that is granted in lieu of salary or bonus paid to an employee, or cash compensation paid to, and for service as, a non-employee director.
Performance Award. The terms, conditions and limitations applicable to any Performance Awards granted pursuant to the 2019 Omnibus Incentive Plan shall be determined by the RemCo, subject to the limitations specified below. Any stock Award which is a Performance Award shall have a minimum restriction period of one year from the date of grant; provided, that the RemCo may provide for earlier vesting following a change of control or other specified event involving the Company, or upon a termination of employment. The RemCo shall set performance goals in its sole discretion which, depending on the extent to which they are met, will determine the value and/or amount of Performance Awards that will be paid out to the participant and/or the portion of an Award that may be exercised.
A performance goal is objective if a third party having knowledge of the relevant facts could determine whether the goal is met. Such a performance goal may be based on one or more business criteria that apply to an executive officer, one or more business units, divisions or sectors of the Company, or the Company as a whole, and if so desired by the RemCo, by comparison with a peer group of companies. A performance goal may include one or more of the following and need not be the same for each participant:
revenue and income measures (which include net sales, gross margin, income from operations, net income, and earnings per share);
expense measures (which include costs of goods sold, selling, general and administrative expenses and overhead costs);
operating measures (which include volume, margin, breakage and shrinkage, productivity and market share);
cash flow measures (which include net cash flow from operating activities and working capital);
liquidity measures (which include earnings before or after the effect of certain items such as interest, taxes, depreciation and amortization, and free cash flow);
leverage measures (which include debt-to-equity ratio and net debt);
market measures (which include market share, stock price, total stockholder return and market capitalization measures);
return measures (which include return on equity, return on assets and return on invested capital);
corporate value measures (which include compliance, safety, environmental and personnel matters);
other measures such as those relating to acquisitions, dispositions or customer satisfaction; and
any such other goals as may be identified by the RemCo.
Unless otherwise stated, such a performance goal need not be based upon an increase or positive result under a particular business criterion and could include, for example, maintaining the status quo or performance relative to a peer group determined by the RemCo.
The RemCo shall adjust the performance goals (either up or down) and the level of the Performance Award that a participant may earn under the 2019 Omnibus Incentive Plan, if it determines that the occurrence of external changes or other unanticipated business conditions have materially affected the fairness of the goals and have unduly influenced our ability to meet them, including without limitation, events such as material acquisitions, changes in the capital structure of the Company, and extraordinary accounting changes. In addition, performance goals and Performance Awards shall be calculated without regard to any changes in accounting standards that may be required by the Financial Accounting Standards Board after such performance goals are established. Further, in the event a period of service to which a performance goal relates is less than twelve months, the Compensation Committee shall have the right, in its sole discretion, to adjust the performance goals and the level of Performance Award opportunity.
Taxes. The Company shall have the right to deduct applicable taxes from any Award payment and withhold, at the time of delivery or vesting of cash or shares of common stock under the 2019 Omnibus Incentive Plan, an appropriate amount of cash or number of shares of common stock or a combination thereof for payment of taxes required by law or to take such other action as may be necessary in the opinion of the Company to satisfy all obligations for withholding of such taxes. The RemCo may also permit withholding to be satisfied by the transfer to the Company of shares of common stock theretofore owned by the holder of the Award with respect to which withholding is required. If shares of common stock are used to satisfy tax withholding, such shares will be valued based on the fair market value when the tax withholding is required to be made.
The following is a summary of certain U.S. federal income tax consequences of awards under our equity compensation plans and arrangements, the material terms of which are discussed above. It does not purport to be a complete description of all applicable rules, and those rules (including those summarized here) are subject to change. The summary discusses only federal income tax laws and does not discuss any state or local or non-U.S. tax laws that may be applicable.
Incentive Options. In general, no taxable income is realized by a participant upon the grant of an Incentive Option. If shares of common stock are issued to a participant pursuant to the exercise of an Incentive Option, then, generally (i) the participant will not realize ordinary income with respect to the exercise of the Incentive Option, (ii) upon sale of the underlying shares acquired upon the exercise of an Incentive Option, any amount realized in excess of the exercise price paid for the shares will be taxed to the participant as capital gain and (iii) the Company will not be entitled to a deduction. The amount by which the fair market value of the stock on the exercise date of an Incentive Option exceeds the purchase price generally will, however, constitute an item which increases the participant’s income for purposes of the alternative minimum tax. However, if the participant disposes of the shares acquired on exercise before the later of the second anniversary of the date of grant or one year after the receipt of the shares by the participant (a “disqualifying disposition”), the participant generally would include in ordinary income in the year of the disqualifying disposition an amount equal to the excess of the fair market value of the shares at the time of exercise (or, if less, the amount realized on the disposition of the shares), over the exercise price paid for the shares. If ordinary income is recognized due to a disqualifying disposition, the Company would generally be entitled to a deduction in the same amount. Subject to certain exceptions, an Incentive Option generally will not be treated as an Incentive Option if it is exercised more than three months following termination of employment. If an ISO is exercised at a time when it no longer qualifies as an ISO, it will be treated for tax purposes as an Nonqualified Option as discussed below.
Nonqualified Options. In general, no taxable income is realized by a participant upon the grant of a Nonqualified Option. Rather, at the time of exercise of the Nonqualified Option, the participant will recognize ordinary income for income tax purposes in an amount equal to the excess, if any, of the fair market value of the ordinary shares purchased over the exercise price. The Company generally will be entitled to a tax deduction at such time and in the same amount, if any, that the participant recognizes as ordinary income. The participant’s tax basis in any ordinary shares received upon exercise of a Nonqualified Option will be the fair market value of the ordinary shares on the date of exercise, and if the shares are later sold or exchanged, then the difference between the amount received upon such sale or exchange and the fair market value of such shares on the date of exercise will generally be taxable as long-term or short-term capital gain or loss (if the shares are a capital asset of the participant) depending upon the length of time such shares were held by the participant.
Stock Appreciation Rights. In general, no taxable income is recognized by a participant upon the grant of a Stock Appreciation Right, and the Company will not be entitled to a tax deduction at that time. Upon exercise, however, the participant will recognize compensation taxable as ordinary income (and subject to income tax withholding) equal to the fair market value of any shares delivered and the amount of cash paid by the Company in settlement of the rights. The Company generally will be entitled to a corresponding deduction at that time.
Restricted Stock. In general, no taxable income is recognized by a participant upon the grant of shares of restricted stock, and the Company will not be entitled to a tax deduction at such time, unless the participant makes an election under Section 83(b) of the Code to be taxed at that time. If the Section 83(b) election is made, the participant will recognize compensation taxable as ordinary income (and subject to income tax withholding) at the time of the grant, equal to the excess of the fair market value of the shares at such time over the amount, if any, paid for such shares. If such Section 83(b) election is not made, the participant will recognize compensation taxable as ordinary income (and subject to income tax withholding) at the time the restrictions lapse, in an amount equal to the excess of the fair market value of the shares at such time over the amount, if any, paid for such shares. The Company will generally be entitled to a corresponding deduction at the time the ordinary income is recognized by the participant, except to the extent that the deduction limits of Section 162(m) apply.
In addition, a participant receiving dividends with respect to restricted stock for which the above-described 83(b) election has not been made, and prior to the time the restrictions lapse, will recognize compensation taxable as ordinary income (and subject to income tax withholding) rather than dividend income. The Company will generally be entitled to a corresponding deduction, except to the extent that the deduction limits of Section 162(m) apply.
Restricted Stock Units. In general, taxable income is not recognized by a participant upon the grant of a restricted stock unit, and the Company will not be entitled to a tax deduction at that time. The participant will recognize compensation taxable as ordinary income (and subject to income tax withholding), however, at the time of the settlement of the award, equal to the fair market value of any shares delivered and the amount of cash paid by the Company. The Company will be entitled to a corresponding deduction, except to the extent that the deduction limits of Section 162(m) apply.
Unrestricted Stock. In general, a participant will recognize compensation taxable as ordinary income (and subject to income tax withholding) upon the grant of unrestricted stock, and of restricted stock subject only to restrictions on transferability, equal to the excess of the fair market value of the shares at such time over the amount, if any, paid for such shares. The Company will generally be entitled to a corresponding deduction at that time, except to the extent that the deduction limits of Section 162(m) apply.
Section 162(m). Section 162(m) of the Code imposes an annual limit of $1 million per person on the corporate tax deduction for compensation paid by a company to its chief executive officer, its chief financial officer and its top three highest paid officers in a given year, and each person who has been a Covered Employee for any prior tax year beginning after December 31, 2016 (“Covered Employees”). The Tax Cuts and Jobs Act, signed into law in December 2017 (“Tax Reform Act”), substantially modified Section 162(m) of the Code by, among other things, eliminating the exemption for performance-based compensation. As a result, beginning in 2018, compensation paid to Covered Employees in excess of $1 million will generally be nondeductible, whether or not it is a Performance Award granted pursuant to the 2019 Omnibus Incentive Plan.
The foregoing general tax discussion is intended for the information of our shareholders considering how to vote with respect to this proposal, and not as tax guidance to participants in the 2019 Omnibus Incentive Plan. We strongly urge participants to consult their own tax advisors regarding the federal, state, local, foreign, and other tax consequences of participating in the 2019 Omnibus Incentive Plan.
Amendment, Modification, Suspension or Termination. The Board or the RemCo may amend, modify, suspend or terminate the 2019 Omnibus Incentive Plan for the purpose of meeting or addressing any changes in legal requirements or for any other purpose permitted by law, except that (i) no amendment or alteration that would materially adversely affect the rights of any participant under any Award previously granted to such participant shall be made without the consent of such participant and (ii) no amendment or alteration shall be effective prior to its approval by the stockholders of the Company to the extent stockholder approval is otherwise required by applicable legal requirements.
Adjustments. The existence of outstanding Awards shall not effect in any manner the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the capital stock of the Company or its business or any merger or consolidation of the Company, or any issue of bonds, debentures, preferred or prior preference stock (whether or not such issue is prior to, on a parity with or junior to the common stock) or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding of any kind, whether or not of a character similar to that of the acts or proceedings enumerated in the 2019 Omnibus Incentive Plan. In the event of any subdivision or consolidation of outstanding shares of common stock, declaration of a dividend payable in shares of common stock or other stock split, then (i) the number of shares of common stock reserved under the 2019 Omnibus Incentive Plan, (ii) the number of shares of common stock covered by outstanding Awards in the form of common stock or units denominated in common stock, (iii) the exercise or other price in respect of such Awards, (iv) the number of shares of common stock covered by Awards to non-employee directors granted pursuant to the 2019 Omnibus Incentive Plan, and (v) the appropriate fair market value and other price determinations for such Awards shall each be proportionately adjusted by the Board to reflect such transaction. In the event of any other recapitalization or capital reorganization of the Company, any consolidation or merger of the Company with another corporation or entity, the adoption by the Company of any plan of exchange affecting the common stock or any distribution to holders of common stock or securities or property (other than normal cash dividends or dividends payable in common stock), the Board shall make appropriate adjustments to (x) the number of shares of common stock covered by Awards in the form of common stock or units denominated in common stock, (y) the exercise or other price in respect of such Awards, (z) the appropriate fair market value and other price determinations for such Awards, and (vi) the number of shares of common stock covered by Awards to non-employee directors automatically granted pursuant to the 2019 Omnibus Incentive Plan,
to give effect to such transaction shall each be proportionately adjusted by the Board to reflect such transaction; provided that such adjustments shall only be such as are necessary to maintain the proportionate interest of the holders of the Awards and preserve, without exceeding, the value of such Awards.
In the event of a corporate merger, consolidation, acquisition of property or stock, separation, reorganization or liquidation, the Board may make such adjustments to Awards or other provisions for the disposition of Awards as it deems equitable, and shall be authorized, in its sole discretion, (i) to provide for the substitution of a new Award or other arrangement (which, if applicable, may be exercisable for such property or stock as the Board determines) for an Award or the assumption of the Award, regardless of whether in a transaction to which Section 424(a) of the Code applies, (ii) to provide, prior to the transaction, for the acceleration of the vesting and exercisability of, or lapse of restrictions with respect to, the Award and, if the transaction is a cash merger, provide for the termination of any portion of the Award that remains unexercised at the time of such transaction or (iii) to cancel any such Awards and to deliver to the participants cash in an amount that the Board shall determine in its sole discretion is equal to the fair market value of such Awards on the date of such event, which in the case of Options or Stock Appreciation Rights shall be the excess of the fair market value of common stock on such date over the exercise price of an Award (for the avoidance of doubt, if the fair market value is equal to or less than the exercise price, the Option or Stock Appreciation Right may be canceled for no consideration).
Section 409A of the Code. Awards under the 2019 Omnibus Incentive Plan are intended to comply with Section 409A of the Code to the extent subject thereto, and, accordingly, to the maximum extent permitted, the 2019 Omnibus Incentive Plan will be interpreted and be administered to be in compliance therewith. Any payments described in the 2019 Omnibus Incentive Plan that are due within the “short-term deferral period” as defined in Section 409A of the Code will not be treated as deferred compensation unless applicable law requires otherwise. To the extent required in order to avoid accelerated taxation and/or tax penalties under Section 409A of the Code, a participant will not be considered to have terminated employment with the Company for purposes of the 2019 Omnibus Incentive Plan and no payment will be due to such participant under the 2019 Omnibus Incentive Plan or any Award until such participant would be considered to have incurred a “separation from service” from the Company within the meaning of Section 409A of the Code. Notwithstanding anything to the contrary in the 2019 Omnibus Incentive Plan, to the extent required in order to avoid accelerated taxation and/or tax penalties under Section 409A of the Code, amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to the 2019 Omnibus Incentive Plan during the six (6) month period immediately following a participant’s termination of employment shall instead be paid on the first business day after the date that is six (6) months following a participant’s separation from service (or upon a participant’s death, if earlier). In addition, for purposes of the 2019 Omnibus Incentive Plan, each amount to be paid or benefit to be provided to the participant pursuant to the 2019 Omnibus Incentive Plan, which constitute deferred compensation subject to Section 409A of the Code, will be construed as a separate identified payment for purposes of Section 409A of the Code.
New Plan Benefits
Awards under the 2019 Omnibus Incentive Plan will be made by the RemCo in its discretion and depend on a number of factors. Generally, the future awards that would be received under the 2019 Omnibus Incentive Plan by our officers, employees, non-employee directors or consultants are discretionary and are therefore not determinable at this time.
Registration with the SEC
We intend to file a Registration Statement on Form S-8 relating to the issuance of our common stock under the 2019 Omnibus Incentive Plan with the SEC pursuant to the Securities Act of 1933, as amended, as soon as is practicable after approval of the 2019 Omnibus Incentive Plan by our stockholders.
The affirmative vote of the holders of our common stock having a majority of the voting power eligible to vote and voting, either in person or by proxy, at the annual meeting will be required to approve the 2019 Omnibus Incentive Plan.
THE BOARD RECOMMENDS A VOTE “FOR” THE APPROVAL AND ADOPTION OF THE OMNIBUS STOCK INCENTIVE PLAN OF 2019.
POLITICAL CONTRIBUTIONS
Our RemCo has oversight responsibility for our political activities, including our Political Action Committee. Our political contributions policy sets forth basic principles that, together with our Code of Conduct, guide our approach to corporate political contributions. We disclose on our website our approach for political contributions and a summary of direct corporate contributions and those of our Political Action Committee, including contributions to industry associations and federal, state and local parties and candidates. This disclosure is available on our website at www.keurigdrpepper.com under Our Company — Downloads (at bottom of page) — Public Policy (at bottom of downloads) — Public Policy link.
DELIVERY OF PROXY MATERIALS TO HOUSEHOLDS WITH MULTIPLE STOCKHOLDERS
If you have consented to the delivery of only one 2018 Form 10-K or set of proxy materials, as applicable, to multiple KDP stockholders who share your address, then only one 2018 Form 10-K or set of proxy materials, as applicable, will be delivered to your household unless we have received contrary instructions from one or more of the stockholders sharing your address. We will deliver promptly, upon oral or written request, a separate copy of the 2018 Form 10-K or set of proxy materials, as applicable, to any stockholder at your address. If, now or in the future, you wish to receive a separate copy of the 2018 Form 10-K or set of proxy materials, as applicable, you may contact in writing Broadridge Financial Solutions, Inc. (“Broadridge”), Householding Department at 51 Mercedes Way, Edgewood, New York, 11717, or call 1-866-540-7095. We will deliver promptly a separate copy of the Notice or proxy materials to a shareholder at a shared address to which a single copy was delivered, if requested. If you would like to opt out of householding for future deliveries of proxy materials, please contact your broker, bank or other nominee. Stockholders sharing an address who now receive multiple copies of the 2018 Form 10-K or set of proxy materials, as applicable, may request delivery of a single copy by calling Broadridge at the above number or writing to Broadridge at the above address.
STOCKHOLDER PROPOSALS FOR 2020 ANNUAL MEETING
We currently expect to hold our 2020 annual meeting on or around June 2020, and will mail the Proxy Statement for that meeting in April 2020, subject to any changes we may make. If any of our stockholders intends to present a proposal for consideration at the 2020 annual meeting, including the nomination of directors, without inclusion of such proposal in the proxy statement and form of proxy, such stockholder must provide notice to us of such proposal.
Pursuant to Rule 14a-8 of the Exchange Act, stockholder proposals will need to be received by us not later than December 26, 2019, in order to be eligible for inclusion in the Proxy Statement and form of proxy distributed by the Board with respect to the 2020 annual meeting. With respect to any notice of a proposal that a stockholder intends to present for consideration at the 2020 annual meeting, without inclusion of such proposal in the Proxy Statement and form of proxy, in accordance with Article II, Section 6(c) or 7(b) of our Amended and Restated By-Laws, as applicable, stockholder proposals will need to be received by us not sooner than February 8, 2020, but not later than March 9, 2020, in order to be presented at the 2020 annual meeting. Stockholder proposals must be sent to our principal executive offices, 5301 Legacy Drive, Plano, Texas 75024, Attention: James L. Baldwin, Corporate Secretary.
By Order of the Board of Directors
James L. Baldwin
Corporate Secretary
April 25, 2019
APPENDIX I
KEURIG DR PEPPER INC.
OMNIBUS STOCK INCENTIVE PLAN OF 2019
1. Plan. This Keurig Dr Pepper Group Inc. Omnibus Stock Incentive Plan of 2019 (this “Plan”) was adopted by Keurig Dr Pepper Inc., a Delaware corporation (the “Company”), to reward certain employees, consultants and nonemployee directors of the Company or its Subsidiaries by enabling them to acquire shares of common stock of the Company.
2. Objectives. This Plan is designed to attract and retain employees and consultants of the Company and its Subsidiaries, to attract and retain qualified nonemployee directors of the Company, to encourage the sense of proprietorship of such employees, consultants and nonemployee directors and to stimulate the active interest of such persons in the development and financial success of the Company and its Subsidiaries. These objectives are to be accomplished by making Awards under this Plan and thereby providing Participants with a proprietary interest in the growth and performance of the Company and its Subsidiaries.
3. Definitions. As used herein, the terms set forth below shall have the following respective meanings:
“Authorized Officer” means the Chairman of the Board, the Chief Executive Officer, or Chief Human Resources Officer of the Company (or any other senior officer of the Company to whom either of them shall delegate the authority to execute any Award Agreement).
“Award” means the grant of any Option, Stock Appreciation Right, Stock Award or Performance Award, whether granted singly, in combination or in tandem, to a Participant pursuant to such applicable terms, conditions and limitations as the Committee may establish in accordance with the objectivesreverse side of this Plan.
“Award Agreement” means any written agreement (including in electronic form) between the Company and a Participant setting forth the terms, conditions and limitations applicable to an Award.
“Board” means the boardballot, all of directors of the Company.
“Code” means the Internal Revenue Code of 1986, as amended from time to time.
“Committee” means the Remuneration and Nomination Committee of the Board, any successor committee thereto or such other committee of the Board as may be designated by the Board to administer this Plan in whole or in part including any subcommittee of the Board as designated by the Board.
“Common Stock” means the common stock, par value $0.01 per share, of the Company.
“Consultant” means any consultant or independent contractor of the Company or any Subsidiary, but not including any Employee or Nonemployee Director.
“Disability” means permanent and total disability as determined under the Company’s long-term disability plan applicable to the Participant, or if there is no such plan applicable to the Participant, “Disability” means a determination of total disability by the Social Security Administration; provided that, in either case, the Participant’s condition also qualifies as a “disability” for purposes of Section 409A with respect to an Award subject to Section 409A.
“Disaffiliation” means the sale, spin-off, public offering or other transaction that affects the divestiture of the Company’s ownership of a Subsidiary or division of the Company.
“Dividend Equivalents” means, with respect to shares of Restricted Stock or Restricted Stock Units, with respect to which shares are to be issued at the end of the Restriction Period, an amount equal to all dividends and
other distributions (or the economic equivalent thereof) that are payable to shareholders of record during the Restriction Period on a like number of shares of Common Stock.
“Effective Date” has the meaning set forth in Section 23.
“Employee” means an employee of the Company or any of its Subsidiaries.
“Fair Market Value” of a share of Common Stock means, as of a particular date, (i) if shares of Common Stock are listed on a national securities exchange, the closing sales price per share of Common Stock on the consolidated transaction reporting system for the principal national securities exchange on which shares of Common Stock are listed on that date, or, if there shall have been no such sales reported on that date, on the last preceding date on which such a sale was so reported, (ii) if the Common Stock is not so listed but is traded on an over-the-counter market, the mean between the closing bid and asked price on that date, or, if there are no such prices available for such date, on the last preceding date on which such prices shall be available, as reported by the National Quotation Bureau Incorporated, or (iii) if shares of Common Stock are not publicly traded, the most recent value determined by an independent appraiser appointed by the Company for such purpose.
“Incentive Option” means an Option that is intended to comply with the requirements set forth in Section 422 of the Code.
“Nonemployee Director” means an individual serving as a member of the Board who is not an employee of the Company or any of its Subsidiaries.
“Nonqualified Option” means an Option that is not intended to comply with the requirements set forth in Section 422 of the Code.
“Option” means a right to purchase a specified number of shares of Common Stock at a specified price.
“Participant” means an Employee, Consultant or Nonemployee Director to whom an Award has been made under this Plan.
“Performance Award” means an award made pursuant to this Plan to a Participant, which Award is subject to the attainment of one or more Performance Goals.
“Performance Goal” means a standard established by the Committee, to determine in whole or in part whether a Performance Award shall be earned.
“Prior Plan” means the Keurig Dr Pepper Inc. Omnibus Stock Incentive Plan of 2009, as amended.
“Restricted Stock” means any Common Stock that is restricted or subject to forfeiture provisions.
“Restricted Stock Unit” means a unit evidencing the right to receive one share of Common Stock or equivalent value (as determined by the Committee) that is restricted or subject to forfeiture provisions.
“Restriction Period” means a period of time beginning as of the date upon which an Award of Restricted Stock or Restricted Stock Units is made pursuant to this Plan and ending as of the date upon which the Common Stock subject to such Award is issued (if not previously issued) no longer restricted or subject to forfeiture provisions.
“Section 409A” means Section 409A of the Code and any Treasury Regulations and guidance promulgated thereunder.
“Separation from Service” with respect to Awards that are subject to Section 409A, means a Participant’s Termination of Employment with the Company and any of its Subsidiaries, other than by reason of death or Disability that qualifies as a ‘separation from service’ for purposes of Section 409A.
“Stock Appreciation Right” or “SAR” means a right to receive a payment, in cash or Common Stock, equal to the excess of the Fair Market Value or other specified valuation of a specified number of shares of Common Stock on the date the right is exercised over a specified strike price, in each case, as determined by the Committee.
“Stock Award” means an award in the form of shares of Common Stock or units denominated in shares of Common Stock, including an award of Restricted Stock or Restricted Stock Units.
“Subsidiary” means (i) in the case of a corporation, any corporation of which the Company directly or indirectly owns shares representing 50% or more of the combined voting power of the shares of all classes or series of capital stock of such corporation which have the right to vote generally on matters submitted to a vote of the shareholders of such corporation and (ii) in the case of a partnership or other business entity not organized as a corporation, any such business entity of which the Company directly or indirectly owns 50% or more of the voting, capital or profits interests (whether in the form of partnership interests, membership interests or otherwise).
“Termination of Employment” means the termination of a Participant’s employment with, or performance of services for, the Company and any of its Subsidiaries. Unless otherwise determined by the Committee, if a Participant’s employment with the Company and its Subsidiaries terminates but such Participant continues to provide services to the Company and its Subsidiaries in a non-employee capacity, such change in status shall not be deemed a Termination of Employment. A Participant shall be deemed to incur a Termination of Employment in the event of the Disaffiliation of such Participant’s Subsidiary or division unless the Committee specifies otherwise. Temporary absences from employment because of illness, vacation or leave of absence and transfers among the Company and its Subsidiaries do not constitute a Termination of Employment. If an Award is subject to Section 409A, however, Termination of Employment for purposes of that Award shall mean the Participant’s Separation from Service.
4. Eligibility.
(a) Employees. All Employees are eligible for Awards under this Plan in the sole discretion of the Committee.
(b) Consultants. Consultants are eligible for Awards under this Plan in the sole discretion of the Committee.
(c) Nonemployee Directors. Nonemployee Directors are eligible for Awards under this Plan, in their capacities as directors.
5. Common Stock Available for Awards. Subject to the provisions of paragraph 15 hereof, there shall be available for Awards under this Plan granted wholly or partly in Common Stock (including rights or options that may be exercised for or settled in Common Stock) an aggregate number of shares of Common Stock equal to the sum of (i) 25,000,000 (all of which may be granted, in the sole discretion of the Committee, as Incentive Options), plus (ii) the number of shares that remain available for grant under the Prior Plan as of the Effective Date plus (iii) the number of shares that are subject to or underlie awards which expire or for any reason are cancelled, terminated, forfeited, fail to vest, or for any other reason are not paid or delivered in shares under the Prior Plan following the Effective Date, except for the shares surrendered or withheld as payment of either the exercise price of an award and/or withholding taxes in respect of such an award.
(a) In connection with the granting of an Option or other Award, the number of shares of Common Stock available for issuance under this Plan shall be reduced by the number of shares of Common Stock in respect of which the Option or Award is granted or denominated. For example, upon the grant of stock-settled SARs, the number of shares of Common Stock available for issuance under this Plan shall be reduced by the full number of SARs granted, and the number of shares of Common Stock available for issuance under this Plan shall not thereafter be increased upon the exercise of the SARs and settlement in shares of Common Stock, even if the actual number of
shares of Common Stock delivered in settlement of the SARs is less than the full number of SARs exercised. However, Awards that by their terms do not permit settlement in shares of Common Stock shall not reduce the number of shares of Common Stock available for issuance under this Plan.
(b) Any shares of Common Stock that are tendered by a Participant or withheld as full or partial payment of withholding or other taxes or as payment for the exercise or conversion price of an Award under this Plan shall not be added back to the number of shares of Common Stock available for issuance under this Plan.
(c) Whenever any outstanding Option or other Award (or portion thereof) expires, is cancelled, is settled in cash rather than in shares of Common Stock (pursuant to the terms of an Award that permits but does not require cash settlement) or is otherwise terminated for any reason without having been exercised or payment having been made in the form of shares of Common Stock, the number of shares of Common Stock available for issuance under this Plan shall be increased by the number of shares of Common Stock allocable to the expired, cancelled, settled or otherwise terminated Option or other Award (or portion thereof). To the extent that any Award is forfeited, or any Option or SAR terminates, expires or lapses without being exercised, the shares of Common Stock subjectof Keurig Dr Pepper Inc. that the stockholder(s) is/are entitled to such Awards will notvote at the virtual Annual Meeting of Stockholders to be counted as shares delivered under this Plan.
(d) Any shares of Common Stock underlying Awards granted throughheld live online at 10:00 a.m., ET, on Thursday, June 9, 2022, or any postponement or adjournment thereof. In their discretion, the assumption of, or in substitution for, outstanding awards previously granted to individuals who become employees of the Company as a result of a merger, consolidation, acquisition or other corporate transaction involving the Company shall not, unless required by law or regulation, count against the reserve of available shares of Common Stock under this Plan.
(e) Awards valued by reference to Common Stock that may be settled in equivalent cash value will count as shares of Common Stock delivered to the same extent as if the Award were settled in shares of Common Stock.
The Committee and the appropriate officers of the Company shall beproxy holders are authorized to from time to time, take allvote upon such actions as any of them may determine are necessary or appropriate to file any documents with governmental authorities, stock exchanges and transaction reporting systemsother business as may be required to ensure that sharesproperly come before the virtual Annual Meeting of Common Stock are available for issuance pursuant to Awards.
6. Administration.
(a) Authority of the Committee. Stockholders or any postponement or adjournment thereof.This Plan shall be administered by the Committee, which shall have the powers vested in it by the terms of this Plan, such powers to include the authority (within the limitations described in this Plan):
to select the Employees, Consultantsproxy, when properly executed and Nonemployee Directors to be granted Awards under this Plan;
to determine the terms of Awards to be made to each Participant;
to determine the time when Awards are to be granted and any conditions that must be satisfied before an Award is granted;
to establish objectives and conditions for earning Awards;
to determine the terms and conditions of Award Agreements (which shall not be inconsistent with this Plan) and who must sign each Award Agreement;
to determine whether the conditions for earning an Award have been met and whether a Performance Awardreturned, will be paid
at the end of an applicable performance period;
except as otherwise provided in paragraph 13, to modify the terms of Awards made under this Plan;
to determine if, when and under what conditions payment of all or any part of an Award may be deferred;
to determine whether the amount or payment of an Award should be reduced or eliminated; and
to determine the guidelines and/or procedures for the payment or exercise of Awards.
The Committee may correct any defect or supply any omission or reconcile any inconsistency in this Plan or in any Awardvoted in the manner and to the extent the Committee deems necessary or desirable to further Plan purposes. Any decision of the Committee in the interpretation and administration ofdirected herein. If no such direction is made, this Plan shall lie within its sole discretion and shallproxy will be final, conclusive and binding on all parties concerned.
(b) Limitation of Liability. No member of the Committee or officer of the Company to whom the Committee has delegated authorityvoted in accordance with the provisionsBoard of paragraph 7 of this Plan shall be liable for anything done or omitted to be done by him or her, by any member of the Committee or by any officer of the Company in connection with the performance of any duties under this Plan, except for his or her own willful misconduct or as expressly provided by statute.Directors’ recommendations.IMPORTANT: CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE.
(c) Prohibition on Repricing of Awards. The terms of outstanding Awards may not be amended to reduce the exercise price of outstanding Options or SARs nor may outstanding Options or SARS be cancelled, exchanged, substituted, bought out or surrendered in exchange for cash, other awards or Options or SARs with an exercise price that is less than the exercise price of the
original Options or SARs, unless (i) approved by the stockholders or (ii) in connection with a corporate transaction involving the company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, or exchange of shares).
7. Delegation of Authority. To the extent permitted by applicable law or the rules of any securities exchange or automated quotation system on which the shares of Common Stock are listed, quoted or traded, the Board or Committee may from time to time delegate to a committee of one or more members of the Board or to one or more officers of the Company the authority to grant or amend Awards or to take other administrative actions pursuant to this Section 6; provided, however, that in no event shall an officer of the Company be delegated the authority to grant Awards to, or amend Awards held by, the following individuals: (a) individuals who are subject to Section 16 of the Securities Exchange Act of 1934, as amended or (b) officers of the Company (or Nonemployee Directors) to whom authority to grant or amend Awards has been delegated hereunder. Any delegation hereunder shall be subject to the restrictions and limits that the Board or Committee specifies at the time of such delegation, and the Board may at any time rescind the authority so delegated or appoint a new delegatee.
8. Awards. (a) The Committee shall determine the type or types of Awards to be made under this Plan and shall designate from time to time the Participants who are to be the recipients of such Awards. Each Award shall be embodied in an Award Agreement, which shall contain such terms, conditions and limitations as shall be determined by the Committee in its sole discretion.
Awards may consist of those listed in this paragraph 8(a) and may be granted singly, in combination or in tandem. Awards may also be made in combination or in tandem with, in replacement of, or as alternatives to, grants or rights under this Plan or any other plan of the
Company or any of its Subsidiaries, including the plan of any acquired entity; provided that, except as contemplated in paragraph 15 hereof, no Option may be issued in exchange for the cancellation of an Option with a higher exercise price nor may the exercise price of any Option be reduced. Further, any Award shall also be subject to the restrictions set forth in paragraph 6(c) hereof. All or part of an Award may be subject to conditions established by the Committee, which may include, but are not limited to, continuous service with the Company and its Subsidiaries, achievement of specific business objectives, increases in specified indices, attainment of specified growth rates and other comparable measurements of performance. Upon the termination of employment by a Participant, any unexercised, deferred, unvested or unpaid Awards shall be treated as set forth in the applicable Award Agreement.
(i) Option. An Award may be in the form of an Option. An Option awarded pursuant to this Plan may consist of an Incentive Option or a Nonqualified Option. Incentive Options may not be awarded to Nonemployee Directors. The price at which shares of Common Stock may be purchased upon the exercise of an Option shall be not less than the Fair Market Value of the Common Stock on the date of grant. The term of an Option shall not exceed ten years from the date of grant. Subject to the foregoing provisions, the terms, conditions and limitations applicable to any Options awarded pursuant to this Plan, including the term of any Options and the date or dates upon which they become exercisable, shall be determined by the Committee.
(ii) Stock Appreciation Right. An Award may be in the form of a Stock Appreciation Right. The strike price for a Stock Appreciation Right shall not be less than the Fair Market Value of the Common Stock on the date on which the Stock Appreciation Right is granted. The term of a Stock Appreciation Right shall not exceed ten years from the date of grant. Subject to the foregoing limitations, the terms, conditions and limitations applicable to any Stock Appreciation Rights awarded pursuant to this Plan, including the term of any Stock Appreciation Rights and the date or dates upon which they become exercisable, shall be determined by the Committee.
(iii) Stock Award. An Award may be in the form of a Stock Award. The terms, conditions and limitations applicable to any Stock Awards granted pursuant to this Plan shall be determined by the Committee, subject to the limitations specified below. Any Stock Award which is not a Performance Award shall have a minimum Restriction Period of one year from the date of grant, provided that (i) the Committee may provide for earlier vesting following a change of control or other specified events involving the Company or upon an Employee’s termination of employment, and (ii) such one-year minimum
Restricted Period shall not apply to a Stock Award that is granted in lieu of salary or bonus.
(iv) Performance Award. Without limiting the type or number of Awards that may be made under the other provisions of this Plan, an Award may be in the form of a Performance Award. The terms, conditions and limitations applicable to any Performance Awards granted to Participants pursuant to this Plan shall be determined by the Committee, subject to the limitations specified below. Any Stock Award which is a Performance Award shall have a minimum Restriction Period of one year from the date of grant, provided that the Committee may provide for earlier vesting following a change of control or other specified events involving the Company, or upon a termination of employment. The Committee shall set Performance Goals in its sole discretion which, depending on the extent to which they are met, will determine the value and/or amount of Performance Awards that will be paid out to the Participant and/or the portion of an Award that may be exercised.
A Performance Goal may include one or more of the following and need not be the same for each Participant:
revenue and income measures (which include revenue, gross margin, income from operations, net income, net
sales and earnings per share);
expense measures (which include costs of goods sold, selling, general and administrative expenses and overhead
costs);
operating measures (which include volume, margin, breakage and shrinkage, productivity and market share);
cash flow measures (which include net cash flow from operating activities and working capital);
liquidity measures (which include earnings before or after the effect of certain items such as interest, taxes,
depreciation and amortization, and free cash flow);
leverage measures (which include debt-to-equity ratio and net debt);
market measures (which include market share, stock price, total shareholder return and market capitalization
measures);
return measures (which include return on equity, return on assets, return on invested capital and internally
developed total return measures incorporating profit growth and cash flow yield measures, with cash flow yield
incorporating cash flow and capital expenditures);
corporate value measures (which include compliance, safety, environmental and personnel matters);
other measures such as those relating to acquisitions, dispositions or customer satisfaction; and
any such other goal as may be identified by the Committee.
Unless otherwise stated, such a Performance Goal may be set using the following baselines: past performance, forward looking budgets or expectations, performance relative to a peer group selected by the Committee.
(b) The Committee shall adjust the Performance Goals (either up or down) and the level of the Performance Award that a Participant may earn under this Plan, if it determines that the occurrence of external changes or other unanticipated business conditions have materially affected the fairness of the goals and have unduly influenced the Company’s ability to meet them, including without limitation, events such as material acquisitions, changes in the capital structure of the Company, and extraordinary accounting changes. In addition, Performance Goals and Performance Awards shall be calculated without regard to any changes in accounting standards that may be required by the Financial Accounting Standards Board after such Performance Goals are established. Further, in the event a period of service to which a Performance Goal relates is less than twelve months, the Committee shall have the right, in its sole discretion, to adjust the Performance Goals and the level of Performance Award opportunity.
9. Awards to Nonemployee Directors. The Committee may grant a Nonemployee Director of the Company one or more Awards and establish the terms thereof in accordance with paragraph 8 consistent with the provisions therein for the granting of Awards to Employees and subject to the applicable terms, conditions and limitations set forth in this Plan and the applicable Award Agreement.
10. Award Payment; Dividends; Substitution; Fractional Shares.
(a) General. Payment of Awards may be made in the form of cash or Common Stock, or a combination thereof, and may include such restrictions as the Committee shall determine, including, in the case of Common Stock, restrictions on transfer and forfeiture provisions.
(b) Dividends and Interest. Rights to dividends or Dividend Equivalents may be extended to and made part of any Award consisting of shares of Common Stock or units denominated in shares of Common Stock, subject to such terms, conditions and restrictions as the Committee may establish. No dividends shall be paid on Options or SARs. No dividends shall be paid on Stock
Awards or Performance Awards until such Awards are earned. The Committee may also establish rules and procedures for the crediting of interest on deferred cash payments and Dividend Equivalents for Awards consisting of shares of Common Stock or units denominated in shares of Common Stock.
(c) Fractional Shares. No fractional shares shall be issued or delivered pursuant to any Award under this Plan. The Committee shall determine whether cash, Awards or other property shall be issued or paid in lieu of fractional shares, or whether fractional shares or any rights thereto shall be forfeited or otherwise eliminated.
11. Stock Option Exercise. The price at which shares of Common Stock may be purchased under an Option shall be paid in full at the time of exercise in cash or, if elected by the Participant, the Participant may purchase such shares by means of tendering Common Stock valued at Fair Market Value on the date of exercise, or any combination thereof. The Board or the Committee, in its sole discretion, shall determine acceptable methods for Participants to tender Common Stock. In accordance with the rules and procedures established for this purpose and subject to applicable law, Options may also be exercised through “cashless exercise” procedures approved by the Board or the Committee involving an approved broker or dealer.
12. Taxes. The Company shall have the right to deduct applicable taxes from any Award payment and withhold, at the time of delivery or vesting of cash or shares of Common Stock under this Plan, an appropriate amount of cash or number of shares of Common Stock or a combination thereof for payment of taxes required by law or to take such other action as may be necessary in the opinion of the Company to satisfy all obligations for withholding of such taxes. The Board or the Committee may also permit withholding to be satisfied by the transfer to the Company of shares of Common Stock theretofore owned by the holder of the Award with respect to which withholding is required. If shares of Common Stock are used to satisfy tax withholding, such shares shall be valued based on the Fair Market Value when the tax withholding is required to be made.
13. Amendment, Modification, Suspension or Termination. The Board or the Committee may amend, modify, suspend or terminate this Plan for the purpose of meeting or addressing any changes in legal requirements or for any other purpose permitted by law, except that (i) no amendment or alteration that would materially adversely affect the
rights of any Participant under any Award previously granted to such Participant shall be made without the consent of such Participant and (ii) no amendment or alteration shall be effective prior to its approval by the shareholders of the Company to the extent shareholder approval is otherwise required by
applicable legal requirements.
14. Assignability. Unless otherwise determined by the Committee in the Award Agreement, no Award or any other benefit under this Plan shall be assignable or otherwise transferable. Any attempted assignment of an Award or any other benefit under this Plan in violation of this paragraph 14 shall be null and void.
15. Adjustments.
(a) The existence of outstanding Awards shall not affect in any manner the right or power of the Company or its shareholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the capital stock of the Company or its business or any merger or consolidation of the Company, or any issue of bonds, debentures, preferred or prior preference stock (whether or not such issue is prior to, on a parity with or junior to the Common Stock) or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding of any kind, whether or not of a character similar to that of the acts or proceedings enumerated above.
(b) In the event of any subdivision or consolidation of outstanding shares of Common Stock, declaration of a dividend payable in shares of Common Stock or other stock split, then (i) the number of shares of Common Stock reserved under this Plan, (ii) the number of shares of Common Stock covered by outstanding Awards in the form of Common Stock or units denominated in Common Stock, (iii) the exercise or other price in respect of such Awards, (iv) the number of shares of Common Stock covered by Awards to Nonemployee Directors granted pursuant to paragraph 9 hereof, and (v) the appropriate Fair Market Value and other price determinations for such Awards shall each be proportionately adjusted by the Board to reflect such transaction. In the event of any other recapitalization or capital reorganization of the Company, any consolidation or merger of the Company with another corporation or entity, the adoption by the Company of any plan of exchange affecting the Common Stock or any distribution to holders of Common Stock of securities or property (other than normal cash dividends or dividends payable in Common Stock), the Board shall make appropriate adjustments to (i) the number of shares of Common Stock covered by Awards in the form of Common Stock or units denominated in Common Stock, (ii) the exercise or other price in respect of such Awards, and (iii) the appropriate Fair Market Value and other price determinations for such Awards, and (iv) the number of shares of Common Stock covered by Awards to Nonemployee Directors automatically granted pursuant to paragraph 9 hereof, to give effect to such transaction shall each be proportionately adjusted by the Board to reflect such transaction; provided that such adjustments shall only be such as are necessary to maintain the proportionate interest of the holders of the Awards and preserve, without exceeding, the value of such Awards.
(c) In the event of a corporate merger, consolidation, acquisition of property or stock, separation, reorganization or liquidation, the Board may make such adjustments to Awards or other provisions for the disposition of Awards as it deems equitable, and shall be authorized, in its sole discretion, (i) to provide for the substitution of a new Award or other arrangement (which, if applicable, may be exercisable for such property or stock as the Board determines) for an Award or the assumption of the Award, regardless of whether in a transaction to which Section 424(a) of the Code applies, (ii) to provide, in connection with a transaction, for the acceleration of the vesting and exercisability of, or lapse of restrictions with respect to, the Award and, if the transaction is a cash merger, provide for the termination of any portion of the Award that remains unexercised at the time of such transaction or (iii) to cancel any such Awards and to deliver to the Participants cash in an amount that the Board shall determine in its sole discretion is equal to the fair market value of such Awards on the date of such event, which in the case of Options or Stock Appreciation Rights shall be the excess of the Fair Market Value of Common Stock on such date over the exercise price of such Award (for the avoidance of doubt, if the exercise price is less than Fair Market Value the Option or Stock Appreciation Right may be canceled for no consideration).
16. Restrictions. No Common Stock or other form of payment shall be issued with respect to any Award unless the Company shall be satisfied based on the advice of its counsel that such issuance will be in compliance with
applicable federal and state securities laws. Certificates evidencing shares of Common Stock delivered under this Plan (to the extent that such shares are so evidenced) may be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any securities exchange or transaction reporting system upon which the Common Stock is then listed or to which it is admitted for quotation and any applicable federal or state securities law. The Committee may cause a legend or legends to be placed upon such certificates (if any) to make appropriate reference to such restrictions.
17. Unfunded Plan. Insofar as it provides for Awards of cash, Common Stock or rights thereto, this Plan shall be unfunded. Although bookkeeping accounts may be established with respect to Participants who are entitled to cash, Common Stock or rights thereto under this Plan, any such accounts shall be used merely as a bookkeeping convenience. The Company shall not be required to segregate any assets that may at any time be represented by cash, Common Stock or rights thereto, nor shall this Plan be construed as providing for such segregation, nor shall the Company, the Board or the Committee be deemed to be a trustee of any cash, Common Stock or rights thereto to be granted under this Plan. Any liability or obligation of the Company to any Participant with respect to an Award of cash, Common Stock or rights thereto under this Plan shall be based solely upon any contractual obligations that may be created by this Plan and any Award Agreement, and no such liability or obligation of the Company shall be deemed to be secured by any pledge or other encumbrance on any property of the Company. Neither the Company nor the Board nor the Committee shall be required to give any security or bond for the performance of any obligation that may be created by this Plan.
18. Section 409A of the Code. The intent of the parties is that payments and benefits under the Plan comply with Section 409A of the Code to the extent subject thereto, and, accordingly, to the maximum extent permitted, the Plan shall be interpreted and be administered to be in compliance therewith. Any payments described in the Plan that are due within the “short-term deferral period” as defined in Section 409A of the Code shall not be treated as deferred compensation unless applicable law requires otherwise. Notwithstanding anything contained herein to the contrary, to the extent required in order to avoid accelerated taxation and/or tax penalties under Section 409A of the Code, the Participant shall not be considered to have terminated employment with the Company for purposes of the Plan and no payment shall be due to the Participant under the Plan or any Award until the Participant would be considered to have incurred a “separation from service” from the Company within the meaning of Section 409A of the Code. Notwithstanding anything to the contrary in the Plan, to the extent required in order to avoid accelerated taxation and/or tax penalties under Section 409A of the Code, amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to the Plan during the six (6) month period immediately following the Participant’s termination of employment shall instead be paid on the first business day after the date that is six (6) months following the Participant’s separation from service (or upon the Participant’s death, if earlier). In addition, for purposes of the Plan, each amount to be paid or benefit to be provided to the Participant pursuant to the Plan, which constitute deferred compensation subject to Section 409A of the Code, shall be construed as a separate identified payment for purposes of Section 409A of the Code. Notwithstanding the foregoing, for each Award that constitutes nonqualified deferred compensation under Section 409A of the Code, if required to avoid accelerated taxation and/or tax penalties, a “change in control” shall be deemed to have occurred for purposes of the payment or settlement of such Award under the Plan only if a “change in the ownership of the corporation,” a “change in effective control of the corporation” or a “change in the ownership of a substantial portion of the assets of the corporation,” within the meaning of Section 409A(a)(2)(A)(v) of the Code shall also be deemed to have occurred under Section 409A of the Code. Notwithstanding anything in this Plan to the contrary, if any Plan provision or Award under this Plan would result in the imposition of an applicable tax under Section 409A, that Plan provision or Award shall be reformed to avoid imposition of the applicable tax and no such action shall be deemed to adversely affect the Participant’s rights to an Award.
19. Governing Law. This Plan and all determinations made and actions taken pursuant hereto, to the extent not otherwise governed by mandatory provisions of the Code or the securities laws of the United States, shall be governed by and construed in accordance with the laws of the State of Delaware.
20. No Right to Employment or Directorship. Nothing in this Plan or an Award Agreement shall interfere with or limit in any way the right of the Company or a Subsidiary to terminate any Participant’s employment or other service
relationship at any time, nor confer upon any Participant any right to continue in the capacity in which he or she is employed or otherwise serves the Company or any Subsidiary. Further, nothing in this Plan or an Award Agreement constitutes any assurance or obligation of the Board to nominate any Nonemployee Director for re-election by the Company’s shareholders.
21. Successors. All obligations of the Company under this Plan with respect to Awards granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.
22. Tax Consequences. Nothing in this Plan or an Award Agreement shall constitute a representation by the Company to a Participant regarding the tax consequences of any Award received by a Participant under this Plan. Although the Company may endeavor to (i) qualify a Performance Award for favorable U.S. or foreign tax treatment or (ii) avoid adverse tax treatment (e.g. under Section 409A), the Company makes no representation to that effect and expressly disavows any covenant to maintain favorable or unavoidable tax treatment. The Company shall be unconstrained in its corporate activities without regard to the potential negative tax impact on holders of Performance Awards under this Plan.
23. Effectiveness. This Plan is effective June 7, 2019 (the “Effective Date”), subject to approval by the shareholders of the Company. This Plan shall continue in effect for a term of ten years after the date on which the shareholders of the Company approve this Plan, unless sooner terminated by action of the Board.
24. Recoupment. All Awards made under the Plan shall be subject to any clawback or recoupment policies of the Company, as may be in effect from time to time, or as otherwise required by law.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed by its duly authorized officer on the date first written above.
KEURIG DR PEPPER INC.
By:_______________________
James L. Baldwin, Jr.
Title: Chief Legal Officer, General Counsel and Secretary
