Del Monte Corp 10-Q for FY2022 Q2
Del Monte Corp (DMC)
10-Q
2022-08-03
For: 2022-07-01
View Original
Added on
April 06, 2026
About this 10-Q
Del Monte Corp filed this 10-Q on August 3, 2022, covering the quarter ended July 1, 2022 (FY2022 Q2).
Headline figures
Quarter ended July 1, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $1.21B
- up 6.2% from $1.14B a year earlier
- Net income
- $21.2M
- down 55.1% from net income of $47.2M a year earlier
- Diluted EPS
- $0.44
- down 55.6% from $0.99 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
———————————
FORM 10-Q
———————————
(Mark One)
For the quarterly period ended July 01, 2022
OR
For the transition period from to
(Commission file number)
———————————
(Exact Name of Registrant as Specified in Its Charter)
———————————
| N/A | |||||||||||
| (State or Other Jurisdiction of Incorporation or Organization) | (I.R.S Employer Identification No.) | ||||||||||
| Grand Cayman, | |||||||||||
| N/A | |||||||||||
| (Address of Registrant’s Principal Executive Office) | (Zip Code) | ||||||||||
(305 ) 520-8400
(Registrant’s telephone number including area code)
Please send copies of notices and communications from the Securities and Exchange Commission to:
c/o Del Monte Fresh Produce Company
241 Sevilla Avenue
Coral Gables, Florida 33134
(Address of Registrant’s U.S. Executive Office)
———————————
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ☒ | Accelerated filer | ☐ | |||||||||
| Non-accelerated filer | ☐ | ||||||||||
| Smaller reporting company | |||||||||||
| Emerging growth company | |||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of July 22, 2022, there were 47,832,974 ordinary shares of Fresh Del Monte Produce Inc. issued and outstanding.
TABLE OF CONTENTS
| Page | ||||||||
| PART I: FINANCIAL INFORMATION | ||||||||
| Item 1. Financial Statements | ||||||||
| PART II. OTHER INFORMATION | ||||||||
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
(U.S. dollars in millions, except share and per share data)
| July 1, 2022 | December 31, 2021 | ||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
Trade accounts receivable, net of allowance of $ | |||||||||||
Other accounts receivable, net of allowance of $ | |||||||||||
| Inventories, net | |||||||||||
| Assets held for sale | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Total current assets | |||||||||||
| Investments in and advances to unconsolidated companies | |||||||||||
| Property, plant and equipment, net | |||||||||||
| Operating lease right-of-use assets | |||||||||||
| Goodwill | |||||||||||
| Intangible assets, net | |||||||||||
| Deferred income taxes | |||||||||||
| Other noncurrent assets | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities and shareholders' equity | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable and accrued expenses | $ | $ | |||||||||
| Current maturities of debt and finance leases | |||||||||||
| Current maturities of operating leases | |||||||||||
| Income taxes and other taxes payable | |||||||||||
| Total current liabilities | |||||||||||
| Long-term debt and finance leases | |||||||||||
| Retirement benefits | |||||||||||
| Deferred income taxes | |||||||||||
| Operating leases, less current maturities | |||||||||||
| Other noncurrent liabilities | |||||||||||
| Total liabilities | |||||||||||
| Commitments and contingencies (See note 9) | |||||||||||
| Redeemable noncontrolling interest | |||||||||||
| Shareholders' equity: | |||||||||||
Preferred shares, $ authorized; | |||||||||||
Ordinary shares, $ | |||||||||||
| Paid-in capital | |||||||||||
| Retained earnings | |||||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Total Fresh Del Monte Produce Inc. shareholders' equity | |||||||||||
| Noncontrolling interests | |||||||||||
| Total shareholders' equity | |||||||||||
Total liabilities, redeemable noncontrolling interest and shareholders' equity | $ | $ | |||||||||
See accompanying notes.
1
FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(U.S. dollars in millions, except share and per share data)
| Quarter ended | Six months ended | ||||||||||||||||||||||
| July 1, 2022 | July 2, 2021 | July 1, 2022 | July 2, 2021 | ||||||||||||||||||||
| Net sales | $ | $ | $ | $ | |||||||||||||||||||
| Cost of products sold | |||||||||||||||||||||||
| Gross profit | |||||||||||||||||||||||
| Selling, general and administrative expenses | |||||||||||||||||||||||
| Gain (loss) on disposal of property, plant and equipment, net | ( | ||||||||||||||||||||||
| Asset impairment and other charges (credits), net | ( | ||||||||||||||||||||||
| Operating income | |||||||||||||||||||||||
| Interest expense | |||||||||||||||||||||||
| Interest income | |||||||||||||||||||||||
| Other expense, net | |||||||||||||||||||||||
| Income before income taxes | |||||||||||||||||||||||
| Income tax provision | |||||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Less: Net (loss) income attributable to redeemable and noncontrolling interests | ( | ( | ( | ||||||||||||||||||||
| Net income attributable to Fresh Del Monte Produce Inc. | $ | $ | $ | $ | |||||||||||||||||||
| Net income per ordinary share attributable to Fresh Del Monte Produce Inc. - Basic | $ | $ | $ | $ | |||||||||||||||||||
| Net income per ordinary share attributable to Fresh Del Monte Produce Inc. - Diluted | $ | $ | $ | $ | |||||||||||||||||||
| Dividends declared per ordinary share | $ | $ | $ | $ | |||||||||||||||||||
| Weighted average number of ordinary shares: | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
See accompanying notes.
2
FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(U.S. dollars in millions)
| Quarter ended | Six months ended | ||||||||||||||||||||||
| July 1, 2022 | July 2, 2021 | July 1, 2022 | July 2, 2021 | ||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Other comprehensive income (loss): | |||||||||||||||||||||||
| Net unrealized gain (loss) on derivatives, net of tax | ( | ||||||||||||||||||||||
| Net unrealized foreign currency translation (loss) gain | ( | ( | ( | ||||||||||||||||||||
| Net change in retirement benefit adjustment, net of tax | ( | ( | |||||||||||||||||||||
| Comprehensive income | $ | $ | $ | $ | |||||||||||||||||||
| Less: Comprehensive (loss) income attributable to redeemable and noncontrolling interests | ( | ( | ( | ||||||||||||||||||||
| Comprehensive income attributable to Fresh Del Monte Produce Inc. | $ | $ | $ | $ | |||||||||||||||||||
See accompanying notes.
3
FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(U.S. dollars in millions)
| Six months ended | |||||||||||
| July 1, 2022 | July 2, 2021 | ||||||||||
| Operating activities: | |||||||||||
| Net income | $ | $ | |||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Amortization of debt issuance costs | |||||||||||
| Share-based compensation expense | |||||||||||
| Asset impairments | |||||||||||
| Change in uncertain tax positions | |||||||||||
| Loss (gain) on disposal of property, plant and equipment | ( | ||||||||||
| Deferred income taxes | ( | ||||||||||
| Foreign currency translation adjustment | ( | ||||||||||
| Other, net | ( | ||||||||||
Changes in operating assets and liabilities | |||||||||||
| Receivables | ( | ( | |||||||||
| Inventories | |||||||||||
| Prepaid expenses and other current assets | ( | ||||||||||
| Accounts payable and accrued expenses | |||||||||||
| Other assets and liabilities | ( | ||||||||||
| Net cash provided by operating activities | |||||||||||
| Investing activities: | |||||||||||
| Capital expenditures | ( | ( | |||||||||
| Proceeds from sales of property, plant and equipment | |||||||||||
| Cash (paid) received from settlement of derivatives not designated as hedges | ( | ||||||||||
| Investments in unconsolidated companies | ( | ||||||||||
| Other investing activities | |||||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| Financing activities: | |||||||||||
| Proceeds from debt | |||||||||||
| Payments on debt | ( | ( | |||||||||
| Distributions to noncontrolling interests | ( | ( | |||||||||
| Share-based awards settled in cash for taxes | ( | ( | |||||||||
| Dividends paid | ( | ( | |||||||||
| Other financing activities | ( | ||||||||||
| Net cash used in financing activities | ( | ( | |||||||||
| Effect of exchange rate changes on cash | |||||||||||
| Net (decrease) increase in cash and cash equivalents | ( | ||||||||||
| Cash and cash equivalents, beginning | |||||||||||
| Cash and cash equivalents, ending | $ | $ | |||||||||
| Supplemental cash flow information: | |||||||||||
| Cash paid for interest | $ | $ | |||||||||
| Cash paid for income taxes | $ | $ | |||||||||
| Non-cash financing and investing activities: | |||||||||||
| Right-of-use assets obtained in exchange for new operating lease obligations | $ | $ | |||||||||
| Dividends on restricted stock units | $ | $ | |||||||||
See accompanying notes.
4
FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY AND REDEEMABLE NONCONTROLLING INTEREST
(Unaudited) (U.S. dollars in millions, except share data)
| Ordinary Shares Outstanding | Ordinary Shares | Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Fresh Del Monte Produce Inc. Shareholders' Equity | Noncontrolling Interests | Total Shareholders' Equity | Redeemable Noncontrolling Interest | |||||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2021 | $ | $ | $ | $ | ( | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Settlement of restricted stock units | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Share-based payment expense | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Disposal of noncontrolling interest | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Dividend declared | — | — | ( | — | ( | — | ( | — | |||||||||||||||||||||||||||||||||||||||||||||
| Comprehensive income: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||
| Unrealized gain on derivatives, net of tax | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Net unrealized foreign currency translation loss | — | — | — | — | ( | ( | — | ( | — | ||||||||||||||||||||||||||||||||||||||||||||
| Change in retirement benefit adjustment, net of tax | — | — | — | — | ( | ( | — | ( | — | ||||||||||||||||||||||||||||||||||||||||||||
| Comprehensive income (loss) | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of April 1, 2022 | $ | $ | $ | $ | ( | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Exercises of stock options | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Settlement of restricted stock units | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Share-based payment expense | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Adjustment of noncontrolling interest | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Dividend declared | — | — | — | ( | — | ( | — | ( | — | ||||||||||||||||||||||||||||||||||||||||||||
| Comprehensive income: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
| Unrealized gain on derivatives, net of tax | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Net unrealized foreign currency translation loss | — | — | — | — | ( | ( | — | ( | — | ||||||||||||||||||||||||||||||||||||||||||||
| Change in retirement benefit adjustment, net of tax | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Comprehensive income (loss) | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of July 1, 2022 | $ | $ | $ | $ | ( | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
5
FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY AND REDEEMABLE NONCONTROLLING INTEREST
(Unaudited) (U.S. dollars in millions, except share data)
| Ordinary Shares Outstanding | Ordinary Shares | Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Fresh Del Monte Produce Inc. Shareholders' Equity | Noncontrolling Interests | Total Shareholders' Equity | Redeemable Noncontrolling Interest | |||||||||||||||||||||||||||||||||||||||||||||
| Balance as of January 1, 2021 | $ | $ | $ | $ | ( | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Settlement of restricted stock units | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Share-based payment expense | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Dividend declared | — | — | ( | — | ( | — | ( | — | |||||||||||||||||||||||||||||||||||||||||||||
| Comprehensive income: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||
| Unrealized gain on derivatives, net of tax | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Net unrealized foreign currency translation loss | — | — | — | — | ( | ( | — | ( | — | ||||||||||||||||||||||||||||||||||||||||||||
| Change in retirement benefit adjustment, net of tax | — | — | — | — | ( | ( | — | ( | — | ||||||||||||||||||||||||||||||||||||||||||||
| Comprehensive income (loss) | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at April 2, 2021 | $ | $ | $ | $ | ( | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Exercises of stock options | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Settlement of restricted stock units | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Share-based payment expense | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Distribution to noncontrolling interests | — | — | — | — | — | — | ( | ( | — | ||||||||||||||||||||||||||||||||||||||||||||
| Dividend declared | — | — | — | ( | — | ( | — | ( | — | ||||||||||||||||||||||||||||||||||||||||||||
| Comprehensive income: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| Unrealized loss on derivatives, net of tax | — | — | — | — | ( | ( | — | ( | — | ||||||||||||||||||||||||||||||||||||||||||||
| Net unrealized foreign currency translation gain | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Change in retirement benefit adjustment, net of tax | — | — | — | — | ( | ( | — | ( | — | ||||||||||||||||||||||||||||||||||||||||||||
| Comprehensive income (loss) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at July 2, 2021 | $ | $ | $ | $ | ( | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
See accompanying notes.
6
FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. General
Reference in this Report to “Fresh Del Monte”, “we”, “our” and “us” and the “Company” refer to Fresh Del Monte Produce Inc. and its subsidiaries, unless the context indicates otherwise.
Nature of Business
We were incorporated under the laws of the Cayman Islands in 1996. We are one of the world’s leading vertically integrated producers, marketers and distributors of high-quality fresh and fresh-cut fruit and vegetables, as well as a leading producer and marketer of prepared fruit and vegetables, juices, beverages and snacks in Europe, Africa and the Middle East. We market our products worldwide under the Del Monte® brand, a symbol of product innovation, quality, freshness and reliability since 1892. Our major sales markets are organized as follows: North America, Europe, the Middle East (which includes North Africa) and Asia. Our global sourcing and logistics system allows us to provide regular delivery of consistently high-quality produce and value-added services to our customers. Our major producing operations are located in North, Central and South America, Asia and Africa. Our products are sourced from company-owned operations, through supply contracts with independent growers, and through joint venture arrangements.
Our business is comprised of three reportable segments, two of which represent our primary businesses of fresh and value-added products and banana, and one that represents our other ancillary businesses.
•Fresh and value-added products - includes pineapples, fresh-cut fruit, fresh-cut vegetables (which includes fresh-cut salads), melons, vegetables, non-tropical fruit (including grapes, apples, citrus, blueberries, strawberries, pears, peaches, plums, nectarines, cherries and kiwis), other fruit and vegetables, avocados, and prepared foods (including prepared fruit and vegetables, juices, other beverages, and meals and snacks).
•Banana
•Other products and services - includes our ancillary businesses consisting of sales of poultry and meat products, a plastic product business, and third-party freight services.
Basis of Presentation
The accompanying unaudited Consolidated Financial Statements for the quarter and six months ended July 1, 2022 have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. They do not include all information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments of a normal recurring nature considered necessary for fair presentation have been included. Operating results for the quarter and six months ended July 1, 2022 are subject to significant seasonal variations and are not necessarily indicative of the results that may be expected for the year ending December 30, 2022. For further information, refer to the Consolidated Financial Statements and notes thereto included in our annual report on Form 10-K for the fiscal year ended December 31, 2021.
We are required to evaluate events occurring after July 1, 2022 for recognition and disclosure in the unaudited Consolidated Financial Statements for the quarter and six months ended July 1, 2022. Events are evaluated based on whether they represent information existing as of July 1, 2022, which require recognition in the unaudited Consolidated Financial Statements, or new events occurring after July 1, 2022 which do not require recognition but require disclosure if the event is significant to the unaudited Consolidated Financial Statements. We evaluated events occurring subsequent to July 1, 2022 through the date of issuance of these unaudited Consolidated Financial Statements.
Certain reclassification of prior period balances have been made to conform to current presentation. Refer to Note 12. Business Segment Data for further information.
7
FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)
2. Recently Issued Accounting Pronouncements
New Accounting Pronouncements - Not Yet Adopted
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, and a subsequent amendment to the guidance, ASU 2021-01 in January 2021. The ASU provides optional guidance to companies to ease the potential burden associated with transitioning away from reference rates that are expected to be discontinued. The new guidance provides optional expedients and exceptions to apply generally accepted accounting principles to contract modifications and hedging relationships, subject to certain criteria, that reference LIBOR or another reference rate expected to be discontinued. This ASU may currently be adopted and may be applied prospectively to contract modifications made on or before December 31, 2022. We have LIBOR-based borrowings and interest rate hedges that reference LIBOR. While we are continuing to evaluate the impact of this ASU on our financial condition, results of operations and cash flows, we do not expect its impact will be material at this time.
3. Asset Impairment and Other Charges (Credits), Net
The following represents a summary of asset impairment and other charges (credits), net recorded during the quarters and six months ended July 1, 2022 and July 2, 2021 (U.S. dollars in millions):
| Quarter ended | Six months ended | ||||||||||||||||||||||||||||||||||
| July 1, 2022 | July 1, 2022 | ||||||||||||||||||||||||||||||||||
| Long-lived and other asset impairment | Exit activity and other (credits) charges | Total | Long-lived and other asset impairment | Exit activity and other (credits) charges | Total | ||||||||||||||||||||||||||||||
| Banana segment: | |||||||||||||||||||||||||||||||||||
Exit costs related to European facility(1) | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Fresh and value-added products segment: | |||||||||||||||||||||||||||||||||||
| Impairment of South America farm | |||||||||||||||||||||||||||||||||||
| Other fresh and value-added products segment charges | |||||||||||||||||||||||||||||||||||
| Other: | |||||||||||||||||||||||||||||||||||
| Former President/COO severance expense | |||||||||||||||||||||||||||||||||||
Total asset impairment and other charges (credits), net | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Quarter ended | Six months ended | ||||||||||||||||||||||||||||||||||
| July 2, 2021 | July 2, 2021 | ||||||||||||||||||||||||||||||||||
| Long-lived and other asset impairment | Exit activity and other (credits) charges | Total | Long-lived and other asset impairment | Exit activity and other (credits) charges | Total | ||||||||||||||||||||||||||||||
| Banana segment: | |||||||||||||||||||||||||||||||||||
Insurance recovery related to hurricanes(2) | $ | $ | $ | $ | $ | ( | $ | ( | |||||||||||||||||||||||||||
| Fresh and value-added products segment: | |||||||||||||||||||||||||||||||||||
Exit costs related to European facility(1) | |||||||||||||||||||||||||||||||||||
Total asset impairment and other charges (credits), net | $ | $ | $ | $ | $ | ( | $ | ( | |||||||||||||||||||||||||||
8
FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)
3. Asset Impairment and Other Charges (Credits), Net (continued)
(1) $0.4
(2) $(0.8 ) million insurance recovery for the six months ended July 2, 2021 associated with damages to certain of our banana fixed assets in Guatemala caused by hurricanes Eta and Iota in the fourth quarter of 2020.
4. Income Taxes
In connection with the examination of the tax returns in two foreign jurisdictions, the taxing authorities have issued income tax deficiencies related to transfer pricing aggregating approximately $138.3 million (including interest and penalties) for tax years 2012 through 2016. We strongly disagree with the proposed adjustments and have filed a protest with each of the taxing authorities as we believe that the proposed adjustments are without technical merit.
In one of the foreign jurisdictions, we are currently contesting tax assessments related to the 2012-2015 audit years and the 2016 audit year in both the administrative court and the judicial court. During 2019 and 2020, we filed actions contesting the tax assessment in the administrative office. Our initial challenge to each of these tax assessments was rejected, and we subsequently lost our appeals at the administrative court. We have subsequently filed actions to contest each of these tax assessments in the country’s judicial courts. In addition, we have filed a request for injunction to the judicial court to stay the tax authorities' collection efforts for these two tax assessments, pending final judicial decisions. The court granted our injunction with respect to the 2016 audit year, however denied our injunction with respect to the 2012-2015 audit years. We timely appealed the denial of the injunction, and an appellate hearing has been set for August 2022. In the interim, the appellate court has stayed the tax collection action until the August hearing. Pursuant to local law, we registered real estate collateral with an approximate fair market value of $5.7 million in connection with the grant of the 2016 audit year injunction. This real estate collateral has a net book value of $4.1 million as of the quarter ended July 1, 2022. To the extent that our appeal of the injunction for the 2012-2015 audit years is granted and the tax authorities collection efforts are enjoined, we estimate that additional collateral of approximately $25.0 million would be required to be posted. The registration of this real estate collateral does not affect our operations in the country.
In the other foreign jurisdiction, the administrative court denied our appeal, and on March 4, 2020 we filed an action in the judicial court to contest the administrative court's decision. The case is still pending.
We will continue to vigorously contest the adjustments and to exhaust all administrative and judicial remedies necessary in both jurisdictions to resolve the matters, which could be a lengthy process.
Income tax provision was $4.9 million for the quarter ended July 1, 2022 compared with $4.8 million for the quarter ended July 2, 2021. The income tax provision for the quarter ended July 2, 2021 reflected the impact of return-to-provision adjustments related to a change in estimate which included a $0.8 million benefit associated with the net operating loss carryback provision of the Coronavirus Aid, Relief and Economic Security (CARES) Act enacted in March 2020. Income tax provision for the six months ended July 1, 2022 decreased to $10.7 million from $15.8 million for the six months ended July 2, 2021, primarily due to decreased earnings in certain higher tax jurisdictions.
5. Allowance for Credit Losses
We estimate expected credit losses on our trade receivables and financing receivables in accordance with Accounting Standards Codification (“ASC”) 326 - Financial Instruments - Credit Losses.
Trade Receivables
Trade receivables as of July 1, 2022 were $396.4 million, net of an allowance of $25.7 million. Our allowance for trade receivables consists of two components: a $9.1 million allowance for credit losses and a $16.6 million allowance for customer claims accounted for under the scope of ASC 606 - Revenue Recognition.
9
FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)
5. Allowance for Credit Losses (continued)
As a result of our robust credit monitoring practices, the industry in which we operate, and the nature of our customer base, the credit losses associated with our trade receivables have historically been insignificant in comparison to our annual net sales. We measure the allowance for credit losses on trade receivables on a collective (pool) basis when similar risk characteristics exist.
We generally pool our trade receivables based on the geographic region or country to which the receivables relate. Receivables that do not share similar risk characteristics are evaluated for collectability on an individual basis.
Our historical credit loss experience provides the basis for our estimation of expected credit losses. We generally use a three-year average annual loss rate as a starting point for our estimation, and make adjustments to the historical loss rate to account for differences in current conditions impacting the collectability of our receivable pools. We generally monitor macroeconomic indicators to assess whether adjustments are necessary to reflect current conditions.
The table below presents a rollforward of our trade receivable allowance for credit losses for the six months ended July 1, 2022 and July 2, 2021 (U.S. dollars in millions):
| Six months ended | |||||||||||||||||||||||
| Trade receivables | July 1, 2022 | July 2, 2021 | |||||||||||||||||||||
Allowance for credit losses: | |||||||||||||||||||||||
| Balance, beginning of period | $ | $ | |||||||||||||||||||||
| Provision for uncollectible amounts | ( | ||||||||||||||||||||||
| Deductions to allowance related to write-offs | ( | ||||||||||||||||||||||
| Foreign exchange effects | ( | ||||||||||||||||||||||
Reclassifications(1) | ( | ||||||||||||||||||||||
Balance, end of period | $ | $ | |||||||||||||||||||||
(1) $0.3 million reclassification to the long-term allowance for credit losses, presented in other noncurrent assets on our Consolidated Balance Sheets, from short-term during the six months ended July 1, 2022. The amount in the long-term allowance related to trade receivables as of July 1, 2022 is not material to our Consolidated Financial Statements.
Financing Receivables
Financing receivables are included in other accounts receivable, net on our Consolidated Balance Sheets and are recognized at amortized cost less an allowance for estimated credit losses. Financing receivables include seasonal advances to growers and suppliers, which are usually short-term in nature, and other financing receivables.
A significant portion of the fresh produce we sell is acquired through supply contracts with independent growers. In order to ensure the consistent high quality of our products and packaging, we make advances to independent growers and suppliers. These growers and suppliers typically sell all of their production to us and make payments on their advances as a deduction to the agreed upon selling price of the fruit or packaging material. The majority of the advances to growers and suppliers are for terms less than one year and typically span a growing season. In certain cases, there may be longer term advances with terms of up to five years .
We measure the allowance for credit losses on advances to suppliers and growers on a collective (pool) basis when similar risk characteristics exist. We generally pool our advances based on the country to which they relate, and further disaggregate them based on their current or past-due status. We generally consider an advance to a grower to be past due when the advance is not fully paid within the respective growing season. The allowance for advances to growers and suppliers that do not share similar risk characteristics are determined on a case-by-case basis, depending on the expected production for the season and other contributing factors. The advances are typically collateralized by property liens and pledges of the respective season’s produce. Occasionally, we agree to a payment plan with these growers or take steps to recover the advance via established collateral. We may write-off uncollectible financing receivables after our collection efforts are exhausted. Historically, our credit losses associated with our advances to suppliers and growers have not been significant.
10
FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)
5. Allowance for Credit Losses (continued)
Our historical credit loss experience provides the basis for our estimation of expected credit losses. We generally use a three-year average annual loss rate as a starting point for our estimation, and make adjustments to the historical loss rate to account for differences in current or expected future conditions. We generally monitor macroeconomic indicators as well as other factors, including unfavorable weather conditions and crop diseases, which may impact the collectability of the advances when assessing whether adjustments to the historical loss rate are necessary.
The following table details the advances to growers and suppliers based on their credit risk profile (U.S. dollars in millions):
| July 1, 2022 | December 31, 2021 | ||||||||||||||||||||||
| Current | Past-Due | Current | Past-Due | ||||||||||||||||||||
| Gross advances to growers and suppliers | $ | $ | $ | $ | |||||||||||||||||||
The allowance for advances to growers and suppliers for the six months ended July 1, 2022 and July 2, 2021 were as follows (U.S. dollars in millions):
| Six months ended | |||||||||||||||||||||||
| July 1, 2022 | July 2, 2021 | ||||||||||||||||||||||
| Allowance for advances to growers and suppliers: | |||||||||||||||||||||||
| Balance, beginning of period | $ | $ | |||||||||||||||||||||
| Provision for uncollectible amounts | ( | ||||||||||||||||||||||
| Deductions to allowance related to write-offs | ( | ( | |||||||||||||||||||||
| Balance, end of period | $ | $ | |||||||||||||||||||||
6. Share-Based Compensation
On June 2, 2022, our shareholders approved and ratified the 2022 Omnibus Share Incentive Plan (the “2022 Plan”). The 2022 Plan allows us to grant equity-based compensation awards including restricted stock units (“RSUs”), performance stock units (“PSUs”), stock options, and restricted stock awards. The 2022 Plan replaces and supersedes the 2014 Omnibus Share Incentive Plan (the “Prior Plan”). Under the 2022 Plan, the Board of Directors is authorized to award up to 2,800,000 ordinary shares plus approximately 270,000 ordinary shares remaining available under the Prior Plan.
Stock-based compensation expense related to RSUs and PSUs is included in selling, general and administrative expenses in the accompanying Consolidated Statements of Operations and is comprised as follows (U.S. dollars in millions):
| Quarter ended | Six months ended | ||||||||||||||||||||||
| July 1, 2022 | July 2, 2021 | July 1, 2022 | July 2, 2021 | ||||||||||||||||||||
| RSUs/PSUs | $ | $ | $ | $ | |||||||||||||||||||
11
FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)
6. Share-Based Compensation (continued)
Restricted Stock Units and Performance Stock Units
The following table lists the RSUs and PSUs awarded under the 2022 Plan and the Prior Plan for the six months ended July 1, 2022 and July 2, 2021:
| Date of Award | Type of award | Units awarded | Price per share | ||||||||||||||
| For the six months ended July 1, 2022 | |||||||||||||||||
| June 15, 2022 | RSU | $ | |||||||||||||||
| June 15, 2022 | PSU | ||||||||||||||||
| June 2, 2022 | RSU | ||||||||||||||||
| For the six months ended July 2, 2021 | |||||||||||||||||
| May 4, 2021 | RSU | $ | |||||||||||||||
| March 30, 2021 | RSU | ||||||||||||||||
| March 1, 2021 | RSU | ||||||||||||||||
| March 1, 2021 | PSU | ||||||||||||||||
Subsequent to the six months ended July 1, 2022, an additional 101,672 PSUs were awarded at an average price per share of $31.27 .
Under the 2022 Plan and Prior Plan, each RSU/PSU represents a contingent right to receive one of our ordinary shares. The PSUs are subject to meeting minimum performance criteria set by the Compensation Committee of our Board of Directors. The actual number of shares the recipient receives is determined based on the results achieved versus performance goals. Those performance goals are based on exceeding a measure of our earnings. Depending on the results achieved, the actual number of shares that an award recipient receives at the end of the period may range from 0 % to 100 % of the award units granted. Provided such criteria are met, the PSUs granted during the six months ended July 1, 2022 will vest in three equal installments in June 2023, March 2024 and March 2025. PSUs granted prior to 2022 will vest in three equal annual installments on each of the next three anniversary dates. All PSU vesting is contingent on the recipient's continued employment with us.
Expense for RSUs is recognized on a straight line basis over the requisite service period for the entire award. RSUs granted in 2022 vest in three equal installments in June 2023, March 2024 and March 2025, with the exception of RSUs granted to our Board of Directors which vest after a one-year period. RSUs granted in 2021 vest annually in three equal installments over a three -year service period while RSUs granted prior to 2021 vested 20 % on the grant date, with 20 % vesting on each of the next four anniversaries.
The fair market value for RSUs and PSUs is based on the closing price of our stock on the grant date. We recognize expenses related to RSUs and PSUs based on the fair market value, as determined on the grant date, ratably over the vesting period, provided the performance condition, if any, is probable. Forfeitures are recognized as they occur.
RSUs and PSUs do not have the voting rights of ordinary shares, and the shares underlying the RSUs and PSUs are not considered issued and outstanding. However, shares underlying RSUs/PSUs are included in the calculation of diluted earnings per share to the extent the performance criteria are met, if any.
RSUs and PSUs are eligible to earn Dividend Equivalent Units (“DEUs”) equal to the cash dividend paid to ordinary shareholders. DEUs are subject to the same performance and/or service conditions as the underlying RSUs and PSUs and are forfeitable.
12
FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)
7. Inventories, net
Inventories consisted of the following (U.S. dollars in millions):
| July 1, 2022 | December 31, 2021 | ||||||||||
| Finished goods | $ | $ | |||||||||
| Raw materials and packaging supplies | |||||||||||
| Growing crops | |||||||||||
| Total inventories, net | $ | $ | |||||||||
8. Debt and Finance Lease Obligations
The following is a summary of long-term debt and finance lease obligations (U.S. dollars in millions):
| July 1, 2022 | December 31, 2021 | ||||||||||
| Senior unsecured revolving credit facility (see Credit Facility below) | $ | $ | |||||||||
| Finance lease obligations | |||||||||||
| Total debt and finance lease obligations | |||||||||||
| Less: Current maturities | ( | ( | |||||||||
| Long-term debt and finance lease obligations | $ | $ | |||||||||
Credit Facility
On October 1, 2019, we entered into a Second Amended and Restated Credit Agreement (as amended, the “Second A&R Credit Agreement”) with Bank of America, N.A. as administrative agent and BofA Securities, Inc. as sole lead arranger and sole bookrunner and certain other lenders. The Second A&R Credit Agreement provides for a five-year , $1.1 billion syndicated senior unsecured revolving credit facility maturing on October 1, 2024 (the “Revolving Credit Facility”). Certain of our direct and indirect subsidiaries have guaranteed the obligations under the Second A&R Credit Agreement.
Amounts borrowed under the Revolving Credit Facility accrue interest, at our election, at either (i) the Eurocurrency Rate (as defined in the Second A&R Credit Agreement) plus a margin that ranges from 1.0 % to 1.5 % or (ii) the Base Rate (as defined in the Second A&R Credit Agreement) plus a margin that ranges from 0 % to 0.5 %, in each case based on our Consolidated Leverage Ratio (as defined in the Second A&R Credit Agreement). The Second A&R Credit Agreement interest rate grid provides for five pricing levels for interest rate margins.
The Second A&R Credit Agreement provides for an accordion feature that permits us, without the consent of the other lenders, to request that one or more lenders provide us with increases in revolving credit facility or term loans up to an aggregate of $300 million (“Incremental Increases”). The aggregate amount of Incremental Increases can be further increased to the extent that after giving effect to the proposed increase in revolving credit facility commitments or term loans our Consolidated Leverage Ratio, on a pro forma basis, would not exceed 2.50 to 1.00. Our ability to request such increases in the revolving credit facility or term loans is subject to our compliance with customary conditions set forth in the Second A&R Credit Agreement including compliance, on a pro forma basis, with the financial covenants and ratios set forth therein. Upon our request, each lender may decide, in its sole discretion, whether to increase all or a portion of its revolving credit facility commitment or provide term loans.
13
FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)
8. Debt and Finance Lease Obligations (continued)
The Second A&R Credit Agreement requires us to comply with certain financial and other covenants. Specifically, it requires us to maintain a 1) Consolidated Leverage Ratio of not more than 3.50 to 1.00 at any time during any period of four consecutive fiscal quarters, subject to certain exceptions and 2) a minimum Consolidated Interest Coverage Ratio of not less than 2.25 to 1.00 as of the end of any fiscal quarter. Additionally, it requires us to comply with certain other covenants, including limitations on capital expenditures, stock repurchases, the amount of dividends that can be paid in the future, the amount and types of liens and indebtedness, material asset sales, and mergers. Under the Second A&R Credit Agreement, we are permitted to declare or pay cash dividends in any fiscal year up to an amount that does not exceed the greater of (i) an amount equal to the greater of (A) 50 % of the Consolidated Net Income (as defined in the Second A&R Credit Agreement) for the immediately preceding fiscal year or (B) $25 million or (ii) the greatest amount which would not cause the Consolidated Leverage Ratio (determined on a pro forma basis) to exceed 3.25 to 1.00. It also provides an allowance for stock repurchases to be an amount not exceeding the greater of (i) $150 million in the aggregate or (ii) the amount that, after giving pro forma effect thereto and any related borrowings, will not cause the Consolidated Leverage Ratio to exceed 3.25 to 1.00. As of July 1, 2022, we were in compliance with all of the covenants contained in the Second A&R Credit Agreement.
Debt issuance costs of $1.0 million and $1.3 million are included in other noncurrent assets on our Consolidated Balance Sheets as of July 1, 2022 and December 31, 2021, respectively.
We have a renewable 364 -day, $25.0 million letter of credit facility with Rabobank Nederland.
The following is a summary of the material terms of the Revolving Credit Facility and other working capital facilities at July 1, 2022 (U.S. dollars in millions):
| Term | Maturity date | Interest rate | Borrowing limit | Available borrowings | |||||||||||||||||||||||||
| Bank of America credit facility | $ | $ | |||||||||||||||||||||||||||
| Rabobank letter of credit facility | Varies | ||||||||||||||||||||||||||||
| Other working capital facilities | Varies | Varies | Varies | ||||||||||||||||||||||||||
| $ | $ | ||||||||||||||||||||||||||||
The current margin for LIBOR advances is 1.375 %. We intend to use funds borrowed under the Revolving Credit Facility from time to time for general corporate purposes, working capital, capital expenditures and other permitted investment opportunities.
The Revolving Credit Facility permits borrowings under the revolving commitment with an interest rate determined based on our leverage ratio and spread over LIBOR. In addition, we pay a fee on unused commitments.
As of July 1, 2022, we applied $26.9 million to letters of credit and bank guarantees issued from Rabobank Nederland, Bank of America, and other banks.
During 2018, we entered into interest rate swaps in order to hedge the risk of the fluctuation on future interest payments related to our variable rate LIBOR-based borrowings from our Revolving Credit Facility. Refer to Note 13, “Derivative Financial Instruments.”
14
FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)
9. Commitments and Contingencies
Kunia Well Site
In 1980, elevated levels of certain chemicals were detected in the soil and ground-water at a plantation leased by one of our U.S. subsidiaries in Honolulu, Hawaii (the “Kunia Well Site”). In 2005, our subsidiary signed a Consent Decree (“Consent Decree”) with the Environmental Protection Agency (“EPA”) for the performance of the clean-up work for the Kunia Well Site.
Based on findings from remedial investigations, our subsidiary continues to evaluate with the EPA the clean-up work currently in progress in accordance with the Consent Decree.
The estimate associated with the clean-up costs, and on which our accrual is based, is $12.8 million. As of July 1, 2022, $12.4 million was included in other noncurrent liabilities, and $0.4 million was included in accounts payable and accrued expenses in the Consolidated Balance Sheets for the Kunia Well Site clean-up. We expect to expend approximately $0.4 million in 2022, $1.1 million in 2023 and $0.9
Additional Information
In addition to the foregoing, we are involved from time to time in various claims and legal actions incident to our operations, both as plaintiff and defendant. In the opinion of management, after consulting with legal counsel, none of these other claims are currently expected to have a material adverse effect on the results of operations, financial position or our cash flows.
We intend to vigorously defend ourselves in all of the above matters.
10. Earnings Per Share
Basic and diluted net income per ordinary share is calculated as follows (U.S. dollars in millions, except share and per share data):
| Quarter ended | Six months ended | ||||||||||||||||||||||
| July 1, 2022 | July 2, 2021 | July 1, 2022 | July 2, 2021 | ||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
Net income attributable to Fresh Del Monte Produce Inc. | $ | $ | $ | $ | |||||||||||||||||||
| Denominator: | |||||||||||||||||||||||
Weighted average number of ordinary shares - Basic | |||||||||||||||||||||||
Effect of dilutive securities - share-based awards | |||||||||||||||||||||||
Weighted average number of ordinary shares - Diluted | |||||||||||||||||||||||
Antidilutive awards (1) | |||||||||||||||||||||||
Net income per ordinary share attributable to Fresh Del Monte Produce Inc.: | |||||||||||||||||||||||
| Basic | $ | $ | $ | $ | |||||||||||||||||||
| Diluted | $ | $ | $ | $ | |||||||||||||||||||
(1)Certain unvested RSUs and PSUs are not included in the calculation of net income per ordinary share because the effect would have been antidilutive.
15
FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)
11. Retirement and Other Employee Benefits
The following table sets forth the net periodic benefit costs of our defined benefit pension plans and post-retirement benefit plans (U.S. dollars in millions):
| Quarter ended | Six months ended | ||||||||||||||||||||||
| July 1, 2022 | July 2, 2021 | July 1, 2022 | July 2, 2021 | ||||||||||||||||||||
| Service cost | $ | $ | $ | $ | |||||||||||||||||||
| Interest cost | |||||||||||||||||||||||
| Expected return on assets | ( | ( | ( | ( | |||||||||||||||||||
| Amortization of net actuarial loss | |||||||||||||||||||||||
| Net periodic benefit costs | $ | $ | $ | $ | |||||||||||||||||||
We provide certain other retirement benefits to certain employees who are not U.S.-based and are not included above. Generally, benefits under these programs are based on an employee’s length of service and level of compensation. These programs are immaterial to our consolidated financial statements. The net periodic benefit costs related to other non-U.S. based plans is $0.9 million for the quarter ended July 1, 2022 and $0.9 million for the quarter ended July 2, 2021. The net periodic benefit costs related to other non-U.S. based plans is $1.7 million for the six months ended July 1, 2022 and $1.8 million for the six months ended July 2, 2021.
12. Business Segment Data
Our business is comprised of three reportable segments, two of which represent our primary businesses of fresh and value-added products and banana, and one that represents our other ancillary businesses.
•Fresh and value-added products - includes pineapples, fresh-cut fruit, fresh-cut vegetables (which includes fresh-cut salads), melons, vegetables, non-tropical fruit (including grapes, apples, citrus, blueberries, strawberries, pears, peaches, plums, nectarines, cherries and kiwis), other fruit and vegetables, avocados, and prepared foods (including prepared fruit and vegetables, juices, other beverages, and meals and snacks).
•Banana
•Other products and services - includes our ancillary businesses consisting of sales of poultry and meat products, a plastic product business, and third-party freight services.
16
FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)
12. Business Segment Data (continued)
We evaluate performance based on several factors, of which net sales and gross profit by product are the primary financial measures (U.S. dollars in millions):
| Quarter ended | ||||||||||||||||||||||||||
| July 1, 2022 | July 2, 2021 | |||||||||||||||||||||||||
| Segments: | Net Sales | Gross Profit | Net Sales | Gross Profit | ||||||||||||||||||||||
| Fresh and value-added products | $ | $ | $ | $ | ||||||||||||||||||||||
| Banana | ||||||||||||||||||||||||||
| Other products and services | ||||||||||||||||||||||||||
| Totals | $ | $ | $ | $ | ||||||||||||||||||||||
| Six months ended | ||||||||||||||||||||||||||
| July 1, 2022 | July 2, 2021 | |||||||||||||||||||||||||
| Segments: | Net Sales | Gross Profit | Net Sales | Gross Profit | ||||||||||||||||||||||
| Fresh and value-added products | $ | $ | $ | $ | ||||||||||||||||||||||
| Banana | ||||||||||||||||||||||||||
| Other products and services | ||||||||||||||||||||||||||
| Totals | $ | $ | $ | $ | ||||||||||||||||||||||
Our segment data disclosures for the quarter and six months ended July 2, 2021 have been adjusted to reflect a reclassification of cost of products sold between our three segments as a result of a refinement in our cost allocation methodology. For the quarter ended July 2, 2021, this reclassification resulted in an increase to our fresh and value-added products segment gross profit of $1.0 million, an increase to our banana segment gross profit of $1.4 million and a decrease to our other products and services segment gross profit of $2.4 million. For the six months ended July 2, 2021, this reclassification resulted in an increase to our fresh and value-added products segment gross profit of $1.7 million, an increase to our banana segment gross profit of $2.1 million and a decrease to our other products and services segment gross profit of $3.8 million.
| Quarter ended | Six months ended | ||||||||||||||||||||||
| Net sales by geographic region: | July 1, 2022 | July 2, 2021 | July 1, 2022 | July 2, 2021 | |||||||||||||||||||
| North America | $ | $ | $ | $ | |||||||||||||||||||
| Europe | |||||||||||||||||||||||
| Asia | |||||||||||||||||||||||
| Middle East | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Totals | $ | $ | $ | $ | |||||||||||||||||||
17
FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)
12. Business Segment Data (continued)
The following table indicates our net sales by product and the percentage of the total (U.S. dollars in millions):
| Quarter ended | Six months ended | ||||||||||||||||||||||||||||||||||||||||||||||
| July 1, 2022 | July 2, 2021 | July 1, 2022 | July 2, 2021 | ||||||||||||||||||||||||||||||||||||||||||||
| Fresh and value-added products: | |||||||||||||||||||||||||||||||||||||||||||||||
| Fresh-cut fruit | $ | % | $ | % | $ | % | $ | % | |||||||||||||||||||||||||||||||||||||||
| Fresh-cut vegetables | % | % | % | % | |||||||||||||||||||||||||||||||||||||||||||
| Pineapples | % | % | % | % | |||||||||||||||||||||||||||||||||||||||||||
| Avocados | % | % | % | % | |||||||||||||||||||||||||||||||||||||||||||
| Non-tropical fruit | % | % | % | % | |||||||||||||||||||||||||||||||||||||||||||
| Prepared foods | % | % | % | % | |||||||||||||||||||||||||||||||||||||||||||
| Melons | % | % | % | % | |||||||||||||||||||||||||||||||||||||||||||
| Tomatoes | % | % | % | % | |||||||||||||||||||||||||||||||||||||||||||
| Vegetables | % | % | % | % | |||||||||||||||||||||||||||||||||||||||||||
| Other fruit and vegetables | % | % | % | % | |||||||||||||||||||||||||||||||||||||||||||
| Total fresh and value-added products | % | % | % | % | |||||||||||||||||||||||||||||||||||||||||||
| Banana | % | % | % | % | |||||||||||||||||||||||||||||||||||||||||||
| Other products and services | % | % | % | % | |||||||||||||||||||||||||||||||||||||||||||
| Totals | $ | % | $ | % | $ | % | $ | % | |||||||||||||||||||||||||||||||||||||||
13. Derivative Financial Instruments
Our derivative financial instruments reduce our exposure to fluctuations in foreign exchange rates, variable interest rates and bunker fuel prices. We designate our derivative financial instruments as cash flow hedges.
Counterparties expose us to credit loss in the event of non-performance on hedges. We monitor our exposure to counterparty non-performance risk both at inception of the hedge and at least quarterly thereafter.
Fluctuations in the value of the derivative instruments are generally offset by changes in the cash flows of the underlying exposures being hedged. A cash flow hedge requires that the change in the fair value of a derivative instrument be recognized in other comprehensive income (loss), a component of shareholders’ equity, and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings and is presented in the same income statement line item as the earnings effect of the hedged item.
Certain of our derivative instruments contain provisions that require the current credit relationship between us and our counterparty to be maintained throughout the term of the derivative instruments. If that credit relationship changes, certain provisions could be triggered, and the counterparty could request immediate collateralization of derivative instruments in a net liability position above a certain threshold. The aggregate fair value of all derivative instruments with a credit-risk-related contingent feature that are in a liability position on July 1, 2022 is $15.2 million. As of July 1, 2022, no triggering event has occurred and thus we are not required to post collateral.
Derivative instruments are disclosed on a gross basis. There are various rights of setoff associated with our derivative instruments that are subject to an enforceable master netting arrangement or similar agreements. Although various rights of setoff and master netting arrangements or similar agreements may exist with the individual counterparties, individually, these financial rights are not material.
18
FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)
13. Derivative Financial Instruments (continued)
Cash flows from derivative instruments that are designated as cash flow hedges are classified in the same category as the cash flows from the underlying hedged items. In the event that hedge accounting is discontinued, cash flows related to changes in fair value subsequent to the date of discontinuance are classified within investing activities.
Foreign Currency Hedges
We are exposed to fluctuations in currency exchange rates against the U.S. dollar on our results of operations and financial condition, and we mitigate that exposure by entering into foreign currency forward contracts. Certain of our subsidiaries periodically enter into foreign currency forward contracts in order to hedge portions of forecasted sales or cost of sales denominated in foreign currencies, which generally mature within one year. Our foreign currency hedges were entered into for the purpose of hedging portions of our 2022 and 2023 foreign currency exposure.
The foreign currency forward contracts qualifying as cash flow hedges were designated as single-purpose cash flow hedges of forecasted cash flows.
We had the following outstanding foreign currency forward contracts as of July 1, 2022 (in millions):
| Foreign currency contracts qualifying as cash flow hedges: | Notional amount | |||||||||||||||||||||||||||||||||||||
| Euro | EUR | |||||||||||||||||||||||||||||||||||||
| British pound | GBP | |||||||||||||||||||||||||||||||||||||
| Japanese yen | JPY | |||||||||||||||||||||||||||||||||||||
| Chilean peso | CLP | |||||||||||||||||||||||||||||||||||||
| Kenyan shilling | KES | |||||||||||||||||||||||||||||||||||||
| Korean won | KRW | |||||||||||||||||||||||||||||||||||||
Interest Rate Contracts
We are exposed to fluctuations in variable interest rates on our results of operations and financial condition, and we mitigate a portion of that exposure by entering into interest rate swaps. We entered into interest rate swaps in order to hedge the risk of the fluctuation on future interest payments related to our variable rate LIBOR-based borrowings through 2028.
Gains or losses on interest rate swaps are recorded in other comprehensive income (loss) and are subsequently reclassified into earnings as the interest expense on debt is recognized in earnings. At July 1, 2022, the notional value of interest rate contracts outstanding was $400.0 million, with $200.0 million maturing in 2024 and the remaining $200.0 million maturing in 2028. Refer to Note 8, “Debt and Finance Lease Obligations.”
Bunker Fuel Hedges
We are exposed to fluctuations in bunker fuel prices on our results of operations and financial condition, and we periodically enter into bunker fuel swap agreements which permit us to lock in bunker fuel prices and mitigate that exposure. During fiscal 2020, one of our subsidiaries entered into bunker fuel swap agreements in order to hedge portions of our fuel expenses incurred by our owned and chartered vessels throughout 2020 and 2021. We designated our bunker fuel swap agreements as cash flow hedges. As of July 1, 2022, there were no outstanding bunker fuel hedges.
19
FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)
13. Derivative Financial Instruments (continued)
The following table reflects the fair values of derivative instruments, which are designated as level 2 in the fair value hierarchy, as of July 1, 2022 and December 31, 2021 (U.S. dollars in millions):
Derivatives designated as hedging instruments (1) | |||||||||||||||||||||||||||||||||||||||||||||||
| Foreign exchange contracts | Interest rate swaps | Total | |||||||||||||||||||||||||||||||||||||||||||||
| Balance Sheet location: | July 1, 2022 | December 31, 2021 | July 1, 2022 | December 31, 2021 | July 1, 2022 | December 31, 2021 | |||||||||||||||||||||||||||||||||||||||||
| Asset derivatives: | |||||||||||||||||||||||||||||||||||||||||||||||
| Prepaid expenses and other current assets | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||
| Other noncurrent assets | |||||||||||||||||||||||||||||||||||||||||||||||
| Total asset derivatives | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||
| Liability derivatives: | |||||||||||||||||||||||||||||||||||||||||||||||
| Accounts payable and accrued expenses | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||
| Other noncurrent liabilities | |||||||||||||||||||||||||||||||||||||||||||||||
| Total liability derivatives | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||
(1) See Note 14, “Fair Value Measurements,” for fair value disclosures.
We expect that $9.1 million of the net fair value of our cash flow hedges recognized as a net gain in accumulated other comprehensive loss will be transferred to earnings during the next 12 months and a net loss of $6.2 million will be transferred to earnings over a period of approximately 6 years, along with the earnings effect of the related forecasted transactions.
The following table reflects the effect of derivative instruments on the Consolidated Statements of Comprehensive Income for the quarters and six months ended July 1, 2022 and July 2, 2021 (U.S. dollars in millions):
| | Net amount of gain (loss) recognized in other comprehensive income (loss) on derivatives | ||||||||||||||||||||||
| Quarter ended | Six months ended | ||||||||||||||||||||||
Derivative instruments | July 1, 2022 | July 2, 2021 | July 1, 2022 | July 2, 2021 | |||||||||||||||||||
| Foreign exchange contracts | $ | $ | ( | $ | $ | ||||||||||||||||||
| Bunker fuel swaps | ( | ||||||||||||||||||||||
| Interest rate swaps, net of tax | ( | ||||||||||||||||||||||
| Total | $ | $ | ( | $ | $ | ||||||||||||||||||
Refer to Note 15, “Accumulated Other Comprehensive Loss,” for the effect of derivative instruments on the Consolidated Statements of Operations related to amounts reclassified from accumulated other comprehensive loss for the quarters and six months ended July 1, 2022 and July 2, 2021.
14. Fair Value Measurements
Fair Value of Derivative Instruments
Our derivative assets or liabilities include foreign exchange and interest rate derivatives that are measured at fair value using observable market inputs such as forward rates, interest rates, our own credit risk as well as an evaluation of our counterparties' credit risks. We use an income approach to value our outstanding foreign currency and interest rate hedges, which consists of a discounted cash flow model that takes into account the present value of future cash flows under the terms of the contract using current market information as of the measurement date such as foreign currency spot rates, forward rates and interest rates. Additionally, we include an element of default risk based on observable inputs into the fair value calculation. Based on these inputs, the derivative assets or liabilities are classified within Level 2 of the valuation hierarchy.
20
FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)
14. Fair Value Measurements (continued)
The following table provides a summary of the fair values of our derivative financial instruments measured on a recurring basis (U.S. dollars in millions):
| Fair value measurements | |||||||||||||||||||||||||||||||||||
| Foreign currency forward contracts, net asset (liability) | Interest rate contracts, net liability | ||||||||||||||||||||||||||||||||||
| July 1, 2022 | December 31, 2021 | July 1, 2022 | December 31, 2021 | ||||||||||||||||||||||||||||||||
| Quoted prices in active markets for identical assets (Level 1) | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
| Significant observable inputs (Level 2) | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Significant unobservable inputs (Level 3) | |||||||||||||||||||||||||||||||||||
In estimating our fair value disclosures for financial instruments, we use the following methods and assumptions:
Cash and cash equivalents: The carrying amount reported in the Consolidated Balance Sheets for these items approximates fair value due to their liquid nature and are classified as Level 1.
Trade accounts receivable and other accounts receivable, net: The carrying value reported in the Consolidated Balance Sheets for these items is net of allowances, which includes a degree of counterparty non-performance risk and are classified as Level 2.
Accounts payable and other current liabilities: The carrying value reported in the Consolidated Balance Sheets for these items approximates their fair value, which is the likely amount for which the liability with short settlement periods would be transferred to a market participant with a similar credit standing as ours and are classified as Level 2.
Long-term debt: The carrying value of our long-term debt reported in the Consolidated Balance Sheets approximates their fair value since they bear interest at variable rates which contain an element of default risk. The fair value of our long-term debt is estimated using Level 2 inputs based on quoted prices for those or similar instruments. Refer to Note 8, “Debt and Finance Lease Obligations.”
Fair Value of Non-Financial Assets
The fair value of the banana reporting unit's goodwill and the prepared food reporting unit's goodwill and remaining trade names and trademarks are highly sensitive to differences between estimated and actual cash flows and changes in the related discount rate used to evaluate the fair value of these assets. We disclosed the sensitivity related to the banana reporting unit's goodwill and the prepared food reporting unit's goodwill and remaining trade names and trademarks in our notes to the consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
In addition, certain definite-lived intangible assets related to our fresh and value-added products segment are sensitive to changes in estimated cash flows. To the extent that future developments result in estimated cash flows that are less than currently estimated levels, it could lead to impairment of these assets.
During fiscal 2020, we performed a comprehensive review of our asset portfolio and identified non-strategic and underutilized property, plant, and equipment assets across various of our regions to dispose of while reducing costs and driving further efficiencies in our operations (the “Optimization Program”). Certain of these assets met the held for sale criteria as of July 1, 2022, and primarily relate to our fresh and value-added products segment. Included in the $26.1 million of assets held for sale as of July 1, 2022 were the following: $16.1 million consists of a facility and related assets in the United States, $5.0 million consists of farm land and associated assets primarily located in Asia and Central America, $4.0 million consists of facilities and farm land in South America, and the remaining $1.0 million is related to vacant land in Middle East. These assets are recognized at the lower of cost or fair value less cost to sell. The fair value measurements for our held for sale assets are generally based on Level 3 inputs, which include information obtained from third-party appraisals.
During the six months ended July 1, 2022, we received proceeds of $4.5 million from the sale of assets previously held for sale and recorded a gain on disposal of property, plant and equipment, net of $1.8 million.
21
FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)
15. Accumulated Other Comprehensive Loss
The following table includes the changes in accumulated other comprehensive loss by component (U.S. dollars in millions):
Changes in Accumulated Other Comprehensive Loss by Component (1) | |||||||||||||||||||||||
| Cash Flow Hedges | Foreign Currency Translation Adjustment | Retirement Benefit Adjustment | Total | ||||||||||||||||||||
| Six months ended July 1, 2022 | |||||||||||||||||||||||
| Balance at December 31, 2021 | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Other comprehensive income (loss) before reclassifications | (3) | ( | (2) | ||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive loss | ( | ||||||||||||||||||||||
| Net current period other comprehensive income (loss) | ( | ||||||||||||||||||||||
| Balance at July 1, 2022 | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
| Six months ended July 2, 2021 | |||||||||||||||||||||||
| Balance at January 1, 2021 | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Other comprehensive income (loss) before reclassifications | (3) | ( | (2) | ( | |||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive loss | (4) | ||||||||||||||||||||||
| Net current period other comprehensive income (loss) | ( | ( | |||||||||||||||||||||
| Balance at July 2, 2021 | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
(1) All amounts are net of tax and noncontrolling interest.
(2) Includes a loss of $7.0 million and $3.1 million for the six months ended July 1, 2022 and six months ended July 2, 2021, respectively, on intra-entity foreign currency transactions that are of a long-term-investment nature.
(3) Includes a tax effect of $(3.6 ) million and $(1.6 ) million for the six months ended July 1, 2022 and six months ended July 2, 2021, respectively.
(4) Includes amounts reclassified for both designated and dedesignated cash flow hedges. Refer to the following table for the amounts of each.
22
FRESH DEL MONTE PRODUCE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Unaudited)
15. Accumulated Other Comprehensive Loss (continued)
The following table includes details about amounts reclassified from accumulated other comprehensive loss by component (U.S. dollars in millions):
| Amount of (gain) loss reclassified from accumulated other comprehensive loss | ||||||||||||||||||||||||||||||||
| July 1, 2022 | July 2, 2021 | |||||||||||||||||||||||||||||||
| Details about accumulated other comprehensive loss components | Quarter ended | Six months ended | Quarter ended | Six months ended | Affected line item in the statement where net income is presented | |||||||||||||||||||||||||||
| Cash flow hedges: | ||||||||||||||||||||||||||||||||
| Designated as hedging instruments: | ||||||||||||||||||||||||||||||||
| Foreign currency cash flow hedges | $ | ( | $ | ( | $ | $ | Net sales | |||||||||||||||||||||||||
| Foreign currency cash flow hedges | Cost of products sold | |||||||||||||||||||||||||||||||
| Interest rate swaps | Interest expense | |||||||||||||||||||||||||||||||
| Bunker fuel swaps no longer designated as hedging instruments | ( | ( | Cost of products sold | |||||||||||||||||||||||||||||
| Bunker fuel swaps no longer designated as hedging instruments | ( | Other expense, net | ||||||||||||||||||||||||||||||
| Total | $ | ( | $ | ( | $ | $ | ||||||||||||||||||||||||||
| Amortization of retirement benefits: | ||||||||||||||||||||||||||||||||
Actuarial losses | Other expense, net | |||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||||||||
16. Shareholders’ Equity
Our shareholders have authorized 50,000,000 preferred shares at $0.01 par value, of which none 200,000,000 ordinary shares at $0.01 par value, of which 47,832,974
The below is a summary of the dividends paid per share during the six months ended July 1, 2022 and July 2, 2021. These dividends were declared and paid within the same fiscal quarter.
| Six months ended | ||||||||||||||||||||
| July 1, 2022 | July 2, 2021 | |||||||||||||||||||
| Dividend Payment Date | Cash Dividend per Ordinary Share | Dividend Payment Date | Cash Dividend per Ordinary Share | |||||||||||||||||
| June 10, 2022 | $ | June 11, 2021 | $ | |||||||||||||||||
| April 1, 2022 | April 2, 2021 | |||||||||||||||||||
We paid $14.3 million in dividends during the six months ended July 1, 2022 and $9.5 million in dividends during the six months ended July 2, 2021.
On August 2, 2022, our Board of Directors declared a quarterly cash dividend of fifteen cents ($0.15 ) per share, payable on September 9, 2022, to shareholders of record on August 17, 2022.
23
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Overview
We are one of the world’s leading vertically integrated producers, marketers and distributors of high-quality fresh and fresh-cut fruit and vegetables, as well as a leading producer and marketer of prepared fruit and vegetables, juices, beverages and snacks in Europe, Africa and the Middle East. We market our products worldwide under the Del Monte® brand, a symbol of product innovation, quality, freshness and reliability since 1892. Our major sales markets are organized as follows: North America, Europe, the Middle East (which includes North Africa) and Asia. Our global sourcing and logistics system allows us to provide regular delivery of consistently high-quality produce and value-added services to our customers. Our major producing operations are located in North, Central and South America, Asia and Africa.
Our business is comprised of three reportable segments, two of which represent our primary businesses of fresh and value-added products and banana, and one that represents our other ancillary businesses.
•Fresh and value-added products - includes pineapples, fresh-cut fruit, fresh-cut vegetables (which includes fresh-cut salads), melons, vegetables, non-tropical fruit (including grapes, apples, citrus, blueberries, strawberries, pears, peaches, plums, nectarines, cherries and kiwis), other fruit and vegetables, avocados, and prepared foods (including prepared fruit and vegetables, juices, other beverages, and meals and snacks).
•Banana
•Other products and services - includes our ancillary businesses consisting of sales of poultry and meat products, a plastic product business, and third-party freight services.
Our vision is to inspire healthy lifestyles through wholesome and convenient products. Our strategy is founded on six goals:
COVID-19 Pandemic and Current Economic Environment
In March 2020, the World Health Organization declared the outbreak of coronavirus (“COVID-19”) a global pandemic. The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and created significant volatility and disruption of financial markets. These factors have resulted in inflationary and cost pressures that have significantly increased, and continue to adversely impact, our production and distribution costs, including costs of packaging materials, fertilizer, labor, fuel, and ocean and inland freight. We are also experiencing pressure on our supply chain due to strained transportation capacity and lack of sufficient labor availability. In addition, the invasion of Ukraine by Russia in early 2022 has led to further economic disruption. While we do not operate in Ukraine and while our operations in Russia are not material, the conflict has exacerbated inflationary cost, supply chain and logistical pressures which have negatively impacted the global economy and our business.
24
In response to these ongoing inflationary and cost pressures, we began instituting price increases on the majority of our products during the latter part of 2021. Additionally, certain of our contracts for key products include contractually indexed fuel and freight surcharges that vary depending on commodity pricing. While we expect that these inflation-justified price increases and surcharges will continue to help mitigate our increased costs, our gross profit continues to be negatively impacted by these unfavorable market conditions as reflected in our financial results for the first six months of 2022. We believe these factors will continue to impact our financial performance in future periods.
The recent events surrounding the global economy and COVID-19 pandemic continue to evolve. Although we believe that we will ultimately emerge from these events well positioned for long-term growth, uncertainties remain and, as such, we cannot reasonably estimate the duration or extent of these adverse factors on our business, operating results, and long-term liquidity position.
Optimization Program
During fiscal 2020, we performed a comprehensive review of our asset portfolio aimed at identifying non-strategic and underutilized assets to dispose of while reducing costs and driving further efficiencies in our operations (hereon referred to as the “Optimization Program”). As a result of the review, we identified assets across all of our regions, primarily consisting of underutilized facilities and land, which we made a strategic decision to sell for total anticipated cash proceeds of approximately $100.0 million. As of July 1, 2022, we have received cash proceeds of $63.3 million in connection with asset sales under the Optimization Program (approximately $57.0 million of which was received during fiscal years 2020 and 2021). Due to challenging market conditions which have resulted in delays of some of the asset sales, in part driven by COVID-19 travel restrictions, the completion of the program has extended beyond the originally anticipated timeframe of the first quarter of 2022.
Income Taxes
In connection with the examination of the tax returns in two foreign jurisdictions, the taxing authorities have issued income tax deficiencies related to transfer pricing aggregating approximately $138.3 million (including interest and penalties) for tax years 2012 through 2016. We strongly disagree with the proposed adjustments and have filed a protest with each of the taxing authorities as we believe that the proposed adjustments are without technical merit.
In one of the foreign jurisdictions, we are currently contesting tax assessments related to the 2012-2015 audit years and the 2016 audit year in both the administrative court and the judicial court. During 2019 and 2020, we filed actions contesting the tax assessment in the administrative office. Our initial challenge to each of these tax assessments was rejected, and we subsequently lost our appeals at the administrative court. We have subsequently filed actions to contest each of these tax assessments in the country’s judicial courts. In addition, we have filed a request for injunction to the judicial court to stay the tax authorities' collection efforts for these two tax assessments, pending final judicial decisions. The court granted our injunction with respect to the 2016 audit year, however denied our injunction with respect to the 2012-2015 audit years. We timely appealed the denial of the injunction, and an appellate hearing has been set for August 2022. In the interim, the appellate court has stayed the tax collection action until the August hearing. Pursuant to local law, we registered real estate collateral with an approximate fair market value of $5.7 million in connection with the grant of the 2016 audit year injunction. This real estate collateral has a net book value of $4.1 million as of the quarter ended July 1, 2022. To the extent that our appeal of the injunction for the 2012-2015 audit years is granted and the tax authorities collection efforts are enjoined, we estimate that additional collateral of approximately $25.0 million would be required to be posted. The registration of this real estate collateral does not affect our operations in the country.
In the other foreign jurisdiction, the administrative court denied our appeal, and on March 4, 2020 we filed an action in the judicial court to contest the administrative court's decision. The case is still pending.
We will continue to vigorously contest the adjustments and to exhaust all administrative and judicial remedies necessary in both jurisdictions to resolve the matters, which could be a lengthy process.
25
RESULTS OF OPERATIONS
Consolidated Financial Results
The following summarizes the more significant factors impacting our operating results for the 13-week and 26-week periods ended July 1, 2022 (also referred to as the “second quarter of 2022” and "first six months of 2022," respectively) and July 2, 2021 (also referred to as the “second quarter of 2021” and "first six months of 2021," respectively).
| Quarter ended | Six months ended | ||||||||||||||||||||||
| July 1, 2022 | July 2, 2021 | July 1, 2022 | July 2, 2021 | ||||||||||||||||||||
| Net sales | $ | 1,211.9 | $ | 1,141.6 | $ | 2,348.9 | $ | 2,229.9 | |||||||||||||||
| Gross profit | 80.7 | 110.0 | 170.5 | 215.1 | |||||||||||||||||||
| Selling, general and administrative expenses | 47.3 | 51.4 | 92.5 | 100.3 | |||||||||||||||||||
| Operating income | 34.3 | 59.3 | 74.1 | 119.0 | |||||||||||||||||||
Net sales - Net sales for the second quarter of 2022 increased by $70.3 million, or 6%, when compared with the second quarter of 2021, and increased by $119.0 million, or 5%, for the first six months of 2022 when compared with the first six months of 2021. In both periods, net sales benefited from inflation-justified price increases. Partially offsetting the increase in net sales was the negative impact of fluctuations in exchange rates primarily versus the Japanese yen and euro compared with the prior-year periods. The negative impact of fluctuations in exchange rates was partially mitigated by our foreign currency hedges.
Gross profit - Gross profit for the second quarter of 2022 was $80.7 million compared with $110.0 million in the prior-year period, and $170.5 million in the first six months of 2022 compared with $215.1 million in the prior-year period. In both periods, despite higher net sales, gross profit continued to be negatively impacted by broad-based inflationary, supply chain, and logistical pressures compared to the prior-year. Higher costs across the board, including costs of packaging materials, fertilizers, ocean and inland freight, fuel and labor, offset our higher net sales.
Selling, general and administrative expenses - Selling, general and administrative expenses decreased by $4.1 million, or 8%, in the second quarter of 2022 when compared with the second quarter of 2021, and decreased by $7.8 million, or 8%, in the first six months of 2022 when compared with the first six months of 2021. The decrease in both periods was primarily due to lower administrative and advertising expenses in the current year.
Gain (loss) on disposal of property, plant and equipment, net - The gain (loss) on disposal of property, plant and equipment, net of $1.6 million during the second quarter of 2022 primarily related to a gain on the sale of vacant land in Mexico. For the first six months of 2022, gain (loss) on disposal of property, plant and equipment, net of $(2.2) million also included a loss on the disposal of low-yielding banana plants in Central America. The gain (loss) on disposal of property, plant and equipment, net of $1.1 million during the second quarter of 2021 primarily related to a gain on the sale of vacant land in the Middle East, while the first six months of 2021 also included a gain on the sale of a refrigerated vessel.
Asset impairment and other charges (credits), net - Asset impairment and other charges (credits), net of $0.7 million during the second quarter of 2022 primarily consisted of severance expense associated with the planned exit from a European facility. For the first six months of 2022, asset impairment and other charges (credits), net of $1.7 million also included severance expense in connection with the departure of our former President and Chief Operating Officer. Asset impairment and other charges (credits), net of $(0.4) million for the first six months of 2021 primarily related to an insurance recovery associated with hurricane damage to fixed assets in Central America.
Operating income - Operating income decreased by $25.0 million in the second quarter of 2022 and by $44.9 million in the first six months of 2022 when compared with the respective prior-year periods. The decrease in operating income in both periods was primarily driven by lower gross profit, partially offset by lower selling, general, and administrative expenses. The decrease for the first six months of 2022 compared with the first six months of 2021 was also partially driven by the net impact of disposals of property, plant, and equipment.
Interest expense - Interest expense was higher in the second quarter and first six months of 2022 when compared with the prior-year periods, primarily due to higher interest rates and higher average debt balances.
26
Other expense, net - Other expense, net increased by $1.0 million in the second quarter of 2022 when compared with the second quarter of 2021, mainly due to higher foreign exchange losses. For the first six months of 2022, other expense, net increased by $3.0 million when compared with the first six months of 2021, primarily as a result of the prior-year period including a gain related to fuel derivatives that were no longer designated as hedging instruments.
Income tax provision - Income tax provision was $4.9 million for the second quarter of 2022 compared with $4.8 million for the second quarter of 2021. The income tax provision for the second quarter of 2021 reflected the impact of return-to-provision adjustments related to a change in estimate which included a $0.8 million benefit associated with the net operating loss carryback provision of the Coronavirus Aid, Relief and Economic Security (CARES) Act enacted in March 2020. Income tax provision for the first six months of 2022 decreased to $10.7 million from $15.8 million in the first six months of 2021, primarily due to decreased earnings in certain higher tax jurisdictions.
Financial Results by Segment
The following table presents net sales and gross profit by segment (U.S. dollars in millions), and in each case, the percentage of the total represented thereby and gross margin percentage:
| Quarter ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| July 1, 2022 | July 2, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment | Net Sales | Gross Profit | Gross Margin | Net Sales | Gross Profit | Gross Margin | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fresh and value-added products | $ | 732.4 | 60 | % | $ | 49.4 | 61 | % | 6.7 | % | $ | 674.0 | 59 | % | $ | 58.3 | 53 | % | 8.7 | % | |||||||||||||||||||||||||||||||||||||||
| Banana | 421.6 | 35 | % | 22.2 | 28 | % | 5.3 | % | 426.7 | 37 | % | 48.1 | 44 | % | 11.3 | % | |||||||||||||||||||||||||||||||||||||||||||
| Other products and services | 57.9 | 5 | % | 9.1 | 11 | % | 15.6 | % | 40.9 | 4 | % | 3.6 | 3 | % | 8.9 | % | |||||||||||||||||||||||||||||||||||||||||||
| Totals | $ | 1,211.9 | 100 | % | $ | 80.7 | 100 | % | 6.7 | % | $ | 1,141.6 | 100 | % | $ | 110.0 | 100 | % | 9.6 | % | |||||||||||||||||||||||||||||||||||||||
| Six months ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| July 1, 2022 | July 2, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Sales | Gross Profit | Gross Margin | Net Sales | Gross Profit | Gross Margin | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fresh and value-added products | $ | 1,405.1 | 60 | % | $ | 93.8 | 55 | % | 6.7 | % | $ | 1,305.0 | 59 | % | $ | 110.6 | 51 | % | 8.5 | % | |||||||||||||||||||||||||||||||||||||||
| Banana | 827.6 | 35 | % | 60.0 | 35 | % | 7.2 | % | 844.9 | 38 | % | 98.0 | 46 | % | 11.6 | % | |||||||||||||||||||||||||||||||||||||||||||
| Other products and services | 116.2 | 5 | % | 16.7 | 10 | % | 14.4 | % | 80.0 | 3 | % | 6.5 | 3 | % | 8.1 | % | |||||||||||||||||||||||||||||||||||||||||||
| Totals | $ | 2,348.9 | 100 | % | $ | 170.5 | 100 | % | 7.3 | % | $ | 2,229.9 | 100 | % | $ | 215.1 | 100 | % | 9.6 | % | |||||||||||||||||||||||||||||||||||||||
Second Quarter of 2022 Compared with Second Quarter of 2021
Fresh and value-added products
Net sales for the second quarter of 2022 increased by $58.4 million, or approximately 9%, when compared with the prior-year period. The increase in net sales was primarily driven by higher pricing in most product categories. Sales volume remained in line with the prior-year period.
Gross profit for the second quarter of 2022 was $49.4 million compared with $58.3 million in the second quarter of 2021. The decrease in gross profit from the prior-year period was mainly due to lower gross profit on non-tropical fruit, primarily driven by the lack of availability of third-party shipping capacity on certain shipping routes, and lower gross profit on avocados, mainly due to market volatility. Additionally, despite higher net sales, gross profit continued to be negatively impacted by ongoing cost pressures in the current year period which resulted in higher per unit production and distribution costs, including ocean and inland freight. As a result, gross margin decreased to 6.7% compared with 8.7% in the prior-year period.
Gross profit in the fresh and value-added products segment included $1.6 million of other product-related charges in the second quarter of 2021, mainly comprised of a $1.3 million inventory write-off incurred in the Middle East. There were no other product-related charges in the second quarter of 2022.
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Banana
Net sales for the second quarter of 2022 decreased by $5.1 million, or 1%, when compared with the prior-year period. The decrease in net sales was primarily driven by lower sales volume and the negative impact of fluctuations in exchange rates in Asia.
Gross profit for the second quarter of 2022 was $22.2 million compared with $48.1 million in the prior-year period. The decrease in gross profit was primarily driven by higher per unit distribution costs, including ocean and inland freight, and higher per unit production costs. As a result of these factors, gross margin decreased to 5.3% compared with 11.3% in the prior-year period.
Other products and services
Net sales for the second quarter of 2022 increased by $17.0 million, or 42%, when compared with the prior-year period mainly due to higher net sales of third-party freight services. Our fleet of vessels has enabled the expansion of our commercial cargo services, which are benefiting from elevated shipping rates and demand due to market logistical constraints.
Gross profit increased by $5.5 million as a result of higher net sales of third-party freight services. Gross margin increased to 15.6% from 8.9% in the prior-year period.
First Six Months of 2022 Compared with First Six Months of 2021
Fresh and value-added products
Net sales for the first six months of 2022 increased by $100.1 million, or approximately 8%, when compared with the prior-year period. The increase in net sales was primarily driven by higher pricing in most product categories. Sales volume remained in line with the prior-year period.
Gross profit for the first six months of 2022 was $93.8 million compared with $110.6 million in the prior-year period. The decrease in gross profit compared with the prior-year period was mainly due to lower gross profit on (i) non-tropical fruit, primarily driven by the lack of availability of third-party shipping capacity on certain shipping routes, (ii) avocados, mainly related to market volatility, and (iii) melons. Additionally, despite higher net sales, gross profit for the segment continued to be negatively impacted by ongoing cost pressures which resulted in higher per unit production and distribution costs, including ocean and inland freight. As a result, gross margin decreased to 6.7% compared with 8.5% in the prior-year period.
Gross profit in the fresh and value-added products segment included $4.7 million of other product-related charges in the first six months of 2021 comprised of $3.4 million in non-tropical fruit inventory write-offs related to inclement weather in Chile in the first quarter of 2021, and a $1.3 million inventory write-off incurred in the Middle East. There were no other product-related charges in the first six months of 2022.
Banana
Net sales for the first six months of 2022 decreased by $17.3 million, or 2%, when compared with the prior-year period. The decrease in net sales was primarily driven lower sales volume in North America and Asia. In Asia, net sales were also negatively impacted by fluctuations in exchange rates. The decrease in net sales was partially offset by higher per unit sales prices.
Gross profit for the first six months of 2022 was $60.0 million compared with $98.0 million in the prior-year period. The decrease in gross profit was primarily driven by lower sales volume and higher per unit production and distribution costs, including ocean and inland freight. As a result of these factors, gross margin decreased to 7.2% compared with 11.6% in the prior-year period.
Gross profit for the banana segment included a $1.2 million net insurance recovery in the first six months of 2021 associated with hurricane damage in Central America in the fourth quarter of 2020. There were no other product-related charges in the first six months of 2022.
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Other products and services
Net sales for the first six months of 2022 increased by $36.2 million, or 45%, when compared with the prior-year period mainly due to higher net sales of third-party freight services. Our fleet of vessels has enabled the expansion of our commercial cargo services, which are benefiting from elevated shipping rates and demand due to market logistical constraints.
Gross profit increased by $10.2 million as a result of higher net sales of third-party freight services. Gross margin increased to 14.4% from 8.1% in the prior-year period.
Liquidity and Capital Resources
Fresh Del Monte Produce Inc. is a holding company with limited business operations of its own. Fresh Del Monte Produce Inc.'s only significant asset is the outstanding capital stock of our subsidiaries that directly or indirectly own all of our assets. We conduct all of our business operations through our subsidiaries. Accordingly, our only source of cash to pay our obligations, other than financings, depends primarily on the net earnings and cash flow generated by these subsidiaries.
Our primary sources of cash flow are net cash provided by operating activities and borrowings under our credit facility. Our primary uses of net cash flow are capital expenditures to increase and expand our product offerings and geographic reach, investments to increase our productivity and investments in businesses such as Mann Packing.
A summary of our cash flows is as follows (U.S. dollars in millions):
| Six months ended | |||||||||||
| July 1, 2022 | July 2, 2021 | ||||||||||
| Summary cash flow information: | |||||||||||
| Net cash provided by operating activities | $ | 95.1 | $ | 139.5 | |||||||
| Net cash used in investing activities | (25.1) | (54.5) | |||||||||
| Net cash used in financing activities | (72.4) | (82.5) | |||||||||
| Effect of exchange rate changes on cash | 1.9 | 0.6 | |||||||||
| Net (decrease) increase in cash and cash equivalents | (0.5) | 3.1 | |||||||||
| Cash and cash equivalents, beginning | 16.1 | 16.5 | |||||||||
| Cash and cash equivalents, ending | 15.6 | 19.6 | |||||||||
Operating Activities
Net cash provided by operating activities was $95.1 million for the first six months of 2022 compared with $139.5 million for the first six months of 2021, a decrease of $44.4 million. The decrease was primarily attributable to lower net income and higher levels of accounts receivable, mainly due to higher net sales in the current period and the timing of collections. The decrease in net cash provided by operating activities was partially offset by higher levels of accounts payable and accrued expenses, mainly due to the timing of period end payments to suppliers, and higher purchases of raw materials inventory in the prior-year period.
At July 1, 2022, we had working capital of $482.1 million compared with $467.2 million at December 31, 2021, an increase of $14.9 million. The increase in working capital was mainly due to higher levels of trade accounts receivable, primarily due to seasonal variations and higher sales prices, and higher levels of assets held for sale and other current assets. Partially offsetting the increase in working capital were lower levels of finished goods and growing crop inventory, primarily due to seasonal variations, and higher levels of accounts payable and accrued expenses, primarily due to the timing of period end payments to suppliers.
Investing Activities
Net cash used in investing activities for the first six months of 2022 was $25.1 million compared with $54.5 million for the first six months of 2021. Net cash used in investing activities for the first six months of 2022 primarily consisted of capital expenditures of $23.2 million, which mainly included expenditures related to (1) improvements to and expansion of our banana
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operations in Central America, (2) improvements to our operations and production facilities in North America, including operational investments in automation and data-driven technology primarily benefiting our fresh and value-added products segment, and (3) improvements to our pineapple operations in Central America and Kenya. Net cash used in investing activities for the first six months of 2022 also reflects $8.1 million in investments in unconsolidated companies in the food and nutrition sector that align with our long-term strategy and vision. Partially offsetting the net cash used in investing activities were proceeds from the sale of property, plant and equipment of $6.3 million, primarily relating to the sale of vacant land in Mexico.
Net cash used in investing activities for the first six months of 2021 primarily consisted of capital expenditures of $70.4 million, mainly related to (1) the purchase of our refrigerated container ships, the final two of which were received during the first six months of 2021, (2) expansion and improvements to facilities in North America and Asia, related to both our banana and fresh and value-added products segments, and (3) improvements to our banana operations in Central America. Partially offsetting the net cash used in investing activities were $11.0 million in proceeds from the sale of property, plant and equipment which mainly related to the sales of surplus land in the Middle East, South America, and Central America, and a vessel. In addition, proceeds from the settlement of derivative instruments no longer designated in hedging relationships of $4.6 million contributed to the offset in net cash used in investing activities.
Financing Activities
Net cash used in financing activities for the first six months of 2022 was $72.4 million compared with $82.5 million for the first six months of 2021. Net cash used in financing activities for the first six months of 2022 primarily consisted of net repayments on debt of $56.4 million and dividends paid of $14.3 million.
Net cash used in financing activities for the first six months of 2021 primarily consisted of net repayments on debt of $68.4 million, dividends paid of $9.5 million, and distributions to noncontrolling interests of $4.3 million.
Debt Instruments and Debt Service Requirements
On October 1, 2019, we and certain of our subsidiaries entered into a Second Amended and Restated Credit Agreement (the “Second A&R Credit Agreement”) with the financial institutions and other lenders named therein, including Bank of America, N.A. as administrative agent and BofA Securities, Inc. as sole lead arranger and sole bookrunner. The Second A&R Credit Agreement provides for a five-year, $1.1 billion syndicated senior unsecured revolving credit facility (the “Revolving Credit Facility”) maturing on October 1, 2024. Certain of our direct and indirect subsidiaries have guaranteed the obligations under the Second A&R Credit Agreement. We intend to use funds borrowed under the Second A&R Credit Agreement from time to time for general corporate purposes, working capital, capital expenditures and other permitted investment opportunities.
Pursuant to the terms of the Second A&R Credit Agreement, amounts borrowed under the Revolving Credit Facility accrue interest, at our election, at either (i) the Eurocurrency Rate (as defined in the Second A&R Credit Agreement) plus a margin that ranges from 1.0% to 1.5% or (ii) the Base Rate (as defined in the Second A&R Credit Agreement) plus a margin that ranges from 0% to 0.5%, in each case based on our Consolidated Leverage Ratio (as defined in the Second A&R Credit Agreement). The Second A&R Credit Agreement interest rate grid provides for five pricing levels for interest rate margins. At July 1, 2022, we had borrowings of $462.7 million outstanding under the Revolving Credit Facility bearing interest at a per annum rate of 3.11%. In addition, we pay an unused commitment fee.
The Second A&R Credit Agreement provides for an accordion feature that permits us, without the consent of the other lenders, to request that one or more lenders provide us with increases in revolving credit facility or term loans up to an aggregate of $300 million (“Incremental Increases”). The aggregate amount of Incremental Increases can be further increased to the extent that after giving effect to the proposed increase in revolving credit facility commitments or term loans, our Consolidated Leverage Ratio, on a pro forma basis, would not exceed 2.50 to 1.00. Our ability to request such increases in the Revolving Credit Facility or term loans is subject to its compliance with customary conditions set forth in the Second A&R Credit Agreement including compliance, on a pro forma basis, with the financial covenants and ratios set forth therein. Upon our request, each lender may decide, in its sole discretion, whether to increase all or a portion of its revolving credit facility commitment or provide term loans.
The Second A&R Credit Agreement requires us to comply with certain financial and other covenants. Specifically, it requires us to maintain a 1) Consolidated Leverage Ratio of not more than 3.50 to 1.00 at any time during any period of four consecutive fiscal quarters, subject to certain exceptions and 2) a minimum Consolidated Interest Coverage Ratio of not less than 2.25 to 1.00 as of the end of any fiscal quarter. Additionally, it requires us to comply with certain other covenants, including limitations on capital expenditures, stock repurchases, the amount of dividends that can be paid in the future, the amount and types of liens
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and indebtedness, material asset sales, and mergers. Under the Second A&R Credit Agreement, we are permitted to declare or pay cash dividends in any fiscal year up to an amount that does not exceed the greater of (i) an amount equal to the greater of (A) 50% of the Consolidated Net Income (as defined in the Second A&R Credit Agreement) for the immediately preceding fiscal year or (B) $25 million or (ii) the greatest amount which would not cause the Consolidated Leverage Ratio (determined on a pro forma basis) to exceed 3.25 to 1.00. It also provides an allowance for stock repurchases to be an amount not exceeding the greater of (i) $150 million in the aggregate or (ii) the amount that, after giving pro forma effect thereto and any related borrowings, will not cause the Consolidated Leverage Ratio to exceed 3.25 to 1.00. As of July 1, 2022, we were in compliance with all of the covenants contained in the Second A&R Credit Agreement.
We have a renewable 364-day, $25.0 million letter of credit facility with Rabobank Nederland.
As of July 1, 2022, we had $661.2 million of borrowing availability under committed working capital facilities, primarily under the Revolving Credit Facility.
As of July 1, 2022, we applied $26.9 million to letters of credit and bank guarantees issued from Rabobank Nederland, Bank of America, and other banks.
We believe that our cash on hand, borrowing capacity available under our Revolving Credit Facility, and cash flows from operations for the next twelve months will be sufficient to service our outstanding debt during the next twelve months. However, we cannot predict whether future developments associated with the current economic environment or COVID-19 pandemic will materially adversely affect our long-term liquidity position. Our liquidity assumptions, the adequacy of our available funding sources, and our ability to meet our Revolving Credit Facility covenants are dependent on many additional factors, including those set forth in “Item 1A. Risk Factors” of our Form 10-K for the year ended December 31, 2021.
Contractual Obligations
As of July 1, 2022, there were no material changes in our commitments or contractual obligations as compared to those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021.
Critical Accounting Policies and Estimates
A discussion of our critical accounting policies and estimates can be found in “Management's Discussion and Analysis of Financial Condition and Results of Operations” included in our Form 10-K for the fiscal year ended December 31, 2021. There were no material changes to these critical accounting policies or estimates during the second quarter of 2022.
Fair Value Measurements
We are exposed to fluctuations in currency exchange rates against the U.S. dollar on our results of operations and financial condition, and we mitigate that exposure by entering into foreign currency forward contracts. Certain of our subsidiaries periodically enter into foreign currency forward contracts in order to hedge portions of forecasted sales or cost of sales denominated in foreign currencies with forward contracts and options, which generally expire within one year. The fair value of our foreign currency cash flow hedges was a net asset position of $4.4 million as of July 1, 2022 compared to a net liability position of $13.7 million as of December 31, 2021 due to the relative strengthening or weakening of exchange rates when compared to contracted rates.
We are exposed to fluctuations in variable interest rates on our results of operations and financial condition, and we mitigate that exposure by entering into interest rate swaps from time to time. During 2018, we entered into interest rate swaps in order to hedge the risk of the fluctuation on future interest payments related to a portion of our variable rate LIBOR-based borrowings through 2028. The fair value of our interest rate swap cash flow hedges was a net liability position of $1.2 million as of July 1, 2022 compared to $29.4 million as of December 31, 2021. The decrease in our liability position is due to the relative increase in variable interest rates when compared to the rates as of December 31, 2021.
We enter into derivative instruments with counterparties that are highly rated and do not expect a deterioration of our counterparty’s credit ratings; however, the deterioration of our counterparty’s credit ratings would affect the Consolidated Financial Statements in the recognition of the fair value of the hedges that would be transferred to earnings as the contracts settle. We expect that $9.1 million of the net fair value of our cash flow hedges recognized as a net gain in accumulated other comprehensive loss will be transferred to earnings during the next 12 months and a net loss of $6.2 million over a period of approximately 6 years, along with the earnings effect of the related forecasted transactions.
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The fair value of the banana reporting unit's goodwill and the prepared food reporting unit's goodwill and remaining trade names and trademarks are highly sensitive to differences between estimated and actual cash flows and changes in the related discount rate used to evaluate the fair value of these assets. We disclosed the sensitivity related to the banana reporting unit's goodwill and the prepared food reporting unit's goodwill and trade names and trademarks in our Annual Report on Form 10-K for the year ended December 31, 2021. During the quarter ended July 1, 2022, we did not record impairment charges associated with these reporting units or trade names and trademarks, however we continue to monitor their performance.
Potential impairment exists if the fair value of a reporting unit to which goodwill has been allocated is less than the carrying value of the reporting unit. Future changes in the estimates used to conduct our impairment review, including our financial projections and changes in the discount rates used, could cause the analysis to indicate that our goodwill or trade names and trademarks are impaired in subsequent periods and result in a write-off of a portion or all of goodwill or trade names and trademarks.
In addition, certain definite-lived intangible assets related to our fresh and value-added products segment are sensitive to changes in estimated cash flows. To the extent that future developments result in estimated cash flows that are less than currently estimated levels, it could lead to impairment of these assets.
New Accounting Pronouncements
Refer to Note 2. “Recently Issued Accounting Pronouncements” to the accompanying unaudited consolidated financial statements for a discussion of recent accounting pronouncements.
Seasonality
Interim results are subject to significant variations and may not be indicative of the results of operations that may be expected for the entire 2022 fiscal year. Due to seasonal sales price fluctuations, we have historically realized a greater portion of our net sales and gross profit during the first two calendar quarters of the year. The sales price of any fresh produce item fluctuates throughout the year due to the supply of and demand for that particular item, as well as the pricing and availability of other fresh produce items, many of which are seasonal in nature. See the information under the caption “Seasonality” provided in Item 1. Business, of our Annual Report on Form 10-K for the year ended December 31, 2021.
Forward-Looking Statements
This quarterly report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements concern expectations, beliefs, projections, plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. Specifically, this quarterly report contains forward-looking statements regarding:
•our expectations regarding future financial and operational performance;
•our expectations regarding the impacts of the COVID-19 pandemic on our business and operating results, and the factors for such impacts;
•our intentions regarding the use of borrowed funds;
•our expectations regarding continued inflationary pressures, our ability to mitigate such pressures through pricing, and the impacts to our operating results;
•our beliefs that our cash on hand, capacity under our Revolving Credit Facility and cash flows from operations for the next twelve months will be sufficient to service our outstanding debt during the next twelve months;
•our expectations regarding our derivative instruments, including our counterparties’ credit ratings and the anticipated impacts on our financials;
•our expectations and estimates regarding certain legal, tax and accounting matters, including our litigation strategy, plans and beliefs regarding the ultimate outcome of income tax adjustments assessed by foreign taxing authorities;
•our belief that certain proposed adjustments by taxing authorities are without merit, our ability to contest the adjustments and our plans to contest such adjustments;
•our beliefs related to the sufficiency of our capital resources;
•our expectations concerning the fair value of hedges, including the timing and impact to our results;
•our expectations regarding estimated liabilities related to environmental cleanup; and
•our plans and future performance.
These forward-looking statements reflect our current views about future events and are subject to risks, uncertainties and assumptions. We wish to caution readers that certain important factors may have affected and could in the future affect our
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actual results and could cause actual results to differ significantly from those expressed in any forward-looking statement. These various factors include, but are not limited to, the following:
•the impact of the ongoing COVID-19 pandemic and the war in Ukraine on our business, suppliers, customers, consumers, employees, and communities, including the inflationary impact on fuel, petroleum-based products such as fertilizer and packaging materials;
•disruptions or inefficiencies in our operations and supply chain, including any impact of the pandemic, the war in Ukraine and the inflationary environment;
•the impact of inflation and rising costs on our operations;
•our ability to successfully execute our long-term strategy;
•the impact of governmental trade restrictions, including adverse governmental regulation that may impact our ability to access certain markets;
•the ability to meet our anticipated cash needs;
•the continued ability of our distributors and suppliers to have access to sufficient liquidity to fund their operations;
•the impact of product and raw material supply and pricing, as well as prices for petroleum-based products and packaging materials;
•the impact of pricing and other actions by our competitors, particularly during periods of low consumer confidence and spending levels;
•trends and other factors affecting our financial condition or results of operations from period to period, including changes in product mix, consumer preferences or consumer demand for branded products such as ours; anticipated price and expense levels;
•the impact of crop disease, such as vascular diseases, one of which is known as Tropical Race 4, or TR4 (also known as Panama Disease);
•our ability to find contingency plans to protect our and our suppliers’ banana crops from vascular diseases;
•competitive pressures and our ability to realize the full benefits of the inflation driven price increases implemented;
•disruptions or issues that impact our production facilities or complex logistics network;
•the availability of sufficient labor during peak growing and harvesting seasons;
•the impact of foreign currency fluctuations, including the effectiveness of our hedging activities;
•inability to realize expected benefits on plans for expansion of our business (including through acquisitions);
•our ability to successfully integrate acquisitions and new product lines into our operations;
•the impact of impairment or other charges associated with exit activities, crop or facility damage or otherwise,
•the timing and cost of resolution of pending and future legal and environmental proceedings or investigation;
•the impact of changes in tax accounting or tax laws (or interpretations thereof), the impact of claims or adjustments proposed by the Internal Revenue Service or other foreign taxing authorities in connection with our current or future tax audits and our ability to successfully contest such tax claims and pursue necessary remedies;
•the success of our joint ventures;
•the impact of severe weather conditions and natural disasters, such as flooding and earthquakes, on crop quality and yields and on our ability to grow, procure or export our products;
•the adequacy of our insurance coverage;
•the cost and other implications of changes in regulations applicable to our business, including potential legislative or regulatory initiatives in the United States or elsewhere directed at mitigating the effects of climate change;
•damage to our reputation or brand names or negative publicity about our products;
•exposure to product liability claims and associated regulatory and legal actions, product recalls, or other legal proceedings relating to our business;
•our ability to continue to comply with covenants and the terms of our credit instruments and our ability to obtain additional financing to fund our capital expenditures;
•our ability to successfully implement our Optimization Program and to realize its expected benefits; and
•our ability to successfully manage the risks associated with international operations, including risks relating to political or economic conditions, inflation, tax laws, currency restrictions and exchange rate fluctuations, legal or judicial systems.
All forward-looking statements in this report are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. Our plans and performance may also be affected by the factors described in our most recent Annual Report on Form 10-K along with other reports that we file with the Securities and Exchange Commission.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in market risk from the information provided in Item 7A. Quantitative and Qualitative Disclosures About Market Risk of our Annual Report on Form 10-K for the year ended December 31, 2021.
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Item 4. Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of July 1, 2022. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of such date to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms. Such officers also confirm that there were no changes to our internal control over financial reporting during the quarter ended July 1, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Tax related matters
In connection with the examination of the tax returns in two foreign jurisdictions, the taxing authorities have issued income tax deficiencies related to transfer pricing aggregating approximately $138.3 million (including interest and penalties) for tax years 2012 through 2016. We strongly disagree with the proposed adjustments and have filed a protest with each of the taxing authorities as we believe that the proposed adjustments are without technical merit.
In one of the foreign jurisdictions, we are currently contesting tax assessments related to the 2012-2015 audit years and the 2016 audit year in both the administrative court and the judicial court. During 2019 and 2020, we filed actions contesting the tax assessment in the administrative office. Our initial challenge to each of these tax assessments was rejected, and we subsequently lost our appeals at the administrative court. We have subsequently filed actions to contest each of these tax assessments in the country’s judicial courts. In addition, we have filed a request for injunction to the judicial court to stay the tax authorities' collection efforts for these two tax assessments, pending final judicial decisions. The court granted our injunction with respect to the 2016 audit year, however denied our injunction with respect to the 2012-2015 audit years. We timely appealed the denial of the injunction, and an appellate hearing has been set for August 2022. In the interim, the appellate court has stayed the tax collection action until the August hearing. Pursuant to local law, we registered real estate collateral with an approximate fair market value of $5.7 million in connection with the grant of the 2016 audit year injunction. This real estate collateral has a net book value of $4.1 million as of the quarter ended July 1, 2022. To the extent that our appeal of the injunction for the 2012-2015 audit years is granted and the tax authorities collection efforts are enjoined, we estimate that additional collateral of approximately $25.0 million would be required to be posted. The registration of this real estate collateral does not affect our operations in the country.
In the other foreign jurisdiction, the administrative court denied our appeal, and on March 4, 2020 we filed an action in the judicial court to contest the administrative court's decision. The case is still pending.
We will continue to vigorously contest the adjustments and to exhaust all administrative and judicial remedies necessary in both jurisdictions to resolve the matters, which could be a lengthy process.
Item 5. Other Information
Item 1.01 Entry into a Material Definitive Agreement.
At our Annual General Meeting of Shareholders on June 2, 2022, our shareholders approved the 2022 Omnibus Share Incentive Plan (the “2022 Plan”). The 2022 Plan allows us to grant equity-based compensation awards including restricted stock units, performance stock units, stock options, and restricted stock awards. The 2022 Plan replaces the 2014 Omnibus Share Incentive Plan (the “Prior Plan”). Under the 2022 Plan, the Board of Directors is authorized to award up to 2,800,000 ordinary shares plus approximately 270,000 ordinary shares remaining available under the Prior Plan. For more information on the 2022 Plan, please see our proxy statement, filed with the SEC on April 22, 2022.
On June 15, 2022, the Compensation Committee approved a new form of Restricted Stock Unit Award Agreement and a new form of Performance Based Stock Unit Award Agreement to be consistent with the terms of the 2022 Plan, copies of which are filed as exhibits 10.26 and 10.27 to this Form 10-Q.
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Item 6. Exhibits
| 3.3** | |||||
| 10.25**,*** | |||||
| 10.26**,*** | |||||
| 10.27**,*** | |||||
| 31.1** | |||||
| 31.2** | |||||
| 32* | |||||
| 101.INS**** | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | ||||
| 101.SCH**** | Inline XBRL Taxonomy Extension Schema Document. | ||||
| 101.CAL**** | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | ||||
| 101.DEF**** | Inline XBRL Taxonomy Extension Definition Linkbase Document. | ||||
| 101.LAB**** | Inline XBRL Taxonomy Extension Label Linkbase Document. | ||||
| 101.PRE**** | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | ||||
| 104 | Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | ||||
_____________________
* Furnished herewith.
** Filed herewith.
*** Management contract or compensatory plan or arrangement.
**** Attached as Exhibit 101 to this report are the following formatted in Inline XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets as of July 1, 2022 and December 31, 2021, (ii) Consolidated Statements of Operations for the quarters and six months ended July 1, 2022 and July 2, 2021, (iii) Consolidated Statements of Comprehensive Income for the quarters and six months ended July 1, 2022 and July 2, 2021, (iv) Consolidated Statements of Cash Flows for the six months ended July 1, 2022 and July 2, 2021, (v) Consolidated Statements of Shareholders' Equity and Redeemable Noncontrolling Interest for the quarters and six months ended July 1, 2022 and July 2, 2021 and (vi) Notes to Consolidated Financial Statements.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Fresh Del Monte Produce Inc. | |||||||||||
| Date: | August 3, 2022 | By: | /s/ Mohammed Abbas | ||||||||
| Mohammed Abbas | |||||||||||
| Executive Vice President & Chief Operating Officer | |||||||||||
| By: | /s/ Monica Vicente | ||||||||||
| Monica Vicente | |||||||||||
| Senior Vice President & Chief Financial Officer | |||||||||||
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THE COMPANIES ACT (AS AMENDED)
OF THE CAYMAN ISLANDS
COMPANY LIMITED BY SHARES
SECOND AMENDED AND RESTATED
MEMORANDUM OF ASSOCIATION
MEMORANDUM OF ASSOCIATION
OF
FRESH DEL MONTE PRODUCE INC.
(Adopted by special resolution passed on June 2, 2022)
1. The name of the Company is FRESH DEL MONTE PRODUCE INC.
2. The Registered Office of the Company will be situated at the offices of Intertrust Corporate Services (Cayman) Limited, One Nexus Way, Camana Bay, Grand Cayman KY1-9005, Cayman Islands, or at such other location within the Cayman Islands as the Board may from time to time determine.
3. The objects for which the Company is established are unrestricted and the Company shall have full power and authority to carry out any object not prohibited by the Companies Act or any other law of the Cayman Islands.
4. The Company shall have and be capable of exercising all the functions of a natural person of full capacity irrespective of any question of corporate benefit as provided by the Companies Act.
5. The Company will not trade in the Cayman Islands with any person, firm or corporation except in furtherance of the business of the Company carried on outside the Cayman Islands; provided that nothing in this section shall be construed as to prevent the Company effecting and concluding contracts in the Cayman Islands, and exercising in the Cayman Islands all of its powers necessary for the carrying on of its business outside the Cayman Islands.
6. The liability of each Shareholder of the Company is limited to the amount, if any, unpaid on the Shares held by such Shareholder.
7. The authorised share capital of the Company is US$2,500,000 divided into (i) 200,000,000 Ordinary Shares of a nominal or par value of US$0.01 each, and (ii) 50,000,000 Preferred Shares of a nominal or par value of US$0.01 each, provided always that subject to the Companies Act and the Articles of Association the Company shall have power to redeem or purchase any of its Shares and to sub-divide or consolidate the said Shares or any of them and to issue all or any part of its capital whether original, redeemed, increased or reduced with or without any preference, priority, special privilege or other rights or subject to any postponement of rights or to any conditions or restrictions whatsoever and so that unless the conditions of issue shall otherwise expressly provide, every issue of shares whether stated to be ordinary, preference or otherwise shall be subject to the powers on the part of the Company hereinbefore provided.
8. The Company has power to register by way of continuation as a body corporate limited by shares under the laws of any jurisdiction outside the Cayman Islands and to be deregistered in the Cayman Islands.
9. Capitalized terms that are not defined in this Memorandum of Association bear the same meanings as those given in the Articles of Association of the Company.
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TABLE OF CONTENTS
CLAUSE
TABLE A | 1 | ||||
INTERPRETATION | 1 | ||||
PRELIMINARY | 5 | ||||
SHARES | 6 | ||||
General | 6 | ||||
Modification of Rights | 6 | ||||
Transfer and Registration of Shares | 7 | ||||
Alteration of Share Capital | 7 | ||||
Redemption, Repurchase and Surrender of Shares | 8 | ||||
Treasury Shares | 8 | ||||
Dividends | 9 | ||||
MEETINGS OF SHAREHOLDERS | 9 | ||||
Ability to Call Meeting | 9 | ||||
Notice of General Meetings | 9 | ||||
Quorum | 10 | ||||
Virtual Participation in Meetings | 11 | ||||
Adjournment, Cancellation or Postponement | 11 | ||||
Voting and Proxies | 11 | ||||
DIRECTORS | 12 | ||||
Powers and Duties of Directors | 12 | ||||
Number and Term of Office | 13 | ||||
Election of Directors | 13 | ||||
Removal | 13 | ||||
Vacancies | 13 | ||||
Relinquishment of Office of Director | 14 | ||||
Shareholding Qualification | 14 | ||||
Committees of the Board | 14 | ||||
Meetings; Voting; Conduct of Business | 15 | ||||
Director Conflicts of Interest | 16 | ||||
Officers | 17 | ||||
NOTICES | 17 | ||||
MISCELLANEOUS | 20 | ||||
The Seal | 20 | ||||
Accounts, Annual Return and Declaration | 20 | ||||
Capitalisation of Reserves | 21 | ||||
Share Premium Account | 21 | ||||
Depositary and Clearing Houses | 21 | ||||
Non-Recognition of Trusts | 22 | ||||
Winding Up | 22 | ||||
Amendment of Articles of Association | 22 | ||||
Registration by Way of Continuation | 22 | ||||
Disclosure | 23 | ||||
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THE COMPANIES ACT (AS AMENDED)
OF THE CAYMAN ISLANDS
COMPANY LIMITED BY SHARES
SECOND AMENDED AND RESTATED
ARTICLES OF ASSOCIATION
ARTICLES OF ASSOCIATION
OF
FRESH DEL MONTE PRODUCE INC.
(Adopted by special resolution passed on June 2, 2022)
TABLE A
The Regulations contained or incorporated in Table ‘A’ in the First Schedule of the Law shall not apply to the Company and the following Articles shall comprise the Articles of Association of the Company.
INTERPRETATION
1.In these Articles the following defined terms will have the meanings ascribed to them, if not inconsistent with the subject or context:
“Articles” | means these articles of association of the Company, as amended or substituted from time to time; | ||||
“Board” and “Board of Directors” | means the board of directors of the Company, or as the case may be, a committee thereof; | ||||
“Business Day” | means any day other than Saturday, Sunday, or other day on which commercial banks located in the Cayman Islands and the United States are authorized or required by law or executive order to be closed. | ||||
“Chairperson” | means the chairperson of the Board of Directors; | ||||
“Class” or “Classes” | means any class or classes of Shares as may from time to time be issued by the Company; | ||||
“Commission” | means the Securities and Exchange Commission of the United States of America or any other federal agency for the time being administering the Securities Act; | ||||
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“Company” | means FRESH DEL MONTE PRODUCE INC., a Cayman Islands exempted company; | ||||
“Companies Act” | means the Companies Act (as amended) of the Cayman Islands and any statutory amendment or re-enactment thereof; | ||||
“Company’s Website” | means the main corporate and investors relations website of the Company, the address or domain name of which has been notified to Shareholders; | ||||
“Designated Stock Exchange” | means any national securities exchange or automated quotation system on which the Shares or securities are then traded, including but not limited to the New York Stock Exchange; | ||||
“Designated Stock Exchange Rules” | means the relevant code, rules and regulations, as amended, from time to time, applicable as a result of the original and continued listing of any Shares on the Designated Stock Exchange; | ||||
“Director” | means a member of the Board; | ||||
“electronic” | has the meaning given to it in the Electronic Transactions Act; | ||||
“electronic communication” | means electronic posting to the Company’s Website, transmission to any number, address or internet website or other electronic delivery methods as otherwise decided and approved by the Board; | ||||
“Electronic Transactions Act” | means the Electronic Transactions Act (as amended) of the Cayman Islands and any statutory amendment or re-enactment thereof; | ||||
“Independent Director” | means a Director who is an independent director as defined in the Designated Stock Exchange Rules; | ||||
“Law” | means the Companies Act and every other law and regulation of the Cayman Islands or any other jurisdiction for the time being in force concerning companies and affecting the Company, including the federal securities laws of the United States; | ||||
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“Memorandum” | means the memorandum of association of the Company, as amended or substituted from time to time; | ||||
“Ordinary Resolution” | means a resolution passed by a simple majority of the votes cast by such Shareholders on such matter as, being entitled to do so, in person or by proxy. For purposes of determining votes cast, abstentions and broker non-votes shall be not be deemed to have been “cast”. | ||||
“Ordinary Shares” | means an ordinary share of a par value of US$0.01 in the capital of the Company and having the rights provided for in these Articles; | ||||
“Person” | means any natural person, firm, company, joint venture, partnership, corporation, association or other entity (whether or not having a separate legal personality) or any of them as the context so requires, other than in respect of a Director or officer of the Company in which circumstances Person shall mean any natural person; | ||||
| “Preferred Shares” | means a preferred share of a par value of US$0.01 in the capital of the Company; | ||||
“Register” | means the register of Shareholders of the Company maintained in accordance with the Companies Act; | ||||
“Registered Office” | means the registered office of the Company as required by the Companies Act; | ||||
“Registration Agent” | means the Person maintaining the Company’s register of Shareholders; | ||||
“Seal” | means the common seal of the Company (if adopted) including any facsimile thereof; | ||||
“Secretary” | means any Person (if any) appointed by the Board to perform any of the duties of the secretary of the Company; | ||||
“Securities Act” | means the Securities Act of 1933 of the United States of America, as amended, or any similar federal statute and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time; | ||||
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“Share” | means a share in the capital of the Company, including the Ordinary Shares and Preferred Shares. All references to “Shares” herein shall be deemed to be Shares of any or all Classes as the context may require; | ||||
“Shareholder” | means a Person who is registered as the holder of any Share in the Register (a Member as set forth in Section 38 of the Companies Act); | ||||
“Share Premium Account” | means the share premium account established in accordance with these Articles and the Companies Act; | ||||
“signed” | means bearing a signature or representation of a signature affixed by mechanical means or an electronic symbol or process attached to or logically associated with an electronic communication and executed or adopted by a person with the intent to sign the electronic communication; | ||||
“Special Resolution” | has the meaning given to it in the Companies Act. For purposes of determining votes cast, abstentions and broker non-votes shall be not be deemed to have been “cast”. | ||||
“Treasury Share” | means a Share held in the name of the Company as a treasury share in accordance with the Companies Act; | ||||
“United States” | means the United States of America, its territories, its possessions and all areas subject to its jurisdiction; | ||||
“year” | means calendar year. | ||||
2.In these Articles, save where the context requires otherwise:
(a)words importing the singular number shall include the plural number and vice versa;
(b)words importing the masculine gender only shall include the feminine gender and any Person as the context may require;
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(c)the word “may” shall be construed as permissive and the word “shall” shall be construed as imperative;
(d)reference to a dollar or dollars (or US$) and to a cent or cents is reference to dollars and cents of the United States;
(e)reference to a statutory enactment shall include reference to any amendment or re-enactment thereof for the time being in force;
(f)reference to any determination by the Board or by Directors shall be construed as a determination by the Board in its sole and absolute discretion and shall be applicable either generally or in any particular case;
(g)reference to “in writing” shall be construed as written or represented by any means reproducible in writing, including any form of print, lithograph, email, facsimile, photograph or telex or represented by any other substitute or format for storage or transmission for writing or partly one and partly another;
(h)any requirements as to delivery under these Articles include delivery in the form of an electronic record (as defined in the Electronic Transactions Act) or an electronic communication;
(i)the term "clear days" in relation to the period of a notice means that period excluding the day when the notice is received or deemed to be received and the day for which it is given or on which it is to take effect; and
(j)any requirements as to execution or signature under these Articles including the execution of these Articles themselves can be satisfied in the form of an electronic signature as defined in the Electronic Transactions Act;
3.Subject to the last two preceding Articles, any words defined in the Companies Act shall, if not inconsistent with the subject or context, bear the same meaning in these Articles.
PRELIMINARY
4.The Registered Office shall be at such address in the Cayman Islands as the Board may from time to time determine. The Company may in addition establish and maintain such other offices and places of business and agencies in such places as the Board may from time to time determine.
5.The Company shall keep, or cause to be kept, the Register at such place and with such Person as the Board may from time to time determine and, in the absence of any such determination, the Register shall be kept at the Registered Office.
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SHARES
General
6.Subject to these Articles and, where applicable, the rules of the Designated Stock Exchange, all Shares for the time being unissued shall be under the control of the Board who may:
(a)issue, allot and dispose of the same to such Persons, in such manner, on such terms and having such rights and being subject to such restrictions as the Board may from time to time determine; and
(b)grant options with respect to such Shares and issue warrants or similar instruments with respect thereto;
and, for such purposes, the Board may reserve an appropriate number of Shares for the time being unissued. For the avoidance of doubt, the Board may in its absolute discretion and without approval of the existing Shareholders, issue Shares or issue other securities in one or more series as the Board deems necessary and appropriate, and determine designations, powers, preferences, privileges and other rights, including dividend rights, conversion rights, terms of redemption and liquidation preferences, any or all of which may be greater than the powers and rights associated with the Shares held by existing Shareholders, at such times and on such other terms as the Board thinks proper. The Company shall not issue Shares to bearer.
7.The Board may authorise the division of Shares into any number of Classes and the different Classes shall be authorised, established and designated (or re-designated as the case may be) and the variations in the relative rights (including, without limitation, voting, dividend and redemption rights), restrictions, preferences, privileges and payment obligations as between the different Classes (if any) may be fixed and determined by the Board.
8.The Board may refuse to accept any application for Shares and may accept any application in whole or in part, for any reason or for no reason.
Modification of Rights
9.Whenever the capital of the Company is divided into different Classes (and as otherwise determined by the Directors) the rights attached to any such Class may, subject to any rights or restrictions for the time being attached to any Class, be materially adversely varied or abrogated with the consent in writing of the holders of not less than two-thirds of the issued Shares of the relevant Class, or with the sanction of a resolution passed at a separate meeting of the holders of the Shares of such Class by two-thirds of the votes cast at such a meeting on such resolution. To every such separate meeting all the provisions of these Articles relating to general meetings of the Company or to the proceedings thereat shall, mutatis mutandis, apply, except that the necessary quorum shall be one or more Persons at least holding or representing by proxy one-third of the issued Shares of the relevant Class (but so that if at any adjourned meeting of such holders a quorum as above defined is not present, those Shareholders who are present shall form a quorum) and that, subject to any rights or restrictions for the time being attached to the Shares of that Class, every Shareholder of the Class shall have one vote for each Share of the Class held by him. For the
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purposes of this Article, the Directors may treat all the Classes or any two or more Classes as forming one Class if they consider that all such Classes would be affected in the same way by the proposals under consideration, but in any other case shall treat them as separate Classes. The Directors may vary the rights attaching to any Class without the consent or approval of Shareholders provided that the rights will not, in the determination of the Directors, be materially adversely varied or abrogated by such action.
10.The rights conferred upon the holders of any Shares issued with preferred or other rights shall not, subject to any rights or restrictions for the time being attached to such Shares issued, be deemed to be materially adversely varied or abrogated by, inter alia, the creation, allotment or issue of further Shares (for the avoidance of doubt including, without limitation, Preferred Shares) ranking pari passu with or senior to them or the redemption or purchase of any Shares of any Class by the Company.
Transfer and Registration of Shares
11.The process and procedures for the issuance, transfer and replacement of Shares shall be set forth in the corporate governance policies adopted by the Board.
12.Title to listed Shares of the Company may be evidenced and transferred in accordance with the laws applicable to and the rules and regulations of the relevant Designated Stock Exchange that are or shall be applicable to such listed Shares.
Alteration of Share Capital
13.The Company may, from time to time by Ordinary Resolution, increase the share capital by such sum, to be divided into Shares of such Classes and amount, as the resolution shall prescribe.
14.The Company may, by Ordinary Resolution:
(a)consolidate and divide all or any of its share capital into Shares of a larger amount than its existing Shares;
(b)convert all or any of its paid up Shares into stock and reconvert that stock into paid up Shares of any denomination;
(c)subdivide its existing Shares, or any of them into Shares of a smaller amount provided that in the subdivision the proportion between the amount paid and the amount, if any, unpaid on each reduced Share shall be the same as it was in case of the Share from which the reduced Share is derived; and
(d)cancel any Shares that, at the date of the passing of the resolution, have not been taken or agreed to be taken by any Person and diminish the amount of its share capital by the amount of the Shares so cancelled.
15.The Shareholders may by Special Resolution reduce its share capital and any capital redemption reserve in any manner authorised by law.
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Redemption, Repurchase and Surrender of Shares
16.Subject to the provisions of the Companies Act and these Articles, the Company may:
(a)issue Shares that are to be redeemed or are liable to be redeemed at the option of the Shareholder who holds such Shares or the Company. The redemption of Shares shall be effected in such manner and upon such terms as may be determined, before the issue of such Shares, by the Board;
(b)purchase its own Shares (including any redeemable Shares) in such manner and upon such terms as have been approved by the Board, or are otherwise authorized by these Articles; and
(c)make a payment in respect of the redemption or purchase of its own Shares in any manner permitted by the Companies Act, including out of its capital.
17.The purchase of any Share shall not oblige the Company to purchase any other Share other than as may be required pursuant to applicable law and any other contractual obligations of the Company.
Treasury Shares
18.Shares that the Company purchases, redeems or acquires (by way of surrender or otherwise) may, at the option of the Company, be cancelled immediately or held as Treasury Shares in accordance with the Companies Act. In the event that the Directors do not specify that the relevant Shares are to be held as Treasury Shares, such Shares shall be cancelled.
19.No dividend may be declared or paid, and no other distribution (whether in cash or otherwise) of the Company’s assets (including any distribution of assets to Shareholders on a winding up) may be declared or paid in respect of a Treasury Share.
20.The Company shall be entered in the Register as the holder of the Treasury Shares provided that:
(a)the Company shall not be treated as a Shareholder for any purpose and shall not exercise any right in respect of the Treasury Shares, and any purported exercise of such a right shall be void;
(b)a Treasury Share shall not be voted, directly or indirectly, at any meeting of the Company and shall not be counted in determining the total number of issued shares at any given time, whether for the purposes of these Articles or the Companies Act, save that an allotment of Shares as fully paid bonus shares in respect of a Treasury Share is permitted and Shares allotted as fully paid bonus shares in respect of a treasury share shall be treated as Treasury Shares.
21.Treasury Shares may be disposed of by the Company on such terms and conditions as determined by the Directors.
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Dividends
22.Subject to any rights and restrictions for the time being attached to any Shares and the Companies Act, the Board may from time to time declare dividends (including interim dividends) and other distributions on Shares in issue and authorise payment of the same out of the funds of the Company lawfully available therefor in the manner and subject to the conditions and restrictions as determined by the Board from time to time.
23.Any dividend payable in cash to the holder of Shares may be paid in any manner determined by the Board. If paid by cheque it will be sent by mail addressed to the holder at his or her address in the Register, or addressed to such person and at such addresses as the holder may direct. Every such cheque or warrant shall, unless the holder or joint holders otherwise direct, be made payable to the order of the holder or, in the case of joint holders, to the order of the holder whose name stands first on the Register in respect of such Shares, and shall be sent at his, her or their risk and payment of the cheque or warrant by the bank on which it is drawn shall constitute a good discharge to the Company.
24.All dividends unclaimed for one (1) year after having been declared may be invested or otherwise made use of by the Board for the benefit of the Company until claimed. Any dividend unclaimed after a period of the lesser of (i) six (6) years from the date of declaration of such dividend or (ii) one year after dissolution of the Company may be forfeited by the Board of Directors and, if so forfeited, shall revert to the Company.
Fractional Shares
25.The Board may issue fractions of a Share and, if so issued, a fraction of a Share shall be subject to and carry the corresponding fraction of liabilities (whether with respect to nominal or par value, premium, contributions, calls or otherwise), limitations, preferences, privileges, qualifications, restrictions, rights (including, without prejudice to the generality of the foregoing, voting and participation rights) and other attributes of a whole Share. If more than one fraction of a Share of the same Class is issued to or acquired by the same Shareholder such fractions shall be accumulated.
MEETINGS OF SHAREHOLDERS
Ability to Call Meeting
26.Except as otherwise required by Law, a general meeting may only be called by a resolution of a majority of the Board of Directors or by the Chairman of the Board of Directors, provided that an annual general meeting shall be held once in each calendar year.
Notice of General Meetings
27.Notice of any meeting of Shareholders (for meetings called by the Board of Directors or by Shareholders in accordance with Article 26) shall be given not less than ten (10) nor more than sixty (60) days before the date of any meeting of Shareholders, to each Shareholder entitled to vote at such meeting, as of the record date for determining the stockholders entitled to notice of the meeting.
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28.The accidental omission to give notice of a meeting to or the non-receipt of a notice of a meeting by any Shareholder shall not invalidate the proceedings at any meeting.
29.Shareholders at a general meeting may only consider proposals or nominations specified in the notice of meeting which shall include any proposal or nomination brought before the meeting (a) by or at the direction of the Board or (b) by a Shareholder who is a Shareholder as at the record date for the relevant meeting and who has tabled or put forward a proposal or nomination for consideration at a general meeting in accordance with the provisions of these Articles. In the case of (b), such proposal or nomination shall only be valid if (i) it contains the precise language of any such proposal or nomination to be considered by Shareholders as shall be determined in the absolute discretion of the Directors and (ii) it is forwarded to the Directors by hand or by registered post, along with a certificate certifying that such Shareholder is a Shareholder as at the record date for the relevant meeting, at least 80 and not more than 100 clear days prior to the relevant general meeting or within 10 clear days of the relevant record date if such record date has not been set or falls after that period of time.
Quorum
30.No business except for the appointment of a chairperson of the meeting shall be transacted at any general meeting unless a quorum of Shareholders is present at the time when the meeting proceeds to business. Except as otherwise provided by these Articles, the holders of a majority of the Shares entitled to vote at the general meeting, present in person, by remote communication or represented by proxy, shall constitute a quorum for all purposes, unless or except to the extent that a presence of a larger number may be required by Law.
31.If, within half an hour from the time appointed for the meeting, a quorum is not present, the meeting, if convened upon the requisition of Shareholders, shall be dissolved. In any other case, then either (i) the chairperson of the meeting or (ii) the holders of a majority of the Shares entitled to be cast by the Shareholder entitled to vote at the general meeting, present in person, or by remote communication, if applicable, or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the original meeting.
32.When a meeting is adjourned to another time or place, unless required by Law, notice need not be given of the adjourned meeting if the time, place, if any, thereof, and the means of remote communications, if any, by which Shareholders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken. At any adjourned meeting, the Company may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, a notice of the adjourned meeting shall be given to each Shareholder of record entitled to vote at the meeting. If after the adjournment a new record date for determination of Shareholders entitled to vote is fixed for the adjourned meeting, the Board shall fix a new record date for notice of such adjourned meeting, and shall give notice of the adjourned meeting to each Shareholders entitled to vote at such adjourned meeting as of the record date fixed for notice of such adjourned meeting.
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Virtual Participation in Meetings
33.To the extent approved by the Board or the Chairperson, participation for a specific general meeting or all general meetings of the Company may be by means of a telephone or similar communication equipment by way of which all Persons participating in such meeting can communicate with each other and such participation shall be deemed to constitute presence in person at the meeting.
Adjournment, Cancellation or Postponement
34.The chairperson may adjourn the meeting from time to time and from place to place, but no business shall be transacted at any adjourned meeting other than the business which might lawfully have been transacted at the meeting had the adjournment not taken place. When a meeting is adjourned for fourteen (14) days or more, at least seven (7) clear days’ notice of the adjourned meeting shall be given specifying the time and place of the adjourned meeting but it shall not be necessary to specify in such notice the nature of the business to be transacted at the adjourned meeting and the general nature of the business to be transacted. Save as aforesaid, it shall be unnecessary to give notice of an adjournment.
35.The Board may cancel or postpone any duly convened general meeting at any time prior to such meeting, except for general meetings requisitioned by the Shareholders in accordance with these Articles, for any reason or for no reason, upon notice in writing to Shareholders. A postponement may be for a stated period of any length or indefinitely as the Board may determine. Notice of the business to be transacted at such postponed general meeting shall not be required. If a general meeting is postponed in accordance with this Article, the appointment of a proxy will be valid if it is received as required by these Articles not less than forty-eight (48) hours before the time appointed for holding the postponed meeting.
Voting and Proxies
36.Subject to any rights and restrictions for the time being attached to any Share by Law, at a general meeting, every Shareholder present in person or by proxy shall have one vote for each Ordinary Share of which such Shareholder is the holder and the number of votes set forth in the terms of the Preferred Shares, if any, for each Preferred Share of which such Shareholder is the holder.
37.Votes may be given either personally or by proxy.
38.The instrument appointing a proxy shall be (i) in writing under the hand of the appointor or of his or her attorney duly authorised in writing or, if the appointor is a corporation or a company, either under Seal or under the hand of an officer or attorney duly authorised or (ii) by way of a telephone or other similar communication equipment or electronic means approved by the Board from time to time. A proxy need not be a Shareholder. An instrument or other means appointing a proxy may be in any usual or common form or such other form as the Board may approve and, in the case of an instrument appointing a proxy in writing, such instrument shall be deposited with the Company in accordance with the terms of the notice of the relevant general meeting.
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39.All actions that are presented at any general meeting or any special meeting to be voted upon shall be adopted by Ordinary Resolution, unless such action is required to be passed by a Special Resolution under the Companies Act.
DETERMINATION OF RECORD DATE
40.For the purpose of determining Shareholders entitled to notice of, or to vote at any meeting of Shareholders or any adjournment thereof, or Shareholders entitled to receive payment of any Dividend or other distribution, or in order to make a determination of Shareholders for any other purpose, the Directors may, after notice has been given by advertisement in an appointed newspaper or any other newspaper or by any other means in accordance with the requirements of the Designated Stock Exchange, provide that the Register of Shareholders shall be closed for transfers for a stated period which shall not in any case exceed forty days.
41.In lieu of, or apart from, closing the Register of Shareholders, the Directors may fix in advance a date as the record date for any such determination of Shareholders entitled to notice of, or to vote at any meeting of the Shareholders or any adjournment thereof, or for the purpose of determining the Shareholders entitled to receive payment of any Dividend or other distribution, or in order to make a determination of Shareholders for any other purpose, provided that the record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board shall, unless otherwise required by applicable law, not be more than sixty (60) nor less than ten (10) days before the date of any meeting of Shareholders.
42.If the Register of Shareholders is not so closed and no record date is fixed for the determination of Shareholders entitled to notice of, or to vote at, a meeting of Shareholders or Shareholders entitled to receive payment of a Dividend or other distribution, the date on which notice of the meeting is sent or the date on which the resolution of the Directors resolving to pay such Dividend or other distribution is passed, as the case may be, shall be the record date for such determination of Shareholders. When a determination of Shareholders entitled to vote at any meeting of Shareholders has been made as provided in this Article, such determination shall apply to any adjournment thereof.
DIRECTORS
Powers and Duties of Directors
43.Subject to the Companies Act, these Articles and to any resolutions passed in a general meeting, the business of the Company shall be managed by the Board, who may exercise all powers of the Company. No resolution passed by the Company in general meeting shall invalidate any prior act of the Board that would have been valid if that resolution had not been passed.
44.The Board may exercise all the powers of the Company to borrow money and to mortgage or charge its undertaking, property and uncalled capital or any part thereof, to issue debentures, debenture stock and other securities whenever money is borrowed or as security for any debt, liability or obligation of the Company or of any third party.
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45.The Board may, from time to time, and except as required by applicable law or the listing rules of the Designated Stock Exchange, adopt, institute, amend, modify or revoke the corporate governance policies or initiatives, which shall be intended to set forth the policies of the Company and the Board on various corporate governance related matters as the Board shall determine by resolution from time to time.
Number and Term of Office
46.The number of Directors which shall constitute the Board of Directors of the Company shall be between three (3) and nine (9). Upon the adoption of these Articles of Association the Directors shall be divided by resolution of the Directors into three classes of equal size, designated as Class I, Class II and Class III, provided however, that if the total number of Directors is 4, 5, 7, or 8, one Class may have one fewer or one more Director than the other two Classes. The Board of Directors shall make the subsequent appointments of individual Directors to particular Classes. Any increase or decrease in the number of Directors shall be so apportioned among the classes as to make all classes as nearly equal in number as possible.
47.Each Director shall serve for a term ending on the date of the third annual general meeting following the annual general meeting at which such Director was elected.
48.For so long as Shares are listed on the Designated Stock Exchange, the Directors shall include such number of Independent Directors as applicable law, rules or regulations or the Designated Stock Exchange Rules require, unless the Board resolves to follow any available exceptions or exemptions.
49.Each Director shall hold office until the earliest to occur of (i) expiration of his or her term as provided in the written agreement with the Company relating to the Director’s term, if any, and the election or appointment of his or her successor, (ii) his or her resignation or (iii) his or her removal pursuant to these Articles notwithstanding any agreement between such Director
Election of Directors
50.The Directors shall be nominated by the Board or by Shareholders holding at least twenty-five percent (25%) of the votes of the issued and outstanding Ordinary Shares present and entitled to vote thereon, voting as a single class. Once nominated, the Directors shall be elected to the Board of Directors by Ordinary Resolution on the election of such Director at any general meeting called for that purpose at which a quorum is present.
Removal
51.A Director may be removed from office by Ordinary Resolution, notwithstanding anything in these Articles or in any agreement between the Company and such Director (but without prejudice to any claim for damages under such agreement).
Vacancies
52.The Board, by the affirmative vote of a simple majority of the Directors present and voting at a meeting of the Board of Directors, may at any time and from time
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to time appoint any person to be a Director to fill a vacancy arising from the resignation or removal of a former Director or as an addition to the existing Board, subject to compliance with director qualification requirements under the Designated Stock Exchange Rules as long as Shares are listed on the Designated Stock Exchange, unless the Board resolves to follow any available exceptions or exemptions.
53.The continuing Directors may act notwithstanding any vacancy in their body.
Relinquishment of Office of Director
54.A Director shall have relinquished his or her position as a Director if the Director:
(a)resigns his or her office by Notice delivered to the Company at the Office or tendered at a meeting of the Board;
(b)becomes of unsound mind or dies;
(c)without special leave of absence from the Board, is absent from meetings of the Board for three consecutive times and the Board resolves that his or her office be vacated; or
(d)becomes bankrupt or has a receiving order made against him or suspends payment or compounds with his or her creditors;
(e)is prohibited by Law from being a Director; or
(f)ceases to be a Director by virtue of any provision of the Companies Act or is removed from office pursuant to these Articles.
Shareholding Qualification
55.The Board shall determine the qualification for Directors.
Committees of the Board
56.The Board may delegate any of its powers to committees consisting of one or more directors; any committee so formed shall in the exercise of the powers so delegated conform to any regulations that may be imposed on it by the Board.
57.Subject to any regulations imposed on it by the Board, a committee appointed by the Board may elect a chairperson of its meetings. If no such chairperson is elected, or if at any meeting the chairperson is not present within sixty (60) minutes after the time appointed for holding the meeting, the committee members present may choose one of their number to be chairperson of the meeting.
58.Any such delegates as aforesaid may be authorised by the Board to sub-delegate all or any of the powers, authorities, and discretion for the time being vested in them.
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Meetings; Voting; Conduct of Business
59.The Board and each committee thereof may meet together (either within or without the Cayman Islands) for the dispatch of business, adjourn, and otherwise regulate its meetings and proceedings as it thinks fit.
60.A meeting of the Board may be convened by the Secretary on request of the Chairperson, the Chief Executive Officer or by any Director. The Secretary shall convene a meeting of the Board (i) upon written notice of at least three (3) business days to all Directors which notice shall set forth the general nature of the business to be considered of the Board or committee, as the case may be, unless notice is waived by all the Directors either at, before or after the meeting is held and (ii) in accordance with the other procedures set forth in the Corporate Guidelines as approved by the Board from time to time. To any such notice of a meeting of the Directors all the provisions of the Articles relating to the giving of notices by the Company to the Shareholders shall apply mutatis mutandis.
61.A Director may participate in any meeting of the Board or of any committee thereof by means of telephone or similar communication equipment by way of which all Persons participating in such meeting can communicate with each other and such participation shall be deemed to constitute presence in person at the meeting.
62.The quorum necessary for the transaction of the business of the Board or any committee thereof shall be a majority of the Directors that constitute the Board or the relevant committee, as the case may be, at the time of the notice for such meeting shall be given.
63.All matters arising at any meeting of the Board or any committee thereof shall be decided by a majority of the votes cast at the meeting, provided that a quorum is present.
64.Each Director shall be entitled to cast one (1) vote on each matter submitted to the Board, or to any committee thereof of which he or she is a member.
65.The Directors may elect a chairperson of their meetings and determine the period for which he or she is to hold office; but if no such chairperson is elected, or if at any meeting the chairperson is not present within fifteen (15) minutes after the time appointed for holding the same, the Directors present may choose one of their number to be chairperson of the meeting.
66.The Board shall cause minutes to be made for the purpose of recording:
(a)all appointments of officers made by the Board;
(b)the names of the Directors present at each meeting of the Board and of any committee of the Board; and
(c)all resolutions and proceedings at all meetings of the Company, and of the Board and of committees of Board.
67.All acts done by any meeting of the Board or of a committee of the Board shall be as valid as if every such Person had been duly appointed and was qualified to be a Director notwithstanding that it be afterwards discovered that there was some
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defect in the appointment of any such Director(s) or that such Director(s) were disqualified.
CONFLICT OF INTERESTS
Director Conflicts of Interest
68.Subject to the Law and to these Articles, no Director or proposed or intending Director shall be disqualified by his or her office from contracting with the Company, either with regard to his or her tenure of any office or place of profit or as vendor, purchaser or in any other manner whatever, nor shall any such contract or any other contract or arrangement in which any Director is in any way interested be liable to be avoided, nor shall any Director so contracting or being so interested be liable to account to the Company or the Shareholders for any remuneration, profit or other benefits realised by any such contract or arrangement by reason of such Director holding that office or of the fiduciary relationship thereby established provided that such Director shall disclose the nature of his or her interest in any contract or arrangement in which he or she is interested in accordance with Article 70 herein. Any such transaction that would reasonably be likely to affect a Director’s status as an “Independent Director”, or that would constitute a “related party transaction” as defined under applicable law or the rules of the Designated Stock Exchange, shall require the approval of the Audit Committee.
69.A Director who to his or her knowledge is in any way, whether directly or indirectly, interested in a contract or arrangement or proposed contract or arrangement with the Company shall declare the nature of his or her interest at the meeting of the Board at which the question of entering into the contract or arrangement is first considered, if he or she knows his or her interest then exists, or in any other case at the first meeting of the Board after he or she knows that he or she is or has become so interested.
70.Following a declaration being made pursuant to the last preceding two Articles, subject to any separate requirement for Audit Committee approval under applicable law or the listing rules of the Company’s Designated Stock Exchange, and unless disqualified by the Chairperson of the relevant Board meeting, a Director may vote in respect of any contract or proposed contract or arrangement in which such Director is interested and may be counted in the quorum at such meeting.
71.Subject to any corporate governance policies adopted by the Board, a Director may hold any other office or place of profit under the Company (other than the office of auditor) in conjunction with his or her office of Director for such period and on such terms (as to remuneration and otherwise) as the Board may determine and no Director or intending Director shall be disqualified by his or her office from contracting with the Company either with regard to his or her tenure of any such other office or place of profit or as vendor, purchaser or otherwise, nor shall any such contract or arrangement entered into by or on behalf of the Company in which any Director is in any way interested, be liable to be avoided, nor shall any Director so contracting or being so interested be liable to account to the Company for any profit realised by any such contract or arrangement by reason of such Director holding that office or of the fiduciary relation thereby established. A Director, notwithstanding his or her interest, may be counted in the quorum present at any meeting of the Board whereat he or she or any other
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Director is appointed to hold any such office or place of profit under the Company or whereat the terms of any such appointment are arranged and he or she may vote on any such appointment or arrangement.
Officers
72.Subject to these Articles, the Board may from time to time appoint any natural person, whether or not a Director to hold such office in the Company as the Board may think necessary for the administration of the Company.
73.The Board may appoint any natural person to be a Secretary (and if need be an assistant Secretary or assistant Secretaries) who shall hold office for such term, at such remuneration and upon such conditions and with such powers as it thinks fit. Any Secretary or assistant Secretary so appointed by the Board may be removed by the Board.
74.The Board may from time to time and at any time by power of attorney (whether under Seal or under hand) or otherwise appoint any company, firm or Person or body of Persons, whether nominated directly or indirectly by the Board, to be the attorney or attorneys or authorised signatory (any such person being an “Attorney” or “Authorised Signatory”, respectively) of the Company for such purposes and with such powers, authorities and discretion (not exceeding those vested in or exercisable by the Board under these Articles) and for such period and subject to such conditions as it may think fit, and any such power of attorney or other appointment may contain such provisions for the protection and convenience of Persons dealing with any such Attorney or Authorised Signatory as the Board may think fit, and may also authorise any such Attorney or Authorised Signatory to delegate all or any of the powers, authorities and discretion vested in him.
NOTICES
75.Except as otherwise provided in these Articles, at the discretion of the Board, any notice or document may be served by the Company or by the Person entitled to give notice to any Shareholder either personally, or by posting it by airmail or by courier service in a prepaid letter addressed to such Shareholder at his or her address as appearing in the Register, or by electronic mail to any electronic mail address such Shareholder may have specified in writing for the purpose of such service of notices, or by facsimile to any facsimile number such Shareholder may have specified in writing for the purpose of such service of notices, or by placing it on the Company’s Website should the Board deems it appropriate. In the case of joint holders of a Share, all notices shall be given to that one of the joint holders whose name stands first in the Register in respect of the joint holding, and notice so given shall be sufficient notice to all the joint holders.
76.Any Shareholder present, either personally or by proxy, at any meeting of the Company shall for all purposes be deemed to have received due notice of such meeting and, where requisite, of the purposes for which such meeting was convened.
77.Any notice or other document, if served by:
(a)post, shall be deemed to have been served five (5) days after the time when the letter containing the same is posted;
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(b)facsimile, shall be deemed to have been served upon production by the transmitting facsimile machine of a report confirming transmission of the facsimile in full to the facsimile number of the recipient;
(c)courier service, shall be deemed to have been served forty-eight (48) hours after the time when the letter containing the same is delivered to the courier service; or
(d)electronic mail, shall be deemed to have been served immediately upon the time of the transmission by electronic mail; or
(e)placing it on the Company’s Website, shall be deemed to have been served immediately upon the time when the same is placed on the Company’s Website.
In proving service by post or courier service it shall be sufficient to prove that the letter containing the notice or documents was properly addressed and duly posted or delivered to the courier service.
78.Any notice or document delivered or sent by post to or left at the registered address of any Shareholder in accordance with the terms of these Articles shall notwithstanding that such Shareholder be then dead or bankrupt, and whether or not the Company has notice of his or her death or bankruptcy, be deemed to have been duly served in respect of any Share registered in the name of such Shareholder as sole or joint holder, unless his or her name shall at the time of the service of the notice or document, have been removed from the Register as the holder of the Share, and such service shall for all purposes be deemed a sufficient service of such notice or document on all Persons interested (whether jointly with or as claiming through or under him) in the Share.
79.Notice of every general meeting shall be given to:
(a)all Shareholders holding Shares with the right to receive notice and who have supplied to the Company an address for the giving of notices to them; and
(b)every Person entitled to a Share in consequence of the death or bankruptcy of a Shareholder, who but for his or her death or bankruptcy would be entitled to receive notice of the meeting and who has supplied to the Company an address for the giving of notices to him.
No other Person shall be entitled to receive notices of general meetings.
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INDEMNIFICATION AND INSURANCE
80.Every Director and officer of the Company and any former Director or former officer (solely with respect to such former Director's or officer's term as such) and any individual who, at the request of the Company, serves or has served as a director, officer, partner or trustee of (i) another corporation, partnership, joint venture or other entity which is a subsidiary of the Company, or (ii) a trust or employee benefit plan associated with the business of the Company or a subsidiary of the Company (each an “Indemnified Person”) shall be indemnified and secured harmless out of the assets and funds of the Company from and against any claim or liability and all actions, proceedings, costs, charges, damages or expenses (including legal expenses), losses, or liabilities whatsoever which he or she incurred or sustained as a result of any act or failure to act in carrying out their functions (including any claim or liability to which such person may become subject or which such person may incur by reason of his or her status as a present or former Director or officer of the Company), including without prejudice to the generality of the foregoing, any costs, expenses, losses or liabilities incurred by him in defending (whether successfully or otherwise) any civil proceedings concerning the Company or its affairs in any court whether in the Cayman Islands or elsewhere other than such liability (if any) that they may incur by reason of their own actual fraud or willful default.
81.No Indemnified Person shall be liable to the Company for any loss or damage incurred by the Company as a result (whether direct or indirect) of the carrying out of their functions unless that liability arises through the actual fraud or willful default of such Indemnified Person. No person shall be found to have committed actual fraud or willful default under this Article unless or until a court of competent jurisdiction shall have made a finding to that effect.
82.The Company shall advance to each Indemnified Person reasonable attorneys' fees and other costs and expenses incurred in connection with the defense of any action, suit, proceeding or investigation involving such Indemnified Person for which indemnity will or could be sought. In connection with any advance of any expenses hereunder, the Indemnified Person shall execute an undertaking to repay the advanced amount to the Company if it shall be determined by final judgment or other final adjudication that such Indemnified Person was not entitled to indemnification pursuant to this Article. If it shall be determined by a final judgment or other final adjudication that such Indemnified Person was not entitled to indemnification with respect to such judgment, costs or expenses, then such party shall not be indemnified with respect to such judgment, costs or expenses and any advancement shall be returned to the Company (without interest) by the Indemnified Person.
83.The Directors, on behalf of the Company, may purchase and maintain insurance for the benefit of any Director or other officer of the Company against any liability which, by virtue of any rule of law, would otherwise attach to such person in respect of any negligence, default, breach of duty or breach of trust of which such person may be guilty in relation to the Company.
84.Neither the amendment nor repeal of Articles 79-83 of these Articles, nor the adoption or amendment of any other provision of the Memorandum and Articles of Association of the Company inconsistent with Articles 79-83 of these Articles, shall apply to affect in any respect the applicability of Articles 79-83 of these
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Articles with respect to any act, or circumstance or condition, or failure to act, which occurred prior to such amendment, repeal or adoption.
MISCELLANEOUS
The Seal
85.The Seal shall not be affixed to any instrument except by the authority of any Director provided always that such authority may be given prior to or after the affixing of the Seal and if given after may be in general form confirming a number of affixing of the Seal. The Seal shall be affixed in the presence of a Director or a Secretary (or an assistant Secretary) or in the presence of any one or more Persons as any Director may appoint for the purpose and such Person or Persons as aforesaid shall sign every instrument to which the Seal is so affixed in their presence.
86.The Company may maintain a facsimile of the Seal in such countries or places as the Board may appoint and such facsimile Seal shall not be affixed to any instrument except by the authority of any Director provided always that such authority may be given prior to or after the affixing of such facsimile Seal and if given after may be in general form confirming a number of affixing’s of such facsimile Seal. The facsimile Seal shall be affixed in the presence of such Person or Persons as any Director may appoint for the purpose and such Person or Persons as aforesaid shall sign every instrument to which the facsimile Seal is so affixed in their presence and such affixing of the facsimile Seal and signing as aforesaid shall have the same meaning and effect as if the Seal had been affixed in the presence of and the instrument signed by a Director or a Secretary (or an assistant Secretary) or in the presence of any one or more Persons as any Director may appoint for the purpose.
87.Notwithstanding the foregoing, a Secretary or any assistant Secretary shall have the authority to affix the Seal, or the facsimile Seal, to any instrument for the purposes of attesting authenticity of the matter contained therein but which does not create any obligation binding on the Company. The financial year of the company shall end on (i) the last Friday of the calendar year or the first Friday subsequent to the end of the calendar year, whichever is closest to the end of the calendar year or (ii) such other date as the Directors may determine.
Accounts, Annual Return and Declaration
88.The books of account relating to the Company’s affairs shall be kept in such manner as may be determined from time to time by the Board. The books of account shall be kept at the Registered Office, or at such other place or places as the Board thinks fit, and shall always be open to the inspection of the Directors.
89.The Board may from time to time determine whether and to what extent and at what times and places and under what conditions or regulations the accounts and books of the Company or any of them shall be open to the inspection of Shareholders not being Directors, and no Shareholder (not being a Director) shall have any right to inspect any account or book or document of the Company except as conferred by Law or Designated Stock Exchange Rule or authorised by the Board.
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90.The Board in each year shall prepare, or cause to be prepared, an annual return and declaration setting forth the particulars required by the Companies Act and deliver a copy thereof to the Registrar of Companies in the Cayman Islands.
Capitalisation of Reserves
91.Subject to the Companies Act, the Board may:
(a)resolve to capitalise an amount standing to the credit of reserves (including the Share Premium Account, capital redemption reserve and profit and loss account), or otherwise available for distribution;
(b)appropriate the sum resolved to be capitalised to the Shareholders in proportion to the nominal amount of Shares held by them respectively and apply that sum on their behalf in or towards paying up in full unissued Shares or debentures of a nominal amount equal to that sum, and allot the Shares or debentures, credited as fully paid, to the Shareholders (or as the Board may direct) in those proportions, or partly in one way and partly in the other, but the Share Premium Account, the capital redemption reserve and profits which are not available for distribution may, for the purposes of this Article, only be applied in paying up unissued Shares to be allotted to Shareholders credited as fully paid
(c)make any arrangements it thinks fit to resolve a difficulty arising in the distribution of a capitalised reserve;
(d)authorise a Person to enter (on behalf of all the Shareholders concerned) into an agreement with the Company providing for the allotment to the Shareholders respectively, credited as fully paid, of Shares or debentures to which they may be entitled on the capitalization, and any such agreement made under this authority being effective and binding on all those Shareholders; and
(e)generally, do all acts and things required to give effect to the resolution.
Share Premium Account
92.The Board shall in accordance with the Companies Act establish a Share Premium Account and shall carry to the credit of such account from time to time a sum equal to the amount or value of the premium paid on the issue of any Share.
93.There shall be debited to any Share Premium Account on the redemption or purchase of a Share the difference between the nominal value of such Share and the redemption or purchase price provided always that at the discretion of the Board such sum may be paid out of the profits of the Company or, if permitted by the Companies Act, out of capital.
Depositary and Clearing Houses
94.If a recognised clearing house (or its nominee(s)) or depositary (or its nominee(s)) is a Shareholder of the Company it may, by resolution of its directors or other governing body or by power of attorney, authorise such Person(s) as it thinks fit to act as its representative(s) at any general meeting or of any Class of Shareholders of the Company provided that, if more than one Person is so
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authorised, the authorisation shall specify the number and Class of Shares in respect of which each such Person is so authorised. A Person so authorised pursuant to this Article shall be entitled to exercise the same powers on behalf of the recognised clearing house (or its nominee(s)) or depositary (or its nominee(s)) which he or she represents as that recognised clearing house (or its nominee(s)) or depositary (or its nominee(s)) could exercise if it were an individual Shareholder holding the number and Class of Shares specified in such authorisation.
Non-Recognition of Trusts
95.No Person shall be recognised by the Company as holding any Share upon any trust and the Company shall not, unless required by law, be bound by or be compelled in any way to recognise (even when having notice thereof) any equitable, contingent, future or partial interest in any Share or (except only as otherwise provided by these Articles or as the Companies Act requires) any other right in respect of any Share except an absolute right to the entirety thereof in each Shareholder registered in the Register.
Winding Up
96.If the Company shall be wound up the liquidator shall apply the assets of the Company in such manner and order as he or she thinks fit in satisfaction of creditors’ claims.
97.If the Company shall be wound up, the liquidator may, with the sanction of an Ordinary Resolution divide amongst the Shareholders in specie or kind the whole or any part of the assets of the Company (whether they shall consist of property of the same kind or not) and may, for such purpose set such value as he or she deems fair upon any property to be divided as aforesaid and may determine how such division shall be carried out as between the Shareholders or different Classes. The liquidator may, with the like sanction, vest the whole or any part of such assets in trustees upon such trusts for the benefit of the Shareholders as the liquidator, with the like sanction shall think fit, but so that no Shareholder shall be compelled to accept any assets whereon there is any liability.
Amendment of Articles of Association
98.Subject to the Companies Act and the provisions set forth herein, the Shareholders may at any time and from time to time by Special Resolution alter or amend these Articles or the Memorandum, in whole or in part.
Registration by Way of Continuation
99.The Shareholders may by Special Resolution resolve to be registered by way of continuation in a jurisdiction outside the Cayman Islands or such other jurisdiction in which it is for the time being incorporated, registered or existing. In furtherance of a resolution adopted pursuant to this Article, the Board may cause an application to be made to the Registrar of Companies to deregister the Company in the Cayman Islands or such other jurisdiction in which it is for the time being incorporated, registered or existing and may cause all such further steps as they consider appropriate to be taken to affect the transfer by way of continuation of the Company.
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Disclosure
100.The Board, or any service providers (including the officers, the Secretary and the registered office provider of the Company) specifically authorised by the Board, shall be entitled to disclose to any regulatory or judicial authority any information regarding the affairs of the Company including without limitation information contained in the Register and books of the Company.
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NOTICE OF GRANT OF RESTRICTED STOCK UNIT AWARD
FRESH DEL MONTE PRODUCE INC.
2014 OMNIBUS SHARE INCENTIVE PLAN
FOR GOOD AND VALUABLE CONSIDERATION, Fresh Del Monte Produce Inc. (the “Company”) hereby grants, pursuant to the provisions of the Company’s 2014 Omnibus Share Incentive Plan (the “Plan”), to the Participant designated in this Notice of Grant of Restricted Stock Unit Award (the “Notice”) an Award comprised of the right to receive a number of Ordinary Shares at the Grant Date and future vesting dates (the “Restricted Stock Units” or “RSUs”), subject to certain restrictions as outlined below in this Notice and the additional provisions set forth in the attached Terms and Conditions of Restricted Stock Unit Award (the “Terms & Conditions”). The Notice and the Terms & Conditions shall hereinafter be referred to collectively as the “Agreement.”
Participant: [ ]
Grant Date: [DATE] (“Grant Date”)
# of Restricted Stock Units: [ ]
Service Vesting: Except as otherwise set forth in the Agreement, so long as the Participant continues to serve as a member of the Company’s Board of Directors from the Grant Date through the vesting date, the vesting of the Participant’s rights and interests in the RSUs shall become vested and non-forfeitable at the earlier of the one-year anniversary of the Grant Date and the next annual shareholder meeting.
By signing below, the Participant agrees that this Notice of Grant of Restricted Stock Unit Award is granted under and governed by the terms and conditions of the Company’s 2014 Omnibus Share Incentive Plan, as amended from time to time, and the attached Terms & Conditions.
| Participant | Fresh Del Monte Produce Inc. | |||||||||||||
| By: | By: | |||||||||||||
| Name: | Name: | |||||||||||||
| Title: | ||||||||||||||
| Date: | Date: | |||||||||||||
TERMS AND CONDITIONS OF RESTRICTED STOCK UNIT AWARD
These Terms and Conditions of Restricted Stock Unit Award (these “Terms & Conditions”) relate to the Notice of Grant of Restricted Stock Unit Award (the “Notice”) to which these Terms & Conditions are attached, by and between Fresh Del Monte Produce Inc. (the “Company”), and the person identified in the Notice (the “Participant”). The Terms & Conditions and the Notice shall hereinafter be collectively referred to as the “Agreement.”
The terms of the Company’s 2014 Omnibus Share Incentive Plan are hereby incorporated by reference and made part of this Agreement.
The Company’s Board of Directors (the “Committee”) has approved an award to the Participant under the 2014 Omnibus Share Incentive Plan of the right to receive a number of the Company’s Ordinary Shares, subject to such restrictions contained in this Agreement, and conditioned upon the Participant’s acceptance of the provisions set forth in this Agreement within sixty (60) days after the date of the Notice. For purposes of this Agreement, any reference to the Company shall include a reference to any subsidiary of the Company.
1.Defined Terms. Whenever the following terms are used in these Terms & Conditions, they shall have the meaning specified below unless the context clearly indicates to the contrary. The masculine pronoun shall include the feminine and neuter, and the singular shall include the plural, where the context so indicates. All capitalized terms used herein without definition shall have the meanings ascribed to such terms in the Plan.
(a)“Change of Control” shall have the meaning set forth in the Plan.
(b)“Code” means the US Internal Revenue Code of 1986, as amended from time to time.
(c)“Company Agreements” shall mean, collectively, (1) the Company’s Code of Conduct and Business Ethics, Insider Trading Policy and other policy to which the Participant is subject, in each case as these policies may be amended from time to time, (2) this Agreement and (3) any other contractual obligation between the Company and the Participant.
(d)“Fair Market Value” shall have the meaning set forth in the Plan.
(e)Section 409A” shall mean Section 409A of the Code and the Treasury Regulations and other guidance promulgated or issued thereunder.
(f)“Securities Act” shall mean the Securities Act of 1933, as amended.
(g)“Separation from Service” shall mean the date the Participant is no longer serving as a member of the Board of Directors.
(h)“Settlement” or “Settled” shall mean the delivery to the Participant of either (i) a certificate evidencing a number of Ordinary Shares equal to the number of RSUs that become vested and non-forfeitable upon that Settlement Date or (ii) an electronic issuance evidencing such Ordinary Shares.
(i)“Settlement Date” shall mean the date on which the Shares are Settled.
(j)“Stock Ownership Guidelines” shall mean the policy adopted by the Company’s Board of Directors that requires an employee to hold a specific number of Ordinary Shares of the Company, as such policy currently exists or as it may from time to time be modified in the future.
(k)“System” shall mean the eTrade equity plan administration system or any subsequent system utilized by the Company.
2.Grant of Restricted Stock Units; Dividend Equivalent Units.
(a) As of the Grant Date set forth in the Notice, subject to the terms and conditions provided in this Agreement and the Plan, the Company hereby grants to the Participant the number of Restricted Stock Units set forth in the Notice (the “RSUs”). Each RSU represents the right to receive one Ordinary Share (a “Share”) to the extent that the RSU becomes vested and non-forfeitable in accordance with Section 4 hereof.
(b) With respect to each RSU, whether or not vested, that has not been forfeited (but only to the extent such award of RSUs has not been settled for Shares), the Company shall, with respect to any cash dividends paid on the Shares, accrue and credit to the Participant’s bookkeeping account a number of RSUs having a Fair Market Value as of the date such dividend is paid equal to the cash dividends that would have been paid with respect to such RSU if it were an outstanding Share (the “Dividend Units”). These Dividend Units thereafter shall (i) be treated as RSUs for purposes of future dividend accruals pursuant to this Section 2; and (ii) vest in such amounts (rounded to the nearest whole RSU) at the same time as the RSUs with respect to which such Dividend Unit were received. The Participant shall not be entitled to any Dividend Unit payment with respect to any RSU that does not vest in accordance with this Agreement. Any dividends or distributions on Shares paid other than in cash shall accrue in the Participant’s bookkeeping account and shall vest at the same time as the RSUs in respect of which they are made (in each case in the same form, based on the same record date and at the same time, as such dividend or other distribution is paid on such Share).
(c) The Dividend Units and any amounts that may become payable in respect thereof shall be treated separately from the RSUs and the rights arising in connection therewith for purposes of Section 409(A) of the Code.
(d) The Company’s obligations under this Agreement (with respect to both the RSUs and the Dividend Units, if any) shall be unfunded and unsecured, and no special or separate fund shall be established and no other segregation of assets shall be made. The rights of Participant under this Agreement shall be no greater than those of a general unsecured creditor of the Company. In addition, the RSUs shall be subject to such restrictions as the Company may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which Shares are then listed, any Company policy and any applicable federal or state securities law.
3.Restrictions.
(a) The Participant shall have no rights as a stockholder of the Company by virtue of any RSU unless and until such RSU vests and resulting Ordinary Shares are issued to the Participant.
(b) The RSUs shall not be assignable or transferable by the Participant, other than (i) by will or the laws of descent and distribution, (ii) to family members or entities (including trusts) established for the benefit of the Participant or the Participant’s family members; or (iii) to any other person to the extent permitted by applicable securities law and approved by the Committee in its sole discretion. Any RSUs assigned or transferred pursuant to this Section 3(b) shall continue to be subject to the same terms and conditions as were applicable to the RSUs immediately before the transfer. Notwithstanding the foregoing, in no event shall any rights pursuant to this Agreement be assignable or transferable by the Participant if and to the extent the Committee determines that the RSUs are subject to Section 409A and that such assignment or transfer would result in a violation of Section 409A.
(c) Any attempt to dispose of the RSUs or any interest in the RSUs in a manner contrary to the restrictions set forth in this Agreement shall be void and of no effect.
4.Vesting; Acceleration of Vesting.
(a) Except as may be otherwise provided in Sections 4(b) and 4(c) of this Agreement, so long as the Participant continues to serve as a member of the Company’s Board of Directors from the Grant Date through the vesting date, the vesting of the Participant’s rights and interests in the RSUs shall become vested and non-forfeitable at the earlier of the one-year anniversary of the Grant Date and the next annual shareholder meeting.
(b) Change of Control. Upon the occurrence of a Change of Control, all RSUs granted hereunder that are not yet vested shall vest in accordance with Section 11 of the Plan.
(c) Death or Disability. In the event of the Participant’s Separation from Service due to death or Disability, any portion of the RSUs that are not yet vested shall become immediately vested.
5.Settlement of RSUs/Dividend Units.
(a)Unless and until the RSUs and the corresponding Dividend Units become vested and non-forfeitable in accordance with Section 4 hereof, the Participant will have no right to Settlement of any such RSUs or Dividend Units. Vested and non-forfeitable RSUs and Dividend Units shall be Settled by the Company reasonably promptly after the date of any such vesting (and in all events not later than 60 days after such vesting date) and upon the satisfaction of all other applicable conditions as to the RSUs and Dividend Units (including the payment by the Participant of all applicable withholding taxes).
(b)Such Settlement shall be accomplished by delivering to the Participant (or his beneficiary in the event of death) either (i) a certificate evidencing a number of Ordinary Shares equal to the number of RSUs and corresponding Dividend Units that become vested and non-forfeitable upon that Settlement Date or (ii) an electronic issuance evidencing such Ordinary Shares. To the extent that the Participant is then subject to Stock Ownership Guidelines and that such Ordinary Shares are subject to transfer restrictions pursuant to such Stock Ownership Guidelines then such Ordinary Shares (i) may be issued with a legend indicating that “THE TRANSFERABILITY OF THIS CERTIFICATE AND THE ORDINARY SHARES REPRESENTED HEREBY IS SUBJECT TO TRANSFERABILITY RESTRICTIONS CONTAINED IN THE FRESH DEL MONTE PRODUCE INC. STOCK OWNERSHIP GUIDELINES” or (ii) if delivered electronically, the Company may make such provisions as it deems necessary to ensure that each Ordinary Share is subject to the same terms and conditions as shares that are represented by a physical stock certificate. Neither the Participant nor any of the Participant’s successors, heirs, assigns or personal representatives shall have any further rights or interests in any RSUs or Dividend Units that are so paid.
6.Withholding.
(a)The Participant is responsible for any or all federal, state, local or foreign income tax, payroll tax or other tax-related withholding imposed with respect to RSUs or the Dividend Units (“Tax-Related Items”), regardless of any action the Company takes with respect to the Tax-Related Items. The Company (i) makes no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Award, including the grant or vesting of the RSUs or the subsequent sale of Shares acquired upon vesting; and (ii) does not commit to structure the terms of the grant or any aspect of the Award to reduce or eliminate the Participant’s liability for Tax-Related Items.
(b)Prior to vesting of the RSUs, the Participant, to the extent required by applicable law, shall pay or make adequate arrangements satisfactory to the Company to satisfy all withholding obligations of the Company. To the extent permissible under applicable law, the Company may permit a Participant to satisfy his liability for Tax-Related Items by:
(i) instructing the Company to execute a broker-assisted sale and remittance program, or “cashless” exercise/sale procedure, acceptable to the Committee where the amount of withholding due is remitted to the Company (a “sell-to-cover” arrangement); and/or
(ii) to the extent permissible under Section 409A of the Code, instructing the Company to withhold a number of Ordinary Shares deliverable on the Settlement Date, which have a Fair Market Value on the date of vesting equal to the amount of Tax-Related Items due (a “net-settlement” arrangement);
subject, in each case, to any limitations imposed by the Company’s insider trading policy and the U.S. federal securities laws.
7.No Rights as Shareholder. The Participant shall have no right to vote or receive dividends or any other rights as a shareholder of the Company with respect to the RSUs or the Ordinary Shares underlying the RSUs unless and until the RSUs become vested and non-forfeitable and such Shares are delivered to the Participant in accordance with this Agreement.
8.Consideration to the Company. In consideration of the awarding of the RSUs by the Company, the Participant agrees (i) to render faithful and efficient services to the Company, with such duties and responsibilities as the Company shall from time to time prescribe, (ii) to comply with all Company Agreements to which the Participant is subject from time to time and (iii) to those Additional Acknowledgements set forth in Appendix A attached hereto. Nothing in this Agreement or in the Plan shall confer upon the Participant any right to continue to serve as a member of the Board of Directors, or shall interfere with or restrict in any way the rights of the Board of Directors or the shareholders of the Company, which are hereby expressly reserved, to remove, not re-nominate or not re-elect the Participant to serve as a member of the Board of Directors at any time for any reason whatsoever as permitted by law.
9.Participant Representations. The Participant hereby represents to the Company that the Participant has read and fully understands the provisions of this Agreement and the Plan and the Participant’s decision to participate in the Plan is completely voluntary. Further, the Participant acknowledges that the Participant is relying solely on his or her own advisors with respect to the tax consequences of this award.
10.Regulatory Restrictions on the RSUs.
(a) Compliance with Securities Laws. The Participant acknowledges that the Plan is intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated by the Securities and Exchange Commission thereunder, including, without limitation, the applicable exemptive conditions of Rule 16b-3. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the RSUs are awarded and may be Settled, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and regulations. The Company reserves the right to restrict, in whole or in part, the delivery of Shares pursuant to this Agreement prior to the satisfaction of all legal requirements relating to the issuance of such shares, to their registration, qualification or listing or to an exemption from registration, qualification or listing.
(b) Conditions to Issuance of Ordinary Shares. The Ordinary Shares deliverable upon the Settlement of the RSUs, or any portion thereof, may be either previously authorized but unissued shares or issued shares which have then been reacquired by the Company. Such Ordinary Shares shall be fully paid and nonassessable. Subject to the requirements of Section 409A, the Company shall not be required to issue or deliver any shares of stock
upon the vesting of the RSUs or portion thereof prior to fulfillment of all of the following conditions (i) the admission of such Ordinary Shares to listing on all stock exchanges on which such class of shares is then listed, (ii) the completion of any registration or other qualification of such Ordinary Shares under any state or federal law or under rulings or regulations of the Securities and Exchange Commission or of any other governmental regulatory body, which the Committee shall, in its absolute discretion, deem necessary or advisable, (iii) the obtaining of any approval or other clearance from any state or federal governmental agency which the Committee shall, in its absolute discretion, determine to be necessary or advisable, and (iv) the lapse of such reasonable period of time following the vesting of the RSUs as the Committee may from time to time establish for reasons of administrative convenience.
11.Compliance with Section 409A.
(a) General. It is the intention of the Company that the benefits and rights to which the Participant could be entitled pursuant to this Agreement comply with Section 409A to the extent that the requirements of Section 409A are applicable thereto, and the provisions of this Agreement shall be construed in a manner consistent with that intention. If the Company believes, at any time, that any such benefit or right that is subject to Section 409A does not so comply, the Company may, without the Participant’s consent, amend the terms of such benefits and rights such that they comply with Section 409A.
(b) Distributions on Account of Separation from Service. If and to the extent required to comply with Section 409A, no payment or benefit required to be paid under this Agreement on account of the Separation from Service of the Participant shall be made unless and until the Participant incurs a “separation from service” within the meaning of Section 409A, and applicable Treasury Regulations.
(c) 6 Month Delay for Specified Employees.
(i) If the Participant is a “specified employee”, then no payment or benefit that is payable on account of the Participant’s “separation from service”, as that term is defined for purposes of Section 409A, shall be made before the date that is the business day following the six-month anniversary of the Participant’s “separation from service” (or, if earlier, the date of the Participant’s death) if and to the extent that such payment or benefit constitutes deferred compensation (or may be nonqualified deferred compensation) under Section 409A and such deferral is required to comply with the requirements of Section 409A. Any payment or benefit delayed by reason of the prior sentence shall be paid out or provided in a single lump sum at the end of such required delay period in order to catch up to the original payment schedule.
(ii) For purposes of this provision, the Participant shall be considered to be a “specified employee” if, at the time of his or her separation from service, the Participant is a “key employee”, within the meaning of Section 416(i) of the Code, of the Company (or any person or entity with whom the Company would be considered a single employer under Section 414(b) or Section 414(c) of the Code) any stock in which is publicly traded on an established securities market or otherwise.
(d) No Acceleration of Payments. Neither the Company nor the Participant, individually or in combination, may accelerate any payment or benefit that is subject to Section 409A, except in compliance with Section 409A and the provisions of this Agreement, and no amount that is subject to Section 409A shall be paid prior to the earliest date on which it may be paid without violating Section 409A.
(e) Treatment of Each Installment as a Separate Payment. For purposes of applying the provisions of Section 409A to this Agreement, each separately identified amount to which the Participant is entitled under this Agreement shall be treated as a separate payment. In
addition, to the extent permissible under Section 409A, any series of installment payments under this Agreement shall be treated as a right to a series of separate payments.
(f) No Guaranty of 409A Compliance. Notwithstanding the foregoing, the Company does not make any representation to the Participant that the payments or benefits provided under this Agreement are exempt from, or satisfy, the requirements of Section 409A, and the Company shall have no liability or other obligation to indemnify or hold harmless the Participant or any beneficiary of the Participant for any tax, additional tax, interest or penalties that the Participant or any beneficiary of the Participant may incur in the event that any provision of this Agreement, or any amendment or modification thereof, or any other action taken with respect thereto, is deemed to violate any of the requirements of Section 409A.
12.Miscellaneous.
(a) Notices. Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of the officer designated as the “Administrator” from time to time, and any notice to be given to the Participant shall be communicated to him (i) via electronic notification on the System, (ii) by e-mail to the Participant at the Participant’s e-mail address on file with the Company, or (iii) by mail to the Participant at the Participant’s mailing address on file with the Company. By a notice given pursuant to this Section 15(a), either party may hereafter designate a different address for notices to be given to him. Any notice which is required to be given to the Participant shall, if the Participant is then deceased, be given to the Participant’s personal representative if such representative has previously informed the Company of his status and address by written notice under this Section 15(a). Any notice delivered by mail shall be deemed duly given when enclosed in a properly sealed envelope or wrapper addressed as aforesaid, and deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.
(b) Waiver. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any other or subsequent breach.
(c)Entire Agreement. These Terms & Conditions, the Notice and the Plan constitute the entire agreement between the parties with respect to the subject matter hereof.
(d)Administration. The Committee shall have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules. All actions taken and all interpretations and determinations made by the Committee in good faith shall be final and binding upon the Participant, the Company and all other interested persons. No member of the Committee or the Board of Directors shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or the RSU. In its absolute discretion, the Company’s Board of Directors may at any time and from time to time exercise any and all rights and duties of the Committee under the Plan and this Agreement except with respect to matters which, under Rule 16b-3, or any regulations or rules issued thereunder, are required to be determined in the sole discretion of the Committee.
(e)Binding Effect; Successors. This Agreement shall inure to the benefit of and be binding upon the parties hereto and to the extent not prohibited herein, their respective heirs, successors, assigns and representatives. Nothing in this Agreement, express or implied, is intended to confer on any person other than the parties hereto and as provided above, their respective heirs, successors, assigns and representatives any rights, remedies, obligations or liabilities.
(f)Governing Law; Jurisdiction. This Agreement shall be administered, interpreted and enforced under the internal laws of the State of Florida without regard to conflicts of laws thereof. Venue in any action arising out of or relating to this Agreement shall be in federal
court in the Southern District of Florida, if federal jurisdiction exists. If federal jurisdiction does not exist, venue shall be in state court in Miami-Dade County, Florida.
(g)Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of these Terms & Conditions.
(h)Conflicts; Amendment. The provisions of the Plan are incorporated in this Agreement in their entirety. In the event of any conflict between the provisions of this Agreement and the Plan, the provisions of the Plan shall control. This Agreement and the Plan may be amended without the consent of the Participant provided that such amendment would not affect in any adverse manner any rights of the Participant under this Agreement. No amendment of this Agreement shall, without the consent of the Participant, affect in any adverse manner any rights of the Participant under this Agreement.
(i)Adjustments. Notwithstanding any other provision of this Agreement, the Committee may adjust the RSUs in accordance with the provisions of the Plan.
(j)Further Assurances. The Participant agrees, upon demand of the Company or the Committee, to do all acts and execute, deliver and perform all additional documents, instruments and agreements which may be reasonably required by the Company or the Committee, as the case may be, to implement the provisions and purposes of this Agreement and the Plan.
(k)Language. If the Participant has received this Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version differs from the English version, the English version shall control.
APPENDIX A
ADDITIONAL ACKNOWLEDGEMENTS
1. DATA PRIVACY
As a condition of the award of the Restricted Stock RSUs, the Participant hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of the Participant’s personal data as described in this Appendix. The Participant understands that the Company and its subsidiaries hold certain personal information about the Participant, including, but not limited to, the Participant’s name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company, details of any entitlement to shares of stock or equivalent benefits awarded, canceled, vested, unvested or outstanding in the Participant’s favor (“Data”). The Participant further understands that the Company and its subsidiaries will transfer Data among themselves as necessary for the purpose of implementing, administering and managing the RSUs. The Participant understands that Data may be transferred to any third parties assisting in the implementation, administration and management of the RSUs, that these recipients may be located in the Participant’s country or elsewhere, and that the recipient’s country may have different data privacy laws and protections from the Participant’s country. The Participant understands that the Participant may request a list with the names and addresses of any potential recipients of the Data by contacting the Participant’s local human resources representative. The Participant authorizes the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing the RSUs. The Participant understands that Data will be held only as long as is necessary to implement, administer and manage the RSUs. The Participant understands that the Participant may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing the Participant’s local human resources representative. Further, the Participant understands that the Participant is providing the consents herein on a purely voluntary basis. If the Participant does not consent, or if the Participant later seeks to revoke the Participant’s consent, the Participant’s employment status or service and career with the Participant’s employer will not be adversely affected; the only adverse consequence of refusing or withdrawing the Participant’s consent is that the Company would not be able to grant to the Participant RSUs or other awards or administer or maintain such awards. Therefore, the Participant understands that refusing or withdrawing the Participant’s consent may affect the Participant’s ability to benefit from the RSUs. For more information on the consequences of the Participant’s refusal to consent or withdrawal of consent, the Participant understands that the Participant may contact the Participant’s local human resources representative.
2. ADDITIONAL ACKNOWLEDGEMENTS
By entering into this Agreement and accepting the grant of RSUs evidenced hereby, the Participant acknowledges, understands and agrees that:
(a) the Plan is established voluntarily by the Company, is discretionary in nature and may be modified, suspended or terminated by the Company at any time;
(b) the award of the RSUs is voluntary and occasional and does not create any contractual or other right to receive future awards of RSUs or benefits in lieu of RSUs, even if such awards have been awarded in the past;
(c) all decisions with respect to future awards, if any, will be at the sole discretion of the Company;
(d) the Participant is voluntarily accepting the grant of RSUs;
(e) the RSUs, the Dividend Units, the Ordinary Shares and any payments or benefits with respect thereto are not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, bonuses, long-service awards, pension or retirement benefits or welfare benefits or similar payments, and in no event should be considered as compensation for, or in any way relating to, past services for the Company or any of its subsidiaries;
(f) in accepting the grant of RSUs, the Participant expressly recognizes that the RSUs are an award made solely by the Company, with principal offices at c/o Del Monte Fresh Produce Company, 241 Sevilla Avenue, Coral Gables, Florida 33134, U.S.A.; the Company is solely responsible for the administration of the Plan and the Participant’s participation in the Plan; in the event that the Participant is an employee of a subsidiary, the RSUs and the Participant’s participation in the Plan will not be interpreted to form an employment contract or relationship with the Company; furthermore, the RSUs will not be interpreted to form an employment contract with any subsidiary;
(g) unless otherwise provided in the Plan or by the Company in its discretion, the RSUs and the benefits evidenced by this Agreement do not create any entitlement to have the RSUs or any such benefits transferred to, or assumed by, another company nor to be exchanged, cashed out or substituted for, in connection with any corporate transaction affecting the Shares;
(h) neither the Company nor any of its subsidiaries shall be liable for any foreign exchange rate fluctuation between the Participant’s local currency and the United States Dollar that may affect the value of the RSUs or any payment made pursuant to the RSUs;
(i) the Company is not providing any tax, legal, or financial advice, nor is the Company making any recommendations regarding the RSUs, the Dividend Units or the Shares issuable with respect to the RSUs or the Dividend Units. The Participant is hereby advised to consult with the Participant’s personal tax, legal and financial advisors regarding the RSUs, the Dividend Units and the Shares before taking any action in relation thereto; and
(j) the Participant has received and read the 10(a) Prospectus under the Plan pursuant to which the RSUs are being offered, which Prospectus has been uploaded to the System.
Form of PSU Award Agreement
NOTICE OF GRANT OF
PERFORMANCE-BASED RESTRICTED STOCK UNIT AWARD
FRESH DEL MONTE PRODUCE INC.
2022 OMNIBUS SHARE INCENTIVE PLAN
FOR GOOD AND VALUABLE CONSIDERATION, Fresh Del Monte Produce Inc. (the “Company”) hereby grants, pursuant to the provisions of the Company’s 2022 Omnibus Share Incentive Plan (the “Plan”), to the Participant designated in this Notice of Grant of Performance-Based Restricted Stock Unit Award (the “Notice”) an Award comprised of the right to receive a number of Ordinary Shares (i) to the extent earned upon attainment of the performance set forth below and (ii) if earned, on the vesting dates set forth below (the “Performance-Based Restricted Stock Units” or “PSUs”), subject to certain restrictions as outlined below in this Notice and the additional provisions set forth in the attached Terms and Conditions of Restricted Stock Unit Award (the “Terms & Conditions”). The Notice and the Terms & Conditions shall hereinafter be referred to collectively as the “Agreement”.
Participant: [ ]
Grant Date: [DATE] (the “Grant Date”)
Target Number of Performance-Based Restricted Stock Units: [ ]
Performance Cycle: The period commencing on [FIRST DAY OF FISCAL YEAR] and concluding on the earlier of (i) [LAST DAY OF FISCAL YEAR], or (ii) a Change of Control (the “Performance Cycle”).
Performance Level: Except as otherwise provided in the Agreement, so long as the Participant’s service with the Company is continuous from the Grant Date through the end of the Performance Cycle, the percentage of Performance-Based Restricted Stock Units earned shall depend on the Company’s level of achievement of the following performance goal, measured as of the end of the Performance Cycle:
| Target Performance Measure | Achievement of Target Performance Measure | Earned Percentage | ||||||
| FY [YEAR] EBITDA = $[TARGET] | 100% or more | 100% | ||||||
| 80% | 80% | |||||||
| Less than 80% | 0% | |||||||
The Compensation Committee of the Company’s Board of Directors shall determine in writing the performance level achieved as set forth above and the number of Performance-Based Restricted Stock Units earned no later than [END OF NEXT FY Q1]. Achievement of the Target Performance Measure between 80% and 100% shall result in a corresponding earned percentage of PSUs (e.g., achievement of 87% of the Target Performance Measure results in the Participant earning 87% of the PSUs, rounded to the nearest share).
Vesting Dates: Except as otherwise provided in this Agreement or the Plan, so long as the Participant’s service with the Company is continuous from the Grant Date through the applicable vesting date, the PSUs earned as of the end of the Performance Cycle due to achievement of the performance goal (the “Earned PSUs”) shall vest and become nonforfeitable on each of the following dates:
33.3% of the Earned PSUs on [ONE YEAR AFTER GRANT DATE]
33.3% of the Earned PSUs on [DATE]
33.4% of the Earned PSUs on [DATE]
Form of PSU Award Agreement
If the number of PSUs determined as of a vesting date is a fractional number, the number vesting will be rounded down to the nearest whole number with any fractional portion carried forward.
By signing below, the Participant agrees that this Notice of Grant of Performance-Based Restricted Stock Unit Award is granted under and governed by the terms and conditions of the Company’s 2022 Omnibus Share Incentive Plan, as amended from time to time, and the attached Terms & Conditions.
| Participant | Fresh Del Monte Produce Inc. | |||||||||||||
| By: | By: | |||||||||||||
| Name: | Name: | |||||||||||||
| Title: | ||||||||||||||
| Date: | Date: | |||||||||||||
Form of PSU Award Agreement
TERMS AND CONDITIONS OF
PERFORMANCE-BASED RESTRICTED STOCK UNIT AWARD
These Terms and Conditions of Performance-Based Restricted Stock Unit Award (these “Terms & Conditions”) relate to the Notice of Grant of Performance-Based Restricted Stock Unit Award (the “Notice”) to which these Terms & Conditions are attached, by and between Fresh Del Monte Produce, Inc. (the “Company”), and the person identified in the Notice (the “Participant”). The Terms & Conditions and the Notice shall hereinafter be collectively referred to as the “Agreement.”
The terms of the Company’s 2022 Omnibus Share Incentive Plan (the “Plan”) are hereby incorporated by reference and made part of this Agreement.
The Compensation Committee of the Company’s Board of Directors (the “Committee”) has approved an award to the Participant under the 2022 Omnibus Share Incentive Plan of the right to receive a number of the Company’s Ordinary Shares, subject to such restrictions contained in this Agreement, and conditioned upon the Participant’s acceptance of the provisions set forth in this Agreement within sixty (60) days after the date of the Notice. For purposes of this Agreement, any reference to the Company shall include a reference to any subsidiary of the Company.
1)Defined Terms. Whenever the following terms are used in these Terms & Conditions, they shall have the meaning specified below unless the context clearly indicates to the contrary. The masculine pronoun shall include the feminine and neuter, and the singular shall include the plural, where the context so indicates. All capitalized terms used herein without definition shall have the meanings ascribed to such terms in the Plan.
a)“Change of Control” shall have the meaning set forth in the Plan.
b)“Change of Control Separation” shall mean that the Participant experiences a Separation from Service by the Company (or its successor) without Cause or by the Participant for Good Reason within twenty-four (24) months after the date of a Change of Control.
c)“Clawback Policy” shall mean any Company compensation recoupment policy that currently exists or that may from time to time be adopted or modified in the future by the Company and/or by applicable law.
d)“Code” means the US Internal Revenue Code of 1986, as amended from time to time.
e)“Company Agreements” shall mean, collectively, (1) the Company’s Code of Conduct and Business Ethics, Insider Trading Policy, Employee Compensation Recoupment Policy and other policy to which the Participant is subject, in each case as these policies may be amended from time to time, (2) this Agreement and (3) any other contractual obligation between the Company and the Participant.
f)“EBITDA” shall mean the Company’s consolidated earnings before interest, taxes, depreciation and amortization, as calculated by the Committee in its sole discretion.
g)“Fair Market Value” shall have the meaning set forth in the Plan.
h)“FY [YEAR] EBITDA” shall mean the Company’s consolidated EBITDA for the fiscal year ending [FY END DATE].
i)“Ordinary Shares” shall mean the Ordinary Shares of Fresh Del Monte Produce Inc., $.01 par value per share.
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Form of PSU Award Agreement
j)“Section 409A” shall mean Section 409A of the Code and the Treasury Regulations and other guidance promulgated or issued thereunder.
k)“Securities Act” shall mean the Securities Act of 1933, as amended.
l)“Separation from Service” shall mean the date the Participant is no longer actively employed and providing services to the Company or one of its subsidiaries (for any reason whatsoever and regardless of whether or not such termination is later found to be invalid or in breach of the employment laws in the jurisdiction where the Participant is employed or the terms of the Participant’s employment agreement, if any), in each case with or without Cause, including, but not by way of limitation, a termination by resignation, discharge, death, Disability or retirement; but excluding, unless it is the express policy of the Company or a subsidiary, as the case may be, or the Committee otherwise provides, (a) sick leave, (b) military leave, or (c) any other leave of absence authorized by the Company, or the Committee; provided that unless reemployment upon the expiration of such leave is guaranteed by contract or law, such leave is for a period of not more than three (3) months; provided, however, that such date will not be extended by any notice period mandated under local law (e.g., active employment would not include a period of “garden leave” or similar period mandated under the employment laws in the jurisdiction where the Participant is employed or the terms of the Participant’s employment agreement, if any). The Committee, in its absolute discretion, shall determine the effect of all matters and questions relating to a Separation from Service, including, but not by way of limitation, the question of whether a Separation from Service resulted from a discharge for Cause, and all questions of whether a particular leave of absence constitutes a Separation from Service; provided, however, that, unless otherwise determined by the Committee in its discretion, a leave of absence, change in status from an employee to an independent contractor or other change in the employee-employer relationship shall constitute a Separation from Service if, and to the extent that, such leave of absence, change in status or other change interrupts employment for the purposes of Section 422(a)(2) of the Code and the then applicable regulations and revenue rulings under said Section. If the Participant is not an employee of the Company or one of its subsidiaries and provides other services to the Company or one of its subsidiaries, the Committee shall be the sole judge of whether the Participant continues to render services to the Company or one of its subsidiaries and the date, if any, upon which such services shall be deemed to have terminated. Notwithstanding any other provision of this Agreement or of the Plan, the Company has an absolute and unrestricted right to terminate the Participant’s employment at any time for any reason whatsoever, with or without Cause, except to the extent expressly provided otherwise in writing.
m)“Settlement” or “Settled” shall mean the delivery to the Participant of either (i) a certificate evidencing a number of Ordinary Shares equal to the number of PSUs that become vested and non-forfeitable upon that Settlement Date, or (ii) an electronic issuance evidencing such Ordinary Shares.
n)“Settlement Date” shall mean the date on which the Ordinary Shares are Settled.
o)“Stock Ownership Guidelines” shall mean the policy adopted by the Company’s Board of Directors that requires an employee to hold a specific number of Ordinary Shares of the Company, as such policy currently exists or as it may from time to time be modified in the future.
p)“System” shall mean the eTrade equity plan administration system or any subsequent system utilized by the Company.
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Form of PSU Award Agreement
2)Grant of Restricted Stock Units; Dividend Equivalent Units.
a) As of the Grant Date set forth in the Notice (the “Grant Date”), subject to the terms and conditions provided in this Agreement and the Plan, the Company hereby grants to the Participant the number of Performance Based Restricted Stock Units set forth in the Notice (the “PSUs”). Each PSU represents the right to receive one Ordinary Share to the extent that the PSU becomes vested and non-forfeitable in accordance with Section 4 hereof.
b) With respect to each PSU, whether or not vested, that has not been forfeited (but only regarding PSUs that have not been settled for Ordinary Shares), the Company shall accrue and credit to the Participant’s bookkeeping account a number of PSUs, as of the date the dividend is paid, equal to the cash dividends that would have been paid with respect to such PSUs if the PSUs were outstanding Ordinary Shares divided by the closing pricing of the Ordinary Shares on the New York Stock Exchange on the date prior to the date the dividend is paid (the “Dividend Units”). These Dividend Units thereafter shall (i) be treated as PSUs for purposes of future dividend accruals pursuant to this Section 2, and (ii) vest, in proportionate amounts (rounded to the nearest whole PSU ), at the same time as the PSUs, with respect to which such Dividend Units were received, vest. The Participant shall not be entitled to any Dividend Unit payment with respect to any PSU that does not vest in accordance with this Agreement. Any dividends or distributions on Ordinary Shares paid other than in cash shall accrue in the Participant’s bookkeeping account and shall vest at the same time as the PSUs in respect of which they are made (in each case in the same form, based on the same record date and at the same time, as such dividend or other distribution is paid on such Ordinary Shares).
c) The Dividend Units and any amounts that may become payable in respect thereof shall be treated separately from the PSUs and the rights arising in connection therewith for purposes of Section 409(A) of the Code.
d) The Company’s obligations under this Agreement (with respect to both the PSUs and the Dividend Units, if any) shall be unfunded and unsecured, and no special or separate fund shall be established and no other segregation of assets shall be made. The rights of Participant under this Agreement shall be no greater than those of a general unsecured creditor of the Company. In addition, the PSUs shall be subject to such restrictions as the Company may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which Ordinary Shares are then listed, any Company policy and any applicable federal or state securities law.
3)Restrictions.
a) The PSUs shall not be assignable or transferable by the Participant, other than (i) by will or the laws of descent and distribution, (ii) to family members or entities (including trusts) established for the benefit of the Participant or the Participant’s family members for no value, or (iii) to any other person to the extent permitted by applicable securities law and approved by the Committee in its sole discretion. Any PSUs assigned or transferred pursuant to this Section 3(b) shall continue to be subject to the same terms and conditions as were applicable to the PSUs immediately before the transfer. Notwithstanding the foregoing, in no event shall any rights pursuant to this Agreement be assignable or transferable by the Participant if and to the extent the Committee determines that the PSUs are subject to Section 409A and that such assignment or transfer would result in a violation of Section 409A.
b) Any attempt to dispose of the PSUs or any interest in the PSUs in a manner contrary to the restrictions set forth in this Agreement shall be void and of no effect.
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Form of PSU Award Agreement
4)Performance Requirement; Vesting; Acceleration of Vesting.
a) Performance Requirement. Except as may be otherwise provided in these Terms & Conditions, so long as the Participant’s service with the Company is continuous from the Grant Date through the end of the Performance Cycle, the PSUs shall be earned upon determination by the Committee that the Company has achieved the performance levels set forth in the Notice. The number of Earned PSUs shall be calculated as a percentage of the Target Number of PSUs awarded and shall depend on the performance level achieved by the Company. The PSUs shall be subject to forfeiture and cancellation by the Company if the Company’s performance during the Performance Cycle does not meet or exceed the threshold performance level for the Performance Cycle. Achievement of the Target Performance Measure between 80% and 100% shall result in a corresponding earned percentage of Restricted Stock Units (e.g., achievement of 87% of the Target Performance Measure results in the Participant earning 87% of the PSUs, rounded to the nearest 10th of a percentage).
b) Vesting Schedule. Except as may be otherwise provided in this Agreement, so long as the Participant’s service with the Company is continuous from the Grant Date through the applicable vesting date, the Participant’s rights and interest in the PSUs shall become vested and non-forfeitable in those amounts and on the dates set forth in the Notice.
c) Change of Control. In the event of a Change of Control, all outstanding Awards that are assumed or replaced with equivalent awards by the successor company will remain outstanding and continue to be governed by their terms; provided, however,
i)that the Performance Cycle will end on the date immediately prior to such Change of Control, the Committee shall determine the actual level of achievement of performance goals based upon the audited or unaudited financial information or other information then available as the Committee deems relevant and if a Change of Control Separation shall have occurred, then all such assumed or replaced PSUs held by the Participant shall accelerate and will be deemed to have immediately vested as of the date immediately prior to the date of the Separation of Service; and
ii)if a Change of Control Separation shall have occurred, then all such assumed or replaced PSUs held by the Participant shall accelerate and will be deemed to have immediately vested as of the date immediately prior to the date of the Separation of Service.
d) Death or Disability. In the event of the Participant’s Separation from Service due to death or Disability, any portion of the PSUs that are not yet vested shall become immediately vested based on the attainment of the Target Performance Measure at the “target” level.
5)Settlement of PSUs/Dividend Units.
a) Unless and until the PSUs and the corresponding Dividend Units become vested and non-forfeitable in accordance with Section 4 hereof, the Participant will have no right to Settlement of any such PSUs or Dividend Units. Vested and non-forfeitable PSUs and Dividend Units shall be Settled by the Company reasonably promptly after the date of any such vesting (and in all events not later than 60 days after such vesting date) and upon the satisfaction of all other applicable conditions as to the PSUs and Dividend Units (including the payment by the Participant of all applicable withholding taxes).
b) Such Settlement shall be accomplished by delivering to the Participant (or his beneficiary in the event of death) either (i) a certificate evidencing a number of Ordinary Shares equal to the number of PSUs and corresponding Dividend Units that become vested and non-
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Form of PSU Award Agreement
forfeitable upon that Settlement Date, or (ii) an electronic issuance evidencing such Ordinary Shares. To the extent that the Participant is then subject to Stock Ownership Guidelines and that such Ordinary Shares are subject to transfer restrictions pursuant to such Stock Ownership Guidelines then such Ordinary Shares (i) may be issued with a legend indicating that “THE TRANSFERABILITY OF THIS CERTIFICATE AND THE ORDINARY SHARES REPRESENTED HEREBY IS SUBJECT TO TRANSFERABILITY RESTRICTIONS CONTAINED IN THE FRESH DEL MONTE PRODUCE INC. STOCK OWNERSHIP GUIDELINES”, or (ii) if delivered electronically, the Company may make such provisions as it deems necessary to ensure that each Ordinary Share is subject to the same terms and conditions as shares that are represented by a physical stock certificate. Neither the Participant nor any of the Participant’s successors, heirs, assigns or personal representatives shall have any further rights or interests in any PSUs or Dividend Units that are so paid.
6)Forfeiture. Subject to Section 7 hereof, if prior to the applicable vesting date, (i) upon the Participant’s Separation from Service for any reason other than death or Disability, (ii) there occurs a material breach of this Agreement by the Participant (including any of the restrictive covenants set forth in Appendix B attached hereto), or (iii) the Participant has failed to meet the tax withholding obligations described in Section 7 hereof for any prior award, all rights of the Participant to the PSUs that have not vested in accordance with Section 4 hereof as of the date of such event shall terminate immediately and be forfeited in their entirety. Notwithstanding anything in this Agreement to the contrary, if the Committee determines, in its sole discretion, that the Participant has violated any Company Agreement to which the Participant is subject, the Committee may, in its sole discretion, terminate any or all rights to payments or benefits to which the Participant is entitled under this Agreement and the Plan. To the extent that the PSUs are terminated, then any portion of the PSUs that are not vested on such date shall be cancelled.
7)Withholding.
a)The Participant is responsible for any or all federal, state, local or foreign income tax, payroll tax or other tax-related withholding imposed with respect to PSUs or the Dividend Units (“Tax-Related Withholding”), regardless of any action the Company takes with respect to the Tax-Related Items. The Company (i) makes no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Award, including the grant or vesting of the PSUs or the subsequent sale of Ordinary Shares acquired upon vesting, and (ii) does not commit to structure the terms of the grant or any aspect of the Award to reduce or eliminate the Participant’s liability for Tax-Related Items.
b)With respect to any vesting event specified in Section 4 above, the Participant may elect to pay the amount of Tax-Related Withholding due by either:
i)on or prior to the vesting date of the PSUs, delivering, by cash or a check, funds equal to the amount of Tax-Related Withholding due;
ii)instructing the Company to execute a broker-assisted sale and remittance program, or “cashless” exercise/sale procedure, acceptable to the Committee where the amount of Tax-Related Withholding due is remitted to the Company; or
iii)to the extent permissible under Section 409A of the Code, and upon the consent of the Committee, instructing the Company to withhold a number of Ordinary Shares deliverable upon the Settlement Date, which have a Fair Market Value on the date of vesting equal to the amount of Tax-Related Withholding due (a “net-settlement” arrangement);
subject, in each case, to any limitations imposed by the Company’s insider trading policy and the U.S. federal securities laws.
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Form of PSU Award Agreement
c) The Company may refuse to issue and deliver Ordinary Shares in payment of any vested PSUs or Dividend Units if the Participant fails to comply with the Participant’s obligations in connection with the Tax-Related Items as described in this Section 7. The Participant acknowledges that if the Company has not received prior notification of the Participant’s election with regard to the payment of Tax-Related Items, the Company may settle the Tax-Related Items utilizing (i) broker-assisted sale and remittance program, or “cashless” exercise/sale procedure, acceptable to the Committee or (ii) by withholding such Tax-Related Withholding any amounts payable to the Participant, either as salary, other compensation, proceeds from the sale, or otherwise, any taxes required to be withheld with respect to the PSUs. It is intended that the terms of this award of PSUs will not result in the imposition of any tax liability pursuant to Section 409A of the Code, and this Agreement shall be construed, interpreted, operated, and administered consistent with that intent.
8)Committee’s Discretion. Notwithstanding any provision of this Agreement to the contrary, the Committee shall have discretion to waive any forfeiture of the PSUs as set forth in Section 4 hereof, the Restricted Period and any other conditions set forth in this Agreement.
9)No Rights as Shareholder. The Participant shall have no right to vote or receive dividends or any other rights as a shareholder of the Company with respect to the PSUs or the Ordinary Shares underlying the PSUs unless and until the PSUs become vested and non-forfeitable and such Ordinary Shares are delivered to the Participant in accordance with this Agreement.
10)Participant Representations; Consideration to the Company. In consideration of the awarding of the PSUs by the Company, the Participant agrees (i) to render faithful and efficient services to the Company, with such duties and responsibilities as the Company shall from time to time prescribe, (ii) to comply with all Company Agreements to which the Participant is subject from time to time, (iii) to those Additional Acknowledgements set forth in Appendix A attached hereto, and (iv) to comply with each of the Restrictive Covenants set forth in Appendix B attached hereto. Nothing in this Agreement or in the Plan shall confer upon the Participant any right to continue in the employ of the Company, or shall interfere with or restrict in any way the rights of the Company, which are hereby expressly reserved, to discharge the Participant at any time for any reason whatsoever, with or without Cause. Further, the Participant acknowledges that the Participant is relying solely on his or her own advisors with respect to the tax consequences of this award.
11)Regulatory Restrictions on the PSUs.
a)Compliance with Securities Laws. The Participant acknowledges that the Plan is intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated by the Securities and Exchange Commission thereunder, including, without limitation, the applicable exemptive conditions of Rule 16b-3. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the PSUs are awarded and may be Settled, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and regulations. The Company reserves the right to restrict, in whole or in part, the delivery of Ordinary Shares pursuant to this Agreement prior to the satisfaction of all legal requirements relating to the issuance of such shares, to their registration, qualification or listing or to an exemption from registration, qualification or listing.
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Form of PSU Award Agreement
b)Conditions to Issuance of Ordinary Shares. The Ordinary Shares deliverable upon the Settlement of the PSUs, or any portion thereof, may be either previously authorized but unissued shares or issued shares which have then been reacquired by the Company. Such Ordinary Shares shall be fully paid and nonassessable. Subject to the requirements of Section 409A, the Company shall not be required to issue or deliver any shares of stock upon the vesting of the PSUs or portion thereof prior to fulfillment of all of the following conditions (i) the admission of such Ordinary Shares to listing on all stock exchanges on which such class of shares is then listed, (ii) the completion of any registration or other qualification of such Ordinary Shares under any state or federal law or under rulings or regulations of the Securities and Exchange Commission or of any other governmental regulatory body, which the Committee shall, in its absolute discretion, deem necessary or advisable, (iii) the obtaining of any approval or other clearance from any state or federal governmental agency which the Committee shall, in its absolute discretion, determine to be necessary or advisable, and (iv) the lapse of such reasonable period of time following the vesting of the PSUs as the Committee may from time to time establish for reasons of administrative convenience.
12)Clawback Provisions.
a)In the event that it is determined by the Committee and ratified by the Board that distribution, payment or issuance of an Award was, in whole or in part, based on incorrect data (including financial results which pursuant to applicable laws, rules, regulations or applicable accounting principles are required to be restated), the Participant shall return to the Company the overpayment amount, where the overpayment amount shall be equal to the Award distributed or otherwise paid to the Participant, reduced by the Award the Participant would have received had the correct data been used in the calculation of the Award. The determinations made by the Committee and ratified by the Board pursuant to this Section shall be conclusive and binding on the Participant unless reached in an arbitrary and capricious manner. The Company shall have the right to offset any amounts due it under this provision from any amounts due Participant from any other incentive compensation or equity award plans in which Participant participates.
b)In addition, to the extent permitted by applicable law,, this Award, including any Ordinary Shares issued in connection with the Award, will be subject to the requirements of (i) Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (regarding recovery of erroneously awarded compensation) and any implementing rules and regulations thereunder, (ii) similar rules under the laws of any other jurisdiction, and (iii) the Clawback Policy adopted by the Company, as may be amended from time to time, or regulations or laws requiring the return or reduction of all or some of the PSUs or the Ordinary Shares received under the Award. The Participant acknowledges that he or she has been provided a copy of the current Clawback Policy.
13)Compliance with Section 409A.
a)General. It is the intention of the Company that the benefits and rights to which the Participant could be entitled pursuant to this Agreement comply with Section 409A to the extent that the requirements of Section 409A are applicable thereto, and the provisions of this Agreement shall be construed in a manner consistent with that intention. If the Company believes, at any time, that any such benefit or right that is subject to Section 409A does not so comply, the Company may, without the Participant’s consent, amend the terms of such benefits and rights such that they comply with Section 409A.
b)Distributions on Account of Separation from Service. If and to the extent required to comply with Section 409A, no payment or benefit required to be paid under this Agreement on account of the Separation from Service of the Participant shall be made unless and until the Participant incurs a “separation from service” within the meaning of Section 409A, and applicable Treasury Regulations.
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Form of PSU Award Agreement
c)6 Month Delay for Specified Employees.
(i)If the Participant is a “specified employee”, then no payment or benefit that is payable on account of the Participant’s “separation from service”, as that term is defined for purposes of Section 409A, shall be made before the date that is the business day following the six-month anniversary of the Participant’s “separation from service” (or, if earlier, the date of the Participant’s death) if and to the extent that such payment or benefit constitutes deferred compensation (or may be nonqualified deferred compensation) under Section 409A and such deferral is required to comply with the requirements of Section 409A. Any payment or benefit delayed by reason of the prior sentence shall be paid out or provided in a single lump sum at the end of such required delay period in order to catch up to the original payment schedule.
(ii) For purposes of this provision, the Participant shall be considered to be a “specified employee” if, at the time of his or her separation from service, the Participant is a “key employee”, within the meaning of Section 416(i) of the Code, of the Company (or any person or entity with whom the Company would be considered a single employer under Section 414(b) or Section 414(c) of the Code) any stock in which is publicly traded on an established securities market or otherwise.
d)No Acceleration of Payments. Neither the Company nor the Participant, individually or in combination, may accelerate any payment or benefit that is subject to Section 409A, except in compliance with Section 409A and the provisions of this Agreement, and no amount that is subject to Section 409A shall be paid prior to the earliest date on which it may be paid without violating Section 409A.
e)Treatment of Each Installment as a Separate Payment. For purposes of applying the provisions of Section 409A to this Agreement, each separately identified amount to which the Participant is entitled under this Agreement shall be treated as a separate payment. In addition, to the extent permissible under Section 409A, any series of installment payments under this Agreement shall be treated as a right to a series of separate payments.
f)No Guaranty of 409A Compliance. Notwithstanding the foregoing, the Company does not make any representation to the Participant that the payments or benefits provided under this Agreement are exempt from, or satisfy, the requirements of Section 409A, and the Company shall have no liability or other obligation to indemnify or hold harmless the Participant or any beneficiary of the Participant for any tax, additional tax, interest or penalties that the Participant or any beneficiary of the Participant may incur in the event that any provision of this Agreement, or any amendment or modification thereof, or any other action taken with respect thereto, is deemed to violate any of the requirements of Section 409A.
14)Miscellaneous.
a)Notices. Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of the officer designated as the “Administrator” from time to time, and any notice to be given to the Participant shall be communicated to him (i) via electronic notification on the System, (ii) by e-mail to the Participant at the Participant’s e-mail address on file with the Company, or (iii) by mail to the Participant at the Participant’s mailing address on file with the Company. By a notice given pursuant to this Section 14(a), either party may hereafter designate a different address for notices to be given to him. Any notice which is required to be given to the Participant shall, if the Participant is then deceased, be given to the Participant’s personal representative if such representative has previously informed the Company of his status and address by written notice under this Section 14(a). Any notice delivered by mail shall be deemed duly given when enclosed in a properly sealed envelope or wrapper addressed as
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Form of PSU Award Agreement
aforesaid, and deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.
b)Waiver. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any other or subsequent breach.
c)Entire Agreement. These Terms & Conditions, the Notice and the Plan constitute the entire agreement between the parties with respect to the subject matter hereof.
d)Administration. The Committee shall have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules. All actions taken and all interpretations and determinations made by the Committee in good faith shall be final and binding upon the Participant, the Company and all other interested persons. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or the PSU . In its absolute discretion, the Company’s Board of Directors may at any time and from time to time exercise any and all rights and duties of the Committee under the Plan and this Agreement except with respect to matters which, under Rule 16b-3, or any regulations or rules issued thereunder, are required to be determined in the sole discretion of the Committee.
e)Binding Effect; Successors. This Agreement shall inure to the benefit of and be binding upon the parties hereto and to the extent not prohibited herein, their respective heirs, successors, assigns and representatives. Nothing in this Agreement, express or implied, is intended to confer on any person other than the parties hereto and as provided above, their respective heirs, successors, assigns and representatives any rights, remedies, obligations or liabilities.
f)Governing Law; Jurisdiction. This Agreement shall be administered, interpreted and enforced under the internal laws of the State of Florida without regard to conflicts of laws thereof. Venue in any action arising out of or relating to this Agreement shall be in federal court in the Southern District of Florida, if federal jurisdiction exists. If federal jurisdiction does not exist, venue shall be in state court in Miami-Dade County, Florida.
g)Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of these Terms & Conditions.
h)Conflicts; Amendment. The provisions of the Plan are incorporated in this Agreement in their entirety. In the event of any conflict between the provisions of this Agreement and the Plan, the provisions of the Plan shall control. This Agreement and the Plan may be amended without the consent of the Participant provided that such amendment would not affect in any adverse manner any rights of the Participant under this Agreement. No amendment of this Agreement shall, without the consent of the Participant, affect in any adverse manner any rights of the Participant under this Agreement.
i)Adjustments. Notwithstanding any other provision of this Agreement, the Committee may adjust the PSUs in accordance with the provisions of the Plan.
j)Further Assurances. The Participant agrees, upon demand of the Company or the Committee, to do all acts and execute, deliver and perform all additional documents, instruments and agreements which may be reasonably required by the Company or the Committee, as the case may be, to implement the provisions and purposes of this Agreement and the Plan.
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Form of PSU Award Agreement
k)Language. If the Participant has received this Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version differs from the English version, the English version shall control.
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Form of PSU Award Agreement
APPENDIX A
ADDITIONAL ACKNOWLEDGEMENTS BY PARTICIPANT
1.DATA PRIVACY
As a condition of the award of the Restricted Stock PSUs, the Participant hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of the Participant’s personal data as described in this Appendix. The Participant understands that the Company and its subsidiaries hold certain personal information about the Participant, including, but not limited to, the Participant’s name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company, details of any entitlement to shares of stock or equivalent benefits awarded, canceled, vested, unvested or outstanding in the Participant’s favor (“Data”). The Participant further understands that the Company and its subsidiaries will transfer Data among themselves as necessary for the purpose of implementing, administering and managing the PSUs. The Participant understands that Data may be transferred to any third parties assisting in the implementation, administration and management of the PSUs, that these recipients may be located in the Participant’s country or elsewhere, and that the recipient’s country may have different data privacy laws and protections from the Participant’s country. The Participant understands that the Participant may request a list with the names and addresses of any potential recipients of the Data by contacting the Participant’s local human resources representative. The Participant authorizes the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing the PSUs. The Participant understands that Data will be held only as long as is necessary to implement, administer and manage the PSUs. The Participant understands that the Participant may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing the Participant’s local human resources representative. Further, the Participant understands that the Participant is providing the consents herein on a purely voluntary basis. If the Participant does not consent, or if the Participant later seeks to revoke the Participant’s consent, the Participant’s employment status or service and career with the Participant’s employer will not be adversely affected; the only adverse consequence of refusing or withdrawing the Participant’s consent is that the Company would not be able to grant to the Participant PSUs or other awards or administer or maintain such awards. Therefore, the Participant understands that refusing or withdrawing the Participant’s consent may affect the Participant’s ability to benefit from the PSUs. For more information on the consequences of the Participant’s refusal to consent or withdrawal of consent, the Participant understands that the Participant may contact the Participant’s local human resources representative.
2.ADDITIONAL ACKNOWLEDGEMENTS
By entering into this Agreement and accepting the grant of PSUs evidenced hereby, the Participant acknowledges, understands and agrees that:
(a)the Plan is established voluntarily by the Company, is discretionary in nature and may be modified, suspended or terminated by the Company at any time;
(b)the award of the PSUs is voluntary and occasional and does not create any contractual or other right to receive future awards of PSUs or benefits in lieu of PSUs, even if such awards have been awarded in the past;
(c)all decisions with respect to future awards, if any, will be at the sole discretion of the Company;
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Form of PSU Award Agreement
(d)the Participant is voluntarily accepting the grant of PSUs;
(e)the PSUs, the Dividend Units, the Ordinary Shares and any payments or benefits with respect thereto are not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, bonuses, long-service awards, pension or retirement benefits or welfare benefits or similar payments, and in no event should be considered as compensation for, or in any way relating to, past services for the Company or any of its subsidiaries;
(f)in accepting the grant of PSUs, the Participant expressly recognizes that the PSUs are an award made solely by the Company, with principal offices at c/o Del Monte Fresh Produce Company, 241 Sevilla Avenue, Coral Gables, Florida 33134, U.S.A.; the Company is solely responsible for the administration of the Plan and the Participant’s participation in the Plan; in the event that the Participant is an employee of a subsidiary, the PSUs and the Participant’s participation in the Plan will not be interpreted to form an employment contract or relationship with the Company; furthermore, the PSUs will not be interpreted to form an employment contract with any subsidiary;
(g)no claim or entitlement to compensation or damages shall arise from forfeiture of the PSUs resulting from termination of the Participant’s employment by the Company or the Participant’s employer (for any reason whatsoever and regardless of whether or not such termination is later found to be invalid or in breach of the employment laws in the jurisdiction where the Participant is employed or the terms of the Participant’s employment agreement, if any) or recoupment of all or any portion of any payment made pursuant to the PSUs as provided by Section 12 of the Agreement and, in consideration of the grant of the PSUs to which the Participant is not otherwise entitled, the Participant irrevocably agrees never to institute any claim against the Company or the Participant’s employer, waives the Participant’s ability, if any, to bring any such claim, and releases the Company and the Participant’s employer from any such claim; if, notwithstanding the foregoing, any such claim is allowed by a court of competent jurisdiction, then, by participating in the Plan, the Participant shall be deemed irrevocably to have agreed not to pursue such claim, and the Participant agrees to execute any and all documents necessary to request dismissal or withdrawal of such claim;
(h)unless otherwise provided in the Plan or by the Company in its discretion, the PSUs and the benefits evidenced by this Agreement do not create any entitlement to have the PSUs or any such benefits transferred to, or assumed by, another company nor to be exchanged, cashed out or substituted for, in connection with any corporate transaction affecting the Ordinary Shares;
(i)neither the Participant’s employer, the Company nor any of its subsidiaries shall be liable for any foreign exchange rate fluctuation between the Participant’s local currency and the United States Dollar that may affect the value of the PSUs or any payment made pursuant to the PSUs;
(j)the Company is not providing any tax, legal, or financial advice, nor is the Company making any recommendations regarding the PSUs, the Dividend Units or the Ordinary Shares issuable with respect to the PSUs or the Dividend Units. The Participant is hereby advised to consult with the Participant’s personal tax, legal and financial advisors regarding the PSUs, the Dividend Units and the Ordinary Shares before taking any action in relation thereto; and
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Form of PSU Award Agreement
(k)the Participant has received and read the 10(a) Prospectus under the Plan pursuant to which the PSUs are being offered, which Prospectus has been uploaded to the System.
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Form of PSU Award Agreement
APPENDIX B
RESTRICTIVE COVENANTS
Confidentiality.
(a)Participant acknowledges that during the Participant’s employment with the Company, the Participant has had access to certain business, financial, and other information of the Company which is not made readily available to the public, including, without limitation, marketing, advertising and promotional ideas, surveys and strategies, technology, budgets, business plans, vendor lists, research, financial, purchasing, and employment data and information, and costs, profits, market, sales, products, product lines, key personnel, pricing policies, operational methods, customers, customer requirements, suppliers, plans for future developments, and other business affairs and methods and other information not readily available to the public (herein “Confidential Information”) that must be maintained in strict confidence in order for the Company to protect its business and its competitive position in the marketplace. Unless otherwise authorized in writing by the Company, the Participant agrees that he/she will not directly or indirectly publish or disclose any Confidential Information to any competitor or other person outside the Company, and he/she will not remove from the premises of the Company or use for his/her own benefit or otherwise appropriate or copy any Confidential Information. This applies, whether or not, the Participant developed the Confidential Information.
(b)Additionally, the Participant agrees not to make any disparaging or derogatory remarks orally or in writing, directly or through others, about the conduct or character of the Company or any of its parents, subsidiaries, or affiliates, or their agents, employees, officers, directors, successors, or assigns.
Non-Competition.
(a)In exchange for the promises made herein and for other good a valuable consideration received, the Participant agrees that, throughout the “Non-Compete Period” (as hereinafter defined), and without the express prior written consent of the Company, the Participant shall not, directly or indirectly, as employee, agent, consultant, stockholder, director, partner or in any other individual or representative capacity, own, operate, manage, control, engage in, invest in or participate in any manner in, act as a consultant or advisor to, render services to (alone or in association with any firm, person, corporation or entity), or otherwise assist any person or entity (including, but not limited to, any investment banking firm, venture capital firm, or hedge fund or other investment entity) that directly or indirectly engages in the primary business of producing, marketing, distributing or selling fresh or prepared fruits or vegetable products anywhere in the world (the “Business”). If the Participant is in any way involved with a person or entity that is engaged in, or planning to engage in, the Business, the Participant shall immediately cease his/her involvement with such person or entity so as to remain in compliance with the provisions of this Section. The foregoing provisions of this Section shall not prohibit the Participant during the Non-Compete Period from at any time investing in the publicly held common equity of any entity that is engaged in the Business, provided that the Participant is not otherwise involved in the Business and that he/she does not directly or indirectly own more than an aggregate of 2% of the outstanding common equity of such entity.
(b)Without limiting the generality of the foregoing, the Participant agrees that during the Non-Compete Period he/she will not, directly or indirectly, solicit (or participate as employee, agent, consultant, stockholder, director, partner, member or in any other individual or representative capacity in any business that solicits) business from any person, firm, corporation or other entity that is a customer of the Company or any of its affiliated companies at the time of such solicitation, or from any successor in interest to
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Form of PSU Award Agreement
any such person, firm, corporation or other entity, for the purpose of securing business or contracts relating to the Business.
(c)The Participant further agrees that during the Non-Compete Period he/she shall expressly inform any person or entity that is actively considering engaging the Participant’s services as an employee, independent contractor or otherwise during the Non-Compete Period and that is involved, either itself or through any related person or entity, in any way with producing, marketing, distributing or selling fresh fruits or vegetables or prepared food or beverages of the Participant’s obligations under this Section. If the Participant requests relief from any of the restrictions of this Section, the Company will entertain the Participant’s request in good faith but reserves the unilateral right, in its sole and absolute discretion, to deny for any reason whatsoever the Participant’s request, in whole or in part.
For purposes of this Agreement, “Non-Compete Period” shall mean the twelve (12)-month period commencing as of the date of the Separation from Service.
Non-Solicitation of Employees.
The Participant further agrees that, during the Non-Compete Period, he/she shall not, without the prior written consent of the Company, directly or indirectly, in any capacity, solicit, entice, or induce, or attempt to solicit, entice or induce, any person who at the time is or within the preceding twelve (12) months was an employee, officer or director of the Company or any subsidiary or affiliate of the Company to (a) become employed by or enter into a joint venture or partnership with the Participant or any other business, person or entity, or (b) terminate his or her employment with the Company or such subsidiary or affiliate of the Company.
Judicial Modification.
In the event that the restrictions against engaging in a competitive activity contained in this Appendix B shall be determined by any court of competent jurisdiction to be unenforceable for any reason, including but not limited to, for extending over too great a period of time, over too great a geographical area, or for being too extensive in any other respect; the applicable provision of this Appendix B shall be interpreted to extend only over the maximum period of time for which it may be enforceable, over the maximum geographical areas as to which it may be enforceable, and to the maximum extent in all other respects as to which it may be enforceable, all as determined by such court in such action.
Injunctive Remedies.
The Participant acknowledges and agree that the covenants set forth in this Appendix B, are reasonable and necessary for the protection of the Company's business interests, that irreparable injury will result to the Company if the Participant breaches any of the terms of said covenants, and that in the event of the Participant’s actual or threatened breach of any such covenant, the Company will have no adequate remedy at law. The Participant accordingly agrees that in the event of any actual or threatened breach by him/her of any of the covenants contained in this Appendix B, the Company or any of its affiliated companies shall be entitled to immediate temporary injunctive and other equitable relief, without bond and without the necessity of showing actual monetary damages, subject to hearing as soon thereafter as possible. Nothing contained herein shall be construed as prohibiting the Company or any of its affiliated companies from pursuing any other remedies available to it for such breach or threatened breach, including the recovery of damages.
Non-Compliance.
The Participant understands and agrees that if he/she breaches any of the terms or conditions of this Agreement during the Non-Compete Period, irrespective of whether he/she can be judicially compelled to comply with the breached provision, the Participant shall
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Form of PSU Award Agreement
immediately forfeit any unvested portion of PSUs and the Dividend Units. The foregoing is in addition to any other remedies the Company may have at law or in equity.
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Form of RSU Award Agreement
NOTICE OF GRANT OF RESTRICTED STOCK UNIT AWARD
FRESH DEL MONTE PRODUCE INC.
2022 OMNIBUS SHARE INCENTIVE PLAN
FOR GOOD AND VALUABLE CONSIDERATION, Fresh Del Monte Produce Inc. (the “Company”) hereby grants, pursuant to the provisions of the Company’s 2022 Omnibus Share Incentive Plan (the “Plan”), to the Participant designated in this Notice of Grant of Restricted Stock Unit Award (the “Notice”) an Award comprised of the right to receive a number of Ordinary Shares at the Grant Date and future vesting dates (the “Restricted Stock Units” or “RSUs”), subject to certain restrictions as outlined below in this Notice and the additional provisions set forth in the attached Terms and Conditions of Restricted Stock Unit Award (the “Terms & Conditions”). The Notice and the Terms & Conditions shall hereinafter be referred to collectively as the “Agreement.”
Participant: [ ]
Grant Date: [DATE] (the “Grant Date”)
# of Restricted Stock Units: [ ]
Service Vesting: Except as otherwise set forth in the Agreement, so long as the Participant’s service with the Company is continuous from the Grant Date through the applicable vesting date, the RSUs shall vest and become non-forfeitable on each of the following dates:
| Vesting Date | Vesting Percentage | ||||
| [ONE YEAR AFTER GRANT DATE] | 33.33% | ||||
| [DATE] | 33.33% | ||||
| [DATE] | 33.34% | ||||
If the number of RSUs determined as of a vesting date is a fractional number, the number vesting will be rounded down to the nearest whole number with any fractional portion carried forward.
Form of RSU Award Agreement
By signing below, the Participant agrees that this Notice of Grant of Restricted Stock Unit Award is granted under and governed by the terms and conditions of the Company’s 2022 Omnibus Share Incentive Plan, as amended from time to time, and the attached Terms & Conditions.
| Participant | Fresh Del Monte Produce Inc. | |||||||||||||
| By: | By: | |||||||||||||
| Name: | Name: | |||||||||||||
| Title: | ||||||||||||||
| Date: | Date: | |||||||||||||
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Form of RSU Award Agreement
TERMS AND CONDITIONS OF RESTRICTED STOCK UNIT AWARD
These Terms and Conditions of Restricted Stock Unit Award (these “Terms & Conditions”) relate to the Notice of Grant of Restricted Stock Unit Award (the “Notice”) to which these Terms & Conditions are attached, by and between Fresh Del Monte Produce Inc. (the “Company”), and the person identified in the Notice (the “Participant”). The Terms & Conditions and the Notice shall hereinafter be collectively referred to as the “Agreement.”
The terms of the Company’s 2022 Omnibus Share Incentive Plan (the “Plan”) are hereby incorporated by reference and made part of this Agreement.
The Compensation Committee of the Company’s Board of Directors (the “Committee”) has approved an award to the Participant under the 2022 Omnibus Share Incentive Plan of the right to receive a number of the Company’s Ordinary Shares, subject to such restrictions contained in this Agreement, and conditioned upon the Participant’s acceptance of the provisions set forth in this Agreement within sixty (60) days after the date of the Notice. For purposes of this Agreement, any reference to the Company shall include a reference to any subsidiary of the Company.
1)Defined Terms. Whenever the following terms are used in these Terms & Conditions, they shall have the meaning specified below unless the context clearly indicates to the contrary. The masculine pronoun shall include the feminine and neuter, and the singular shall include the plural, where the context so indicates. All capitalized terms used herein without definition shall have the meanings ascribed to such terms in the Plan.
a)“Change of Control” shall have the meaning set forth in the Plan.
b)“Change of Control Separation” shall mean that the Participant experiences a Separation from Service by the Company (or its successor) without Cause or by the Participant for Good Reason within twenty-four (24) months after the date of a Change of Control.
c)“Clawback Policy” shall mean any Company compensation recoupment policy that currently exists or that may from time to time be adopted or modified in the future by the Company and/or by applicable law.
d)“Code” means the US Internal Revenue Code of 1986, as amended from time to time.
e)“Company Agreements” shall mean, collectively, (1) the Company’s Code of Conduct and Business Ethics, Insider Trading Policy, Employee Compensation Recoupment Policy and other policy to which the Participant is subject, in each case as these policies may be amended from time to time, (2) this Agreement and (3) any other contractual obligation between the Company and the Participant.
f)“Fair Market Value” shall have the meaning set forth in the Plan.
g)“Ordinary Shares” shall mean the Ordinary Shares of Fresh Del Monte Produce Inc., $.01 par value per share.
h)“Section 409A” shall mean Section 409A of the Code and the Treasury Regulations and other guidance promulgated or issued thereunder.
i)“Securities Act” shall mean the Securities Act of 1933, as amended.
j)“Separation from Service” shall mean the date the Participant is no longer actively employed and providing services to the Company or one of its subsidiaries (for any reason whatsoever and regardless of whether or not such termination is later found to be invalid or in breach of the employment laws in the jurisdiction where the Participant is employed or the terms of the Participant’s employment agreement, if any), in each case with or without Cause, including, but not by way of limitation, a termination by resignation, discharge, death, Disability or retirement; but excluding, unless it is the
Form of RSU Award Agreement
express policy of the Company or a subsidiary, as the case may be, or the Committee otherwise provides, (a) sick leave, (b) military leave, or (c) any other leave of absence authorized by the Company, or the Committee; provided that unless reemployment upon the expiration of such leave is guaranteed by contract or law, such leave is for a period of not more than three (3) months; provided, however, that such date will not be extended by any notice period mandated under local law (e.g., active employment would not include a period of “garden leave” or similar period mandated under the employment laws in the jurisdiction where the Participant is employed or the terms of the Participant’s employment agreement, if any). The Committee, in its absolute discretion, shall determine the effect of all matters and questions relating to a Separation from Service, including, but not by way of limitation, the question of whether a Separation from Service resulted from a discharge for Cause, and all questions of whether a particular leave of absence constitutes a Separation from Service; provided, however, that, unless otherwise determined by the Committee in its discretion, a leave of absence, change in status from an employee to an independent contractor or other change in the employee-employer relationship shall constitute a Separation from Service if, and to the extent that, such leave of absence, change in status or other change interrupts employment for the purposes of Section 422(a)(2) of the Code and the then applicable regulations and revenue rulings under said Section. If the Participant is not an employee of the Company or one of its subsidiaries and provides other services to the Company or one of its subsidiaries, the Committee shall be the sole judge of whether the Participant continues to render services to the Company or one of its subsidiaries and the date, if any, upon which such services shall be deemed to have terminated. Notwithstanding any other provision of this Agreement or of the Plan, the Company has an absolute and unrestricted right to terminate the Participant’s employment at any time for any reason whatsoever, with or without Cause, except to the extent expressly provided otherwise in writing.
k)“Settlement” or “Settled” shall mean the delivery to the Participant of either (i) a certificate evidencing a number of Ordinary Shares equal to the number of RSUs that become vested and non-forfeitable upon that Settlement Date, or (ii) an electronic issuance evidencing such Ordinary Shares.
l)“Settlement Date” shall mean the date on which the Ordinary Shares are Settled.
m)“Stock Ownership Guidelines” shall mean the policy adopted by the Company’s Board of Directors that requires an employee to hold a specific number of Ordinary Shares of the Company, as such policy currently exists or as it may from time to time be modified in the future.
n)“System” shall mean the eTrade equity plan administration system or any subsequent system utilized by the Company.
2)Grant of Restricted Stock Units; Dividend Equivalent Units.
a)As of the Grant Date set forth in the Notice (the “Grant Date”), subject to the terms and conditions provided in this Agreement and the Plan, the Company hereby grants to the Participant the number of Restricted Stock Units set forth in the Notice (the “RSUs”). Each RSU represents the right to receive one Ordinary Share to the extent that the RSU becomes vested and non-forfeitable in accordance with Section 4 hereof.
b)With respect to each RSU, whether or not vested, that has not been forfeited (but only regarding RSUs that have not been settled for Ordinary Shares), the Company shall accrue and credit to the Participant’s bookkeeping account a number of RSUs, as of the date the dividend is paid, equal to the cash dividends that would have been paid with respect to such RSUs if the RSUs were outstanding Ordinary Shares divided by the closing pricing of the Ordinary Shares on the New York Stock Exchange on the date prior to the date the dividend is paid (the “Dividend Units”). These Dividend Units thereafter shall (i) be treated as RSUs for purposes of future dividend accruals pursuant to this Section 2, and (ii) vest, in proportionate amounts (rounded to the nearest whole RSU), at the same time as the RSUs, with respect to which such Dividend Units were received,
Form of RSU Award Agreement
vest. The Participant shall not be entitled to any Dividend Unit payment with respect to any RSU that does not vest in accordance with this Agreement. Any dividends or distributions on Ordinary Shares paid other than in cash shall accrue in the Participant’s bookkeeping account and shall vest at the same time as the RSUs in respect of which they are made (in each case in the same form, based on the same record date and at the same time, as such dividend or other distribution is paid on such Ordinary Shares).
c)The Dividend Units and any amounts that may become payable in respect thereof shall be treated separately from the RSUs and the rights arising in connection therewith for purposes of Section 409(A) of the Code.
d)The Company’s obligations under this Agreement (with respect to both the RSUs and the Dividend Units, if any) shall be unfunded and unsecured, and no special or separate fund shall be established and no other segregation of assets shall be made. The rights of Participant under this Agreement shall be no greater than those of a general unsecured creditor of the Company. In addition, the RSUs shall be subject to such restrictions as the Company may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which Ordinary Shares are then listed, any Company policy and any applicable federal or state securities law.
3)Restrictions.
a)The RSUs shall not be assignable or transferable by the Participant, other than (i) by will or the laws of descent and distribution, (ii) to family members or entities (including trusts) established for the benefit of the Participant or the Participant’s family members for no value, or (iii) to any other person to the extent permitted by applicable securities law and approved by the Committee in its sole discretion. Any RSUs assigned or transferred pursuant to this Section 3(b) shall continue to be subject to the same terms and conditions as were applicable to the RSUs immediately before the transfer. Notwithstanding the foregoing, in no event shall any rights pursuant to this Agreement be assignable or transferable by the Participant if and to the extent the Committee determines that the RSUs are subject to Section 409A and that such assignment or transfer would result in a violation of Section 409A.
b)Any attempt to dispose of the RSUs or any interest in the RSUs in a manner contrary to the restrictions set forth in this Agreement shall be void and of no effect.
4)Vesting; Acceleration of Vesting.
a)Vesting Schedule. Except as may be otherwise provided in this Agreement, so long as the Participant’s service with the Company is continuous from the Grant Date through the applicable vesting date, the Participant’s rights and interest in the RSUs shall become vested and non-forfeitable in those amounts and on the dates set forth in the Notice.
b)Change of Control. In the event of a Change of Control, all outstanding Awards that are assumed or replaced with equivalent awards by the successor company will remain outstanding and continue to be governed by their terms; provided, however, if a Change of Control Separation shall have occurred, then all such assumed or replaced Restricted Stock Units held by the Participant shall accelerate and will be deemed to have immediately vested as of the date immediately prior to the date of the Separation of Service.
c)Death or Disability. In the event of the Participant’s Separation from Service due to death or Disability, any portion of the RSUs that are not yet vested shall become immediately vested.
Form of RSU Award Agreement
5)Settlement of RSUs/Dividend Units.
a)Unless and until the RSUs and the corresponding Dividend Units become vested and non-forfeitable in accordance with Section 4 hereof, the Participant will have no right to Settlement of any such RSUs or Dividend Units. Vested and non-forfeitable RSUs and Dividend Units shall be Settled by the Company reasonably promptly after the date of any such vesting (and in all events not later than 60 days after such vesting date) and upon the satisfaction of all other applicable conditions as to the RSUs and Dividend Units (including the payment by the Participant of all applicable withholding taxes).
b)Such Settlement shall be accomplished by delivering to the Participant (or his beneficiary in the event of death) either (i) a certificate evidencing a number of Ordinary Shares equal to the number of RSUs and corresponding Dividend Units that become vested and non-forfeitable upon that Settlement Date, or (ii) an electronic issuance evidencing such Ordinary Shares. To the extent that the Participant is then subject to Stock Ownership Guidelines and that such Ordinary Shares are subject to transfer restrictions pursuant to such Stock Ownership Guidelines then such Ordinary Shares (i) may be issued with a legend indicating that “THE TRANSFERABILITY OF THIS CERTIFICATE AND THE ORDINARY SHARES REPRESENTED HEREBY IS SUBJECT TO TRANSFERABILITY RESTRICTIONS CONTAINED IN THE FRESH DEL MONTE PRODUCE INC. STOCK OWNERSHIP GUIDELINES”, or (ii) if delivered electronically, the Company may make such provisions as it deems necessary to ensure that each Ordinary Share is subject to the same terms and conditions as shares that are represented by a physical stock certificate. Neither the Participant nor any of the Participant’s successors, heirs, assigns or personal representatives shall have any further rights or interests in any RSUs or Dividend Units that are so paid.
6)Forfeiture. Subject to Section 7 hereof, if prior to the applicable vesting date, (i) upon the Participant’s Separation from Service for any reason other than death or Disability, (ii) there occurs a material breach of this Agreement by the Participant (including any of the restrictive covenants set forth in Appendix B attached hereto), or (iii) the Participant has failed to meet the tax withholding obligations described in Section 7 hereof for any prior award, all rights of the Participant to the RSUs that have not vested in accordance with Section 4 hereof as of the date of such event shall terminate immediately and be forfeited in their entirety. Notwithstanding anything in this Agreement to the contrary, if the Committee determines, in its sole discretion, that the Participant has violated any Company Agreement to which the Participant is subject, the Committee may, in its sole discretion, terminate any or all rights to payments or benefits to which the Participant is entitled under this Agreement and the Plan. To the extent that the RSUs are terminated, then any portion of the RSUs that are not vested on such date shall be cancelled.
7)Withholding.
a)The Participant is responsible for any or all federal, state, local or foreign income tax, payroll tax or other tax-related withholding imposed with respect to RSUs or the Dividend Units (“Tax-Related Withholding”), regardless of any action the Company takes with respect to the Tax-Related Items. The Company (i) makes no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Award, including the grant or vesting of the RSUs or the subsequent sale of Ordinary Shares acquired upon vesting, and (ii) does not commit to structure the terms of the grant or any aspect of the Award to reduce or eliminate the Participant’s liability for Tax-Related Items.
b)With respect to any vesting event specified in Section 4 above, the Participant may elect to pay the amount of the Tax-Related Withholding due by either:
i)on or prior to the vesting date of the RSUs, delivering, by cash or a check, funds equal to the amount of Tax-Related Withholding due;
Form of RSU Award Agreement
ii)instructing the Company to execute a broker-assisted sale and remittance program, or “cashless” exercise/sale procedure, acceptable to the Committee where the amount of Tax-Related Withholding due is remitted to the Company; or
iii)to the extent permissible under Section 409A of the Code, and upon the consent of the Committee, instructing the Company to withhold a number of Ordinary Shares deliverable upon the Settlement Date, which have a Fair Market Value on the date of vesting equal to the amount of Tax-Related Withholding due (a “net-settlement” arrangement);
subject, in each case, to any limitations imposed by the Company’s insider trading policy and the U.S. federal securities laws.
c)The Company may refuse to issue and deliver Ordinary Shares in payment of any vested RSUs or Dividend Units if the Participant fails to comply with the Participant’s obligations in connection with the Tax-Related Items as described in this Section 7. The Participant acknowledges that if the Company has not received prior notification of the Participant’s election with regard to the payment of Tax-Related Items, the Company may settle the Tax-Related Items utilizing (i) broker-assisted sale and remittance program, or “cashless” exercise/sale procedure, acceptable to the Committee or (ii) by withholding such Tax-Related Withholding any amounts payable to the Participant, either as salary, other compensation, proceeds from the sale, or otherwise, any taxes required to be withheld with respect to the RSUs. It is intended that the terms of this award of RSUs will not result in the imposition of any tax liability pursuant to Section 409A of the Code, and this Agreement shall be construed, interpreted, operated, and administered consistent with that intent.
8)Committee’s Discretion. Notwithstanding any provision of this Agreement to the contrary, the Committee shall have discretion to waive any forfeiture of the RSUs as set forth in Section 4 hereof, the Restricted Period and any other conditions set forth in this Agreement.
9)No Rights as Shareholder. The Participant shall have no right to vote or receive dividends or any other rights as a shareholder of the Company with respect to the RSUs or the Ordinary Shares underlying the RSUs unless and until the RSUs become vested and non-forfeitable and such Ordinary Shares are delivered to the Participant in accordance with this Agreement.
10)Participant Representations; Consideration to the Company. In consideration of the awarding of the RSUs by the Company, the Participant agrees (i) to render faithful and efficient services to the Company, with such duties and responsibilities as the Company shall from time to time prescribe, (ii) to comply with all Company Agreements to which the Participant is subject from time to time, (iii) to those Additional Acknowledgements set forth in Appendix A attached hereto, and (iv) to comply with each of the Restrictive Covenants set forth in Appendix B attached hereto. Nothing in this Agreement or in the Plan shall confer upon the Participant any right to continue in the employ of the Company, or shall interfere with or restrict in any way the rights of the Company, which are hereby expressly reserved, to discharge the Participant at any time for any reason whatsoever, with or without Cause. Further, the Participant acknowledges that the Participant is relying solely on his or her own advisors with respect to the tax consequences of this award.
11)Regulatory Restrictions on the RSUs.
a)Compliance with Securities Laws. The Participant acknowledges that the Plan is intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated by the Securities and Exchange Commission thereunder, including, without limitation, the applicable exemptive conditions of Rule 16b-3. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the RSUs are awarded and may be Settled, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and regulations. The Company reserves the
Form of RSU Award Agreement
right to restrict, in whole or in part, the delivery of Ordinary Shares pursuant to this Agreement prior to the satisfaction of all legal requirements relating to the issuance of such shares, to their registration, qualification or listing or to an exemption from registration, qualification or listing.
b)Conditions to Issuance of Ordinary Shares. The Ordinary Shares deliverable upon the Settlement of the RSUs, or any portion thereof, may be either previously authorized but unissued shares or issued shares which have then been reacquired by the Company. Such Ordinary Shares shall be fully paid and nonassessable. Subject to the requirements of Section 409A, the Company shall not be required to issue or deliver any shares of stock upon the vesting of the RSUs or portion thereof prior to fulfillment of all of the following conditions (i) the admission of such Ordinary Shares to listing on all stock exchanges on which such class of shares is then listed, (ii) the completion of any registration or other qualification of such Ordinary Shares under any state or federal law or under rulings or regulations of the Securities and Exchange Commission or of any other governmental regulatory body, which the Committee shall, in its absolute discretion, deem necessary or advisable, (iii) the obtaining of any approval or other clearance from any state or federal governmental agency which the Committee shall, in its absolute discretion, determine to be necessary or advisable, and (iv) the lapse of such reasonable period of time following the vesting of the RSUs as the Committee may from time to time establish for reasons of administrative convenience.
12)Clawback Provisions.
a)In the event that it is determined by the Committee and ratified by the Board that distribution, payment or issuance of an Award was, in whole or in part, based on incorrect data (including financial results which pursuant to applicable laws, rules, regulations or applicable accounting principles are required to be restated), the Participant shall return to the Company the overpayment amount, where the overpayment amount shall be equal to the Award distributed or otherwise paid to the Participant, reduced by the Award the Participant would have received had the correct data been used in the calculation of the Award. The determinations made by the Committee and ratified by the Board pursuant to this Section shall be conclusive and binding on the Participant unless reached in an arbitrary and capricious manner. The Company shall have the right to offset any amounts due it under this provision from any amounts due Participant from any other incentive compensation or equity award plans in which Participant participates.
b)In addition, to the extent permitted by applicable law,, this Award, including any Ordinary Shares issued in connection with the Award, will be subject to the requirements of (i) Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (regarding recovery of erroneously awarded compensation) and any implementing rules and regulations thereunder, (ii) similar rules under the laws of any other jurisdiction, and (iii) the Clawback Policy adopted by the Company, as may be amended from time to time, or regulations or laws requiring the return or reduction of all or some of the RSUs or the Ordinary Shares received under the Award. The Participant acknowledges that he or she has been provided a copy of the current Clawback Policy.
13)Compliance with Section 409A.
a)General. It is the intention of the Company that the benefits and rights to which the Participant could be entitled pursuant to this Agreement comply with Section 409A to the extent that the requirements of Section 409A are applicable thereto, and the provisions of this Agreement shall be construed in a manner consistent with that intention. If the Company believes, at any time, that any such benefit or right that is subject to Section 409A does not so comply, the Company may, without the Participant’s consent, amend the terms of such benefits and rights such that they comply with Section 409A.
b)Distributions on Account of Separation from Service. If and to the extent required to comply with Section 409A, no payment or benefit required to be paid under this Agreement on account of the Separation from Service of the Participant shall be made
Form of RSU Award Agreement
unless and until the Participant incurs a “separation from service” within the meaning of Section 409A, and applicable Treasury Regulations.
c)6 Month Delay for Specified Employees.
(i)If the Participant is a “specified employee”, then no payment or benefit that is payable on account of the Participant’s “separation from service”, as that term is defined for purposes of Section 409A, shall be made before the date that is the business day following the six-month anniversary of the Participant’s “separation from service” (or, if earlier, the date of the Participant’s death) if and to the extent that such payment or benefit constitutes deferred compensation (or may be nonqualified deferred compensation) under Section 409A and such deferral is required to comply with the requirements of Section 409A. Any payment or benefit delayed by reason of the prior sentence shall be paid out or provided in a single lump sum at the end of such required delay period in order to catch up to the original payment schedule.
(ii) For purposes of this provision, the Participant shall be considered to be a “specified employee” if, at the time of his or her separation from service, the Participant is a “key employee”, within the meaning of Section 416(i) of the Code, of the Company (or any person or entity with whom the Company would be considered a single employer under Section 414(b) or Section 414(c) of the Code) any stock in which is publicly traded on an established securities market or otherwise.
d)No Acceleration of Payments. Neither the Company nor the Participant, individually or in combination, may accelerate any payment or benefit that is subject to Section 409A, except in compliance with Section 409A and the provisions of this Agreement, and no amount that is subject to Section 409A shall be paid prior to the earliest date on which it may be paid without violating Section 409A.
e)Treatment of Each Installment as a Separate Payment. For purposes of applying the provisions of Section 409A to this Agreement, each separately identified amount to which the Participant is entitled under this Agreement shall be treated as a separate payment. In addition, to the extent permissible under Section 409A, any series of installment payments under this Agreement shall be treated as a right to a series of separate payments.
f)No Guaranty of 409A Compliance. Notwithstanding the foregoing, the Company does not make any representation to the Participant that the payments or benefits provided under this Agreement are exempt from, or satisfy, the requirements of Section 409A, and the Company shall have no liability or other obligation to indemnify or hold harmless the Participant or any beneficiary of the Participant for any tax, additional tax, interest or penalties that the Participant or any beneficiary of the Participant may incur in the event that any provision of this Agreement, or any amendment or modification thereof, or any other action taken with respect thereto, is deemed to violate any of the requirements of Section 409A.
14)Miscellaneous.
a)Notices. Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of the officer designated as the “Administrator” from time to time, and any notice to be given to the Participant shall be communicated to him (i) via electronic notification on the System, (ii) by e-mail to the Participant at the Participant’s e-mail address on file with the Company, or (iii) by mail to the Participant at the Participant’s mailing address on file with the Company. By a notice given pursuant to this Section 14(a), either party may hereafter designate a different address for notices to be given to him. Any notice which is required to be given to the Participant shall, if the Participant is then deceased, be given to the Participant’s personal representative if such representative has previously informed the Company of his status and address by written notice under this Section 14(a). Any notice delivered by mail shall be deemed duly given when enclosed in a properly sealed envelope or wrapper addressed as
Form of RSU Award Agreement
aforesaid, and deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.
b)Waiver. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any other or subsequent breach.
c)Entire Agreement. These Terms & Conditions, the Notice and the Plan constitute the entire agreement between the parties with respect to the subject matter hereof.
d)Administration. The Committee shall have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules. All actions taken and all interpretations and determinations made by the Committee in good faith shall be final and binding upon the Participant, the Company and all other interested persons. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or the RSU. In its absolute discretion, the Company’s Board of Directors may at any time and from time to time exercise any and all rights and duties of the Committee under the Plan and this Agreement except with respect to matters which, under Rule 16b-3, or any regulations or rules issued thereunder, are required to be determined in the sole discretion of the Committee.
e)Binding Effect; Successors. This Agreement shall inure to the benefit of and be binding upon the parties hereto and to the extent not prohibited herein, their respective heirs, successors, assigns and representatives. Nothing in this Agreement, express or implied, is intended to confer on any person other than the parties hereto and as provided above, their respective heirs, successors, assigns and representatives any rights, remedies, obligations or liabilities.
f)Governing Law; Jurisdiction. This Agreement shall be administered, interpreted and enforced under the internal laws of the State of Florida without regard to conflicts of laws thereof. Venue in any action arising out of or relating to this Agreement shall be in federal court in the Southern District of Florida, if federal jurisdiction exists. If federal jurisdiction does not exist, venue shall be in state court in Miami-Dade County, Florida.
g)Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of these Terms & Conditions.
h)Conflicts; Amendment. The provisions of the Plan are incorporated in this Agreement in their entirety. In the event of any conflict between the provisions of this Agreement and the Plan, the provisions of the Plan shall control. This Agreement and the Plan may be amended without the consent of the Participant provided that such amendment would not affect in any adverse manner any rights of the Participant under this Agreement. No amendment of this Agreement shall, without the consent of the Participant, affect in any adverse manner any rights of the Participant under this Agreement.
i)Adjustments. Notwithstanding any other provision of this Agreement, the Committee may adjust the RSUs in accordance with the provisions of the Plan.
j)Further Assurances. The Participant agrees, upon demand of the Company or the Committee, to do all acts and execute, deliver and perform all additional documents, instruments and agreements which may be reasonably required by the Company or the Committee, as the case may be, to implement the provisions and purposes of this Agreement and the Plan.
k)Language. If the Participant has received this Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version differs from the English version, the English version shall control.
Form of RSU Award Agreement
APPENDIX A
ADDITIONAL ACKNOWLEDGEMENTS BY PARTICIPANT
1.DATA PRIVACY
As a condition of the award of the Restricted Stock RSUs, the Participant hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of the Participant’s personal data as described in this Appendix. The Participant understands that the Company and its subsidiaries hold certain personal information about the Participant, including, but not limited to, the Participant’s name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company, details of any entitlement to shares of stock or equivalent benefits awarded, canceled, vested, unvested or outstanding in the Participant’s favor (“Data”). The Participant further understands that the Company and its subsidiaries will transfer Data among themselves as necessary for the purpose of implementing, administering and managing the RSUs. The Participant understands that Data may be transferred to any third parties assisting in the implementation, administration and management of the RSUs, that these recipients may be located in the Participant’s country or elsewhere, and that the recipient’s country may have different data privacy laws and protections from the Participant’s country. The Participant understands that the Participant may request a list with the names and addresses of any potential recipients of the Data by contacting the Participant’s local human resources representative. The Participant authorizes the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing the RSUs. The Participant understands that Data will be held only as long as is necessary to implement, administer and manage the RSUs. The Participant understands that the Participant may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing the Participant’s local human resources representative. Further, the Participant understands that the Participant is providing the consents herein on a purely voluntary basis. If the Participant does not consent, or if the Participant later seeks to revoke the Participant’s consent, the Participant’s employment status or service and career with the Participant’s employer will not be adversely affected; the only adverse consequence of refusing or withdrawing the Participant’s consent is that the Company would not be able to grant to the Participant RSUs or other awards or administer or maintain such awards. Therefore, the Participant understands that refusing or withdrawing the Participant’s consent may affect the Participant’s ability to benefit from the RSUs. For more information on the consequences of the Participant’s refusal to consent or withdrawal of consent, the Participant understands that the Participant may contact the Participant’s local human resources representative.
2.ADDITIONAL ACKNOWLEDGEMENTS
By entering into this Agreement and accepting the grant of RSUs evidenced hereby, the Participant acknowledges, understands and agrees that:
(a)the Plan is established voluntarily by the Company, is discretionary in nature and may be modified, suspended or terminated by the Company at any time;
(b)the award of the RSUs is voluntary and occasional and does not create any contractual or other right to receive future awards of RSUs or benefits in lieu of RSUs, even if such awards have been awarded in the past;
(c)all decisions with respect to future awards, if any, will be at the sole discretion of the Company;
(d)the Participant is voluntarily accepting the grant of RSUs;
Form of RSU Award Agreement
(e)the RSUs, the Dividend Units, the Ordinary Shares and any payments or benefits with respect thereto are not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, bonuses, long-service awards, pension or retirement benefits or welfare benefits or similar payments, and in no event should be considered as compensation for, or in any way relating to, past services for the Company or any of its subsidiaries;
(f)in accepting the grant of RSUs, the Participant expressly recognizes that the RSUs are an award made solely by the Company, with principal offices at c/o Del Monte Fresh Produce Company, 241 Sevilla Avenue, Coral Gables, Florida 33134, U.S.A.; the Company is solely responsible for the administration of the Plan and the Participant’s participation in the Plan; in the event that the Participant is an employee of a subsidiary, the RSUs and the Participant’s participation in the Plan will not be interpreted to form an employment contract or relationship with the Company; furthermore, the RSUs will not be interpreted to form an employment contract with any subsidiary;
(g)no claim or entitlement to compensation or damages shall arise from forfeiture of the RSUs resulting from termination of the Participant’s employment by the Company or the Participant’s employer (for any reason whatsoever and regardless of whether or not such termination is later found to be invalid or in breach of the employment laws in the jurisdiction where the Participant is employed or the terms of the Participant’s employment agreement, if any) or recoupment of all or any portion of any payment made pursuant to the RSUs as provided by Section 12 of the Agreement and, in consideration of the grant of the RSUs to which the Participant is not otherwise entitled, the Participant irrevocably agrees never to institute any claim against the Company or the Participant’s employer, waives the Participant’s ability, if any, to bring any such claim, and releases the Company and the Participant’s employer from any such claim; if, notwithstanding the foregoing, any such claim is allowed by a court of competent jurisdiction, then, by participating in the Plan, the Participant shall be deemed irrevocably to have agreed not to pursue such claim, and the Participant agrees to execute any and all documents necessary to request dismissal or withdrawal of such claim;
(h)unless otherwise provided in the Plan or by the Company in its discretion, the RSUs and the benefits evidenced by this Agreement do not create any entitlement to have the RSUs or any such benefits transferred to, or assumed by, another company nor to be exchanged, cashed out or substituted for, in connection with any corporate transaction affecting the Ordinary Shares;
(i)neither the Participant’s employer, the Company nor any of its subsidiaries shall be liable for any foreign exchange rate fluctuation between the Participant’s local currency and the United States Dollar that may affect the value of the RSUs or any payment made pursuant to the RSUs;
(j)the Company is not providing any tax, legal, or financial advice, nor is the Company making any recommendations regarding the RSUs, the Dividend Units or the Ordinary Shares issuable with respect to the RSUs or the Dividend Units. The Participant is hereby advised to consult with the Participant’s personal tax, legal and financial advisors regarding the RSUs, the Dividend Units and the Ordinary Shares before taking any action in relation thereto; and
(k)the Participant has received and read the 10(a) Prospectus under the Plan pursuant to which the RSUs are being offered, which Prospectus has been uploaded to the System.
Form of RSU Award Agreement
APPENDIX B
RESTRICTIVE COVENANTS
Confidentiality.
(a)Participant acknowledges that during the Participant’s employment with the Company, the Participant has had access to certain business, financial, and other information of the Company which is not made readily available to the public, including, without limitation, marketing, advertising and promotional ideas, surveys and strategies, technology, budgets, business plans, vendor lists, research, financial, purchasing, and employment data and information, and costs, profits, market, sales, products, product lines, key personnel, pricing policies, operational methods, customers, customer requirements, suppliers, plans for future developments, and other business affairs and methods and other information not readily available to the public (herein “Confidential Information”) that must be maintained in strict confidence in order for the Company to protect its business and its competitive position in the marketplace. Unless otherwise authorized in writing by the Company, the Participant agrees that he/she will not directly or indirectly publish or disclose any Confidential Information to any competitor or other person outside the Company, and he/she will not remove from the premises of the Company or use for his/her own benefit or otherwise appropriate or copy any Confidential Information. This applies, whether or not, the Participant developed the Confidential Information.
(b)Additionally, the Participant agrees not to make any disparaging or derogatory remarks orally or in writing, directly or through others, about the conduct or character of the Company or any of its parents, subsidiaries, or affiliates, or their agents, employees, officers, directors, successors, or assigns.
Non-Competition.
(a)In exchange for the promises made herein and for other good a valuable consideration received, the Participant agrees that, throughout the “Non-Compete Period” (as hereinafter defined), and without the express prior written consent of the Company, the Participant shall not, directly or indirectly, as employee, agent, consultant, stockholder, director, partner or in any other individual or representative capacity, own, operate, manage, control, engage in, invest in or participate in any manner in, act as a consultant or advisor to, render services to (alone or in association with any firm, person, corporation or entity), or otherwise assist any person or entity (including, but not limited to, any investment banking firm, venture capital firm, or hedge fund or other investment entity) that directly or indirectly engages in the primary business of producing, marketing, distributing or selling fresh or prepared fruits or vegetable products anywhere in the world (the “Business”). If the Participant is in any way involved with a person or entity that is engaged in, or planning to engage in, the Business, the Participant shall immediately cease his/her involvement with such person or entity so as to remain in compliance with the provisions of this Section. The foregoing provisions of this Section shall not prohibit the Participant during the Non-Compete Period from at any time investing in the publicly held common equity of any entity that is engaged in the Business, provided that the Participant is not otherwise involved in the Business and that he/she does not directly or indirectly own more than an aggregate of 2% of the outstanding common equity of such entity.
(b)Without limiting the generality of the foregoing, the Participant agrees that during the Non-Compete Period he/she will not, directly or indirectly, solicit (or participate as employee, agent, consultant, stockholder, director, partner, member or in any other individual or representative capacity in any business that solicits) business from any person, firm, corporation or other entity that is a customer of the Company or any of its affiliated companies at the time of such solicitation, or from any successor in interest to any such person, firm, corporation or other entity, for the purpose of securing business or contracts relating to the Business.
Form of RSU Award Agreement
(c)The Participant further agrees that during the Non-Compete Period he/she shall expressly inform any person or entity that is actively considering engaging the Participant’s services as an employee, independent contractor or otherwise during the Non-Compete Period and that is involved, either itself or through any related person or entity, in any way with producing, marketing, distributing or selling fresh fruits or vegetables or prepared food or beverages of the Participant’s obligations under this Section. If the Participant requests relief from any of the restrictions of this Section, the Company will entertain the Participant’s request in good faith but reserves the unilateral right, in its sole and absolute discretion, to deny for any reason whatsoever the Participant’s request, in whole or in part.
For purposes of this Agreement, “Non-Compete Period” shall mean the twelve (12)-month period commencing as of the date of the Separation from Service.
Non-Solicitation of Employees.
The Participant further agrees that, during the Non-Compete Period, he/she shall not, without the prior written consent of the Company, directly or indirectly, in any capacity, solicit, entice, or induce, or attempt to solicit, entice or induce, any person who at the time is or within the preceding twelve (12) months was an employee, officer or director of the Company or any subsidiary or affiliate of the Company to (a) become employed by or enter into a joint venture or partnership with the Participant or any other business, person or entity, or (b) terminate his or her employment with the Company or such subsidiary or affiliate of the Company.
Judicial Modification.
In the event that the restrictions against engaging in a competitive activity contained in this Appendix B shall be determined by any court of competent jurisdiction to be unenforceable for any reason, including but not limited to, for extending over too great a period of time, over too great a geographical area, or for being too extensive in any other respect; the applicable provision of this Appendix B shall be interpreted to extend only over the maximum period of time for which it may be enforceable, over the maximum geographical areas as to which it may be enforceable, and to the maximum extent in all other respects as to which it may be enforceable, all as determined by such court in such action.
Injunctive Remedies.
The Participant acknowledges and agree that the covenants set forth in this Appendix B, are reasonable and necessary for the protection of the Company's business interests, that irreparable injury will result to the Company if the Participant breaches any of the terms of said covenants, and that in the event of the Participant’s actual or threatened breach of any such covenant, the Company will have no adequate remedy at law. The Participant accordingly agrees that in the event of any actual or threatened breach by him/her of any of the covenants contained in this Appendix B, the Company or any of its affiliated companies shall be entitled to immediate temporary injunctive and other equitable relief, without bond and without the necessity of showing actual monetary damages, subject to hearing as soon thereafter as possible. Nothing contained herein shall be construed as prohibiting the Company or any of its affiliated companies from pursuing any other remedies available to it for such breach or threatened breach, including the recovery of damages.
Non-Compliance.
The Participant understands and agrees that if he/she breaches any of the terms or conditions of this Agreement during the Non-Compete Period, irrespective of whether he/she can be judicially compelled to comply with the breached provision, the Participant shall immediately forfeit any unvested portion of RSUs and the Dividend Units. The foregoing is in addition to any other remedies the Company may have at law or in equity.
EXHIBIT 31.1
CERTIFICATION
I, Mohammad Abu-Ghazaleh, certify that:
1.I have reviewed this quarterly report on Form 10-Q of Fresh Del Monte Produce Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: | August 3, 2022 | |||||||
| Signature: | /s/ Mohammad Abu-Ghazaleh | |||||||
| Title: | Chairman and Chief Executive Officer | |||||||
EXHIBIT 31.2
CERTIFICATION
I, Monica Vicente, certify that:
1.I have reviewed this quarterly report on Form 10-Q of Fresh Del Monte Produce Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: | August 3, 2022 | |||||||
| Signature: | /s/ Monica Vicente | |||||||
| Title: | Senior Vice President and Chief Financial Officer | |||||||
EXHIBIT 32
CERTIFICATIONS
PURSUANT TO 18 USC SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
We, Mohammad Abu-Ghazaleh and Monica Vicente, as Chief Executive Officer and Chief Financial Officer, respectively, of Fresh Del Monte Produce Inc. (the “Company”), hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to our knowledge:
(1)the accompanying Quarterly Report on Form 10-Q of the Company for the period ended July 1, 2022, as filed with the U.S. Securities and Exchange Commission on the date hereof (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Date: | August 3, 2022 | By: | /s/ Mohammad Abu-Ghazaleh | ||||||||
| Name: | Mohammad Abu-Ghazaleh | ||||||||||
| Title: | Chairman and Chief Executive Officer | ||||||||||
| Date: | August 3, 2022 | By: | /s/ Monica Vicente | ||||||||
| Name: | Monica Vicente | ||||||||||
| Title: | Senior Vice President and Chief Financial Officer | ||||||||||