=================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
Form 10
----------------------
GENERAL FORM FOR REGISTRATION
OF SECURITIES
Pursuant to Section 12(b) or 12(g) of
the Securities Exchange Act of 1934
-----------------------
Corn Products International, Inc.
Delaware 22-3514823
(State or other jurisdiction (I.R.S. Employer
of incorporation Identification No.)
or organization)
Corn Products International, Inc. 60501
P.O. Box 345 (Zip Code)
6500 Archer Road
Argo, IL
(Address of principal
executive offices)
Registrant's telephone number, including area code:
708-563-2400
--------------------------
Securities to be registered pursuant
to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be registered each class is to be registered
---------------- ------------------------------
Common Stock, $.01 par value New York Stock Exchange, Inc.
Securities to be registered pursuant
to Section 12(g) of the Act:
None
=================================================================
EXPLANATORY NOTE
This Registration Statement has been prepared on a
prospective basis on the assumption that, among other things, the
Distribution (as defined in the Information Statement which is a
part of this Registration Statement) and the related transactions
contemplated to occur prior to or contemporaneously with the
Distribution will be consummated as contemplated by the
Information Statement. There can be no assurance, however, that
any or all of such transactions will occur or will occur as so
contemplated. Any significant modifications or variations in the
transactions contemplated will be reflected in an amendment or
supplement to this Registration Statement.
2
CROSS REFERENCE
CORN PRODUCTS INTERNATIONAL, INC.
I. INFORMATION INCLUDED IN INFORMATION STATEMENT AND INCORPORATED
IN FORM 10 BY REFERENCE
CROSS-REFERENCE SHEET BETWEEN INFORMATION STATEMENT
AND ITEMS OF FORM 10
Item
No. Item Caption Location in Information Statement
- --- ------------ ---------------------------------
1. Business................... "SUMMARY;" "INTRODUCTION;"
"BUSINESS;" "RISK FACTORS;" "THE
DISTRIBUTION -- Reasons for the
Distribution" and "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS
OF OPERATIONS."
2. Financial Information...... "CORN PRODUCTS INTERNATIONAL,
INC. SUMMARY HISTORICAL
FINANCIAL DATA;" "CORN PRODUCTS
INTERNATIONAL, INC. SUMMARY PRO
FORMA FINANCIAL DATA;" "BUSINESS
-- Management of Corn Cost Versus
Selling Price;" "FINANCING;" "SELECTED
HISTORICAL FINANCIAL DATA;" "PRO
FORMA FINANCIAL DATA" and
"MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS."
3. Properties................. "BUSINESS -- Properties."
4. Security Ownership of
Certain Beneficial
Owners and Management..... "SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS."
5. Directors and Executive
Officers.................. "MANAGEMENT."
6. Executive Compensation..... "EXECUTIVE COMPENSATION;
PENSION AND BENEFIT PLANS."
3
Item
No. Item Caption Location in Information Statement
- --- ------------ ---------------------------------
7. Certain Relationships and
Related Transactions....... "SUMMARY;" "THE DISTRIBUTION;"
"RELATIONSHIP BETWEEN CPC AND
CORN PRODUCTS AFTER THE
DISTRIBUTION" and "CERTAIN
RELATIONSHIPS AND TRANSACTIONS."
8. Legal Proceedings........... "BUSINESS -- Legal Proceedings."
9. Market Price of and
Dividends on the Registrant's
Common Equity and Related
Stockholder Matters........ "SUMMARY;" "INTRODUCTION;" "THE
DISTRIBUTION -- Listing and Trading
of Corn Products Common Stock" and
"DIVIDEND POLICY."
11. Description of Registrant's
Securites to be
Registered................ "DESCRIPTION OF CAPITAL STOCK."
12. Indemnification of Directors "LIABILITY AND INDEMNIFICATION OF
and Officers............. OFFICERS AND DIRECTORS."
13. Financial Statements and
Supplementary Data........ "SUMMARY;" "SELECTED HISTORICAL
FINANCIAL DATA;" "PRO FORMA
FINANCIAL DATA" and Corn
Products Combined Financial
Statements beginning on page
F-1.
15. Financial Statements and
Exhibits.
(a) List of Financial
Statements................. "INDEX TO CORN PRODUCTS
COMBINED FINANCIAL STATEMENTS."
II. INFORMATION NOT INCLUDED IN INFORMATION STATEMENT
Item 10. Recent Sales of Unregistered Securities.
None.
Item 14. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
4
Item 15. Financial Statements and Exhibits.
(b) Exhibits The following documents are filed as exhibits hereto:
Exhibit No. Description
- ----------- -----------
2.1 Form of Distribution Agreement.*
3.1 Amended and Restated Certificate of Incorporation of
Corn Products International, Inc.
3.2 By-Laws of Corn Products International, Inc.
4.1 Form of Rights Agreement.*
4.2 Certificate of Designation for Registrant's Series A
Junior Participating Preferred Stock.*
10.1 Form of Master Supply Agreement.*
10.2 Form of Tax Sharing Agreement.
10.3 Form of Tax Indemnification Agreement.
10.4 Form of Debt Agreement.
10.5 Form of Transition Services Agreement.*
10.6 Form of Master License Agreement.*
10.7 Form of Distribution Agreement (filed as Exhibit 2.1).*
10.8 Form of Employee Benefits Agreement.
10.9 Form of Argo Access Agreement.*
10.10 Form of Stock Incentive Plan.*
10.11 Form of Severance Agreement.*
21.1 List of Subsidiaries.*
- -----------------------------
* To be filed by amendment.
5
SIGNATURE
Pursuant to the requirements of Section 12 of the
Securities Exchange Act of 1934, the registrant has duly caused
this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
CORN PRODUCTS INTERNATIONAL, INC.
By /s/ Hanes A. Heller
----------------------
Name: Hanes A. Heller
Title: President
September 19, 1997
6
Subject to completion or amendment,
dated September 19, 1997
INFORMATION STATEMENT
[Corn Products Logo]
CORN PRODUCTS INTERNATIONAL, INC.
Common Stock
(Par Value $0.01 Per Share)
This Information Statement is being furnished in
connection with the distribution (the "Distribution") by CPC
International Inc. ("CPC") to holders of record of CPC common
stock at the close of business on December 15, 1997 (the "Record
Date") of one share of common stock, par value $0.01 per share,
including the associated preferred stock purchase rights (the
"Corn Products Common Stock"), of its wholly owned subsidiary,
Corn Products International, Inc. (the "Company" or "Corn
Products"), for every four shares of CPC common stock owned on
the Record Date. The Distribution will result in 100% of the
outstanding shares of Corn Products Common Stock being
distributed to holders of CPC common stock. It is expected that
the Distribution will be effective at 12:00 midnight on December
31, 1997 (the "Effective Date"). It is expected that certificates
representing shares of Corn Products Common Stock will be mailed
to holders of CPC common stock on or about January 5, 1998.
No consideration will be paid by CPC's stockholders
for the shares of Corn Products Common Stock. There is no current
public trading market for the shares of Corn Products Common
Stock, although it is expected that a "when-issued" trading
market will develop on or about the Record Date. The Corn
Products Common Stock is expected to be approved for listing,
subject to official notice of issuance, on the New York Stock
Exchange, Inc. (the "NYSE") under the symbol "CPO" and "regular
way" trading on the NYSE is expected to begin on January 5, 1998.
IN REVIEWING THIS INFORMATION STATEMENT, YOU SHOULD
CAREFULLY CONSIDER THE MATTERS DESCRIBED UNDER THE CAPTION "RISK
FACTORS" BEGINNING AT PAGE _____.
--------------------
NO STOCKHOLDER APPROVAL IS REQUIRED OR SOUGHT IN CONNECTION
WITH THE DISTRIBUTION. EACH STOCKHOLDER WILL AUTOMATICALLY
RECEIVE A CERTIFICATE REPRESENTING CORN PRODUCTS COMMON STOCK
RECEIVED IN THE DISTRIBUTION. WE ARE NOT ASKING YOU FOR A PROXY
AND YOU ARE NOT REQUESTED TO TAKE ANY ACTION
WITH RESPECT TO YOUR SHARES.
--------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS INFORMATION STATEMENT. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
--------------------
THIS INFORMATION STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES.
--------------------
THE DATE OF THIS INFORMATION STATEMENT IS NOVEMBER __, 1997.
THIS INFORMATION STATEMENT IS BEING FURNISHED SOLELY
TO PROVIDE INFORMATION TO STOCKHOLDERS OF CPC WHO WILL RECEIVE
SHARES OF CORN PRODUCTS COMMON STOCK IN THE DISTRIBUTION. IT IS
NOT, AND IS NOT INTENDED TO BE CONSTRUED AS, AN INDUCEMENT OR
ENCOURAGEMENT TO BUY OR SELL ANY SECURITIES OF THE COMPANY OR
CPC. THE INFORMATION CONTAINED IN THIS INFORMATION STATEMENT IS
BELIEVED TO BE ACCURATE AS OF NOVEMBER __, 1997. CHANGES MAY
OCCUR AFTER THAT DATE, AND NEITHER THE COMPANY NOR CPC WILL
UPDATE THE INFORMATION CONTAINED HEREIN EXCEPT IN THE NORMAL
COURSE OF THEIR RESPECTIVE PUBLIC DISCLOSURES.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange
Commission (the "SEC") a Registration Statement on Form 10 (the
"Registration Statement") under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), with respect to the shares
of Corn Products Common Stock to be received by the holders of
CPC common stock in the Distribution. This Information Statement
does not contain all of the information set forth in the
Registration Statement and the exhibits thereto. For further
information, reference is made to the Registration Statement and
the exhibits thereto. Statements made in this Information
Statement as to the contents of any contract, agreement or other
document referred to herein are qualified in their entirety by
reference to each such contract, agreement or other document
filed as an exhibit to the Registration Statement, all of which
are hereby incorporated herein by reference. The Registration
Statement and the exhibits thereto may be inspected and copied at
the SEC's public reference room located at Judiciary Plaza, 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at the
public reference facilities in the SEC's regional offices at
Seven World Trade Center, Suite 1300, New York, New York 10048
and at Citicorp Center, Suite 1400, 500 West Madison Street,
Chicago, Illinois 60661. Copies of such material may be obtained
at prescribed rates by writing to the SEC, Public Reference
Section, 450 Fifth Street, N.W., Washington, D.C. 20549. In
addition, copies of the Registration Statement and related
documents may be obtained through the SEC Internet address at
http://www.sec.gov.
The Company will be required to comply with the
reporting requirements of the Exchange Act and, in accordance
therewith, to file reports, proxy statements and other
information with the SEC. Additionally, the Company will be
required to provide annual reports containing audited financial
statements to its stockholders in connection with its annual
meetings of stockholders. After the Distribution, such reports,
proxy statements and other information will be available to be
inspected and copied at the public reference facilities of the
SEC or obtained by mail or over the Internet from the SEC, as
described above. Application has been made to list the shares of
Corn Products Common Stock on the NYSE and, if and when such
shares of Corn Products Common Stock commence trading on the
NYSE, such reports, proxy statements and other information will
be available for inspection at the offices of the NYSE, 20 Broad
Street, New York, New York 10005.
ii
FORWARD-LOOKING STATEMENTS
This Information Statement includes or may include
certain forward-looking statements that involve risks and
uncertainties. This Information Statement contains certain
forward-looking statements concerning the Company's financial
position, business strategy, budgets, projected costs and plans
and objectives of management for future operations as well as
other statements including words such as "anticipate," "believe,"
"plan," "estimate," "expect," "intend," and other similar
expressions. Although the Company believes its expectations
reflected in such forward-looking statements are based on
reasonable assumptions, stockholders are cautioned that no
assurance can be given that such expectations will prove correct
and that actual results and developments may differ materially
from those conveyed in such forward-looking statements. Important
factors that could cause actual results to differ materially from
the expectations reflected in the forward-looking statements
herein include fluctuations in worldwide commodities markets and
the associated risks of hedging against such fluctuations;
fluctuations in aggregate industry supply and market demand;
general economic, business and market conditions in the various
geographic regions and countries in which the Company
manufactures and sells its products, including fluctuations in
the value of local currencies; costs or difficulties related to
the establishment of the Company as an independent entity; and
increased competitive and/or customer pressure in the corn
refining industry. See "RISK FACTORS" at page ___.
--------------------
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS INFORMATION STATEMENT, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR CPC.
iii
TABLE OF CONTENTS
ADDITIONAL INFORMATION................................................ii
FORWARD-LOOKING STATEMENTS...........................................iii
SUMMARY................................................................1
CORN PRODUCTS INTERNATIONAL, INC.
SUMMARY HISTORICAL FINANCIAL DATA.....................................7
CORN PRODUCTS INTERNATIONAL, INC.
SUMMARY PRO FORMA FINANCIAL DATA......................................9
INTRODUCTION..........................................................10
BUSINESS..............................................................11
Overview..............................................................11
Business Strategy.....................................................12
Products..............................................................13
Competition...........................................................15
Customers.............................................................15
Raw Materials.........................................................15
Management of Corn Cost versus Selling Price..........................16
Geographic Scope......................................................16
Research and Development..............................................17
Sales and Distribution................................................17
Patents and Trademarks................................................17
Employees and Management..............................................18
Properties............................................................18
Government Regulation and Environmental Matters.......................19
Legal Proceedings.....................................................20
RISK FACTORS..........................................................21
Recent Performance of the Corn Refining Business......................21
Business Strategy and Future Prospects................................22
Competition; Expanding Industry Capacity..............................22
Raw Material Price Volatility and Availability........................23
Commodities Hedging...................................................23
Unavailability of CPC's Financial and Other Resources.................24
Absence of Prior Trading Market for Corn Products Common Stock........24
Payment of Dividends..................................................24
Multinational Operations..............................................25
Certain Anti-Takeover Effects.........................................25
Indebtedness..........................................................26
Limited Relevance of Historical Financial Information.................27
Possibility of Substantial Redistribution of Corn
Products Common Stock.................................................27
Reliance on Major Customers...........................................27
THE DISTRIBUTION......................................................28
Reasons for the Distribution..........................................28
Manner of Effecting the Distribution..................................29
Certain U.S. Federal Income Tax Consequences of
the Distribution......................................................30
Listing and Trading of Corn Products Common Stock.....................31
Expenses of the Distribution..........................................32
Treatment of Employee Options, Restricted Stock
and Rabbi Trusts in the Distribution..................................32
RELATIONSHIP BETWEEN THE COMPANT AND
CPC AFTER THE DISTRIBUTION............................................34
Distribution Agreement................................................34
Tax Sharing Agreement.................................................35
Tax Indemnification Agreement.........................................35
Debt Agreement........................................................37
Transition Services Agreement.........................................37
Employee Benefits Agreement...........................................38
Other Agreements and Arrangements.....................................39
iv
FINANCING.............................................................40
PRO FORMA CAPITALIZATION..............................................41
SELECTED HISTORICAL FINANCIAL DATA....................................42
PRO FORMA FINANCIAL DATA..............................................43
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.............................................47
Introduction..........................................................47
Overview and Outlook..................................................47
Results of Operations: First Six Months of 1997 Compared
With First Six Months of 1996.........................................48
Results of Operations: 1996 Compared With 1995.......................50
Results of Operations: 1995 Compared With 1994.......................50
Liquidity and Capital Resources.......................................51
MANAGEMENT............................................................53
Directors of the Company..............................................53
Directors' Meetings, Fees and Committees..............................54
Audit Committee.......................................................55
Compensation and Nominating Committee.................................55
Executive Officers of the Company.....................................55
EXECUTIVE COMPENSATION; PENSION AND BENEFIT PLANS.....................58
Historical Compensation...............................................58
Base Salaries.........................................................62
Annual Bonuses........................................................63
Severance Agreements..................................................63
Stock Incentive Plan..................................................63
Pension Plans.........................................................64
Defined Contribution Plan.............................................65
Other Benefit Plans...................................................66
CERTAIN RELATIONSHIPS AND TRANSACTIONS................................66
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS.......................66
DESCRIPTION OF CAPITAL STOCK..........................................68
Authorized Stock......................................................68
No Preemptive Rights..................................................70
Transfer Agent and Registrar..........................................70
Rights Plan...........................................................70
ANTI-TAKEOVER EFFECTS OF CERTAIN
PROVISIONS OF THE CHARTER, THE BY-LAWS,
THE RIGHTS PLAN AND DELAWARE LAW......................................74
Classified Board of Directors; Removal of Directors...................74
Filling Vacancies on the Board........................................75
Written Consents and Special Meetings.................................75
Advance Notice Provisions for Stockholder
Nominations and Proposals.............................................75
Restrictions on Amendment.............................................76
Preferred Stock.......................................................77
Other Considerations..................................................77
Certain Effects of the Rights Plan....................................78
Delaware Business Combination Statute.................................78
LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS...............79
INDEPENDENT ACCOUNTANTS...............................................79
DIVIDEND POLICY.......................................................80
TABLE OF DEFINED TERMS................................................81
v
INDEX TO CORN PRODUCTS COMBINED FINANCIAL STATEMENTS.................F-1
vi
SUMMARY
The following is a summary of certain information contained
elsewhere in this Information Statement. Reference is made to,
and this summary is qualified in its entirety by, the more
detailed information and financial statements set forth in this
Information Statement, which should be read in its entirety.
Corn Products International, Inc.
CPC International Inc., a Delaware corporation
("CPC"), is a successor to Corn Products Refining Company, which
was originally incorporated in 1906. Corn Products Refining
Company was initially an amalgamation of virtually all of the
corn syrup and starch companies in the United States. CPC
remained the leading corn refiner in the United States into the
early 1970's. Over the years, CPC grew and diversified and placed
an increasing emphasis on a branded foods business. The
management and the Board of Directors of CPC have concluded that
it is in the best interests of CPC and its stockholders for CPC
to focus exclusively on its worldwide branded foods businesses,
and to create a separate, independent company to focus solely on
the corn refining and related businesses (the "Corn Refining
Business").
Corn Products International, Inc., a Delaware
corporation and a wholly owned subsidiary of CPC (the "Company"
or "Corn Products"), was formed in March 1997 to assume the
operations of the Corn Refining Business. As described herein,
effective at 12:00 midnight on December 31, 1997, CPC will
distribute all of the stock of the Company to holders of CPC
common stock (the "Distribution"). CPC will transfer the assets
and related liabilities of the Corn Refining Business to the
Company prior to the Distribution. Following the Distribution,
CPC will no longer own any stock of the Company and the Company
will operate the Corn Refining Business as an independent,
publicly traded company. The Company's principal executive
offices are located at P.O. Box 345, 6500 Archer Road, Argo, IL
60501 and its telephone number is (708) 563-2400. See "THE
DISTRIBUTION" at page ___ and "RELATIONSHIP BETWEEN THE COMPANY
AND CPC AFTER THE DISTRIBUTION" at page ___.
Business
The Company produces a large variety of food
ingredients and industrial products derived from the wet milling
of corn and other farinaceous materials for use in more than 60
industries. The Company is one of the largest corn refiners in
the world, and believes it is the fourth largest corn refiner in
the United States and the leading corn refiner in both Latin
America and Canada based on annual grind. The Company engages in
business in over 20 countries, operating directly and through
affiliates in nine countries with 19 plants and indirectly
through joint ventures and technical licensing agreements
elsewhere in Latin America, Asia, Africa, Australia and New
Zealand. In 1996, the Corn Refining Business produced net sales
worldwide of approximately $1.5 billion of which intercompany
sales accounted for approximately $157 million. Sweeteners, such
as high fructose corn syrup (a sweetener used in soft drinks and
other products), accounted for $842 million (55%) of 1996 net
sales, while starches (used for both food and non-food purposes)
accounted for $336 million (22%) of 1996 net sales. See
"BUSINESS" at page ___, "RISK FACTORS" at page ___, "SELECTED
HISTORICAL FINANCIAL
1
DATA" at page ___, "PRO FORMA FINANCIAL DATA" at page ___,
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS" beginning at page ___ and the Company's
Combined Financial Statements beginning at page F-1.
Business Strategy
The Company is committed to optimizing its productive
capacities, enhancing its market positions and increasing
profitability by employing the following key strategies:
- Leverage Leading Market Positions and Geographic
Diversity.
- Expand into New Markets through New and Existing
Strategic Relationships.
- Seize Trade Opportunities Based on Regional Presence.
- Improve and Introduce Value-Added Products.
- Maximize Operating Efficiencies.
- Emphasize Close Customer Relationships in Delivering
Quality Products and Service.
- Improve Management Effectiveness and Focus Employee
Incentives.
See "BUSINESS -- Business Strategy" at page ___.
The Distribution
Primary Purposes
of the Distribution... CPC and the Company believe that
the Distribution will enhance the
ability of each of CPC and the Company
to maximize the profitability of its
respective operations by enabling each
company to focus its managerial and
financial resources on the growth and
development of its core businesses without
regard to the corporate objectives,
policies and investment standards of
the other. In addition, the Distribution
will enable the Company to establish
equity-based incentive compensation
arrangements which will more
effectively attract, retain
and motivate employees by offering
benefits that are more directly
associated with the employees' efforts
to improve the performance of the
Company. CPC also believes that the
Distribution will enable CPC to
implement significant cost savings that
would not have been possible without
the decision to proceed with the
Distribution. See "THE
2
DISTRIBUTION -- Reasons for the
Distribution" at page ___.
Distribution Ratio...... Each holder of CPC common stock, par
value $0.25 per share ("CPC Common Stock"),
will receive one share of common stock, par
value $0.01 per share, including the
associated preferred stock purchase
rights ( "Corn Products Common Stock"),
of the Company for every four shares of
CPC Common Stock held on the Record Date
(as defined below). See "THE DISTRIBUTION
-- Manner of Effecting the Distribution"
at page ___.
Tax Consequences to CPC
Stockholders............ CPC expects to receive a private letter
ruling (the "Ruling") from the Internal
Revenue Service (the "IRS") that the
receipt of shares of Corn Products Common
Stock will be tax-free for U.S. federal
income tax purposes to the holders
of CPC Common Stock. The Ruling will
not address the treatment of cash received
for fractional share interests of
Corn Products Common Stock. Cash, if any,
received in lieu of fractional shares
will not be tax-free to holders of
CPC Common Stock. See "THE DISTRIBUTION
-- Manner of Effecting the Distribution"
at page ___ and "-- Certain U.S. Federal
Income Tax Consequences of the Distribution"
at page ___.
Shares to be
Distributed............. Approximately 35.5 million shares of
Corn Products Common Stock will be
distributed pursuant to the Distribution
based on the approximately 142 million shares
of CPC Common Stock outstanding on June 30,
1997 and eligible to receive the Distribution.
The shares to be distributed will constitute
100% of the outstanding shares of Corn
Products Common Stock. The Company expects
to reserve an additional _________ shares of
Corn Products Common Stock for issuance from
time to time under stock-based compensation
plans. See "THE DISTRIBUTION -- Manner of
Effecting the Distribution" at page ___ and
"EXECUTIVE COMPENSATION; PENSION AND
BENEFIT PLANS" at page ___.
No Fractional Shares.... No fractional shares of Corn Products Common
Stock will be distributed. All fractional
share interests will be aggregated and sold
by the Distribution Agent (as defined
below) and the cash proceeds will be distri-
buted to those stockholders otherwise
entitled to a fractional interest. See
3
"THE DISTRIBUTION -- Manner of Effecting
the Distribution" at page __.
Listing and Trading
Market.................. An application to list the Corn
Products Common Stock has
been filed with the New York Stock
Exchange, Inc. (the "NYSE") and the
Corn Products Common Stock is expected
to be approved for listing, subject to
official notice of issuance, on the
NYSE under the symbol "CPO." See "THE
DISTRIBUTION -- Listing and Trading of
Corn Products Common Stock" at page
___.
Record Date............. Close of business on December 15, 1997
(the "Record Date").
Effective Date.......... 12:00 midnight on December 31, 1997 (the
"Effective Date").
Mailing Date............ Certificates representing shares of Corn
Products Common Stock are expected to be
mailed to holders of CPC Common Stock on
or about January 5, 1998.
Distribution Agent...... First Chicago Trust Company of New York (the
"Distribution Agent"). CPC stockholders
with questions concerning procedural issues
related to the Distribution or the trading
of Corn Products Common Stock or CPC
Common Stock for the period generally between
the Record Date and the Effective Date may
call the Distribution Agent at (201) 324-0498
or (800) 446-2617.
Dividend Policy......... The Company's dividend policy will be set
by the Company's Board of Directors (the
"Corn Products Board") after the Distribution.
The Company currently anticipates that it will
pay modest quarterly cash dividends, although
the declaration and payment of dividends is at
the discretion of the Corn Products Board and
will be subject to the Company's financial
results and the availability of surplus funds
to pay dividends. The Delaware General
Corporation Law (the "DGCL") prohibits the
Company from paying dividends or otherwise
distributing funds to its stockholders, except
out of legally available funds. The declaration
of dividends and the amount thereof will depend
on a number of factors, including the Company's
financial condition, capital requirements,
funds from operations, future business prospects
and such other factors as the Corn Products
Board may deem relevant. No assurance can be
given that the Company will pay any
4
dividends. See "RISK FACTORS -- Payment
of Dividends" at page ___,
"MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS beginning at page ___ and
"DIVIDEND POLICY" at page ___.
Relationship with CPC
After the Distribution. The Company will have ongoing relationships
with CPC following the Distribution. CPC and
the Company intend to enter into the Master
Supply Agreement and a number of other
agreements in connection with the Distribution,
including the Distribution Agreement, the Tax
Sharing Agreement, the Tax Indemnification
Agreement, the Debt Agreement, the Transition
Services Agreement, the Employee Benefits
Agreement, the Argo Access Agreement and the
Master License Agreement. Under the
Master Supply Agreement, CPC will generally
agree, among other things, to purchase certain
products exclusively from the Company for a
period of two years from the Effective Date.
In addition, the Company and CPC initially
will have four common members on their
respective Boards of Directors and one CPC
employee will initially serve as a director
of the Company. See "RELATIONSHIP BETWEEN
THE COMPANY AND CPC AFTER THE DISTRIBUTION"
at page ___ and "MANAGEMENT" at page ___.
Risk Factors............ Stockholders should carefully consider the
matters discussed in the section of this
Information Statement entitled "RISK FACTORS"
beginning at page ___.
STOCKHOLDER INQUIRIES
Stockholders of CPC with questions relating to the
Distribution and delivery of stock certificates, or the trading
of Corn Products Common Stock or CPC Common Stock for the period
generally between the Record Date and the Effective Date, should
contact the Distribution Agent:
First Chicago Trust Company of New York
P.O. Box 2500
Jersey City, NJ 07303-2506
(201) 324-0498
or
(800) 446-2617 (Anywhere in the U.S.)
5
-------------------
For other questions addressed to CPC, please contact:
Shareholder Communications Corporation
17 State Street
New York, NY 10004
(800) 451-0155
After the Effective Date, stockholders of the Company with
inquiries relating to the Distribution or their investment in the
Company should contact ____________ at Corn Products
International, Inc., P.O. Box 345, 6500 Archer Road, Argo, IL
60501.
6
CORN PRODUCTS INTERNATIONAL, INC.
SUMMARY HISTORICAL FINANCIAL DATA
The following table sets forth a summary of selected
financial data for the Company. The historical financial
information below may not necessarily be indicative of the
results of operations or financial position that would have been
obtained if the Company had been a separate, independent company
during the period shown or of the Company's future performance as
an independent company. The financial data set forth below should
be read in conjunction with the Company's financial statements
and the notes thereto found elsewhere in this Information
Statement. Interim results may not necessarily be indicative of
the Company's results of operations or financial position for a
full year. See "SELECTED HISTORICAL FINANCIAL DATA" at page __,
"PRO FORMA FINANCIAL DATA" at page __, "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS"
beginning at page __ and the Company's Combined Financial Statements
beginning at page F-1. Earnings per share data are presented
elsewhere in this Information Statement and on a pro forma basis
only. See "PRO FORMA FINANCIAL DATA" at page __.
(in millions, except Six Months Ended
current ratio) June 30, Year Ended December 31,
------------------ ------------------------
1997 1996 1996 1995
---- ---- ---- ----
Income Statement
Data:
Net sales (1) .......... $695 $744 $1,524 $1,387
Gross profit ........... 54 105 143 304
Restructuring and
other charges
(gains), net .......... 86 - - (37)
Operating income
(loss) ................. (82) 60 65 251
Income (loss)
before income taxes .... (97) 47 37 223
Income tax expense
(benefit) .............. (26) 17 12 86
Minority
stockholders'
interest ............... 1 1 2 2
----- ----- ----- -----
Net income
(loss) ................. $(72)(2) $29 $23 $135(2)
===== ===== ===== =====
(in millions, except
current ratio) Year Ended December 31,
-----------------------------------------
1994 1993 1992
---- ---- ----
Income Statement
Data:
Net sales (1) .......... $1,385 $1,243 $1,250
Gross profit ........... 298 254 258
Restructuring and
other charges
(gains), net .......... 19 - -
Operating income
(loss) ................. 188 182 180
Income (loss)
before income taxes .... 169 166 162
Income tax expense
(benefit) .............. 67 66 65
Minority
stockholders'
interest ............... 2 1 1
----- ----- -----
Net income
(loss) ................. $100(2) $99 $96
===== ===== =====
7
(in millions, except Six Months Ended
current ratio) June 30, Year Ended December 31,
------------------ ------------------------
1997 1996 1996 1995
---- ---- ---- ----
Balance Sheet
Data:
Working capital ........ $84 $43 $147 $31
Current ratio .......... 1.3 1.2 1.5 1.1
Plant and
properties, net ........ $1,060 $1,028 $1,057 $920
Total debt ............. $350 $340 $350 $363
Deferred
income taxes,
net .................... $72 $104 $85 $102
CPC
International Inc.
equity
investment ............. $979 $836 $1,025 $600
Total assets ........... $1,658 $1,502 $1,663 $1,306
(in millions, except
current ratio) Year Ended December 31,
-----------------------------------------
1994 1993 1992
---- ---- ----
Balance Sheet
Data:
Working capital ........ $106 $33 $33
Current ratio .......... 1.5 1.2 1.2
Plant and
properties, net ........ $830 $792 $745
Total debt ............. $294 $269 $263
Deferred
income taxes,
net .................... $100 $114 $118
CPC
International Inc.
equity
investment ............. $550 $484 $444
Total assets ........... $1,207 $1,110 $1,053
- -----------------------
(1) Includes sales to CPC as follows: $84; $83; $157; $154;
$163; $140; and $153 for the six months ended June 30,
1997 and 1996 and the years ended December 31, 1996,
1995, 1994, 1993 and 1992, respectively.
(2) Includes provisions for restructuring. See
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" beginning at page __.
8
CORN PRODUCTS INTERNATIONAL, INC.
SUMMARY PRO FORMA FINANCIAL DATA
The following summary pro forma financial data make
adjustments to the Company's historical statement of income as if
the Distribution had occurred on December 31, 1995 for purposes
of the pro forma statement of earnings, and make adjustments to
the Company's historical balance sheet as if the Distribution had
occurred on June 30, 1997 for purposes of the June 30, 1997 pro
forma balance sheet and on December 31, 1996 for purposes of the
December 31, 1996 pro forma balance sheet. See "PRO FORMA
FINANCIAL DATA" at page __ for a discussion of the principal
adjustments involved in the preparation of the pro forma
financial information. The pro forma financial statements of the
Company may not reflect the future results of operations or
financial position of the Company or what the results of
operations would have been if the Company had been a separate,
independent company during such periods. See "PRO FORMA FINANCIAL
DATA" at page ___.
Six Months Year
Ended Ended
June 30, December 31,
(in millions, except per share data) 1997 1996
---- ----
Statement of Earnings Data:
Net sales $ 695 $1,524
Restructuring charges 86 --
Operating income (loss) (80) 69
Income (loss) before income taxes (95) 41
Net income (loss) (71) 26
Earnings (loss) per share(1) $(1.99) $0.72
Balance Sheet Data:
Current assets $ 407 $ 434
Working capital 241 309
Plant and properties, net 1,060 1,057
Total assets 1,658 1,663
Current liabilities 166 125
Long-term debt 350 350
Stockholders' equity 990 1,037
(1) The number of shares used to compute earnings (loss) per
share is based on the number of shares of CPC Common Stock
outstanding at June 30, 1997 and December 31, 1996, adjusted
for an assumed distribution ratio of one share of Corn
Products Common Stock for every four shares of CPC Common
Stock held on the Record Date.
9
INTRODUCTION
On _____, 1997, the Board of Directors of CPC declared
the Distribution payable to the holders of record of CPC Common
Stock at the close of business on the Record Date of one share of
Corn Products Common Stock, including the associated preferred
stock purchase rights ("Rights"), for every four shares of CPC
Common Stock outstanding on the Record Date. (Unless the context
otherwise requires, all references to Corn Products Common Stock
in this Information Statement shall include the associated
Rights.) The Distribution will occur at the Effective Date. As a
result of the Distribution, 100% of the outstanding shares of
Corn Products Common Stock will be distributed to holders of CPC
Common Stock, and CPC will no longer own any shares of Corn
Products Common Stock. It is expected that certificates
representing shares of Corn Products Common Stock will be mailed
to holders of CPC Common Stock on or about January 5, 1998. See
"THE DISTRIBUTION -- Manner of Effecting the Distribution" at
page ___.
CPC formed the Company in March 1997 to assume the
operations of the Corn Refining Business and to effect the
Distribution. In connection with the Distribution, CPC will
transfer to the Company all of the assets and related liabilities
of the Corn Refining Business, including the stock of certain of
CPC's foreign and domestic subsidiaries engaged in the Corn
Refining Business. Following the Distribution, the Company will
focus on the Corn Refining Business and CPC will focus on its
worldwide branded foods business. See "BUSINESS" at page ____ and
"RELATIONSHIP BETWEEN THE COMPANY AND CPC AFTER THE DISTRIBUTION
- -- Distribution Agreement" at page ___. Unless the context
indicates otherwise, all references herein to the business,
operations, activities, customers, assets and other attributes of
the Company prior to the Distribution Date relate to the Corn
Refining Business conducted by CPC and its subsidiaries prior to
the Distribution and are described herein as those of the Company
for ease of presentation and all references herein to the Company
or Corn Products include Corn Products International, Inc. and
its subsidiaries.
Stockholders of CPC with questions concerning
procedural issues related to the Distribution or the trading of
Corn Products Common Stock or CPC Common Stock for the period
generally between the Record Date and the Effective Date may call
the Distribution Agent, First Chicago Trust Company of New York,
at (201) 324-0498 or (800) 446-2617. Other inquiries addressed to
CPC should be directed to Shareholder Communications Corporation
at 17 State Street, New York, NY 10004, or by telephone at (800)
451-0155. After the Effective Date, stockholders of the Company
with inquiries relating to the Distribution or their investment
in the Company should contact _________________ at Corn Products
International, Inc. The Company's address is P.O. Box 345, 6500
Archer Road, Argo, IL 60501 and its telephone number is (708)
563-2400.
10
BUSINESS
Overview
The Corn Refining Business dates back to the original
formation of CPC's predecessor over 90 years ago. In 1906, Corn
Products Refining Company was formed through an amalgamation of
virtually all the corn syrup and starch companies in the United
States. International expansion followed soon thereafter. In
1928, the Corn Refining Business commenced Latin American
operations in Brazil, followed quickly by expansions into
Argentina and Mexico. The Company engages in business in over 20
countries, operating directly and through affiliates in nine
countries with 19 plants and indirectly through joint ventures
and technical licensing agreements elsewhere in Latin America,
Asia, Africa, Australia and New Zealand. The largest of these
joint ventures is in Mexico, where the operations of the Corn
Refining Business have been combined into a joint venture with
the corn refining operations of Arancia Industrial S.A. de C.V.
This joint venture was, in 1996, the first producer in Mexico of
HFCS-55, the primary form of high fructose corn syrup used in the
soft drink industry. The Company is one of the largest corn
refiners in the world, and believes it is the fourth largest corn
refiner in the United States and the leading corn refiner both in
Latin America (including its Mexican joint venture which is the
largest corn refiner in Mexico) and in Canada, based on annual
grind. Approximately 68% of the Company's net sales are generated
in North America, 27% in Latin America and 5% in other geographic
regions through product sales and technology license fees.
As a result of the multinational nature of the
Company's operations, the Company has developed a management
structure that is able to provide strategic direction on a global
basis and also can implement ideas and service customers locally.
The Company has developed both formal and informal networks to
facilitate the sharing of business experiences and problem
solving. The Company believes this flexible structure enables it
to take advantage of the relaxation of international trade
barriers to increase exports between countries and allows for
more effective management and higher utilization of resources.
The Corn Refining Business supplies customers in more
than 60 industries with value-added products processed from
starch and commodity products. The Company's most important
customers are in the food and beverage, pharmaceuticals, paper
products, corrugated and laminated paper, textiles and brewing
industries and in the animal feed markets.
Corn refining is a capital-intensive two-step process
that involves the wet milling and processing of corn. During the
front end grind, corn is steeped in water and separated into
starch and co-products such as animal feed and germ. The starch
is then either dried for sale or further modified or refined
through various processes to make products designed to serve the
particular needs of various industries. The germ is refined to
produce corn oil. See "-- Products" at page ___.
The Company believes it has competitive, up-to-date
and cost-effective facilities. In recent years, significant
capital expenditures have been made to update, expand and improve
11
the Company's facilities, averaging in excess of $135 million per
year for the last five years. Capital investments have included
the rebuilding of the Company's plant in Cali, Colombia; an
expansion of both grind capacity and dextrose production capacity
at the Company's facility in Argo, Illinois; entry into the high
maltose corn syrup business in Brazil, Colombia and Argentina;
and the installation of energy co-generation facilities in
Canada. The Company believes these capital expenditures will
allow the Company to operate highly efficient facilities for the
foreseeable future with further annual capital expenditures that
are significantly below historical averages. In recent years,
steps have also been taken to reduce costs by closing facilities
which could not economically be made efficient, including plants
in Argentina and Honduras.
Business Strategy
The Company is committed to generating growth by
optimizing its productive capacities, enhancing its market
positions and increasing its profitability, employing the
following key strategies:
Leverage Leading Market Positions and Geographic
Diversity. The Company intends to increase sales and develop new
markets by leveraging its position as a market leader for
specific products and in specific geographic regions. For
dextrose, in which the Company has a leading position on a
worldwide basis, the Company's investment strategy favors the
timely provision of additional production capacity to meet rising
demand. For glucose, corn syrup and starch, in which the Company
generally has a strong position and a leading position in Latin
America, the Company follows a similar investment strategy. For
example, in 1994, the Company introduced high maltose corn syrup
for use by the brewing industry in Latin America, where the
Company was already a leader in the corn refining industry. The
Company also plans to use its local operations, licensing and
technical relationships and joint ventures, which are located in
over 20 countries around the world, to expand in markets where
demand for corn refining products is expected to grow at a faster
rate than demand in North America and other more established
markets. In light of its existing market positions for sweeteners
and starches in the faster-growing areas of Latin America, Asia
and Africa, the Company believes it is well-positioned to expand
its presence in these emerging markets.
Expand into New Markets through New and Existing
Strategic Relationships. The Company plans to seek additional
strategic alliances with local starch producers as a cost
effective method of expanding into emerging markets. The Company
believes it can leverage its advanced technology, global business
experience, management and product application skills and
existing customer relationships by forming alliances with local
market participants who have unique knowledge of regional
customers, markets and other political and business conditions.
For example, by combining operations in a joint venture with
Mexico's largest corn refiner in November 1994, the Company and
its partner solidified their leading market positions and enabled
themselves to tap into that nation's developing market for high
fructose corn syrup.
Seize Trade Opportunities Based on Regional Presence.
The Company believes it is well-positioned to take advantage of
the relaxation of international trade barriers to increase
12
exports between countries by using facilities and distribution
systems currently in place. Moreover, the Company is focused on
employing its local operations around the world as a base for
expansion into newly-accessible markets.
Improve and Introduce Value-Added Products. While
non-differentiated commodity products have accounted, and are
expected to continue to account, for most of the Company's sales
volume, the Company intends to continue to invest in the
introduction of products geared to the specific needs of its
customers as well as to attempt to anticipate their future needs
in ever-changing international markets.
Maximize Operating Efficiencies. Competitiveness in
the corn refining industry depends on the ability to continually
improve operating and cost efficiencies. The Company has
implemented, and intends to continue to focus on, cost-saving and
productivity programs. For example, the Company has installed
energy co-generation facilities in a number of plants to reduce
utility costs and has recently coordinated global purchasing to
optimize its worldwide purchasing power. The Company plans to
continue to emphasize continued improvement in preventive
maintenance programs that have resulted in improved facility
reliability over the past several years and have enabled the
Company to achieve record annual corn grind in fifteen plants in
1996.
Emphasize Close Customer Relationships in Delivering
Quality Products and Service. The Company believes it has
established a reputation for delivering high quality products and
providing superior customer service. The Company intends to
continue to improve its service levels and focus on customer
needs through its sales networks and customer surveys. The
Company believes that its localized operations enable it to reach
a broad customer base and that close relations with customers
increase its overall profitability.
Improve Management Effectiveness and Focus Employee
Incentives. The Company intends to continue to give strategic
direction on a global basis while encouraging strong local
management implementation. Moreover, the Company will seek to
increase sales and efficiency by tying compensation more closely
to the performance of the Corn Refining Business and expanding
performance-based compensation further into the organizational
structure than was possible before the Distribution.
Products
The Company serves many industries, including the food
and beverage, pharmaceuticals, paper products, corrugated and
laminated paper, textiles and brewing industries and the animal
feed markets in North America and internationally.
Sweetener Products. Sweeteners accounted for 55%, or $842
million, of the net sales of the Corn Refining Business in 1996.
The Company's Sweeteners Products include:
High Fructose Corn Syrup: The Company produces two types of
high fructose corn syrup: (1) HFCS-55, which is primarily
used as a sweetener in soft drinks and (2)
13
HFCS-42, which is used as a sweetener in various consumer
products such as fruit-flavored beverages, yeast-raised
breads, rolls, doughs, ready-to-eat cakes, yogurt and ice
cream.
Glucose Corn Syrups: Glucose corn syrups are widely used in
the food industry, including in baked goods, snack foods,
alcoholic and non-alcoholic beverages, canned fruits,
condiments, candy and other sweets, dairy products, ice
cream, jams and jellies and as table syrups.
High Maltose Corn Syrup: This special type of glucose syrup
has a unique carbohydrate profile, which makes it ideal for
use in brewing as a source of fermentable sugars to produce
quality beers. High maltose syrups are also used in the
production of confections, canning and some other food
processing applications.
Maltodextrin: Maltodextrin, which comes in several grades,
has a wide variety of uses, contributing bulking benefits
and complex carbohydrates to many applications including
dry mixes, sports drinks, baked products and confections.
Dextrose: The Company produces two types of dry dextrose -
monohydrate and anhydrous. Monohydrate dextrose is used in
a broad variety of applications by the food industry where
a dry product is needed, including confections, baking, dry
mixes and sugar substitutes. Anhydrous dextrose is used for
making dextrose solutions for intravenous injection and
other pharmaceutical applications. Dextrose also has a wide
range of industrial applications, including production of
biodegradable surfactants, wall board and as a base for
many fermentation products including organic acids,
vitamins, amino acids and alcohols.
Starch Products. Starch products accounted for 22%, or $336
million, of the net sales of the Corn Refining Business in 1996.
Corn Starch: Corn starch is a component in the production
of paper, corrugated containers, construction materials and
textiles. It is also used in numerous food applications as
a thickener and binder in a range of products. Other
examples of starch applications include dusting powders,
pharmaceutical tablets, cosmetics, mining and the
production of plastics and resins.
Co-Products. Co-products accounted for 23%, or $346 million,
of the net sales of the Corn Refining Business in 1996. The
Company's Co-products include:
Corn Oil: Corn oil is used as cooking oil and in the
production of margarine, salad dressings, shortening,
mayonnaise and other foods.
Corn Gluten Feed and Corn Gluten Meal: Corn gluten feed is
sold as animal feed and corn gluten meal is sold as a feed
protein, primarily to the poultry industry.
14
Competition
The corn refining industry is highly competitive. Most
of the Company's products compete with virtually identical
products and derivatives manufactured by other companies in the
industry. The U.S. market is the most competitive, with
participation by eleven corn refiners, including ADM Corn
Processing Division ("ADM") (a division of Archer Daniels Midland
Company), Cargill, A.E. Staley Manufacturing Co. ("Staley") (a
subsidiary of Tate & Lyle, PLC) and National Starch and Chemical
Company ("National Starch") (a subsidiary of Imperial Chemicals
Industries plc). In Latin America, Cargill has corn refining
operations in Brazil, National Starch has operations in Brazil
and Mexico, and ALMEX, a joint venture between ADM and Staley,
has operations in Mexico. Several local corn refiners also
operate in Latin America. Competition within markets is largely
based on price, quality and product availability.
Several of the Company's products also compete with
products made from raw materials other than corn. High fructose
corn syrup and monohydrate dextrose compete principally with cane
and beet sugar products. Co-products such as corn oil and gluten
meal compete with products of the corn dry milling industry and
with soybean oil and soybean meal. Fluctuations in prices of
these competing products may affect prices of, and profits
derived from, the Company's products.
Customers
The Company supplies a broad range of customers in
over 60 industries. Historically, CPC's worldwide branded foods
business has been one of the Corn Refining Business' largest
customers, accounting for approximately 10% of total sales in
1996. The Company and CPC will enter into a two-year Master
Supply Agreement, which sets forth the terms under which the
Company will sell its products to CPC following the Distribution.
See "RELATIONSHIP BETWEEN THE COMPANY AND CPC AFTER THE
DISTRIBUTION -- Other Agreements and Arrangements" at page ___. In
addition, approximately 15% of the worldwide sales of the Corn
Refining Business in 1996 represented sales of high fructose corn
syrup to international, regional and local companies engaged in
the soft drink industry, primarily in North America. See "RISK
FACTORS -- Reliance on Major Customers" at page ___. The Company
believes its customers value its local approach to service.
Raw Materials
The basic raw material of the corn refining industry
is yellow dent corn. In the United States, the corn refining
industry processes about 10% to 15% of the annual U.S. corn crop.
The supply of corn in the United States has been, and is
anticipated to continue to be, adequate for the Company's
domestic needs. The price of corn, which is determined by
reference to prices on the Chicago Board of Trade, fluctuates as
a result of three primary supply factors -- farmer planting
decisions, climate and government policies -- and three major
market demand factors -- livestock feeding, shortages or
surpluses of world grain supplies and domestic and foreign
government policies and trade agreements.
15
Corn is also grown in other areas of the world, including
Canada, South Africa, Argentina, Brazil, China and Australia. The
Company's affiliates outside the United States utilize both local
supplies of corn and corn imported from other geographic areas,
including the United States. The supply of corn for these
affiliates is also generally expected to be adequate for the
Company's needs. Corn prices for the Company's non-U.S.
affiliates generally fluctuate as a result of the same factors
that affect U.S. corn prices.
Due to the competitive nature of the corn refining
industry and the availability of substitute products not produced
from corn, such as sugar from cane or beets, end product prices
may not necessarily fluctuate in relation to raw material costs
of corn. See "RISK FACTORS -- Raw Material Price Volatility and
Availability" at page ____ and "-- Commodities Hedging" at page
__.
Management of Corn Cost versus Selling Price
Approximately 50% of the Company's starch and refinery
products are sold at prices established in supply contracts
lasting for periods of up to one year. The remainder of the
Company's starch and refinery products are not sold under firm
pricing arrangements and actual pricing for those products is
affected by the cost of corn at the time of production and sale.
The Company generally hedges its exposure to corn
price fluctuations to attempt to mitigate their impact on
operating profits. However, such hedging activities cannot
eliminate all risk exposure, and at times the Company will
realize gains or losses in its raw material positions.
In North America, the Company follows guidelines (the
"Corn Purchasing Policy") to coordinate final product prices with
corn costs and reduce the risks associated with corn purchasing
and/or hedging activities. The Corn Purchasing Policy operates
according to two basic principles. First, the Company purchases
or prices corn for all contracted firm price product sales.
Second, the Company purchases or prices a limited amount of corn
on an anticipatory basis, based upon continuous evaluation of
market conditions and expectations with respect to the sale of
starch and refinery products not covered by firm price contracts.
The Company has similar purchasing and pricing policies for its
non-U.S. affiliates.
Notwithstanding these programs, losses can and have
occurred. See "RISK FACTORS -- Raw Material Price Volatility and
Availability" at page ____, "-- Commodities Hedging" at page __
and the Company's Combined Financial Statements beginning at page
F-1.
Geographic Scope
The Company engages in business in over 20 countries,
operating directly and through affiliates in nine countries with
19 plants and indirectly through joint ventures and technical
licensing agreements elsewhere in Latin America, Asia, Africa,
Australia and New Zealand. The Company has wholly owned
operations in North America, Latin America and Africa, as well as
a 49% interest in a joint venture in Mexico and other joint
venture interests (as
16
well as licensing and technical agreements) in Latin
America, Asia and Africa. In 1996, approximately 68% ($1,046
million) of the Company's net sales was derived from its
operations in North America, 27% ($406 million) was derived from
Latin American operations (excluding the Company's Mexican joint
venture) and 5% ($72 million) was derived from the Company's
Cooperative Management Group in other regions. See "RISK FACTORS
- -- Multinational Operations" at page __.
Research and Development
The Company's product development activity is focused
on developing product applications for identified customer and
market needs. Through this approach, the Company has developed
value-added products for use in the corrugated paper, food,
textile, baking and confectionery industries. The Company usually
collaborates with customers to develop the desired product
application either in the customers' facilities, the Company's
technical service laboratories or on a contract basis. The
Company's marketing, product technology and technology support
staffs devote a substantial portion of their time to these
efforts. Product development is enhanced through technology
transfers pursuant to existing licensing arrangements.
Sales and Distribution
The Company's products are sold directly to
manufacturers and distributors by salaried sales personnel, who
are generally dedicated to customers in a geographic region. In
addition, the Company has a staff that provides technical support
to the sales personnel on an industry basis. The Company
generally utilizes contract truckers to deliver bulk products to
customer destinations but also has some of its own trucks for
product delivery. In North America, the trucks generally ship to
nearby customers. For those customers located considerable
distances from Company plants, a combination of railcars and
trucks is used to deliver product. Railcars are generally leased
for terms of five to fifteen years.
Patents and Trademarks
Following the Distribution, the Company will own a number
of patents which relate to a variety of products and processes and a
number of established trademarks under which the Company markets
such products. The Company will also have the right to use
certain other patents and trademarks pursuant to patent and
trademark licenses, including the Master License Agreement with
CPC. See "RELATIONSHIP BETWEEN THE COMPANY AND CPC AFTER THE
DISTRIBUTION" at page __. The Company does not believe that any
individual patent or trademark is material to the Corn Refining
Business. There is not currently any pending challenge to the use
or registration of any of the Company's significant patents or
trademarks that would have a material adverse impact on the
Company or its results of operations.
17
Employees and Management
As of June 30, 1997, the Corn Refining Business had
approximately 4,300 employees, of which approximately 950 were
located in the U.S. Approximately 30% and 52% of these employees
are unionized in the U.S. and worldwide, respectively. The
Company believes its union and non-union employee relations are
good.
The Company has a new Chief Executive Officer and a
new Chief Financial Officer, both of whom have substantial
experience in the Corn Refining Business. Otherwise, the Company
will have substantially the same operating management as
currently operates the Corn Refining Business. See "MANAGEMENT --
Executive Officers of the Company" at page __. While it is
anticipated that the Company will operate the Corn Refining
Business in substantially the same manner in which it has
operated in the past, the Distribution will enable the Company's
management team to focus on developing the Corn Refining Business
without regard to how such developments will impact CPC's
worldwide branded foods business. See "THE DISTRIBUTION --
Reasons for the Distribution" at page ___.
Properties
In the U.S., the Company owns and operates four
manufacturing facilities. The Company's international
subsidiaries operate an additional fifteen facilities, fourteen
of which are owned and one of which is leased (Jundiai, Brazil).
While the Company has achieved high capacity utilization, the
Company believes its facilities are sufficient to meet its
current production needs. In addition, the Company owns its
corporate headquarters in Argo, Illinois. The following list
details the location of the Company's manufacturing
plants/facilities:
U.S.
----
Stockton, California
Argo, Illinois
Winston-Salem, North Carolina
Beloit, Wisconsin
Canada
------
Cardinal, Ontario
London, Ontario
Port Colborne, Ontario
Latin America
-------------
Baradero, Argentina
Balsa Nova, Brazil
Cabo, Brazil
Jundiai, Brazil
Mogi-Guacu, Brazil
Llay-Llay, Chile
Barranquilla, Colombia
Cali, Colombia
Medellin, Colombia
18
Asia
----
Petaling Jaya, Malaysia
Faisalabad, Pakistan
Africa
------
Eldoret, Kenya
The Company is continually implementing preventive
maintenance and debottlenecking programs in order to further
improve grind capacity and facility reliability. The Company
believes its facilities are well maintained and suitable and
adequate for its immediate needs and that additional space is
available if needed to accommodate expansion.
The Company has agreed to provide utilities and other
services to CPC at certain of these facilities where CPC will
maintain facilities or conduct operations next to or on the
Company's property. See "RELATIONSHIP BETWEEN THE COMPANY AND CPC
AFTER THE DISTRIBUTION -- Other Agreements and Arrangements" at
page __.
CPC is currently the obligor under certain tax-exempt
bonds issued by the Illinois Development Finance Authority and
its predecessor (the "Authority") to finance the construction and
installation of boiler emission control equipment on property
located at the Argo, Illinois facility and used by the Corn
Refining Business. Until certain of the bonds are repaid in full,
CPC leases this property and equipment from the Authority, a
state agency formed to create and increase job opportunities in
labor surplus areas in the State of Illinois. In connection with
the Distribution, CPC will transfer all of its interests in this
property and equipment to the Company. The Company will not have
any obligation to make payments pursuant to the underlying bonds
and CPC will retain the obligation to make all such payments. The
Company, however, will agree to continue to use the property and
equipment for air or water pollution control within the meaning
of applicable sections of the Code and the regulations
thereunder, and as required by the Authority and to provide 90
days' prior notice to CPC of certain occurrences or
circumstances. Once these bonds have been paid in full, title to
the property and equipment will be transferred to the Company.
Government Regulation and Environmental Matters
As a manufacturer and maker of food items and items
for use in the pharmaceutical industry, the Company's operations
and the use of many Company products are subject to various U.S.,
state, foreign and local statutes and regulations, including the
Federal Food, Drug and Cosmetic Act and the Occupational Safety
and Health Act, and to regulation by various government agencies,
including the United States Food and Drug Administration, which
prescribe requirements and establish standards for product
quality, purity and labeling. The finding of a failure to comply
with one or more regulatory requirements can result in a variety
of sanctions, including monetary fines. The Company may also be
required to comply with U.S., state, foreign and local laws
regulating food handling and storage. The Company believes its
competitive position has not been negatively affected by these
laws and regulations.
19
The operations of the Company are also subject to various
U.S., state, foreign and local laws and regulations with respect
to environmental matters, including air and water quality and
underground fuel storage tanks, and other regulations intended to
protect public health and the environment. Compliance by the
Company with such laws and regulations has not had a material
adverse effect upon the Company, and the Company believes it is
in material compliance with all such applicable laws and
regulations. Based upon current laws and regulations and the
interpretations thereof, the Company has no reason to believe
that the costs of future environmental compliance would be likely
to materially adversely impact its business, results of
operations, cash flows or financial position.
The Company currently anticipates that it will spend
approximately $4.9 million in fiscal 1998 for environmental
control equipment to be incorporated into existing facilities and
in planned construction projects. This equipment is intended to
enable the Company to continue its policy of compliance with
existing known environmental laws and regulations. Under the U.S.
Clean Air Act Amendments of 1990, air toxics regulations will be
promulgated for a number of industry source categories. The U.S.
Environmental Protection Agency's regulatory timetable specifies
the promulgation of standards for vegetable oil production and
for industrial boilers by the year 2000. At that time, additional
pollution control devices may be required at the Company's U.S.
facilities to meet these standards. The ultimate financial impact
of the standards cannot be accurately estimated at this time.
Legal Proceedings
On July 6, 1995, CPC announced that it had received a
federal grand jury subpoena to provide documents relating to an
investigation by the Antitrust Division of the U.S. Department of
Justice of U.S. corn refiners regarding the marketing of high
fructose corn syrup and other "food additives" (the investigation
of CPC relates only to high fructose corn syrup). CPC has
complied with the grand jury subpoena. CPC, as a high fructose
corn syrup producer, was also named as one of the defendants in a
number of private treble damage class action lawsuits, by direct
and indirect customers, alleging violations of federal and state
antitrust laws. Following the certification of a federal class
action on behalf of direct purchasers of high fructose corn syrup
in June, 1996, CPC entered into a settlement of this action in
which it paid the class plaintiffs $7 million. CPC remains a
defendant in one opt-out individual case (Gray and Company v.
Archer Daniels Midland, Civ. No. 97-69-AS) in the United States
District Court for the District of Oregon (subsequently
transferred to the United States District Court for the Central
District of Illinois, Peoria Division for consolidation in MDL,
Docket No. 1087 and Master File No. 95-1477). CPC is also a
defendant in related state law indirect purchaser class actions
in Alabama, California, the District of Columbia, West Virginia,
Kansas and Michigan, each of which was filed in 1995 or 1996.
Pursuant to the terms of the Distribution Agreement,
the Company has agreed to indemnify CPC for certain liabilities
relating to the operation of the Corn Refining Business prior to
the Distribution, including liabilities relating to the federal
antitrust investigation, the Gray case and the state law indirect
purchaser class actions. See "RELATIONSHIP BETWEEN THE COMPANY
AND CPC AFTER THE DISTRIBUTION -- Distribution Agreement" at page
___.
20
Although it is impossible to predict the outcome of any
legal proceeding and the Company cannot predict the range of the
ultimate liability, if any, relating to these proceedings, the
Company believes that CPC has meritorious defenses to the claims
pending against it in such proceedings and that the outcome of
such proceedings should not, individually or in the aggregate,
have a material adverse effect on the business, results of
operations or financial condition of the Company.
The Company is currently, and is from time to time,
subject to claims and suits arising in the ordinary course of
business, including under environmental laws. The Company does
not believe that the results of such legal proceedings, even if
unfavorable to the Company, will have a materially adverse impact
on its financial condition or the results of operations.
RISK FACTORS
Recent Performance of the Corn Refining Business
The Company's ability to generate operating income and
to increase profitability depends to a large extent upon its
ability to price finished products at a level that will cover
manufacturing and raw material costs and provide a profit margin.
The Company's ability to maintain appropriate price levels is
determined by a number of factors largely beyond the Company's
control, such as aggregate industry supply and market demand,
which may vary from time to time and by the geographic region of
the Company's operations.
For example, in 1996, although the Corn Refining
Business produced worldwide sales of $1.5 billion (a 9.9%
increase over 1995 sales of approximately $1.4 billion),
operating income fell approximately 70% to $64.9 million from
$214 million in 1995 (excluding restructuring and other charges).
This decline in operating income reflected sharply lower profit
margins resulting from unprecedentedly high costs for corn in
1996 and increased industry capacity in North America,
particularly for production of high fructose corn syrup. Combined
with extreme volatility in the corn futures markets and
competitive prices in alternative feed ingredient markets
worldwide, these factors prevented the Company from raising its
price levels to cover higher raw material costs in the North
American market and exerted pressure on the Company's profit
margins in other world markets. See "BUSINESS" at page ___,
"-- Competition; Expanding Industry Capacity" at page ___, "-- Raw
Material Price Volatility and Availability" at page ___, "--
Commodities Hedging" at page __ and "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS"
beginning at page ___.
Other factors also affect the Company's profitability,
including the economic conditions in various geographic regions
and countries in which the Company manufactures and sells its
finished products. See "-- Multinational Operations" at page ___.
21
Business Strategy and Future Prospects
While the Company's future profitability and growth
depends partly on the external factors described above, it also
depends on the Company's ability to reduce operating costs and
per-unit product costs, to maintain effective cost control
programs and to develop successful value-added products and new
product applications, while at the same time maintaining
competitive pricing and superior quality products, customer
service and support.
The Company's ability to maintain a competitive cost
structure depends on continued containment of manufacturing,
delivery and administrative costs as well as the implementation
of cost-effective purchasing programs for raw materials, energy
and related manufacturing requirements.
As part of its strategy, the Company expects to spend
approximately $70 to $100 million per year for worldwide capital
expenditures from 1998 through 2000, primarily to implement
productivity improvements and, if supported by customer demand,
expand the production capacity of its facilities. Additional
funds may be needed for working capital as the Company grows and
expands its operations. To the extent possible, these capital
expenditures and other expenses are expected to be funded from
operations. If the Company's cash flow is insufficient to fund
such expenses, the Company can either reduce its capital
expenditures or utilize certain general credit facilities. See
"FINANCING" at page ___ and "MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" beginning at
page ___. The Company may also generate additional liquidity
through the sale of debt or equity securities in the private or
public markets or through the sale of non-productive assets;
however, the Company has agreed, pursuant to the Tax
Indemnification Agreement (as hereinafter defined), to certain
restrictions on its ability to issue equity securities and to
dispose of certain of its assets and businesses for a period of
two years following the Effective Date. See "RELATIONSHIP BETWEEN
THE COMPANY AND CPC AFTER THE DISTRIBUTION" beginning at page
___.
The Company cannot provide any assurance that cash
flow from operations will be sufficient to fund anticipated
capital expenditures and working capital requirements or that
additional funds can be obtained from the financial markets or
the sale of assets at terms favorable to the Company. If the
Company is unable to generate sufficient cash flows or raise
sufficient additional funds to fund capital expenditures, it may
not be able to achieve its desired operating efficiencies and
expansion plans, which may adversely impact the Company's
competitiveness and, therefore, its results of operations.
Competition; Expanding Industry Capacity
The Company operates in a highly competitive environment.
Almost all of the Company's products compete with virtually
identical or similar products manufactured by other companies in
the corn refining industry. In the United States, there are ten
other corn refiners, several of which are divisions of larger
enterprises and some of which, unlike the Company, have
vertically integrated their corn refining and other operations.
Currently, the supply of products
22
produced by the Company and its competitors exceeds the current
U.S. demand for these products, particularly high fructose corn
syrup. Many of the Company's products also compete with products
made from raw materials other than corn. Fluctuation in prices of
these competing products may affect prices of, and profits
derived from, the Company's products. Competition within markets
is largely based on price, quality and product availability and
the Company experiences price pressures in certain of its markets
as a result of competitors' pricing practices. See "BUSINESS --
Competition" at page ____.
Raw Material Price Volatility and Availability
Corn purchasing costs, which include the price of the
corn plus delivery cost, vary between 40% and 65% of the
Company's product costs. Corn costs are influenced by supply and
demand factors that are difficult to anticipate and that the
Company cannot control or influence, including crop disease and
severe weather conditions such as drought, floods or frost. There
can be no assurance that the Company will be able to pass
increases in corn prices on to its customers in the form of price
increases, and any such inability could have an adverse impact
upon the Company's profitability. In 1996, profitability was
adversely impacted by an exceptional increase in corn costs. In
addition, the price of corn sweeteners, especially high fructose
corn syrup, is indirectly impacted by government programs
supporting sugar prices. See "BUSINESS -- Raw Materials" at page
___, "-- Management of Corn Cost versus Selling Price" at page
___ and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" beginning at page ___.
The availability of corn is also dependent on certain
of the factors described above. The Company believes there is an
adequate supply of corn and other agricultural products available
at the present time, but cannot predict future availability of
corn or other agricultural products.
Commodities Hedging
In an attempt to minimize the effects of the
volatility of corn costs on operating profits, the Company takes
hedging positions in the corn futures markets. The effectiveness
of such hedging activities is dependent upon, among other things,
the cost of corn and the ability of the Company to sell
sufficient products to utilize all of the corn with respect to
which it has futures contracts. Although the Company attempts to
link its hedging activities to its sales plans and pricing
activities, occasionally such hedging activities can themselves
result in losses. For example, during the fourth quarter of 1996,
the Company recognized a loss of $40 million when it liquidated
certain corn futures contracts. There can be no assurance that
such losses will not recur. See "BUSINESS -- Raw Materials" at
page ___, "BUSINESS -- Management of Corn Cost versus Selling
Price" at page ___ and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS" beginning at page
___.
23
Unavailability of CPC's Financial and Other Resources
Prior to the consummation of the Distribution, the
business conducted by the Company has been operated as an
unincorporated division of CPC. Thus, the Company does not have
an operating history as a separate company. Following
consummation of the Distribution, the Company will not be able to
rely on CPC for financial support or benefit from its
relationships with CPC to obtain credit or receive favorable
terms for the purchase or sale of certain goods and services. In
addition, following consummation of the Distribution, the Company
will be responsible for obtaining its own sources of financing
and, except as provided in the Transition Services Agreement, for
its own corporate administrative services such as tax, treasury,
risk management and insurance, accounting, legal, information
systems and human resources. See "RELATIONSHIP BETWEEN THE
COMPANY AND CPC AFTER THE DISTRIBUTION" at page ___.
Absence of Prior Trading Market for Corn Products Common Stock
There has not been any established public trading for
Corn Products Common Stock. The Company has filed an application
with the NYSE for the listing of Corn Products Common Stock under
the symbol "CPO." It is currently anticipated that Corn Products
Common Stock will be approved for listing on the NYSE prior to
the Distribution, and trading is expected to commence on a
"when-issued" basis prior to the Distribution. See "THE
DISTRIBUTION -- Listing and Trading of Corn Products Common
Stock" at page ___.
There can be no assurance as to the prices at which
Corn Products Common Stock will trade before or after the
Effective Date. Until the Corn Products Common Stock is fully
distributed and an orderly market develops, the prices at which
such shares trade may fluctuate significantly and may be lower or
higher than the price that would be expected for a fully
distributed issue. Prices for shares of Corn Products Common
Stock will be determined in the marketplace and may be influenced
by many factors, including the depth and liquidity of the market
for the shares, investor perception of the Company, changes in
economic conditions in the corn refining industry and general
economic and market conditions. In addition, the stock market
often experiences significant price fluctuations that are
unrelated to the operating performance of the specific companies
whose stock is traded. Market fluctuations, as well as economic
conditions, could have a materially adverse impact on the market
price of the shares of Corn Products Common Stock.
Payment of Dividends
The Company's dividend policy will be set by the Corn
Products Board after the Distribution. The Company currently
intends to pay modest quarterly cash dividends although the
declaration and payment of dividends is at the discretion of the
Corn Products Board and will be subject to the Company's
financial results and the availability of surplus funds to pay
dividends. The DGCL prohibits the Company from paying dividends
or otherwise distributing funds to its stockholders, except out
of legally available funds. The declaration of dividends and the
amount thereof, if any, will depend on a number of factors,
including the Company's
24
financial condition, capital requirements, funds from
operations, future business prospects and such other factors as
the Corn Products Board may deem relevant. No assurance can be
given that the Company will pay any dividends. See "DIVIDEND
POLICY" at page ___.
Multinational Operations
The Company operates a multinational business and,
accordingly, is subject to risks that are inherent in operating
in foreign countries. Approximately 46% of the Corn Refining
Business' 1996 revenues were generated by non-U.S. operations and
approximately 52% of revenues in the first half of 1997 were
generated by non-U.S. operations. Due to the significant amount
of non-U.S. revenues, fluctuations in the value of foreign
currencies relative to the U.S. dollar could increase the
volatility of the Company's U.S. dollar-denominated operating
results. The Company's non-U.S. operations are also subject to
political, economic and other risks inherent in operating in
countries outside the United States, including possible
nationalization, expropriation, adverse government regulation,
imposition of import and export duties and quotas, currency
restrictions, price controls, potentially burdensome taxation
and/or other restrictive government actions. See "BUSINESS --
Geographic Scope" at page __.
Certain Anti-Takeover Effects
Certain provisions of the Company's Amended and
Restated Certificate of Incorporation (the "Corn Products
Charter") and the Company's By-Laws (the "Corn Products By-Laws")
and of the DGCL may have the effect of delaying, deterring or
preventing a change in control of the Company not approved by the
Corn Products Board. These provisions include (i) a classified
Board of Directors, (ii) a requirement of the unanimous consent
of all stockholders for action to be taken without a meeting,
(iii) a requirement that special meetings of stockholders be
called only by the Chairman of the Board or the Board of
Directors, (iv) advance notice requirements for stockholder
proposals and nominations, (v) limitations on the ability of
stockholders to amend, alter or repeal the Corn Products By-Laws
and certain provisions of the Corn Products Charter, (vi)
authorization for the Corn Products Board to issue without
stockholder approval preferred stock with such terms as the Board
of Directors may determine and (vii) authorization for the Corn
Products Board to consider the interests of creditors, customers,
employees and other constituencies of the Corporation and its
subsidiaries and the effect upon communities in which the
Corporation and its subsidiaries do business, in evaluating
proposed corporate transactions. With certain exceptions, Section
203 of the DGCL ("Section 203") imposes certain restrictions on
mergers and other business combinations between the Company and
any holder of 15% or more of the Corn Products Common Stock. In
addition, the Company has adopted a stockholder rights plan (the
"Rights Plan"). The Rights Plan is designed to protect
stockholders in the event of an unsolicited offer and other
takeover tactics which, in the opinion of the Corn Products
Board, could impair the Company's ability to represent stockholder
interests. The provisions of the Rights Plan may render an
unsolicited takeover of the Company more difficult or less likely
to occur or might prevent such a takeover. See "DESCRIPTION OF
CAPITAL STOCK" at page ___ and "ANTI-TAKEOVER EFFECTS OF
25
CERTAIN PROVISIONS OF THE CHARTER, THE BY-LAWS, THE RIGHTS PLAN AND
DELAWARE LAW" at page ___.
These provisions of the Corn Products Charter and Corn
Products By-Laws, the DGCL and the Rights Plan could discourage
potential acquisition proposals and could delay or prevent a
change in control of the Company, although such proposals, if
made, might be considered desirable by a majority of the
Company's stockholders. Such provisions could also make it more
difficult for third parties to remove and replace the members of
the Corn Products Board. Moreover, these provisions could
diminish the opportunities for a stockholder to participate in
certain tender offers, including tender offers at prices above
the then-current market value of Corn Products Common Stock, and
may also inhibit increases in the market price of Corn Products
Common Stock that could result from takeover attempts or
speculation.
In connection with the Distribution, the Company has
agreed to indemnify CPC for certain taxes resulting from the
failure of the Distribution (or certain related transactions) to
qualify as tax-free transactions if such failure is attributable
to certain actions by, or relating to, the Company, including
certain change in control transactions involving the Company and
certain dispositions of the Company's businesses occurring prior
to the second anniversary of the Effective Date. Such agreements
may have the effect of discouraging or preventing an acquisition
of the Company or a disposition of the Company's businesses,
which may in turn depress the market price for the shares of Corn
Products Common Stock. See "RELATIONSHIP BETWEEN THE COMPANY AND
CPC AFTER THE DISTRIBUTION -- Tax Indemnification Agreement" at
page ___.
Indebtedness
After the Distribution and, in part, as a result of
the incurrence of debt under a credit facility to be negotiated
with one or more major financial institutions (the "Credit
Facility"), the Company will have approximately $350 million of
total debt, all of which will have been assumed by the Company or
incurred pursuant to the terms of the Debt Agreement, and based
upon the Company's total capitalization of approximately $1,340
million as of June 30, the Company's total debt as a percentage
of total capitalization would be approximately 26%, on a pro
forma basis. In addition, the Company may incur additional
indebtedness from time to time to meet working capital
requirements and for capital expenditures. In addition to
creating debt service obligations for the Company, the terms of
the Credit Facility will contain customary affirmative and
negative covenants that will, among other things, require the
Company to satisfy certain financial tests, maintain certain
financial ratios and restrict the Company's ability to make asset
dispositions, incur additional indebtedness, make certain
payments and investments, transact business with affiliates or
engage in mergers or other business combinations. See "FINANCING"
at page ____.
The Company's ability to service this anticipated
indebtedness will depend on future operating performance, which
will be affected by prevailing economic conditions and financial
and other factors, certain of which are beyond the Company's
control. The Company believes that, based upon current levels of
operations, it should be able to meet its projected debt
26
service obligations when due. However, if the Company were
unable to service its indebtedness, it would be forced to pursue
one or more alternative strategies such as reducing its capital
expenditures, selling assets, restructuring or refinancing its
indebtedness or seeking additional equity capital (which may
substantially dilute the ownership interest of existing holders
of Corn Products Common Stock). There can be no assurance that
any of these strategies could be effected on satisfactory terms,
if at all. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" beginning at page __,
"RELATIONSHIP BETWEEN THE COMPANY AND CPC AFTER THE DISTRIBUTION
- -- Debt Agreement" at page __ and "FINANCING" at page __.
Limited Relevance of Historical Financial Information
The historical financial information included in this
Information Statement may not necessarily reflect the results of
operations, financial position and cash flows of the Company in
the future or the results of operations, financial position and
cash flows had the Company operated as a separate stand-alone
entity during the periods presented. The financial information
included herein does not reflect any changes that may occur in
the funding and operations of the Company as a result of the
Distribution. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS" beginning at page
__ and the Company's Combined Financial Statements beginning at
page F-1.
Possibility of Substantial Redistribution of Corn Products
Common Stock
The Distribution will involve the distribution to
holders of CPC Common Stock of an aggregate of approximately 35.5
million shares of Corn Products Common Stock, representing all of
the outstanding shares of Corn Products Common Stock. It is
expected that substantially all of these shares will be eligible
for immediate resale in the public market. The Company is not
able to predict whether substantial amounts of Corn Products
Common Stock will be redistributed in the open market following
the Distribution. Sales of substantial amounts of Corn Products
Common Stock in the public markets, or the perception that such
sales might occur, could materially adversely affect the market
price for the Corn Products Common Stock. See "THE DISTRIBUTION
- -- Listing and Trading of Corn Products Common Stock" at page __.
Reliance on Major Customers
The Company's products are used in a wide variety of food
ingredients and industrial products by customers in more than 60
industries. See "BUSINESS -- Products" at page __. Historically,
CPC's worldwide branded foods business has been one of the Corn
Refining Business' largest customers, accounting for
approximately 10% of total sales in 1996. The Company and CPC
will enter into a two-year Master Supply Agreement, which sets
forth the terms under which the Company will sell its products to
CPC following the Distribution. See "RELATIONSHIP BETWEEN THE
COMPANY AND CPC AFTER THE DISTRIBUTION -- Other Agreements and
Arrangements" at page __. In addition, approximately 15% of the
27
worldwide sales of the Corn Refining Business in 1996 represented
sales of high fructose corn syrup to international, regional and
local companies engaged in the soft drink industry, primarily in
North America. If CPC were not to continue to purchase products
from the Company, or if an unforeseen development caused all the
Company's soft drink customers to cease to purchase products from
the Company, the business of the Company might be materially
adversely affected.
THE DISTRIBUTION
Reasons for the Distribution
CPC continually reviews its businesses for means by
which it can improve its focus and performance, as well as
enhance the long-term interests of stockholders. In February
1997, following a lengthy period of considerable review of
available strategic alternatives for maximizing the potential of
the Corn Refining Business, the CPC Board of Directors determined
that it is in the best interests of CPC's stockholders, and the
respective businesses, to separate the Corn Refining Business
from CPC's core worldwide branded foods business by means of the
Distribution.
The Distribution is designed to separate two different
businesses with distinct financial, investment and operating
characteristics so that each company can pursue objectives
appropriate to its specific businesses. In this regard, CPC's
worldwide branded foods business is a marketing-oriented business
in which investment in advertising and in product differentiation
and innovation is critical. In the Corn Refining Business,
however, the focus is on capital expenditures for manufacturing
facilities to cut costs and improve efficiency because capacity
utilization is a key determinant of price and profit. CPC and the
Company believe that the Distribution will enable the management
of each company to focus its managerial and financial resources
on the growth and development of its core business operations
without regard to the corporate objectives, policies and
investment standards of the other, and to develop appropriate
operational, marketing and financial strategies. Furthermore,
each company's management will have greater flexibility to
respond more quickly to the competitive requirements of its own
industry.
In addition, by separating the Corn Refining Business
into an independent publicly traded company, the Company will be
able to establish incentive compensation arrangements (including
the Stock Incentive Plan (as defined herein) and other
equity-based benefits described herein) which will enable the
Company to more effectively attract, retain and motivate
employees by offering benefits which are more directly associated
with the employees' efforts to improve the performance of the
Company. See "EXECUTIVE COMPENSATION; PENSION AND BENEFIT PLANS"
at page __.
CPC also believes that the Distribution will enable CPC
to implement significant cost savings that would not have been
possible without the decision to proceed with the Distribution.
28
Manner of Effecting the Distribution
The general terms and conditions relating to the
Distribution are set forth in the Distribution Agreement, dated
as of ________________, 1997 (the "Distribution Agreement"),
between CPC and the Company.
CPC will effect the Distribution on the Effective Date
by providing for the delivery of shares of Corn Products Common
Stock to the Distribution Agent for Distribution to the holders
of record of CPC Common Stock on the Record Date. The
Distribution will be made on the basis of one share of Corn
Products Common Stock for every four shares of CPC Common Stock
outstanding on the Record Date. Pursuant to adjustments made in
accordance with CPC's 1984 and 1993 Stock and Performance Plans
(the "CPC Stock Plans"), employee holders of restricted shares of
CPC Common Stock who remain with CPC after the Distribution will
receive additional restricted shares of CPC Common Stock in lieu
of shares of Corn Products Common Stock. Employees who become
employees of the Company will receive restricted shares of Corn
Products Common Stock in substitution for their restricted shares
of CPC Common Stock. In addition, certain trusts (the "Rabbi
Trusts") established in relation to certain CPC benefit plans are
expected to waive their right to receive shares of Corn Products
Common Stock in the Distribution and no distribution of Corn
Products Common Stock will be made with respect to shares of CPC
Common Stock held by the Rabbi Trusts. In lieu of the
Distribution, the Rabbi Trusts will receive additional shares of
CPC Common Stock. As of June 30, 1997, the Rabbi Trusts held, in
the aggregate, approximately 1.26 million shares of CPC Common
Stock. See "-- Treatment of Employee Options, Restricted Stock
and Rabbi Trusts in the Distribution" at page _____.
The actual number of shares of Corn Products Common
Stock to be distributed will depend on the number of shares of
CPC Common Stock outstanding on the Record Date. Based upon the
approximately 142 million shares of CPC Common Stock outstanding
on June 30, 1997 (excluding restricted shares held by employees
expected to remain with CPC and shares held by the Rabbi Trusts),
the Company estimates that approximately 35.5 million shares of
Corn Products Common Stock will be distributed to holders of CPC
Common Stock.
The Board of Directors of the Company has adopted the
Rights Plan. Each share of Corn Products Common Stock issued in
the Distribution will be accompanied by a Right issued under the
Rights Plan. See "DESCRIPTION OF CAPITAL STOCK -- Rights Plan" at
page ___.
It is expected that the Distribution will be declared by
the CPC Board of Directors in November 1997 and made on December 31,
1997. At the time of the Distribution, shares of Corn Products
Common Stock will be delivered to the Distribution Agent for
transfer to CPC's stockholders. It is expected that certificates
representing shares of Corn Products Common Stock will be mailed
to holders of CPC Common Stock on or about January 5, 1998. All
such shares of Corn Products Common Stock will be fully paid,
nonassessable and free of preemptive rights. See "DESCRIPTION OF
CAPITAL STOCK" at page ___.
29
No certificates or scrip representing fractional
shares of Corn Products Common Stock will be issued to holders of
CPC Common Stock as part of the Distribution. The Distribution
Agent will aggregate fractional shares into whole shares and sell
them in the open market at then prevailing prices on behalf of
holders who otherwise would be entitled to receive fractional
share interests, and such persons will receive instead a cash
payment in the amount of their pro rata share of the total sale
proceeds. Proceeds from sales of fractional shares will be paid
by the Distribution Agent based upon the average gross selling
price per share of Corn Products Common Stock of all such sales.
See "-- Certain U.S. Federal Income Tax Consequences of the
Distribution" below. CPC will bear the cost of commissions
incurred in connection with such sales. Such sales are expected
to be made as soon as practicable after the Record Date. None of
CPC, the Company or the Distribution Agent will guarantee any
minimum sale price for the shares of Corn Products Common Stock,
and no interest will be paid on the proceeds.
No holders of CPC Common Stock will be required to pay
any cash or other consideration for the shares of Corn Products
Common Stock to be received in the Distribution or to surrender
or exchange shares of CPC Common Stock or to take any other
action in order to receive Corn Products Common Stock. Except as
described in "-- Treatment of Employee Options, Restricted Stock
and Rabbi Trusts in the Distribution" at page ___, the
Distribution will not affect the number of outstanding shares of
CPC Common Stock.
Certain U.S. Federal Income Tax Consequences of the Distribution
CPC has requested the Ruling from the IRS to the
effect that, among other things, the Distribution will qualify as
a tax-free spin-off to CPC and its stockholders under Sections
355 and 368(a)(1)(D) of the Internal Revenue Code of 1986, as
amended (the "Code"). So long as the Distribution qualifies under
Sections 355 and 368(a)(1)(D) of the Code, the material United
States federal income tax consequences to holders of CPC Common
Stock as a result of the Distribution will be as follows:
(i) no income, gain or loss will be recognized by or
be includible in the income of a holder of CPC Common Stock
solely as a result of the receipt of Corn Products Common Stock
upon the Distribution, except as described below in connection
with cash received in lieu of fractional shares of Corn Products
Common Stock;
(ii) assuming that a holder of CPC Common Stock holds
his or her CPC Common Stock as a capital asset, such
stockholder's holding period for the Corn Products Common Stock
received in the Distribution will include the period during which
the stockholder held CPC Common Stock;
(iii) the tax basis of CPC Common Stock held by a holder of
CPC Common Stock immediately prior to the Distribution will be
apportioned (based upon relative fair market values at the time
of the Distribution) between such CPC Common Stock and the Corn
Products Common Stock received (including any fractional shares
of Corn Products Common Stock deemed received) by such
stockholders in the Distribution; and
30
(iv) a holder of CPC Common Stock who receives cash in
lieu of a fractional share of Corn Products Common Stock as a
result of the sale of such shares by the Distribution Agent will
be treated as if such fractional share had been received by the
stockholder as part of the Distribution and then redeemed from
the stockholder by the Company. Such stockholder will recognize
gain or loss equal to the difference between the cash so received
and the portion of the tax basis in the Corn Products Common
Stock that is allocable to such fractional shares. Such gain or
loss will be capital gain or loss, provided that such fractional
share was held by the stockholder as a capital asset at the time
of the Distribution.
Treasury regulations require each holder of CPC Common
Stock who receives Corn Products Common Stock pursuant to the
Distribution to attach to his or her federal income tax return
for the year in which the Distribution occurs a detailed
statement setting forth such data as may be appropriate in order
to show the applicability of Section 355 of the Code to the
Distribution. Holders of record of CPC Common Stock as of the
Record Date will receive a statement conveying the information
necessary to comply with this requirement and information with
respect to allocation of tax basis between Corn Products Common
Stock and CPC Common Stock described in clause (iii) above.
THE FOREGOING IS ONLY A SUMMARY OF CERTAIN UNITED
STATES FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION UNDER
CURRENT LAW AND IS INTENDED FOR GENERAL INFORMATION ONLY. EACH
STOCKHOLDER SHOULD CONSULT HIS OR HER TAX ADVISOR AS TO THE
PARTICULAR CONSEQUENCES OF THE DISTRIBUTION TO SUCH STOCKHOLDER,
INCLUDING THE APPLICATION OF STATE, LOCAL AND FOREIGN TAX LAWS,
AND AS TO POSSIBLE CHANGES IN TAX LAWS THAT MAY AFFECT THE TAX
CONSEQUENCES DESCRIBED ABOVE.
Listing and Trading of Corn Products Common Stock
An application to list Corn Products Common Stock has been
filed with the NYSE and Corn Products Common Stock is expected to
trade on the NYSE under the symbol "CPO." There is currently no
public trading market for Corn Products Common Stock. The Company
cannot predict prices at which Corn Products Common Stock may
trade prior to the Distribution on a "when-issued" basis or after
the Distribution. In particular, until the Corn Products Common
Stock is fully distributed and an orderly market develops, the
prices at which trading in such stock occurs may fluctuate
significantly and may be higher or lower than the price that
would be expected for a fully distributed issue. The prices at
which Corn Products Common Stock trades will be determined by the
market and may be influenced by many factors, including, among
others, the depth and liquidity of the market for Corn Products
Common Stock, investor perception of the Company and the corn
refining industry, the Company's dividend policy, and general
economic and market conditions. See "RISK FACTORS -- Absence of
Prior Trading Market for Corn Products Common Stock" at page ___.
Such prices may also be affected by the anti-takeover provisions
in the Corn Products Charter and the Corn Products By-Laws. See
"RISK FACTORS -- Certain Anti-Takeover Effects" at page ___,
"ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF THE CHARTER, THE
BY-LAWS,
31
THE RIGHTS PLAN AND DELAWARE LAW" at page ___ and "DIVIDEND
POLICY" at page ___.
As a result of the Distribution, the trading price of
CPC Common Stock will likely be lower immediately following the
Distribution as compared to the trading price of CPC Common Stock
immediately prior to the Record Date, although the receipt of
shares of Corn Products Common Stock is likely to offset some or
all of such effect. The aggregate market values of CPC Common
Stock and Corn Products Common Stock after the Distribution may
be less than, equal to or greater than the market value of CPC
Common Stock prior to the Distribution.
The shares of Corn Products Common Stock to be
received by holders of CPC Common Stock in the Distribution will
be freely transferable, unless a holder is deemed to be an
"affiliate" of the Company under the Securities Act of 1933, as
amended (the "Securities Act"). Persons who may be deemed
affiliates of the Company after the Distribution generally
include individuals or entities that control, are controlled by,
or are under common control with the Company and may include
certain of the Company's officers and directors. Persons who are
affiliates of the Company will be permitted to sell their shares
of Corn Products Common Stock only pursuant to an effective
registration statement under the Securities Act or an exemption
from the registration requirements of the Securities Act, such as
exemptions afforded by Section 4(2) of the Securities Act or Rule
144 thereunder.
The Company estimates that it will initially have
approximately 27,347 stockholders of record, based on the number
of stockholders of record of CPC as of June 30, 1997. The
Distribution Agent will also serve initially as the transfer
agent and the registrar for the Corn Products Common Stock.
Expenses of the Distribution
All costs and expenses of the Distribution incurred on
or prior to the Effective Date shall be paid by CPC. Except as
otherwise provided in the Distribution Agreement or in any other
agreement entered into in connection with the Distribution, CPC
and the Company shall each bear its own costs and expenses after
the Effective Date. See "RELATIONSHIP BETWEEN THE COMPANY AND CPC
AFTER THE DISTRIBUTION" at page ___.
Treatment of Employee Options, Restricted Stock and Rabbi
Trusts in the Distribution
Each employee of the Company or any subsidiary of the
Company on the day following the Effective Date (a "Corn Products
Employee") who at the time of the Distribution holds an option to
purchase CPC Common Stock issued under the CPC Stock Plans will
receive an option to purchase Corn Products Common Stock from the
Company in substitution for such option, with the number of
shares that may be acquired and the exercise price adjusted
pursuant to the following formula: (i) the number of shares of
Corn Products Common Stock covered by the substitute option shall
be equal to the pre-Distribution number of shares of CPC Common
Stock covered by the CPC option multiplied by a fraction, the
numerator of which is the pre-
32
Distribution CPC Market Price and the denominator of which
is the post-Distribution Corn Products Market Price (the "Corn
Products Conversion Factor"), and (ii) the exercise price under
the substituted option shall be equal to the pre-Distribution
exercise price under the CPC option multiplied by a fraction, the
numerator of which is the post-Distribution Corn Products Market
Price and the denominator of which is the pre-Distribution CPC
Market Price. For this purpose, the "pre-Distribution CPC Market
Price" means the average of the high and low prices of CPC Common
Stock on the NYSE for each of the ten trading days prior to the
first day on which there is trading in CPC Common Stock on a
post-Distribution basis, and the "post-Distribution Corn Products
Market Price" means the average of the high and low prices of
Corn Products Common Stock on the NYSE for each of the ten
trading days beginning on the first day on which there is trading
in Corn Products Common Stock, including on a "when issued"
basis. In addition, each Corn Products Employee who at the
Distribution holds an outstanding grant of shares of restricted
CPC Common Stock issued under the CPC Stock Plans will receive
restricted Corn Products Common Stock from the Company in
substitution for such restricted CPC Common Stock, with the
number of shares of restricted Corn Products Common Stock
determined by multiplying the number of shares of restricted CPC
Common Stock held by such employee by the Corn Products
Conversion Factor. Such restricted Corn Products Common Stock
will be subject to the same terms as the restricted CPC Common
Stock except that Corn Products Employees will be credited with
their past service with CPC and, after the Distribution, service
with the Company will be substituted for service with CPC.
In the case of each person other than a Corn Products
Employee who at the Distribution holds an option to purchase CPC
Common Stock issued under the CPC Stock Plans, the number of
shares of CPC Common Stock that may be acquired and the exercise
price will be adjusted pursuant to the following formula: (i) the
number of shares of CPC Common Stock covered by the adjusted
option shall be equal to the greater of (w) the pre-Distribution
number of shares of CPC Common Stock covered by the option and
(x) such number of shares multiplied by a fraction, the numerator
of which is the pre-Distribution CPC Market Price and the
denominator of which is the post-Distribution CPC Market Price
(the "CPC Conversion Factor"), and (ii) the exercise price under
the adjusted option shall be equal to the lesser of (y) the
pre-Distribution exercise price under the option and (z) such
exercise price multiplied by a fraction, the numerator of which
is the post-Distribution CPC Market Price and the denominator of
which is the pre-Distribution CPC Market Price. For this purpose,
the pre-Distribution CPC Market Price is as defined above, and
the "post-Distribution CPC Market Price" means the average of the
high and low prices of CPC Common Stock on the NYSE for each of
the ten trading days beginning on the first day on which there is
trading in CPC Common Stock on a post-Distribution basis. In
addition, in the case of each person other than a Corn Products
Employee who at the Distribution holds an outstanding grant of
shares of restricted CPC Common Stock issued under the CPC Stock
Plans, additional shares of restricted CPC Common Stock will be
issued to such person such that the aggregate number of shares of
restricted CPC Common Stock held by such person will be equal to
the number of restricted shares held by such person prior to the
Distribution, or if greater, such number of restricted shares
multiplied by the CPC Conversion Factor.
33
Five Rabbi Trusts exist to assist CPC in carrying out
its obligations under certain non-qualified deferred compensation
plans. The assets of each of these Rabbi Trusts are subject to
the claims of CPC's creditors in the event of CPC's insolvency.
These Rabbi Trusts currently hold shares of CPC Common Stock. It
is expected that the trustee of each of these Rabbi Trusts will
waive such Rabbi Trust's right to receive shares of Corn Products
Common Stock in the Distribution, so that no distribution of Corn
Products Common Stock will be made with respect to shares of CPC
Common Stock held by such trusts. In consideration for such
waiver and in lieu of the Distribution, CPC will contribute to
each Rabbi Trust an additional number of shares, if any, of CPC
Common Stock so that the cumulative number of shares of CPC
Common Stock held by each such Rabbi Trust will be the greater of
the number of shares held by such Rabbi Trust immediately prior
to the Distribution and such number of shares multiplied by the
CPC Conversion Factor. As of June 30, 1997, the Rabbi Trusts
held, in the aggregate, approximately 1.26 million shares of CPC
Common Stock.
RELATIONSHIP BETWEEN THE COMPANY AND CPC AFTER THE
DISTRIBUTION
For purposes of governing certain of the ongoing
relationships between CPC and the Company after the Distribution
and to provide for an orderly transition on the Effective Date to
the status of two separate, independent companies, CPC and the
Company have entered into the various agreements described below.
The discussion below is a summary of certain provisions of the
Distribution Agreement, the Tax Sharing Agreement, the Tax
Indemnification Agreement, the Debt Agreement, the Transition
Services Agreement, the Employee Benefits Agreement, the Master
License Agreement, the Argo Access Agreement and the Master
Supply Agreement. This summary does not purport to be complete.
Reference is made to the complete provisions of, and such summary
is qualified in its entirety by reference to, forms of such
agreements, copies of which are filed as exhibits to the
Registration Statement on Form 10 (the "Registration Statement")
filed by the Company with the Securities and Exchange Commission
(the "SEC") under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), with respect to the shares of Corn Products
Common Stock to be received by the holders of CPC Common Stock in
the Distribution.
Distribution Agreement
CPC and the Company will enter into the Distribution
Agreement which provides for, among other things, the principal
corporate transactions required to effect the transition to the
Company's status as a company separate and independent from CPC,
and the allocation of certain assets and liabilities of CPC's
overall business between CPC and the Company. The Distribution
Agreement provides that all outstanding intercompany payables and
receivables between the Company and its subsidiaries and CPC and
its subsidiaries will be settled prior to the Effective Date, to
the extent practicable, and otherwise thereafter.
Pursuant to the Distribution Agreement, the Company
will indemnify CPC against most liabilities relating to the
operation of the Corn Refining Business, whether such liabilities
arise on, prior to, or after the Effective Date, except for
liabilities arising out of events
34
or occurrences prior to the Effective Date that are covered
by CPC's insurance and are not also covered by the Company's
insurance. CPC will indemnify the Company against all other
liabilities relating to the operation of CPC's business, before,
on or after the Effective Date. The Distribution Agreement
includes procedures of notice and payment of such claims and
generally provides that the indemnifying party may assume the
defense of a claim or suit brought by a third party. None of the
foregoing indemnities applies to tax or employee benefit claims
or liabilities, which are respectively addressed in the Tax
Sharing Agreement, the Tax Indemnification Agreement and the
Employee Benefits Agreement described below.
Tax Sharing Agreement
CPC and the Company will enter into a tax sharing
agreement on or prior to the Effective Date (the "Tax Sharing
Agreement") which will allocate responsibility for U.S. federal
income and various other taxes ("Taxes") among the companies,
except for Taxes arising as a result of the failure of the
Distribution to qualify for the treatment stated in the Ruling
(which Taxes are allocated pursuant to the Tax Indemnification
Agreement).
In general, CPC will be liable for the U.S. federal income
taxes payable with respect to the returns of the CPC consolidated
group (which prior to the Effective Date includes the Company) as
well as certain other Taxes payable with respect to returns
attributable to the operations of the Corn Refining Business (i)
directly conducted by CPC for periods ending on or prior to the
Effective Date or (ii) directly conducted by a foreign affiliate
of CPC that also conducted the branded foods business. The
Company and its U.S. subsidiaries will be liable for Taxes
payable with respect to returns filed after the Effective Date
that are attributable to the operations of the Company or its
U.S. subsidiaries. The Company and its subsidiaries will be
liable for certain other Taxes to be paid after the Effective
Date with respect to (i) returns filed on or after the Effective
Date that are attributable to the operations of the Corn Refining
Business conducted by a U.S. subsidiary of the Company for
periods ending on or prior to the Effective Date and (ii) returns
filed by non-U.S. subsidiaries of the Company for all periods
(whether ending before or after the Effective Date). If, in
connection with a Tax audit contest, or the filing of an amended
return, a taxing authority adjusts CPC's consolidated federal
income tax return or any other return described above with
respect to which CPC is liable for payment of Taxes, CPC will be
liable for the resulting Tax assessments or will be entitled to
the resulting Tax refund. Similarly, the Company will be
responsible for the Tax assessments and entitled to the Tax
refunds, in connection with the above described returns with
respect to which the Company is liable for payment of Taxes. CPC,
in general, will be responsible for Tax assessments and will be
entitled to the Tax refunds in connection with returns originally
filed prior to the Effective Date relating to the Company's U.S.
subsidiaries.
Tax Indemnification Agreement
CPC and the Company will enter into a tax
indemnification agreement on or prior to the Effective Date (the
"Tax Indemnification Agreement") pursuant to which:
35
(A) the Company will represent to CPC that (1) it has
reviewed the submissions to the IRS in connection with the
request for rulings under Sections 355 and 368(a)(1)(D) of the
Code filed in respect of the Distribution (and certain related
transactions) on behalf of CPC on April 11, 1997 and all
supplements thereto (the "Ruling Request"), and that, to the best
of its knowledge, all statements and representations therein
concerning the Company and its affiliates are complete and
accurate in all material respects, (2) the Company and its
affiliates will comply with each representation concerning the
Company and its affiliates made in or in connection with the
Ruling Request or the Ruling, (3) the Company concurs with all
representations and statements made in the submissions and (4)
neither the Company nor any of its subsidiaries in Canada, Brazil
and Chile, as described and defined in the Ruling Request (each a
"Foreign Spinoff Company"), or their respective affiliates has
any present intention to (a) cease to engage in an active
business as defined in the Treasury regulations under Section 355
of the Code (the "Active Business"), (b) undertake, or permit to
be undertaken, any action that would result in a violation of any
of the Company's covenants under the Tax Indemnification
Agreement, or (c) in any way undertake, approve, or facilitate
any contract or transaction described in paragraph B(3) below;
(B) the Company and each Foreign Spinoff Company will
covenant that during the two-year period commencing on the
Effective Date (the "Restricted Period") (1) to continue to
engage in an Active Business; (2) (a) to continue to manage and
own directly at least 50% of the gross assets which it manages
and owns directly immediately after the Effective Date or the
foreign spinoff date, as applicable, (b) to continue to manage
and own (directly and indirectly through one or more entities) at
least 50% of the gross assets which it manages or owns (directly
and indirectly) immediately after the Effective Date or the
foreign spinoff date, as applicable and (c) not to take any
action (including the acquisition or entering into of business
other than extensions of the Active Business) which would cause
the fair market value of its Active Business to be less than five
percent (5%) of its total gross assets; (3) that neither the
Company, nor any Foreign Spinoff Company nor any affiliated
entity, person or representative will in any way undertake,
approve or facilitate a contract or transaction with respect to:
(a) the issuance of common stock or other ownership interests
(including options and other instruments convertible into common
stock or other ownership interests) that would exceed twenty
percent (20%) of the outstanding shares of common stock or other
ownership interests immediately after the Effective Date; (b) the
issuance of any other instrument that would constitute equity for
U.S. federal income tax purposes ("Disqualified Stock"); (c) the
issuance of options and other instruments convertible into
Disqualified Stock; (d) any acquisitions of more than 20% of
capital stock or other equity capital from shareholders, or any
redemptions, purchases or other acquisitions by the Company, any
Foreign Spinoff Company or any of their respective affiliates
unless such redemptions, purchases or other acquisitions satisfy
certain requirements; (e) the dissolution, merger, or complete or
partial liquidation of the Company or any announcement of such
action; or (f) the waiver, redemption, amendment, termination or
modification of any provision of the Rights Plan, or the
redemption of the Rights thereunder, in connection with, or in
order to permit or facilitate, any acquisition of Corn Products
Common Stock or other equity interest in the Company; and
36
(C) the Company will agree to indemnify CPC (i) for
Taxes and other liabilities arising from breaches or violations
of paragraphs (A) or (B) above (provided, however, that the
Company will not be required to indemnify CPC for violations of
covenants described in paragraph (B) above if, following the day
which is six months after the Effective Date, and prior to such
conduct, the Company delivers to CPC a ruling from the IRS or an
opinion of counsel to the effect that the proposed action or
conduct will not cause the Distribution or any of the foreign
spinoffs to fail to qualify for the tax treatment stated in the
Ruling) and (ii) for Taxes arising as a result of (X) an
acquisition of 50% or more of the stock of the Company by a
person or group of persons during the Restricted Period or (Y)
the commencement of a tender offer by a third party for 50% or
more of the stock of the Company. If obligations of the Company
under this agreement were breached and as a result thereof the
Distribution or any of the foreign spinoffs did not qualify for
the treatment stated in the Ruling, the Company would be required
to indemnify CPC for Taxes imposed as well as related expenses
and such indemnification obligations could exceed the net asset
value of the Company at such time.
Generally, the Tax Indemnification Agreement also
requires the Company to take such actions as CPC may reasonably
request to preserve the favorable tax treatment provided for in
any rulings obtained from the IRS in respect of the Distribution.
Debt Agreement
CPC and the Company will enter into a debt agreement
prior to the Effective Date (the "Debt Agreement") which will
provide that the Company and certain of its subsidiaries will
assume from CPC, and borrow from third parties, an aggregate
amount of debt so that, as of the Effective Date, the Company and
its subsidiaries will have approximately $350 million of total
interest-bearing debt. The Company will transfer to CPC the
proceeds of any third party debt that is borrowed by the Company.
CPC will use these proceeds to repay certain of its third party
indebtedness. In addition, after the Effective Date, the Company
may borrow under its credit facilities to fund operations. See
"FINANCING" at page __ and "MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" at page __.
Transition Services Agreement
CPC and the Company plan to enter into a Transition
Services Agreement prior to the Effective Date (the "Transition
Services Agreement") pursuant to which, in exchange for the fees
specified in the Transition Services Agreement, CPC will agree to
continue to provide certain administrative services to the
Company including accounting, payroll processing and tax filing
assistance and the Company will agree to provide certain
administrative services to CPC. In general, these services will
be provided at a fixed percentage above the provider's cost. In
this agreement, the respective service provider will undertake to
provide the same degree of care and diligence as it uses in
providing these services to itself and its subsidiaries. The
Transition Services Agreement will expire two years from the
Effective Date. The Company believes that the terms and
conditions of the Transition Services Agreement are as favorable
to the Company as those available from unrelated parties for a
comparable arrangement.
37
Employee Benefits Agreement
CPC and the Company plan to enter into an agreement
with regard to their respective liabilities for employee
benefit-related matters for periods before and after the
Effective Date and to provide for certain other employee benefit
matters (the "Employee Benefits Agreement"). The Employee
Benefits Agreement provides that the Company will adopt a defined
benefit plan for salaried employees, a defined benefit plan for
certain hourly employees, a defined contribution savings plan for
salaried employees and related trusts effective as of the day
following the Effective Date (the "Coverage Date") each of which
will be designed to meet the requirements for tax qualification
and to recognize service with CPC prior to the Coverage Date for
the Corn Products Employees. Such defined benefit plan for
certain hourly employees will be substantially identical to the
CPC International Inc. Hourly Employees Retirement Income Plan,
Supplement H (Corn Products OCAW/IAM) (the "CPC Hourly Plan").
CPC will cause assets and liabilities attributable to the accrued
benefits of Corn Products Employees to be transferred from the
CPC International Inc. Non-Contributory Retirement Income Plan
for Salaried Employees, the CPC Hourly Plan and the CPC
International Inc. Savings/Retirement Plan for Salaried Employees
to the corresponding plans of the Company. In addition, CPC will
continue to maintain after the Effective Date the CPC
International Inc. Hourly Employees Retirement Income Plan,
Supplements I (Discontinued) and K (Frozen OCAW/IAM) and the CPC
International Inc. Supplemental Benefits Plan (OCAW, AFGM, IAM
Acme Resin). The Company will adopt, effective as of the Coverage
Date, the CPC International Inc. Corn Products Division
Savings/Retirement Plan for Hourly Employees (Corn Products
OCAW/IAM) and CPC will withdraw its sponsorship of such plan.
Effective as of the Coverage Date, the Company will also adopt
plans similar to CPC's Excess Pension Plan and Excess Savings
Plan recognizing service of Corn Products Employees with CPC
prior to the Coverage Date, and the liabilities for accrued
benefits of Corn Products Employees will be transferred from such
CPC excess plans to a new Company excess plan. The Employee
Benefits Agreement also provides that, effective as of the
Coverage Date, the Company will assume all of CPC's obligations
and liabilities under the collective bargaining agreements
entered into by CPC with the Oil, Chemical and Atomic Workers
Union, Local 7-507, and the International Association of
Machinists, District 8.
The Employee Benefits Agreement also provides that the
Company will establish employee welfare benefit plans for
salaried employees, effective as of the Coverage Date, providing
medical, long-term disability, flexible spending and life
insurance benefits to Corn Products Employees which are generally
comparable to those previously provided by CPC, including health
care coverage for certain retirees and their dependents through a
cash balance account. In addition, the Company will assume
sponsorship of certain insured welfare benefit plans covering
hourly Corn Products Employees (subject to any required consent
of the insurer) and the Corn Products (Argo, Illinois) Cafeteria
Plan and CPC will withdraw as sponsor of such plans, effective as
of the Coverage Date. Effective as of the Effective Date, the
Company will assume all accrued liabilities for vacation pay for
Corn Products Employees. CPC's long term disability plan for
salaried employees will continue to cover individuals who are
totally disabled on the Distribution Date and who would have
become Corn Products Employees if in active employment on the
Coverage Date for so long as such individuals remain totally
disabled. Effective on the Coverage Date, the Company will assume
sole responsibility for all Corn
38
Products Employees who are on medical leave from CPC. The
Company will establish, effective as of the Coverage Date, an
executive life insurance plan substantially similar to CPC's
executive life insurance plan covering Corn Products Employees
previously covered by CPC's plan who consent to the transfer of
CPC's rights and obligations under CPC's plan to the Company.
Pursuant to the Employee Benefits Agreement, the
Company will establish a stock incentive plan effective as of the
Coverage Date pursuant to which stock options on Corn Products
Common Stock, restricted Corn Products Common Stock, and other
equity-based rights may be granted. The Corn Products stock
options and shares of restricted Corn Products Common Stock to be
issued to Corn Products Employees in substitution for CPC stock
options and shares of restricted CPC Common Stock will be issued
pursuant to this plan. See "THE DISTRIBUTION -- Treatment of
Employee Options, Restricted Stock and Rabbi Trusts in the
Distribution" at page ___ and "EXECUTIVE COMPENSATION; PENSION
AND BENEFIT PLANS" at page ___. Effective as of the Coverage
Date, The Company will adopt a deferred compensation plan and
deferred stock unit plan which will assume liabilities for Corn
Products Employees under CPC's deferred compensation plan and
deferred stock unit plan, respectively. CPC will transfer to the
Company the insurance policies associated with the liabilities
under CPC's deferred compensation plan assumed by the Company.
CPC will be responsible for paying any amounts awarded to Corn
Products Employees under CPC's annual bonus plans by CPC's Board
of Directors for 1997.
In general, the Employee Benefits Agreement provides
that Corn Products Employees shall be given credit for all years
of service with CPC or any CPC affiliate performed on or prior to
the Effective Date with respect to matters of employment,
including vacation eligibility and participation in employee
benefit plans.
Other Agreements and Arrangements
CPC and the Company plan to enter into a variety of other
agreements and arrangements governing certain activities
following the Distribution. Pursuant to the Master Supply
Agreement, the Company and its affiliates will continue to supply
CPC and its affiliates with certain corn refining products at
prices based generally upon prevailing market prices. The Master
Supply Agreement will have a two-year term and is renewable
thereafter. For certain products (e.g., corn starch, corn oil and
corn syrup), CPC will agree to purchase exclusively from the
Company, and the Company will agree to certain limitations with
respect to competing with CPC in the sale of these products.
Under the Master License Agreement, each of CPC and the Company
will license to the other certain intellectual property which
will be subject to usage by both parties for a period of time
following the Distribution. The terms and fees for such licenses
vary depending on the intellectual property and are set forth in
such Agreement.
After the Distribution, CPC and the Company will
continue to have common use of certain plants and facilities.
Under the Argo Access Agreement, CPC will be permitted to
continue to package branded food products at the Company's Argo
plant for an access fee which will be a fixed percentage above
the cost of CPC's use of utilities and other support services. In
39
certain other countries, specific agreements and arrangements
will be put in place between the affiliates of CPC and the
Company in order to (i) divide ownership of certain facilities,
(ii) permit affiliates of CPC to utilize facilities owned by the
Company or (iii) permit affiliates of the Company to use
facilities owned by CPC.
FINANCING
The Company intends to enter into an unsecured
revolving Credit Facility of approximately $350 million with one
or more major financial institutions in the U.S. In addition, the
Company will have a number of other credit facilities in its
non-U.S. affiliates.
The Company expects to borrow under the Credit
Facility to fund a portion of its payments under the Debt
Agreement. Subsequent borrowings under the Credit Facility are
expected to be used by the Company for working capital and other
general corporate purposes. The Company expects to be required to
repay in full all borrowings under the Credit Facility on the
fifth anniversary of the date of its initial borrowing under the
Credit Facility. Borrowings under the Credit Facility are
expected to generally accrue interest on a variable basis.
The Credit Facility is expected to include financial
covenants requiring the Company to (i) maintain a ratio of debt
to debt plus shareholders' equity of no more than approximately
60% and (ii) maintain a specified interest coverage ratio.
The Credit Facility is also expected to include
customary restrictive covenants, including those restricting the
Company's ability to incur liens, repurchase common stock, sell
or make investments, enter into mergers and permit its
international subsidiaries to incur indebtedness.
The Credit Facility is expected to contain customary
events of default, including failure by the Company to satisfy
its obligations under the Credit Facility, a change of control of
the Company, events of bankruptcy, insolvency and reorganization
and other material indebtedness defaults by the Company.
40
PRO FORMA CAPITALIZATION
The following table sets forth the unaudited pro forma
capitalization of the Company at June 30, 1997. This data should
be read in conjunction with the pro forma balance sheet and the
introduction to the pro forma financial statements appearing
elsewhere in this Information Statement. The pro forma
capitalization table has been derived from the historical
financial statements and reflects certain pro forma adjustments
as if the Distribution had been consummated as of June 30, 1997.
The pro forma information may not reflect the capitalization of
the Company in the future or as it would have been had the
Company been a separate, independent company at June 30, 1997.
See "PRO FORMA FINANCIAL DATA" at page __.
($ Millions) June 30, 1997
-----------------------------------
Historical Adjustment Pro Forma
---------- ---------- ---------
Debt - third party $ 236 114 $ 350
Debt - CPC International Inc. $ 114 (114)(1) --
Equity:
CPC equity investment (2) 992 (992)(3) --
Stockholders' equity
Cumulative translation adjustment (13) -- (13)
Common stock, par value $0.01,
authorized 900,000,000 shares,
outstanding shares -- 1 (4) 1
Additional paid in capital -- 1,002 (5) 1,002
----- ----- -----
Total capitalization $1,329 $ 11 $1,340
====== ===== ======
(1) To record recapitalization of CPC's debt to third party
debt.
(2) CPC's equity investment includes the original investment in
the Company and the net intercompany payable from the
Company reflecting transactions described in Note 13 to the
Company's Combined Financial Statements beginning at page
F-1.
(3) To reflect the elimination of CPC's equity investment
effected by the distribution of all the outstanding shares
of Corn Products Common Stock to holders of CPC Common Stock
described under "THE DISTRIBUTION" at page __.
(4) To record the par value of the shares of Corn Products
Common Stock distributed to holders of CPC's Common Stock at
a distribution ratio of one share of Corn Products Common
Stock for every four shares of CPC's Common Stock held on
the Record Date as described under "THE DISTRIBUTION" at
page __.
(5) To record the recapitalization of CPC's equity investment.
See note 6 to the Corn Products International, Inc. Pro
Forma Balance Sheet at June 30, 1997.
41
SELECTED HISTORICAL FINANCIAL DATA
The following selected historical financial data of
the Company should be read in conjunction with the historical
financial statements and notes thereto included elsewhere in this
Information Statement. The historical financial statements of the
Company may not necessarily reflect the results of operations or
financial position that would have been obtained had the Company
been a separate, independent company. See "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" beginning at page __. Earnings per share data are
presented elsewhere in this Information Statement and on a pro
forma basis only. See "PRO FORMA FINANCIAL DATA" at page __.
Six Months Ended
($ Millions) June 30, Year Ended December 31,
---------------- ----------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
(Unaudited)
Statement of
Earning Data:
Net sales $695 $744 $1,524 $1,387 $1,385 $1,243 $1,250
Cost of sales 641 639 1,381 1,083 1,087 989 992
------ ------ ------ ------ ------ ------ ------
Gross profit 54 105 143 304 298 254 258
Selling,
general and
administrative 49 47 88 102 99 84 89
Restructuring
and other
charges, net 86 - - (37) 19 - -
Equity in
earnings of
unconsolidated
affiliates 1 (2) (10) (12) (8) (12) (11)
------ ------ ------ ------ ------ ------ ------
Operating
income
(loss) (82) 60 65 251 188 182 180
Financing
costs 15 13 28 28 19 16 18
------ ------ ------ ------ ------ ------ ------
Income (loss)
before income
taxes (97) 47 37 223 169 166 162
Provision
(benefit)
for income
taxes (26) 17 12 86 67 66 65
Minority
interest 1 1 2 2 2 1 1
------ ------ ------ ------ ------ ------ ------
Net income
(loss) (72)(1) $29 $23 $135 $100 $99 $96
====== ====== ====== ====== ====== ====== ======
Balance Sheet
Data:
Working
capital $84 $43 $147 $31 $106 $33 $33
Current
ratio 1.3 1.2 1.5 1.1 1.5 1.2 1.2
Plants and
properties,
net $1,060 $1,028 $1,057 $920 $830 $792 $745
Total debt $350 $340 $350 $363 $294 $269 $263
Deferred
income
taxes, net $72 $104 $85 $102 $100 $114 $118
CPC
International
Inc. equity
investment $979 $836 $1,025 $600 $550 $484 $444
Total assets $1,658 $1,502 $1,663 $1,306 $1,207 $1,110 $1,052
Other
Financial
Data:
EBITDA (2) $(35) $103 $153 $334 $268 $260 $259
Net cash
flows from
operations $52 $(15) $(105) $174 $148 $151 $171
Net cash
used by
investing
activities $(66) $(149) $(251) $(132) $(145) $(120) $(64)
Net cash
provided by
(used by)
financing
activities $19 $166 $357 $(45) $(1) $(31) $(110)
42
(1) Reflects the effect of the $86 million provision for
restructuring and consolidation. See "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS" beginning at page __.
(2) EBITDA represents earnings before interest, income taxes,
depreciation and amortization. EBITDA should not be
considered in isolation or as a substitute for measures of
performance or cash generation prepared in accordance with
generally accepted accounting principles. See Combined
Financial Statements and notes thereto, beginning at page
F-1.
PRO FORMA FINANCIAL DATA
The historical combined financial statements of the
Company reflect periods during which the Corn Refining Business
was operated as a division of CPC. The historical financial
statements of the Company may not necessarily reflect the
consolidated results of operations or financial position of the
Company or what the results of operations would have been if the
Corn Refining Business had been operated as an independent,
public company during such periods.
The unaudited pro forma combined statements of income
for the period ended June 30, 1997 and the fiscal year ended
December 31, 1996 present the combined results of the Company's
operations assuming that the Distribution had occurred on
December 31, 1995. Such statements of income have been prepared
by adjusting the historical statement of income to reflect the
costs, expenses and the recapitalization associated with the
Distribution as if it had occurred on December 31, 1995.
The unaudited pro forma combined balance sheets at
June 30, 1997 and December 31, 1996 present the combined
financial position of the Company assuming the Distribution had
occurred on June 30, 1997 and December 31, 1996, respectively.
Such balance sheets have been prepared by adjusting the
historical balance sheet for the effects of assets, liabilities
and the recapitalization associated with the Distribution as if
it had occurred on June 30, 1997 and December 31, 1996,
respectively.
The unaudited pro forma financial statements should be
read in conjunction with the financial data presented elsewhere
in this Information Statement. The pro forma financial data are
presented for informational purposes only and may not reflect the
future results of operations or financial position of the Company
or what the results of operations would have been had the Company
been operated as an independent, public company during such
periods.
43
CORN PRODUCTS INTERNATIONAL, INC.
PRO FORMA STATEMENTS OF INCOME
(Dollars in millions)
Historical Adjustments Pro Forma
--------------------------------------
For the Six Months
Ended June 30, 1997
Net sales $ 695 $ 695
Cost of sales 641 641
----- ----- -----
Gross profit 54 54
----- ----- -----
Selling, general and administrative 49 (2)(1) 47
Restructuring and other charges - net 86 86
Equity in earnings of
unconsolidated affilia1es 1 1
----- ----- -----
Expenses and other income - net 136 (2) 134
----- ----- -----
Operating income (loss) (82) 2 (80)
Financing costs 15 15
----- ----- -----
Income (loss) before income
taxes and minority interest (97) 2 (95)
Provision (benefit) for income taxes (26) 1(2) (25)
Minority stockholders' interest 1 1
----- ----- -----
Net income (loss) $ (72) $ -- $ (71)
===== ===== =====
(1) To record the reduction in pension and postemployment
expenses due to the retention of the liability and
associated expenses for retirees by CPC and changes in plan
design.
(2) To record the net change in the provision for income taxes
to reflect the pro forma adjustments. The effective tax rate
utilized was 36%, which approximates the Company's effective
rate before the benefit associated with the restructuring
charge.
44
CORN PRODUCTS INTERNATIONAL, INC.
PRO FORMA STATEMENTS OF INCOME
(Dollars in millions)
Historical Adjustments Pro Forma
--------------------------------------
For the Year Ended
December 31, 1996
Net sales $1,524 $1,524
Cost of sales 1,381 1,381
----- ----- -----
Gross profit 143 143
----- ----- -----
Selling, general and administrative 88 (4)(1) 84
Restructuring and other charges - net -- --
Equity in earnings of
unconsolidated affiliates (10) (10)
--- ----- -----
Expenses and other income - net 78 (4) 74
----- ------ -----
Operating income 65 4 69
Financing costs 28 28
----- ----- -----
Income before income taxes
and minority interest 37 4 41
Provision (benefit) for income taxes 12 1(2) 13
Minority stockholders' interest 2 2
----- ----- -----
Net income $ 23 $ 3 $ 26
===== ===== =====
(1) To record the reduction in pension and postemployment
expenses due to the retention of the liability and
associated expenses for retirees by CPC and changes in plan
design.
(2) To record the net change in the provision for income taxes
to reflect the pro forma adjustments. The effective tax rate
utilized was 33.6%.
45
CORN PRODUCTS INTERNATIONAL, INC.
PRO FORMA BALANCE SHEETS
(Dollars in Millions)
--------------------------------------
Historical Adjustments Pro Forma
--------------------------------------
At June 30, 1997
Assets
Current assets
Cash and cash equivalents $ 37 $ 37
Accounts receivable - net 189 189
Inventories 136 136
Prepaid expenses 16 16
Other current assets 18 18
Due to parent 11 11
----- ----- -----
Total current assets 407 -- 407
Investments in and loans
to unconsolidated
affiliates 166 166
Plants and properties - net 1,060 1,060
Other assets 25 25
----- ----- -----
Total Assets $ 1,658 -- $1,658
===== ===== =====
Liabilities and Stockholders'
Equity
Current liabilities
Notes payable $ 148 $(148)(1) $ --
Current portion of long-term debt 9 (9)(1) --
Accounts payable 78 78
Accrued liabilities 88 88
----- ----- -----
Total current liabilities 323 (157) 166
----- ----- -----
Noncurrent liabilities 72 (19)(2) 53
Long-term debt 193 157(1) 350
Deferred taxes on income 83 8(3) 91
Minority stockholders' interest 8 8
----- ----- -----
Total noncurrent liabilities 356 146 502
----- ----- -----
Stockholders' equity
Cumulative translation adjustment (13) (13)
Net stockholders' investment 992 (992)(4) --
Common stock -- 1(5) 1
Paid-in-capital -- 1,002(6) 1,002
----- ----- -----
Total stockholders' equity 979 11 990
----- ----- -----
Total Liabilities and
Stockholders' Equity $1,658 -- $1,658
===== ===== =====
46
(1) To record the recapitalization of the Company's debt.
(2) To record an increase in the pension liability of $11
million and a decrease in the postemployment liability of
($30) million.
(3) To reflect the deferred tax liability associated with the
pension and postemployment liabilities to be retained by
CPC.
(4) To reflect the elimination of CPC's equity investment
effected by the distribution of all outstanding shares of
Corn Products Common Stock to holders of CPC Common Stock as
described under "THE DISTRIBUTION."
(5) To record the par value of shares of Corn Products Common
Stock distributed to holders of CPC Common Stock at a
distribution ratio of one share of Corn Products Common
Stock for every four shares of CPC Common Stock held on the
Record Date as described under "THE DISTRIBUTION."
(6) To record the transfer of CPC's equity investment of $967
and the cumulative effect of (i) an increase in net assets
for the assumption by CPC of the postemployment benefit
liability associated with retirees of ($30) million, (ii) a
decrease in net assets for the assumption by CPC of the
pension liability associated with retirees of ($46) million
and a reduction in the pension assets transferred to the
Company of $57 million, (iii) a decrease in net assets for
the change in the deferred tax liability associated with (i)
and (ii) above and (iv) par value of $0.01 of the Corn
Products Common Stock attributable to the distribution of
all of the outstanding shares of Corn Products Common Stock
to holders of CPC Common Stock as described under "THE
DISTRIBUTION."
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Introduction
This discussion should be read in conjunction with the
description of the Company's business (including the RISK
FACTORS) and the Combined Financial Statements and notes thereto
included elsewhere in this Information Statement. This discussion
and the financial statements included in this Information
Statement were prepared by attributing the historical data for
the Corn Refining Business to the Company utilizing accounting
policies consistent with those applied to the preparation of
CPC's historical financial statements. Since the Corn Refining
Business was operated as a division of CPC during the periods
presented, such financial information and statements may not
necessarily reflect the consolidated results of operations or
financial position of the Company or what the results of
operations would have been if the Company had been an
independent, public company during those periods.
Overview and Outlook
Following several years of attractive growth, the Company's
profits declined sharply in 1996 and 1997 (see below). The
primary reason for the profit decline in 1997 was a significant
expansion of high fructose corn syrup capacity in North America
ahead of industry demand which has been, however, growing at
approximately 5% per year. The current supply/demand imbalance
caused North American high fructose corn syrup prices to fall
sharply and made this
47
important product unprofitable for the Company in 1997.
Based on the Company's 90 years of experience in the corn
refining industry, it believes that such imbalances and the
accompanying profit downturns arise periodically, approximately
every 7 - 10 years. The industry, however, has historically
recovered from such downturns, generally fairly quickly.
To restart profit growth, for 1998, the Company
intends to focus in all its markets and operations on improving
prices, volume, profit margins and efficiencies by continuing to
strive for optimal product selection, optimal production capacity
usage, cost reductions in purchasing, manufacturing and
administration, and improvement in quality of products and
customer service. More specifically:
In North America, in view of the industry
over-capacity in high fructose corn syrup and the resulting
depressed profit margins, the Company's strategy is to seek sales
and profit growth by shifting production, to the extent its
existing capacity permits, away from high fructose corn syrup to
products with better margins. The Company plans to concentrate
its capital expenditures on cost reduction projects at existing
facilities. The Company also intends to increase export sales by
making full use of its worldwide infrastructure.
In Latin America, the Company plans to concentrate on
meeting growing demand. In 1998, several plant expansions are
expected to be completed. The Company also intends to explore
expansion into new markets across borders in the region, using
its existing strong positions and facilities in Argentina,
Brazil, Chile, Columbia, and Mexico.
In Asia and Africa and other parts of the world, the
Company plans to continue expanding and improving its facilities
to meet growing demand. It further plans to continue to explore
an increased participation in the region's corn refining industry
through joint ventures and technology transfers.
The Company's plans and expectations may change at any
time for various reasons. Should any of the factors described
above change, the Company's results of operations would be
correspondingly affected. See "FORWARD-LOOKING STATEMENTS" at
page __.
Results of Operations: First Six Months of 1997 Compared
With First Six Months of 1996
Net sales. Despite volume growth of 3.9%, net sales for the
first six months of l997 decreased 6.7% to $695 million compared
with net sales of $744 million for the same period in 1996. This
decline was due entirely to a 16% decline in sales in North
America, where lower corn costs in combination with excess supply
in the high fructose corn syrup business resulted in
significantly lower prices. Excess supply was caused by a
significant capacity expansion by one of the Company's
competitors, the entry of a new competitor into the market and
lower than expected demand in Mexico. In Latin America, sales
increased 14% compared with the first six months of 1996 on both
strong volume gains of 11% and improved prices. Sales in Asia and
Africa increased 4.2% compared with the first six months of 1996
on improved volume and prices, which were partially offset by
weaker currency values.
48
Cost of sales and operating expenses. Cost of sales as
a percentage of net sales in the first six months of 1997 was
92.2% compared with 85.9% in the first six months of 1996,
resulting in gross profit margins of 7.8% and 14.4% for each of
these periods, respectively. This decline in gross profit margins
reflects extremely low high fructose corn syrup pricing during
the first six months of 1997 as a result of significant excess
supply in this important product category. A decline in corn
prices during this period compared with the same period in 1996
could not make up for this substantial margin erosion.
Restructuring and Other Charges -- Net. The Company recorded
an $86 million pre-tax ($64.4 million after tax) restructuring
charge in the second quarter of 1997. This charge included direct
costs of the spin-off of the Corn Refining Business including
fees in the legal, tax and investment banking areas, as well as
other costs relating to the separation of facilities that were
used by CPC to produce both consumer foods and corn-derived
products. Approximately $72 million of this charge related to the
restructuring of the Company's operations. The majority of the
restructuring is taking place in the Company's international
operations.
Operating income. Excluding the 1997 second-quarter
restructuring charge described above, operating income declined
93% during the first six months of 1997 compared with the same
period in 1996. All of this decline came from North America,
where excess high fructose corn syrup supply severely impacted
pricing and adversely affected results. In Latin America, Asia
and Africa, volumes and margins both improved, but were unable to
offset margin declines in North America.
Financing costs. Financing costs were $14.9 million
for the first six months of 1997 compared with $12.6 million in
the same period of 1996 due to an increase in the amount of
outstanding borrowings and higher interest rates.
Provision for income taxes. The effective tax rate for
the first six months of 1997 on the loss was 26.2% compared with
an effective tax rate on income of 37% for the same period of
1996. The lower effective tax rate in 1997 was the result of
reduced tax benefits related to the restructuring charge taxed at
a lower effective rate of 25% rather than the regular effective
tax rate on operating results of 36%. This 36% effective tax rate
is not necessarily indicative of the effective tax rate that may
be applicable in future periods and future effective tax rates
may vary depending on the relative proportions of the Company's
U.S. and non-U.S. income and changes in the effective tax rates
in each of the jurisdictions where the Company operates.
Net loss. Excluding the after-tax restructuring charge
described above, the Company reported a net loss of $8 million
for the first six months of 1997, compared with net income of $29
million for the same period in 1996, resulting from much lower
operating income and higher financing costs. Including the
restructuring charge, the net loss was $72 million.
49
Results of Operations: 1996 compared to 1995
Net sales. Net sales in 1996 advanced 9.9% to $1.5
billion on increased volume of 6.4% and also reflecting higher
corn costs. All geographic areas contributed to the increase over
the prior year. North America accounted for the majority of the
sales gain as a result of corn cost increases resulting in higher
prices and an 8% increase in volumes. In Latin America, sales
improved 1.1% on an increase in volumes of 1.6% but were
partially offset by slightly lower prices. Volumes in Asia and
Africa were up significantly, but increased prices were fully
offset by weaker currency values.
Cost of sales and operating expenses. Cost of sales as
a percentage of net sales was 90.6% in 1996, compared with 78.1%
in 1995, resulting in gross profit margins of 9.4% and 21.9%, for
each of these periods, respectively. The higher cost of corn in
1996, which reached an all-time high during the year, and a $40
million fourth-quarter loss for certain liquidated corn futures
positions, significantly impacted results.
Operating income. Operating income decreased 70%,
excluding the 1995 special items (see "Results of Operations:
1995 compared to 1994 -- Restructuring and other charges -- net"
below). Strong volume gains in all areas were more than offset by
reduced margins. In North America, which accounted for most of
the overall decrease in operating income, margins declined
significantly as a result of the higher cost of raw materials
described above and the inability to increase prices due to
excess supply. In Latin America, additional profits from volume
improvements were more than offset by reduced margins related to
higher corn costs. In Asia and Africa, higher volumes and prices
resulted in increased profits but were partially offset by the
effects of weaker currencies.
Provision for income taxes. The effective tax rate in
1996 was 33.6%, compared with 38.5% in 1995. The 4.9% decline was
due chiefly to a decrease in tax rates in certain foreign
jurisdictions and an increase in the proportion of the Company's
worldwide income represented by foreign income, which, on
average, was taxed at a lower rate than U.S. income.
Net income. Net income of $23 million was 79% below
1995, excluding the 1995 special items in (see "Results of
Operations: 1995 compared to 1994 -- Restructuring and other
charges -- net" below). This decline resulted from a significant
decline in operating income partially offset by the benefit of a
lower effective tax rate.
Results of Operations: 1995 compared to 1994
Net sales. Net sales in 1995 remained flat at $1.4
billion, primarily as a result of eliminating sales of the Company's
Mexican operations, which were converted into a joint venture
early in the year. Excluding sales for Mexico in 1994, net sales
in 1995 would have increased 3.9% on a volume advance of 6.9%.
Driven by lower corn costs, sales in North America were 1.2%
lower despite volume gains. In Latin America, sales increased
slightly as volumes increased by 6.4%, but were partially offset
by declines in selling prices driven by corn
50
costs. Sales in Asia and Africa increased on a 10% volume
gain and improved prices. Volumes in this area are increasing as
the Company continues to reach new markets in Asia.
Cost of sales and operating expenses. Cost of sales as
a percentage of net sales was 78.1% in 1995, compared with 78.5%
in 1994, resulting in gross profit margins of 21.9% and 21.5% in
1995 and 1994, respectively. The improvement in gross profit
margins came from the Company's continuing restructuring efforts,
which began in 1994. Operating expenses as a percentage of net
sales remained flat compared to the prior year.
Restructuring and other charges -- net. In 1995, the
Company recorded a pre-tax gain of $52 million from the sale of
its ethanol business in the U.S. This was partially offset by a
pre-tax restructuring charge of $15 million. In 1994, the Company
incurred a restructuring charge of $19 million. Both of these
restructuring charges were designed to ensure competitiveness.
Operating income. Operating income for 1995, excluding
the special items in both 1995 and 1994 (discussed above),
improved 3.3% as profits from volume gains were partially offset
by lower margins. In North America, operating income increased
7.2% on both improved volumes and margins. Latin American
operating income was up 2.1%. Operating income in Asia and Africa
was down, compared to the prior year, as the Company continued to
invest in infrastructure as it expanded into new markets.
Operating income for 1995 also excluded a full year's earnings
from Pekin Energy, the Company's ethanol business. Adjusting 1994
to exclude ethanol earnings, operating income in 1995 rose 5.7%.
Financing costs. Financing costs of $28 million were
significantly higher than in 1994 as borrowings increased 23%,
mostly outside the U.S., where interest rates were higher.
Provision for income taxes. The effective tax rate in
1995 was 38.5%, compared with 39.5% in 1994. The lower tax rate
in 1995 was attributable to the effect of declines in worldwide
tax rates. This rate was higher than the U.S. statutory rate of
35% because it included state income taxes and foreign income
taxed at different effective rates.
Net income. Net income of $112 million (excluding
special items in 1995) was slightly higher than net income in
1994 of $111 million (excluding 1994 special items). Higher
operating income and a lower effective tax rate in 1995 were
mostly offset by increased financing costs.
Liquidity and Capital Resources
The Company expects that future cash flows will be
sufficient to fund operations, to provide for adequate capital
expenditures in support of its growth strategy and to pay a
modest dividend. The Company also expects to secure an
investment-grade debt rating.
The Company's North American and Latin American plants have
been modernized and expanded in line with projected market demand
and no major capacity additions are planned for 1998. Worldwide
capital expenditures of approximately $70 to $100 million per
51
year are planned from 1998 through 2000, primarily for
identified cost reduction opportunities, a significant reduction
from average capital expenditures of $135 million for each of the
last five years. New capacity expansion (other than projects
already in process) will be limited to products or market areas
where the Company anticipates significant growth or has
identified market demand.
The Company is currently negotiating the terms of a
$350 million credit facility in the U.S. to provide funds to
satisfy the Company's obligations under the Debt Agreement and
for working capital and other general corporate purposes. In
addition, the Company also has a number of credit facilities in
its foreign operations. The Company expects that these credit
facilities, together with cash flow from operations, will provide
it with sufficient operating funds. See "FINANCING" at page ____.
If there is a material change in economic conditions, however,
the Company may be required to reduce capital expenditures or
modify or eliminate dividends, or seek additional credit
facilities.
Net cash flows. Net cash flows from operations of $52
million in the first half of 1997 improved significantly over a
$15 million deficit for the same period in 1996, despite a net
loss in 1997. This resulted from reductions in trade working
capital, higher depreciation and the restructuring charge
described above. The benefit of increased cash flows from
operations and lower investment requirements in 1997 resulted in
a significant improvement in net cash outflows after investment
of $14 million versus $167 million in the first half of 1996.
In 1996, lower net income, together with higher working
capital and higher capital expenditures, resulted in a negative
cash flow from operations of $85 million. Capital expenditures
during 1996 were mainly for plant expansions in Latin America and
North America, as well as for plant efficiency projects. A $60
million loan to Arancia-CPC S.A. de C.V., the Company's Mexican
joint venture, financed construction of a high fructose corn
syrup plant to serve the Mexican soft drink industry's conversion
to high fructose corn syrup.
In 1995, net cash flow from operations, which
benefited from a decrease in trade working capital, and the
proceeds from the disposal of the Company's investment in Pekin
Energy fully covered all capital expenditures and provided
positive cash flow after investments of $42 million compared with
$3 million in 1994.
Key balance sheet items. Total assets at June 30,
1997, remained largely the same compared with December 31, 1996
as reduced working capital was largely offset by capital
expenditures in the Company's plants and properties and its
investment in Arancia-CPC S.A. de C.V., its Mexican joint
venture. Total debt at June 30, 1997 increased $10 million to
$350 million from total debt at June 30, 1996.
Total assets in 1996 increased $357 million to $1.6
billion from year-end 1995 mainly due to loans made to the
Company's unconsolidated joint venture in Mexico for the
construction of a new plant; higher capital expenditures and an
increase in working capital. Total debt decreased $13 million to
$350 million.
52
Total assets in 1995 increased $109 million to $1.3 billion
from year-end 1994 mainly due to higher capital expenditures and
the inclusion of the Company's investment in its Mexican joint
venture, partially offset by the sale of the Company's investment
in Pekin Energy and a decrease in trade working capital. Total
debt increased by $67 million to $363 million.
MANAGEMENT
Directors of the Company
Pursuant to the Corn Products Charter and Corn
Products By-Laws, the Corn Products Board will consist of the
number of directors duly authorized from time to time by the Corn
Products Board, divided into three approximately equal classes
with each class serving a three-year term; provided, that there
shall not be fewer than seven nor more than seventeen directors.
Following the Distribution, the Corn Products Board will consist
initially of the nine individuals who currently comprise the Corn
Products Board. Class I directors will initially serve until the
next annual meeting of stockholders, currently expected to be
held in April 1998 and are expected to stand for reelection at
that time. Class II and Class III directors will serve until the
annual meetings of stockholders in 1999 and 2000, respectively.
Set forth below is certain information as to the
individuals who will serve as directors of the Company following
the Distribution, their class membership and their original
terms. The directors' ages are shown as of December 31, 1997. The
Corn Products Board has a director tenure policy that provides
that outside directors will retire from the Corn Products Board
at the annual meeting of stockholders coincident with or
immediately following their 70th birthday, and employee directors
will retire from the Corn Products Board upon retirement or other
termination of active employment, whether or not the term for
which such director has been elected has expired. Konrad
Schlatter will serve as the initial Chairman of the Corn Products
Board.
Ignacio Aranguren-Castiello (Class III), age 66, is
Chairman and Chief Executive Officer of Arancia-CPC S.A. de C.V.,
a joint venture formed in November 1994 by the combination of the
Mexican operations of the Corn Refining Business with Arancia
Industrial S.A. de C.V., a Mexican company controlled by Mr.
Aranguren-Castiello and his family. He has been President of
Arancia Industrial S.A. de C.V. since the late 1970's. Mr.
Aranguren-Castiello is also a director of Bancomer S.A., Grupo
Sidek, S.A. de C.V. and Corfuerte, S.A. de C.V.
Alfred C. DeCrane, Jr. (Class II), age 66, retired as
Chairman and Chief Executive Officer of Texaco Inc. in July 1996.
Mr. DeCrane was elected President of Texaco in 1983, Chairman of
the Board in 1987 and Chief Executive Officer in 1993. He is also
a director of CPC International Inc., CIGNA Corporation and
Harris Corporation.
William C. Ferguson (Class I), age 67, retired as
Chairman of NYNEX Corporation in April 1995 and as Chief
Executive Officer in December 1994. Prior thereto, Mr.
53
Ferguson served as Vice Chairman of NYNEX from 1987 to 1989. He
is also a director of CPC International Inc. and General Re
Corporation.
Richard G. Holder (Class II), age 66, retired as the
Chairman and Chief Executive Officer of Reynolds Metals Company
in 1996. Prior thereto, Mr. Holder served as President and Chief
Operating Officer of Reynolds Metals from 1988 until 1992. He is
also a director of CPC International Inc. and Universal Corp.
Bernard H. Kastory (Class I), age 52, is Senior Vice
President - Finance and Administration, of CPC. Mr. Kastory
served as Chairman and Chief Executive Officer of CPC's baking
business from October 1995 until February 1997 and prior thereto,
served as President of the Corn Refining Business and as a Vice
President of CPC since 1992. Mr. Kastory joined CPC in 1967 and,
since then, has held various technical, financial and general
management positions in its Corn Refining Business.
William S. Norman (Class III), age 59, is President
and Chief Executive Officer of the Travel Industry Association of
America, a position he has held since 1994. Previously, Mr.
Norman served as Executive Vice President of the National
Railroad Passenger Corporation (AMTRAK) since 1987. He is also a
director of CPC International Inc.
Konrad Schlatter (Class II), age 62, is Chairman and
Chief Executive Officer of Corn Products. Mr. Schlatter served as
Senior Vice President of CPC from 1990 to 1997 and Chief
Financial Officer of CPC from 1993 to February 1997.
Samuel C. Scott (Class I), age 53, is President and Chief
Operating Officer of Corn Products. Mr. Scott has been President
of CPC's worldwide Corn Refining Business since 1995 and has been
President of CPC's North American Corn Refining Business since
1989. He was elected a Vice President of CPC in 1991. Mr. Scott
is a director of Motorola, Inc. and Reynolds Metals Company.
Clifford B. Storms (Class III), age 65, is an attorney
in private practice. Mr. Storms was Senior Vice President (since
1988) and General Counsel (since 1975) of CPC until his
retirement from CPC in June 1997. Mr. Storms joined CPC in 1964
and was appointed Assistant General Counsel in 1968 and Vice
President for Legal Affairs in 1973.
Directors' Meetings, Fees and Committees
The Corn Products Board expects to hold regularly
scheduled meetings, and will hold such special meetings as it
deems advisable to review significant matters affecting the
Company and to act upon matters requiring Corn Products Board
approval. Outside directors will receive an annual retainer of
$35,000, plus $1,000 for attending each regular or special Corn
Products Board or committee meeting, including telephone
meetings. In addition, outside
54
directors who are chairmen of the Audit Committee and
Compensation and Nominating Committee will each receive an
additional annual retainer of $3,000.
The Company expects to have a deferred compensation
plan for outside directors under which 50% of a director's annual
retainer will be deferred in phantom stock of the Company plus
dividend equivalents thereon, until death or after termination of
service as a director.
Prior to the Distribution, the Corn Products Board is
expected to establish and delegate specific functions to an Audit
Committee and a Compensation and Nominating Committee. The
Compensation and Nominating Committee will be composed entirely
of outside directors who are independent of management and
eligible to serve on such committee under the applicable rules
and regulations of the SEC, NYSE and the IRS. The eligibility of
each outside director to serve on each committee will be reviewed
annually by the Audit Committee and reported to the full Corn
Products Board.
Audit Committee
The Audit Committee will review the scope and results
of the Company's annual audit, approve the non-audit services
rendered by independent auditors and recommend appointment of
independent auditors for the ensuing year. The Audit Committee
will also review the proposed financial statements for the annual
report to stockholders, accounting policies, internal control
systems and internal auditing procedures, and the process by
which unaudited quarterly financial information is compiled and
issued. The initial members of the Audit Committee will be
Messrs. Storms, Aranguren-Castiello and Ferguson.
Compensation and Nominating Committee
The Compensation and Nominating Committee will approve
the compensation of all executive officers and administer
executive incentive compensation plans, review employee benefit
plans and recommend proposals for adoption, amendment or
termination of such plans and recommend and administer any
compensation arrangements for outside directors. The Compensation
and Nominating Committee will also develop criteria for Corn
Products Board membership and consider candidates for membership
on the Corn Products Board. Stockholders who may wish to
recommend a candidate for consideration for director may do so by
writing to the Secretary of the Company and furnishing a
statement of the candidate's experience and qualifications. See
"ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF THE CHARTER, THE
BY-LAWS, THE RIGHTS PLAN AND DELAWARE LAW -- Advance Notice
Provisions for Stockholder Nominations and Proposals" at page
___. The initial members of the Compensation and Nominating
Committee will be Messrs. Holder, Norman and DeCrane.
Executive Officers of the Company
The Company has a new Chief Executive Officer and a
new Chief Financial Officer, both of whom have substantial
experience in the Corn Refining Business. Otherwise,
55
the Company's senior management (the "Executive Officers")
will consist primarily of those individuals currently responsible
for the management of the Corn Refining Business as conducted by
CPC. See "BUSINESS -- Employees and Management" at page _____.
Generally, following the Distribution, Executive
Officers will be elected by the Corn Products Board concurrently
with the Company's Annual Meeting of Stockholders, and will serve
until the next such meeting or until their earlier retirement,
resignation or removal. The first Annual Meeting of Corn Products
stockholders is expected to be held in April 1998. The Corn
Products Board has adopted an Executive Officer tenure policy
that provides that executive officers will retire at age 65.
In addition to Mr. Schlatter, who will serve as
Chairman and Chief Executive Officer and Mr. Scott, who will
serve as President (see "-- Directors of the Company" above), the
following persons are expected to serve as Executive Officers of
the Company following the Distribution. Ages given are as of
December 31, 1997.
Marcia E. Doane, age 56, will be elected Vice
President, General Counsel and Corporate Secretary prior to the
Effective Date. Ms. Doane has served as Vice President, Legal and
Regulatory Affairs of the Corn Products Division of CPC since
1996. Prior thereto, she served as Counsel to the Corn Products
Division from 1994 to 1996. Ms. Doane joined CPC's legal
department in 1989 as Operations Attorney for the Corn Products
Division.
Frank J. Kocun, age 55, will be elected Vice President
and President, Cooperative Management Group prior to the
Effective Date. Mr. Kocun has served as President of the
Cooperative Management Group of the Corn Products Division of CPC
since 1997 and as Vice President of the Cooperative Management
Group since 1985. Mr. Kocun joined CPC in 1968 and has served in
various executive positions in the Corn Products Division and in
Penick Corporation, a CPC subsidiary.
Eugene J. Northacker, age 56, will be elected Vice
President and President, Latin American Division prior to the
Effective Date. Mr. Northacker was appointed President of CPC's
Latin America Corn Refining Division and elected a Vice President
of CPC in 1992. Prior to that, he served as Business Director of
CPC's Latin America Corn Refining Division from 1989 to 1992, as
Corn Refining General Manager from 1986 to 1989 and as Vice
President of Finance and Administration from 1984 to 1986. Mr.
Northacker joined CPC in 1968 in the financial group of Best
Foods, CPC's North American consumer foods division, and has held
executive assignments in several CPC subsidiaries.
Michael R. Pyatt, age 50, will be elected Vice President
and Executive Vice President, North American Division prior to the
Effective Date. Mr. Pyatt has served as Chairman, President and
Chief Executive Officer of Canada Starch Co., Inc., a CPC
subsidiary, since 1994 and as President of the Canadian business
of CPC's Corn Products Division, Vice Chairman of Canada Starch
and as a Vice President of the Corn Products Division since 1992.
Mr. Pyatt joined CPC in 1982 and has served in various sales and
marketing positions in the Casco business.
56
James W. Ripley, age 54, will be elected Vice
President - Finance and Chief Financial Officer prior to the
Effective Date. Mr. Ripley has served as Comptroller of CPC since
1995. Prior thereto, he served as Vice President of Finance for
CPC's North American Corn Refining Division from 1984 to 1995.
Mr. Ripley joined CPC in 1968 as chief international accountant,
and has subsequently served as CPC's Assistant Corporate
Comptroller, Corporate General Audit Coordinator and Assistant
Comptroller for CPC's European Consumer Foods Division.
Richard M. Vandervoort, age 54, will be elected Vice
President - Business Development and Procurement prior to the
Effective Date. Mr. Vandervoort has served as Vice President -
Business Management and Marketing for CPC's Corn Products
Division since 1989. Mr. Vandervoort joined CPC in 1971 and has
served in various executive sales positions in CPC's Corn
Products Division and in Peterson/Puritan Inc., a CPC subsidiary.
57
EXECUTIVE COMPENSATION; PENSION AND BENEFIT PLANS
Historical Compensation
Prior to the Distribution, the Corn Refining Business
has been operated as a division of CPC. The following table and
narrative describe the compensation paid by CPC in 1996, 1995 and
1994 to the Company's Chief Executive Officer and each of the
other four individuals initially expected to be the most highly
compensated executive officers of the Company (collectively, the
"Named Executive Officers"). Such amounts do not reflect the
compensation such Named Executive Officers will receive following
the Distribution. The principal positions listed in the table are
those which will be held by the Company's Named Executive
Officers following the Distribution Date.
Summary Compensation Table
Annual Compensation
-------------------
Name and Salary Bonus
Principal Position Year ($) ($)
- ------------------ ---- ------- -------
K. Schlatter 1996 391,250 220,000
Chairman and Chief 1995 370,000 205,000
Executive Officer (3) 1994 342,500 160,000
S.C. Scott 1996 286,667 60,000
President and Chief 1995 247,500 140,000
Operating Officer (4) 1994 221,250 110,000
E.J. Northacker 1996 231,250 50,000
Vice President and 1995 217,500 95,000
President, 1994 200,000 85,000
Latin American
Division(5)
J.W. Ripley 1996 183,750 72,000
Vice President - 1995 167,500 60,000
Finance and Chief 1994 151,667 43,000
Financial Officer (6)
F.J. Kocun 1996 183,250 29,000
Vice President and 1995 172,000 74,000
President, Cooperative 1994 160,000 65,000
Management Group (7)
Long-Term Compensation
----------------------
Awards Payouts
------ -------
Securities Long-term All Other
Name and Underlying Incentive Compensation
Principal Position Year Options(#) Payouts($)(1) ($)(2)
- ------------------ ---- ----------- ------------ ---------
K. Schlatter 1996 13,500 750,938 107,006
Chairman and Chief 1995 28,874 787,102 106,679
Executive Officer (3) 1994 13,500 465,781 105,319
S.C. Scott 1996 13,500 500,625 49,090
President and Chief 1995 10,000 572,438 46,694
Operating Officer (4) 1994 9,000 307,389 41,720
E.J. Northacker 1996 8,000 406,737 51,099
Vice President and 1995 7,500 465,105 50,280
President, 1994 7,000 102,445 37,696
Latin American
Division(5)
J.W. Ripley 1996 5,000 - 39,155
Vice President - 1995 - - 37,289
Finance and Chief 1994 - - 24,554
Financial Officer (6)
F.J. Kocun 1996 5,500 281,581 56,559
Vice President and 1995 5,000 286,219 55,455
President, Cooperative 1994 4,500 - 51,317
Management Group (7)
(1) Includes cash and the market value of CPC Common Stock paid
in respect of performance units awarded under CPC's 1984
Stock and Performance Plan at the end of four-year
performance cycles.
(2) Includes the following for 1996:
58
a. CPC matching contributions to defined contribution
plans as follows: K. Schlatter, $30,976; S. C. Scott,
$24,563; E. J. Northacker, $21,565; J. W. Ripley,
$18,922; and F. J. Kocun, $18,894.
b. Value of premiums paid by CPC under its Executive Life
Insurance Plan as follows: K. Schlatter, $76,029; S. C.
Scott, $24,089; E. J. Northacker, $29,016; J. W.
Ripley, $20,041; and F. J. Kocun, $37,665.
c. For S. C. Scott, $438; E. J. Northacker, $518; and J.
W. Ripley, $192, of above - market interest at the rate
credited to all participants in the CPC Deferred
Compensation Plan, pursuant to which all or a portion
of annual bonus may be deferred and credited to an
interest bearing account, and paid over a fifteen-year
period following retirement.
(3) Mr. Schlatter's compensation for 1994, 1995 and 1996
was paid to him as Senior Vice President and Chief
Financial Officer of CPC.
(4) Mr. Scott's compensation for 1994, 1995 and 1996 was
paid to him as President of CPC's North American corn
refining business (1994) and its worldwide Corn
Refining Business (1995 - 1996).
(5) Mr. Northacker's compensation for 1994, 1995 and 1996
was paid to him as President, Latin America Corn
Refining Division of CPC.
(6) Mr. Ripley's compensation for 1994 and 1995 was paid to
him as Vice President - Finance of CPC's North America
Corn Refining Division (1994 - June 1995) and as
Comptroller of CPC (June 1995 - 1996).
(7) Mr. Kocun's compensation for 1994, 1995 and 1996 was
paid to him as President, Cooperative Management Group
of the Corn Refining Business of CPC.
The following table summarizes grants of stock options
made by CPC under the CPC Stock Plans to the Named Executive
Officers during the 1996 fiscal year. As a result of the
Distribution, each CPC option granted to the Company's Named
Executive Officers listed below will be replaced with an option
to purchase Corn Products Common Stock pursuant to adjustments
provided in the Employee Benefits Agreement, and, as a result,
their value will depend on the future value of Corn Products
Common Stock. See "THE DISTRIBUTION --Treatment of Employee
Options, Restricted Stock and Rabbi Trusts in the Distribution"
at page __ and "RELATIONSHIP BETWEEN THE COMPANY AND CPC AFTER
THE DISTRIBUTION -- Employee Benefits Agreement" at page __.
59
Option Grants in 1996
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price Appreciation
Individual Grants for Option Term (3)
- ------------------------------------------------------------------------- ---------------------------
Percent
Number of of Total
Securities Options
Underlying Granted to Exercise
Options Employees Price Expiration
Name Granted(#) in 1996 ($/Share) Date 0%($) 5%($) 10%($)
- ------------ ---------- ------- --------- ----------- ----- ----- ------
K. Schlatter 13,500(1) 0.8957 70.0000 1/15/06 0 594,100 1,505,447
S. C. Scott 13,500(1) 0.8957 70.0000 1/15/06 0 594,100 1,505,447
2,086(2) 0.1384 70.6875 3/14/98 0 16,642 34,257
2,275(2) 0.1509 70.6875 3/20/99 0 27,249 57,520
2,250(2) 0.1493 70.6875 3/19/00 0 36,250 78,481
2,063(2) 0.1369 70.6875 3/18/01 0 42,140 93,612
500(2) 0.0332 70.6875 3/16/02 0 12,478 28,458
500(2) 0.0332 70.6875 1/18/03 0 14,488 33,802
E. J. Northacker 8,000(1) 0.5308 70.0000 1/15/06 0 352,059 892,117
1,000(2) 0.0663 67.8750 3/14/98 0 6,330 12,914
688(2) 0.0456 67.8750 3/18/01 0 12,434 27,360
1,625(2) 0.1078 67.8750 3/16/02 0 36,311 82,013
1,625(2) 0.1078 67.8750 1/18/03 0 42,473 98,119
1,312(2) 0.0870 67.8750 1/17/04 0 40,442 95,998
281(2) 0.0186 67.8750 1/16/05 0 10,045 24,513
J. W. Ripley 5,000(1) 0.3317 70.0000 1/15/06 0 220,037 557,573
1,000(2) 0.0663 68.8440 3/15/98 0 6,309 12,863
1,038(2) 0.0689 68.8440 6/17/01 0 19,987 44,230
F. J. Kocun 5,500(1) 0.3648 70.0000 1/15/06 0 242,041 613,330
1,000(2) 0.0663 68.1875 9/15/97 0 4,752 9,591
2,000(2) 0.1327 68.1875 9/17/00 0 32,544 70,780
2,400(2) 0.1592 68.1875 9/16/01 0 49,159 109,723
1,000(2) 0.0663 68.1875 3/17/02 0 22,667 51,262
281(2) 0.0186 68.1875 1/18/03 0 7,439 17,206
188(2) 0.0125 68.1875 1/17/04 0 5,864 13,938
- ------------------------
(1) The CPC options listed were granted at an exercise
price equal to the fair market value of the CPC Common
Stock on the date of grant in tandem with an equivalent
number of performance units under the CPC 1993 Stock
and Performance Plan. The CPC performance units were
issued for a cycle of four years' duration, with a goal
based on improvement in CPC stockholder value,
determined by the increase in the value of the CPC
Common Stock during
60
each year of the cycle assuming reinvestment of dividends,
measured against the performance of a peer group of
companies. Up to 25% of the units may be earned in each year
of the cycle and are payable at the conclusion of the cycle.
To the extent CPC performance units are earned and payable,
a corresponding number of CPC options are canceled. To the
extent CPC options are exercised, a corresponding number of
CPC performance units are canceled. These CPC options were
granted on January 16, 1996 and became exercisable on
January 16, 1997. Under the CPC 1993 Stock and Performance
Plan, in the event of a change in control of CPC, all CPC
performance cycles will terminate and participants will
receive the value in cash of the CPC performance units
theretofore earned and 100% of the units that could have
been earned during the remainder of the cycles. The amounts
paid to the Named Executive Officers for the cycles ending
in 1996, 1995 and 1994 are shown as "Long-Term Incentive
Payouts" in the Summary Compensation Table on page __.
(2) The CPC options listed are replacement CPC options
which were granted upon exercise of previously granted
CPC options. They are equivalent to the number of
shares exercised and have an exercise price equal to
the fair market value of the CPC Common Stock on the
date of exercise of the original CPC option. The
expiration date of the replacement CPC option is the
same as the expiration date of the original CPC option.
The replacement CPC option becomes exercisable one year
from the date the original CPC option was exercised.
The shares acquired on exercise of the original CPC
option must be retained for three years.
(3) The amounts shown under these columns are calculated at
0% and at the 5% and 10% rates set by the SEC and are
not intended to forecast future appreciation of CPC's
stock price. The amounts shown assume that no CPC
performance units will be earned so that all CPC
options granted will be exercisable.
The following table provides information with respect
to CPC options exercised by the Company's Named Executive
Officers during the 1996 fiscal year and the value of
unexercised CPC options held by the Company's Named Executive
Officers at fiscal year end. The amounts set forth in the two
columns relating to unexercised CPC options, unlike the amounts
set forth in the column headed "Value Realized," have not been,
and might never be, realized. The underlying CPC options might
not be exercised; and actual gains on exercise, if any, would
depend on the value of the CPC Common Stock on the date of
exercise, and there can be no assurance that these values would
be realized. As a result of the Distribution, each CPC option
granted to the Company's Named Executive Officers listed below
will be replaced with an option to purchase Corn Products Common
Stock pursuant to adjustments provided in the Employee Benefits
Agreement, and, as a result, their value will depend on the
future value of Corn Products Common Stock. See "THE DISTRIBUTION
- -- Treatment of Employee Options, Restricted Stock and Rabbi
Trusts in the Distribution" at page __ and "RELATIONSHIP BETWEEN
THE COMPANY AND CPC AFTER THE DISTRIBUTION -- Employee Benefits
Agreement" at page __.
61
- -------------------------------------------------------------------------
Aggregated Option Exercises in 1996
and Option Values as of December 31, 1996
- -------------------------------------------------------------------------
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
December 31, December 31,
Shares 1996 (#) 1996($)(2)
Acquired ------------ -------------
on Value Exercisable/ Exercisable/
Name Exercise(#) Realized($)(1) Unexercisable Unexercisable
- ---- ----------- -------------- ------------- -------------
K. Schlatter -- -- 22,724/33,375 324,495/630,281
S. C. Scott 9,674 374,291 5,063/37,174 154,266/537,654
E. J. Northacker 6,531 166,114 -- /25,281 0/408,702
J. W. Ripley 2,688 110,578 3,962/7,038 119,518/55,141
F. J. Kocun 6,869 195,184 4,187/19,494 119,432/294,054
- ---------------------
(1) Amounts shown are based on the difference between the
market value of CPC Common Stock on the date of
exercise and the exercise price.
(2) Amounts shown are based on the difference between the
closing price of CPC Common Stock on December 31, 1996
($77.50), as reported on the NYSE Consolidated
Transactions Reporting System, and the exercise price.
Base Salaries
The Compensation and Nominating Committee will
establish salaries for each of the Company's Executive Officers
and approve salary changes for such individuals in accordance
with a written salary administration policy to initially be based
upon a long-standing CPC policy. The Company's salary
administration policy will be designed and periodically reviewed
in consultation with external compensation consultants. Salary
ranges are expected to be established for various positions
through job evaluation and comparison with competitive salary
data. Within the ranges, adjustments are expected to be
recommended on the basis of individual performance and a
corporate merit salary percentage factor. Consistent with the
Company's overall objectives, these adjustments, combined with
bonuses as described below, will emphasize payment for
performance.
62
Annual Bonuses
Following the Distribution, it is expected that the
Company will have an annual bonus program applicable to the
Executive Officers and certain other management level employees.
Award levels under the bonus program are expected to range from
zero to 120 percent of base salary as of the beginning of the
annual performance period, depending on each participant's salary
grade and the attainment of the Company's applicable business
division profit targets as approved by the Compensation and
Nominating Committee. The provisions of the Company's annual
bonus program are expected to be substantially similar to those
of CPC's annual bonus program.
Severance Agreements
Each of the Named Executive Officers will enter into
severance agreements with the Company. The following discussion
is a summary of the material provisions of these severance
agreements, a form of which is filed as an exhibit to the
Registration Statement of which this Information Statement forms
a part.
Each of the severance agreements provides for a lump
sum payment equal to three times the sum of the annual salary and
bonus paid in the prior year, and for continuation of medical and
insurance plans for a three-year period, if the executive
officer's employment is terminated involuntarily other than for
cause (as defined in the severance agreements) or voluntarily for
good reason (as defined in the severance agreements) within two
years after a change in control of the Company. The severance
agreements also provide that the amount of excise tax, if any,
under the Code to be paid by any executive officer shall be
reimbursed by the Company. The severance agreements will be
presented for the approval of the outside directors of the
Company.
Stock Incentive Plan
The Company intends to adopt, with the approval of CPC
in its capacity as the sole stockholder of the Company, the Corn
Products International, Inc. Stock Incentive Plan (the "Stock
Incentive Plan"). The Stock Incentive Plan will be administered
by the Company's Compensation and Nominating Committee. The
Company intends to seek shareholder approval of the Stock
Incentive Plan at its 1999 annual meeting of stockholders.
The Stock Incentive Plan provides for the grant of
incentive stock options that qualify under Section 422 of the
Code, nonqualified stock options, restricted stock awards and
performance awards to employees. The Company has reserved ______
shares of Corn Products Common Stock for issuance under the Stock
Incentive Plan. The Compensation and Nominating Committee is
expected to grant, subject to the completion of the Distribution,
qualified options to purchase Corn Products Common Stock to the
Executive Officers and certain other persons who will be
employees of the Company. Each such option will have an exercise
price equal to 100% of the fair market value of Corn Products
Common Stock on the effective date of grant and will
63
be for a term of ten years. Employees of the Company who hold
options and restricted stock under the CPC International Inc.
1984 and 1993 Stock and Performance Plans are expected to receive
substitute awards of equivalent value under the Stock Incentive
Plan following completion of the Distribution. See "THE
DISTRIBUTION -- Treatment of Employee Options, Restricted Stock
and Rabbi Trusts in the Distribution" at page __.
Pension Plans
After the Effective Date, the Company will adopt a
defined benefit plan (the "Pension Plan") which is intended to be
a tax-qualified plan within the meaning of Section 401(a) of the
Code. All salaried employees of the Company who work in the
United States or are U.S. citizens, including the Named Executive
Officers, will be eligible to participate in the Pension Plan.
It is anticipated that the Pension Plan will be a
"cash balance" pension plan. As soon as practicable after the
Effective Date, the accrued benefits of Corn Products Employees
under the CPC Non-Contributory Retirement Income Plan for
Salaried Employees, and assets and liabilities attributable
thereto, will be transferred to the Pension Plan. See
"RELATIONSHIP BETWEEN THE COMPANY AND CPC AFTER THE DISTRIBUTION
- -- Employee Benefits Agreement" at page ____. Employee accounts
will also include an annual credit of between 3% and 10% of
eligible pay, depending on the employee's years of service as of
January 1 of each year. For this purpose, eligible pay will
generally include base salary, bonus and overtime. Each
employee's account will also accrue monthly interest credits
using a rate equal to a specified amount in excess of the
interest rate on short-term Treasury notes. The value of the
account at retirement will be paid out as a straight life or
joint and survivor annuity or under an optional form elected by
the employee such as a lump-sum distribution.
After the Effective Date, the Company will adopt a
nonqualified defined benefit plan (the "Excess Pension Plan") in
order to provide benefits to executives whose benefits under the
Pension Plan are limited under Sections 401(a)(17) and 415 of the
Code. The Excess Pension Plan will assume the existing liability
for Company executives under CPC's excess pension plan. The
Excess Pension Plan will not be tax-qualified under Section
401(a) of the Code and participants will have only the rights of
general creditors of the Company with respect to benefits accrued
thereunder.
Estimated age 65 annual benefits for each of the Named
Executive Officers under the Company's qualified defined benefit
Pension Plan, as well as the nonqualified Excess Pension Plan,
are as follows, assuming that the 1998 and future compensation
for each of the Named Executive Officers is equal to his 1997
base pay plus 1996 earned bonus paid in 1997: K. Schlatter,
$328,036; S.C. Scott, $193,401; E.J. Northacker, $178,706; J.W.
Ripley, $147,973; and F.J. Kocun, $119,747.
Vesting and partial payment of the benefits shown will
be accelerated if certain events occur that would result in a
"change in control" of the Company after the Effective Date.
64
For the portions of the benefits payable under the programs that
are not tax-qualified, if an excise tax were imposed on an
employee as to such benefits on account of such a change in
control, the employee's benefits would be increased to the extent
required to put the employee in the same position after payment
of taxes as if no excise tax had been imposed.
Defined Contribution Plan
After the Effective Date, the Company will adopt a
defined contribution plan (the "Corn Products 401(k) Plan")
designed to comply with the requirements of Sections 401(a) and
401(k) of the Code, which govern tax qualification and cash or
deferred arrangements. All salaried employees of the Company who
work in the United States or are U.S. citizens, including the
Named Executive Officers, will be eligible to participate in this
plan.
An eligible employee may elect to make before-tax and
after-tax contributions to the plan of up to 16% of total
compensation. Special rules imposed by the Code may require lower
limitations for the Executive Officers and other highly
compensated employees. The Company will make matching
contributions on the employees' before-tax and after-tax
contributions in the manner determined by the plan's
administrative committee from time to time. It is anticipated
that during the first plan year after the Effective Date, the
Company will make matching contributions equal to 100% of an
employee's total combined before-tax and after-tax contributions
up to 6% of such employee's base salary, bonus and overtime.
Amounts contributed to the Corn Products 401(k) Plan
will be invested by the trustee in one or more investment funds.
It is contemplated that initially there will be seven funds
offering a variety of investment options, including a Corn
Products stock fund.
All of an employee's before-tax and after-tax
contributions will be 100% vested from the time they are made.
All Company contributions will be vested once an employee has
three years of service (including service with CPC). Upon
termination of employment, retirement, disability or death, the
employee will be entitled to distribution of his or her entire
plan account.
As soon as practicable after the Effective Date, the
individual accounts of Corn Products Employees held under the CPC
Saving/Retirement Plan for Salaried Employees immediately before
the Effective Date will be transferred to the Corn Products
401(k) Plan. See "RELATIONSHIP BETWEEN THE COMPANY AND CPC AFTER
THE DISTRIBUTION -- Employee Benefits Agreement" at page ____.
The Company will adopt a nonqualified defined
contribution plan (the "Excess Benefits Plan") after the
Distribution for the benefit of executives of the Company whose
base salary exceeds the amount that may be taken into account
under the Corn Products 401(k) Plan due to Code limitations. The
Excess Benefits Plan will assume the existing liability for Corn
Products Employees under CPC's excess benefits plan and will
provide for future elective salary deferrals of up to 20% of base
salary and bonus for employees whose pay exceeds the qualified
plan limitation, along with matching contributions up to the 6%
level. The current limitation on
65
compensation that may be taken into account under a qualified
plan is $160,000; accordingly, it is expected that a substantial
number of the Executive Officers and other highly compensated
employees will be eligible to participate in the Excess Benefits
Plan after the Distribution. The Excess Benefits Plan will have
"phantom" investments only for bookkeeping purposes. The Excess
Benefits Plan will not be tax-qualified, and participants will
have only the rights of general creditors of the Company with
respect to their individual accounts under the Excess Benefits
Plan.
Other Benefit Plans
The Company expects to maintain employee group health,
life, long-term disability and other plans in which the Executive
Officers will be eligible to participate on the same terms as
other salaried employees. The Company also expects to maintain a
split dollar life insurance plan for those salaried employees,
including the Named Executive Officers, who are currently
participants in CPC's Executive Life Insurance Plan.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
Four of the Company's directors are also directors of
CPC and one of the Company's directors is currently an executive
officer of CPC. The Company has in the past engaged in
transactions with CPC. Such transactions have included, among
other things, various types of financial support by CPC. Certain
of such transactions have been on terms more or less favorable to
the Company than would otherwise have been obtainable in
transactions with unaffiliated third parties. The Company
anticipates that it will have material ongoing contractual
relationships with CPC following the Distribution. CPC and the
Company have entered into a number of agreements in connection
with the Distribution. See "RELATIONSHIP BETWEEN THE COMPANY AND
CPC AFTER THE DISTRIBUTION" at page ___.
Mr. Aranguren-Castiello is Chairman and Chief Executive
Officer of Arancia-CPC S.A. de C.V. ("Arancia"), a joint venture
formed in November 1994 by the combination of the Mexican
operations of the Corn Refining Business with Arancia Industrial
S.A. de C.V., a Mexican corn refiner controlled by Mr.
Aranguren-Castiello and his family. Arancia is engaged in the
corn refining business and has in the past engaged in
transactions with the Corn Refining Business. Such transactions
are expected to continue after the Distribution. Arancia, which
is headquartered in Guadalajara, Mexico, is a 51%/49% joint
venture between Arancia Industrial S.A. de C.V. and the Company.
Arancia produces high fructose corn syrup, other corn syrups,
modified and unmodified starches, maltodextrins and sorbitol.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Based on information obtained from CPC's records and a
review of statements filed with the SEC pursuant to Section 13 of
the Exchange Act with respect to CPC Common Stock and other
information received by CPC prior to August 31, 1997, no person
known to the
66
Company is expected to be the beneficial owner of more than
5% of the Corn Products Common Stock upon completion of the
Distribution.
The following table shows the shares of Corn Products
Common Stock expected to be owned as of the Distribution by each
present director, the Named Executive Officers and by all present
directors and Executive Officers of the Company, as a group. All
directors and Executive Officers as a group will own beneficially
less than one percent of the outstanding common stock.
Amount and Nature of
Name Beneficial Ownership(1) Percentage
- ---- ----------------------- ----------
Ignacio Aranguren-Castiello.......... 0 *
Alfred C. DeCrane, Jr................ 125 *
William C. Ferguson.................. 700 *
Richard G. Holder(2)................. 500 *
Bernard H. Kastory(2)................ 8,773 *
William S. Norman.................... 250 *
Konrad Schlatter(2)(3)............... 15,298 *
Samuel C. Scott...................... 5,058 *
Clifford B. Storms(2)................ 13,053 *
Frank J. Kocun(2)(3)................. 1,609 *
Eugene J. Northacker................. 2,423 *
James W. Ripley ..................... 1,199 *
All directors and Executive
Officers of the Company as
a group (15 persons)................. 49,082 *
------
(1) Excludes shares receivable with respect to options to
purchase shares of Corn Products Common Stock
exercisable at or within 60 days of December 31, 1997
expected to be granted pursuant to the Stock Incentive
Plan and shares of restricted stock expected to be
granted pursuant to the Stock Incentive Plan in
exchange for restricted shares of CPC Common Stock. The
number of options to purchase shares of Corn Products
Common Stock and the number of restricted shares of
Corn Products Common Stock to be received by the
Executive Officers is dependent upon the market price
of the Corn Products Common Stock and the CPC Common
Stock after the Record Date. See "THE DISTRIBUTION --
Treatment of Employee Options, Restricted Stock and
Rabbi Trusts in the Distribution" at page __.
(2) Includes shares held jointly with or owned by spouses
or minor children or held in certain fiduciary
capacities.
(3) Excludes units of phantom Corn Products Common Stock
that may be granted to replace units of phantom CPC
Common Stock to which Messrs. Schlatter and Kocun are
currently entitled as deferred annual bonus under CPC's
Deferred Stock Unit Plan.
* Less than 1%.
67
DESCRIPTION OF CAPITAL STOCK
Authorized Stock
The total number of shares of all classes of stock
that the Company has authority to issue under the Corn Products
Charter is 225,000,000 shares, of which 200,000,000 shares are
Corn Products Common Stock and 25,000,000 shares are preferred
stock, par value $0.01 per share (the "Preferred Stock"). Based
on the approximately 142 million shares of CPC Common Stock
outstanding as of June 30, 1997 (excluding shares of restricted
CPC Common Stock held by persons other than Corn Products
Employees and shares of CPC Common Stock held by the Rabbi
Trusts), and a distribution ratio of one share of Corn Products
Common Stock for every four shares of CPC Common Stock,
approximately 35.5 million shares of Corn Products Common Stock
are expected to be distributed to holders of CPC Common Stock on
the Distribution Date. In addition, the Company expects to
reserve ___ million shares of Corn Products Common Stock for
issuance pursuant to the Stock Incentive Plan. See "EXECUTIVE
COMPENSATION; PENSION AND BENEFIT PLANS -- Stock Incentive Plan"
at page ___. No shares of Preferred Stock will be issued in
connection with the Distribution, although one million shares of
Series A Preferred Stock (defined below) have been reserved for
issuance in connection with the Rights Plan. See "-- Preferred
Stock" below.
Common Stock
The holders of Corn Products Common Stock will be
entitled to one vote for each share on all matters voted on by
stockholders, and the holders of such shares will possess all
voting power, except as otherwise required by law or later
provided in any resolution adopted by the Board of Directors of
the Company with respect to any series of Preferred Stock. The
Corn Products Common Stock will not have cumulative voting
rights. It is currently expected that the first annual meeting of
stockholders of the Company will be held in April 1998. Subject
to any preferential or other rights of any outstanding series of
Preferred Stock that may be designated by the Board of Directors
of the Company, the holders of Corn Products Common Stock will be
entitled to such dividends, if any, as may be declared from time
to time by the Board of Directors of the Company. See "DIVIDEND
POLICY" at page ___. In the event of the liquidation,
dissolution or winding up of the Company, holders of Corn
Products Common Stock are entitled to receive on a pro rata basis
any assets remaining after provision for payment of creditors and
after payment of any liquidation preferences to holders of
Preferred Stock. Subject to the restrictions contained in the Tax
Indemnification Agreement, additional shares of Corn Products
Common Stock may be issued without stockholder approval, other
than such approval as may be required by applicable stock
exchange rules. See "RELATIONSHIP BETWEEN THE COMPANY AND CPC
AFTER THE DISTRIBUTION -- Tax Indemnification Agreement" at page
__ and "-- Authorized But Unissued Capital Stock" below.
Preferred Stock
The Board of Directors of the Company is authorized to
provide for the issuance of shares of Preferred Stock, in one or
more series, and to fix for each such series such voting
68
powers, designations, preferences and relative,
participating, optional and other special rights and the
qualifications, limitations and restrictions thereon, as are
stated in the resolutions adopted by the Board of Directors of
the Company providing for the issuance of such series and as are
permitted by the DGCL. Subject to the restrictions contained in
the Tax Indemnification Agreement, shares of Preferred Stock may
be issued without stockholder approval, other than such approval
as may be required by applicable stock exchange rules. See
"RELATIONSHIP BETWEEN THE COMPANY AND CPC AFTER THE DISTRIBUTION
- -- Tax Indemnification Agreement" at page __, "-- Authorized But
Unissued Capital Stock" below and "ANTI-TAKEOVER EFFECTS OF
CERTAIN PROVISIONS OF THE CHARTER, THE BY-LAWS, THE RIGHTS PLAN
AND DELAWARE LAW -- Preferred Stock" at page ___.
Under the Corn Products Charter a series of Preferred
Stock designated Series A Junior Participating Preferred Stock
(the "Series A Preferred Stock"), consisting of one million
shares, is authorized in connection with the Rights Plan. For a
description of the Rights Plan and the Series A Preferred Stock,
see "-- Rights Plan" at page ___ and "ANTI-TAKEOVER EFFECTS OF
CERTAIN PROVISIONS OF THE CHARTER, THE BY-LAWS, THE RIGHTS PLAN
AND DELAWARE LAW" at page ___.
Authorized But Unissued Capital Stock
Based on the calculations set forth above, the Company
estimates that, following the Distribution, it will have
approximately 164.5 million shares of authorized but unissued
Corn Products Common Stock (including the ___ million shares of
Corn Products Common Stock reserved for issuance pursuant to the
Stock Incentive Plan) and 25,000,000 shares of authorized but
unissued Preferred Stock (including the one million shares
designated as Series A Preferred Stock). Delaware law does not
require stockholder approval for the issuance of authorized
shares. However, the listing requirements of the NYSE, which
apply so long as the Corn Products Common Stock remains listed on
the NYSE, require prior stockholder approval of certain
issuances, including issuances of shares bearing voting power
equal to or exceeding 20% of the pre-issuance outstanding voting
power or pre-issuance outstanding number of shares of Corn
Products Common Stock. These additional shares could be used for
a variety of corporate purposes, including future public
offerings to raise additional capital or to facilitate corporate
acquisitions. The Company currently does not have any plans to
issue additional shares of Corn Products Common Stock or
Preferred Stock other than in connection with employee
compensation plans. See "EXECUTIVE COMPENSATION; PENSION AND
BENEFIT PLANS" at page __. Pursuant to the Tax Indemnification
Agreement, the Company has agreed to certain limitations on the
issuance of additional Common Stock for a two-year period
following the Effective Date. See "RELATIONSHIP BETWEEN THE
COMPANY AND CPC AFTER THE DISTRIBUTION -- Tax Indemnification
Agreement" at page __.
One of the effects of the existence of unissued and
unreserved Corn Products Common Stock and Preferred Stock may be
to enable the Board of Directors of the Company to issue shares
to persons friendly to current management, which issuance could
render more difficult or discourage an attempt to obtain control
of the Company by means of a merger, tender offer, proxy contest
or otherwise, and thereby protect the continuity of the Company's
69
management and possibly deprive the stockholders of the
opportunity to sell their shares of Corn Products Common Stock at
prices higher than prevailing market prices. Such additional
shares also could be used to dilute the stock ownership of
persons seeking to obtain control of the Company pursuant to the
operation of the Rights Plan, which is discussed below. See
"ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF THE CHARTER, THE
BY-LAWS, THE RIGHTS PLAN AND DELAWARE LAW" at page ___. The
issuance of Corn Products Common Stock or Preferred Stock, other
than pursuant to the Rights Plan, is subject to certain
limitations under the Tax Indemnification Agreement. See
"RELATIONSHIP BETWEEN THE COMPANY AND CPC AFTER THE DISTRIBUTION
- -- Tax Indemnification Agreement" at page __.
No Preemptive Rights
No holder of any class of stock of the Company
authorized at the time of the Distribution will have any
preemptive right to subscribe for or purchase any kind or class
of securities of the Company.
Transfer Agent and Registrar
The transfer agent and registrar for the Corn Products
Common Stock is First Chicago Trust Company of New York.
Rights Plan
In connection with the Distribution, the Company has
adopted the Rights Plan and has entered into a Rights Agreement
(the "Rights Agreement"), dated as of _______, 1997, between the
Company and First Chicago Trust Company of New York, as Rights
Agent (the "Rights Agent"). The Company has distributed to CPC
one Right for each outstanding share of Corn Products Common
Stock owned by CPC and will distribute one associated Right with
each share of Corn Products Common Stock distributed in the
Distribution. The terms of the Rights are set forth in the Rights
Agreement. The Rights Agreement is substantially the same as
CPC's rights plan and the Rights will operate in substantially
the same manner as CPC's preferred share purchase rights. The
Corn Products Charter specifically authorizes the Corn Products
Board to adopt a stockholder rights plan such as the Rights Plan.
Each Right entitles the registered holder to purchase
from the Company one one-hundredth of a share of Series A Preferred
Stock at a purchase price of $______, subject to adjustment (the
"Purchase Price"). The Purchase Price may be paid in cash or,
subject to applicable law, in shares of Corn Products Common
Stock having a value at the time of exercise equal to the
Purchase Price.
Each share of Series A Preferred Stock will be entitled
to a minimum preferential quarterly dividend payment of $5.00 per
share but will be entitled to an aggregate dividend of 100 times
the dividend declared per share of Corn Products Common Stock. In
the event of liquidation, the holders of shares of Series A
Preferred Stock will be entitled to a minimum
70
preferential liquidation payment of $10.00 per share but
will be entitled to an aggregate payment of 100 times the payment
made per share of Corn Products Common Stock. Each share of
Series A Preferred Stock will have 100 votes, voting together
with the Corn Products Common Stock. Finally, in the event of any
merger, consolidation or other transaction in which Corn Products
Common Stock is exchanged, each share of Series A Preferred Stock
will be entitled to receive 100 times the amount received per
share of Corn Products Common Stock. These rights are protected
by customary anti-dilution provisions. Because of the nature of
their dividend, liquidation and voting rights, the value of the
one-one-hundredth interest in a share of Series A Preferred Stock
purchasable upon exercise of each Right should approximate the
value of one share of Corn Products Common Stock.
Until the earlier to occur of (i) the date that a
person or group of affiliated or associated persons (an
"Acquiring Person") has acquired, or obtained the right to
acquire, beneficial ownership of (x) 10% or more of the
outstanding shares of Corn Products Common Stock, if such date is
on or before December 31, 1999 or (y) 15% or more of the
outstanding shares of Corn Products Common Stock, if such date is
after December 31, 1999 (the "Stock Acquisition Date") and (ii)
ten business days (or such later date as the Board of Directors
shall determine prior to such time as any person has become an
Acquiring Person) following the commencement of a tender offer or
exchange offer that would result in a person or group
beneficially owning (x) 10% or more of the outstanding shares of
Corn Products Common Stock, if such offer would terminate on or
before December 31, 1999, or (y) 15% or more of the outstanding
shares of Corn Products Common Stock, if such offer would
terminate after December 31, 1999 (the earlier of such dates
being the "Rights Separation Date"), the Rights will be evidenced
by the certificates representing shares of Corn Products Common
Stock and no separate Rights Certificates (defined below) will be
issued and distributed. Except as otherwise determined by the
Board of Directors, only shares of Corn Products Common Stock
issued prior to the Rights Separation Date will be issued with
Rights.
Until the Rights Separation Date (or earlier redemption
or expiration of the Rights), the Rights will be transferred with
and only with the Corn Products Common Stock. Certificates
representing shares of Corn Products Common Stock issued after
the Effective Date will contain a notation incorporating the
Rights Agreement by reference. As soon as practicable following
the Rights Separation Date, a separate Certificate evidencing the
Rights (a "Rights Certificate") will be mailed to holders of
record of Corn Products Common Stock as of the close of business
on the Rights Separation Date and such separate Rights
Certificate alone will evidence the Rights. Pursuant to the
Rights Agreement, the Company reserves the right to require prior
to the occurrence of a Triggering Event (as defined below) that,
upon any exercise of Rights, a number of Rights be exercised so
that only whole shares of Series A Preferred Stock will be
issued.
The Rights are not exercisable until the Rights
Separation Date and will expire at the close of business on
December 31, 2007, unless previously redeemed by the Company as
described below.
71
In the event that (i) the Company is the surviving
corporation in a merger with an Acquiring Person or any affiliate
or associate thereof and the Corn Products Common Stock is not
changed or exchanged or (ii) any person shall become an Acquiring
Person (except pursuant to a tender offer or exchange offer for
all outstanding shares of Corn Products Common Stock at a price
and on terms which at least a majority of the outside directors
determine to be fair to the stockholders of the Company and
otherwise in the best interests of the Company and its
stockholders), each holder of a Right will thereafter have the
right to receive, upon exercise, Corn Products Common Stock (or,
in certain circumstances, cash, property or other securities of
the Company) having a value equal to two times the exercise price
of the Right. Notwithstanding any of the foregoing, following the
occurrence of any of the events set forth in this paragraph, all
Rights that are, or (under certain circumstances specified in the
Rights Agreement) were, beneficially owned by any Acquiring
Person and certain related parties will become null and void.
To illustrate the rights described in the preceding
paragraph, at an exercise price of $____ per Right, each Right
not owned by an Acquiring Person (or by certain related parties)
following an event set forth in the preceding paragraph would
entitle its holder to purchase $_____ worth of Corn Products
Common Stock (or other consideration, as noted above) for $_____.
Assuming that the Corn Products Common Stock has a per share
value of $_____ at such time, the holder of each Right would be
entitled to purchase _____ shares of Corn Products Common Stock
for $_____.
In the event that, at any time following the Stock
Acquisition Date, (i) the Company is acquired in a merger or
other business combination transaction in which the Company is
not the surviving corporation, (ii) the Company is the surviving
corporation in a merger with any person and the Corn Products
Common Stock is changed into or exchanged for stock or other
securities of any other person or cash or any other property or
(iii) 50% or more of the Company's assets or earning power is
sold or transferred, each holder of a Right (except Rights that
previously have been voided as set forth above) shall thereafter
have the right to receive, upon exercise, common stock of the
acquiring company having a value equal to two times the exercise
price of the Right. The events described in this paragraph and in
the second preceding paragraph are referred to as the "Triggering
Events."
The Purchase Price payable, and the fraction of a
share of Series A Preferred Stock or other securities or property
issuable, upon exercise of the Rights are subject to adjustment
from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification
of, the Series A Preferred Stock, (ii) if holders of the Series A
Preferred Stock are granted certain rights or warrants to
subscribe for Series A Preferred Stock or convertible securities
at less than the current market price of the Series A Preferred
Stock, or (iii) upon the distribution to holders of the Series A
Preferred Stock of evidences of indebtedness or assets (excluding
regular quarterly cash dividends) or of subscription rights or
warrants (other than those referred to above).
With certain exceptions, no adjustment in the Purchase
Price will be required until cumulative adjustments amount to at
least 1% of the Purchase Price. In addition, to the extent
72
that the Company does not have sufficient shares of Corn
Products Common Stock issuable upon exercise of the Rights
following the occurrence of a Triggering Event, the Company may,
under certain circumstances, reduce the Purchase Price. No
fractional shares of Series A Preferred Stock (other than
fractions which are integral multiples of one one-hundredth) will
be issued and, in lieu thereof, an adjustment in cash will be
made based on the market price of the Series A Preferred Stock or
the Corn Products Common Stock on the last trading date prior to
the date of exercise.
At any time until the Stock Acquisition Date, the
Company may redeem the Rights in whole, but not in part, at a
price of $0.01 per Right (payable in cash, Corn Products Common
Stock or other consideration deemed appropriate by the Board of
Directors). Immediately upon the action of the Board of Directors
ordering redemption of the Rights, the Rights will terminate and
thereafter the only right of the holders of Rights will be to
receive the $0.01 redemption price. In addition, at any time
after the Stock Acquisition Date, the Company's Board of
Directors may elect to exchange each Right (other than Rights
that have become null and void as described above), in whole or
in part, for one share of Corn Products Common Stock. Both the
redemption price and the exchange rate are subject to adjustment.
Until a Right is exercised, the holder thereof, as
such, will have no rights as a stockholder of the Company,
including, without limitation, the right to vote or to receive
dividends. While the distribution of the Rights will not be
taxable to stockholders or to the Company, stockholders may,
depending upon the circumstances, recognize taxable income in the
event that the Rights become exercisable for Corn Products Common
Stock (or other consideration) or for common stock of an
acquiring company as set forth above.
Other than those provisions relating to the principal
economic terms of the Rights (except with respect to increasing
the Purchase Price under certain circumstances described in the
Rights Agreement), any of the provisions of the Rights Agreement
may be amended by the Corn Products Board prior to the Stock
Acquisition Date. After the Stock Acquisition Date, the
provisions of the Rights Agreement may be amended by the Corn
Products Board in order to cure any ambiguity, to correct any
defects or inconsistencies, to make changes which do not
adversely affect the interests of holders of Rights (excluding
the interests of any Acquiring Person), or to shorten or lengthen
any time period under the Rights Agreement; provided, however,
that no amendment to adjust the time period governing redemption
shall be made at such time when the Rights are not redeemable.
As long as the Rights are attached to the Corn
Products Common Stock, the Company will issue one Right for each
share of Corn Products Common Stock issued prior to the
Rights Separation Date so that all such shares will have attached
Rights. One million shares of Series A Preferred Stock will
initially be reserved for issuance upon exercise of the Rights.
The Rights have certain anti-takeover effects. See
"ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF THE CHARTER, THE
BY-LAWS, THE RIGHTS PLAN AND DELAWARE LAW" below.
73
The foregoing summary of certain terms of the Rights
is qualified in its entirety by reference to the Rights
Agreement, which is filed as an exhibit to the Registration
Statement and is incorporated herein by reference.
ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF THE CHARTER, THE
BY-LAWS, THE RIGHTS PLAN AND DELAWARE LAW
The Corn Products Charter, the Corn Products By-Laws,
the Rights Plan and the DGCL contain certain provisions that
could make more difficult the acquisition of control of the
Company by means of a tender offer, open market purchases, a
proxy contest or otherwise. Set forth below is a description of
such provisions in the Corn Products Charter, the Corn Products
By-Laws, the Rights Plan and the DGCL. These provisions are based
in large part upon the provisions of CPC's Certificate of
Incorporation and By-Laws. The following description is intended
as a summary only and is qualified in its entirety by reference
to the Corn Products Charter, the Corn Products By-Laws and the
Rights Agreement, the forms of which are included as exhibits to
the Registration Statement of which this Information Statement
forms a part, and to the DGCL.
Classified Board of Directors; Removal of Directors
The Corn Products Charter provides that the number of
directors shall be not less than seven nor more than seventeen,
with the exact number of directors to be determined from time to
time by a majority of the entire Corn Products Board. The
directors shall be divided into three classes, as nearly equal in
number as is possible, serving staggered three-year terms so that
directors' initial terms will expire at the annual meeting of the
Company's stockholders held in 1998, 1999 and 2000, respectively.
Starting with the 1998 annual meeting of the Company's
stockholders, one class of directors will be elected each year
for a three-year term. See "MANAGEMENT -- Directors of the
Company" at page ___.
The Company believes that a classified Board of
Directors will help to assure the continuity and stability of the
Corn Products Board and the Company's business strategies and
policies, since a majority of the directors at any given time
will have had prior experience as directors of the Company. The
Company believes that this in turn will permit the Board to
represent more effectively the interests of stockholders.
With a classified Board of Directors, at least two
annual meetings of stockholders, instead of one, will generally be
required to effect a change in a majority of the members of the
Board of Directors. As a result, the classification of the Board
of Directors of the Company may discourage proxy contests for the
election of directors, unsolicited tender offers or purchases of
a substantial block of the Corn Products Common Stock because it
could prevent an acquiror from obtaining control of the Corn
Products Board in a relatively short period of time. In addition,
pursuant to the DGCL and the Corn Products Charter, a director
may be removed only for cause and only by the affirmative vote of
holders of at least a majority of the outstanding shares of Corn
Products Common Stock entitled to vote thereon. As a result, a
classified Board of Directors delays stockholders who do not
agree with the policies of the Board of Directors from
74
replacing directors, unless they can demonstrate that the
directors should be removed for cause and obtain the requisite
vote. Such a delay may help ensure that the Corn Products Board,
if confronted with a proxy contest or an unsolicited proposal for
an extraordinary corporate transaction, will have sufficient time
to review the proposal and appropriate alternatives to the
proposal and to act in what it believes is the best interest of
the Company's stockholders.
Filling Vacancies on the Board
The Corn Products Charter provides that, subject to
the rights of holders of any shares of Preferred Stock, any
vacancy in the Board of Directors that results from an increase
in the number of directors may be filled by a majority of the
directors then in office, provided that a quorum is present, and
any other vacancy may be filled by a majority of the directors
then in office, even if less than a quorum, or by the sole
remaining director. Accordingly, these provisions could
temporarily prevent any stockholder from obtaining majority
representation on the Board of Directors by enlarging the Board
of Directors and filling the new directorships with its own
nominees.
Written Consents and Special Meetings
The Corn Products Charter provides that no action
required to be taken or which may be taken at any annual or
special meeting of stockholders may be taken without a meeting,
except by unanimous written consent of all of the stockholders of
the Company entitled to vote thereon. The Corn Products By-Laws
provide that special meetings of stockholders may be called only
by the Chairman of the Board or the Board of Directors.
Stockholders are not permitted to call a special meeting or to
require that the Board of Directors call a special meeting of
stockholders. Moreover, the business permitted to be conducted at
any special meeting of stockholders is limited to the purpose or
purposes specified in the written notice of such meeting.
The provisions of the Corn Products Charter governing
action by written consent and the provisions of the Corn Products
By-Laws governing the calling of and matters considered at
special meetings may have the effect of delaying consideration of
a stockholder proposal until the next annual meeting. These
provisions would also prevent the holders of a majority of the
voting power of the outstanding shares of stock entitled to vote
generally in the election of directors from using the written
consent procedure to take stockholder action and from taking
action by consent without giving all the stockholders entitled to
vote on a proposed action the opportunity to participate in
determining such proposed action.
Advance Notice Provisions for Stockholder Nominations and Proposals
The Corn Products By-Laws establish an advance notice
provision with regard to the nomination, other than by or at the
direction of the Board of Directors, of candidates for election
as directors, or the bringing before any annual meeting of any
stockholder proposal (the "Nomination and Business Proposal
Provision").
75
The Nomination and Business Proposal Provision
provides that, subject to any rights of holders of any Preferred
Stock, business other than that proposed by the Board of
Directors may be transacted and candidates for director other
than those selected by the Board of Directors may be nominated at
the annual meeting only if the Secretary of the Company has
received a written notice identifying such business or candidates
and providing specified additional information not less than
sixty nor more than ninety days before the first Tuesday in April
(or, if the Board of Directors has set a different date for the
annual meeting, not less than sixty nor more than ninety days
before such other date or, if such other date has not been
publicly disclosed at least seventy-five days in advance, then
not less than fifteen days after such public disclosure). In
addition, not more than ten days after receipt by the sponsoring
stockholder of the Secretary's written request, the sponsoring
stockholder must provide the Secretary with such additional
information as the Secretary may reasonably require.
By requiring advance notice of nominations by
stockholders, the Nominations and Business Proposal Provision
will afford the Board of Directors a meaningful opportunity to
consider the qualifications of the proposed nominees and, to the
extent deemed necessary or desirable by the Board of Directors,
to inform the stockholders about such qualifications. By
requiring advance notice of proposed business, the Nominations
and Business Proposal Provision will provide the Board of
Directors with a meaningful opportunity to inform stockholders,
prior to such meeting, of any business proposed to be conducted
at such meeting, together with any recommendation or statement of
the Board of Directors' position as to action to be taken with
respect to such business, so as to enable stockholders better to
determine whether they desire to attend such a meeting or to
grant a proxy to the Board of Directors as to the disposition of
any such business. Although the Corn Products By-Laws do not give
the Board of Directors any power to approve or disapprove
stockholder nominations for the election of directors or
proposals for action, they may have the effect of precluding a
contest for the election of directors or the consideration of
stockholder proposals if the proper procedures are not followed,
and of discouraging or deterring a third party from conducting a
solicitation of proxies to elect its own slate of directors or to
approve its proposal without regard to whether consideration of
such nominees or proposals might be harmful or beneficial to the
Company and its stockholders.
Restrictions on Amendment
The Corn Products Charter provides that the approval
of holders of at least two-thirds of the voting power entitled to
vote generally in the election of directors, voting together as a
single class, is required to alter, amend or repeal the
provisions of the Corn Products Charter classifying the Corn
Products Board; establishing the minimum and maximum number of
members of the Corn Products Board; limiting the ability of
stockholders to act by written consent; authorizing the Corn
Products Board to adopt a stockholder rights plan; and
authorizing the Corn Products Board to consider the interests of
creditors, customers, employees and other constituencies of the
Corporation and its subsidiaries and the effect upon communities
in which the Corporation and its subsidiaries do business, in
evaluating proposed corporate transactions. In addition, the Corn
Products Charter provides that the approval of the Board of
Directors or the affirmative vote of the holders of 80% of the
voting power entitled to vote generally in the
76
election of directors, voting together as a single class, is
required to alter, amend or repeal any of the provisions of the
Corn Products By-Laws.
Preferred Stock
The Corn Products Charter authorizes the Board of
Directors of the Company to establish series of Preferred Stock
and to determine, with respect to any series of Preferred Stock,
the terms and rights of such series, including (i) the voting
powers, if any, (ii) preferences and relative, participating,
optional and other special rights, and (iii) the qualifications,
limitations and restrictions thereof.
The Company believes that the availability of the Preferred
Stock will provide increased flexibility in structuring possible
future financings and acquisitions and in meeting other corporate
needs that might arise. Having such authorized shares available
for issuance will allow the Company to issue shares of Preferred
Stock without the expense and delay of a special stockholders'
meeting. However, under the Tax Indemnification Agreement, the
Company generally cannot issue Preferred Stock (other than
pursuant to the Rights Plan) during the two-year period following
the Effective Date. The authorized shares of Preferred Stock, as
well as shares of Common Stock, will be available for issuance
without further action by the stockholders, unless such action is
required by applicable law or the rules of any stock exchange on
which the Company's securities may be listed. Although the Board
of Directors has no intention at the present time of doing so, it
would have the power (subject to applicable law) to issue a
series of Preferred Stock that could, depending on the terms of
such series, impede the completion of a merger, tender offer or
other takeover attempt. For instance, subject to applicable law,
such series of Preferred Stock might impede a business
combination by including class voting rights that would enable
the holder to block such a transaction. The Board of Directors
will make any determination to issue such shares based on its
judgment as to the best interests of the Company and its
stockholders. The Board of Directors, in so acting, could issue
Preferred Stock having terms which could discourage an
acquisition attempt or other transaction that some, or a
majority, of the stockholders might believe to be in their best
interest or in which stockholders might receive a premium for
their stock over the then market price of such stock. See
"DESCRIPTION OF CAPITAL STOCK -- Rights Plan" at page __.
Other Considerations
Article Twelfth of the Corn Products Charter generally
provides that, in determining whether to take or refrain from
taking corporate action on any matter, including
proposing any matter to the stockholders of the Company, the Corn
Products Board may take into account the interests of creditors,
customers, employees and other constituencies of the Company and
its subsidiaries and the effect upon communities in which the
Company and its subsidiaries do business.
77
Certain Effects of the Rights Plan
The Rights Plan is designed to protect stockholders of
the Company in the event of unsolicited offers to acquire the
Company and other coercive takeover tactics which, in the opinion
of the Board of Directors, could impair its ability to represent
stockholder interests. The provisions of the Rights Agreement may
render an unsolicited takeover of the Company more difficult or
less likely to occur or might prevent such a takeover, even
though such takeover may offer the Company's stockholders the
opportunity to sell their stock at a price above the then
prevailing market rate and may be favored by a majority of the
Company's stockholders. See "DESCRIPTION OF CAPITAL STOCK --
Rights Plan" at page ___. The Corn Products Charter specifically
authorizes the Corn Products Board to adopt a stockholder rights
plan.
Delaware Business Combination Statute
The terms of Section 203 of the DGCL apply to the
Company. With certain exceptions, Section 203 generally prohibits
an "interested stockholder" from engaging in a broad range of
"business combination" transactions, including mergers,
consolidations and sales of 10% or more of a corporation's
assets, with a Delaware corporation for three years following the
date on which such person became an interested stockholder unless
(i) the transaction that results in the person's becoming an
interested stockholder or the business combination is approved by
the board of directors of the corporation before the person
becomes an interested stockholder, (ii) upon consummation of the
transaction which results in the stockholder becoming an
interested stockholder, the interested stockholder owns 85% or
more of the voting stock of the corporation outstanding at the
time the transaction commenced, excluding shares owned by persons
who are directors and also officers and shares owned by certain
employee stock plans, or (iii) on or after the date the person
becomes an interested stockholder, the business combination is
approved by the corporation's board of directors and by holders
of at least two-thirds of the corporation's outstanding voting
stock, excluding shares owned by the interested stockholder, at a
meeting of stockholders. Under Section 203, an "interested
stockholder" is generally defined as any person, other than the
corporation and any direct or indirect majority-owned subsidiary,
that is (a) the owner of 15% or more of the outstanding voting
stock of the corporation or (b) an affiliate or associate of the
corporation and was the owner of 15% or more of the outstanding
voting stock of the corporation at any time within the three-year
period immediately prior to the date on which it is sought to be
determined whether such person is an interested stockholder.
Section 203 does not apply to a corporation that so provides in
an amendment to its certificate of incorporation or by-laws
passed by a majority of its outstanding voting shares, but such
stockholder action does not become effective for 12 months
following its adoption and would not apply to persons who were
already interested stockholders at the time of the amendment. The
Corn Products Charter and Corn Products By-Laws do not exclude
the Company from the restrictions imposed under Section 203.
Under certain circumstances, Section 203 makes it more
difficult for a person who would be an "interested stockholder"
to effect various business combinations with a corporation for a
three-year period. The provisions of Section 203 may encourage
companies interested in acquiring the Company to negotiate in
advance with the Company's Board of Directors, because
78
the stockholder approval requirement would be avoided if the
Board of Directors approves either the business combination or
the transaction which results in the stockholder becoming an
interested stockholder. Such provisions also may have the effect
of preventing changes in the Board of Directors. It is further
possible that such provisions could make it more difficult to
accomplish transactions which stockholders may otherwise deem to
be in their best interests.
LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by the DGCL, the Corn Products Charter
and Corn Products By-Laws contain provisions entitling directors
and officers of the Company to indemnification against certain
losses, damages and expenses. Among other things, the Corn
Products Charter provides that a director of the Company shall
not be personally liable to the corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) for payment of an
improper dividend, or for an improper repurchase or redemption of
the stock of the corporation, in violation of Section 174 of the
DGCL, or (iv) for any transaction from which the director derived
an improper personal benefit. The Corn Products By-Laws also set
forth certain rights of the directors and officers of the Company
to indemnification. These provisions are intended to provide
directors and officers of the Company with protection against
monetary damages from certain actions taken in their capacity as
officers and directors of the Company, including providing
directors with protection from liability from suits alleging
breach of the duty of care. These provisions do not eliminate
such duty.
The indemnification and exculpation rights conferred by
the Corn Products Charter and Corn Products By-Laws are not exclusive
of any other right to which a person seeking indemnification may
otherwise be entitled. The Company intends to provide liability
insurance for the directors and officers for certain losses
arising from claims or charges made against them while acting in
their capacities as directors or officers and will enter into
indemnification agreements with each of its directors and
officers to provide the maximum indemnity protection permitted by
Delaware law and the Corn Products By-Laws and to establish
procedures by which their right to protection can be realized.
INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company has appointed
KPMG Peat Marwick LLP ("KPMG") as the firm's independent
accountants to audit the Company's financial statements for the
1997 fiscal year. KPMG has audited the financial statements that
appear in this Information Statement and has served as CPC's
auditors throughout the periods covered by the financial
statements included in this Information Statement.
79
DIVIDEND POLICY
The Company's dividend policy will be set by the Board
of Directors after the Distribution. The Company currently
intends to pay modest quarterly cash dividends, although the
declaration and payment of dividends is at the discretion of the
Company's Board of Directors and will be subject to the Company's
financial results and the availability of surplus funds to pay
dividends. The DGCL prohibits the Company from paying dividends
or otherwise distributing funds to its stockholders, except out
of legally available funds. The declaration of dividends and the
amount thereof will depend on a number of factors, including the
Company's financial condition, capital requirements, funds from
operations, future business prospects and such other factors as
the Corn Products Board may deem relevant. No assurance can be
given that the Company will pay any dividends. See "RISK FACTORS
- -- Payment of Dividends" at page ___ and "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS"
beginning at page ___.
80
TABLE OF DEFINED TERMS
Defined Term
------------
Acquiring Person KPMG
Active Business Named Executive Officers
ADM National Starch
Authority Nomination and Business
Code Proposal Provision
Company NYSE
Corn Products Pension Plan
Corn Products Board post-Distribution Corn
Corn Products By-Laws Products Market Price
Corn Products Charter post-Distribution CPC
Corn Products Common Stock Market Price
Corn Products Conversion pre-Distribution CPC
Factor Market Price
Corn Products Employees Preferred Stock
Corn Products Refining Purchase Price
Corn Products 401(k) Plan Rabbi Trusts
Corn Purchasing Policy Record Date
Corn Refining Business Registration Statement
Coverage Date Restricted Period
CPC Rights
CPC Common Stock Rights Agent
CPC Conversion Factor Rights Agreement
CPC Hourly Plan Rights Certificate
CPC Stock Plans Rights Plan
Credit Facility Rights Separation Date
DGCL Ruling
Disqualified Stock Ruling Request
Distribution SEC
Distribution Agent Section 203
Distribution Agreement Securities Act
Effective Date Series A Preferred Stock
Employee Benefits Agreement Staley
Excess Benefits Plan Stock Acquisition Date
Excess Pension Plan Stock Incentive Plan
Exchange Act Tax Indemnification Agreement
Executive Officers Tax Sharing Agreement
Foreign Spinoff Company Taxes
IRS Transition Services Agreement
Triggering Events
81
INDEX TO CORN PRODUCTS COMBINED FINANCIAL STATEMENTS
Combined Financial Statements:
Independent Auditors' Report....................................F-2
Combined Balance Sheets as of June 30, 1997,
December 31, 1996 and December 31, 1995.......................F-3
Combined Statements of Income for the Six Months
ended June 30, 1997 and 1996 and the Fiscal Years
1996, 1995 and 1994...........................................F-4
Combined Statements of Cash Flows for the Six Months
ended June 30, 1997 and 1996 and the Fiscal Years 1996,
1995 and 1994.................................................F-5
Combined Statement of Stockholders' Equity as of
June 30, 1997, December 31, 1996, December 31, 1995,
and December 31, 1994....................................... .F-6
Notes to Combined Financial Statements..........................F-7
F-1
Independent Auditors' Report
The Board of Directors and Stockholders
Corn Products International, Inc.:
We have audited the accompanying combined balance sheets of Corn
Products International, Inc. and Subsidiaries as of December 31,
1996 and 1995, and the related combined statements of income,
stockholders' equity and cash flows for each of the years in the
three-year period ended December 31, 1996. These combined
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to
above present fairly, in all material respects, the financial
position of Corn Products International, Inc. and Subsidiaries as
of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the years in the
three-year period ended December 31, 1996, in conformity with
generally accepted accounting principles.
(signed) KPMG PEAT MARWICK LLP
September 16, 1997
F-2
CORN PRODUCTS INTERNATIONAL, INC.
COMBINED BALANCE SHEETS
($ Millions) At June 30, At December 31,
----------- -----------------
1997 1996 1995
---- ---- ----
Assets (Unaudited)
Current assets
Cash and cash equivalents $ 37 $ 32 $ 31
Accounts receivable - net 189 209 121
Due from divisions - net 11 8 6
Inventories 136 162 113
Prepaid expenses 16 8 5
Other current assets 7 6 4
Deferred tax asset 11 9 7
------ ------ -----
Total current assets 407 434 287
Investments in and loans
to unconsolidated affiliates 166 149 82
Plants and properties - net 1,060 1,057 920
Other assets 25 23 17
------ ------ -----
Total Assets $1,658 $1,663 $1,306
====== ====== ======
Liabilities and Stockholders'
Equity
Current liabilities
Notes payable $ 148 $ 156 $ 100
Current portion of long-term debt 9 6 1
Accounts payable 78 83 100
Accrued liabilities 88 42 55
------ ------ -----
Total current liabilities 323 287 256
------ ------ -----
Noncurrent liabilities 72 60 70
Long-term debt 193 188 262
Deferred taxes on income 83 94 109
Minority stockholders' interest 8 9 9
Stockholders' equity
Cumulative translation adjustment (13) (12) (10)
Net stockholders' investment 992 1,037 610
------ ------ -----
Total stockholders' equity 979 1,025 600
------ ------ -----
Total Liabilities and
Stockholders' Equity $1,658 $1,663 $1,306
====== ====== ======
- ---------------------
See accompanying Notes to Combined Financial Statements.
F-3
CORN PRODUCTS INTERNATIONAL, INC.
COMBINED STATEMENTS OF INCOME
($ Millions) Six Months Ended
June 30, Years Ended December 31,
---------------- -----------------------
1997 1996 1996 1995 1994
---- ---- ---- ---- ----
(Unaudited)
Net sales $ 695 $ 744 $1,524 $1,387 $1,385
Cost of sales 641 639 1,381 1,083 1,087
----- ----- ----- ----- -----
Gross profit 54 105 143 304 298
----- ----- ----- ----- -----
Selling, general and
administrative 49 47 88 102 99
Restructuring and
other charges - net 86 - - (37) 19
Equity in (earnings)/loss of
unconsolidated affiliates 1 (2) (10) (12) (8)
----- ------ ------ ------ ------
Expenses and other
income - net 136 45 78 53 110
----- ------ ------ ------ ------
Operating income (loss) (82) 60 65 251 188
Financing costs 15 13 28 28 19
----- ----- ----- ----- -----
Income (loss) before
income taxes
and minority interest (97) 47 37 223 169
Provision (benefit) for
income taxes (26) 17 12 86 67
Minority stockholders'
interest 1 1 2 2 2
----- ------ ------ ------ ------
Net income (loss) $ (72) $ 29 $ 23 $ 135 $ 100
====== ===== ===== ===== =====
- ---------------------
See accompanying Notes to Combined Financial Statements.
F-4
CORN PRODUCTS INTERNATIONAL, INC.
COMBINED STATEMENTS OF CASH FLOWS
($ Millions) Six Months Ended
June 30, Years Ended December 31,
---------------- -----------------------
1997 1996 1996 1995 1994
---- ---- ---- ---- ----
(Unaudited)
Cash flows from (used for)
operating activities
Net income (loss) $(72) $29 $23 $135 $100
Non-cash charges (credits)
to net income
Depreciation and amortization 47 43 88 83 80
Restructuring and other
charges - net 86 - - (37) 19
Deferred taxes (11) 4 (17) (6) (12)
Other - net 2 (2) (24) (8) 2
Changes in trade working
capital
Accounts receivable
and prepaid items 11 (29) (95) (7) (38)
Inventories 24 (52) (50) 10 (18)
Due to CPC International Inc. (33) 22 (2) 1 (7)
Accounts payable and accrued
liabilities (2) (30) (28) 3 22
----- ----- ----- ----- -----
Net cash flows from (used
for) operating activities 52 (15) (105) 174 148
----- ----- ----- ----- -----
Cash flows from (used for)
investing activities
Capital expenditures paid (47) (110) (192) (188) (145)
Proceeds from the disposal
of plants and properties - - 1 2 2
Proceeds from businesses sold - - - 67 -
Investment in and loans to
unconsolidated affiliates (19) (39) (60) (13) -
Businesses acquired - - - - (2)
----- ----- ----- ----- -----
Net cash flows used for
investing activities (66) (149) (251) (132) (145)
----- ----- ----- ----- -----
Net cash flows after
investments (14) (164) (356) 42 3
----- ----- ----- ----- -----
Cash flows from (used for)
financing activities
Increase (decrease) in
total debt - (23) (12) 58 28
Dividends paid to parent (13) (16) (32) (106) (97)
Increase in transfers from
CPC International - net 40 224 436 16 67
Other liabilities (deposits) (8) (19) (35) (13) 1
----- ----- ----- ----- -----
Net cash flows from (used
for) financing activities 19 166 357 (45) (1)
----- ----- ----- ----- -----
Increase (decrease) in cash
and cash equivalants 5 2 1 (3) 2
Cash and cash equivalents,
beginning of period 32 31 31 34 32
----- ----- ----- ----- -----
Cash and cash equivalents,
end of period $37 $33 $32 $31 $34
===== ===== ===== ===== =====
- ---------------------
See accompanying Notes to Combined Financial Statements.
F-5
CORN PRODUCTS INTERNATIONAL, INC.
COMBINED STATEMENT OF STOCKHOLDERS' EQUITY
Cumulative Net
($ Millions) translation stockholders'
adjustment investment Total
--------------------------------------
Balance, December 31, 1993 $(11) $495 $484
Net income - 100 100
Dividends paid to parent - (97) (97)
Transfer from CPC, net - 67 67
Translation adjustment (4) - (4)
--------------------------------------
Balance, December 31, 1994 (15) 565 550
--------------------------------------
Net income - 135 135
Dividends paid to parent - (106) (106)
Transfer from CPC, net - 16 16
Translation adjustment 5 - 5
--------------------------------------
Balance, December 31, 1995 (10) 610 600
--------------------------------------
Net income - 23 23
Dividends paid to parent - (32) (32)
Transfer from CPC, net - 436 436
Translation adjustment (2) - (2)
--------------------------------------
Balance, December 31, 1996 (12) 1,037 1,025
--------------------------------------
Net loss - (72) (72)
Dividends paid to parent - (13) (13)
Transfer from CPC, net - 40 40
Translation adjustment (1) - (1)
--------------------------------------
Balance, June 30, 1997 $(13) $992 $979
--------------------------------------
- ---------------------
See accompanying Notes to Combined Financial Statements.
F-6
CORN PRODUCTS INTERNATIONAL, INC.
Notes to Combined Financial Statements
1. Basis of Presentation
On February 26, 1997, the Board of Directors of CPC
International Inc. ("CPC") approved in principle the spin-off of
CPC's corn refining and related businesses (the "Corn Refining
Business") to its stockholders. Subsequently, CPC formed Corn
Products International, Inc. (the "Company") to assume the
operations of the Corn Refining Business. As a result of the
spin-off, CPC will distribute 100% of the Company's common stock
(the "Corn Products Common Stock") and each holder of CPC common
stock will receive a pro rata share of the Corn Products Common
Stock in a special dividend (the "Distribution"). The Company
will become a separately traded, publicly held company.
CPC carries its assets and liabilities at historical
cost. The historical actions of CPC's Corn Refining Business,
including CPC's accounting policies, are attributable to the
Company. The financial results in these financial statements are
not necessarily indicative of the results that would have
occurred if the Company had been an independent public company
during the periods presented or of future results of the Company.
See unaudited "PRO FORMA FINANCIAL DATA" found at page ___ in
this Information Statement for discussion of the effect of the
Distribution on the Company.
The Combined Balance Sheet at June 30, 1997 and the
Combined Statements of Income and Cash Flows for the six months
ended June 30, 1997 and June 30, 1996 have not been audited, but
have been prepared in conformity with generally accepted
accounting principles as applied in the Company's audited
combined financial statements for the year ended December 31,
1996. In the opinion of management, this information includes all
material adjustments, of a normal and recurring nature, for a
fair presentation. The results for the six month periods are not
necessarily indicative of the results expected for the full year.
2. Summary of Accounting Policies
Principles of combination - Combined financial
statements include the accounts of the Company and its
subsidiaries. The accounts of subsidiaries outside of the U.S.,
except for those in Canada, are based on fiscal years ending
September 30.
Foreign currency translation - Assets and liabilities
of foreign subsidiaries other than those in highly inflationary
economies are translated at current exchange rates with the
related translation adjustments reported as a separate component
of stockholders' equity. Income statement accounts are translated
at the average exchange rate during the period. In highly
inflationary economies where the U.S. dollar is considered the
functional currency, monetary
F-7
assets and liabilities are translated at current exchange rates
with the related adjustment included in net income. Non-monetary
assets and liabilities are translated at historical exchange
rates.
Cash and cash equivalents - Cash equivalents consist
of all investments purchased with an original maturity of three
months or less, and which have virtually no risk of loss in
value.
Inventories are stated at the lower of cost or market.
In the U.S., corn is valued at cost on the last-in, first-out
method. Had the first-in, first-out method been used for U.S.
inventories, the carrying value of these inventories would have
increased by $12.7 million and $10.1 million in 1996 and 1995,
respectively. Outside the U.S., inventories generally are valued
at average cost.
Investments in unconsolidated affiliates are carried
at cost or less, adjusted to reflect the Company's proportionate
share of income or loss less dividends received. At December 31,
1996, undistributed earnings of unconsolidated affiliates was
$12.5 million, primarily representing companies of which the
Company owns 50% or less.
Plants and properties are stated at cost. Depreciation
is generally computed on the straight-line method over the
estimated useful lives of depreciable assets at rates ranging
from 2% to 10% for buildings and 5% to 20% for all other assets.
Where permitted by law, accelerated depreciation methods are used
for tax purposes.
Income taxes - Deferred income taxes reflect the
differences between the assets and liabilities recognized for
financial reporting purposes and amounts recognized for tax
purposes. Deferred taxes are based on tax laws as currently
enacted. The Company makes provisions for estimated U.S. and
foreign income taxes, less available tax credits and deductions,
that may be incurred on the remittance by the Company's
subsidiaries of undistributed earnings, except those deemed to be
indefinitely reinvested.
Long-lived assets - In 1996, the Company adopted FAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed of," which did not have a
material impact on the Company's financial position or results of
operations.
Commodities - The Company follows a policy of hedging
its exposure to commodities fluctuations with commodities futures
contracts for certain of its key North American raw material
purchases. Such raw materials may or may not be hedged at any
given time based on management's decisions as to the need to fix
the cost of such raw materials to protect the Company's
profitability. Realized gains and losses arising from such
hedging transactions are considered an integral part of the cost
of these commodities and are included in the cost when purchased.
Risks and uncertainties - The Company operates in one
business segment and in more than 20 countries. In each country,
the business is subject to varying degrees of risk and
uncertainty. It insures its business and assets in each country
against insurable risks in a manner that it deems appropriate.
Because of its diversity, the Company believes that the risk of
loss
F-8
from non-insurable events in any one country would not have
material adverse effect on the Company's operations as a whole.
Additionally, the Company believes there is no concentration of
risk with any single customer or supplier, or small group of
customers or suppliers, whose failure or non-performance would
materially affect the Company's results.
Use of estimates - The preparation of financial
statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from these estimates.
3. Combined Statements of Cash Flows
Supplementary information for the combined statements
of cash flows is set forth below:
$ in millions 1996 1995 1994
- ----------------------------------------------------------------------
Cash paid during the year for:
Interest $19 $14 $ 5
Income taxes 11 69 23
4. Financing Arrangements
Short-term
The Company had average quarter-end bank borrowings of
$143.5 million and $94.4 million outstanding in 1996 and 1995,
respectively, with a weighted average interest rate in 1996 and
1995 of 10.2% and 13.1%, respectively. The maximum amount of
these borrowings outstanding was $156.5 million and $100.4
million in 1996 and 1995, respectively. The majority of the
short-term bank borrowings pertained to the Company's
international operations.
Long-term
At December 31, 1996 and 1995, long-term debt,
including the current portion of $6 million and $1 million,
respectively, amounted to $194 million and $263 million,
respectively. Included in these amounts are amounts payable by
the Company to CPC of $96 million in 1996 and $235 million in
1995.
The balance of debt outstanding in 1996 consists of
various borrowings by the Company's Canadian operations of $62
million, by its Latin American operations of $27 million and
other borrowings of $9 million. In 1995, other debt outstanding
consists of various borrowings by the Company's Canadian
operations of $11 million, by its Latin American operations of $6
million and other borrowings of $11 million.
F-9
5. Restructuring and Other Charges - Net
In the second quarter of 1997, the Company recorded a
$86 million pre-tax restructuring charge. This charge includes
direct costs of the spin-off including fees in the legal, tax and
investment banking areas, as well as other costs of the
separation of facilities that were used by CPC to produce both
consumer foods and corn-derived products. Approximately $72
million of this charge related to the restructuring of the
Company's operations. The majority of the restructuring will take
place in the Company's international operations. The
restructuring charge is summarized below:
($ in millions) To be Utilized in
1997 Charge Charge Utilized Future Periods
----------- --------------- --------------
Spin-off fees $14 --- $14
Employee costs 49 --- 49
Plant and support facilities 9 --- 9
Other 14 --- 14
----------- --------------- --------------
Total $86 --- $86
=========== =============== ==============
In 1995 the Company recorded a $15 million pre-tax
charge to realign production at several corn refining facilities
worldwide. This was in addition to the $19 million pre-tax
restructuring charge recorded in June 1994. Both charges were
utilized by December 31, 1996.
Also in 1995, the Company recorded a pre-tax gain of
$52 million from the sale of a 50% interest in an ethanol
business in the U.S. This gain, combined with the 1995 charge
mentioned above, resulted in a net gain of $37 million, $23
million after taxes. For the 1994 restructuring charge, the net
impact on results was $11 million.
6. Pension Plans
The Company and its subsidiaries have a number of
defined-benefit pension plans covering substantially all U.S.
employees and certain groups of employees in foreign countries.
Plans covering salaried employees generally provide benefits
based on the employee's final salary level or on the average
salary level for a specified period. Plans covering hourly
employees generally provide benefits of stated amounts for each
year of service. The Company's general funding policy is to
contribute annually the maximum amount that can be deducted for
income tax purposes. Certain foreign countries allow income tax
deductions without regard to contribution levels, and the
Company's policy in those countries is to make the contribution
required by the terms of the plan. Domestic plan assets consist
primarily of common stock, real estate, corporate debt securities
and short-term investment funds. The components of net periodic
pension cost are as follows:
U.S. Plans
- --------------------------------------------------------------------
$ in millions 1996 1995 1994
- --------------------------------------------------------------------
Service cost (benefits earned
during the period) $3 $2 $2
Interest cost on projected
benefit obligation 7 7 4
F-10
Actual return on plan assets (15) (17) (3)
Net amortization and deferral 8 11 (2)
- --------------------------------------------------------------------
Net periodic pension cost $ 3 $ 3 $ 1
- --------------------------------------------------------------------
International Plans
- --------------------------------------------------------------------
$ in millions 1996 1995 1994
- --------------------------------------------------------------------
Service cost (benefits earned
during the period) $ 1 $ 1 $ 1
Interest cost on projected
benefit obligation 3 2 2
Actual return on plan assets (3) (2) (2)
- --------------------------------------------------------------------
Net periodic pension cost $ 1 $ 1 $ 1
- --------------------------------------------------------------------
F-11
The funded status for the Company's major pension plans
based on valuations as of September 30 is as follows:
Accumulated
Assets exceed benefits
U.S. Plans accumulated benefits exceed assets
- ------------------------------------------------------------------------------
$ in millions 1996 1995 1996 1995
- ------------------------------------------------------------------------------
Actuarial present value of
benefit obligation:
Vested $(75) $(80) $(6) $ (5)
Nonvested (2) (2) (4) (4)
- ------------------------------------------------------------------------------
Accumulated benefit obligation (77) (82) (10) (9)
Effect of projected future
compensation levels (29) (14) -- --
- ------------------------------------------------------------------------------
Projected benefit obligation (106) (96) (10) (9)
Plan assets at fair value 110 90 -- --
- ------------------------------------------------------------------------------
Plan assets in excess of (less than)
projected benefit obligation 4 (6) (10) (9)
Unrecognized net loss (gain) (8) 2 -- --
Unrecognized prior service cost 5 5 -- --
Unrecognized net transition obligation 1 1 2 2
- ------------------------------------------------------------------------------
Prepaid pension cost at December 31 $ 2 $ 2 $(8) $(7)
- ------------------------------------------------------------------------------
International Plans
- -----------------------------------------------------------
$ in millions 1996 1995
- -----------------------------------------------------------
Actuarial present value of
benefit obligation:
Vested $ (25) $ (21)
Nonvested (2) (1)
- -----------------------------------------------------------
Accumulated benefit obligation (27) (22)
Effect of projected future
compensation levels (4) (2)
- -----------------------------------------------------------
Projected benefit obligation (31) (24)
Plan assets at fair value 31 26
- -----------------------------------------------------------
Plan assets in excess of (less than)
projected benefit obligation -- 2
Unrecognized prior service cost 1 1
Unrecognized net transition obligation 3 --
- -----------------------------------------------------------
Prepaid pension cost at December 31 $ 4 $ 3
- -----------------------------------------------------------
Assumptions (reflecting averages across all plans):
U.S. Plans
- --------------------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------------
Weighted average discount rates 7.0% 6.6% 7.7%
Rate of increase in compensation
levels 5.5% 5.3% 6.3%
Long-term rate of return on plan
asset 8.6% 9.7% 8.6%
- --------------------------------------------------------------------
F-12
International Plans
- --------------------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------------
Weighted average discount rates 8.2% 8.0% 10.0%
Rate of increase in compensation
levels 5.5% 5.5% 5.5%
Long-term rate of return on plan
assets 8.5% 8.5% 8.5%
- --------------------------------------------------------------------
In addition, the Company sponsors defined-contribution
pension plans covering certain domestic and foreign employees.
Contributions are determined by matching a percentage of employee
contributions. Expense recognized in 1996, 1995 and 1994 was $2.9
million, $2.7 million and $2.6 million, respectively.
7. Other Postretirement and Postemployment Benefits
In addition to pension benefits, the Company provides
certain health care and life insurance benefits for its domestic
and certain foreign retired employees. Substantially all of the
Company's domestic employees become eligible for these benefits
when they meet minimum age and service requirements. The Company
has the right to modify or terminate these benefits.
The following is a summary of the status of the
Company's major postretirement benefit plans based on valuations
as of September 30, 1996 and 1995:
- -----------------------------------------------------------------
$ in millions 1996 1995
- -----------------------------------------------------------------
Accumulated postretirement benefit
obligation (APBO):
Retirees $ (27) $ (37)
Fully eligible active plan
participants (11) (11)
Other active plan participants (13) (12)
- -----------------------------------------------------------------
Total (51) (60)
- -----------------------------------------------------------------
Unrecognized prior service cost (1) (2)
Unrecognized net gain -- 1
- -----------------------------------------------------------------
Accrued postretirement benefit cost
at December 31 $(52) $(61)
- -----------------------------------------------------------------
Net periodic postretirement benefit cost included the
following components:
- ---------------------------------------------------------------------
$ in millions 1996 1995 1994
- ---------------------------------------------------------------------
Service cost (benefits earned
during this year) $ 1 $ 1 $ 1
Interest cost on the accumulated
postretirement benefit obligation 4 4 3
Net amortization and deferral (1) --- 1
- ---------------------------------------------------------------------
Net periodic postretirement benefit $ 4 $ 5 $ 5
- ---------------------------------------------------------------------
Annual increases in per capita cost of health care benefits
of 9.5% pre-age-65 and 7.5% post-age-65 were assumed for 1997 to
1998. Rates were assumed to decrease by 1% thereafter until
reaching 4.5%. Increasing the assumed health care cost trend rate
by 1% increases the APBO by $7 million, with a corresponding
effect on the service and interest cost
F-13
components of the net periodic postretirement benefit cost of
less than $1 million. The discount rate used to determine the
APBO for 1996 and 1995 is 7.0% and 6.5%, respectively.
8. Investments in and Advances to Unconsolidated Affiliates
During the first quarter of 1995, the Company's
Mexican operations entered into a joint venture with Arancia
Industrial, S.A. de C.V., a corn refining business located in
Mexico. This investment has been accounted for under the equity
method. During 1996, the Company loaned this joint venture $60
million for the construction of a new plant.
9. Supplementary Balance Sheet and Income Statement Information
Supplementary Balance Sheet and Income Statement
Information is set forth below:
$ in millions 1996 1995
- --------------------------------------------------------------------
Accounts receivable - net
Accounts receivable - trade $149 $125
Accounts receivable - other
accounts receivable 63 (1)
Allowance for doubtful accounts (3) (3)
- --------------------------------------------------------------------
Total accounts receivable - net 209 121
- --------------------------------------------------------------------
Inventories
Finished and in process 69 37
Raw materials 65 34
Manufacturing supplies 28 42
- --------------------------------------------------------------------
Total inventories 162 113
- --------------------------------------------------------------------
Plants and properties
Land 50 49
Buildings 480 471
Machinery and equipment 1,587 1,417
Accumulated depreciation (1,060) (1,017)
- --------------------------------------------------------------------
Plants and properties, net 1,057 920
- --------------------------------------------------------------------
Accrued liabilities
Compensation expenses 3 3
Capital additions 8 8
Accrued interest 3 2
Restructuring reserves --- 14
Taxes payable other than taxes on income 11 9
Other 17 19
- --------------------------------------------------------------------
Total accrued liabilities 42 55
- --------------------------------------------------------------------
Noncurrent liabilities
Employees' pension, indemnity, retirement,
and related provisions 58 65
Restructuring reserves --- 3
F-14
Other noncurrent liabilities 2 2
- --------------------------------------------------------------------
Total noncurrent liabilities 60 70
- --------------------------------------------------------------------
$ in millions 1996 1995 1994
- ---------------------------------------------------------------------
Depreciation expense $88 $82 $79
Amortization expense -- 1 1
- ---------------------------------------------------------------------
Interest expense - net
Interest expense 37 34 26
Interest expense capitalized (8) (3) (2)
Interest income (1) (3) (5)
- ---------------------------------------------------------------------
Interest expense - net $28 $28 $19
- ---------------------------------------------------------------------
10. Financial Instruments
Fair value of financial instruments
The carrying values of cash equivalents, accounts
receivable, accounts payable and debt approximate fair values.
Commodities
At June 30, 1997, the Company had open corn commodity
futures contracts of $83 million to cover some of its
requirements. Contracts open for delivery beyond September 30,
1997, amounted to $47 million, of which $31 million is due in
December 1997, and $16 million in March 1998. At June 30, 1997,
the price of corn under these contracts was $7.6 million in
excess of market quotations of the same date.
During the fourth quarter of 1996, the Company
recognized a loss of $40 million for certain liquidated corn
futures. These futures had been designed to protect anticipated
firm-priced business against an expected run-up in corn prices.
When corn prices instead fell sharply and the business as
anticipated did not materialize, the Company liquidated the
futures contracts.
At December 31, 1996, the Company had open corn
commodity futures contracts of $202 million to cover its
requirements. Contracts open for delivery beyond March 31, 1997,
amounted to $115 million, of which $87 million was due in May
1997, and $28 million in July 1997. At December 31, 1996, the
price of corn under these contracts was $33.4 million in excess
of market quotations of the same date.
F-15
11. Income Taxes
Income before income taxes and the components of the
provision for income taxes are shown below:
$ in millions 1996 1995 1994
- ---------------------------------------------------------------------
Income (loss) before
income taxes:
United States $(20) $136 $86
Outside the United States 57 87 83
- ---------------------------------------------------------------------
Total $37 $223 $169
- ---------------------------------------------------------------------
Provision for income taxes:
Current tax expense
U.S. federal 27 57 29
State and local (2) 12 11
Foreign 4 23 39
- ---------------------------------------------------------------------
Total current 29 92 79
- ---------------------------------------------------------------------
Deferred tax expense (benefit)
U.S. federal (22) (11) --
State and local 1 (3) (5)
Foreign 4 8 (7)
- ---------------------------------------------------------------------
Total deferred (17) (6) (12)
- ---------------------------------------------------------------------
Total provision $ 12 $ 86 $ 67
- ---------------------------------------------------------------------
The tax effects of significant temporary differences
which comprise the deferred tax liabilities and assets at
December 31, 1996 and 1995, are as follows:
$ in millions 1996 1995
- --------------------------------------------------------------
Plants and properties $121 $130
Pensions 1 1
- --------------------------------------------------------------
Gross deferred tax liabilities 122 131
- --------------------------------------------------------------
Restructuring reserves -- 4
Employee benefit reserves 28 24
Other 17 4
- --------------------------------------------------------------
Gross deferred tax assets 45 32
- --------------------------------------------------------------
Valuation allowance (8) (3)
- --------------------------------------------------------------
Total deferred tax liabilities $ 85 $102
- --------------------------------------------------------------
Total net deferred tax liabilities and assets shown
above included current and noncurrent elements.
F-16
A reconciliation of the federal statutory tax rate to the
Company's effective tax rate follows:
1996 1995 1994
- ---------------------------------------------------------------------
Provision for tax at U.S.
statutory rate 35.0% 35.0% 35.0%
Taxes related to foreign income (0.6) 0.2 0.3
State and local taxes - net (0.5) 1.4 --
Other items - net (0.3) 1.9 4.2
- ---------------------------------------------------------------------
Provision at effective tax rate 33.6% 38.5% 39.5%
- ---------------------------------------------------------------------
The effective tax rate in 1996 was lower due to a
decrease in the tax rate in certain foreign jurisdictions and an
increase in the proportion of Company income earned overseas.
This foreign income, on average, was taxed at a lower rate than
domestic income in 1996.
Taxes that would result from dividend distributions by
foreign subsidiaries to the U.S. are provided to the extent
dividends are anticipated. As of December 31, 1996, approximately
$190 million of retained earnings of foreign subsidiaries are
retained indefinitely by the subsidiaries for capital and
operating requirements.
F-17
12. Leases
The Company leases rail cars and certain machinery and
equipment under various operating leases. Rental expense for
operating leases was $12.2 million, $8.9 million and $7.9 million
in 1996, 1995 and 1994, respectively. Minimum lease payments
existing at December 31, 1996 were as follows:
Year Minimum Lease Payment
-------- ---------------------
1997 $15.1
1998 13.8
1999 12.0
2000 9.6
After 2000 31.2
13. Related Party Transactions
CPC maintains a centralized cash management system to
finance its domestic operations. Cash deposits from the Company
are transferred to CPC on a daily basis and CPC funds the
Company's disbursement bank accounts as required.
CPC provided certain general and administrative
services to the Company including tax, treasury, risk management
and insurance, legal, information systems and human resources.
These expenses were allocated to the Company based on actual
usage or other methods which management believes are reasonable.
These allocations were $9.3, $14.3 and $16.7 million in fiscal
years 1996, 1995 and 1994, respectively. These costs could have
been different had the Company operated as an independent public
company during the periods presented.
14. Stockholders' Equity
Common Stock
The Company has authorized 900,000,000 shares of $0.01
par value common stock. Based on the 143,643 million and 145,605
million shares of CPC common stock outstanding as of December 31,
1996 and 1995, and a distribution ratio of one share of Corn
Products Common Stock for every four shares of CPC common stock,
approximately 35,911 million and 36,401 million shares would have
been issued if the distribution had occurred on December 31, 1996
and 1995, respectively.
Preferred Stock and Stockholder's Rights Plan
The Company has authorized 25,000,000 shares of $0.01
par value preferred stock of which one million shares were
designated as Series A Junior Participating Preferred Stock for
the stockholder's rights plan. Under this plan, each share of the
Corn Products Common Stock
F-18
issued in the Distribution carries with it the right to purchase
one one-hundredths of a share of preferred stock. The rights will
at no time have voting power or pay dividends. The rights will
become exercisable if on or before December 31, 1999, a person or
group acquires or announces a tender offer that would result in
the acquisition of 10% or more of the Corn Products Common Stock
or after December 31, 1999 would result in the acquisition of 15%
or more of the Corn Products Common Stock. When exercisable, each
full right entitles a holder to buy one one-hundredth of a share
of Series A Junior Participating Preferred Stock at a price of
$---. If the Company is involved in a merger or other business
combination with a 10% or more stockholder on or before December
31, 1999 or a 15% or more stockholder thereafter, each full right
will entitle a holder to buy a number of the acquiring company's
shares having a value of twice the exercise price of the right.
Alternatively, if a 10% or 15% stockholder (as applicable)
engages in certain self-dealing transactions or acquires the
Company in such a manner that the Corn Products Company and its
common stock survive, or if any person acquires 10% or 15% or
more of the Corn Products Common Stock (as applicable), except
pursuant to an offer for all shares at a fair price, each full
right not owned by a 10% or 15% or more stockholder may be
exercised for Corn Products Common Stock (or, in certain
circumstances, other consideration) having a market value of
twice the exercise price of the right. The Company may redeem the
rights for one cent each at any time before an acquisition of 10%
or 15% or more of its voting securities (as applicable) [and for
at least 10 business days thereafter]. Unless redeemed earlier,
the rights will expire on December 31, 2007.
Employee Stock Ownership Plan (ESOP)
CPC maintained an ESOP as part of its
Savings/Retirement Plan covering U.S. salaried employees. The
Company will not offer an ESOP to its employees. All vested
account balances in the CPC ESOP associated with employees of the
Company will be transferred to accounts in the Corn Products
401(k) Plan in the form of CPC common stock, and in cash for
fractional shares.
Stock Option Plan
CPC maintained stock and performance plans for certain
key employees. The Company will establish its own stock option
plan at a later date. All existing vested CPC stock options of
Company employees will be converted to stock options under the
Corn Products Stock Incentive Plan. These stock options will
retain their vesting schedules and existing expiration dates. The
number of stock options, and the option price, will be calculated
pursuant to the following formula: (i) the number of shares of
Corn Products Common Stock covered by the substitute option shall
be equal to the pre-Distribution number of shares of CPC common
stock covered by the CPC option multiplied by a fraction, the
numerator of which is the pre-Distribution CPC Market Price and
the denominator of which is the post-Distribution Corn Products
Market Price (the "Corn Products Conversion Factor"), and (ii)
the exercise price under the substituted option shall be equal to
the pre-Distribution exercise price under the CPC option
multiplied by a fraction, the numerator of which is the
post-Distribution Corn Products Market Price and the denominator
of which is the pre-Distribution CPC Market Price. For this
purpose, the "pre-Distribution CPC Market Price" means the
average of the high and low prices
F-19
of CPC common stock on the New York Stock Exchange, Inc. (the
"NYSE") for each of the ten trading days prior to the first day
on which there is trading in CPC common stock on a
post-Distribution basis, and the "post-Distribution Corn Products
Market Price" means the average of the high and low prices of
Corn Products Common Stock on the NYSE for each of the ten
trading days beginning on the first day on which there is trading
in Corn Products Common Stock, including on a "when issued"
basis.
The Company accounts for stock based compensation
using the intrinsic value method prescribed by APB 25, as
permitted by FAS 123. The pro forma impact on net income and
earnings per share of the differential between the fair value
method and the intrinsic value method of accounting for
stock-based compensation is not material to the Company's
financial position or results of operations.
15. Geographic Information
The Company operates in the U.S., Canada, Latin
America and Asia. Information concerning operations by geographic
area is as follows:
($ in millions) 1996 1995 1994
----------------------------------------
Sales to Unaffiliated Customers:
United States $ 830 $ 737 $ 788
Canada 216 184 145
----------------------------------------
North America 1,046 921 933
Latin America 406 401 399
Asia 72 65 53
----------------------------------------
Total $1,524 $1,387 $1,385
----------------------------------------
Operating Income:
United States $ 1 $ 159 $ 107
Canada 9 38 26
----------------------------------------
North America 10 197 133
Latin America 44 44 40
Asia 11 10 15
----------------------------------------
Total $ 65 $ 251 $ 188
----------------------------------------
Assets:
United States $ 788 $ 651 $ 648
Canada 204 162 157
----------------------------------------
North America 992 813 805
Latin America 610 442 357
Asia 61 51 45
----------------------------------------
Total $1,663 $1,306 $1,207
----------------------------------------
16. Quarterly Financial Data
Summarized quarterly financial data is as follows:
F-20
($ in millions) 1st Q 2nd Q 3rd Q 4th Q
-----------------------------------------------
1996
Net sales $349 $395 $400 $380
Gross profit 57 48 37 1
Net income (loss) 15 14 8 (14)
1995
Net sales $341 $363 $368 $315
Gross profit 77 78 78 71
Net income 21 27 57 30
F-21
=================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
EXHIBITS
TO
FORM 10
General Form for Registration of Securities
Pursuant to Section 12(b) of the Securities
Exchange Act of 1934
--------------------------
CORN PRODUCTS INTERNATIONAL, INC.
=================================================================
EXHIBIT INDEX
Exhibit No.
- -----------
2.1 Form of Distribution Agreement.*
3.1 Amended and Restated Certificate of Incorporation of
Corn Products International, Inc.
3.2 By-Laws of Corn Products International, Inc.
4.1 Form of Rights Agreement.*
4.2 Certificate of Designation for Registrant's Series A
Junior Participating Preferred Stock.*
10.1 Form of Master Supply Agreement.*
10.2 Form of Tax Sharing Agreement.
10.3 Form of Tax Indemnification Agreement.
10.4 Form of Debt Agreement.
10.5 Form of Transition Services Agreement.*
10.6 Form of Master License Agreement.*
10.7 Form of Distribution Agreement (filed as Exhibit 2.1).*
10.8 Form of Employee Benefits Agreement.
10.9 Form of Argo Access Agreement.*
10.10 Form of Stock Incentive Plan.*
10.11 Form of Severance Agreement.*
21.1 List of Subsidiaries.*
- -----------------------------
* To be filed by amendment.
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
CORN PRODUCTS INTERNATIONAL, INC.
FIRST: The name of the Corporation is Corn Products
International, Inc.
SECOND: The address of the Corporation's registered
office in the State of Delaware is 1209 Orange Street, City of
Wilmington, County of New Castle. The name of the Corporation's
registered agent at such address is The Corporation Trust
Company.
THIRD: The purpose of the Corporation is to engage in
any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of
Delaware.
FOURTH: The total number of shares of all classes of
stock which the Corporation shall have authority to issue is
225,000,000 shares, consisting of
(a) 25,000,000 shares of Preferred Stock, par value
$0.01 per share, and
(b) 200,000,000 shares of Common Stock, par value
$0.01 per share.
Except as otherwise provided by law, the shares of
stock of the Corporation, regardless of class, may be issued by
the Corporation from time to time in such amounts, for such
consideration and for such corporate purposes as the Board of
Directors may from time to time determine.
Shares of Preferred Stock may be issued from time to
time in one or more series of any number of shares as may be
determined from time to time by the Board of Directors, provided
that the aggregate number of shares issued and not cancelled of
any and all such series shall not exceed the total number of
shares of Preferred Stock authorized by this Certificate of
Incorporation. Each series of Preferred Stock shall be distinctly
designated. Except in respect of the particulars fixed for a
series by the Board of Directors as permitted hereby, all shares
of Preferred Stock shall be of equal rank and shall be identical.
All shares of any one series of Preferred Stock shall be alike in
every particular, except that shares of any one series issued at
different times may differ as to the dates from which dividends
thereon shall be cumulative. The voting powers, if any, of each
such series and the preferences and relative, participating,
optional and other special rights of each such series and the
qualifications, limitations and restrictions thereof, if any, may
differ from those of any and all other series at any time
outstanding; and the Board of Directors is hereby expressly
granted authority to fix, in the resolution or resolutions
providing for the issue of stock of a particular series of
Preferred Stock, the voting powers, if any, of each such series
and the designations, preferences and relative, participating,
optional and other special rights of each such series and the
qualifications, limitations and restrictions thereof to the full
extent now or hereafter permitted by this Certificate of
Incorporation and the laws of the State of Delaware.
Subject to the provisions of any applicable law or of
the By-laws with respect to the closing of the transfer books or
the fixing of a record date for the determination of stockholders
entitled to vote, and except as otherwise provided by law or by
the resolution or resolutions providing for the issue of any
series of Preferred Stock, the holders of outstanding shares of
Common Stock shall exclusively possess the voting power for the
election of directors and for all other purposes, each holder of
record of shares of Common Stock being entitled to one vote for
each share of Common Stock standing in such holder's name on the
books of the Corporation.
FIFTH: The Board of Directors is expressly authorized
and empowered to adopt, amend and repeal By-laws, subject to the
power of the stockholders to amend or repeal any By-law made by
the Board of Directors. The stockholders of the Corporation may
not adopt, amend or repeal any By-law unless such action is
approved by the affirmative vote of the holders of not less than
eighty percent (80%) of the voting power of all of the
outstanding shares of capital stock of the Corporation entitled
to vote generally in the election of directors, considered for
purposes of this Article FIFTH as a single class.
SIXTH: Unless and except to the extent that the
By-laws shall so require, the election of directors need not be
by written ballot.
SEVENTH: Subject to the following sentence, from time
to time any of the provisions of this Certificate of
Incorporation may be further amended, altered or repealed, and
other provisions authorized by the laws of the State of Delaware
at the time in force may be added or inserted in the manner and
at the time prescribed or permitted by said laws; and all rights
at any time conferred upon the stockholders of the Corporation by
this Certificate of Incorporation are granted subject to the
provisions of this Article SEVENTH. Notwithstanding any other
provisions of this Certificate of Incorporation or the By-laws of
the Corporation (and notwithstanding that a lesser percentage may
be specified by law), the provisions of this Article SEVENTH,
Article EIGHTH, Article NINTH, Article ELEVENTH and Article
TWELFTH hereof may not be amended or repealed unless such action
is approved by the affirmative vote of the holders of not less
than two thirds of the voting power of all of the outstanding
shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for purposes
of this Article SEVENTH as a single class.
EIGHTH: The business and affairs of the Corporation
shall be managed by or under the direction of a Board of
Directors consisting of not fewer than seven nor more than
seventeen directors (exclusive of directors referred to in the
following paragraph), the exact number to be determined from time
to time by resolution adopted by affirmative vote of a majority
of such directors then in office. The directors shall be divided
into three classes, designated Class I, Class II and Class III.
Each class shall consist, as nearly as may be possible, of
one-third of the total number of directors determined by the
Board of Directors pursuant to this paragraph. At the first
election of directors following adoption of this Amended and
Restated Certificate of Incorporation, Class I directors shall be
elected for a one-year term, Class II directors for a two-year
term and Class III directors for a three-year term. At each
annual meeting of stockholders beginning in 1998, successors to
the directors in the class whose term expires at that annual
meeting shall be elected for a three-year term. If the number of
directors is changed, any increase or decrease shall be
apportioned among the classes so as to maintain the
2
number of directors in each class as nearly equal as
possible, and any additional director of any class elected to
fill a vacancy resulting from an increase in such class shall
hold office for the remaining term of that class, but in no case
will a decrease in the number of directors shorten the term of
any incumbent director. A director shall hold office until the
annual meeting for the year in which his or her term expires and
until his or her successor shall be elected and shall qualify,
subject, however, to prior death, resignation, retirement,
disqualification or removal from office. Subject to the rights of
the holders of any one or more classes or series of Preferred
Stock issued by the Corporation, any director, or the entire
Board of Directors, may be removed from office at any time, but
only for cause and only by the affirmative vote of the holders of
not less than a majority of the voting power of all of the
outstanding shares of capital stock of the Corporation entitled
to vote generally in the election of directors, considered for
purposes of this sentence as a single class. Any vacancy in the
Board of Directors that results from an increase in the number of
directors may be filled by a majority of the directors then in
office, provided that a quorum is present, and any other vacancy
may be filled by a majority of the directors then in office, even
if less than a quorum, or by a sole remaining director. Any
director elected to fill a vacancy not resulting from an increase
in the number of directors shall hold office for the remaining
term of his or her predecessor.
Notwithstanding the foregoing, whenever the holders of
any one or more classes or series of Preferred Stock issued by
the Corporation shall have the right, voting separately by class
or series, to elect directors at an annual or special meeting of
stockholders, the number of such directors and the election, term
of office, filling of vacancies and other features of such
directorships shall be governed by the provisions of Article
FOURTH of this Certificate of Incorporation and any resolution or
resolutions adopted by the Board of Directors pursuant thereto,
and such directors shall not be divided into classes unless
expressly so provided therein.
NINTH: No action required to be taken or which may be
taken at any annual or special meeting of stockholders of the
Corporation may be taken without a meeting, unless a consent in
writing, setting forth the action so taken, shall be signed by
all the stockholders of the Corporation entitled to vote thereon.
TENTH: A director of the Corporation shall not be
personally liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) for payment of an
improper dividend, or for an improper repurchase or redemption of
the stock of the Corporation, in violation of Section 174 of the
Delaware General Corporation Law, or (iv) for any transaction
from which the director derived an improper personal benefit. If
the Delaware General Corporation Law is amended after the
effective date of this Article TENTH to further eliminate or
limit, or to authorize further elimination or limitation of, the
personal liability of directors for breach of fiduciary duty as a
director, then the personal liability of a director to this
Corporation or its stockholders shall be eliminated or limited to
the full extent permitted by the Delaware General Corporation
Law, as so amended. For purposes of this Article TENTH,
"fiduciary duty as a director" shall include any fiduciary duty
arising out of serving at the request of the Corporation as a
director of another corporation, partnership, joint venture,
trust or other enterprise, and "personally liable to the
3
Corporation" shall include any liability to such other
corporation, partnership, joint venture, trust or other
enterprise, and any liability to this Corporation in its capacity
as a security holder, joint venturer, partner, beneficiary,
creditor or investor of or in any such other corporation,
partnership, joint venture, trust or other enterprise.
ELEVENTH: Except as otherwise provided in this Amended
and Restated Certificate of Incorporation, the Board of Directors
shall have authority to authorize the issuance, from time to time
without any vote or other action by the stockholders, of any or
all shares of stock of the Corporation of any class at any time
authorized, any securities convertible into or exchangeable for
any such shares so authorized, and any warrant, option or right
to purchase, subscribe for or otherwise acquire, shares of stock
of the Corporation for any such consideration and on such terms
as the Board of Directors from time to time in its discretion
lawfully may determine, which terms and conditions may include,
without limitation, restrictions or conditions that preclude or
limit the exercise, transfer or receipt thereof or that
invalidate or void any such securities, warrants, options or
rights; provided, however, that the consideration for the
issuance of shares of stock of the Corporation having par value
shall not be less than such par value. Stock so issued, for which
the consideration has been paid to the Corporation, shall be
fully paid stock, and the holders of such stock shall not be
liable to any further call or assessments thereon.
TWELFTH: In addition to any other considerations which
the Board of Directors may lawfully take into account in
determining whether to take or to refrain from taking corporate
action on any matter, including proposing any matter to the
stockholders of the Corporation, the Board of Directors may take
into account the interests of creditors, customers, current and
retired employees and other constituencies of the Corporation and
its subsidiaries and the effect upon communities in which the
Corporation and its subsidiaries do business.
4
BY-LAWS
OF
CORN PRODUCTS INTERNATIONAL, INC.
___________________
ARTICLE I
Offices
SECTION 1. The registered office of the Corporation in the
State of Delaware shall be in the City of Wilmington, County of
New Castle, and the name of the registered agent of the
Corporation in said State is The Corporation Trust Company. The
Corporation may also have an office or offices other than said
registered office at such place or places either within or
without the State of Delaware as the Board of Directors may from
time to time designate or as the business of the Corporation may
require.
ARTICLE II
Seal
SECTION 1. The seal of the Corporation shall be
circular in form and shall have the name of the Corporation and
the words and numerals "Corporate Seal 1997 Delaware."
ARTICLE III
Meetings of Stockholders
SECTION 1. Annual Meeting. The annual meeting of stockholders
of the Corporation shall be held in each year on the fourth
Thursday in April, or on such other date as the Board of
Directors may designate and at such time and place as the Board
of Directors may designate, for the election of directors and for
the transaction of such other business as may properly come
before the meeting.
SECTION 2. Special Meetings. Except as provided in the
Certificate of Incorporation, special meetings of the
stockholders may be called only on the order of the Chairman of
the Board or the Board of Directors and shall be held at such
date, time and place as may be specified by such order.
SECTION 3. Notice; Stockholder Nominations and
Proposals. Written notice of all meetings of the stockholders
shall be mailed or delivered to each stockholder not less than
twenty nor more than sixty days before the meeting. The notice or
an accompanying document shall identify the business to be
transacted at the meeting and, if directors are to be elected,
the candidates therefor, as determined by the Board of Directors.
Other business may be transacted at the annual meeting
(but not at any special meeting), only if the Secretary of the
Corporation has received from the sponsoring stockholder (a) not
less than sixty nor more than ninety days before the fourth
Thursday in April (or, if the Board of Directors has designated
another date for the annual meeting pursuant to Section 1 of this
Article III, not less than sixty nor more than ninety days before
such other date or, if such other date has not been publicly
disclosed at least seventy-five days in advance, then not less
than fifteen days after such public disclosure) a written notice
setting forth (i) as to each matter the stockholder proposes to
bring before the annual meeting, a brief description of the
proposal desired to be brought before the annual meeting and the
reasons for conducting such business at the annual meeting, (ii)
the name and address, as they appear on the Corporation's books,
of the stockholder proposing such business, (iii) the class and
number of shares which are beneficially owned by the stockholder
on the date of such stockholder's notice and (iv) any material
interest of the stockholder in such proposal, and (b) not more
than ten days after receipt by the sponsoring stockholder of a
written request from the Secretary, such additional information
as the Secretary may reasonably require. Notwithstanding anything
in these By-laws to the contrary, no business shall be brought
before or conducted at an annual meeting except in accordance
with the provisions of this Section 3. The officer of the
Corporation or other person presiding over the annual meeting
shall, if the facts so warrant, determine and declare to the
meeting that business was not properly brought before the meeting
in accordance with the provisions of this Section 3 and, if he or
she should so determine, such officer shall so declare to the
meeting and any business so determined to be not properly brought
before the meeting shall not be transacted.
Other candidates may be nominated at the annual
meeting (but not at any special meeting), only if the Secretary
of the Corporation has received from the nominating stockholder
(a) not less than sixty nor more than ninety days before the
fourth Thursday in April (or, if the Board of Directors has
designated another date for the annual meeting pursuant to
Section 1 of this Article III, not less than sixty nor more than
ninety days before such other date or, if such other date has not
been publicly disclosed at least seventy-five days in advance,
then not less than fifteen days after such public disclosure) a
written notice setting forth (i) with respect to each person whom
such stockholder proposes to nominate for election or re-election
as a director, all information relating to such person that is
required to be disclosed in solicitations of proxies for election
of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as
amended (including such person's written consent to being named
in the proxy statement as a nominee and to serving as a director
if elected) or any successor regulation or statute, (ii) the name
and address, as they appear on the Corporation's books, of the
stockholder proposing such business and (iii) the class and
number of shares which are beneficially owned by the stockholder
on the date of such stockholder's notice, and (b) not more than
ten days after receipt by the nominating stockholder of a written
request from the Secretary, such additional information as the
Secretary may reasonably require. At the request of the Secretary
of the Corporation, each nominee proposed by the Board of
2
Directors shall provide the Corporation with such information
concerning himself or herself as is required to be set forth in a
stockholder's notice of nomination. Notwithstanding anything in
these By-laws to the contrary, no person shall be eligible for
election as a director except in accordance with the provisions
of this Section 3. The officer of the Corporation or other person
presiding over the annual meeting shall, if the facts so warrant,
determine and declare to the meeting that a nomination was not
made in accordance with the provisions of this Section 3 and, if
he or she should so determine, such officer shall so declare to
the meeting and any such defective nomination shall be
disregarded.
SECTION 4. Quorum. The holders of a majority of the voting
power of the outstanding shares of the capital stock of the
Corporation entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum for the
transaction of business at all meetings of the stockholders
except as may otherwise be provided by law, by the Certificate of
Incorporation or by these By-laws; but, if there be less than a
quorum, the holders of a majority of the voting power so present
or represented may adjourn the meeting from time to time.
SECTION 5. Voting and Proxies. Each stockholder shall,
subject to the provisions of the Certificate of Incorporation, at
each meeting of the stockholders be entitled to one vote in
person or by proxy for each share of the stock of the Corporation
which has voting power on the matter in question and which shall
have been held by such stockholder and registered in his or her
name on the books of the Corporation:
(a) on the date fixed pursuant to the provisions of
Section 6 of Article VIII of these By-laws as the record
date for the determination of stockholders who shall be
entitled to notice of and to vote at such meeting, or
(b) if no such record date shall have been so fixed,
then at the close of business on the day next preceding the
day on which notice of the meeting shall be given.
At all meetings of the stockholders, all matters, except as
otherwise provided in the Certificate of Incorporation, in these
By-laws, or by law, shall be decided by the vote of the holders
of a majority of the voting power of the outstanding shares of
the capital stock of the Corporation entitled to vote thereat
present in person or by proxy, a quorum being present. Proxies
may be submitted in person, by mail or by facsimile transmission
to the Secretary of the Corporation. The vote at any meeting of
the stockholders on any question need not be by ballot, unless so
directed by the chairman of the meeting. The Board of Directors,
or, if the Board shall not have made the appointment, the
chairman presiding at any meeting of stockholders, shall have the
power to appoint two or more persons to act as inspectors, to
receive, canvass and report the votes cast by the stockholders at
such meeting; but no candidate for the office of director shall
be appointed as an inspector at any meeting for the election of
directors.
SECTION 6. Conduct of Meeting. The Chairman of the Board or,
in his or her absence, a director or officer designated by the
Board of Directors or the Chairman of the Board, shall preside at
all meetings of the stockholders.
3
SECTION 7. Secretary of the Meeting. The Secretary of the
Corporation shall act as secretary of all meetings of the
stockholders; and, in his or her absence, the chairman of the
meeting may appoint any person to act as secretary of the
meeting.
ARTICLE IV
Board of Directors
SECTION 1. Annual Meeting. An annual meeting of the Board of
Directors shall be held following the annual meeting of the
stockholders for the purpose of the organization of the Board and
the election of officers and for the transaction of such other
business as may properly be brought before such meeting. Unless
otherwise provided by law or by these By-laws, notice of annual
meetings of the Board need not be given.
SECTION 2. Regular Meetings. Regular meetings of the
Board of Directors shall be held at such time and at such place
as may from time to time be fixed by resolution of the Board of
Directors. Unless otherwise provided by law or by these By-laws,
notice of regular meetings of the Board need not be given.
SECTION 3. Special Meetings. Special meetings of the Board of
Directors may be called by the number of directors which would
constitute a quorum of the Board of Directors or by order of the
Chairman of the Board. The Secretary shall give notice to each
director of the time, place and purpose or purposes of each
special meeting by mailing the same at least two days before the
meeting, or by delivering the same personally or by telephone or
other electronic means not later than the day before the day of
the meeting.
SECTION 4. Conduct of Meeting. At meetings of the
Board of Directors the Chairman of the Board or, in his or her
absence, a director designated by the Board of Directors, shall
preside.
SECTION 5. Quorum and Action. At meetings of the Board of
Directors, a quorum for the transaction of business shall be a
majority of the total number of directors determined from time to
time by the Board of Directors pursuant to Article EIGHTH of the
Certificate of Incorporation. If less than a quorum shall be
present, a majority of those present may adjourn any meeting
until a quorum shall be present, whereupon the meeting may be
held, as adjourned, without further notice. The act of a majority
of the directors present at a meeting where a quorum is present
shall be the act of the Board of Directors.
SECTION 6. Participation by Telephone. The directors may
participate in a meeting of the Board of Directors by means of
conference telephone or similar communications equipment by means
of which all persons participating in the meeting can hear each
other, and such participation shall constitute presence in person
at such meeting.
SECTION 7. Written Consent. Any action required or
permitted to be taken at any meeting of the Board of Directors
may be taken without a meeting if all the directors consent
4
thereto in writing, and the writing or writings are filed with
the minutes of proceedings of the Board of Directors.
SECTION 8. Compensation of Directors. The directors
shall receive such compensation for their services as may be
prescribed by the Board of Directors and shall be reimbursed by
the Corporation for ordinary and reasonable expenses incurred in
the performance of their duties.
ARTICLE V
Committees
SECTION 1. Appointment. The Board of Directors may appoint
from among its members such committees as the Board may determine
which shall consist of such number of directors and have such
powers and authority as shall from time to time be prescribed by
the Board.
SECTION 2. Regular Meetings. Regular meetings of
committees shall be held at such time and at such place as may
from time to time be fixed by resolution of the Board of
Directors. Unless otherwise provided by law or by these By-laws,
notice of regular meetings of committees need not be given.
SECTION 3. Special Meetings. Special meetings of committees
may be called by order of the chairman of the committee or the
Chairman of the Board. The Secretary shall give notice to each
member of the time, place and purpose or purposes of each special
meeting by mailing the same at least two days before the meeting,
or by delivering the same personally or by telephone or other
electronic means not later than the day before the day of the
meeting.
SECTION 4. Conduct of Meeting. At meetings of
committees, the chairman of the committee, or, in his or her
absence, a director designated by the members of the committee,
shall preside.
SECTION 5. Quorum. A majority of the members of any committee
shall constitute a quorum for the transaction of business;
provided, however, that in the absence or disqualification of a
member of a committee, the member or members thereof present at
any meeting and not disqualified from voting, whether or not he,
she or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the
place of any such absent or disqualified member.
SECTION 6. Participation by Telephone. The members of any
committee may participate in a meeting of the committee by means
of conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear
each other, and such participation shall constitute presence in
person at such meeting.
5
SECTION 7. Written Consent. Any action required or
permitted to be taken at a meeting of any committee may be taken
without a meeting if all the members consent thereto in writing,
and the writing or writings are filed with the minutes of
proceedings of the committee.
ARTICLE VI
Officers
SECTION 1. Election of Officers. The Board of Directors shall
elect the officers of the Corporation, which may include a
Chairman of the Board, a President, one or more Vice Presidents,
a Comptroller, a Treasurer, a Secretary and a General Counsel.
Any Vice President may be given an additional designation of rank
or function. Each officer shall have such powers and duties as
may be prescribed by these By-laws and as may be assigned by the
Board of Directors or the Chairman of the Board.
SECTION 2. Chairman and Chief Executive Officer. The Chairman
of the Board shall be the chief executive officer of the
Corporation, and shall have such powers and duties as customarily
pertain to that office. He or she shall have general supervision
over the property, business and affairs of the Corporation and
over its other officers. He or she may appoint and remove
assistant officers and other employees and agents. He or she may
execute and deliver in the name of the Corporation all powers of
attorney, contracts and other obligations and instruments.
SECTION 3. Acting Chairman. In case of the absence or
disability of the Chairman of the Board, an officer or officers
designated by the Chairman of the Board or, in the absence of
such designation, by the Board of Directors, shall have the
powers and duties of the Chairman of the Board.
SECTION 4. Powers. The officers other than the
Chairman of the Board may execute and deliver in the name of the
Corporation powers of attorney, contracts, and other obligations
and instruments pertaining to the regular course of their
respective duties.
SECTION 5. Responsibility for Audit. An officer or
officers designated by the Board of Directors shall be
responsible to the Board of Directors for financial control and
internal audit of the Corporation and its subsidiaries.
SECTION 6. Treasurer. The Treasurer shall have general
supervision over the funding and currency management affairs of
the Corporation.
SECTION 7. Secretary. The Secretary shall keep the
minutes of all meetings of the stockholders of the Corporation,
of the Board of Directors and of all committees appointed by the
Board.
SECTION 8. General Counsel. The General Counsel shall have
general supervision over the legal affairs of the Corporation.
6
SECTION 9. Vacancies. In case any office shall become vacant,
the Board of Directors shall have power to fill such vacancy. In
case of the absence or disability of any officer, the Board of
Directors or the Chairman of the Board may assign the powers and
duties of such office to any other officer or officers. Any
officer shall be subject to removal at any time by vote of a
majority of the whole Board.
SECTION 10. Voting of Stock held by Corporation. The Chairman
of the Board or the President, or a Vice President thereunto duly
authorized by the Chairman of the Board, shall have full power
and authority on behalf of the Corporation to attend and to vote
at any meeting of stockholders of any corporation in which the
Corporation may hold stock, and may exercise on behalf of the
Corporation any and all of the rights and powers incident to the
ownership of such stock at any such meeting, and shall have power
and authority to execute and deliver proxies and consents on
behalf of the Corporation in connection with the exercise by the
Corporation of the rights and powers incident to the ownership of
such stock. The Board of Directors may confer like powers upon
any other person or persons.
ARTICLE VII
Indemnification
SECTION 1. Each person who was or is made a party to or is
threatened to be made a party to or is involved in any action,
suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact
that he, she, or a person for whom he or she is the legal
representative, is or was a director, officer or employee of the
Corporation or is or was serving at the request of the
Corporation as a director, officer or employee of another
corporation, partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit
plans, shall be indemnified by the Corporation to the fullest
extent permitted by the Delaware General Corporation Law, as the
same exists or may hereafter be amended, against all expense,
liability and loss (including attorneys' fees, judgments, fines,
ERISA excise taxes, penalties and amounts paid or to be paid in
settlement) reasonably incurred or suffered by such person in
connection with such service; provided, however that the
Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding initiated by him
or her only if such proceeding was authorized by the Board of
Directors, either generally or in the specific instance. The
right to indemnification shall include the advancement of
expenses incurred in defending any such proceeding in advance of
its final disposition in accordance with procedures established
from time to time by the Board of Directors; provided, however,
that, if the Delaware General Corporation Law so requires, the
director, officer or employee shall deliver to the Corporation an
undertaking to repay all amounts so advanced if it shall
ultimately be determined that he or she is not entitled to be
indemnified under this Article or otherwise.
SECTION 2. The rights of indemnification provided in
this Article shall be in addition to any rights to which any
person may otherwise be entitled by law or under any By-law,
agreement, vote of stockholders or disinterested directors, or
otherwise. Unless otherwise provided when authorized or ratified,
such rights shall continue as to any person who has ceased
7
to be a director, officer or employee and shall inure to the
benefit of his or her heirs, executors and administrators, and
shall be applicable to proceedings commenced after the adoption
hereof, whether arising from acts or omissions occurring before
or after the adoption hereof.
SECTION 3. The Corporation may purchase and maintain
insurance to protect any person against any liability or expense
asserted against or incurred by such person in connection with
any proceeding, whether or not the Corporation would have the
power to indemnify such person against such liability or expense
by law or under this Article or otherwise. The Corporation may
create a trust fund, grant a security interest or use other means
(including, without limitation, a letter of credit) to insure the
payment of such sums as may become necessary to effect
indemnification as provided herein.
ARTICLE VIII
Capital Stock
SECTION 1. Stock Certificates. Certificates for stock of the
Corporation shall be in such form as the Board of Directors may
prescribe and shall be signed by the Chairman of the Board or a
Vice President and by the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary. If certificates are
signed by a Transfer Agent, acting on behalf of the Corporation,
and a Registrar, the signatures of the officers of the
Corporation may be facsimile.
SECTION 2. Transfer Agent and Registrar. The Board of
Directors shall have power to appoint one or more Transfer Agents
and Registrars for the transfer and registration of stock of any
class, and may require that stock certificates be countersigned
and registered by one or more of such Transfer Agents and
Registrars.
SECTION 3. Transfer. Shares of capital stock of the
Corporation shall be transferable on the books of the Corporation
only by the holder of record thereof in person or by duly
authorized attorney, upon surrender and cancellation of
certificates, or other evidence of ownership if no certificates
shall have been issued, for a like number of shares.
SECTION 4. Lost, Stolen or Destroyed Certificates. In
case any certificate for the capital stock of the Corporation
shall be lost, stolen or destroyed, the Corporation may require
such proof of the fact and such indemnity to be given to it and
to its Transfer Agent and Registrar, if any, as shall be deemed
necessary or advisable by it.
SECTION 5. Record Holders. The Corporation shall be entitled
to treat the holder of record of any share or shares of stock as
the holder thereof in fact, and shall not be bound to recognize
any equitable or other claim to or interest in such shares on the
part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise expressly provided by
law.
SECTION 6. Record Dates. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at
any meeting of stockholders or any adjournment
8
thereof, or entitled to receive payment of any dividend or other
distribution or other allotment of any rights, or entitled to
exercise any rights in respect of any other change, conversion or
exchange of stock or for the purpose of any other lawful action,
the Board of Directors may fix, in advance, a record date, which
shall not be more than sixty nor less than ten days before the
date of such meeting, nor more than sixty days prior to any other
action. If in any case involving the determination of
stockholders for any purpose (other than notice of or voting at a
meeting of stockholders) the Board of Directors shall not fix
such a record date, the record date for determining stockholders
for such purpose shall be the close of business on the day on
which the Board of Directors shall adopt the resolution relating
thereto. A determination of stockholders entitled to notice of or
to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
ARTICLE IX
Miscellaneous
SECTION 1. Fiscal Year. The Board of Directors shall
have power to fix, and from time to time change, the fiscal year
of the Corporation. Unless otherwise fixed by the Board, the
calendar year shall be the fiscal year.
SECTION 2. Waiver of Notice. Whenever notice is required to be
given by these By-laws or by the Certificate of Incorporation or
by law, a written waiver thereof, signed by the person or persons
entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent to notice.
ARTICLE X
Amendment
SECTION 1. The Board of Directors shall have power at any
meeting of the Board, to add any provision to or to alter, amend
or repeal any provision of these By-laws by the vote of a
majority of the total number of directors determined from time to
time by the Board of Directors pursuant to Article EIGHTH of the
Certificate of Incorporation, provided that a statement of the
proposed action shall have been included in a notice or waiver of
notice of such meeting of the Board.
9
FORM OF
TAX SHARING AGREEMENT
between
CPC International Inc.
and
Corn Products International, Inc.
Dated _______, 1997
ARTICLE 1 - DEFINITIONS........................................2
SECTION 1.01. GENERAL............................................2
ARTICLE 2 - TAX RETURN FILING..................................7
SECTION 2.01. CPC CONSOLIDATED RETURNS...........................7
SECTION 2.02. CORN F.I.T. RETURNS................................8
SECTION 2.03. CPC STATE OR LOCAL RETURNS.........................8
SECTION 2.04. CORN STATE OR LOCAL RETURNS........................9
SECTION 2.05. CPC SALARIED EMPLOYEE RETURNS......................9
SECTION 2.06. CPC HOURLY EMPLOYEE RETURNS.......................10
SECTION 2.07. CORN EMPLOYEE RETURNS.............................10
SECTION 2.08. CPC SALES, USE AND PROPERTY TAX RETURNS...........11
SECTION 2.09. CORN SALES, USE AND PROPERTY TAX RETURNS..........11
SECTION 2.10. OTHER CPC RETURNS.................................12
SECTION 2.11. OTHER CORN RETURNS................................13
SECTION 2.12. FOREIGN DISTRIBUTING ENTITY RETURNS...............13
SECTION 2.13. CORN FOREIGN RETURNS..............................14
SECTION 2.14. DESIGNATION OF AGENT..............................14
SECTION 2.15. POST-DISTRIBUTION DATE RETURNS AND POSITION--NO
INCONSISTENT POSITIONS............................15
ARTICLE 3 - TAX LIABILITY.....................................16
SECTION 3.01. CPC LIABILITY.....................................16
SECTION 3.02. CORN LIABILITY....................................16
ARTICLE 4 - POST-DISTRIBUTION CARRYBACKS OF TAX BENEFITS......17
SECTION 4.01. CARRYBACK PROVISIONS..............................17
ARTICLE 5 - POST-DISTRIBUTION CARRYOVERS OF TAX BENEFITS
AND ATTRIBUTES....................................18
SECTION 5.01. CPC GROUP ITEMS...................................18
SECTION 5.02. EARNINGS AND PROFITS..............................19
ARTICLE 6 - ADJUSTMENTS.......................................19
SECTION 6.01. CPC RETURNS AND FOREIGN DISTRIBUTING
ENTITY RETURNS....................................19
SECTION 6.02. CORN RETURNS......................................21
SECTION 6.03. EXPENSES..........................................21
ARTICLE 7 - CONTESTS..........................................22
SECTION 7.01. CPC, CPC COMPANY, AND FOREIGN DISTRIBUTING
ENTITY CONTESTS; NOTIFICATION AND COMMUNICATION...22
SECTION 7.02. GROUP CONTESTS; CONTROL AND MANAGEMENT OF CLAIMS..22
ARTICLE 8 - INFORMATION AND COOPERATION; BOOKS AND RECORDS....24
SECTION 8.01. GENERAL...........................................24
ARTICLE 9 - GENERAL PROVISIONS................................26
SECTION 9.01. EFFECTIVENESS.....................................26
SECTION 9.02. NOTICES...........................................26
SECTION 9.03. COMPLETE AGREEMENT; CONSTRUCTION..................27
SECTION 9.04. COUNTERPARTS......................................27
SECTION 9.05. WAIVER............................................27
SECTION 9.06. AMENDMENTS........................................28
SECTION 9.07. SUCCESSORS AND ASSIGNS............................28
SECTION 9.08. SUBSIDIARIES......................................28
i
SECTION 9.09. THIRD PARTY BENEFICIARIES.........................28
SECTION 9.10. HEADINGS..........................................29
SECTION 9.11. SPECIFIC PERFORMANCE..............................29
SECTION 9.12. GOVERNING LAW.....................................29
SECTION 9.13. ARBITRATION.......................................30
SECTION 9.14. SEVERABILITY......................................30
ii
TAX SHARING AGREEMENT
This TAX SHARING AGREEMENT (this "Agreement") is dated
as of ________, 1997, by and between CPC INTERNATIONAL INC., a
Delaware corporation ("CPC") and CORN PRODUCTS INTERNATIONAL,
INC., a Delaware corporation ("Corn").
WITNESSETH
WHEREAS, CPC is the common parent of an affiliated
group of corporations which includes Corn and which group and the
members thereof file U.S. consolidated federal income tax
returns;
WHEREAS, CPC, as well as its foreign and domestic
subsidiaries file certain other Tax returns relating to U.S. and
foreign Taxes;
WHEREAS, the Board of Directors of CPC has determined
that it is appropriate and desirable to effect the Distribution
as described in the Distribution Agreement between CPC and Corn
dated, , 1997 (the "Distribution Agreement"), subject to
the satisfaction or waiver of the conditions set forth therein;
WHEREAS, the Board of Directors of CPC has determined
that it is appropriate and desirable to take all corporate action
and to cause its subsidiaries to take all corporate action
necessary to effect the division of certain foreign direct and
indirect subsidiaries of CPC as of specified dates to be
determined (each such date shall sometimes hereinafter be
referred to as the "Applicable Foreign Distribution Date"); and
WHEREAS, the parties hereto desire to set forth their
agreements with regard to their respective liabilities for
federal, state, local and foreign Taxes for Tax periods before
and after the Distribution Date and the Applicable Foreign
Distribution Dates, and to provide for certain other Tax matters.
NOW, THEREFORE, in consideration of the mutual
agreements, provisions and covenants contained in this Agreement,
the parties hereby agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. General. As used in this Agreement, the
following terms shall have the following meanings (such meanings
to be equally applicable to both the singular and plural forms of
the terms defined):
"Affiliate" shall mean, when used with respect to a
specified Person, another Person that directly, or indirectly
through one or more intermediaries, will control, or will be
controlled by or will be under common control with the Person
specified immediately following the Distribution Date.
"Agreement" shall have the meaning described in the
above preamble.
"Applicable Foreign Distribution Date" shall have the
meaning described in the above preamble.
"Code" shall mean the Internal Revenue Code of 1986,
as amended.
"Corn" shall have the meaning described in the above
preamble.
2
"Corn Companies" shall mean, collectively, Corn and
each subsidiary of Corn, including without limitation any entity
owned directly or beneficially by Corn after the Distribution
Date (or, if later, the Applicable Foreign Distribution Date).
"Corn Division" shall mean the division of CPC that
operates CPC's U.S. corn refining business before the
Distribution Date.
"Corn Domestic Companies" shall mean, collectively,
each Corn Company incorporated or organized under the laws of one
of the respective States of the United States.
"Corn Employee Returns" shall have the meaning
described in Section 2.07 below.
"Corn F.I.T. Return" shall mean any federal income tax
return or amendment thereof of Corn or any member of the Corn
Group, including any consolidated federal income tax return or
amendment thereof of the Corn Group.
"Corn Foreign Returns" shall have the meaning set
forth in Section 2.13 below.
"Corn Group" shall mean the affiliated group of
corporations as defined in Section 1504(a) of the Code of which
Corn is the common parent.
"Corn Return" shall mean any of a Corn F.I.T. Return,
any of the Corn State or Local Returns, a Corn Employee Return,
any Corn Foreign Return, any of the Corn Sales, Use and Property
Tax Returns, and any Other Corn Return.
"Corn Sales, Use and Property Tax Returns" shall have
the meaning described in Section 2.09 below.
3
"Corn State or Local Returns" shall have the meaning
described in Section 2.04 below.
"CPC" shall have the meaning described in the above
preamble.
"CPC Companies" shall mean, collectively, CPC and each
subsidiary of CPC.
"CPC Consolidated Return" shall mean any consolidated
federal income tax return or amendment thereof of the CPC Group
which includes one or more of the Corn Domestic Companies.
"CPC Consolidated Return Period" shall mean a tax
period for which a CPC Consolidated Return is filed.
"CPC Group" shall mean the affiliated group of
corporations as defined in Section 1504(a) of the Code of which
CPC is the common parent.
"CPC Hourly Employee Returns" shall have the meaning
described in Section 2.06 below.
"CPC Return" shall mean any of a CPC Consolidated
Return, any of the CPC State or Local Returns, a CPC Salaried
Employee Return, a CPC Hourly Employee Return, any of the CPC
Sales, Use and Property Tax Returns, or any Other CPC Return.
"CPC Salaried Employee Returns" shall have the meaning
described in Section 2.05 below.
"CPC Sales, Use and Property Tax Returns" shall have
the meaning described in Section 2.08 below.
4
"CPC State or Local Returns" shall have the meaning
described in Section 2.03 below.
"CPC Subsidiary" shall mean any subsidiary of CPC
other than any of the Corn Companies.
"Distribution" shall mean the distribution by CPC to
its public shareholders of the stock of Corn as more particularly
described in the Distribution Agreement and any transactions
relating thereto.
"Distribution Agreement" shall have the meaning
described in the above preamble.
"Distribution Date" shall be the date on which the
Distribution occurs.
"Foreign Distributed Entity" shall mean a newly
created foreign company that will conduct corn refining business
operations after the Applicable Foreign Distribution Date, and
that will be owned by Corn after the later of the Distribution
Date or the Applicable Foreign Distribution Date.
"Foreign Distributing Entities" shall mean the foreign
CPC Subsidiaries that prior to the Applicable Foreign
Distribution Date conduct both corn refining business operations
and consumer foods business operations in a single entity.
"Foreign Distributing Entity Return" shall mean any
foreign Tax return or amendment thereof of a Foreign Distributing
Entity.
"IRS" shall mean the Internal Revenue Service.
5
"IRS Penalty Rate" shall mean the rate of interest
imposed from time to time on underpayments of income Tax pursuant
to Code section 6621.
"IRS Ruling" shall mean the ruling issued by the IRS
which states the tax treatment of the Distribution and related
transactions.
"Other Corn Returns" shall have the meaning described
in Section 2.11 below.
"Other CPC Returns" shall have the meaning described
in Section 2.10 below.
"Person" shall mean any natural person, corporation,
business trust, joint venture, association, company, partnership
or government, or any agency or political subdivision thereof.
"Tax" shall mean all federal, state, local and foreign
gross or net income, gross receipts, sales, use, ad valorem, VAT,
GST, franchise, profits, license, withholding, payroll,
employment, excise, transfer, recording, severance, stamp,
occupation, premium, property, environmental, custom duty, or
other tax, governmental fee or other like assessment or charge of
any kind whatsoever, together with any interest and any penalty,
addition to tax or additional amount imposed by any governmental
authority responsible for the imposition of any tax.
"Tax Indemnification Agreement" shall mean the Tax
Indemnification Agreement dated of even date herewith between CPC
and Corn.
"Taxing Authority" shall mean any governmental
authority responsible for the imposition of any Tax.
"Temporary Differences" attributable to any entity
shall mean (a) any single item of income or deduction in a CPC
Return or any Foreign Distributing Entity Return in respect of
any Tax period that should reverse in one or more subsequent Tax
periods assuming proper Tax
6
treatment and no change in law or in the Tax accounting policies
of such entity (each an "Originating Temporary Difference") or
(b) the partial or complete reversal of an Originating Temporary
Difference.
ARTICLE 2
TAX RETURN FILING
SECTION 2.01. CPC Consolidated Returns. CPC shall
prepare and file with the IRS all CPC Consolidated Returns
required to be filed by CPC after the Distribution Date. CPC
shall make all decisions relating to the preparation and filing
of such returns (including, without limitation, the manner in
which any item of income, gain, loss, deduction or credit shall
be reported) and shall inform Corn of any such decisions that
might materially affect a Corn Return. CPC shall have the sole
right to determine the elections that will be made pursuant to
the Code on behalf of any member of CPC Group and shall inform
Corn of any such elections that may materially affect a Corn
Return. Corn further agrees that it will, and will compel the
Corn Domestic Companies to, file or join in the filing of such
authorizations, elections, consents and other documents, and take
such other actions as may be necessary or appropriate, in the
opinion of CPC, to carry out the purposes and intent of this
Section 2.01, provided that such actions are not inconsistent
with this Agreement or the Tax Indemnification Agreement. Corn
shall furnish CPC at least thirty (30) days before the due date
(excluding extensions) of any such CPC Consolidated Return all
information necessary for CPC to complete the CPC Consolidated
Return. Any such information requested by CPC shall be consistent
with current practices and applicable law and regulations. Corn
shall also furnish CPC work papers and other such
7
information and documentation as may be reasonably
requested by CPC with respect to the Corn Companies.
SECTION 2.02. Corn F.I.T. Returns. Corn shall prepare
and file with the IRS all Corn F.I.T. Returns required to be
filed by Corn or any member of the Corn Group (whether said
returns are filed on a consolidated basis or otherwise) for all
Tax periods beginning on or after the Distribution Date
(including any short-period returns). Subject to the provisions
of Section 2.15 hereof, Corn shall make all decisions relating to
the preparation and filing of such returns (including, without
limitation, the manner in which any item of income, gain, loss,
deduction or credit shall be reported). Subject to the provisions
of Section 2.15 hereof, Corn shall have the right to determine
the elections that will be made pursuant to the Code on behalf of
any member of Corn Group.
SECTION 2.03. CPC State or Local Returns. CPC will
prepare and file all state and local income or franchise Tax
returns and any amendments thereto which are required to be filed
by CPC after the Distribution Date and which include the Corn
Division (together with such returns filed prior to the
Distribution Date, "CPC State or Local Returns"). CPC shall make
all decisions relating to the preparation and filing of such
returns, and shall inform Corn of any such decisions that may
materially affect a Corn Return. Corn shall furnish CPC at least
thirty (30) days before the due date (excluding extensions) of
any such CPC State or Local Return with a final copy of the
information necessary for CPC to complete such CPC State or Local
Return. Corn shall also furnish CPC work papers and other such
information and documentation as may be reasonably requested by
CPC.
8
SECTION 2.04. Corn State or Local Returns. Each Corn
Domestic Company will prepare and file all respective state and
local income or franchise Tax returns and any amendments thereto
which are required to be filed by such party after the
Distribution Date, and not otherwise described in Section 2.03
above (herein, together with such returns filed prior to the
Distribution Date, "Corn State or Local Returns"), except that
CPC shall prepare all such Corn State or Local Returns required
to be filed after the Distribution Date for Tax periods ending on
or before, or beginning before and ending after, the Distribution
Date. Subject to the provisions of Section 2.15 hereof, each Corn
Domestic Company shall make all decisions relating to the
preparation and filing of such returns.
SECTION 2.05. CPC Salaried Employee Returns. CPC shall
prepare and file all employment Tax returns required to be filed
by CPC after the Distribution Date, and any amendments thereto,
relating to salaried employees of CPC who provided services
directly to the Corn Division on or prior to the Distribution
Date, for all Tax periods ending on or before, or beginning
before and ending after, the Distribution Date (herein, together
with such returns filed prior to the Distribution Date, the "CPC
Salaried Employee Returns"). CPC shall make all decisions
relating to the preparation and filing of such returns, and shall
inform Corn of any such decisions that may materially affect a
Corn Return. Corn shall furnish CPC at least thirty (30) days
before the due date (excluding extensions) of any such CPC
Salaried Employee Return all information necessary for CPC to
complete the CPC Salaried Employee Return. Corn shall also
furnish CPC work papers and other such information and
documentation as may be reasonably requested by CPC with respect
to the completion of any CPC Salaried Employee Return for any Tax
period or portion thereof preceding the Distribution Date.
9
SECTION 2.06. CPC Hourly Employee Returns. Corn,
subject to the provisions of Section 2.15 hereof, shall prepare
and CPC shall file all employment Tax returns and any amendments
thereto that are required to be filed by CPC after the
Distribution Date for Tax periods ending on or before, or
beginning before and ending after, the Distribution Date relating
to hourly employees of CPC who provided services directly to the
Corn Division on or prior to the Distribution Date (herein,
together with such returns filed prior to the Distribution Date,
the "CPC Hourly Employee Returns"). CPC shall have ultimate
authority to make all decisions relating to the preparation and
filing of such returns, and Corn shall comply with all such
decisions of CPC relating to the preparation of such returns. CPC
shall inform Corn of any such decision that may materially affect
a Corn Return. Corn shall furnish CPC at least thirty (30) days
before the due date (including extensions) completed copies of
any such CPC Hourly Employee Returns. Corn shall also furnish CPC
work papers and other such information and documentation as may
be reasonably requested by CPC with respect to the completion of
any CPC Hourly Employee Returns for any such Tax period.
SECTION 2.07. Corn Employee Returns. Each Corn
Domestic Company will prepare and file all respective employment
Tax returns and any amendments thereto that are required to be
filed by such entities after the Distribution Date, (herein,
together with such returns filed prior to the Distribution Date,
"Corn Employee Returns"), except that with respect to any Corn
Employee Returns which were prepared by CPC for periods prior to
the Distribution Date. CPC shall prepare such Corn Employee Returns
due after the Distribution Date for Tax periods ending on or before,
or beginning before and ending after, the Distribution Date. Subject
10
to the provisions of Section 2.15 hereof, each Corn
Domestic Company shall make all decisions relating to the
preparation and filing of its returns.
SECTION 2.08. CPC Sales, Use and Property Tax Returns.
Corn, subject to the provisions of Section 2.15 hereof, shall
prepare and CPC shall file all sales, use and property Tax
returns and any amendments thereto that are required to be filed
by CPC after the Distribution Date for all Tax periods ending on
or before, or beginning before and ending after, the Distribution
Date relating to sales, use and property Taxes levied upon
property or transactions of the Corn Division (herein, together
with such returns filed prior to the Distribution Date, the "CPC
Sales, Use and Property Tax Returns"). CPC shall have ultimate
authority to make all decisions relating to the preparation and
filing of such returns, and Corn shall comply with all such
decisions of CPC relating to the preparation of such returns. CPC
shall inform Corn of any such decisions that may materially
affect a Corn Return. Corn shall furnish CPC at least thirty (30)
days before the due date (including extensions) completed copies
of any such CPC Sales, Use and Property Tax Returns. Corn shall
also furnish CPC work papers and other such information and
documentation as may be reasonably requested by CPC with respect
to the completion of any CPC Sales, Use and Property Tax Returns
for any Tax period preceding or including the Distribution Date.
SECTION 2.09. Corn Sales, Use and Property Tax Returns.
Each Corn Domestic Company will prepare and file all respective
sales, use and property Tax returns and any amendments thereto that
are required to be filed by such party after the Distribution Date
relating to sales, use and property Taxes levied upon such entity's
property or transactions involving such entity's property (herein,
together with such returns filed prior to the Distribution Date, "Corn
11
Sales, Use and Property Tax Returns"). Subject to the
provisions of Section 2.15 hereof, each Corn Domestic Company
shall make all decisions relating to the preparation and filing
of its returns.
SECTION 2.10. Other CPC Returns. CPC shall prepare and
file with the applicable Taxing Authorities all other Tax returns
and any amendments thereto required to be filed by CPC after the
Distribution Date with respect to the business and operations of
the Corn Division for all Tax periods ending on or before, or
beginning before and ending after, the Distribution Date and that
are not otherwise described in this Article 2 (herein, together
with all such returns filed prior to the Distribution Date, the
"Other CPC Returns"), except that Corn shall prepare, and CPC
shall file, any Other CPC Return required to be filed by CPC
after the Distribution Date with respect to such Tax periods,
that, prior to the Distribution Date, had been prepared by the
Corn Division. CPC shall make all decisions relating to the
preparation and filing of all such returns, and Corn shall comply
with all such decisions of CPC relating to the preparation of
such returns. CPC shall inform Corn of any such decision that may
materially affect a Corn Return. Corn shall furnish CPC at least
thirty (30) days before the due date (excluding extensions) of
any such Other CPC Return all information necessary for CPC to
complete any Other CPC Returns. Additionally, Corn will furnish
completed copies of any Other CPC Return prepared by Corn. Corn
shall also furnish CPC work papers and other such information and
documentation as may be reasonably requested by CPC with respect
to the completion of any Other CPC Return for any Tax period or
portion thereof preceding the Distribution Date.
12
SECTION 2.11. Other Corn Returns. Each Corn Domestic
Company will prepare and file all other Tax returns and any
amendments thereto that are required to be filed by such party
after the Distribution Date that are not otherwise described in
this Article 2 (herein, together with such returns filed prior to
the Distribution Date, "Other Corn Returns"). Subject to the
provisions of Section 2.15 hereof, each Corn Domestic Company
shall make all decisions relating to the preparation and filing
of such returns.
SECTION 2.12. Foreign Distributing Entity Returns.
Except as otherwise provided in an agreement between a Foreign
Distributing Entity and a Foreign Distributed Entity, the Foreign
Distributing Entity will prepare and file all foreign Tax returns
and any amendments thereto which are required to be filed by the
Foreign Distributing Entity after the Applicable Foreign
Distribution Date for all Tax periods which include the
operations conducted before or as of the Applicable Foreign
Distribution Date of the corn refining division of the Foreign
Distributing Entity (herein, together with such returns filed
prior to the Applicable Foreign Distribution Date, "Foreign
Distributing Entity Returns"). The Foreign Distributing Entity
shall make all decisions relating to the preparation and filing
of such returns and shall inform the Foreign Distributed Entity
of any such decision that may materially affect a return filed by
such entity after the Applicable Foreign Distribution Date. The
Foreign Distributed Entity shall furnish the Foreign Distributing
Entity at least thirty (30) days before the due date (excluding
extensions) of any such Foreign Distributing Entity Return with a
final copy of the information necessary for the Foreign
Distributing Entity to complete such Foreign Distributing Entity
Return. The Foreign Distributed Entity shall also furnish the
Foreign Distributing Entity
13
work papers and other such information and documentation as
may be reasonably requested by the Foreign Distributing Entity.
SECTION 2.13. Corn Foreign Returns. Each foreign Corn
Company will prepare and file all respective foreign Tax returns
and any amendments thereto which are (i) not otherwise described
in Section 2.12 above and (ii) with respect to each Foreign
Distributed Entity, required to be filed by such party for all
Tax periods beginning on or after the Applicable Foreign
Distribution Date or, with respect to every other foreign Corn
Company, required to be filed by such party for all Tax periods
ending before, on or after the Distribution Date ("Corn Foreign
Returns"). A foreign Corn Company (other than a Foreign
Distributed Entity) may request a foreign CPC Company, if such
foreign CPC Company is better suited, to prepare the foreign Tax
returns due after the Distribution Date for any Tax periods of
the foreign Corn Company that end on or before, or begin before
and end after, the Distribution Date. Subject to the provisions
of Section 2.15 hereof, the foreign Corn Company shall make all
decisions relating to the preparation and filing of all Corn
Foreign Returns.
SECTION 2.14. Designation of Agent. Corn hereby
irrevocably designates CPC, and will cause each applicable Corn
Company to irrevocably designate, CPC, or, as applicable, the
respective Foreign Distributing Entity, as its agent,
coordinator, and administrator for the purpose of taking any and
all actions (including the execution of waivers of applicable
statutes of limitation) necessary or incidental to the filing of
(i) a CPC Return, or a Foreign Distributing Entity Return or (ii)
an amended CPC Return or Foreign Distributing Entity Return or
(iii) an amended Corn Return, filed with respect to a Corn Return
(other than a Corn Foreign Return), filed prior to the Distribution
Date, in order to make any claim for refund (even though an item
14
or Tax attribute giving rise to an amended return or refund
claim arises after the Distribution Date or, as appropriate, the
Applicable Foreign Distribution Date), credit or offset of Tax or
any other proceedings relating to any Tax period or portion
thereof ending prior to the Distribution Date or as appropriate,
the Applicable Foreign Distribution Date. Notwithstanding the
previous sentence, Corn shall not designate CPC as its agent with
respect to any amended CPC Return, or claim for refund, relating
to any assessment of property taxes on real property of the Corn
Division for any period prior to the Distribution Date. CPC, as
agent, or when applicable, the Foreign Distributing Entity, as
agent, shall be responsible to see that all such administrative
matters relating thereto shall be handled promptly and
appropriately. CPC, or, when applicable, the Foreign Distributing
Entity shall inform and consult with Corn or the Foreign
Distributed Entity prior to taking any action on behalf of, or
which will have any material impact on, any of the Corn
Companies, including, without limitation, strategies relating to
waivers of any statute of limitations.
SECTION 2.15. Post-Distribution Date Returns and
Position--No Inconsistent Positions. No Corn Company will
knowingly treat any item in a Corn Return filed by a Corn
Company, or CPC Return prepared by a Corn Company after the
Distribution Date, in a manner inconsistent with the treatment of
the same item in a CPC Return, a Foreign Distributing Entity
Return or any Tax return filed by a CPC Company (including a CPC
Company that will become solely a Corn Company after the Distri-
bution Date). CPC will inform Corn of any changes or amendments
after the Distribution Date to any CPC Return or any Foreign Distri-
buting Entity Return or other Tax return filed by a CPC Company
that would affect any item in a Corn Return. CPC will, or if appli-
cable, cause a CPC Company to, provide any assistance reasonably
15
requested by a Corn Company in satisfying its obligations
under this Section 2.15. If requested by Corn, CPC will review
any Corn F.I.T. Return prepared by a Corn Company with respect to
its first Tax period ending after the Distribution Date; provided
that said review shall be a desk review on CPC's premises
consistent in manner and scope with the review that CPC's senior
Tax Department management performs in respect of CPC Returns. It
is understood that any such review of a Corn F.I.T. Return
pursuant to this Section 2.15 would be undertaken strictly as a
courtesy to Corn, and CPC shall have no liability to Corn or any
Corn Company as a result of any such review. No such review of
any Corn F.I.T. Return will waive any obligations or liabilities
of any Corn Company to CPC under this Agreement.
ARTICLE 3
TAX LIABILITY
SECTION 3.01. CPC Liability. Except to the extent
otherwise provided herein and in the Tax Indemnification
Agreement, the CPC Companies shall be liable for and indemnify
Corn and each Corn Company against all costs, Taxes and other
liabilities incurred in respect of (i) all CPC Returns, (ii) all
Foreign Distributing Entity Returns, (iii) each Corn Return for
which Corn or a Corn Company, pursuant to Section 2.14, has
designated CPC, as its agent in filing an amended Corn Return,
(iv) any other Tax return (other than a Corn Return) required to
be filed by CPC, a Foreign Distributing Entity or any other CPC
Company (provided that such company would not be a Corn Company
following the Distribution Date), with respect to any Tax period
beginning before, on or after the Distribution Date.
SECTION 3.02. Corn Liability. Except to the extent
otherwise provided herein and in the Tax Indemnification
Agreement, the Corn Companies shall be liable for and
16
indemnify CPC and each CPC Company against (i) all costs,
Taxes and other liabilities incurred in respect of all Corn
Returns other than Corn Returns for which Corn or a Corn Company,
pursuant to Section 2.14, has designated CPC as its agent in
filing an amended Corn Return (ii) notwithstanding any other
provision hereof, all costs, Taxes and other liabilities incurred
by CPC or any CPC Company as a result of a violation by Corn or
any Corn Company of Section 2.15 and (iii) notwithstanding any
other provision hereof, all costs, Taxes and other liabilities
incurred by CPC, Corn, any CPC Company or any Corn Company, after
the Distribution Date in respect of any assessment of property
tax referred to in Section 7.02(c)(ii) or any refund thereof
referred to in Section 6.01(b).
ARTICLE 4
POST-DISTRIBUTION CARRYBACKS OF TAX BENEFITS
SECTION 4.01. Carryback Provisions. Corn shall be
entitled to any refund for any Tax obtained by CPC (or any member
of the CPC Group) as a result of the carryback of losses or
credits of any member of the Corn Group from any Tax period
beginning on or after the Distribution Date to a CPC Consolidated
Return for any CPC Consolidated Return Period, provided that CPC
approves in writing such carryback. Such refund is limited to the
net amount received (by refund, offset against other Taxes or
otherwise), net of any net Tax cost incurred by CPC or a CPC
Company resulting from such refund, and shall be paid whenever
payment is received from a Taxing Authority. If such approval is
not granted by CPC, Corn may elect to carryback such losses or
credit in which event CPC shall pay Corn the amount to which it
would be entitled under the preceding sentence reduced by an amount
equal to any CPC Tax detriment which may be incurred in any Tax
period resulting from such carryback; provided that CPC will
17
not be obligated to make any payment to Corn in respect of
any carryback that, in the aggregate, is less than $50,000. When
and if any CPC Tax detriment is reduced, CPC shall pay the amount
of such reduction to Corn. If CPC shall have paid a refund to
Corn in respect of a carryback permitted hereunder, and in a
subsequent Tax period, CPC shall suffer a Tax detriment by reason
of such carryback (that was not contemplated in the computation
of the amount refunded to Corn), Corn shall compensate CPC, on
demand, for the full amount of such Tax detriment. The
application of any such carrybacks by Corn and/or any other
current or former member of the CPC Group shall be in accordance
with the Code and the consolidated return regulations promulgated
thereunder. Corn shall indemnify CPC for any costs and
liabilities including interest and penalties arising out of an
audit by the IRS of the carryback of any item under this
paragraph. Upon request by Corn, CPC shall advise Corn of any
estimate of the Tax detriment it projects will be associated with
any carryback of losses or credits of a member of the Corn Group.
Notwithstanding this Section 4.01, Corn and any member of the
Corn Group shall have the right, in its sole discretion, to make
any election, including the election under Section 172(b)(3) of
the Code, which would eliminate or limit the carryback of any
loss or credit to any Tax period ending before or including the
Distribution Date.
ARTICLE 5
POST-DISTRIBUTION CARRYOVERS OF TAX BENEFITS AND ATTRIBUTES
SECTION 5.01. CPC Group Items. CPC shall notify Corn
as soon as practicable after the Distribution Date of any
carryover item which may be partially or totally attributed to
and carried over by a Corn Company and will notify Corn of
subsequent adjustments which may affect such carryover item. CPC
and Corn each agree to compute their respective Tax liabilities,
18
and the Tax liabilities of their Affiliates, for Tax years after
the Distribution Date consistent with these determinations.
SECTION 5.02. Earnings and Profits. Based on CPC's
determination, CPC shall notify Corn as soon as practicable after
the Distribution Date of the amount of earnings and profits and
associated Tax attributes, if any, which are allocated to a Corn
Company and will notify Corn of subsequent adjustments which may
affect the amount of earnings and profits and associated Tax
attributes, if any, of a Corn Company. CPC and Corn each agree to
compute their respective Tax liabilities, and the Tax liabilities
of their Affiliates, for Tax years after the Distribution Date
consistent with this determination.
ARTICLE 6
ADJUSTMENTS
SECTION 6.01. CPC Returns and Foreign Distributing
Entity Returns. (a) Except as provided in the Tax Indemnification
Agreement, if any Tax liability or refund in respect of any CPC
Company (or a Corn Company that prior to the Distribution Date
was a CPC Company) arises as a result of an amended filing, a
protest, an audit by the IRS or other Taxing Authority, or for
any other reason, and such Tax liability or refund relates to (i)
a CPC Return filed in respect of any Tax period commencing before
or including the Distribution Date, (ii) a Foreign Distributing
Entity Return in respect of any Tax period commencing before or
including the Applicable Foreign Distribution Date, or (iii) a
Corn Return for which Corn or a Corn Company, pursuant to Section
2.14, has designated CPC as its agent in filing an amended Corn
Return, and such liability:
19
(x) does not relate to Temporary Differences
attributable to a Corn Company, then CPC or a Foreign
Distributing Entity, as applicable, shall be liable for and shall
pay any Tax liabilities and any interest and penalties associated
therewith and CPC or a Foreign Distributing Entity, as
applicable, shall receive any Tax refunds and any interest
associated therewith.
(y) does relate to Temporary Differences attributable to
a Corn Company and such Taxing Authority:
(i) acknowledges directly or indirectly to the
satisfaction of CPC or, as applicable, the Foreign
Distributing Entity that CPC or, as applicable, the
Foreign Distributing Entity may solely utilize such
Temporary Differences in computing Tax liability,
benefit or refunds in respect of post-Distribution
Date (or Applicable Foreign Distribution Date) Tax
periods, CPC or the Foreign Distributing Entity, as
applicable, shall be liable for and shall pay any such
Tax liability and any interest and penalties
associated with such Tax liability and shall receive
any such benefit or refunds and any interest
associated therewith; or
(ii) does not acknowledge directly or indirectly
to the satisfaction of CPC or, as applicable, the
Foreign Distributing Entity that CPC or as applicable,
the Foreign Distributing Entity may solely utilize
such Temporary Differences in computing Tax liability,
benefit or refunds in respect of post-Distribution
Date (or Applicable Foreign Distribution Date) Tax
periods, the party hereto against which the issue
giving rise to such Tax liability is directed shall be
liable for and shall pay any such Tax liability and
any interest and penalties associated with such Tax
20
liability and shall receive any such benefit or
refunds and any interest associated therewith;
(b) Notwithstanding any other provision hereof,
Corn shall be entitled to, and shall receive, all refunds of
property tax assessed on real property of the Corn Division,
provided that Corn shall be liable for and shall indemnify and
hold CPC harmless against any Tax in respect of such refunds.
SECTION 6.02. Corn Returns. Except as described in the
Tax Indemnification Agreement, if any Tax liability or refunds in
respect of any Corn Company arises as a result of an amended
filing, a protest, an audit by the IRS or other Taxing Authority,
or for any other reason, and such Tax liability or refund relates
to a Corn Return other than for a Corn Return for which Corn or a
Corn Company, pursuant to Section 2.14, has designated CPC as its
agent in filing an amended Corn Return, Corn or a Corn Company
shall be liable for and shall pay any Tax liabilities and any
interest and penalties associated therewith and Corn or a Corn
Company shall receive any such Tax refunds and any interest
associated therewith.
SECTION 6.03. Expenses. Any out-of-pocket expenses
(e.g., travel expenses, accountants' fees, attorneys' fees,
experts' fees, etc.) incurred by a CPC Company in connection with
proposed or actual liabilities or refunds of the type
contemplated in this Article 6 shall be paid by the entities to
which such liabilities or refunds are allocated hereunder. In
cases where such expenses relate to more than one CPC Company or
more than one party hereto, the parties affected shall allocate
such expenses in proportion to the amount of proposed liabilities
or refunds allocable to each, or by some other reasonable method
which results in an equitable allocation of such expenses.
21
ARTICLE 7
CONTESTS
SECTION 7.01. CPC, CPC Company, and Foreign
Distributing Entity Contests; Notification and Communication. If
either party, or an Affiliate of either party, receives a notice
of audit by any Taxing Authority with respect to (i) the Corn
Division with regard to any CPC Return, (ii) a Corn Company with
regard to a CPC Consolidated Return or any Corn Return for which
CPC is designated as agent, (iii) a foreign Corn Company with
regard to any Foreign Distributing Entity Return, or (iv) a Corn
Foreign Return, other than a Corn Foreign Return which is filed
after the Distribution Date and in respect of which the matter
under audit would not affect a Corn Foreign Return filed prior to
the Distribution Date, such party shall promptly notify the other
party of such event. Thereafter, CPC or Corn, as the case may be,
shall keep the others, on a timely basis, informed of all
material developments in connection with audits, administrative
proceedings, litigation and other similar matters that may affect
their respective Tax liabilities. Failure or delay in providing
notification hereunder shall not relieve any party hereto of any
obligation hereunder in respect of any particular Tax liability,
except to the extent that such failure or delay restricts the
ability of such party to contest such liability administratively
or in the courts and otherwise materially and adversely
prejudices such party.
SECTION 7.02. Group Contests; Control and Management of
Claims. (a) As among the parties hereto, CPC shall control the
prosecution of any audits and any contests in respect of any claim
made by a Taxing Authority on audit or in a related administrative
or judicial proceeding or in respect of any refund or credit of Taxes,
and shall make and prosecute other claims for refunds with respect
to any Tax liability, that relates to a CPC Return (other than
22
in respect of an assessment of property taxes referred to in
Section 7.02(c)(ii) or a Foreign Distributing Entity Return or
any Corn Return for which CPC is designated as an agent. Corn may
participate in such audits or contests to the extent that CPC in
its sole discretion shall deem appropriate, provided, however,
that CPC shall have the sole right to control, at CPC's expense,
the prosecution of any audit, refund claim or related
administrative or judicial proceeding with respect to those
matters which could affect the CPC Group's Tax liability. CPC
shall be entitled to participate in any audit not described in
this section 7.02(a) (and related contests) for which it is
entitled to receive notice under Section 7.01, including without
limitation any matter referred to in Section 7.02(c)(ii).
(b) With respect to a Tax liability or refund that, pur-
suant to the provisions hereof, may be attributable to (i) the Corn
Division with regard to any CPC Return, (ii) a Corn Company with
regard to a CPC Consolidated Return, or a Corn Return for which
CPC is designated as an agent, or (iii) a foreign Corn Company
with respect to any Foreign Distributing Entity Return, if CPC
elects not to exercise its rights of control under subsection (a)
hereof, and if Corn so requests, CPC shall contest, control and
allow Corn to participate to the extent that CPC in its sole
discretion shall deem appropriate, all at Corn's expense, or in
the alternative shall permit Corn at its own expense to contest
and control a claim made by a Taxing Authority on audit or in a
related administrative or judicial proceeding or by appropriate
claim for refund or credit of Taxes (or to make and prosecute
other claims for refund). Corn shall pay all out-of-pocket and
other costs relating to such contests, including but not limited
to fees for attorneys, accountants, expert witnesses or other
consultants.
23
(c) With respect to a Tax liability or refund that,
pursuant to the provisions hereof, may be attributable to (i)
Corn or a Corn Company with regard to a Corn Return, other than a
Corn Return with respect to which CPC is designated as an agent,
or (ii) the Corn Division with respect to an assessment of
property tax on real property of the Corn Division for any period
prior to the Distribution Date, or (iii) a foreign Corn Company
with respect to any Corn Foreign Return, Corn, a Corn Company or
a foreign Corn Company shall control at its own expense the
prosecution of any audits and any contests in respect of any
claim made by a Taxing Authority on audit or in a related
administrative or judicial proceeding or by appropriate claim for
refund or credit of Taxes (or to make and prosecute other claims
for refund).
(d) If asserted liabilities unrelated to the matters
contemplated herein become grouped with contests arising
hereunder, the parties shall use their respective best efforts to
cause the contest arising hereunder to be the subject of a
separate proceeding.
(e) With respect to matters arising hereunder
controlled by CPC, and where deemed necessary by CPC, Corn shall
compel the relevant Corn Company to authorize by appropriate
powers of attorney such Persons as CPC shall designate to
represent such Corn Company with respect to such matters. The
parties hereto shall reasonably cooperate with one another in a
timely manner with respect to any matter arising hereunder.
ARTICLE 8
INFORMATION AND COOPERATION; BOOKS AND RECORDS
SECTION 8.01. General. (a) Corn shall deliver to CPC,
as soon as practicable after CPC's request, and CPC shall deliver to
Corn as soon as practicable after Corn's request such information and
data concerning the operations conducted by the Corn Companies or the
24
CPC Companies, respectively and make available such
knowledgeable employees of the Corn Companies or the CPC
Companies respectively as CPC or Corn, as the case may be, may
reasonably request, including providing the information and data
required by CPC's or Corn's customary internal Tax and accounting
procedures, in order to enable each of CPC or Corn, as the case
may be, to complete and file all Tax forms or reports that it may
be required to file with respect to the activities of the Corn
Companies for Tax periods ending on, prior to or including the
Distribution Date, to respond to audits by any Taxing Authorities
with respect to such activities, to prosecute or defend any
administrative or judicial proceeding, and to otherwise enable
CPC or Corn, as the case may be, to satisfy its accounting and
Tax requirements. Corn shall provide office space to IRS and
other Tax Authorities when they are conducting on-site audits,
and to employees and representatives of CPC or Corn, as the case
may be, for so long as the Tax period for which a CPC Return, a
Foreign Distributing Entity Return or a Corn Return for which CPC
has been designated as an agent, is open to assessment of
additional Taxes or an assessment with respect to such period is
being contested. CPC shall deliver to Corn as soon as practical
after Corn's request, such information and data concerning any
Tax attributes which were allocated to a Corn Company that is
reasonably necessary in order to enable Corn to complete and file
all Tax forms or reports that it may be required to file with
respect to such activities of the Corn Companies from and after
the Distribution Date, to respond to audits by any Tax
Authorities with respect to such activities, to prosecute or
defend claims for Taxes in any administrative or judicial
proceeding, and to otherwise enable Corn to satisfy its
accounting and Tax requirements. In addition, CPC shall make
available to Corn, and Corn shall make available to CPC, its
knowledgeable employees for such purpose.
25
(b) Until the expiration of the applicable statute of
limitations (including any extension or waiver thereof), each
Corn Company shall retain all books, records, documentation or
other information in its possession relating to any CPC Return,
any Foreign Distributing Entity Return, and any Corn Return, and
each CPC Company shall retain all books, records, documentation
or other information in its possession relating to any Corn
Return. Upon the expiration of any statute of limitations, the
foregoing information may be destroyed or disposed of provided
that (i) the party in possession of such books, records,
documentation or other information has provided sixty (60) days'
prior written notice to the other party, describing in reasonable
detail the documentation to be destroyed or disposed of and (ii)
such other party has not removed or made arrangements for
removing of such materials.
ARTICLE 9
GENERAL PROVISIONS
SECTION 9.01. Effectiveness. The effectiveness of this
Agreement and the obligations and rights created hereunder are
subject and conditioned upon the completion of the Distributions.
SECTION 9.02. Notices. All notices, requests, claims,
demands and other communications hereunder shall be in writing
and shall be given or made (and shall be deemed to have been duly
given or made upon receipt) by delivery in person, by courier
service (including overnight delivery), by cable, by telecopy
confirmed by return telecopy, by telegram, by telex or by
registered or certified mail (postage prepaid, return receipt
requested) to the respective parties at the addresses (or at such
other address for a party as shall be specified in a notice given
in accordance with this Section 9.02) listed below:
26
(a) To CPC:
P.O. Box 8000
International Plaza
Englewood Cliffs, NJ 07632
Telecopy: (201) 894-2210
Attn: Vice President-Taxes
with a copy to: General Counsel
(b) To Corn:
P.O. Box 345
6500 Archer Road
Argo, Illinois 60501
Telecopy: (708) 563-6561
Attn: Chief Financial Officer
with a copy to: General Counsel
SECTION 9.03. Complete Agreement; Construction. This
Agreement is intended to provide rights, obligations and
covenants in respect of Taxes and, together with the Tax
Indemnification Agreement, shall supersede all prior agreements
and undertakings, both written and oral, between the parties with
respect to the subject matter hereof and thereof. In the event
provisions of this Agreement are inconsistent with provisions in
a Tax Indemnification Agreement, the provisions in the Tax
Indemnification Agreement shall control, except in cases where
this construction would provide a duplicate benefit.
SECTION 9.04. Counterparts. This Agreement may be
executed in one or more counterparts, and by the different
parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
SECTION 9.05. Waiver. The parties to this Agreement may
(a) extend the time for the performance of any of the obligations
or other acts of the other party or parties, (b) waive
27
any inaccuracies in the representations and warranties of
the other party or parties contained herein or in any document
delivered by the other party or parties pursuant hereto or (c)
waive compliance with any of the agreements or conditions of the
other party or parties contained herein. Any such extension or
waiver shall be valid only if set forth in an instrument in
writing signed by the party to be bound thereby. Any waiver of
any term or condition shall not be construed as a waiver of any
subsequent breach or a subsequent waiver of the same term or
condition, or a waiver of any other term or condition, of this
Agreement. The failure of any party to assert any of its rights
hereunder shall not constitute a waiver of any such rights.
SECTION 9.06. Amendments. This Agreement may not be
amended or modified except (a) by an instrument in writing signed by,
or on behalf of, the parties or (b) by a waiver in accordance with
Section 9.05.
SECTION 9.07. Successors and Assigns. The provisions of
this Agreement shall be binding upon, inure to the benefit of and
be enforceable by the parties and their respective successors and
permitted assigns. This Agreement cannot be assigned by CPC or
Corn without the consent of the other party.
SECTION 9.08. Subsidiaries. Each of the parties hereto
shall cause to be performed, and hereby guarantees the
performance of, all actions, agreements and obligations set forth
herein to be performed by any subsidiary of such party or by any
entity that is contemplated to be a subsidiary of such party on
and after the Distribution Date.
SECTION 9.09. Third Party Beneficiaries. This
Agreement shall be binding upon and inure solely to the benefit
of the parties hereto and their respective subsidiaries, and
nothing herein, express or implied, is intended to or shall
confer upon any third parties any legal
28
or equitable right, benefit or remedy of any nature whatsoever
under or by reason of this Agreement.
SECTION 9.10. Headings. The descriptive headings contained
in this Agreement are for convenience of reference only and shall
not affect in any way the meaning or interpretation of this
Agreement.
SECTION 9.11. Specific Performance. The parties hereto
agree that irreparable damage would occur in the event any
provision of this Agreement was not performed in accordance with
the terms hereof and that the parties shall be entitled to
specific performance of the terms hereof, in addition to any
other remedy at law or equity.
SECTION 9.12. Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the
State of New York applicable to contracts made and to be
performed in the State of New York. Without limiting the
provisions of Section 9.13 hereof, each of the parties
irrevocably submits to the exclusive jurisdiction of (a) the
Superior Court of the State of New Jersey, Bergen County, and (b)
the United States District Court for the District of New Jersey,
for the purposes of any suit, action or other proceeding arising
out of this Agreement or any transaction contemplated hereby.
Each of the parties agrees to commence any action, suit or
proceeding relating hereto that is not required to be submitted
to arbitration pursuant to Section 9.13 hereof either in the
United States District Court for the District of New Jersey or if
such suit, action or other proceeding may not be brought in such
court for jurisdictional reasons, in the Superior Court of the
State of New Jersey, Bergen County. Each of the parties further
agrees that service of any process, summons, notice or document
by U.S. registered mail to such party's respective address set
forth above shall be effective service of
29
process for any such action, suit or proceeding in New
Jersey with respect to any matters to which it has submitted to
jurisdiction in this Section 9.12. Each of the parties
irrevocably and unconditionally waives any objection to the
laying of venue of any action, suit or proceeding arising out of
this Agreement or the transactions contemplated hereby in (i) the
Superior Court of the State of New Jersey, Bergen County, or (ii)
the United States District Court for the District of New Jersey,
and hereby further irrevocably and unconditionally waives and
agrees not to plead or claim in any such court that any such
action, suit or proceeding brought in any such court has been
brought in an inconvenient forum.
SECTION 9.13. Arbitration. Any conflict or disagreement
arising out of the interpretation, implementation, or compliance
with the provisions of this Agreement shall be finally settled
pursuant to the dispute resolution procedures set forth in the
Distribution Agreement, which provisions are incorporated herein
by reference.
SECTION 9.14. Severability. If any term or other
provision of this Agreement is invalid, illegal or incapable of
being enforced by any law or public policy, all other terms and
provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any
manner materially adverse to any party. Upon such determination
that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good
faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable
manner in order that the transactions contemplated hereby are
consummated as originally contemplated to the greatest extent
possible.
30
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed as of the date first written above by
their respective officers thereunto duly authorized.
CPC INTERNATIONAL INC.
By:____________________________
Name:
Title:
CORN PRODUCTS INTERNATIONAL, INC.
By:____________________________
Name:
Title:
31
FORM OF
TAX INDEMNIFICATION AGREEMENT
This TAX INDEMNIFICATION AGREEMENT ("Agreement") is made
and entered into as of the _______ day of _______________, 1997,
by and between CPC INTERNATIONAL INC., a Delaware corporation
("CPC"), and CORN PRODUCTS INTERNATIONAL, INC., a Delaware
corporation ("CORN").
WITNESSETH
WHEREAS, CPC is the common parent of an affiliated group of
corporations within the meaning of Code Section 1504 which
includes CORN (all capitalized terms not otherwise defined shall
be as defined in Section 5.07 hereof); and
WHEREAS, CPC intends to transfer to CORN its corn refining
business, including all stock owned by it in domestic and foreign
corporations engaged in the corn refining business, in exchange
for stock of CORN, and distribute to its shareholders stock
constituting control of CORN, within the meaning of Code Section
368(c) (the "Spinoff"); and
WHEREAS, in connection therewith, it will be necessary for
certain foreign corporations owned by CPC to engage in Foreign
Spinoffs; and
WHEREAS, the IRS has issued the IRS Rulings which state the
United States federal income tax treatment of the Spinoff and the
Foreign Spinoffs, which tax treatment also shall be relied upon
and reported by CPC for all applicable United States state and
local Tax purposes
(such United States federal income tax and state and local
Tax treatment to be referred to hereinafter as the "Tax
Treatment"); and
WHEREAS, the parties hereto are entering into this
Agreement to indemnify CPC as hereinafter provided in the event
the Spinoff or any of the Foreign Spinoffs shall fail to qualify
for the Tax Treatment due to actions by CORN or its Affiliates.
NOW, THEREFORE, in consideration of the mutual agreements,
provisions and covenants contained in this Agreement, the parties
hereby agree as follows:
ARTICLE 1
REPRESENTATIONS AND COVENANTS
SECTION 1.01. Representations.
(a) CORN hereby makes the following representations to CPC:
(i) CORN has reviewed the submissions to the IRS in connection
with the IRS Rulings and, to the best of CORN's knowledge, all
statements and representations therein concerning CORN, its
business, operations, capital structure or organization, are
complete and accurate in all material respects; (ii) CORN shall,
and shall cause each of its Affiliates to, comply with each
statement concerning CORN and its Affiliates that is designated
as a "representation" in the submissions or the IRS Rulings;
(iii) CORN concurs with all representations and statements made
in the submissions. All of the above
2
representations shall survive the Spinoff Date until the
expiration of all statute of limitations (inclusive of
extensions) in respect of taxable periods for which Taxes might
be imposed or otherwise assessed in respect of the Spinoff and
all of the Foreign Spinoffs.
(b) CORN hereby represents and warrants to CPC that neither
CORN nor any Foreign Spinco nor any of their respective
Affiliates has any present intention to cease to engage in its
Active Business (as defined in Section 1.02(a)(i)), undertake, or
permit to be undertaken, any action that would result in a
violation of any of CORN's covenants in Section 1.02(a)(ii), or
undertake, authorize, approve, recommend, permit, facilitate,
enter into any contract with respect to, or consummate, any
transaction described in Section 1.02(a)(iii).
SECTION 1.02. Covenants.
(a) CORN covenants and agrees with CPC that during the Restricted
Period:
(i) CORN and each Foreign Spinco will continue to engage in
the active conduct, within the meaning of section 1.355-3(b) of
the Regulations, of the corn refining business, as described in
the Ruling Request, which business, as actively conducted, shall
be referred to hereinafter as such corporation's Active Business.
(ii) CORN and each Foreign Spinco will (A) continue to
manage and to own directly assets which represent at least fifty
percent (50%) of the Gross Assets which such corporation
3
managed and owned directly immediately after the Spinoff or the
applicable Foreign Spinoff, as the case may be; (B) continue to
manage and own (directly and indirectly through one or more
entities) assets which represent at least 50% of the Gross Assets
which such corporation managed and owned (directly and indirectly
through one or more entities) immediately after the Spinoff or
the applicable Foreign Spinoff, as the case may be; and (C) not
take any action (including the acquisition or entering into of
businesses other than extensions of its Active Business) which
would cause the fair market value of its Active Business to be
less than five percent (5%) of its total Gross Assets.
(iii) Neither CORN, nor any Foreign Spinco, nor any of
their respective directors, officers or other representatives,
will undertake, authorize, approve, recommend, permit,
facilitate, enter into any contract with respect to, or
consummate, any of the following transactions:
(A) the issuance of Common Stock (whether or not subject to
restrictions), or the issuance of any options, warrants, rights
or securities exercisable for, or convertible into, Common Stock
(collectively, the "New Stock"), whether in a single transaction
or in a series of related or unrelated transactions or otherwise,
which in the aggregate if issued (and in the case of options,
warrants, rights or securities, exercised or converted)
immediately prior to the Spinoff or the applicable Foreign
Spinoff, as the case may be, would exceed twenty percent (20%) of
the outstanding shares of Common Stock (including the New Stock)
immediately following the Spinoff or the applicable Foreign
Spinoff, as the case may be;
4
(B) the issuance of any class or series of capital stock or
any other instrument (other than Common Stock (whether or not
subject to restrictions) or options, warrants, rights or
securities exercisable for, or convertible into, Common Stock)
that would constitute equity of CORN or any Foreign Spinco for
United States federal income tax purposes (such classes or series
of capital stock and other instruments being referred to herein
as "Disqualified Stock") other than pursuant to the CORN Rights
Plan;
(C) the issuance of any options, rights, warrants,
securities or similar arrangements exercisable for, or
convertible into, Disqualified Stock other than pursuant to the
CORN Rights Plan;
(D) any redemptions, purchases or other acquisitions from
shareholders of greater than 20% of the outstanding capital stock
or other equity interests in CORN or any Foreign Spinco in a
single transaction or a series of related or unrelated
transactions, except redemptions, purchases or other acquisitions
by CORN, any Foreign Spinco or any of their respective
Affiliates, of the capital stock or other equity interests of
CORN or any Foreign Spinco that satisfy all of the following
requirements: (1) there is a "sufficient business purpose"
(within the meaning of section 4.05(1)(b) of Revenue Procedure
96-30) for the transaction, (2) the stock to be redeemed,
purchased or otherwise acquired is widely held, (3) the stock
redemptions, purchases or other acquisitions will be made on the
open market, and (4) the amount of stock redemptions, purchases
or other acquisitions in a single transaction or in a series of
related or unrelated
5
transactions will not exceed an amount of stock representing
twenty percent (20%) of the outstanding stock of CORN or the
applicable Foreign Spinco immediately following the Spinoff;
(E) the dissolution, merger, or complete or partial
liquidation of CORN or any Foreign Spinco or any announcement of
such action; or
(F) the waiver, amendment, termination or modification of
any provision of the CORN Rights Plan, or redemption of Preferred
Stock Purchase Rights, in connection with, or in order to permit
or facilitate, any acquisition or proposed acquisition of
Beneficial Ownership of capital stock or other equity interest in
CORN.
(b) In addition to the other representations, warranties,
covenants and agreements set forth in this Agreement, CORN and
its Affiliates will take, or refrain from taking, as the case may
be, such actions as CPC may reasonably request during the Ruling
Period as necessary to ensure that the Spinoff and the Foreign
Spinoffs qualify for the Tax Treatment, including, without
limitation, such actions as CPC determines may be necessary to
obtain and preserve the IRS Rulings or any subsequent IRS ruling
relating to the tax treatment of the Spinoff or any of the
Foreign Spinoffs on which the parties can rely. For purposes
hereof, the "Ruling Period" shall mean the period commencing on
the Spinoff Date and ending on the first anniversary of the date
on which there shall have expired all statutes of limitations
(inclusive of extensions) in respect of taxable periods for which
Taxes might be imposed or otherwise assessed in respect of the
Spinoff and all of the Foreign Spinoffs, but in no event ending
sooner than the third anniversary of the
6
close of the taxable year of CPC in which the Spinoff
occurs. Without limiting the generality of the foregoing, CORN
and its Affiliates shall cooperate with CPC if CPC determines to
obtain additional IRS rulings pertaining to whether any actual or
proposed change in facts and circumstances affects the United
States federal income tax status of the Spinoff or any of the
Foreign Spinoffs. This Section 1.02(b) shall not apply after the
termination of the Restricted Period with respect to any of the
actions described in Section 1.02(a), unless (i) at the
termination of the Restricted Period, the federal income tax year
of CPC that includes the Spinoff is under examination by the
Internal Revenue Service or any successor federal income tax
authority or, at or prior to the termination of the Restricted
Period, CPC has received notice that such an examination is to
commence and (ii) CPC delivers to CORN concurrent with any
request after the termination of the Restricted Period pertaining
to an action described in Section 1.02(a), an opinion of
independent tax counsel of recognized national standing who is
experienced in the issues to be addressed and otherwise is
reasonably acceptable to CORN, that such request is reasonable;
provided that this Section 1.02(b) will not apply if the
possible adverse effect on CORN and its business from the actions
requested by CPC pursuant to this Section 1.02(b) is greater
than the possible adverse effect on CPC and its business from not
taking such actions.
7
ARTICLE 2
CORN INDEMNITY OBLIGATIONS
SECTION 2.01. Tax Indemnities.
(a) Except as otherwise provided in Section 2.01(b), if
CORN, any Foreign Spinco, or any of their respective Affiliates
(collectively the "Indemnifying Party"), whether through any of
their respective directors, officers, other representatives or
otherwise, shall violate, or cause or permit to be violated, any
representation or covenant contained in Article 1, and as a
result thereof (singly or in combination with other actions of
the Indemnifying Party), the Spinoff or any of the Foreign
Spinoffs shall fail to qualify for the Tax Treatment, the
Indemnifying Party shall (jointly and severally) indemnify and
hold harmless CPC and each member of the CPC Group (collectively
the "Indemnified Party") against any and all Indemnified
Liabilities (as defined in Section 3.01(a) arising therefrom.
(b) If, following the six-month anniversary of the Spinoff
Date, CORN, any Foreign Spinco or any of their respective
Affiliates takes any action or engages in conduct prohibited by,
or resulting in the violation of any covenant in, Section 1.02(a)
(other than any action or conduct that results in an event
described in Section 2.01(c)), and prior to such action or
conduct, CORN delivers to CPC (i) a ruling from the IRS in form
and substance reasonably satisfactory to CPC, and upon which CPC
can rely, to the effect that the proposed action or conduct will
not cause the Spinoff or any of the Foreign Spinoffs to fail to
qualify for the tax treatment stated in the IRS
8
Ruling or otherwise to be taxable for federal income tax
purposes, or (ii) an Opinion of Counsel, Section 2.01(a) will not
apply with respect to such action or conduct.
(c) Notwithstanding anything to the contrary set forth in
this Agreement, if, during the Restricted Period, any Person or
Group acquires Beneficial Ownership of fifty percent (50%) or
more of the Common Stock (or any other class of capital stock or
other equity interest) of CORN or any Foreign Spinco or commences
a tender or other purchase offer for the capital stock or other
equity interest of CORN or any Foreign Spinco, upon consummation
of which such Person or Group would acquire Beneficial Ownership
of fifty percent (50%) or more of the Common Stock (or any other
class of stock or other equity interest) of CORN or any Foreign
Spinco, and, as a result thereof, the Spinoff or any of the
Foreign Spinoffs shall fail to qualify for the Tax Treatment, the
Indemnifying Party shall indemnify and hold harmless the
Indemnified Party against any and all Indemnified Liabilities (as
defined in Section 3.01(a)) arising therefrom. The Indemnified
Party shall be so indemnified and held harmless under this
Section 2.01(c) without regard to whether the Indemnified Party
has received or delivered to CPC a supplemental ruling from the
IRS or an Opinion of Counsel, and without regard to whether an
acquisition of Beneficial Ownership results from a transaction
which is not prohibited under Article 1.
9
ARTICLE 3
INDEMNIFIED LIABILITIES
SECTION 3.01. Definition and Calculation of Indemnified
Liabilities. For purposes of this Agreement, "Indemnified
Liabilities" shall mean any and all demands, claims, actions or
causes of action, assessments, losses, damages, liabilities,
costs and expenses, including, without limitation, interest,
penalties and reasonable attorneys' fees and expenses, imposed or
incurred, directly or indirectly on an Indemnified Party, by
reason of or resulting from the failure of the Spinoff or any of
the Foreign Spinoffs to qualify for the Tax Treatment, including
(i) any and all Taxes imposed upon or incurred by the Indemnified
Party as a result of said failure, (ii) any liability of the
Indemnified Party arising from Taxes imposed on shareholders of
CPC to the extent any shareholder or shareholders of CPC
successfully seek recourse against the Indemnified Party on
account of said failure, and (iii) any and all costs, fees and
expenses incurred in regard to any Indemnified Liability
(including, subject to Section 4.02(e), costs relating to the
contest of any Indemnified Liability). The amount of any
Indemnified Liability for a tax based on or determined with
reference to income ("Income Tax") shall be deemed to be the
amount of the tax on the gain or income of the Indemnified Party
which is subject to tax and indemnified against under Article 2,
computed at the taxing jurisdiction's highest marginal tax rate
applicable to taxable income of corporations such as the
Indemnified Party on income of the character subject to tax and
indemnified against under Article 2 for the taxable period in
which the Spinoff or the affected Foreign Spinoff, as the case
may be, occurs. If an Indemnified Party should be subject to an
Income Tax on the Indemnified Liability, the amount payable by the
Indemnifying Party to the
10
Indemnified Party shall be increased by (and the
Indemnified Liability shall be deemed to include) such additional
amount necessary to place the Indemnified Party in the same cash
position it would have been in had the Indemnified Liability not
occurred, taking into account for this purpose all Income Taxes
paid or payable by the Indemnified Party with respect to such
Indemnified Liability (including such additional amount) and any
related Income Tax deductions to the Indemnified Party.
ARTICLE 4
PROCEDURAL MATTERS
SECTION 4.01. General. The parties hereto undertake and
agree that from and after such time as either shall obtain
knowledge that any representative of a taxing authority has begun
to investigate or inquire into the Spinoff or any of the Foreign
Spinoffs (whether or not such investigation or inquiry is a
formal or an informal investigation or inquiry), the party
obtaining such knowledge shall (i) notify the other party
thereof, provided that any delay by the Indemnified Party in so
notifying the Indemnifying Party shall not relieve the
Indemnifying Party of any liability hereunder (except to the
extent such delay restricts the ability of the Indemnifying Party
to contest the resulting Indemnified Liability administratively
or in the courts in accordance with Section 4.02 and the
Indemnifying Party is materially and adversely prejudiced by such
delay), (ii) consult with the other party from time to time as to
the conduct of such investigation or inquiry, (iii) provide the
other party with copies of all correspondence with such taxing
authority or any representative thereof pertaining to such
investigation or inquiry, and (iv) arrange for a
11
representative of the other party to be present at all
meetings with such taxing authority or any representative thereof
pertaining to such investigation or inquiry.
SECTION 4.02. Contests.
(a) If any taxing authority shall propose in writing an
adjustment (a "Relevant Adjustment") that, if upheld, would
result in an Indemnified Liability, the party receiving such
proposed adjustment shall promptly notify the other party
thereof, provided that any delay by the Indemnified Party in so
notifying the Indemnifying Party shall not relieve the
Indemnifying Party of any liability hereunder (except to the
extent such delay restricts the ability of the Indemnifying Party
to contest the resulting Indemnified Liability administratively
or in the courts in accordance herewith and the Indemnifying
Party is materially and adversely prejudiced by such delay), and
provide the other party with copies of the portions of all
written material between such party and the taxing authority to
the extent relating solely to such Relevant Adjustment. Provided
that the Indemnifying Party shall timely (i) furnish the
Indemnified Party with evidence reasonably satisfactory to the
Indemnified Party and its independent certified public
accountants of the Indemnifying Party's ability to pay the full
amount of the Indemnified Liability on the basis of its financial
position or the provision of a letter of credit for the full
amount of the liability or other similar adequate security and
(ii) acknowledge in writing that the asserted liability is an
Indemnified Liability, the Indemnifying Party shall be entitled,
at its expense, to contest the Relevant Adjustment in its own
name, or if the Indemnifying Party does not have standing to
contest the Relevant Adjustment, in the name of the Indemnified
Party, at the administrative level.
12
(b) In the event that the issues giving rise to a Relevant
Adjustment are not resolved at the administrative level and an
Indemnified Liability is imposed by the taxing authority, the
Indemnifying Party shall be entitled to contest the Indemnified
Liability beyond the administrative level, provided that the
Indemnifying Party shall acknowledge in writing that the asserted
liability is an Indemnified Liability and (i) pay the full amount
of the asserted liability to the taxing authority (in which case,
the Indemnifying Party would be entitled to pursue a claim for
refund in the appropriate judicial forum) or (ii) furnish the
Indemnified Party with evidence reasonably satisfactory to the
Indemnified Party of its ability to pay the full amount of the
Indemnified Liability which may result at the conclusion of such
contest. If requested by the Indemnified Party, such evidence
shall consist of a letter of credit in favor of the Indemnified
Party for the amount of the Indemnified Liability (or a lesser
amount agreed to by the Indemnified Party) or another comparable
means of directly providing for the payment of the Indemnified
Liability. The Indemnifying Party shall not be entitled to pursue
a contest beyond the first judicial level unless, in addition to
meeting the above requirements, the Indemnifying Party submits to
the Indemnified Party an opinion of Independent Tax Counsel
(which shall mean an independent tax counsel of recognized
national standing and experienced in the issues to be addressed
and otherwise reasonably acceptable to the Indemnified Party)
upon which the Indemnified Party may rely, to the effect that it
is more likely than not that the Indemnifying Party will prevail
on the merits in such contest, and in no event shall the
Indemnifying Party be permitted to contest the asserted liability
to the United States Supreme Court.
13
(c) Subject to Section 4.02(d) and Section 4.02(f) and the
conditions of this Section 4.02(c), the Indemnifying Party shall
control any administrative level contest, but only insofar as it
relates to the Relevant Adjustment, and any contest at the
judicial level relating to an Indemnified Liability, provided
that the Indemnified Party shall be entitled to participate in
said contest and any outside party engaged in connection with
said contest shall be subject to the prior approval of the
Indemnified Party, which approval shall not be unreasonably
withheld. The Indemnifying Party shall (i) consult with the
Indemnified Party regarding the conduct of any said
contest, (ii) keep the Indemnified Party reasonably informed of
the progress of such contest, (iii) permit the Indemnified Party
and its authorized representatives to be present during the
conduct of such contest and (iv) submit to the Indemnified Party
for its approval (which shall not be unreasonably withheld) any
written protests, challenges, pleadings, briefs, memoranda or
other documents prepared prior to or during to course of such
contest by the Indemnifying Party or its counsel, and provide to
the Indemnified Party a copy of any written ruling, order or
other document resulting from said contest.
(d) If at any time during a contest controlled by the
Indemnifying Party pursuant to this Section 4.02 the Indemnifying
Party shall, after a request by the Indemnified Party, fail to
provide evidence reasonably satisfactory to the Indemnified Party
of its continued ability to pay the full amount of the
Indemnified Liability or the Indemnified Party reasonably
determines, after due investigation, that the Indemnifying Party
could not pay the full amount of the Indemnified Liability, then
the Indemnified Party may assume control of the contest upon
seven (7) days written notice.
14
(e) The Indemnifying Party shall pay all out-of-pocket
expenses and other costs related to the Indemnified Liability,
including but not limited to fees for attorneys, accountants,
expert witnesses or other consultants retained by the
Indemnifying Party or the Indemnified Party, other than costs and
expenses incurred solely in the discretion of the Indemnified
Party as a participant in a contest that, at the time such costs
and expenses are incurred, is being controlled by the
Indemnifying Party pursuant to Section 4.02(c), and would not
otherwise be incurred by the Indemnifying Party. To the extent
that any such expenses and other costs have been or are paid by
an Indemnified Party, the Indemnifying Party shall promptly
reimburse the Indemnified Party therefor.
(f) The Indemnifying Party shall not pay (unless otherwise
required by a proper notice of levy and after prompt notification
to the Indemnified Party of receipt of notice and demand for
payment), settle, compromise or concede any portion of the
Indemnified Liability without the written consent of the
Indemnified Party, which consent shall not be unreasonably
withheld.
(g) Any contest relating to an Indemnified Liability which
is not controlled or which is no longer controlled by the
Indemnifying Party pursuant to Section 4.02 shall be controlled
and directed exclusively by the Indemnified Party, and any
related out-of-pocket expenses and other costs incurred by the
Indemnified Party, including but not limited to, fees for
attorneys, accountants, expert witnesses or other consultants,
shall be reimbursed by the Indemnifying Party. The Indemnified
Party shall keep the Indemnifying Party reasonably informed of
the progress of
15
such contest, including the scheduling and results of
meetings with the tax authorities. The Indemnified Party will not
be required to pursue the claim in a federal district court, the
United States Court of Federal Claims or any state court, if as a
prerequisite to such court's jurisdiction, the Indemnified Party
is required to pay the asserted liability, unless the funds
necessary to invoke such jurisdiction are provided by the
Indemnifying Party.
SECTION 4.03. Time and Manner of Payment. The Indemnifying
Party shall pay to the Indemnified Party the amount of the
Indemnified Liability and any expenses or other costs indemnified
against (less any amount paid directly by the Indemnifying Party
to the taxing authority) not less than (7) business days prior to
the date payment of the Indemnified Liability is to be made by
any party to the taxing authority. Such payment shall be paid by
wire transfer of immediately available funds to an account
designated by the Indemnified Party by written notice to the
Indemnifying Party prior to the due date of such payment. If the
Indemnifying Party delays making payment beyond the due date
hereunder, such party shall pay interest on the amount unpaid at
the IRS Penalty Rate for each day and the actual number of days
for which any amount due hereunder is unpaid.
SECTION 4.04 Refunds. In connection with this Agreement,
should an Indemnified Party receive a refund in respect of
amounts paid by an Indemnifying Party to any taxing authority on
its behalf, or should any such amounts that would otherwise be
refundable to the Indemnifying Party be applied by the taxing
authority to obligations of the Indemnified Party unrelated to an
Indemnified Liability, then such Indemnified Party shall,
promptly following receipt (or
16
notification of credit), remit such refund (inclusive
of any interest thereon paid by the taxing authority) to the
Indemnifying Party, net of any tax paid or payable by the
Indemnified Party with respect to the receipt of such amount.
SECTION 4.05. Cooperation. The parties shall cooperate with
one another in a timely manner in any administrative or judicial
proceeding involving any matter that may result in an Indemnified
Liability.
ARTICLE 5
GENERAL PROVISIONS
SECTION 5.01. Notices. All notices, requests, claims and
other communications hereunder shall be in writing and shall be
given or made (and shall be deemed to have been duly given or
made upon receipt) by delivery in person, by courier service, by
cable, by telecopy, by telegram, by telex or any means of
electronic transmission with delivery confirmed (by voice or
otherwise) or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the
addresses listed below, or at such other address for a party as
shall be specified in a notice given in accordance with this
Section 5.01:
17
To CPC or any Indemnified Party:
P.O. Box 8000
International Plaza
Englewood Cliffs, NJ 07632
Telecopy: 1-201-894-2210
Attn: Vice President-Taxes
with a copy to: General Counsel
To CORN or any Indemnifying Party:
P.O. Box 345
6500 Archer Road
Argo, Illinois 60501
Telecopy: 1-708-563-6561
Attn: Chief Financial Officer
with a copy to: General Counsel
SECTION 5.02. Miscellaneous. This Agreement shall
constitute the entire agreement between the parties hereto with
respect to the subject matter hereof and shall supersede all
prior agreements and undertakings, both written and oral, between
the parties with respect to the subject matter hereof and thereof.
This Agreement may be executed in one or more counterparts, and
by the different parties hereto in separate counterparts, each of
which when executed shall be
18
deemed to be an original but all of which taken together shall
constitute one and the same agreement. This Agreement may not be
amended, or modified except by an instrument in writing signed
by, or on behalf of, the parties or by a waiver in accordance
with Section 5.03. This Agreement shall be binding upon and inure
solely to the benefit of the parties hereto and their respective
subsidiaries, and nothing herein, expressed or implied, is
intended to or shall confer upon any third parties any legal or
equitable right, benefit or remedy of any nature whatsoever under
or by reason of this Agreement.
SECTION 5.03. Waiver. The parties to this Agreement may
extend the time for the performance of any of the obligations
hereunder, and either party may waive any inaccuracies in the
representations and warranties of the other party contained
herein or in any document delivered by the other party pursuant
hereto or waive compliance with any of the agreements or
conditions of the other party contained herein. Any such
extension or waiver shall be valid only if set forth in an
instrument in writing signed by the party or parties to be bound
thereby. The waiver of any term or condition shall not be
construed as a waiver of any subsequent breach or a subsequent
waiver of the same term or condition, or a waiver of any other
term or condition, of this Agreement. The failure of any party to
assert any of its rights hereunder shall not constitute a waiver
of any such rights.
SECTION 5.04. Successors and Assigns. The provisions of
this Agreement shall be binding upon, inure to the benefit of and
be enforceable by the parties and their respective successors and
permitted assigns. Notwithstanding the previous sentence, CORN
shall not assign
19
this Agreement or any rights, interests or obligations
hereunder, or delegate performance of any of its obligations
hereunder, without the prior written consent of CPC.
SECTION 5.05. Specific Performance. The parties hereto
agree that irreparable damage would occur in the event any
provision of this Agreement was not performed in accordance with
the terms hereof and that the parties shall be entitled to
specific performance of the terms hereof, in addition to any
other remedy at law or equity.
SECTION 5.06. Dispute Resolution. Article VI of the
Distribution Agreement shall apply hereto and shall be deemed
incorporated herein by reference with respect to any dispute
arising out of the interpretation, implementation or compliance
with the provisions of this Agreement.
SECTION 5.07. Governing Law and Severability.
(a) This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York, other than
its conflicts of laws. Without limiting Section 5.06, each of the
parties irrevocably submits to the exclusive jurisdiction of (a)
the Superior Court of the State of New Jersey for the purposes of
any suit, action or other proceeding arising out of this
Agreement. Each of the parties agrees to commence any action,
suit or proceeding relating hereto that is not required to be
submitted to arbitration pursuant to Section 5.06 either in the
United States District Court for the District of New Jersey or if
such suit, action or other proceeding may not be brought in such
court for jurisdictional reasons, in the Superior Court of
the State of New Jersey,
20
Bergen County. Each of the parties further agrees that
service of any process, summons, notice or document by United
States registered mail to such party's respective address set
forth above shall be effective service of process for any such
action, suit or proceeding in New Jersey with respect to any
matters to which it has submitted to jurisdiction pursuant to
this Section 5.07. Each of the parties irrevocably and
unconditionally waives any objection to the laying of venue of
any action, suit or proceeding arising out of this Agreement or
the transactions contemplated hereby in (i) the Superior Court of
the State of New Jersey, Bergen County, or (ii) the United States
District Court for the District of New Jersey, and hereby further
irrevocably and unconditionally waives and agrees not to plead or
claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient
forum.
(b) If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any law or
public policy, all other terms and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so
as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions
contemplated hereby are consummated as originally contemplated to
the greatest extent possible.
21
SECTION 5.08. Affiliates. Each party hereto shall cause to
be performed, and hereby guarantees the performance of, all
actions, agreements and obligations set forth herein to be
performed by any of its Affiliates.
SECTION 5.09. Definitions. Capitalized terms not otherwise
defined shall have the meanings set forth below, and such
meanings shall be equally applicable to the singular and plural
forms of the terms defined.
"Affiliate" shall mean, when used with respect to a
specified Person, another Person that directly, or indirectly
through one or more intermediaries, Controls, is Controlled by or
is under common Control with such Person.
"Beneficial Owner" (including, with its correlative
meanings, "Beneficially Own" and "Beneficial Ownership"), with
respect to any securities, shall mean any Person who has, or any
of whose Affiliates or Associates has (a) directly or indirectly,
the right to acquire, vote or dispose of, such securities
(whether such right is exercisable immediately or only after the
passage of time), whether pursuant to any agreement, arrangement
or understanding (whether or not in writing), upon the exercise
of conversion rights, exchange rights, warrants or options, or
otherwise, (b) "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Securities Exchange
Act of 1934, as in effect on the date hereof, but including all
such securities which a Person has the right to acquire
beneficial ownership of, whether or not such
22
right is exercisable within the 60-day period specified therein),
including pursuant to any agreement, arrangement or understanding
(whether or not in writing), or (c) any agreement, arrangement or
understanding (whether or not in writing) for the purpose of
acquiring, holding, voting or disposing of any securities which
are Beneficially Owned, directly or indirectly, by any other
Person (or any Affiliate or Associate thereof). For this purpose,
"Associate" shall mean, when used to indicate a relationship with
any Person, (a) any corporation or organization of which such
Person is an officer or partner or is, directly or indirectly,
the Beneficial Owner of 10 percent or more of any class of
capital stock or other equity interest; (b) any trust or other
estate in which such Person has a substantial beneficial interest
or as to which such Person serves as trustee or in a similar
fiduciary capacity; and (c) any relative or spouse of such
Person, or any relative of such spouse, who has the same home as
such Person.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, including any comparable successor legislation.
"Code Section" shall mean a section of the Code.
"Common Stock" shall mean, with respect to (a) CORN, common
stock thereof having a par value of $__ per share and including the
Preferred Stock Purchase Rights ("CORN Common Stock"), (b) New
Canada Cornco, common stock thereof, (c) BrazilCo Corn, quotas
thereof and (d) ChilCo Corn, common stock thereof.
23
"Control" (including its correlative meanings, "Controlled
by" and "under common Control with") shall mean, with respect to
a Person, possession by such Person of the power, directly or
indirectly through one or more intermediaries, to (a) elect a
majority of the board of directors (or the equivalent governing
body) of another Person, or (b) direct or cause the direction of
the management and policies of or with respect to another Person,
whether through ownership of securities, by contract or
otherwise.
"CORN Rights Plan" shall mean the Preferred Stock Purchase
Rights Plan of CORN as governed by the Rights Agreement, dated as
of ___________, 1997, between CORN and ___________________, as
Rights Agent.
"CPC Group" shall mean the affiliated group of corporations
as defined in Code Section 1504(a) of which CPC (or any successor
thereto) is the common parent, excluding for tax periods of the
CPC Group commencing subsequent to the Spinoff Date, CORN and the
other members of the CORN Group. For purposes hereof, the "CORN
Group" shall mean affiliated group of corporations as defined in
Code Section 1504(a) of which CORN (or any successor thereto) is
the common parent.
"Foreign Spinco" shall mean each of New Canada Cornco,
BrazilCo Corn and ChilCo Corn, as described and defined in the
Ruling Request.
24
"Foreign Spinoffs" shall mean, collectively, the
distributions to CPC by Canada Amalco of Canada Cornco, by
Refinacoes de Milho, Brasil Ltda. of BrazilCo Corn and by
Industrias de Maiz y Alimentos S.A. of ChilCo Corn, all as
described in the Ruling Request. All capitalized terms not
defined herein shall have the meanings ascribed thereto in the
Ruling Request.
"Gross Assets" shall mean, when used with respect to a
specified Person, the fair market value of such Person's assets
unencumbered by any liabilities.
"Group" shall mean two or more Persons acting as a
partnership, limited partnership, syndicate, or otherwise acting
in concert for the purpose of acquiring, holding or disposing of
securities of any Person.
"IRS" shall mean the United States Internal Revenue Service.
"IRS Penalty Rate" shall mean the rate of interest imposed
from time to time on underpayments of income tax pursuant to Code
Section 6621.
"IRS Rulings" shall mean the private letter rulings
(together with any supplements) issued by the IRS in respect of
the Ruling Request.
"Opinion of Counsel" shall mean an Unqualified Tax Opinion
addressed to CPC, in form and substance satisfactory to CPC and
upon which CPC can rely. In no event shall CPC be
25
required to conclude that an opinion is satisfactory if there is
any risk, however remote, that the action or conduct which is the
subject of the opinion will cause the Spinoff or any of the
Foreign Spinoffs to be taxable to any extent under the Code. For
this purpose, an "Unqualified Tax Opinion" shall mean an
unqualified "will" opinion of independent tax counsel of
recognized national standing who is experienced in the issues to
be addressed and otherwise is reasonably acceptable to CPC, to
the effect that the action or conduct which is the subject
thereof does not disqualify the Spinoff or any of the Foreign
Spinoffs for tax-free treatment for the Indemnified Party and the
shareholders of CPC under Code Sections 355, 368(a)(1)(D) and any
other applicable Code Sections, assuming that the Spinoff and the
Foreign Spinoffs would have qualified for such tax-free treatment
if the subject action or conduct had not occurred. An Unqualified
Tax Opinion may rely upon, and assume the accuracy of, any
representations contained in the Ruling Request.
"Person" shall mean any natural person, corporation,
business trust, joint venture, association, company, partnership
or government, or any agency or political subdivision thereof.
"Preferred Stock Purchase Rights" shall mean the rights to
purchase preferred stock of CORN specified in the CORN Rights
Plan.
"Regulations" shall mean the income tax regulations issued,
published or promulgated under the Code.
26
"Restricted Period" shall mean the period beginning on the
date of the first to occur of the Spinoff or any of the Foreign
Spinoffs and ending on the second anniversary of the Spinoff
Date.
"Ruling Request" shall mean the request for rulings under
Code Sections 355 and 368(a)(1)(D) filed in respect of the
Spinoff and the Foreign Spinoffs on behalf of CPC on April 11,
1997, and all amendments and supplements thereto filed subsequent
to such date.
"Section" shall refer to a section of this Agreement.
"Spinoff Date" shall mean the date determined by CPC's
Board of Directors as the date on which the Spinoff shall occur.
"Taxes" shall mean all United States federal, state or
local gross or net income, gross receipts, withholding,
franchise, transfer, estimated or other taxes or similar charges
and assessments, including all interest, penalties and additions
imposed with respect to such amounts.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed as of the date first written above.
CPC INTERNATIONAL INC. CORN PRODUCTS INTERNATIONAL, INC.
By________________________ By ______________________________
Name: Name:
Title: Title:
27
FORM OF
DEBT AGREEMENT
This DEBT AGREEMENT, dated as of __________, 1997, (this
"Agreement"), by and between CPC International Inc., a Delaware
corporation ("CPC"), and Corn Products International, Inc., a
Delaware corporation ("Corn Products").
WHEREAS, as contemplated in the Distribution Agreement, the
parties have entered into this Agreement regarding the
indebtedness to be borne by Corn Products and the Corn Products
Consolidated Subsidiaries; and
WHEREAS, CPC intends to reduce the indebtedness of CPC and
the CPC Consolidated Subsidiaries by the proceeds of New Debt,
and any proceeds of New Assumed Debt, mutually agreed to be
incurred or assumed by Corn Products and the Corn Products
Consolidated Subsidiaries;
NOW, THEREFORE, in consideration of the mutual agreements,
provisions and covenants contained in this Agreement and the
Distribution Agreement, the parties hereto agree as follows:
SECTION 1. Certain Definitions. All capitalized terms not
otherwise defined shall have the meanings set forth below (such
meanings to be equally applicable to both the singular and the
plural forms of the terms defined). Any reference by name to any
entity owned directly or indirectly by CPC shall be deemed to
include any successor entity thereto.
"Agreement" shall have the meaning ascribed thereto in the
preamble.
"Brazilian Distribution" shall mean the distribution by
Refinacoes de Milho, Brasil Ltda. (a wholly owned subsidiary of
CPC organized and operating under the laws of Brazil) to CPC of
all of the outstanding equity of Brazilian Newco.
"Brazilian Newco" shall mean the Brazilian entity engaged
solely in the corn refining business which will result from the
transfer of all of the assets and liabilities of the corn
refining business of Refinacoes de Milho, Brasil Ltda. to said
Brazilian entity.
"Canadian Distribution" shall mean the distribution by
Canada Starch Operating Company, Inc. (a wholly owned subsidiary
of CPC organized and operating under the laws of Canada) to CPC
of all of the outstanding stock of Canadian Newco.
"Canadian Newco" shall mean the Canadian entity engaged
solely in the corn refining business which will result from the
transfer of all of the assets and liabilities of the corn
refining business of Canada Starch Operating Company, Inc. to
said Canadian entity.
"Chilean Distribution" shall mean the distribution by
Industrias de Maiz y Alimentos S.A. (a wholly owned subsidiary of
CPC organized and operating under the laws of Chile) to CPC of
all of the outstanding stock of Chilean Newco.
2
"Chilean Newco" shall mean the Chilean entity engaged
solely in the corn refining business which will result from the
transfer of all of the assets and liabilities of the corn
refining business of Industrias de Maiz y Alimentos S.A. to said
Chilean entity.
"Corn Products" shall have the meaning ascribed thereto in the
preamble.
"Corn Products Consolidated Existing Debt" shall have the
meaning ascribed thereto in Section 2(a).
"Corn Products Consolidated New Debt Amount" shall have the
meaning ascribed thereto in Section 2(a).
"Corn Products Consolidated Subsidiaries" shall mean all
entities, wherever organized, that, in accordance with GAAP, are
included in the consolidated financial statements of Corn
Products as of the Distribution Time.
"Corn Products Tax Balance Sheet" shall mean (i) as of the
date hereof, the tax balance sheet set forth in Schedule B,
reflecting the latest estimate of the book assets, liabilities
and net equity of Corn Products on a stand-alone basis as of the
Distribution Time, and adjusted for United States federal income
tax differences, as determined by CPC in accordance with past
practices consistently applied (which such determination shall be
final and binding upon the
3
parties), and (ii) as of the CPC Adjustment Date, the Final Corn
Products Balance Sheet, as adjusted to reflect United States
federal income tax differences determined by CPC in accordance
with past practices consistently applied (which such
determination shall be final and binding upon the parties).
"Corn Products Total Consolidated Debt Amount" shall have
the meaning ascribed thereto in Section 2(a).
"CPC" shall have the meaning ascribed thereto in the preamble.
"CPC Adjustment Date" shall have the meaning ascribed
thereto in Section 4(a).
"CPC Base Amount" shall mean the aggregate amount of CPC's
unrecovered investment for United States federal income tax
purposes in all of the assets (including the stock of domestic
and foreign corporations), net of liabilities (including
liabilities to which said assets are subject, but excluding
contingent and unknown liabilities), contributed by CPC directly
to Corn Products in contemplation of the Distribution and
reflected on the Corn Products Tax Balance Sheet, which amount
shall be determined by CPC, in accordance with past practices
consistently applied (which such determination shall be final and
binding upon the parties), as of the date of the contribution of
each such asset to Corn Products.
4
"CPC Consolidated Subsidiaries" shall mean all entities,
wherever organized, that, in accordance with GAAP, are included
in the consolidated financial statements of CPC as of the
Distribution Time.
"CPC Foreign Distributing Company" shall mean each of (i)
Canada Starch Operating Company, Inc., (ii) Refinacoes de Milho,
Brasil Ltda. and (iii) Industrias de Maiz y Alimentos S.A.
"CPC Foreign Distributing Company Base Amount" shall mean
the aggregate amount of the unrecovered investment for United
States federal income tax purposes of (i) Canada Starch Operating
Company, Inc. in all of the assets, net of all liabilities
(including liabilities to which said assets are subject, but
excluding contingent and unknown liabilities) other than New
Assumed Debt, transferred to Canadian Newco in contemplation of
the Canadian Distribution, (ii) Refinacoes de Milho, Brasil Ltda.
in all of the assets, net of all liabilities (including
liabilities to which said assets are subject, but excluding
contingent and unknown liabilities) other than New Assumed Debt,
transferred to Brazilian Newco in contemplation of the Brazilian
Distribution, and (iii) Industrias de Maiz y Alimentos S.A. in
all of the assets, net of all liabilities (including liabilities
to which said assets are subject, but excluding contingent and
unknown liabilities) other than New Assumed Debt, transferred to
Chilean Newco in contemplation of the Chilean Distribution,
determined in each case by CPC, in accordance with past practices
consistently applied (which such determination shall be final and
binding upon the parties), as of the date of each of the
respective contributions, and reflected on the respective Foreign
Newco Tax Balance Sheet.
5
"Distribution" shall have the meaning ascribed thereto in the
Distribution Agreement.
"Distribution Agreement" shall mean that certain
Distribution Agreement dated as of __________, 1997, by and between
CPC and Corn Products, and to which this Agreement is an Ancillary
Agreement (as defined in the Distribution Agreement).
"Distribution Time" shall mean the close of business on the
Distribution Date, immediately after the Distribution. For this
purpose, "Distribution Date" shall mean such date as may be
determined by the board of directors of CPC as the date on which
the Distribution shall occur.
"Final Corn Products Balance Sheet" shall have the meaning
ascribed thereto in Section 4(a).
"Final Foreign Newco Balance Sheet" shall have the meaning
ascribed thereto in Section 4(b).
"Foreign Adjustment Date" shall have the meaning ascribed
thereto in section 4(b).
"Foreign Distribution" shall mean each of the Brazilian
Distribution, the Canadian Distribution and the Chilean
Distribution.
6
"Foreign Distribution Time" shall mean with respect to each
Foreign Distribution, the close of business on the Foreign
Distribution Date, immediately after the Foreign Distribution.
For this purpose, "Foreign Distribution Date" shall mean with
respect to each Foreign Distribution, such date as may be
determined by the board of directors (or equivalent governing
body) of the respective CPC Foreign Distributing Company as the
date on which such Foreign Distribution shall occur.
"Foreign Newco" shall mean each of Brazilian Newco,
Canadian Newco and Chilean Newco.
"Foreign Newco Tax Balance Sheet" shall mean (i) as of the
date hereof, the tax balance sheet of each Foreign Newco prepared
by CPC and included in Schedule B, each reflecting the assets,
liabilities and net equity of the respective Foreign Newco as of
the relevant Foreign Distribution Time, as adjusted for United
States federal income tax differences determined by CPC in
accordance with past practices consistently applied (which such
determination shall be final and binding upon the parties) and
(ii) as of each Foreign Adjustment Date, the respective Final
Foreign Newco Balance Sheet, as adjusted for United States
federal income tax differences determined by CPC in accordance
with past practices consistently applied (which such
determination shall be final and binding upon the parties).
7
"GAAP" means United States generally accepted accounting
principles and practices, as in effect on the date of this
Agreement, as promulgated by the Financial Accounting Standards
Board and its predecessors.
"Indebtedness" shall mean all interest bearing debt for
money borrowed whether or not evidenced by securities, without
regard to whether such debt is accounted for as a current or
long-term liability on the balance sheet of the borrower, except
that Indebtedness shall not include (i) any debt to CPC, any CPC
Consolidated Subsidiary, Corn Products or any Corn Products
Consolidated Subsidiary, (ii) any trade or non-trade accounts
payable or similar liabilities or (iii) any leases (whether
accounted for as a capital lease or an operating lease).
"New Assumed Debt" shall mean Indebtedness incurred by CPC
or a CPC Consolidated Subsidiary, with respect to which the
lender agrees that (i) such Indebtedness will be transferred to
Corn Products or a Corn Products Consolidated Subsidiary on or
prior to the Distribution Date, (ii) such Indebtedness will, upon
such transfer, become the liability of Corn Products or a Corn
Products Consolidated Subsidiary, and (iii) CPC and the CPC
Consolidated Subsidiaries will be discharged from any liability
related thereto. All Indebtedness of a CPC Foreign Distributing
Company that is to be transferred to a Foreign Newco as part of a
Foreign Distribution shall also be regarded as New Assumed Debt.
"New Debt" shall mean Indebtedness, other than Corn
Products Consolidated Existing Debt or New Assumed Debt, for
money borrowed from banks, financial institutions or other
8
similar lenders, but shall not include any debt to CPC, any CPC
Consolidated Subsidiary, Corn Products or any Corn Products
Consolidated Subsidiary.
"Notice" shall have the meaning ascribed thereto in Section 6(h).
"Section" shall mean a section of this Agreement.
SECTION 2. Debt Undertaking.
(a) Corn Products Total Consolidated Debt. The parties
agree that at the Distribution Time, (i) the Corn Products Total
Consolidated Debt Amount shall be an amount equal to $350
million, and (ii) the Corn Products Consolidated New Debt Amount
shall be the excess of the Corn Products Total Consolidated Debt
Amount over the Corn Products Consolidated Existing Debt. For
purposes hereof, the Corn Products Consolidated Existing Debt
shall be the total amount of Indebtedness, as of September 30,
1997 (or such other date as the parties may mutually agree), of
all Corn Products Consolidated Subsidiaries. The amount of Corn
Products Consolidated Existing Debt held by each of the relevant
Corn Products Consolidated Subsidiaries is set forth in the
Schedule A.
(b) Corn Products Consolidated New Debt Amount. After
September 30, 1997 (or such other date as the parties may
mutually agree), but not later than December 31, 1997, (i) Corn
Products shall incur New Debt and pay the proceeds of such New
Debt to CPC; and (ii) each
9
Corn Products Consolidated Subsidiary designated by Corn Products
and agreed to by CPC shall assume New Assumed Debt from CPC or a
CPC Consolidated Subsidiary. The total of said New Debt to be
incurred by CPC and New Assumed Debt to be assumed by Corn
Products Consolidated Subsidiaries shall be equal to the Corn
Products Consolidated New Debt Amount. The allocation of the Corn
Products Consolidated New Debt Amount among Corn Products and
each of the Corn Products Consolidated Subsidiaries designated by
Corn Products and agreed to by CPC, for the purpose of
determining the amount of New Debt or New Assumed Debt to be
incurred or assumed by each, shall be as set forth in Schedule A.
Such allocation shall take into account the agreements set forth
in Sections 2(c) and 2(d). The parties may agree that, in lieu of
incurring New Debt, Corn Products will assume New Assumed Debt in
respect of all or any portion of the amount of the Corn Products
Consolidated New Debt Amount allocable to Corn Products. All
proceeds of New Debt, and the proceeds, if any, of all New
Assumed Debt referred to herein shall be used exclusively to
retire Indebtedness of CPC and the CPC Consolidated Subsidiaries.
(c) Corn Products Debt. The parties agree that the portion
of the Corn Products Consolidated New Debt Amount to be allocated
to Corn Products shall not exceed the CPC Base Amount.
(d) Foreign Newco Debt. The parties agree that the portion
of the Corn Products Consolidated New Debt Amount to be allocated
to any Foreign Newco shall not exceed the CPC Foreign
Distributing Company Base Amount.
10
SECTION 3. Preliminary Balance Sheets. Included herewith
and attached hereto as Schedule B are book and tax balance
sheets, reflecting the latest estimate of the assets, liabilities
and net equity of (i) Corn Products on a stand-alone basis as of
the Distribution Time and (ii) each Foreign Newco as of the
respective Foreign Distribution Time. Said balance sheets shall
provide the basis for determining, for purposes of Sections 2(c)
and 2(d), the amounts, prior to adjustments, of the CPC Base
Amount and each Foreign Distributing Company Base Amount.
SECTION 4. Final Balance Sheets.
(a) As soon as practicable after the Distribution Time, but
in any event within sixty (60) days following the Distribution
Time (the "CPC Adjustment Date"), CPC shall deliver to Corn
Products (i) a book balance sheet prepared by CPC in cooperation
with Corn Products reflecting the final determination of the
assets, liabilities and net equity as of the Distribution Time of
Corn Products on a stand-alone basis (the "Final Corn Products
Balance Sheet") and (ii) the Corn Products Tax Balance Sheet,
computed from the Final Corn Products Balance Sheet.
(b) As soon as practicable after each Foreign Distribution
Time, but in any event within sixty (60) days following the
respective Foreign Distribution Time (each, a "Foreign Adjustment
Date"), CPC shall deliver to Corn Products (i) book balance
sheets prepared by CPC in cooperation with Corn Products
reflecting the final determination of the assets, liabilities and
net equity as of the respective Foreign Distribution Time of each
Foreign Newco ("Final Foreign
11
Newco Balance Sheets") and (ii) the corresponding final Foreign
Newco Tax Balance Sheets, computed from the Final Foreign Newco
Balance Sheets.
(c) Each of the book balance sheets described in Sections
3, 4(a) and 4(b) are or shall be prepared in accordance with GAAP
applied in a manner consistent with CPC's past practices.
SECTION 5. Adjustments.
(a) If the portion of the Corn Products Consolidated New
Debt Amount allocated directly to Corn Products exceeds the CPC
Base Amount indicated by the Corn Products Tax Balance Sheet
computed from the Final Corn Products Balance Sheet, CPC shall
pay to Corn Products an amount of cash equal to such excess. In
such an event, Corn Products will cause a Corn Products
Consolidated Subsidiary to (i) assume New Assumed Debt in the
amount of such excess, or if agreed to by the parties, (ii) incur
New Debt in the amount of such excess and pay to CPC or the
relevant CPC Foreign Distributing Company the proceeds of such
New Debt.
(b) If the portion of the Corn Products Consolidated New
Debt Amount allocated to any Foreign Newco exceeds the
corresponding CPC Foreign Distributing Company Base Amount
indicated by the Foreign Newco Tax Balance Sheet computed from
the respective Final Foreign Newco Balance Sheet, the respective
CPC Foreign Distributing Company shall pay to the applicable
Foreign Newco an amount of cash equal to such excess. In such an
event, Corn Products will, or will cause a Corn Products
Consolidated Subsidiary to, (i) assume New
12
Assumed Debt in the amount of such excess or, if agreed to by the
parties, (ii) incur New Debt in the amount of such excess and pay
to CPC or the relevant CPC Foreign Distributing Company the
proceeds of such New Debt.
SECTION 6. Miscellaneous Provisions.
(a) Termination. This Agreement may not be terminated except
by an agreement in writing signed by all of the parties hereto.
(b) Further Actions. If at any time after the Distribution
Time any further action is necessary or desirable to carry out
the purposes of this Agreement, either of the parties shall, on
the written request of the other, take all such reasonably
necessary or desirable action.
(c) Cooperation. The parties hereto agree to use their
reasonable best efforts to cooperate with respect to the various
matters contemplated by this Agreement.
(d) Successors and Assigns. Except as otherwise expressly
provided herein, no party hereto may assign or delegate, whether
by operation of law or otherwise, any of such party's rights or
obligations under or in connection with this Agreement without
the written consent of the other party hereto, and any attempt to
so assign or delegate any of said rights or obligations without
such consent shall be void. Except as otherwise expressly
provided herein, all covenants and agreements contained in this
Agreement by or on behalf of any of the parties hereto will be
13
binding upon and enforceable against the respective
successors and assigns of such party and will be enforceable by
and will inure to the benefit of the respective successors and
permitted assigns of such party.
(e) Modification; Waiver; Severability. This Agreement may
be amended, supplemented or waived only by a subsequent writing
signed by all of the parties hereto. The failure of any party
hereto to require strict performance by any other party of any
provision of this Agreement will not waive or diminish that
party's right to demand strict performance thereafter of that or
any other provision hereof. If any provision of this Agreement or
the application thereof is determined by a court of competent
jurisdiction to be invalid, void or unenforceable, the remaining
provisions hereof, or the application of such provision in
circumstances other than those as to which it has been held
invalid or unenforceable, shall remain in full force and effect
and in no way be affected, impaired or invalidated thereby, so
long as the economic or legal substance of the transaction
contemplated hereby is not affected in any manner adverse to any
party.
(f) Counterparts. This Agreement may be executed with
counterpart signature pages or in one or more counterparts, all
of which shall be one and the same Agreement, and shall become
effective when one or more counterparts have been signed by each
of the parties and delivered to all the parties hereto.
14
(g) Descriptive Headings. The descriptive headings of the
Agreement are inserted for the convenience of reference only and
are not intended to be a part of or to affect the meaning or
interpretation of this Agreement.
(h) Notices. All notices, consents, requests, waivers or
other communications required or permitted under this Agreement
(each a "Notice") shall be in writing and shall be sufficiently
given if (a) hand delivered or sent by telecopy or any means of
electronic transmission with delivery confirmed (by voice or
otherwise), (b) sent by nationally recognized overnight courier,
or (c) sent by registered or certified mail, postage prepaid,
return receipt requested, and in each case addressed as follows:
If to CPC at: P.O. Box 8000
International Plaza
Englewood Cliffs, NJ 07632
Telecopy: 1-201-894-2210
Attn: Vice President-Taxes
with a copy to: General Counsel
If to Corn Products at: P.O. Box 345
6500 Archer Road
Argo, Illinois 60501
15
Telecopy: 1-708-563-6561
Attn: Chief Financial Officer
with a copy to: General Counsel
or such other address as shall be furnished by any of the parties
in a Notice. Any Notice shall be deemed given upon receipt.
(i) Survival. Except as otherwise expressly provided
herein, all covenants and agreements of the parties contained in
this Agreement shall survive the Distribution Time.
(j) Binding Effect. This Agreement shall be executed by CPC
and Corn Products on their own behalf and on behalf of their
respective affiliates, which in the case of CPC shall mean the
CPC Consolidated Subsidiaries, and in the case of Corn Products
shall mean the Corn Products Consolidated Subsidiaries, including
each Foreign Newco. Each of CPC and Corn Products agrees to cause
its respective affiliates to perform, and hereby guarantees the
performance of, each and every one of the obligations hereunder
to be performed by such affiliates.
(k) No Third Party Beneficiaries. This Agreement is solely
for the benefit of the parties hereto and their respective
affiliates, and shall not be deemed to confer upon third parties
any remedy, claim, liability, right of reimbursement, action or
other right in excess of those existing without reference to this
Agreement.
16
(l) Dispute Resolution. Article VI of the Distribution
Agreement shall apply hereto and shall be deemed incorporated
herein by reference with respect to any dispute arising out of
the interpretation, implementation or compliance with the
provisions of this Agreement.
(m) Governing Law and Consent to Jurisdiction. This
Agreement shall be governed by, and construed and enforced in
accordance with, the law of the State of New York without regard
to the principles of conflicts of laws thereunder. Without
limiting Article VI of the Distribution Agreement, each of the
parties irrevocably submits to the exclusive jurisdiction of the
Superior Court of the State of New Jersey, Bergen County, or the
United States District Court for the District of New Jersey, for
purposes of any suit, action or other proceeding arising out of
this Agreement. Each of the parties agrees to commence any
action, suit or proceeding relating hereto that is not required
to be submitted to arbitration pursuant to Article VI of the
Distribution Agreement either in the United States District Court
for the District of New Jersey or if such suit, action or other
proceeding may not be brought in such court for jurisdictional
reasons, in the Superior Court of the State of New Jersey, Bergen
County. Each of the parties further agrees that service of any
process, summons, notice or document by United States registered
mail to such party's respective address set forth above shall be
effective service of process for any such action, suit or
proceeding in New Jersey with respect to any matters to which it
has submitted to jurisdiction. Each of the parties irrevocably
and unconditionally waives any objection to the laying of venue
of any action, suit or proceeding arising out of this Agreement
in the Superior Court of the State of New Jersey, Bergen County,
or the United States District Court for the
17
District of New Jersey, and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any
such court that any such action, suit or proceeding brought in
any such court has been brought in an inconvenient forum.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
CPC INTERNATIONAL INC. CORN PRODUCTS INTERNATIONAL, INC.
By _______________________ By_______________________________
Name: Name:
Title: Title:
18
FORM OF
EMPLOYEE BENEFITS AGREEMENT
---------------------------
This EMPLOYEE BENEFITS AGREEMENT (the "Agreement") is made as of
_____________, 1997, by and between CPC International Inc., a
Delaware corporation ("CPC"), and Corn Products International,
Inc., a Delaware corporation ("Corn").
W I T N E S S E T H:
WHEREAS, Corn is presently a wholly-owned subsidiary of CPC; and
WHEREAS, it is intended that CPC will transfer to Corn in
exchange for stock all of CPC's assets comprising its worldwide
corn refining business, followed by the distribution by CPC of
such Corn stock to CPC's shareholders (the "Distribution"); and
WHEREAS, CPC and Corn desire to set forth their
understanding regarding their respective rights and obligations
concerning certain employee benefit and related matters relative
to plans, programs and practices currently maintained by CPC for
the benefit of its employees and former employees;
NOW, THEREFORE, in consideration of the mutual agreements,
provisions and covenants contained in this Agreement, the parties
hereby agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1. Definitions. As used in this Agreement, the
following terms shall have the meanings stated below. Such
meanings shall be equally applicable to the singular and plural
forms of the terms defined.
"Code" means the Internal Revenue Code of 1986, as amended,
including any comparable successor legislation.
"Corn Employee" means an individual who is an employee of
Corn, Enzyme Bio-Systems Ltd., or any other U.S. subsidiary of
Corn on the Coverage Date.
"Corn Stock" means the common stock of Corn, par value $.01.
"Coverage Date" means the day following the Distribution Date.
"CPC Employee" means an individual who is an employee of
CPC or any of its subsidiaries or affiliates on the Coverage
Date.
"CPC Stock" means the common stock of CPC, par value $.25 per share.
2
"Distribution Date" means the date on which the Distribution occurs.
"ERISA" means the Employee Retirement Income Security Act
of 1974, as amended, including any comparable successor
legislation.
ARTICLE 2
PENSION PLANS
SECTION 2.1 Salaried Employees. Effective as of the
Coverage Date, Corn shall adopt the Corn Products International,
Inc. Salaried Employees Pension Plan (the "Corn Pension Plan"),
which shall be a defined benefit plan designed to qualify under
Section 401(a) of the Code, and the Corn Products International,
Inc. Master Trust (the "Corn Master Trust"), which shall be a
trust exempt from taxation under Section 501(a) of the Code. The
Corn Pension Plan shall include provisions recognizing service of
covered Corn Employees with CPC prior to the Coverage Date for
all plan purposes. Subject to the conditions set forth in Section
2.3, as soon as practicable after the Coverage Date, CPC shall
cause the trustee of the CPC International Inc. Master Trust (the
"Master Trust") to transfer to the trustee of the Corn Master
Trust the amount of $48,000,000 (in a combination of cash,
securities and other property, as agreed by CPC and Corn), which
represents the present value of the accrued benefits as of
September 30, 1997 of the Corn Employees who on the Distribution
Date were participants in the CPC International Inc.
Non-Contributory Retirement Income Plan for Salaried Employees
(the "CPC Pension
3
Plan"); provided, however, that such $48,000,000 shall be
adjusted by CPC's independent actuary if a significant difference
would arise as a result of (i) differences in the number of
individuals who become Corn Employees from the number projected
to become Corn Employees as of September 30, 1997, or (ii) any other
variations from the assumptions used by such actuary to compute
such $48,000,000 amount.
SECTION 2.2 Hourly Employees. (a) Effective as of the
Coverage Date, Corn shall adopt the Corn Products International,
Inc. Hourly Employees Retirement Income Plan (the "Corn Hourly
Plan"), which shall be a defined benefit plan designed to qualify
under Section 401(a) of the Code. The Corn Hourly Plan shall be
substantially identical to the CPC International Inc. Hourly
Employees Retirement Income Plan, Supplement H (Corn Products
OCAW/IAM) (the "CPC Hourly Plan"), and shall include provisions
recognizing service of covered Corn Employees with CPC prior to
the Coverage Date for all plan purposes. Subject to the
conditions set forth in Section 2.3, as soon as practicable after
the Coverage Date, CPC shall cause the trustee of the Master
Trust to transfer to the trustee of the Corn Master Trust an
amount (in a combination of cash, securities and other property,
as agreed by CPC and Corn) determined by CPC's independent
actuary to be equal to the present value of the accrued benefits
of the Corn Employees who on the Distribution Date were
participants in the CPC Hourly Plan.
(b) After the Distribution Date, CPC shall continue to
maintain the CPC International Inc. Hourly Employees Retirement
Income Plan, Supplements I
4
(Discontinued) and K (Frozen OCAW/IAM) and the CPC International
Inc. Supplemental Benefits Plan (OCAW, AFGM, IAM Acme Resin), for
the benefit of those individuals covered under such plans.
SECTION 2.3 Asset Transfers. Each transfer of assets
provided for in Sections 2.1 and 2.2 shall occur as soon as
practicable following the latest to occur of (a) the Coverage
Date, (b) the establishment of each of the Corn Pension Plan and
Corn Hourly Plan, (c) for each such Plan, the filing of a
favorable determination letter application with the Internal
Revenue Service and a written commitment from Corn to exert its
best efforts to obtain such a favorable determination letter, and
(d) the expiration of 30 days after CPC and Corn have filed Form
5310-A, if necessary, with the Internal Revenue Service for each
transfer. As a condition to the receipt of such an asset transfer
by the Corn Master Trust, Corn shall cause each of the Corn
Pension Plan and Corn Hourly Plan, as applicable, to assume and
covenant to fully perform, pay and discharge all obligations and
liabilities of CPC and each of the CPC Pension Plan and the CPC
Hourly Plan, as applicable, for and with respect to the accrued
benefits under each of the CPC Pension Plan and the CPC Hourly
Plan of those CPC Pension Plan and CPC Hourly Plan participants
whose accrued benefits are so received by the Corn Pension Plan
and the Corn Hourly Plan, respectively.
SECTION 2.4 Excess Plan. Effective as of the Coverage Date,
Corn shall adopt a plan similar to the CPC International Inc.
Excess Pension Plan (the "Excess Pension
5
Plan"). Such plan shall include provisions recognizing service of
covered Corn Employees with CPC prior to the Coverage Date for
all plan purposes. The liability for accrued benefits of covered
Corn Employees under the Excess Pension Plan shall be transferred
to and recognized by the Corn plan contemplated by this Section
2.4.
ARTICLE 3
SAVINGS PLANS
SECTION 3.1 Salaried Employees. (a) Effective as of the
Coverage Date, Corn shall adopt (i) the Corn Products
International, Inc. Retirement/Savings Plan for Salaried
Employees (the "Corn Savings Plan"), which shall be a defined
contribution savings plan designed to qualify under Section
401(a) of the Code and to preserve "protected benefits," within
the meaning of Section 411(d)(6) of the Code, accrued by
participants under the CPC International Inc.
Savings/Retirement Plan for Salaried Employees (the "CPC
Savings Plan") as of the Distribution Date, and (ii) the Corn
Products International, Inc. Retirement/Savings Plan Trust (the
"Corn Savings Trust"), which shall be a trust exempt from
taxation under Section 501(a) of the Code. The Corn Savings
Plan shall include provisions recognizing service of covered
Corn Employees with CPC prior to the Coverage Date for all plan
purposes.
(b) Subject to the conditions set forth in clause (c)
below, as soon as practicable after the Distribution Date, Corn
shall request that CPC cause a spin off and
6
transfer from the CPC International Inc. Savings/Retirement Plan
for Salaried Employees Trust and the CPC International Inc.
Employee Stock Ownership Trust (the "ESOP Trust") to the Corn
Savings Trust of an amount equal to the aggregate account
balances, as of the date of any such transfer, of those CPC
Savings Plan participants who become Corn Employees. The transfer
from such CPC Trusts shall be in kind (including any participant
loans held by the CPC Savings Plan with respect to Corn
Employees); provided, however, that (i) the transfer from the
ESOP Trust may be made in cash or CPC Stock, or a combination
thereof, as agreed by CPC and Corn and (ii) CPC and Corn may
agree for a transfer in another form (including, for example, an
amount in cash representing pre-Distribution contributions of
Corn Employees to the CPC Savings Plan which have not yet been
invested in accordance with participant elections under the CPC
Savings Plan).
(c) The transfer of assets shall occur as soon as
practicable following the latest to occur of (a) the Coverage
Date, (b) the establishment of the Corn Savings Plan, (c) the
filing of a favorable determination letter application with the
Internal Revenue Service and a written commitment from Corn to
exert its best efforts to obtain such a favorable determination
letter, and (d) the expiration of 30 days after CPC and Corn have
filed Form 5310-A, if necessary, with the Internal Revenue
Service. As a condition to the receipt of such an asset transfer
by the Corn Savings Trust, Corn shall cause the Corn Savings Plan
to assume and covenant to fully perform, pay and discharge all
obligations and liabilities of CPC and the CPC Savings Plan for
and with respect to the account
7
balances under the CPC Savings Plan of those CPC Savings Plan
participants whose account balances are so received by the Corn
Savings Plan.
SECTION 3.2 Hourly Employees. Effective as of the Coverage
Date, Corn shall adopt the CPC International Inc. Corn Products
Division Savings/Retirement Plan for Hourly Employees (Corn
Products OCAW/IAM) as the primary sponsor and CPC shall withdraw
its sponsorship of such Plan. As soon as practicable thereafter,
and effective as of the Coverage Date, Corn shall amend such Plan
in all aspects consistent with such change of sponsorship, such
as the name of the plan and the definition of the Employer
therein.
SECTION 3.3 Excess Plan. Effective as of the Coverage Date,
Corn shall adopt a plan similar to the CPC International Inc.
Excess Savings Plan (the "Excess Savings Plan"). Such plan shall
include provisions recognizing service of covered Corn Employees
with CPC prior to the Coverage Date for all plan purposes. The
liability for accrued benefits of covered Corn Employees under
the Excess Savings Plan shall be transferred to and recognized by
the Corn plan contemplated by this Section 3.3.
ARTICLE 4
WELFARE PLANS
8
SECTION 4.1 Salaried Plans. (a) CPC currently maintains the
CPC International Inc. Salaried Employees Health Care Plan (the
"Medical Plan"), the CPC International Inc. Salaried Employees
Long Term Disability Income Plan (the "LTD Plan"), the CPC
International Inc. Flexible Spending Plan (the "Flex Plan") and
the CPC International Inc. Salaried Employees Life Insurance Plan
(the "Life Insurance Plan"), all of which are "welfare benefit
plans," within the meaning of Section 3(1) of ERISA. Effective as
of the Coverage Date, Corn shall (i) establish or otherwise make
available employee welfare benefit plans (the "Replacement
Welfare Benefit Plans") providing generally comparable medical,
disability, flexible spending and life insurance benefits (such
comparability to include, without limitation, consideration of
existing employee profiles and geographic locations of
employment) to Corn Employees who were participants under the
aforementioned CPC Plans, (ii) provide that such employees shall
be eligible for immediate participation in the Replacement
Welfare Benefit Plans with no interruption of coverage, and (iii)
credit the period of coverage under such CPC Plans towards any
preexisting condition limitations under the Replacement Welfare
Benefit Plans. The Replacement Welfare Benefit Plans shall be
structured in a manner to eliminate any obligation by CPC to
provide continuation of coverage as contemplated in Section 4980B
of the Code and Sections 601 through 608 of ERISA with respect to
Corn Employees (and their qualified beneficiaries) after the
Distribution Date. CPC shall retain liability for and shall pay
when due all benefits attributable to claims incurred by all Corn
Employees prior to the Coverage Date.
9
(b) The medical plan adopted by Corn shall provide
continued access after retirement to health care coverage for all
Corn Employees (and their dependents) who retire under the Corn
Pension Plan. On and after the Coverage Date, such individuals
will no longer be eligible to become Retired Employees (and their
dependents will no longer be eligible to become Eligible
Dependents) under the Medical Plan.
SECTION 4.2 Hourly Plans. (a) CPC currently maintains
certain insured "welfare benefit plans," within the meaning of
Section 3(1) of the ERISA, for the benefit of hourly-paid
employees of the Corn Products division of CPC. Effective as of
the Coverage Date, CPC shall withdraw as the primary sponsor and
Corn shall assume the position of primary sponsor under each of
such plans, subject to any required consent of the insurer paying
benefits under the plan.
(b) Effective as of the Coverage Date, Corn shall adopt the
Corn Products (Argo, Illinois) Cafeteria Plan as the primary
sponsor and CPC shall withdraw its sponsorship of such Plan. As
soon as practicable thereafter, and effective as of the Coverage
Date, Corn shall amend such Plan in all aspects consistent with
such change of sponsorship.
SECTION 4.3 Severance Plans. The Distribution shall not
constitute a severance or a termination of employment under the
CPC International Inc. Severance Pay Plan for Salaried Employees
or the CPC International Inc. Special Severance Program for Salaried
10
Employees and shall not entitle any Corn Employee to benefits
under either of such severance plans.
SECTION 4.4 Vacation Pay. Effective on the Distribution
Date, Corn shall assume as to the Corn Employees all accrued
liabilities (whether vested or unvested, and whether funded or
unfunded) for vacation pay and shall be solely responsible for
the payment of such vacation pay to Corn Employees after the
Distribution Date.
SECTION 4.5 Transition Provisions. (a) Liability for
Claims. Except as otherwise provided herein, after the
Distribution Date, CPC shall retain and be responsible for, or
cause its insurance carriers or Health Maintenance Organizations
to be responsible for, all liabilities and obligations related to
claims incurred through, but not after, the Distribution Date
under the Medical Plan, the LTD Plan, the Flex Plan, and the
Life Insurance Plan in respect of any Corn Employee (whether such
claims are asserted before or after the Distribution Date) and
Corn shall have no liability or obligation with respect thereto.
CPC shall retain any funds remaining on the Distribution Date in
the Flex Plan to pay for any claims incurred under such Plan on
or prior to the Distribution Date. After all such claims have
been paid, CPC shall be entitled to retain any remaining funds in
the Flex Plan, to be used consistent with the purposes of such
Plan.
(b) LTD Plan. An individual who is Totally Disabled under
the LTD Plan (as defined therein) on the Distribution Date and
who would become a Corn Employee if he
11
or she was in active employment on the Coverage Date (as mutually
agreed by CPC and Corn) shall continue to receive benefits under
the LTD Plan after the Distribution Date for so long as such
individual remains Totally Disabled. At such time as such
individual is no longer Totally Disabled, such individual shall
not be eligible to become a CPC Employee, CPC shall have no
further liability to him or her, and, consistent with the
requirements of applicable law, Corn shall determine whether such
individual shall become a Corn Employee.
(c) Medical Leave. Effective on the Coverage Date, Corn
shall assume sole responsibility for all payments to Corn
Employees who are on medical leave from CPC and CPC shall have no
further liability or obligation with respect thereto.
SECTION 4.6 Executive Life Insurance Plan. Effective on the
Coverage Date, Corn shall establish an executive life insurance
plan (the "Replacement ELIP") substantially similar to the CPC
International Inc. Executive Life Insurance Plan (the "ELIP").
Corn shall allow each ELIP participant who becomes a Corn
Employee to participate in the Replacement ELIP; provided,
however, that such participation shall be conditioned upon that
participant's consent, within a reasonable time period after
request for such consent is made, to the assignment to Corn of
the Collateral Assignment executed in favor of CPC of the
insurance policy owned by the participant and subject to the
Participation Agreement entered into under the ELIP. CPC shall
assign to Corn its rights under such Collateral Assignment as to
any participant in the ELIP who becomes a
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participant in the Replacement ELIP under the terms and
conditions set forth above. CPC shall terminate participation in
the ELIP by those participants who become Corn Employees
regardless of whether such a participant consents to the
assignment of such Collateral Assignment to Corn. In addition,
prior to the Distribution Date, CPC shall pay the 1998
employer-paid premium with respect to Corn Employees covered
under the Replacement ELIP.
ARTICLE 5
STOCK AND INCENTIVE COMPENSATION PLANS
SECTION 5.1 Corn Stock Plans. Effective as of the Coverage
Date, Corn shall establish the Corn Products International, Inc.
Stock Incentive Plan (the "Corn Stock Plan") pursuant to which
options to purchase Corn Stock may be granted ("Corn Stock
Option"), grants of shares of restricted Corn Stock may be made
("Corn Restricted Stock"), and other equity-based rights may be
granted to, among others, Corn Employees who held rights on the
Distribution Date under the CPC International Inc. 1984 and 1993
Stock and Performance Plans (the "CPC Stock Plans").
(a) Corn Stock Options. Each Corn Employee who holds an
unexercised option to purchase CPC Stock under the CPC Stock
Plans ("CPC Stock Option") at the Distribution shall receive Corn
Stock Options from Corn in substitution of such unexercised CPC
Stock Options in accordance with the following formula: (i)
Number of shares: The total number of substituted Corn Stock
Options granted shall equal the pre-
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Distribution number of CPC Stock Options multiplied by a
fraction, the numerator of which is the Pre-Distribution Date CPC
Market Price and the denominator of which is the
Post-Distribution Date Corn Market Price (the "Conversion
Fraction"). As used herein, the Pre-Distribution Date CPC Market
Price shall mean the average of the high and low prices of CPC
Stock on the New York Stock Exchange for each of the ten trading
days prior to the first day on which there is trading in CPC
Stock on a post-Distribution basis, and the Post-Distribution
Date Corn Market Price shall mean the average of the high and low
prices of Corn Stock on the New York Stock Exchange for each of
the ten trading days beginning on the first day on which there is
trading in Corn Stock on a post-Distribution basis. (ii)
Exercise price: The exercise price for the substituted Corn Stock
Options shall equal the pre-Distribution exercise price of CPC
Stock Options multiplied by a fraction, the numerator of which is
the Post-Distribution Date Corn Market Price and the denominator
of which is the Pre-Distribution Date CPC Market Price.
(b) Corn Restricted Stock. Each Corn Employee who holds an
outstanding grant of shares of restricted CPC Stock under the CPC
Stock Plans ("CPC Restricted Stock") at the Distribution shall
receive Corn Restricted Stock from Corn in substitution of such
CPC Restricted Stock. The amount of substituted Corn Restricted
Stock shall be determined by multiplying the number of shares of
CPC Restricted Stock by the Conversion Fraction. The Corn
Restricted Stock will be subject to restrictions identical to
those applicable to the CPC Restricted Stock, and shall be
released from restrictions at the same time and on the same
schedule as the CPC Restricted Stock, under the terms of
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the restrictions to which the CPC Restricted Stock was subject,
except that Corn shall be substituted for CPC where the context
so requires.
(c) Fractional Shares. The computations required under
Sections 5.1(a)(i) and (b) shall be adjusted to the extent any
result is expressed in fractional shares. Any result expressed as
one-half of one share or more shall be rounded up to the next
whole number, and any result expressed as less than one-half of
one share shall be rounded down to the next whole number.
SECTION 5.2 Deferred Compensation Plan. Effective as of the
Coverage Date, Corn shall adopt the Corn Products International,
Inc. Deferred Compensation Plan (the "Corn Deferred Plan"). The
Corn Deferred Plan may provide similar post-Distribution benefits
to those provided under the CPC International Inc. Deferred
Compensation Plan (the "CPC Deferred Plan") and shall include
provisions recognizing service of covered Corn Employees with CPC
prior to the Coverage Date for all plan purposes. The liability
for benefits of covered Corn Employees under the CPC Deferred
Plan on the Distribution Date shall be transferred to and
recognized by the Corn Deferred Plan, and CPC shall transfer to
Corn as part of the Distribution the policies of insurance held
by CPC which are associated with the liabilities under the CPC
Deferred Plan.
SECTION 5.3 Deferred Stock Unit Plan. Effective as of the
Coverage Date, Corn shall adopt the Corn Products International,
Inc. Deferred Stock Unit Plan (the
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"Corn DSUP"), which shall assume all benefit liabilities as of
the Distribution Date under the CPC International Inc. Deferred
Stock Unit Plan (the "CPC DSUP"). Corn shall in its sole
discretion determine (a) whether the Corn DSUP shall provide
further deferrals to eligible Corn Employees with respect to
services rendered on and after the Coverage Date, (b) the type of
investments and choice of timing and form of benefit payments
under the Corn DSUP, and (c) all other terms and provisions of
the Corn DSUP.
SECTION 5.4 Annual Incentive Plans. CPC currently maintains
annual bonus plans in which employees of its Corn Products
division participate. For the year ended December 31, 1997, CPC
shall pay any amounts awarded under such plans by the CPC Board
of Directors to Corn Employees.
ARTICLE 6
UNION MATTERS
SECTION 6.1 Collective Bargaining Agreements. Effective as
of the Coverage Date, Corn shall assume all of CPC's obligations
and liabilities under the collective bargaining agreements
entered into by CPC with the Oil, Chemical and Atomic Workers
International Union, Local 7-507, and the International
Association of Machinists, District 8. Corn shall take all steps
and procedures necessary to secure any required acknowledgment or
agreement of the relevant labor unions.
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ARTICLE 7
GENERAL PROVISIONS
SECTION 7.1 Service Credit. A Corn Employee who was an
employee of CPC or a CPC affiliate at the Distribution shall be
given credit for all years of service with CPC or any CPC
affiliate (to the extent such years of service were recognized by
CPC) performed on or prior to the Distribution Date with respect
to matters of employment generally, including vacation
eligibility and participation in employee benefit plans,
programs or practices, regardless of whether such service credit
is expressly provided for elsewhere in the Agreement as to any
particular employee benefit plan, program or practice.
SECTION 7.2 Amendment or Termination of Employee Benefit
Plans. Except as otherwise expressly provided herein, nothing in
this Agreement shall be construed as limiting the ability of CPC
or Corn, as applicable, in its sole discretion, to amend or
terminate any employee benefit plan, program or practice which it
now maintains or may hereafter establish at any time or for any
reason nor shall any provision of this Agreement be construed as
creating a right in any CPC Employee or Corn Employee under any
such plans, programs or practices which such Employee would not
otherwise have under the terms of the plans, program or practice
itself.
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SECTION 7.3 Unfunded Liabilities. In connection with the
Distribution, and the undertakings and transfers of liabilities
set forth in Sections 2.4, 3.3, 4.1(b) and 5.3, the
Distribution-related financial accounting statements for each of
CPC and Corn shall appropriately reflect such transfers of
liabilities in relation to the pre-Distribution CPC accounting
treatment of the matters set forth in such Sections.
SECTION 7.4 Garnishments, Tax Levies, Child Support Orders,
and Wage Assignments. As the successor employer with respect to
each Corn Employee, Corn shall honor any payroll deductions with
respect to Corn Employees with garnishments, tax levies, child
support orders, or wage assignments in effect on the Distribution
Date and will continue to make payroll deductions and payments to
the authorized payee, as specified by the court or governmental
order which was filed with CPC.
SECTION 7.5 Retirees. Subject to Section 7.2 hereof and the
terms of the applicable plans, all retired individuals currently
participating in an applicable benefit plan sponsored by CPC
shall continue such participation after the Distribution,
regardless of whether such individual was employed by CPC's Corn
Products division, Enzyme Bio-System Ltd., or any other U.S.
subsidiary of CPC which is included in the Distribution, at the
time of his or her retirement.
SECTION 7.6 Cooperation and Further Assurances. Each party
covenants to cooperate fully with the other to ensure an orderly
transition of the matters contemplated
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by this Agreement and to execute such additional instruments and
take such actions as may be reasonably requested by the other to
confirm, perfect or otherwise carry out the intent and purposes
of this Agreement. Such matters shall include, but are not
limited to, sharing of participant information as necessary to
facilitate administration of employee benefit plans, programs and
practices and the completion and filing of any forms or reports
required to be filed with the Internal Revenue Service,
Department of Labor, Pension Benefit Guaranty Corporation,
Securities and Exchange Commission, or other government entity.
SECTION 7.7 No Waiver. No failure by either party to insist
upon the strict performance of any term, covenant, condition or
provision of this Agreement, or to exercise any right or remedy
consequent upon an event of default hereunder, shall constitute a
waiver of any such default or of such term, covenant, condition
or provision or a waiver or relinquishment for the future of the
right to insist upon and to enforce by any appropriate legal
remedy a strict compliance with all the terms, covenants,
conditions and provisions of this Agreement, or of the right to
exercise any such rights or remedies, if any default by the other
party be continued or repeated. No breach of this Agreement shall
be waived except as set forth in a written instrument executed by
the party waiving such breach. No waiver of any breach shall
affect or alter this Agreement but every term, covenant,
condition and provision of this Agreement shall continue in full
force and effect with respect to any other existing or subsequent
breach hereof. Any failure on the
19
part of any party hereto to comply with any of its obligations
hereunder may be waived by the other party.
SECTION 7.8 Headings. The headings of the Sections of this
Agreement have been inserted solely for convenience of reference
and shall not constitute a part of this Agreement, nor shall they
affect its meaning, construction or effect.
SECTION 7.9 Amendment of Agreement. This Agreement may be
amended only by a written agreement duly executed by each of the
parties hereto.
SECTION 7.10 Applicable Law. This Agreement shall be
construed and enforced in accordance with the laws of the State
of New York to the extent not preempted by federal law.
SECTION 7.11 Multiple Counterparts. This Agreement may be
executed in multiple counterparts, each of which shall be
regarded for all purposes as an original constituting but one and
the same instrument.
SECTION 7.12 Severability. If any one or more of the
Sections, sentences or other portions of this Agreement shall be
determined by a court of competent jurisdiction to be invalid,
the invalidity of any such Section, sentence, or other portion of
this Agreement shall in no way affect the validity or
effectiveness of the remainder of this
20
Agreement, and this Agreement shall continue in force to the
fullest extent permitted by law.
SECTION 7.13 Assignments. Except as otherwise provided
herein, no party hereto shall give, assign or pledge its rights
under this Agreement without the consent of the other party.
SECTION 7.14 Notices; Demands; Requests. All notices,
demands and requests to be given or made hereunder to or by any
party shall be in writing and hand delivered or mailed by
registered or certified mail (return receipt requested) or sent
by any means of electronic message transmission with delivery
confirmed (by voice or otherwise) to the parties at the following
addresses and will be deemed given on the date on which such
notice is received:
(a) As to CPC:
P.O. Box 8000
International Plaza
Englewood Cliffs, NJ 07632
Attention: Senior Vice President - Human Resources
(b) As to Corn:
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P.O. Box 345
6500 Archer Road
Argo, Illinois 60501
Attention: Vice President - Human Resources
Any of such addressees and addresses may be changed at any
time upon written notice given in accordance with this Section to
the other party by the party effecting the change. Any time
periods commencing with notice prescribed by the terms of this
Agreement shall commence with the date of receipt of written
notice as provided under this Section.
SECTION 7.15 Survival of Covenants. All covenants set forth
herein shall survive the execution of this Agreement.
SECTION 7.16 Entire Agreement. This Agreement contains the
entire understanding of the parties with respect to the
transactions contemplated hereby and supersedes all other prior
and contemporaneous agreements, undertakings, negotiations,
discussions and representations, oral or written, between the
parties.
SECTION 7.17 Specific Performance. This Agreement and each
and every provision hereof shall be specifically enforceable.
Each party hereto upon the introduction and presentation to the
applicable court having jurisdiction over the matter of evidence
showing a material breach by the other party hereto shall be
entitled to
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injunctive relief mandating specific performance. In addition,
each party shall have all of the rights and remedies conferred in
this Agreement or now or hereafter conferred at law or in equity,
which rights and remedies are cumulative.
SECTION 7.18 No Third Party Beneficiaries. This agreement
is not intended to, and does not, create any third party
contractual or other rights. No person or entity shall be deemed
to be a third party beneficiary with respect to the Agreement.
SECTION 7.19 Binding Effect. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and
their respective legal representatives, successors and assigns.
IN WITNESS WHEREOF, the parties to this Agreement have
caused their corporate names to be subscribed by officers duly
authorized as of the date first set forth above.
CPC International Inc.
By:______________________________
Name:____________________________
Title:___________________________
Corn Products International, Inc.
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By:______________________________
Name:____________________________
Title:___________________________
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