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No. 1-13397
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
Form 10/A
(Amendment No. 1)
----------------------
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 of (I.R.S. Employer Identification No.)
incorporation or organization)
Corn Products International, Inc. 60501-1933
P.O. Box 345 (Zip Code)
6500 South Archer Road
Bedford Park, 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 to be Name of each exchange on which each
registered class is to be registered
- ------------------------- -----------------------------------
Common Stock, $.01 par value, New York Stock Exchange, Inc.
including attached Preferred
Stock Purchase Right
Securities to be registered pursuant to Section 12(g) of the Act:
None
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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 "SECURITY OWNERSHIP OF CERTAIN
Beneficial Owners and BENEFICIAL OWNERS."
Management.............
5. Directors and Executive "MANAGEMENT."
Officers...............
6. Executive Compensation..... "EXECUTIVE COMPENSATION;
PENSION AND BENEFIT PLANS."
7. Certain Relationships and "SUMMARY;" "THE DISTRIBUTION;"
Related Transactions... "RELATIONSHIP BETWEEN THE
3
Item
No. Item Caption Location in Information Statement
- ---- ------------ ---------------------------------
COMPANY AND CPC AFTER THE
DISTRIBUTION" and "CERTAIN
RELATIONSHIPS AND TRANSACTIONS."
8. Legal Proceedings.......... "BUSINESS -- Legal Proceedings."
9. Market Price of and Dividends "SUMMARY;" "INTRODUCTION;" "THE
on the Registrant's DISTRIBUTION -- Listing and Trading of
Common Equity and Corn Products Common Stock" and
Related Stockholder "DIVIDEND POLICY."
Matters................
11. Description of Registrant's "DESCRIPTION OF CAPITAL STOCK."
Securities to be
Registered..........
12. Indemnification of Directors "LIABILITY AND INDEMNIFICATION OF
and Officers........... DIRECTORS AND OFFICERS."
13. Financial Statements and "SUMMARY;" "SELECTED HISTORICAL
Supplementary Data..... 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 "INDEX TO CORN PRODUCTS
Statements............... COMBINED FINANCIAL STATEMENTS."
4
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.
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 Amended 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 Access Agreement.
5
10.10 Form of Stock Incentive Plan.*
10.11 Form of Severance Agreement.*
21.1 List of Subsidiaries.
- -----------------------------
* To be filed by amendment.
+ Previously filed.
6
SIGNATURE
Pursuant to the requirements of Section 12 of the
Securities Exchange Act of 1934, the registrant has duly caused
this Amendment No. 1 to the 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
November 14, 1997
7
Subject to completion or amendment,
dated November 14, 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. Corn Products was formed in March 1997 for the
purpose of effecting the Distribution and assuming the operations
of the corn refining business of CPC and has no previous
operating history. 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 11:59:59 p.m. 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 2, 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.
--------------------------
THISINFORMATION 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.............................................17
Research and Development.....................................17
Sales and Distribution.......................................17
Patents and Trademarks.......................................17
Employees and Management.....................................18
Properties...................................................18
Government Regulation and Environmental Matters..............20
Legal Proceedings............................................20
RISK FACTORS.................................................21
Uncertain Ability to Reverse Recent Disappointing
Financial Performance......................................21
Uncertain Ability to Contain Costs or to Fund
Capital Expenditures.......................................22
Competition; Expanding Industry Capacity.....................23
Price Volatility and Uncertain Availability of Corn..........23
Potential Losses from Commodities Hedging Activities.........23
Unavailability of CPC's Financial and Other Resources........24
Absence of Prior Trading Market for Corn Products
Common Stock...............................................24
Uncertainty of Dividends.....................................24
Foreign Operations Risks.....................................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.............................................27
Reasons for the Distribution.................................27
Manner of Effecting the Distribution.........................28
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 COMPANY 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..................................37
Other Agreements and Arrangements............................39
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 Nine Months of 1997 Compared
With First Nine Months of 1996.............................48
Results of Operations: 1996 Compared With 1995...............50
Results of Operations: 1995 Compared With 1994...............51
Liquidity and Capital Resources..............................52
MANAGEMENT...................................................53
Directors of the Company.....................................53
Directors' Meetings, Fees and Committees.....................55
Audit Committee..............................................56
Compensation and Nominating Committee........................56
Executive Officers of the Company............................56
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
INDEX TO CORN PRODUCTS COMBINED FINANCIAL STATEMENTS........F-1
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 11:59:59 p.m. 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 6500 South Archer Road, Bedford Park, IL
60501-1933 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
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 DISTRIBUTION --
2
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 has received 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 does 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 September 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 3.5 million 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 distributed 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 .......... 11:59:59 p.m. 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 2, 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 --
Uncertainty 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 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 be aware that there
are certain risks inherent in an
investment in Corn Products Common Stock
and should carefully consider those
risks, which include the uncertain
ability of the Company to reverse its
recent disappointing financial
performance and to fund its anticipated
capital expenditures; the competitiveness
of the corn refining industry and its
recent overcapacity; the price volatility
of corn; the potential losses that may
result from the Company's commodities
hedging activities; and the impact of the
Company's anticipated indebtedness on its
operations. For a full description of
these and other risks associated with
such an investment, see "RISK FACTORS"
beginning at page __.
5
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.)
-------------------
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 Corn Products International, Inc., 6500
South Archer Road, Bedford Park, IL 60501-1933, Attention:
Investor Relations.
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, Nine Months Ended
except current September 30,
ratio) ----------------------
1997 1996
---- ----
Income Statement
Data:
Net sales (1) ....... $1,055 $1,144
Gross profit ........ 96 142
Restructuring
charges (gains)
- net .............. 94 --
Spin-off costs 15 --
Operating income
(loss) ............. (84) 81
Income (loss)
before income
taxes .............. (106) 60
Income tax
expense (benefit) .. (25) 22
Minority
stockholders'
interest ........... 1 2
------ ------
Net income (loss) ... $(82)(2) $36
====== ======
(in millions,
except current Years Ended December 31,
ratio) ----------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Income Statement
Data:
Net sales (1) ...... $1,524 $1,387 $1,385 $1,243 $1,250
Gross profit ....... 143 304 298 254 258
Restructuring
charges (gains)
- net ............. -- (37) 19 -- --
Spin-off costs ..... -- -- -- -- --
Operating income
(loss) ............ 65 251 188 182 180
Income (loss)
before income
taxes ............. 37 223 169 166 162
Income tax
expense (benefit) . 12 86 67 66 65
Minority
stockholders'
interest .......... 2 2 2 1 1
------- ------ ------ ------ ------
Net income (loss) .. $23 $135(2) $100(2) $99 $96
======= ====== ====== ====== ======
7
(in millions, Nine Months Ended
except current September 30,
ratio) ----------------------
1997 1996
---- ----
Balance Sheet
Data:
Working capital ... $88 $176
Current ratio ..... 1.3 1.6
Plant and
properties,
net .............. $1,051 $1,042
Total debt ........ $350 $340
Deferred income
taxes, net ....... $73 $107
CPC equity
investment ....... $941 $1,007
Total assets ...... $1,642 $1,656
(in millions,
except current Years Ended December 31,
ratio) ----------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Balance Sheet
Data:
Working capital ..... $147 $31 $106 $33 $33
Current ratio ....... 1.5 1.1 1.5 1.2 1.2
Plant and
properties,
net ................ $1,057 $920 $830 $792 $745
Total debt .......... $350 $363 $294 $269 $263
Deferred income
taxes, net ......... $85 $102 $100 $114 $118
CPC equity
investment ......... $1,025 $600 $550 $484 $444
Total assets ........ $1,663 $1,306 $1,207 $1,110 $1,053
- -----------------------
(1) Includes sales to CPC as follows: $123; $124; $157; $154;
$163; $140; and $153 for the nine months ended September 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 September 30, 1997 for purposes of the September 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 __.
Nine Months Year
Ended Ended
September 30, December 31,
(in millions, except per share data) 1997 1996
Statement of Earnings Data: ------------- ------------
Net sales $1,055 $1,524
Restructuring charges - net 94 --
Spin-off costs 15 --
Operating income (loss) (81) 69
Income (loss) before income taxes (103) 41
Net income (loss) (80) 26
Earnings (loss) per share(1) $(2.22) $0.72
Balance Sheet Data:
Current assets $ 416 $ 434
Working capital 236 309
Plant and properties, net 1,051 1,057
Total assets 1,642 1,663
Current liabilities 180 125
Long-term debt 350 350
Stockholders' equity $ 952 $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 September 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 November __, 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
2, 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 Corn Products International, Inc.,
6500 South Archer Road, Bedford Park, IL 60501-1933, Attention:
Investor Relations. The Company's 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 Argo facility in Bedford Park, 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;
57%, or $786 million, and 50%, or $688 million, of net sales in
1995 and 1994, respectively. The Company's Sweeteners Products
include:
13
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) 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; 22%, or $308 million, and 24%, or $334 million, of net
sales in 1995 and 1994, respectively.
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;
21%, or $293 million, and 26%, or $363 million, of net sales in
1995 and 1994, respectively. 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.
14
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.
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
15
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.
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 -- Price Volatility and Uncertain
Availability of Corn" at page ____ and "-- Potential Losses from
Commodities Hedging Activities" 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 -- Price Volatility and Uncertain
Availability of Corn" at page ____, "-- Potential Losses from
Commodities Hedging Activities" at page __ and the Company's
Combined Financial Statements beginning at page F-1.
16
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 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
- -- Foreign Operations Risks" at page __. See Note 15 to the
Company's Combined Financial Statements at page F-__.
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
17
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.
Employees and Management
As of September 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 Bedford Park, Illinois. The following
list details the location of the Company's manufacturing
plants/facilities:
U.S.
Stockton, California
Bedford Park, Illinois
Winston-Salem, North Carolina
Beloit, Wisconsin
Canada
Cardinal, Ontario
London, Ontario
Port Colborne, Ontario
Latin America
Baradero, Argentina
Balsa Nova, Brazil
Cabo, Brazil
18
Jundiai, Brazil
Mogi-Guacu, Brazil
Llay-Llay, Chile
Barranquilla, Colombia
Cali, Colombia
Medellin, Colombia
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 electricity co-generation facilities
at all of its U.S. and Canadian plants, as well as its plants in
Argentina and Pakistan, that provide electricity at a lower cost
than is available from third parties. The Company generally owns
and operates such co-generation facilities itself, but has two
large facilities at its Stockton, California and Cardinal,
Ontario locations that are owned by, and operated pursuant to
co-generation agreements with, third parties.
The Company has agreed to provide utilities and other
services to CPC at certain 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 facility in Bedford Park, Illinois 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 Internal
Revenue Code of 1986, as amended (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.
19
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.
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
20
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
___.
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
Uncertain Ability to Reverse Recent Disappointing Financial
Performance
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
21
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 ___, "-- Uncertain
Availability and Price Volatility of Corn" at page ___, "--
Recent Losses and Commodities Hedging Activities" 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 "-- Foreign Operations Risks" at page ___.
Accordingly, there can be no assurance that the
Company will successfully restart profit growth in 1998.
Uncertain Ability to Contain Costs or to Fund Capital Expenditures
The Company's future profitability and growth also
depends on the Company's ability to reduce operating costs and
per-unit product costs, to maintain and/or implement 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. 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 may
either reduce its capital expenditures or utilize certain general
credit facilities. To the extent permitted by the Tax
Indemnification Agreement (as hereinafter defined) and the Credit
Facility (as hereinafter defined), the Company may also seek to
generate additional liquidity through the sale of debt or equity
securities in private or public markets or through the sale of
non-productive assets. 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. See
"-- Indebtedness" at page ____, "RELATIONSHIP BETWEEN THE COMPANY
AND CPC AFTER THE DISTRIBUTION -- Tax Indemnification Agreement"
at page ____ and "FINANCING" at page ____.
22
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 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 ____.
Price Volatility and Uncertain Availability of Corn
Corn purchasing costs, which include the price of the
corn plus delivery cost, vary between 40% and 65% of the
Company's product costs. The price and availability of corn are
influenced by economic and industry conditions, including supply
and demand factors such as crop disease and severe weather
conditions such as drought, floods or frost, that are difficult
to anticipate and cannot be controlled by the Company. In 1996,
profitability was adversely impacted by an exceptional increase
in corn costs which the Company was not able to offset with an
increase in the price of its products. In addition, the price of
corn sweeteners, especially high fructose corn syrup, is
indirectly impacted by government programs supporting sugar
prices. There can be no assurance that the Company will be able
to purchase corn at prices that can be adequately passed on to
customers or in quantities sufficient to sustain or increase its
profitability. 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 ___.
Potential Losses from Commodities Hedging Activities
The Company enters into corn futures contracts, or
takes hedging positions in the corn futures markets, in an
attempt to minimize the effects of the volatility of corn costs
on operating profits. 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. Occasionally, such hedging activities can themselves
result in losses, some of which may be material. During the
fourth quarter of 1996, the Company recognized a loss of $40
million in connection with the liquidation of certain corn
futures contracts. No assurance can be given that such
hedging-related 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.
Uncertainty of Dividends
The 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. No assurance can be given that the Company will pay
any dividends. See "DIVIDEND POLICY" at page ___.
24
Foreign Operations Risks
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 nine months 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 Delaware General Corporation Law (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 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
25
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. 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 and maintain certain financial ratios. 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. 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 __.
26
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 of the Corn Products Common Stock. See "THE DISTRIBUTION --
Listing and Trading of Corn Products Common Stock" at page __.
Reliance on Major Customers
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. If CPC were not to
continue to purchase products from the Company or the Company's
soft drink customers were to substantially decrease their
purchases, 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. As it became
increasingly clear that the Corn Refining Business and CPC's
branded foods business were
27
becoming more dissimilar, CPC undertook a review of the strategic
alternatives available for maximizing the potential of each
business. In February 1997, following a lengthy period of review
of other available strategic alternatives, including the spin-off
of the Corn Refining Business, a recapitalization in which CPC
would issue a "lettered stock" security that tracked the Corn
Refining Business, a sale of the Corn Refining Business or a
spin-off of the branded foods business followed by an acquisition
by a third party of the remaining Corn Refining Business, the CPC
Board of Directors determined that the strategic alternative that
was most likely to be successfully completed and that best
furthered the interests of CPC's stockholders, and the respective
businesses, was 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.
Manner of Effecting the Distribution
The general terms and conditions relating to the
Distribution will be set forth in a Distribution Agreement (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
28
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 special grantor trusts established to
protect beneficiaries under certain CPC benefit plans (the "Rabbi
Trusts"), which hold shares of CPC Common Stock 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
September 30, 1997, the Rabbi Trusts held, in the aggregate,
approximately 1.258 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 September 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
2, 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 ___.
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
29
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 received 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 Code. Accordingly, the Distribution
qualifies under Sections 355 and 368(a)(1)(D) of the Code, and
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
(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.
30
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. IT DOES NOT PURPORT TO COVER ALL INCOME TAX
CONSEQUENCES AND MAY NOT APPLY TO SHAREHOLDERS WHO ACQUIRED THEIR
CPC COMMON STOCK IN CONNECTION WITH A GRANT OF SHARES AS
COMPENSATION, WHO ARE NOT CITIZENS OR RESIDENTS OF THE UNITED
STATES, OR WHO ARE OTHERWISE SUBJECT TO SPECIAL TREATMENT UNDER
THE CODE. 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, 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
31
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 26,980 stockholders of record, based on the number
of stockholders of record of CPC as of September 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 U.S. 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-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
32
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.
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
33
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 September 30,
1997, the Rabbi Trusts held, in the aggregate, approximately
1.258 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 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 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,
34
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, subject to the Tax Indemnification Agreement,
will allocate responsibility for U.S. federal income and various
other taxes ("Taxes") among the companies.
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:
(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
35
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
(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 tax-free treatment) 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
36
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
tax-free treatment, 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 tax-free treatment of the Distribution or
the foreign spinoffs.
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 in certain locations 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.
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
37
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. The 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 the new Company excess plans. 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 (Bedford Park, 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 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.
38
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. Pursuant to the Master Supply Agreement, CPC will
agree to purchase certain products 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 Access Agreement, CPC will be permitted to continue to
package branded food products at the Company's Argo plant in
Bedford Park, Illinois for an access fee which will be a fixed
percentage above the cost of CPC's use of utilities and other
support services. In 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.
39
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 consisting of committed and uncommitted bank
lines.
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
45% and (ii) an EBITDA/interest coverage ratio of greater than or
equal to 3.5 times.
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 September 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 September 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
September 30, 1997. See "PRO FORMA FINANCIAL DATA" at page __.
($ Millions) September 30, 1997
-----------------------------------
Historical Adjustment Pro Forma
---------- ---------- ---------
Debt - third party $ 227 $ 123 $ 350
Debt - CPC International Inc. 123 (123) --
Equity:
CPC equity investment (1) 954 (954)(2) --
Stockholders' equity
Cumulative translation adjustment (13) -- (13)
Common stock, par value $0.01,
authorized 900,000,000 shares,
outstanding shares -- 1 (3) 1
Additional paid in capital -- 964 (4) 964
------ ----- ------
Total capitalization $1,291 $ 11 $1,302
====== ===== ======
(1) CPC's equity investment includes the original investment in
the Company and the net intercompany payable from the
Company reflecting transactions described in Note 13 to the
Company's Combined Financial Statements beginning at page
F-1.
(2) To reflect the elimination of CPC's equity investment
effected by the distribution of all the outstanding shares
of Corn Products Common Stock to holders of CPC Common Stock
described under "THE DISTRIBUTION" at page __.
(3) To record the par value of the shares of Corn Products
Common Stock distributed to holders of CPC's Common Stock at
a distribution ratio of one share of Corn Products Common
Stock for every four shares of CPC's Common Stock held on
the Record Date as described under "THE DISTRIBUTION" at
page __.
(4) To record the recapitalization of CPC's equity investment.
See note 6 to the Corn Products International, Inc. Pro
Forma Balance Sheet at September 30, 1997.
41
SELECTED HISTORICAL FINANCIAL DATA
The following selected historical financial data of
the Company should be read in conjunction with the historical
financial statements and notes thereto included elsewhere in this
Information Statement. The historical financial statements of the
Company may not necessarily reflect the results of operations or
financial position that would have been obtained had the Company
been a separate, independent company. See "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" beginning at page __. Earnings per share data are
presented elsewhere in this Information Statement and on a pro
forma basis only. See "PRO FORMA FINANCIAL DATA" at page __.
Nine Months Ended
($ Millions) September 30,
--------------------
1997 1996
---- ----
(Unaudited)
Statement of
Earning Data:
Net sales $1,055 $1,144
Cost of sales 959 1,002
------ ------
Gross profit 96 142
Selling, general
and administrative 70 67
Restructuring
charges (gains)
- net 94 --
Spin-off costs 15 --
Equity in
earnings of
unconsolidated
affiliates 1 (6)
------ ------
Operating income (loss) (84) 81
Financing costs 22 21
------ ------
Income (loss)
before income taxes (106) 60
Provision (benefit)
for income taxes (25) 22
Minority interest 1 2
------ ------
Net income (loss) $(82)(1) $36
====== ======
Balance Sheet Data:
Working capital $88 $176
Current ratio 1.3 1.6
Plants and
properties, net $1,051 $1,042
Total debt $350 $340
Deferred income
taxes, net $73 $107
CPC International
Inc. equity
investment $941 $1,007
Total assets $1,642 $1,656
Other Financial
Data:
EBITDA (2) $(13) $146
Net cash flows
from operations $114 $(110)
Net cash used
by investing
activities $(83) $(188)
Net cash provided
by (used by)
financing
activities $(28) $299
($ Millions) Years Ended December 31,
-----------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Statement of
Earning Data:
Net sales $1,524 $1,387 $1,385 $1,243 $1,250
Cost of sales 1,381 1,083 1,087 989 992
------ ------ ------ ------ ------
Gross profit 143 304 298 254 258
Selling, general
and administrative 88 102 99 84 89
Restructuring
charges (gains)
- net -- (37) 19 -- --
Spin-off costs -- -- -- -- --
Equity in
earnings of
unconsolidated
affiliates (10) (12) (8) (12) (11)
------ ------ ------ ------ ------
Operating income (loss) 65 251 188 182 180
Financing costs 28 28 19 16 18
------ ------ ------ ------ ------
Income (loss)
before income taxes 37 223 169 166 162
Provision (benefit)
for income taxes 12 86 67 66 65
Minority interest 2 2 2 1 1
------ ------ ------ ------ ------
Net income (loss) $23 $135 $100 $99 $96
====== ====== ====== ====== ======
Balance Sheet Data:
Working capital $147 $31 $106 $33 $33
Current ratio 1.5 1.1 1.5 1.2 1.2
Plants and
properties, net $1,057 $920 $830 $792 $745
Total debt $350 $363 $294 $269 $263
Deferred income
taxes, net $85 $102 $100 $114 $118
CPC International
Inc. equity
investment $1,025 $600 $550 $484 $444
Total assets $1,663 $1,306 $1,207 $1,110 $1,053
Other Financial
Data:
EBITDA (2) $153 $334 $268 $260 $259
Net cash flows
from operations $(105) $174 $148 $151 $171
Net cash used
by investing
activities $(251) $(132) $(145) $(120) $(64)
Net cash provided
by (used by)
financing
activities $357 $(45) $(1) $(31) $(110)
(1) Reflects the effect of the $109 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.
42
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 September 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
September 30, 1997 and December 31, 1996 present the combined
financial position of the Company assuming the Distribution had
occurred on September 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 September 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 Nine Months Ended
September 30, 1997
Net sales $1,055 $1,055
Cost of sales 959 959
----- ----- -----
Gross profit 96 96
----- ----- -----
Selling, general and administrative 70 (3)(1) 67
Restructuring charges - net 94 94
Spin-off costs 15 -- 15
Equity in earnings of unconsolidated
affiliates 1 1
----- ----- -----
Expenses and other income - net 180 (3) 177
----- ----- -----
Operating income (loss) (84) 3 (81)
Financing costs 22 22
----- ----- -----
Income (loss) before income taxes
and minority interest (106) 3 (103)
Provision (benefit) for income taxes (25) 1(2) (24)
Minority stockholders' interest 1 1
----- ----- -----
Net income (loss) $ (82) $ 2 $ (80)
===== ===== =====
(1) To record the reduction in pension and other 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 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 September 30, 1997
Assets
Current assets
Cash and cash equivalents $ 35 $ 35
Accounts receivable - net 182 182
Inventories 147 147
Prepaid expenses 16 16
Other current assets 26 26
Due to parent 10 10
------- ----- -------
Total current assets 416 -- 416
Investments in unconsolidated
affiliates 164 164
Plants and properties 1,051 1,051
Other assets 11 11
------ ----- -------
Total Assets $ 1,642 -- $ 1,642
======= ===== =======
Liabilities and Stockholders' Equity
Current liabilities
Notes payable $ 142 $ (142)(1) $ --
Current portion of long-term debt 6 (6)(1) --
Accounts payable 102 102
Accrued liabilities 78 78
------- ----- -------
Total current liabilities 328 (148) 180
------- ----- -------
Noncurrent liabilities 70 (19)(2) 51
Long-term debt 202 148 (1) 350
Deferred taxes on income 92 8 (3) 100
Minority stockholders' interest 9 9
------- ----- -------
Total noncurrent liabilities 373 137 510
------- ----- -------
Stockholders' equity
Cumulative translation adjustment (13) (13)
Net stockholders' investment 954 (954)(4) --
Common stock -- 1 (5) 1
Paid-in capital -- 964 (6) 964
------- ----- -------
Total stockholders' equity 941 11 952
------- ----- -------
Total Liabilities and Stockholders'
Equity $ 1,642 -- $ 1,642
======= ===== =======
(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.
46
(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 $954
million 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 5 - 6% per year. The current supply/demand imbalance
caused North American high fructose corn syrup prices to fall
sharply and made this 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
47
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.
There can be no assurance that the Company will
successfully restart profit growth in 1998. 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 Nine Months of 1997 Compared With
First Nine Months of 1996
Net sales. Despite volume growth of 2.3%, net sales
for the first nine months of l997 decreased 8.7% to $1,055
million compared with net sales of $1,144 million for the same
period in 1996. This decline was due entirely to a 18% 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 nine months of 1996 on both
strong volume gains of 12% and improved prices. Sales in Asia and
Africa increased 4% compared with the first nine months of 1996
on improved volume and prices, which were partially offset by
weaker currency values.
Cost of sales and operating expenses. Cost of sales as
a percentage of net sales in the first nine months of 1997 was
90.9% compared with 87.6% in the first nine months of 1996,
resulting in gross profit margins of 9.1% and 12.4% for each of
these periods, respectively. This decline in gross profit margins
reflects extremely low high fructose corn syrup pricing
48
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.
The Company follows a policy of hedging its exposure
to commodities fluctuations with commodities futures contracts
for certain of its North American raw material purchases. Such
raw materials may or may not be hedged at any given time based on
management's judgment as to the need to fix the costs 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 costs of those commodities and are
included in the cost when purchased.
At September 30, 1997, the Company had open corn
commodities contracts of $49.5 million, or 19.8 million bushels,
to cover its requirements in North America. These contracts call
for delivery between December 1997 and December 1998 and had
unrealized gains of $2.4 million. These contracts cover less than
13% of the Company's North American annual grind requirements.
Restructuring charge - net. The Company recorded a $94
million pre-tax ($71 million after tax) restructuring charge in
1997. This charge included primarily severance and
severance-related costs for more than 200 employees who were or
will be terminated as part of the overall realignment of the new
business. The majority of the restructuring is taking place in
the Company's international operations.
Spin-off costs. The Company also recorded a $15
million ($12 million after taxes) charged by CPC to the Company
for the direct costs of the spin-off of the Corn Refining
Business including fees in the legal, tax and investment banking
areas.
Operating income. Excluding the 1997 restructuring
charge described above, operating income declined 69% during the
first nine 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 $22 million for
the first nine months of 1997 compared with $20.8 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 nine months of 1997 on the loss was 23.6% 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 24% 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
49
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 income of $.3 million
for the first nine months of 1997, compared with net income of
$36.6 million for the same period in 1996, resulting from much
lower operating income and higher financing costs. Including the
restructuring and spin-off charges, the net loss was $82.2
million.
Impact of new accounting pronouncements. In February
1997, the Financial Accounting Standards Board issued Statement
No. 128 (FAS 128), "Earnings Per Share," which superseded APB 15,
"Earnings Per Share." FAS 128 requires a dual presentation of
basic and diluted earnings per share on the income statement for
companies with complex capital structures. FAS 128 is required to
be adopted for year end 1997 and earlier application is not
permitted.
FAS 129, "Disclosure of Information About Capital
Structure," was also issued in February 1997. The Company does
not expect its current disclosures regarding capital structure to
be materially different under this new statement.
FAS 130, "Reporting Comprehensive Income," was issued
in June 1997 and is effective for the Company's 1998 fiscal year.
This statement requires the reporting of comprehensive income as
part of a full set of financial statements. The Company will
comply with the requirements of this statement.
Also in June 1997, FAS 131, "Disclosure About Segments
of an Enterprise and Related Information," was issued and
requires certain information be reported about operating segments
of an enterprise on an annual and interim basis. This statement
is effective for the Company's 1998 fiscal year. The Company will
comply with the requirements of this statement.
Results of Operations: 1996 compared with 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.
50
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 with 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
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
51
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 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 $114
million in the first nine months of 1997 improved significantly
over a $110 million deficit for the same period in 1996,
52
despite a net loss in 1997. This resulted from reductions in
trade working capital, higher depreciation and the adjustment of
the net loss for the restructuring charge and spin-off costs
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 $31 million versus $298 million deficit in the first nine
months 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 September 30,
1997 remained largely the same compared with December 31, 1996 as
a reduction in current assets was matched by an increase in the
investment in Arancia-CPC S.A. de C.V., the Company's Mexican
joint venture. Total debt at September 30, 1997 increased $10
million to $350 million from total debt at September 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.
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
53
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.
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. 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,
54
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 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.
55
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, DeCrane 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 and Norman.
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, 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.
56
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 1991 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 of CPC's then Mexican subsidiary
from 1986 to 1989 and as Vice President of Finance and
Administration of such Mexican subsidiary 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.
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, North American
Division 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 ($) ($)
K. Schlatter 1996 391,250 220,000
Chairman and Chief 1995 370,000 205,000
Executive Officer (4) 1994 342,500 160,000
S.C. Scott 1996 286,667 60,000
President and Chief 1995 247,500 140,000
Operating Officer (5) 1994 221,250 110,000
E.J. Northacker 1996 231,250 50,000
Vice President and 1995 217,500 95,000
President,
Latin American
Division(6) 1994 200,000 85,000
J.W. Ripley 1996 183,750 72,000
Vice President - 1995 167,500 60,000
Finance and Chief
Financial Officer (7) 1994 151,667 43,000
F.J. Kocun 1996 183,250 29,000
Vice President and 1995 172,000 74,000
President, Cooperative
Management Group (8) 1994 160,000 65,000
Long-Term Compensation
----------------------
Awards Payouts
Restricted Securities Long-term All Other
Name and Stock Underlying Incentive Compensation
Principal Position Awards($) Options(#) Payouts($)(1) ($)(2)
K. Schlatter 0 13,500 750,938 107,006
Chairman and Chief 0 28,874 787,102 106,679
Executive Officer (4) 0 13,500 465,781 105,319
S.C. Scott 0 13,500 500,625 49,293
President and Chief 0 10,000 572,438 46,698
Operating Officer (5) 0 9,000 307,389 42,311
E.J. Northacker 0 8,000 406,737 51,199
Vice President and 0 7,500 465,105 50,280
President,
Latin American
Division(6) 0 7,000 102,445 38,758
J.W. Ripley 0 5,000 - 39,256
Vice President - 123,250(3) - - 37,290
Finance and Chief
Financial Officer (7) 0 - - 24,673
F.J. Kocun 0 5,500 281,581 56,699
Vice President and 0 5,000 286,219 55,495
President, Cooperative
Management Group (8) 0 4,500 - 52,522
(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:
a. CPC matching contributions to defined contribution plans
as follows:
58
K. Schlatter, $30,976; S. C. Scott, $24,763; E. J. Northacker,
$21,666; J. W. Ripley, $19,022; and F. J. Kocun, $18,994.
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) Represents the value of 2,000 shares of restricted stock on
June 20, 1995, the date of the award. Restrictions lapse on
one-fourth of the shares on each of the four anniversary
dates of the award. On December 31, 1996 the 1,500 remaining
restricted shares had a value of $116,250. Dividends are
paid on restricted stock at the rate paid to all
stockholders. The named executive officers hold no other
shares of restricted stock.
(4) Mr. Schlatter's compensation for 1994, 1995 and 1996 was
paid to him as Senior Vice President and Chief Financial
Officer of CPC.
(5) Mr. Scott's compensation for 1994, 1995 and 1996 was paid to
him as President of CPC's North American corn refining
business (1994) and its worldwide Corn Refining Business
(1995 - 1996).
(6) Mr. Northacker's compensation for 1994, 1995 and 1996 was
paid to him as President, Latin America Corn Refining
Division of CPC.
(7) Mr. Ripley's compensation for 1994 and 1995 was paid to him
as Vice President - Finance of CPC's North America Corn
Refining Division (1994 - June 1995) and as Comptroller of
CPC (June 1995 - 1996).
(8) Mr. Kocun's compensation for 1994, 1995 and 1996 was paid to
him as President, Cooperative Management Group of the Corn
Refining Business of CPC.
The following table summarizes grants of stock options
made by CPC under the CPC Stock Plans to the Named Executive
Officers during the 1996 fiscal year. As a result of the
Distribution, each CPC option granted to the Company's Named
Executive Officers listed below will be replaced with an option
to purchase Corn Products Common Stock pursuant to adjustments
provided in the Employee Benefits Agreement, and, as a result,
their value will depend on the future value of Corn Products
Common Stock. See "THE DISTRIBUTION -- Treatment of Employee
Options, Restricted Stock and Rabbi Trusts in the Distribution"
at page __ and "RELATIONSHIP BETWEEN THE COMPANY AND CPC AFTER
THE DISTRIBUTION -- Employee Benefits Agreement" at page __.
59
Option Grants in 1996
Individual Grants
-----------------------------------------------
Percent of
Number of Total
Securities Options
Underlying Granted to Exercise
Options Employees Price Expiration
Name Granted(#) in 1996 ($/Share) Date
- ---- ----------- ---------- --------- ----------
K. Schlatter 13,500(1) 0.8957 70.0000 1/15/06
S. C. Scott 13,500(1) 0.8957 70.0000 1/15/06
2,086(2) 0.1384 70.6875 3/14/98
2,275(2) 0.1509 70.6875 3/20/99
2,250(2) 0.1493 70.6875 3/19/00
2,063(2) 0.1369 70.6875 3/18/01
500(2) 0.0332 70.6875 3/16/02
500(2) 0.0332 70.6875 1/18/03
E. J. Northacker 8,000(1) 0.5308 70.0000 1/15/06
1,000(2) 0.0663 67.8750 3/14/98
688(2) 0.0456 67.8750 3/18/01
1,625(2) 0.1078 67.8750 3/16/02
1,625(2) 0.1078 67.8750 1/18/03
1,312(2) 0.0870 67.8750 1/17/04
281(2) 0.0186 67.8750 1/16/05
J. W. Ripley 5,000(1) 0.3317 70.0000 1/15/06
1,000(2) 0.0663 68.8440 3/15/98
1,038(2) 0.0689 68.8440 6/17/01
F. J. Kocun 5,500(1) 0.3648 70.0000 1/15/06
1,000(2) 0.0663 68.1875 9/15/97
2,000(2) 0.1327 68.1875 9/17/00
2,400(2) 0.1592 68.1875 9/16/01
1,000(2) 0.0663 68.1875 3/17/02
281(2) 0.0186 68.1875 1/18/03
188(2) 0.0125 68.1875 1/17/04
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price Appreciation
for Option Term (3)
---------------------------------
Name 0%($) 5%($) 10%($)
- ---- ----- ------- ---------
K. Schlatter 0 594,100 1,505,447
S. C. Scott 0 594,100 1,505,447
0 16,642 34,257
0 27,249 57,520
0 36,250 78,481
0 42,140 93,612
0 12,478 28,458
0 14,488 33,802
E. J. Northacker 0 352,059 892,117
0 6,330 12,914
0 12,434 27,360
0 36,311 82,013
0 42,473 98,119
0 40,442 95,998
0 10,045 24,513
J. W. Ripley 0 220,037 557,573
0 6,309 12,863
0 19,987 44,230
F. J. Kocun 0 242,041 613,330
0 4,752 9,591
0 32,544 70,780
0 49,159 109,723
0 22,667 51,262
0 7,439 17,206
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 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
60
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 Value ------------ -------------
on Realized Exercisable/ Exercisable/
Name Exercise(#) ($)(1) Unexercisable Unexercisable
- ---- ----------- ------ ------------- -------------
K. Schlatter -- -- 22,724/33,375 324,495/630,281
S. C. Scott 9,674 374,291 5,062/37,174 154,251/537,654
E. J. Northacker 6,531 166,114 -- /25,281 0/408,072
J. W. Ripley 2,688 110,578 3,962/7,038 119,518/55,141
F. J. Kocun 6,869 195,184 4,186/19,494 119,397/294,054
- ---------------------
(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 1998 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 3.5
million 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
63
date of grant and will 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 October 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).............. 15,286 *
Samuel C. Scott (3).................. 5,058 *
Clifford B. Storms (2)............... 13,053 *
Frank J. Kocun (3)................... 1,609 *
Eugene J. Northacker (3)............. 2,423 *
James W. Ripley (3).................. 1,199 *
All directors and Executive
Officers of the Company as a
group (15 persons)................... 49,070 *
------
(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 the Named Executive Officers 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 September 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 3.5 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 3.5 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 November 19, 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 $120.00, 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
interest in the one one-hundredth of 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 $120.00 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 $240.00 worth of Corn Products
Common Stock (or other consideration, as noted above) for
$120.00. Assuming that the Corn Products Common Stock has a per
share value of $20.00 at such time, the holder of each Right
would be entitled to purchase twelve shares of Corn Products
Common Stock for $120.00.
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
- -- Uncertainty 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
Active Business
ADM
Authority
Code
Company
Corn Products
Corn Products Board
Corn Products By-Laws
Corn Products Charter
Corn Products Common Stock
Corn Products Conversion Factor
Corn Products Employee
Corn Products 401(k) Plan
Corn Purchasing Policy
Corn Refining Business
Coverage Date
CPC
CPC Common Stock
CPC Conversion Factor
CPC Hourly Plan
CPC Stock Plans
Credit Facility
DGCL
Disqualified Stock
Distribution
Distribution Agent
Distribution Agreement
Effective Date
Employee Benefits Agreement
Excess Benefits Plan
Excess Pension Plan
Exchange Act
Executive Officers
Foreign Spinoff Company
IRS
KPMG
Named Executive Officers
National Starch
Nomination and Business Proposal
Provision
NYSE
Pension Plan
post-Distribution Corn Products Market
Price
post-Distribution CPC Market Price
pre-Distribution CPC Market Price
Preferred Stock
Purchase Price
Rabbi Trusts
Record Date
Registration Statement
Restricted Period
Rights
Rights Agent
Rights Agreement
Rights Certificate
Rights Plan
Rights Separation Date
Ruling
Ruling Request
SEC
Section 203
Securities Act
Series A Preferred Stock
Staley
Stock Acquisition Date
Stock Incentive Plan
Tax Indemnification Agreement
Tax Sharing Agreement
Taxes
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
September 30, 1997, December 31, 1996
and December 31, 1995.........................................F-3
Combined Statements of Income for the
Nine Months ended September 30, 1997
and 1996 and the Fiscal Years 1996,
1995 and 1994.................................................F-4
Combined Statements of Cash Flows for
the Nine Months ended September 30, 1997
and 1996 and the Fiscal Years 1996, 1995
and 1994......................................................F-5
Combined Statement of Stockholders' Equity
as of September 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
New York, New York
F-2
CORN PRODUCTS INTERNATIONAL, INC.
COMBINED BALANCE SHEETS
($ Millions) At September 30, At December 31,
---------------- ---------------
1997 1996 1995
---- ---- ----
Assets (Unaudited)
Current assets
Cash and cash equivalents $35 $32 $31
Accounts receivable - net 182 209 121
Due from CPC International Inc. - net 10 8 6
Inventories 147 162 113
Prepaid expenses 16 8 5
Other current assets 7 6 4
Deferred tax asset 19 9 7
----------------------
Total current assets 416 434 287
Investments in and loans to
unconsolidated affiliates 164 149 82
Plants and properties - net 1,051 1,057 920
Other assets 11 23 17
----------------------
Total Assets $1,642 $1,663 $1,306
==========================
Liabilities and Stockholders' Equity
Current liabilities
Notes payable $142 $156 $100
Current portion of long-term debt 6 6 1
Accounts payable 102 83 100
Accrued liabilities 78 42 55
----------------------
Total current liabilities 328 287 256
-----------------------
Noncurrent liabilities 70 60 70
Long-term debt 202 188 262
Deferred taxes on income 92 94 109
Minority stockholders' interest 9 9 9
Stockholders' equity
Cumulative translation adjustment (13) (12) (10)
Net stockholders' investment 954 1,037 610
-----------------------
Total stockholders' equity 941 1,025 600
-----------------------
Total Liabilities and
Stockholders' Equity $1,642 $1,663 $1,306
==========================
- ---------------------
See accompanying Notes to Combined Financial Statements.
F-3
CORN PRODUCTS INTERNATIONAL, INC.
COMBINED STATEMENTS OF INCOME
Nine Months Ended
($ Millions) September 30, Years Ended December 31,
----------------- ---------------------------
1997 1996 1996 1995 1994
---- ---- ---- ---- ----
(Unaudited)
Net sales $1,055 $1,144 $1,524 $1,387 $1,385
Cost of sales 959 1,002 1,381 1,083 1,087
----- ----- ----- ----- -----
Gross profit 96 142 143 304 298
----- ----- ----- ----- -----
Selling, general
and administrative 70 67 88 102 99
Restructuring
charges - net 94 - - (37) 19
Spin-off Costs 15 - - - -
Equity in
(earnings)/
loss of
unconsolidated
affiliates 1 (6) (10) (12) (8)
----- ----- ----- ----- -----
Expenses and
other income
- net 180 61 78 53 110
----- ----- ----- ----- -----
Operating income
(loss) (84) 81 65 251 188
Financing costs 22 21 28 28 19
----- ----- ----- ----- -----
Income (loss)
before income
taxes and
minority interest (106) 60 37 223 169
Provision (benefit)
for income taxes (25) 22 12 86 67
Minority
stockholders'
interest 1 2 2 2 2
----- ----- ----- ----- -----
Net income (loss) $ (82) $ 36 $ 23 $ 135 $ 100
===== ===== ===== ===== =====
- ---------------------
See accompanying Notes to Combined Financial Statements.
F-4
CORN PRODUCTS INTERNATIONAL, INC.
COMBINED STATEMENTS OF CASH FLOWS
Nine Months Ended
($ Millions) September 30, Years Ended December 31,
----------------- ---------------------------
1997 1996 1996 1995 1994
---- ---- ---- ---- ----
(Unaudited)
Cash flows from
(used for)
operating
activities
Net income (loss) $(82) $36 $23 $135 $100
Non-cash charges
(credits) to
net income
Depreciation and
amortization 71 65 88 83 80
Restructuring
charges - net 94 - - (37) 19
Spin-off Costs 15 - - - -
Deferred taxes (12) 1 (17) (6) (12)
Other - net (7) - (23) 1 -
Equity in
earnings of
unconsolidated
affiliates 1 (1) (1) (9) 2
Changes in trade
working capital
Accounts
receivable and
prepaid items 25 (119) (95) (7) (38)
Inventories 13 (41) (50) 10 (18)
Due (to) from CPC
International Inc. (2) (8) (2) 1 (7)
Accounts payable
and accrued
liabilities (2) (43) (28) 3 22
----- ----- ----- ----- -----
Net cash flows
from (used for)
operating activities 114 (110) (105) 174 148
----- ----- ----- ----- -----
Cash flows from
(used for)
investing
activities
Capital
expenditures
paid (65) (150) (192) (188) (145)
Proceeds from
the disposal
of plants and
properties 1 1 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 (83) (188) (251) (132) (145)
----- ----- ----- ----- -----
Net cash flows
after investments 31 (298) (356) 42 3
----- ----- ----- ----- -----
Cash flows from
(used for)
financing
activities
Net change in
short-term debt (25) 88 55 73 (21)
New long-term
debt 1 5 72 9 -
Repayment of
long-term debt - - - - -
Net change in
intercompany
debt 24 (125) (139) (24) 49
Dividends paid
to parent 5 (21) (32) (106) (97)
Increase in
transfers from
CPC International
- net (42) 393 436 16 67
Other liabilities
(deposits) 9 (41) (35) (13) 1
Net cash flows
from (used for)
financing activities (28) 299 357 (45) (1)
----- ----- ----- ----- -----
Increase (decrease)
in cash and cash
equivalents 3 1 1 (3) 2
Cash and cash
equivalents,
beginning of
period 32 31 31 34 32
----- ----- ----- ----- -----
Cash and cash
equivalents,
end of period $35 $32 $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 - (82) (82)
Dividends paid to parent - 5 5
Transfer from CPC, net - (6) (6)
Translation adjustment (1) - (1)
--------------------------------------
Balance, September 30, 1997 $ (13) $ 954 $ 941
--------------------------------------
- ---------------------
See accompanying Notes to Combined Financial Statements.
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
F-6
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 September 30, 1997 and
the Combined Statements of Income and Cash Flows for the nine
months ended September 30, 1997 and September 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 nine 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 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.
F-7
Environmental contingencies - The Company accounts for
environmental contingencies in accordance with FAS 5, "Accounting
for Contingencies," which requires expense recognition when it is
both "probable" that an obligation exists and that the obligation
can be "reasonably estimated."
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 - 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 10 to 50 years for
buildings and 5 to 20 years for all other assets. Where permitted
by law, accelerated depreciation methods are used for tax
purposes.
Revenue recognition - The Company recognizes revenue
when finished products are shipped to unaffiliated customers with
appropriate provisions for product returns.
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.
Impact of new accounting pronouncements - In February
1997, the Financial Accounting Standards Board issued Statement
No. 128 (FAS 128), "Earnings Per Share," which superseded APB 15,
"Earnings Per Share." FAS 128 requires a dual presentation of
basic and diluted earnings per share on the income statement for
companies with complex capital structures. FAS 128 is required to
be adopted for year end 1997 and earlier application is not
permitted.
F-8
FAS 129, "Disclosure of Information About Capital
Structure," was also issued in February 1997. The Company does
not expect its current disclosures regarding capital structure to
be materially different under this new statement.
FAS 130, "Reporting Comprehensive Income," was issued
in June 1997 and is effective for the Company's 1998 fiscal year.
This statement requires the reporting of comprehensive income as
part of a full set of financial statements. The Company will
comply with the requirements of this statement.
Also in June 1997, FAS 131, "Disclosure About Segments
of an Enterprise and Related Information," was issued and
requires certain information be reported about operating segments
of an enterprise on an annual and interim basis. This statement
is effective for the Company's 1998 fiscal year. The Company will
comply with the requirements of this statement.
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 from non-insurable events in any one country would not have
a 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
F-9
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.
At December 31, 1996, the Company was required to
apply toward the retirement of the principal of the third party
indebtedness not less than the following amounts: 1997 (included
in current liabilities) $6 million; 1998, $5 million; 1999, $27
million; 2000, $32 million; and 2001, $13 million.
The Company's overall effective interest rate for 1996
was 8%. The Company did not have any interest rate swaps
outstanding at the end of 1996 or 1995.
5. Restructuring Charges - Net and Spin-off Costs
- --------------------------------------------------
In the second quarter of 1997, the Company recorded a
$72 million pre-tax restructuring charge and a spin-off charge
from CPC of $14 million. The restructuring charge includes the
costs of the separation of facilities that were used by CPC to
produce both consumer foods and corn-derived products. The
spin-off charge includes the direct costs of the spin-off
including fees in the legal, tax and investment banking areas. In
the third quarter of 1997, the Company recorded additional
restructuring costs in the amount of $22 million and $1 million
for additional spin-off costs. The increase in the third quarter
was due to the finalization of plans regarding the spin-off
elements. The majority of the restructuring will take place in
the Company's international operations. The restructuring charge
and the charge for the spin-off costs are summarized below:
($ in millions) To be Utilized in
1997 Charge Charge Utilized Future Periods
----------- --------------- -----------------
Spin-off costs $15 $ 3 $12
----------- --------------- -----------------
Restructuring charge - net
Employee costs 54 8 46
Plant and support facilities 23 15 8
Other 17 7 10
----------- --------------- -----------------
F-10
Total $94 $30 $64
=========== =============== =================
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 $ 3 $ 2 $ 2
during the period)
Interest cost on projected benefit
obligation 7 7 4
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 perood) $ 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:
Assets exceed Accumulated benefits
U.S. Plans accumulated exceed
benefits 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 assets 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
the 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, 58 65
retirement, and related provisions
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 September 30, 1997, the Company had open corn
commodity futures contracts of $49 million to cover some of its
requirements. Contracts open for delivery beyond December 31,
1997, amounted to $26 million, of which $25 million is due in
March 1998, and $1 million in December 1998. At September 30,
1997, the price of corn under these contracts was $2.4 million
below 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.
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 million, $14.3
F-17
million 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.
Intercompany interest expense was allocated based on
CPC's effective borrowing rate applied to the intercompany debt
which was apportioned based on the cash flow requirements of the
Company.
The Company had intercompany sales with CPC amounting
to the following: for the nine months ended September 30, 1997
and 1996, $123 million and $124 million, respectively, and for
the years ended December 31, 1996 and 1995, $157 million and $154
million, respectively.
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 issued in the Distribution carries
with it the right to purchase one one-hundredth 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 $120. 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
F-18
each at any time before an acquisition of 10% or 15% or more of
its voting securities (as applicable). 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 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.
Under the provisions of FAS 123, the Company accounts
for stock-based compensation using the intrinsic value method
prescribed by APB 25. The pro forma information required by FAS
123 is set forth below. For purposes of this pro forma
disclosure, the estimated fair value of the awards is amortized
to expense over the awards' vesting period.
- ---------------------------------------------------------------------
$ Millions, except per share amounts 1996 1995
- ---------------------------------------------------------------------
Pro forma net income $22 $134
The fair value of the awards was estimated at the
grant date using a Black-Scholes option pricing model with the
following weighted average assumptions for 1996 and 1995,
respectively: risk-free interest rates of 6.2% and 5.5%; dividend
yields of 2.3% and 2.4%;
F-19
volatility factors of 16.4% and 17.2%; and a weighted averaged
expected life of the awards of 5 years.
The Black-Scholes model requires the input of highly
subjective assumptions and does not necessarily provide a
reliable measure of fair value.
The following table summarizes the historical activity
of CPC's stock and performance plan as it relates to the
Company's employees, without adjustment for the four-to-one
distribution ratio:
- ---------------------------------------------------------------------------
Number of options 1996 1995 1994
- ---------------------------------------------------------------------------
Outstanding beginning of year 362,608 322,885 253,961
Granted 170,307 111,924 94,850
Exercised (75,507) (34,626) (5,650)
Canceled (16,469) (37,575) (20,276)
- ---------------------------------------------------------------------------
Outstanding end of year 440,939 362,608 322,885
- ---------------------------------------------------------------------------
Exercisable at year-end 215,885 213,354 128,388
- ---------------------------------------------------------------------------
Weighted average fair value
of options granted $9.33 $11.74 --
Weighted average exercise price:
Outstanding beginning of year $49.32 $44.31 --
Granted 71.10 59.20 --
Exercised 42.33 38.47 --
Canceled 52.50 46.25 --
Outstanding end of year $58.86 $49.32 --
- ---------------------------------------------------------------------------
The following tables summarize information about stock
and performance plan awards outstanding at December 31, 1996:
- ---------------------------------------------------------------------------
Options Outstanding Options Exercisable
- ---------------------------------------------------------------------------
Range of Number Average Average Number Weighted
Exercise Outstanding Remaining Exercise Exercisable Average
Prices Life Price Exercise Price
- ---------------------------------------------------------------------------
25.63-47.81 109,593 4.7 $48.83 87,593 $43.23
47.88-56.00 125,968 7.0 52.33 93,218 51.98
65.94-69.94 68,633 7.5 68.15 19,700 65.94
70.00-77.06 136,745 7.4 71.82 15,374 70.94
- ---------------------------------------------------------------------------
25.63-77.06 440,939 6.6 $58.72 215,885 $51.06
- ---------------------------------------------------------------------------
F-20
In addition to stock options, 7,450 shares were
awarded to employees in 1996 under the restricted stock award
provisions of the 1993 plan. The cost of these awards is being
amortized over the restriction period.
15. Geographic Information
- ---------------------------
The Company operates in the U.S., Canada, Latin
America and Asia. Information concerning operations by geographic
area is as follows:
- ------------------------------------------------------------------
($ 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 $1,207
----------------------------------------
F-21
16. Quarterly Financial Data
- -----------------------------
Summarized quarterly financial data is as follows:
- -------------------------------------------------------------------
($ 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-22
=============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
EXHIBITS
TO
FORM 10
(Amendment No. 1)
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 Amended 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 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.
+ Previously filed.
Exhibit 3.2
AMENDED 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. 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 2. 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 3. 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 4. 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 5. 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 6. 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 thereto in
writing, and the writing or writings are filed with the minutes
of proceedings of the Board of Directors.
SECTION 7. Compensation of Directors. The directors
shall receive such compensation for their services as may be
prescribed by the Board of Directors and shall be
4
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 and permitted by subsection (2) of
Section 141(c) of the Delaware General Corporation Law.
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 commit-
tees 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 commit-
tees, 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.
SECTION 7. Written Consent. Any action required or permit-
ted 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.
5
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.
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 Direc-
tors or the Chairman of the Board may assign the powers and duties of
6
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 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.
7
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. Certificated or Uncertificated Shares. The
Board of Directors may authorize the issuance of stock either in
certificated or in uncertificated form. If shares are issued in
uncertificated form, each stockholder shall be entitled upon
written request to a stock certificate or certificates,
representing and certifying the number and kind of full shares
held, 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, which signatures 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 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,
8
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.
Amended 11/12/97
9
Exhibit 10.1
FORM OF MASTER SUPPLY AGREEMENT
This MASTER SUPPLY AGREEMENT dated as of January 1, 1998 by
and between CPC INTERNATIONAL INC., a Delaware corporation
("CPC") and CORN PRODUCTS INTERNATIONAL, INC., a Delaware
corporation ("CPI").
WHEREAS, prior to the date hereof, the business of CPI was
a division of CPC;
WHEREAS, prior to the date hereof, CPC (and its Affiliates
in the Territories) purchased the Products listed in the
Schedules hereto from CPI (and its Affiliates in the Territories)
on an intercompany basis;
WHEREAS, on December 31, 1997 CPI was spun-off from CPC and
is now an independent corporation, and the Affiliates of CPI are
no longer under common ownership with the Affiliates of CPC; and
WHEREAS, CPC and CPI desire to formalize the supply
relationships set forth in the Schedules hereto.
NOW, THEREFORE, the parties agree as follows:
1. Definitions.
As used herein, the following terms shall have the
meanings set forth below:
(a) "Affiliate" shall mean any entity which is
controlled by, in control of, or under common
control with, the party to which the reference is
made.
(b) "Applicable Law" shall mean any law, rule,
regulation, statute, ordinance, decree, treaty or
directive applicable to any of the Purchasers or
Suppliers.
(c) "Commodity Consumer Products" shall mean corn
starch, corn oil, corn syrup and dextrose which are
branded and packaged for sale to the retail trade,
club stores, mass merchandisers and the foodservice
sector. Each Schedule identifies the Commodity
Consumer Products sold in each Territory.
(d) "Commodity Industrial Products" shall mean bulk corn
starch, corn oil (crude or refined), corn syrup
(glucose), and dextrose purchased solely for the
production of Commodity Consumer Products. Each
Schedule identifies the Commodity Industrial
Products sold to the purchaser in each Territory.
(e) "Consumer Products" shall mean all branded and
packaged products (including Commodity Consumer
Products) produced by the Purchasers for sale to the
retail trade, club stores and mass merchandisers
utilizing any Products as ingredients.
(f) "Purchaser" shall mean any of the Purchasers.
(g) "Purchasers" shall mean collectively CPC and all of
its Affiliates who purchase under this Agreement.
(h) "Products" shall mean all products sold by the
Suppliers to the Purchasers (including the Commodity
Industrial Products) set forth in the Schedules
hereto for each Territory.
(i) "Supplier" shall mean any of the Suppliers.
(j) "Suppliers" shall mean collectively CPI and all of
its Affiliates who supply under this Agreement.
(k) "Territories" shall mean all of the countries for which
there is a Schedule.
(l) "Territory" shall mean any country for which there is a
Schedule.
2. Scope.
2.1. This Agreement shall apply to all purchases by
Purchasers from Suppliers of the Products listed
in the Schedules in the corresponding Territories.
The provisions of Section 5 shall apply to
Commodity Consumer Products and Commodity
Industrial Products and the provisions of Sections
6.1 and 6.2 shall only apply to Commodity Industrial
Products.
2.2. This Agreement does not constitute a purchase
order. Purchases under this Agreement shall be
made by purchase orders issued by Purchasers as
provided in Section 7 hereof.
3. Term.
3.1. This Agreement shall have an initial term of two
years from the date hereof (the "Initial Term"),
unless terminated earlier in accordance with
Section 3.4 below.
3.2. Six (6) months prior to the end of the Initial Term,
the Purchasers and Suppliers from each Territory shall
review the terms of their respective Schedules. If any
of the Purchasers and Suppliers are
2
unable to agree upon future terms for their respective
Schedules, this Agreement shall terminate as to
those Territories at the end of the Initial Term.
For those Purchasers and Suppliers that are able
to agree upon future terms for their respective
Schedules, this Agreement shall automatically be
renewed, as modified, as to those Territories for
successive renewal terms of one year each, unless
notice of termination is given by either party in
writing, not later than six (6) months prior to
the end of the one year term then in effect.
3.3 After the Initial Term, any Supplier or Purchaser
may terminate this Agreement in accordance with
Section 3.2 or 3.4 hereof as to some of the
Products in the corresponding Territories. In the
event of such a partial termination, this
Agreement shall remain in full force and effect as
to those Products in the corresponding Territories
for which this Agreement has not been terminated.
3.4. This Agreement may be terminated automatically at any
time in the event of the following:
(a) In the event of a breach or failure to perform
this Agreement by one party, the non-breaching
party may terminate this Agreement for those
Products in corresponding Territories where
the breach or failure occurred, if the breach
or failure has continued for a period of sixty
days after written notice thereof has been
received by the breaching party.
(b) In the event of a change in control of either
party, the other party shall have the right to
terminate this Agreement in whole as to (i) or
in part as to (ii) immediately after giving written
notice upon the occurrence of such change in control.
For purposes of this Agreement:
(i) change in control of CPC or CPI shall
mean: (y) the acquisition by any person (as
such term is defined in the Securities Act
of 1933, as amended) (excluding the party
to which the change in control relates or
any of its Affiliates or a fiduciary
holding its securities in any type of
benefit plan), directly or indirectly, of
beneficial ownership of 20% or more of the
combined voting power of the then
outstanding voting securities entitled to
vote generally at the election of
directors, or (z) the merger,
consolidation, reorganization, liquidation,
involving the sale or transfer of
substantially all of the assets of the
party; and
3
(ii) change in control of any Affiliate of
CPC or CPI shall mean any change in the
ownership of any Affiliate of CPC or CPI
such that CPC or CPI ceases to hold voting
control of its respective Affiliate(s).
3.5. In the event that this Agreement is terminated in
whole or in part in accordance with Section 3.2,
3.3 or 3.4 above, the obligations of CPI and its
Affiliates contained in Section 5 shall
nevertheless continue to remain in full force and
effect for a period of six months from the date of
such termination as to all Commodity Industrial
Products in corresponding Territories for which
this Agreement has been terminated.
4. Pricing.
Products shall be sold hereunder at prices to be
determined in accordance with the pricing mechanism currently
utilized by the relevant Purchasers and Suppliers. All pricing
mechanisms to be used for purposes of this Agreement are
described in the Schedules hereto.
5. Non-Competition.
5.1. For so long as this Agreement remains in force and
effect with respect to any Commodity Industrial
Products in any Territory, and for a period of six
months after any termination hereof, CPI agrees
that it will not, nor will its Affiliates:
(i) sell Commodity Consumer Products in the Territories
for which this Agreement is in effect as to the
corresponding Commodity Industrial Products;
(ii) sell, manufacture or package Commodity
Consumer Products to or for third parties if,
to the knowledge of CPI or its Affiliates after
reasonable inquiry of such third parties, such
Commodity Consumer Products are intended for
sale in Territories for which this Agreement is
in effect as to the corresponding Commodity
Industrial Products; or
(iii) acquire a controlling interest in any person
or entity which engages in (i) or (ii) above
(an "Acquired Business") unless, if a
portion of the Acquired Business consists of
(i) or (ii) above, CPI or its Affiliates
offers to sell the portion of the Acquired
Business that engages in (i) or (ii) above
to CPC or its Affiliates on reasonable terms
and conditions; provided, however, that if
CPI and CPC (or their respective Affiliates)
cannot agree on such terms and conditions
and CPI (or its Affiliate) proceeds to
4
acquire the Acquired Business then CPC (or its
Affiliate) shall have the automatic right to
terminate this Agreement as to such
Commodity Industrial Products in the
corresponding Territory upon written notice.
5.2. Nothing in this Section 5 shall be deemed to
prohibit CPI from performing any toll packaging
agreement with CPC or its Affiliates or from
selling any Products (including Commodity
Industrial Products) to third parties in any
Territory that may sell, manufacture or package
Commodity Consumer Products in any Territory.
6. Exclusivity and Product Volume.
6.1. For so long as this Agreement is in effect,
Suppliers shall be the sole and exclusive
suppliers to Purchasers and Purchasers shall
purchase 100% of their requirements for Commodity
Industrial Products from Suppliers in the
Territories for which this Agreement is in effect,
except as provided in Sections 6.2 and 8.2(b).
6.2 Notwithstanding Section 6.1, if at any time during
the term of this Agreement a Purchaser requires
Commodity Industrial Product in excess of a
Supplier's production capacity at the relevant
supply location, the Supplier shall notify the
Purchaser that it is unable to fill the entire
purchase order within five business days of
Supplier's receipt of the purchase order, and such
Purchaser shall be permitted to purchase Commodity
Industrial Product from a third party only for so
long as such Purchaser's requirements exceed such
Supplier's production capacity, and thereafter the
Supplier shall promptly notify the Purchaser when
it becomes able to fulfill the Purchaser's
requirements. Nothing in this Section 6 shall be
deemed to require any Supplier to increase its
production capacity. In the event of such
purchases from third parties, Suppliers shall not
be liable for the costs of such purchases,
including but not limited to the differential in
the price of such purchases.
6.3. Purchasers will provide as much forecasting
information as possible to assist Suppliers. Two
months prior to the start of the fiscal year of
each Purchaser for each year that this Agreement
will be in effect for the following year,
Purchasers shall provide Suppliers with estimates
of their volume requirements for the following
year.
6.4. Nothing in this Section 6 shall be deemed to
require Purchasers to purchase all of their
requirements for Products, other than Commodity
Industrial Products, from Suppliers and nothing in
this Section 6 shall prohibit Purchasers from
purchasing test quantities of
5
Commodity Industrial Products from third parties as
long as Purchasers neither sell such test quantities
nor sell Commodity Consumer Products containing such
test quantities.
7. Purchase Orders and Invoices.
7.1. Purchases hereunder will be made on the basis of purchase
orders issued by Purchasers. Purchase orders will contain
the following information:
(a) location for delivery;
(b) shipment date;
(c) volume; and
(d) Product specifications.
7.2. Invoices will be submitted by Suppliers to Purchasers
which will contain the following information:
(a) payment terms;
(b) title and risk of loss; and
(c) responsibility for insurance, freight and taxes.
7.3. Suppliers and Purchasers shall agree upon a form of
purchase order and invoice to be used in their Territory.
7.4. In the event of any conflict between a purchase
order or an invoice and this Agreement, the terms
of this Agreement shall prevail.
8. Warranties.
8.1 Suppliers warrant that all Products sold hereunder
shall: (a) comply with the specifications agreed
to by the parties, (b) be produced in accordance
with the quality assurance standards described in
Section 10 hereof, and (c):
(i) for Products sold within the U.S.A.: (I) shall
not be adulterated or misbranded within the
meaning of the U.S. Federal Food, Drug and
Cosmetic Act and regulations thereunder, and
(II) shall be produced in accordance with good
manufacturing practices, as such term is
defined in 21 U.S.C. Part 110 ("GMPs"); and
(ii) for Products sold outside the U.S.A.: (I)
shall be in compliance with all Applicable
Laws, and (II) shall be produced in accordance
with Applicable Law governing manufacturing
practices.
6
Suppliers make no other warranties, either
express or implied, including but not limited to
fitness for a particular purpose, except those set
forth above.
8.2 (a) In the event that any Products sold
hereunder do not comply with the warranties set
forth in this Section 8 or in Section 10,
Purchaser shall notify Supplier of such breach
and of its timing requirements for such
Products within five business days of
Purchaser's discovery of the breach.
(b) If Supplier is unable to replace the
non-complying Product in sufficient time to
meet Purchaser's timing requirements for such
Products pursuant to the notice given under
Section 8.2(a) above, Supplier shall refund to
Purchaser the purchase price of the
non-complying Product and Purchaser shall have
the right to purchase replacement Product from
a third party, notwithstanding Section 6.1.
(c) Supplier's liability under this Section 8 and
under Section 10 shall be limited to: (i)
replacement of the Products or a refund in the
amount of the purchase price of the Products in
accordance with Section 8.2(b), (ii) the cost
of manufacturing and packaging the Consumer
Products (less the purchase price of the
Products), (iii) the reasonable costs of
processing customer complaints as to Consumer
Products rendered unusable, and (iv) the
reasonable costs of recalling and disposing of
any defective Consumer Products.
9. Indemnification and Insurance.
9.1 Each party (the "Indemnifying Party") shall
defend, indemnify and hold harmless the other
party (the "Indemnified Party") and its respective
employees and representatives from and against all
liability, loss, damage and expense, (including
reasonable attorney's fees) actions and claims for
injury and/or death to persons and damage to
property arising out of the negligent or wrongful
acts or omissions of the Indemnifying Party, but
only to the extent that such injury or damage is
attributable to the Indemnifying Party's negligent
or wrongful acts or omissions.
9.2 In the event that an Indemnified Party is subject
to any indemnifiable action or claim in accordance
with Section 9.1, the procedures for
indemnification in Article VI of the Distribution
Agreement dated December __, 1997 between CPC and
CPI (the "Distribution Agreement") shall apply.
7
9.3 Suppliers and Purchasers shall procure and
maintain, at their respective costs and expenses,
for so long as this Agreement is in effect,
occurrence based commercial general liability
insurance and automobile liability insurance
coverage. The policies, including excess policies,
shall have limits of not less than $25,000,000 per
occurrence and $25,000,000 in the aggregate
(combined single limit) for each policy year and
shall be obtained from insurers rated A- or better
by A.M. Best Company, and with a financial size
category of VIII or larger. The policies shall be
endorsed to name the Indemnified Party as an
additional insured with respect to liabilities
arising out of the foregoing indemnification
agreements and shall provide that the insurance of
the Indemnifying Party will be primary to any
other insurance of the additional insured.
Purchasers and Suppliers agree that their
respective insurers shall not be subrogated to the
rights of the Indemnified Party against the
Indemnifying Party with respect to any claim
arising under this Agreement and neither party
shall assign any such right of subrogation to
their insurers. In addition to the foregoing
insurance, Suppliers and Purchasers shall procure
and maintain, at their respective cost and
expense, any additional insurance as may be
required by Applicable Laws. Each party shall
deliver to the other Certificates of Insurance and
endorsements evidencing the issuance of the
required coverage and stating that the policies
are in effect and that such policies will not be
canceled or non-renewed without 30 days' prior
written notice to the additional insured. In the
event of a claim, copies of the policies shall be
supplied to the party claiming indemnification
upon request.
10. Quality Assurance and Control.
10.1. All Products supplied under this Agreement shall
be produced in accordance with Supplier's quality
assurance standards and program in effect as of
the date hereof. Suppliers reserve the right to
reasonably modify their quality assurance
standards from time to time; provided, however,
that any significant changes shall be implemented
by Suppliers only after full and open discussion
with Purchasers with regard to their impact on
manufacturing of the Products.
10.2. From time to time, upon prior notice to Suppliers,
Purchasers shall have the right to examine
Suppliers' facilities used for the manufacture of
the Products hereunder.
8
11. Confidentiality.
11.1. The process, formulations, data and information
(collectively "Information") which has been or may
be furnished by one party to the other in order to
perform this Agreement, is the property of the
providing party and has been or will be furnished
solely to enable the receiving party to perform
this Agreement, with the understanding that:
(a) the receiving party will not use or reproduce
such Information for any other purpose;
(b) the receiving party will take all reasonable care
to ensure that such Information is not disclosed
to other parties; and
(c) upon request by the providing party, the
receiving party will promptly return all such
Information at any time during the term of
this Agreement or thereafter, except that
either party may continue to use such
Information of the other party as it may
require in order to perform this Agreement.
11.2. The foregoing restrictions will not apply to any information
and data which is:
(a) already in possession of the receiving party at the
time of first receipt from the providing party;
(b) independently developed by employees of the receiving
party who did not have access to the Information;
(c) becomes part of the public domain without breach of
this Agreement by the receiving party; or
(d) rightfully obtained by the receiving party
from third persons without restriction or
breach by this Agreement by any receiving
party.
12. Dispute Resolution.
Any dispute, controversy or claim in connection with
this Agreement shall be resolved in accordance with Article VI of
the Distribution Agreement. The parties acknowledge that disputes
arising under Section 9.2 (or the applicability thereof) may
raise difficult factual questions relating to proportional
responsibility, proximate cause and duties to mitigate damages;
such questions and similar issues as to allocating responsibility
and damages shall be considered in the resolution of disputes.
9
13. Removal of Equipment.
In the event that any Purchaser removes packaging
equipment owned by it from the plant of a Supplier either during
the term of this Agreement or following termination hereof, the
Purchaser shall, at its own expense, restore the area of the
plant where the equipment was located, to reasonable working
condition.
14. Independent Contractor.
Suppliers shall act under this Agreement solely as
independent contractors. Nothing herein shall constitute any
Supplier or Purchaser as an agent of the other, nor shall it
constitute any member of one party's staff as an agent or
employee of the other party.
15. Assignment.
None of the rights or obligations of either party
hereunder is assignable either by voluntary act or operation of
law, nor transferable by it without the prior written consent of
the other party, which consent shall not be unreasonably
withheld.
16. Force Majeure.
If performance by either party of any of its duties or
obligations under or pursuant to this Agreement is prevented,
hindered, delayed or otherwise made impracticable by reason of
any strike, flood, riot, fire, explosion, war or any other
casualty which cannot be overcome by reasonable diligence and
without unusual expense, such party shall be excused from such
performance to the extent that it is so prevented, hindered or
delayed thereby during the continuance of any such happening or
event and for so long as such event shall continue to prevent,
hinder or delay such performance.
17. Notices.
Any notice to be given hereunder by either party shall
be in writing and shall be deemed given when: (i) sent by
registered mail, return receipt requested upon receipt by the
sender of confirmation of receipt; (ii) sent by telecopy upon
receipt by the sender of confirmation of transmittal; or (iii)
delivered to the addressee as follows:
In the case of Purchaser to: CPC International Inc.
P.O. Box 8000, International Plaza
Englewood Cliffs, New Jersey 07632
Attn: Corporate Secretary
Telephone: (201) 894-2381
Facsimile: (201) 894-2192
10
In the case of Supplier to: Corn Products International, Inc.
P.O. Box 345, 6500 Archer Road
Argo, Illinois 60501-0345
Attn: Corporate Secretary
Telephone: (708) 563-6958
Facsimile: (708) 563-6851
Any party may from time to time designate by written notice
to the other revised address or telecopy information.
18. Severability.
The invalidity or unenforceability of any particular
provision of this Agreement shall not affect any other provisions
hereof, and this Agreement shall be construed in all respects as
if such invalid or unenforceable provision were omitted.
19. Headings.
The headings of this Agreement are for the convenience
of the parties, and shall not be construed as having any legal or
binding meaning or effect.
20. Entire Agreement and Amendment.
This Agreement constitutes the entire understanding and
agreement between the parties hereto with respect to the subject
matter hereof, and cancels and supersedes any prior negotiations,
and merges all understandings, and agreements, whether verbal or
written, with respect thereto. This Agreement can be amended only
by a written instrument executed by the parties hereto.
21. Binding Effect.
This Agreement shall be executed by CPC and CPI on their
own behalf and on behalf of their respective Affiliates. Each of
CPC and CPI agrees to cause their respective Affiliates to
perform each and every one of the obligations hereunder to be
performed by such Affiliates.
22. No Waiver.
The failure by either party to insist upon strict
performance of any covenant or condition of this Agreement, in
any one or more instances, shall not be construed as a waiver or
relinquishment of any such covenant or condition in the future,
but the same shall be and remain in full force and effect.
11
23. Survival.
Notwithstanding any termination of this Agreement the
provisions of Section 5 shall survive such termination for the
period stated therein.
24. Choice of Law.
THIS AGREEMENT SHALL, IN ALL RESPECTS, BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY, EFFECT AND
PERFORMANCE, EXCEPT FOR SUCH LAWS OF THE STATE OF NEW YORK WHICH
REQUIRE THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first above written.
CPC INTERNATIONAL INC.
By:___________________________________
Title:________________________________
CORN PRODUCTS INTERNATIONAL, INC.
By:___________________________________
Title:________________________________
12
Exhibit 10.9
FORM OF ACCESS AGREEMENT
THIS AGREEMENT is entered into effective the 1st day of
January, 1998 between CPC INTERNATIONAL INC., a Delaware
corporation ("CPC") and CORN PRODUCTS INTERNATIONAL, INC. a
Delaware corporation ("CPI").
WHEREAS, prior to the date hereof, the business of CPI was
a division of CPC;
WHEREAS, on December 31, 1997, CPI was spun-off from CPC
and is now an independent corporation;
WHEREAS, CPI is the owner of certain real property
including all buildings and improvements thereon located in
Bedford Park, Illinois and Summit, Illinois with an address of
6400 Archer Road, Bedford Park, Illinois (the "Property"); and
WHEREAS, CPI and CPC desire to enter into this Agreement to
allow CPC access to certain areas of the Property, more
specifically defined in Exhibit A hereof (the "Access Area") for
the purpose of conducting certain activities (the "Access
Activities").
NOW, THEREFORE, CPI and CPC agree as follows:
1.0 DEFINITIONS
As used herein, the following terms shall have the
meanings set forth below:
"Access Activities" shall mean those food packaging
activities and operations conducted by CPC
including but not limited to packaging of corn
oil, corn starch, corn syrup and related products
and all activities and operations necessary for
and associated therewith.
"Access Area" shall mean the area of the Property,
specifically delineated in Exhibit A hereof,
including but not limited to all buildings, access
roads, parking lots and railroad tracks, to which
CPC is granted access for the purposes of
conducting Access Activities.
"Access Fee" shall mean the fee payable to CPI by CPC
in accordance with Exhibit D hereof. The term
"Access Fee" shall include sums for services
provided to CPC by CPI and for goods or services
of third party vendors or contractors as indicated
in Exhibit D. Such amounts shall be invoiced by
CPI to CPC on a monthly or quarterly basis and
shall be subject to adjustment as indicated in
Exhibit D.
"Distribution Agreement" shall mean the Distribution
Agreement dated December 31, 1997 between CPC and
CPI.
"Master Supply Agreement" shall mean the Master
Supply Agreement dated January 1, 1998 between CPC
and CPI.
"Packaging Equipment" shall mean the equipment and
associated systems owned and operated by CPC in
the Access Area as listed on Exhibit C.
All other capitalized terms not defined herein shall
have the meanings set forth in the Distribution Agreement.
2.0 SCOPE
CPI grants to CPC, its officers, employees, authorized
representatives, agents, and authorized CPC vendors or
contractors the right to enter upon, move freely on and maintain
and operate Packaging Equipment in or on the Access Area at any
time and for any purpose associated with the Access Activities.
Specific entrances to the property to be used by CPC,
and CPC's visitors, vendors, and contractors are designated on
Exhibit A.
3.0 TERM
3.1 This Agreement shall have an initial term of five
(5) years beginning on January 1, 1998 through and including
December 31, 2002 (the "Initial Term") unless earlier terminated
pursuant to this Section 3.0.
3.2 This Agreement may be renewed for a term agreed
upon by the parties upon the written agreement of the parties. In
the event that negotiations with respect to a renewal are in
progress after the termination date of this Agreement, the term
of this Agreement shall continue until such time as a new
agreement is entered into or negotiations are terminated. If CPC
does not wish to renew this Agreement at the expiration of the
Initial Term, it shall give CPI notice thereof no later than
twelve (12) months prior to expiration of the Initial Term, and
CPC shall pay to CPI the Termination Fee set forth in Paragraph
3.5 below at the expiration of the Initial Term or any subsequent
renewal.
3.3 In the event that CPC or the assets or business of
the Best Foods Division of CPC are acquired by any third party,
whether by sale, transfer, merger, or otherwise, CPC shall give
CPI prompt written notice of said acquisition. CPI may terminate
this Agreement, without penalty to CPI and without payment by CPC
of the Termination Fee set forth in Paragraph 3.5 below, by
delivering written notice to CPC within six (6) months of CPI's
receipt of CPC's notice.
3.4. In the event that CPI or its North American corn
refining business is acquired by a third party competitor of CPC,
whether by sale, transfer, merger or otherwise, CPI shall give
CPC prompt written notice of said acquisition, and CPC may
terminate this Agreement without penalty, by delivering written
notice to CPI within six (6) months of CPC's receipt of CPI's
notice. In the event that CPI or its North American corn refining
business is acquired by a third party that is not a competitor of
CPC, whether by sale, transfer, merger or otherwise, CPI shall
give CPC prompt written notice of said acquisition and CPC may
terminate this Agreement by delivering written notice to CPI
within six (6)
Page 2
months of CPC's receipt of CPI's notice and payment of the
Termination Fee set forth in Paragraph 3.5 below.
3.5 CPC may, at its sole option and without cause,
terminate this Agreement at any time prior to the expiration of
the Initial Term by providing CPI with twelve (12) months written
notice and subject to a termination fee equal to the lesser of
$5,000,000 dollars or the cost of demolition of the buildings in
the Access Area ("Termination Fee"), said cost of demolition to
be determined by CPI. If CPI decides, in its sole discretion, to
perform said demolition, CPI shall have responsibility for all
aspects of the demolition. CPC's only obligation with respect to
said demolition shall be payment of the Termination Fee.
3.6 If at any time either party is in material breach
of any representation, warranty or obligation set forth herein,
the other party may terminate this Agreement upon sixty (60)
calendar days written notice, provided the breaching party failed
to take all reasonable measures to cure within the sixty (60)
days. In the case of a breach caused by a failure of either party
to comply with any provision of Section 8.0 or 9.0 below, if the
law provides a time period for correction of a violation without
imposition of any fine or penalty by the applicable governmental
or regulatory authority, such time period will be considered a
reasonable time for correction. In the event of termination of
this Agreement by CPI pursuant to this Paragraph 3.6, CPC shall
pay to CPI the Termination Fee.
4.0 ACCESS FEE
CPC shall pay to CPI an Access Fee in accordance with
Exhibit D hereof. At any time during the term of this Agreement,
the parties may add specific line items for additional services
to Exhibit D upon mutual written agreement. Should changes in the
Access Activities require changes in the services or service
charges set forth in Exhibit D, appropriate revisions to Exhibit
D shall be made upon mutual written agreement. CPI shall, upon
written request, provide to CPC all bills, invoices or other
documentation supporting any charges set forth in Exhibit D. The
administrative fee of $150,000.00 set forth in Exhibit D shall be
reviewed by the parties after the second year of the Initial
Term.
5.0 UTILITIES
5.1 CPI shall provide to CPC electricity, instrument
air, water (process and potable), steam, natural gas, sewer and
fire suppression system in accordance with Exhibit B and Exhibit
D hereof. CPI makes no representations, warranties or guarantees
with respect to the quality of those utilities that are not
generated by CPI unless defects in the quality of said utilities
is caused in any way by negligent or willful acts or omissions of
CPI. With respect to the quantity of those utilities that are not
generated by CPI, CPI represents, warrants and guarantees that,
provided it receives said utilities at the quantity and rate
received in 1997, it will provide said utilities to CPC in
accordance with Exhibit B and Exhibit D, or in a prorated amount
commensurate with that amount which CPI receives. With respect to
the quality and quantity of those utilities that are generated by
CPI, CPI represents and warrants that it will use its best
reasonable efforts to meet the quality and quantity standards set
forth in Exhibit B and Exhibit D hereof. CPI shall notify CPC in
advance, or as soon as practicable, of any utility outages and
shall take reasonable steps to resolve those outages. CPI shall
use good
Page 3
faith in scheduling required outages in a manner that will not be
unduly detrimental to CPC. CPI MAKES NO REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, REGARDING
THE UTILITIES TO BE PROVIDED TO CPC UNDER THIS ARTICLE 5.0 OTHER
THAN THOSE SET FORTH EXPRESSLY IN THIS PARAGRAPH 5.1. CPI's
liability for breach of warranties or representations provided in
this Paragraph 5.1 shall be limited to the value of the utilities
not provided or the difference in value between the utilities
provided and the utilities described in Exhibit B and Exhibit D.
5.2 For the purposes of metering and measuring the
electricity, instrument air, steam and natural gas utilities
delivered by CPI to CPC set forth in Exhibit B and Exhibit D, CPI
shall furnish, install, maintain, calibrate and read certain
metering devices ("Metering Devices" or "Devices"). The number,
type, operation and location of such Devices shall be mutually
agreed upon by the parties and shall then be set forth in Exhibit
A to this Agreement.
5.3 The Devices will be sealed. CPI will provide CPC
with access to the Devices at any time upon reasonable notice,
but readings, inspections, tests and adjustments thereof shall be
done by employees or agents of CPI. A Device seal shall be broken
only by CPI and only when a Device is to be inspected, tested, or
adjusted; provided, however, that CPC will receive reasonable
prior notice thereof and will have the right to be present at
such inspection, testing or adjustment. CPI shall periodically
inspect and test its Devices at intervals not to exceed six
months and shall provide CPC with information concerning the
results of such testing. CPC at any time may request
additional testing with respect to the Devices. Upon receiving
such written request, CPI shall promptly schedule a test of the
Device and give to CPC reasonable notice of the time of the test.
The cost of such additional testing shall be borne by CPC in the
month in which such additional testing occurs, except that if the
percentage of error is found to be greater than 2.5 percent in
the case of Metering Devices for electricity, greater than 2.5
percent in the case of Metering Devices for steam, greater than
1.5 percent in the case of Metering Devices for instrument air,
and greater than 1.5 percent in the case of Metering Devices for
natural gas, the costs of such additional testing shall be borne
by CPI.
5.4 CPC shall have the right to install and operate
metering devices at the CPC interconnection points downstream of
the Devices. All readings, inspections, tests, adjustments and
maintenance of the metering devices installed by CPC under this
provision shall be the sole responsibility of CPC.
5.5 If a Device fails to register, or if the
measurement made by a Device is found upon testing to be
inaccurate, the Device will be adjusted as soon as practicable
so as to read accurately.
5.6 If the percentage of error is found pursuant to
Paragraph 5.3 to be greater than 2.5 percent in the case of
Metering Devices for steam, greater than 2.5 percent in the case
of Metering Devices for electricity, greater than 1.5 percent in
the case of Metering Devices for instrument air, or greater than
1.5 percent in the case of Metering Devices for natural gas, an
adjustment shall be made to the records for such Device at the
rate of such inaccuracy for (a) the actual period during which
inaccurate measurements were made, if that period can be
determined to the mutual satisfaction of the parties; or (b) if
the actual period or
Page 4
rate cannot be determined to the satisfaction of the parties,
the CPC devices shall be tested for accuracy, and if found
to be accurate or less inaccurate than the Devices, the CPC
devices and the previous records of the CPC devices shall then be
used to the extent practicable to establish the period and extent
of the inaccuracy of the Devices; or (c) in the event neither (a)
nor (b) is applicable, a period extending backward one-half of
the number of days since the previous test of the particular
Device, but in no event, however, greater than 90 days.
5.7 If the percentage of error is found pursuant to
Paragraph 5.3 to be less than 2.5 percent in the case of a
Metering Device for steam, less than 2.5 percent in the case of a
Metering Device for electricity, greater than 1.5 percent in the
case of Metering Devices for instrument air, or greater than 1.5
percent in the case of Metering Devices for natural gas, there
shall not be an adjustment pursuant to this paragraph with
respect to the current billing period, and all previous records
of the Device shall be considered to be accurate in measuring
deliveries hereunder.
5.8 If the percentage of error is not ascertainable by
calibration, tests, the CPC devices or mathematical calculation,
then the adjustment to be made to the records for such Device
shall be made by estimating the adjustment on the basis of
deliveries during periods under similar conditions when the
Device was registering accurately.
5.9 If, upon testing, any of the Metering Devices or
CPC metering devices should be found inaccurate, the Device or
CPC metering device, as the case may be, shall be calibrated at
once to record accurately.
6.0 MAINTENANCE AND REPAIRS
6.1 CPC shall maintain and keep in good repair and
condition all buildings in the Access Area, including the loading
docks, in compliance with law and to the same standard of repair
as applicable to Best Foods' manufacturing facilities.
6.2 CPI shall maintain and keep in good repair and
condition all outside areas of the Property including the Access
Area, and all buildings on the Property not subject to Section
6.1 above.
6.3 For those maintenance and repair obligations for
Building No. 44 that are common or applicable to the entire
building, CPI and CPC shall agree in writing as to the standard
of repair and maintenance and the allocation of costs thereof.
6.4 CPI shall maintain and keep in good repair CPI's
utility systems providing CPC with electricity, instrument air,
water (process and potable), steam, natural gas, sewer and fire
suppression in accordance with Exhibit B hereof.
6.5 CPC shall maintain and keep in good repair those
portions of CPI's utility systems to the extent set forth in
Exhibit B hereof.
6.6 CPI and CPC shall provide each other written
notification of any perceived maintenance need for any item for
which either party is responsible.
Page 5
6.7 CPC shall maintain and keep in good repair all
Packaging Equipment. CPC shall operate all Packaging Equipment
consistent with the pollution control devices or pre-treatment
equipment and/or any permits, licenses or registrations for the
Access Area which CPI is responsible for maintaining. CPC shall
shut down all or part of the Packaging Equipment if such shutdown
is required by law or if such shutdown is reasonably required to
avoid non-compliance with the law. The parties shall cooperate
with each other in scheduling shutdowns required for repair or
maintenance of pollution control devices or pre-treatment
equipment. CPI shall perform said repair or maintenance as
expediently as possible so as to minimize the interruption to
CPC's Access Activities. CPC shall be liable to CPI for any
damages caused to pollution control devices or pre-treatment
equipment due to violation of any said permits, licenses or
registrations or resulting from CPC's willful or negligent breach
of this Paragraph 6.7.
6.8 CPC shall be responsible for notifying all
personnel with access to the Access Area, including the employees
of CPI or third parties, of any known hazards in the Access Area,
whether those hazards were caused, directly or indirectly, by
CPC, by CPI, or by a third party. CPC shall take all reasonable
steps to protect any such personnel from injury in the Access
Area, including but not limited to the prompt correction or
repair of any potentially hazardous or dangerous situation for
which it has maintenance responsibilities under this paragraph.
CPC shall take all necessary precautions to prevent the
occurrence of any injury to persons or damage to property due to
the Access Activities, except to the extent that any such injury
or damage is due to the negligent or willful acts of CPI.
6.9 The maintenance obligations and costs thereof set forth
in this Section 6 shall not duplicate those obligations and costs
set forth in Exhibit D hereto.
7.0 DAMAGE TO OR DESTRUCTION OF PREMISES
If during the term of this Agreement the Access Area
is damaged by fire, flood, windstorm, strikes, riots, civil
commotions, acts of public enemy, acts of God, or other casualty
so that the same are rendered wholly unfit for the Access
Activities, and if said Access Area cannot be repaired within
sixty (60) days from the time of such damage, or in some other
reasonable time period agreed to by the parties, then this
Agreement, at the option of CPC, may be terminated as of the date
of such damage. In the event CPC elects to terminate the
Agreement, CPC shall pay the Access Fee, apportioned to the time
of such damage, and shall immediately surrender the Access Area
to CPI and CPC shall be relieved from any further liability
hereunder. If CPC does not elect to terminate this Agreement or
if any damage by any of the above casualties, rendering the
Access Area wholly unfit, can be repaired within sixty (60) days
thereafter, or in some other reasonable time period agreed to by
the parties, CPI agrees to repair such damage promptly and this
Agreement shall not be affected in any manner except that the
Access Fee shall be suspended and shall not accrue from the date
of such damage until such repairs have been completed; however,
CPC shall continue to pay any portion of the Access Fee which is
based upon actual costs which continue to be incurred prior to
completion of the repairs. If said Access Area shall be so
slightly damaged by any of the above casualties as not to be
rendered wholly unfit for occupancy, CPI shall repair the Access
Area promptly and during the period from the date of such damage
until the repairs are completed, the Access Fee shall be
apportioned so that CPC shall pay an
Page 6
amount which bears the same ratio to the entire Access Fee as the
portion of the Access Area which CPC is able to utilize without
disturbance during the period bears to the entire Access Area. If the
damage by any of the above casualties is so slight that CPC is not
disturbed in its Access Activities, then same shall be promptly
repaired by CPI and in that case, the Access Fee accrued or accruing
shall not abate. CPI's obligations to repair damages under this Section
shall be limited to the dollar amount of any insurance proceeds
which are actually received by CPI specifically as a result of
the damage to or destruction of the Access Area buildings or
portions of the Access Area for which CPI has maintenance
obligations under this Agreement; however, if CPI insures the
buildings in the Access Area for less than reasonable replacement
cost, CPI shall be required to repair damages and rebuild under
this paragraph to the replacement cost of the buildings, minus
any environmental remediation of or debris removal from the
Access Area specifically required for rebuilding.
8.0 COMPLIANCE WITH LAWS
8.1 CPI shall comply with all federal, state and local
laws, regulations, ordinances, codes and orders applicable to CPI
that affect the Access Area including, but not limited to, OSHA
and environmental laws, regulations and orders.
8.2 CPC shall comply with all federal, state and local
laws, regulations, ordinances, codes and orders applicable to CPC
that affect the Access Area or Access Activities, including but
not limited to OSHA and environmental laws, regulations and
orders. CPC shall comply with all safety rules established by CPI
for the exterior portions of the Access Area to the extent said
rules are reasonably applicable. CPC shall prepare an Emergency
Action Plan, as required by law, governing the Access Activities
and Access Area and shall annually submit a copy of that plan to
CPI. CPC shall establish its own safety rules for the interior
portions of the Access Area, including but not limited to its
Packaging Equipment. The parties shall mutually agree on safety
rules applicable to Building No. 44. CPC shall be responsible for
ensuring compliance with all safety rules by its employees,
contractors, vendors, and visitors. Both CPC and CPI
shall be responsible for their own vendor or contractor
qualification or selection procedures, if any, and vendors or
contractors for one party shall not be required to comply with
qualification or selection procedures of the other party.
8.3 CPC shall provide CPI with notice of any
governmental or third party inquiry or notice involving CPC's
Access Activities and the Access Area and provide CPI with all
written communications regarding same. CPC shall not (a) share
any information concerning CPI with any governmental authority or
agency, or (b) apply to or attempt to obtain from any
governmental authority or agency, any variation from or revision
to any safety, health, or air, water, land or noise pollution law
or regulation relating to the performance of this Agreement,
without CPI's prior written approval. In the event CPC is under a
duty, pursuant to any applicable law, statute, regulation or
order, to report information concerning CPI's activities under
this Agreement to any governmental authority or agency, CPC shall
not make such report without first advising CPI thereof, unless
CPC is under duty to immediately report such information, in
which case it will notify CPI as soon as possible.
Page 7
8.4 CPI shall provide CPC with notice of any
governmental or third party inquiry or notice involving the
Access Area and provide CPC with all written communications
regarding same.
8.5 Both CPI and CPC shall maintain all documents or
records required by law to show compliance with this Section 8.0
and Section 9.0 below. Each party shall make those documents or
records available to the other upon request, but no later than
two (2) business days after receipt of a written request for
review of the documents or records.
9.0 PERMITS, LICENSES & REGISTRATIONS
9.1 CPI shall be responsible for maintaining all
existing air, water, and sanitary discharge permits and
authorizations for the Access Activities and the Access Area and
CPI shall own, operate and maintain all existing pretreatment or
pollution control equipment for the Access Area and the Access
Activities. CPI shall make a good faith effort to modify existing
air, water or sanitary discharge permits or obtain any new air,
water, or sanitary discharge permits agreed by the parties to be
necessary or beneficial, subject to the environmental consulting
fee outlined in Exhibit D. CPI shall notify CPC of any
applications, amendments, modifications or renewals of any air,
water and sanitary discharge permits and authorizations affecting
the Access Activities or Access Area and provide CPC the
opportunity to participate and comment on said application,
amendment, modification or renewal.
9.2 CPC shall conduct all Access Activities consistent
with all permits, licenses or approvals held by CPI, where
applicable.
9.3 CPC shall be responsible, as required by law, for
all waste or hazardous materials, including waste or materials
brought into the Access Area or generated by CPC or its vendors
or contractors, except for those materials permitted by CPI for
discharge to air or sewer. CPI shall be responsible, as required
by law, for all waste or hazardous materials brought into the
Access Area or generated by CPI or its vendors or contractors.
9.4 CPI shall indemnify and hold CPC harmless from any
and all damages, penalties, fines, costs, expenses or claims
incurred by CPC should CPC be required to cease or limit any
Access Activity due in any way to CPI's negligent or willful
failure to fulfill its obligations under Section 9.1.
10.0 EQUIPMENT
10.1 CPI shall allow CPC to maintain and operate the
Packaging Equipment in the Access Area. In the event that CPC
wishes to install additional packaging equipment or fixtures or
building modifications relating to the Access Activities,
including but not limited to installation of a new fire
suppression system or fire suppression devices, which will impact
upon any existing CPI permit or license, will require a new
permit or license, or will change CPC's utility usage, CPC shall
obtain CPI's prior written authorization, which will not be
unreasonably withheld, prior to installation. For all other
packaging equipment to be added by CPC, CPC shall provide prior
written notice to CPI. The parties shall amend Exhibit C no less
than annually, if necessary, to reflect any packaging equipment
added pursuant to this
Page 8
Section. CPC shall indemnify and protect CPI from any liens,
claims, or encumbrances imposed upon the Property as a result
of the Access Activities or CPC's installation of fixtures,
modifications, or equipment. CPC shall be liable to CPI for an
increase in property or other taxes imposed upon CPI due to the
addition by CPC of fixtures, building modifications, or Packaging
Equipment in the Access Area, unless the parties agree otherwise in
writing prior to installation of the fixture, modification or
equipment. CPC shall have no obligation to notify or obtain approval
from CPI for equipment installation which commenced prior to
January 1, 1998.
10.2 CPC shall own and maintain the Packaging
Equipment in the Access Area, as set forth in Exhibit C, and
packaging equipment installed after the date of this Agreement
and shall retain ownership of and remove said equipment at CPC's
cost upon termination of this Agreement, unless otherwise agreed
to by CPC and CPI in writing. For fixtures and modifications
installed after the date of this Agreement, the parties will
agree in writing prior to installation as to who will retain
ownership of said fixtures and modifications, whether said
fixtures or modifications will be removed upon termination of
this Agreement, and the standard for restoration of the area of
the plant where the fixtures and modifications were located. Any
Packaging Equipment in the Access Area, as set forth in Exhibit
C, removed by CPC pursuant to this Agreement shall be at CPC's
own expense and CPC shall restore the area of the plant where the
Packaging Equipment was located to reasonable working condition.
11.0 SERVICES OF THIRD PARTY VENDORS
Exhibit D outlines certain shared services, including
but not limited to snow removal, security, street sweeping and
dust control, and road repair, which will be provided to CPC and
CPI by third party vendors or contractors. The scope of any such
services, including the frequency and means of providing services
and the quality standards for such services, are governed by the
contract or agreement with the third party vendor. CPI makes no
warranties, representations, or guarantees regarding the services
of third party vendors or contractors who will be performing
services outlined in Exhibit D. Any additional third party
services or any additional services required from the third party
vendors performing services outlined in Exhibit D required by CPC
or CPI shall be at the cost of the party requiring such
additional services.
Nothing contained herein shall create third party
beneficiary rights in any third party.
12.0 INDEMNITY
12.1 CPC shall hold harmless and indemnify and defend
Corn Products Indemnitees from and against any and all
Indemnifiable Losses based upon or arising out of any bodily
injury or death of any person (including any CPC employee),
damage to or destruction of any property, including adverse
effects on the environment, or any violation of law, regulation
or order to the extent that such damage was caused by CPC's
negligence or CPC's breach of any warranty, representation or
obligation under this Agreement. Nothing herein shall require CPC
to indemnify CPI for CPI's own negligence.
Page 9
12.2 CPI shall hold harmless and indemnify and defend
CPC Indemnitees from and against any and all Indemnifiable Losses
based upon or arising out of any bodily injury or death of any
person (including any CPI employee), damage to or destruction of
any property, including adverse effects on the environment, or
any violation of law, regulation or order to the extent that such
damage was caused by CPI's negligence or CPI's breach of any
warranty, representation or obligation under this Agreement.
Nothing herein shall require CPI to indemnify CPC for CPC's own
negligence.
12.3 This indemnity shall only apply to actions of, or
conditions caused by, either party on or after January 1, 1998
arising out of the activities under this Agreement.
13.0 ASSIGNMENT
CPC may assign its rights under this Agreement to a
third party with the written consent of CPI, and CPI's consent
shall not be unreasonably withheld, delayed or conditioned.
14.0 COOPERATION OF PARTIES
The parties hereto acknowledge that they are entering
into an agreement in which the cooperation of both parties will
be required. If, during the term, changes in the operations,
facilities or methods of either party will materially benefit a
party without detriment to the other party, or where the
benefiting party agrees to hold the other harmless from such
detriment, the parties commit to each other to make reasonable
efforts to cooperate and assist each other. The parties hereto
further acknowledge and understand that they operate businesses
that are significantly different and that any and all obligations
under this Agreement shall be conducted and enforced considering
said acknowledgment and understanding.
CPC shall provide CPI notice of any labor disturbances
or strikes involving CPC employees, vendors, or contractors
working in the Access Area. CPC shall comply with CPI's
reasonable instructions with regard to entrances to be used
during a strike or labor disturbance or other impacts upon CPI or
the Property during the strike or labor disturbance.
15.0 CONFIDENTIALITY
All information concerning CPC or CPI in either
party's possession shall be subject to the confidentiality
provisions of Section 4.4 of the Distribution Agreement.
16.0 INSURANCE
During the term of this Agreement, CPC shall maintain
in full force and effect at its own expense the following
insurance in at least the amounts indicated:
16.1 CPC shall comply with all requirements of the
Workers' Compensation laws of the state(s) in which work is
performed hereunder. CPC will obtain at its own cost insurance
sufficient to discharge its obligations under all applicable
workers compensation
Page 10
laws and covering all CPC employees engaged in the Access Activities.
CPC will obtain at its own cost Employer's Liability Insurance with a
limit of $100,000 per person.
16.2 CPC shall procure and maintain, at its sole cost
and expense, at all times while performing hereunder,
comprehensive general liability insurance, on an occurrence
basis, with a reputable and financially responsible insurance
carrier(s) satisfactory and acceptable to CPI with minimum policy
limits of $2,000,000 per occurrence for property damage and
$2,000,000 per occurrence for bodily injury (including injury
resulting in death) and shall name CPI as an additional insured
under that policy. This insurance shall include blanket
contractual liability coverage and shall specifically cover the
liability assumed by CPC in this Agreement. This insurance shall
include products and completed operations coverage and personal
injury liability coverage.
16.3 CPC agrees to carry an excess liability policy
with a limit no less than $25,000,000, and on which CPI is
endorsed as additional insured.
16.4 CPC shall bear all costs of the insurance
coverage set forth herein, including but not limited to the costs
of any amounts deductible, retained or self-insured under the
required policies. Failure to keep the required insurance
policies in full force and effect or to self-insure during the
term of this Agreement shall constitute a material breach of this
Agreement.
16.5 CPC shall provide to CPI insurance certificates
and endorsements acceptable to CPI evidencing the above
insurance; however, the failure of CPC to provide such evidence
shall not operate as a waiver or amendment of these insurance
requirements. The furnishing of evidence of the above insurance
requirements by any certificate or endorsement that is not in
conformance with the requirements of this Article or the failure
to furnish such evidence shall not constitute a waiver or an
amendment of such requirements. In the event that any of CPC's
insurance policies expire during the term of this Agreement, CPC
shall deliver certificates and endorsements for renewed insurance
to CPI. Nothing contained in this section shall operate as a
satisfaction or limitation of either party's liability in tort or
contract or in any way modify or limit the obligations in Section
12.0.
16.6 In the event that any insurance provision in a
contract of insurance between CPC and its insurance company is to
any extent determined to be void or unenforceable, such
circumstance shall not otherwise affect the validity or
enforceability of such contract of insurance, which shall be
enforced to the fullest extent permitted by law.
16.7 CPI shall procure and maintain, at its sole cost
and expense, workers compensation and employers liability
insurance, in all states governed by this agreement, sufficient
to comply with the laws in those states. CPI shall obtain, at its
sole cost and expense, employers liability insurance with a limit
of at least $1,000,000 per person.
16.8 CPI shall procure and maintain, at its sole cost
and expense, as long as this Agreement is in effect,
comprehensive general liability insurance on an occurrence basis,
with a reputable and financially sound insurance carrier(s)
satisfactory and acceptable to CPC with a minimum policy limit of
$2,000,000 per occurrence for property damage and
Page 11
$2,000,000 per occurrence for bodily injury, including injuries
resulting in death, and shall name CPC as an additional insured
under that policy. This insurance shall include blanket
contractual liability coverage, and shall specifically cover the
liability assumed by CPI through this Agreement. This insurance
shall include products and completed operations coverage and
personal injury liability coverage.
16.9 CPI shall carry excess liability insurance with a
limit of no less than $25,000,000 on which CPC is endorsed as an
additional insured.
16.10 CPI shall bear all costs of its insurance
coverage set forth herein, including but not limited to the costs
of any deductible amounts, and retained or self-insured amounts,
under the required policies. Failure to keep the required
insurance policies in full force and effect or to self-insure
during the term of this Agreement shall constitute a material
breach of this Agreement.
16.11 CPI shall provide to CPC insurance certificates
acceptable to CPC evidencing the above insurance. In the event
that any of CPI's insurance policies expire during the term of
this Agreement, CPI shall deliver certificates for renewed
insurance to CPC. Nothing contained in this section shall operate
as a satisfaction or limitation of either party's liability in
tort or contract, or in any way modify or limit the obligations
in Section 12.
16.12 CPC and CPI shall each individually maintain
property insurance covering its respective assets governed by
this Agreement, including but not limited to its own process or
packaging equipment or other personal property. CPC and CPI agree
that their respective insurance carriers shall not be subrogated
to their respective rights against each other in connection with
this Agreement and neither party shall execute any document
granting such right of subrogation.
16.13 In the event that CPC wishes to perform
significant construction activities in the Access Area, CPC shall
obtain an Owners and Contractors Protective Liability policy, on
an occurrence basis, with a reputable and financially responsible
insurance carrier(s) satisfactory and acceptable to CPI with
minimum policy limits sufficient to cover the risk of property
damage and bodily injury (including injury resulting in death)
and contractual liability hereunder for that construction project
and shall name CPI as an additional insured under that policy,
provided said policy is commercially available and the cost of
said policy is reasonable.
16.14 Any insurance policy of a party which is
endorsed to name the other party as an additional insured shall
provide that the insurance of the party indemnifying the other,
under Section 12.0, shall be primary to any other insurance of
the additional insured.
16.15 The certificates of insurance and endorsements
required to be provided by a party under this Section 16.0 shall
state that the policies are in effect and will not be cancelled
or non-renewed without 30 days' prior written notice to the other
party. In the event of a claim, copies of the policies shall be
supplied to the party claiming indemnification upon request.
Page 12
17.0 INSPECTION
CPI shall have the right to enter upon the Access Area
for any activity associated with this Agreement, except that CPI
shall only enter a building where Access Activities are being
conducted at reasonable times and upon reasonable notice to CPC.
Notwithstanding the foregoing, if CPI determines an emergency
situation exists and that entry into a building where Access
Activities are being conducted is necessary, CPI may enter that
building and provide CPC notice as soon as is practicable. Except
as required in an emergency situation or to prevent any violation
of Sections 8.0 or 9.0 above, any CPI activity in the Access Area
shall not unreasonably interfere with the Access Activities. An
emergency situation shall be one in which there is an
unreasonable risk of harm to persons or damage to property or a
violation of law.
Upon request from CPC, CPI shall allow CPC to enter
upon areas of the Property outside of the Access Area at times
and locations mutually agreed to by the parties for the purpose
of inspecting CPI activities, other than those involving Metering
Devices, associated with Article 5.0 above.
18.0 DISPUTE RESOLUTION
Any dispute, controversy or claim in connection with
this Agreement shall be resolved in accordance with Article VII
of the Distribution Agreement.
19.0 FORCE MAJEURE
If performance by either party of any of its duties or
obligations under this Agreement is prevented, hindered, delayed
or otherwise made impracticable by reason of any strike, flood,
riot, fire, explosion, equipment failure that is beyond the
party's control, war or any other casualty which cannot be
overcome by reasonable diligence and without unusual expense,
such party shall be excused from such performance to the extent
that it is so prevented, hindered or delayed thereby during the
continuance of any such happening or event and for so long as
such event shall continue to prevent, hinder or delay such
performance; provided, however, that such party diligently works
to cure such non-performance in the shortest reasonable time
period. The party asserting force majeure shall, in each
instance, give the other party written notice within a reasonable
time after knowledge thereof. Such notice shall include a brief
description of the events or circumstances of force majeure and
an estimate of the anticipated duration. Within a reasonable time
after knowledge of the cessation of any such continuing events or
circumstances constituting force majeure, the party that asserted
the same shall give the other party written notice of the date of
such cessation.
20.0 NOTICES
Any notice to be given hereunder by either party shall
be in writing and shall be deemed given when: (i) sent by
registered mail, return receipt requested upon receipt by the
sender of confirmation of receipt; (ii) sent by telecopy upon
receipt by the sender of confirmation of transmittal; or (iii)
delivered to the addressee as follows:
Page 13
In the case of CPC to: CPC International Inc.
P.O. Box 8000, International Plaza
Englewood Cliffs, New Jersey 07632
Attn: General Counsel
Telephone: (201) 894-2381
Facsimile: (201) 894-2192
In the case of CPI to: Corn Products International, Inc.
Corporate Office
P.O. Box 345, 6500 Archer Road
Summit, Illinois 60501-0345
Attn: General Counsel
Telephone: (708) 563-6958
Facsimile: (708) 563-6592
Any party may from time to time designate by written
notice to the other revised address or telecopy information.
21. SEVERABILITY
The invalidity or unenforceability of any particular
provision of this Agreement shall not affect any other provisions
hereof, and this Agreement shall be construed in all respects as
if such invalid or unenforceable provision were omitted.
22. HEADINGS
The headings of this Agreement are for the convenience
of the parties, and shall not be construed as having any legal or
binding meaning or effect.
23. NO WAIVER
The failure by either party to insist upon strict
performance of any covenant or condition of this Agreement, in
any one or more instances, shall not be construed as a waiver or
relinquishment of any such covenant or condition in the future,
but the same shall be and remain in full force and effect.
24. SURVIVAL
Notwithstanding any termination of this Agreement the
provisions of Sections 12, 15 and 18 shall survive such
termination.
25. ENTIRE AGREEMENT
This Agreement constitutes the entire understanding and
agreement between the parties hereto with respect to the subject
matter hereof, and cancels and supersedes any prior negotiations,
and merges all understandings, and agreements, whether verbal or
written, with
Page 14
respect thereto. This Agreement can be amended only
by a written instrument executed by the parties hereto.
26. EXHIBITS
All exhibits referred to in, and attached to this
Agreement are hereby made a part of this Agreement.
27. CHOICE OF LAW
THIS AGREEMENT SHALL, IN ALL RESPECTS, BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
ILLINOIS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY, EFFECT
AND PERFORMANCE, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF
CONFLICT OF LAWS THEREOF.
28. RELATIONSHIP OF THE PARTIES
Nothing contained in this Agreement shall be construed
to create any relationship of partnership, employer or employee,
or create a joint venture between or among the parties hereto.
With respect to this Access Agreement and the Access Activities,
neither CPC nor CPI shall be responsible for the debts,
operations, liabilities or any other obligations of the other and
neither CPC nor CPI has authority to bind or act on behalf of the
other, except as otherwise provided in this Agreement. Neither
CPC nor CPI nor their respective agents, employees or
subcontractors shall be deemed agents or employees of the other.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first above written.
CPC INTERNATIONAL INC.
By: ___________________________________
Title: _________________________________
CORN PRODUCTS INTERNATIONAL, INC.
By: ____________________________________
Title: __________________________________
Page 15
Exhibit 21.1
List of Corn Products International, Inc. Subsidiaries
------------------------------------------------------
Place of
Company Name Incorporation
- ------------ -------------
Productos de Maiz, S.A. Argentina
Corn Products Brasil
Ingredientes Industrias, Ltda. Brazil
Corn Products Canada Holding Canada
Corn Products Canada Operating Canada
Corn Products Chile S.A. Chile
Derivados del Maiz y de la
Yuca, S.A. (DELMAIZ INYUCAL S.A.) Colombia
Industrias del Maiz S.A. (Maizena S.A.) Colombia
Corn Products Ecuador Ecuador
Almidones del Istmo S.A. de C.V. (ALISA) Honduras
Corn Products India India
Glucosan Iran
CPC Japan Ltd. Japan
CPC-NSK Techno Company Ltd. Japan
Nihon Shokuhin Kako Kabushiki Kaisha
(NSKK) Japan Maize Products, Co. Ltd. Japan
CPC Industrial Products (Kenya) Ltd. Kenya
Stamford Food Industries Sdn. Berhad Malaysia
Productos Modificados, S.A. de C.V. Mexico
CPC Rafhan Limited Pakistan
Corn Products Trading Co. Pte. Ltd. Singapore
Corn Products Thailand Thailand
Bedford Construction Company New Jersey
Cali Investment Corp. Delaware
Corn Products Sales Corporation Delaware
Colombia Millers Ltd. Delaware
Crystal Car Line, Inc. Illinois
Enzyme Bio-Systems Ltd. Delaware
Feed Products Limited New Jersey
Hispano-American Company, Inc. Delaware
Inversiones Latinoamericanas S.A. Delaware
The Chicago, Peoria and Western
Railway Company Illinois
Valon, S.A. Uruguay
Corn Products Venezuela Venezuela