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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR THE FISCAL YEAR ENDED COMMISSION FILE NUMBER
AUGUST 2, 1998 1-3822
CAMPBELL SOUP COMPANY
New Jersey 21-0419870
State of Incorporation I.R.S. Employer Identification No.
Campbell Place
Camden, New Jersey 08103-1799
Principal Executive Offices
Telephone Number: (609) 342-4800
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
Capital Stock, par value $.0375 New York Stock Exchange
Philadelphia Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ x]
As of September 21, 1998, the aggregate market value of capital stock
held by non-affiliates of the Registrant was $12,439,494,944. There were
445,585,204 shares of capital stock outstanding as of September 21, 1998.
Portions of the Annual Report to Shareowners for the fiscal year
ended August 2, 1998 are incorporated by reference into Parts I and II. Portions
of the Notice of Annual Meeting and Proxy Statement dated October 9, 1998, for
the Annual Meeting of Shareowners to be held on November 19, 1998, are
incorporated by reference into Part III.
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PART I
ITEM 1. BUSINESS
THE COMPANY
Campbell Soup Company, together with its consolidated subsidiaries, is a global
manufacturer and marketer of high quality, branded convenience food products.
Campbell was incorporated as a business corporation under the laws of New Jersey
on November 23, 1922; however, through predecessor organizations, it traces its
heritage in the food business back to 1869. On March 30, 1998, the company spun
off certain specialty foods businesses to its shareowners as an independent
publicly-held company. The new company, Vlasic Foods International Inc.,
includes Swanson frozen foods, Vlasic pickles, and certain European and
Argentine businesses, including Swift-Armour Sociedad Anonima Argentina.
Additional information about the spin-off is incorporated by reference from Note
2 of the Notes to Consolidated Financial Statements on page 26 of the Company's
1998 Annual Report to Shareowners for the fiscal year ended August 2, 1998
("1998 Annual Report").
During 1998, the company acquired Liebig, the leading wet soup brand in France,
and the remaining thirty percent of the outstanding shares of Arnotts Limited,
increasing its ownership of Arnotts Limited to 100%. The company divested its
European-based Delacre biscuit business, Continental Sweets Europe, Boas B.V.,
its fresh mushroom business in Australia and Spring Valley Beverages Pty. Ltd.
As part of its ongoing review of all vertically integrated operations, the
company sold its poultry and can-making operations in the United States.
The company operates in three business segments: Soup and Sauces, Biscuits and
Confectionery, and Foodservice. The Soup and Sauces segment includes the
worldwide soup businesses, Prego spaghetti sauce, Franco-American pastas and
gravies, Pace Mexican foods, Swanson broths and the V8 beverage business. The
Biscuits and Confectionery segment includes the Pepperidge Farm, Godiva and
Arnotts Limited businesses. The Foodservice segment consists of products
distributed to the food service and home meal replacement markets and includes
Campbell's Restaurant Soups, Pace Tabletop picante and Campbell's Specialty
Kitchens entrees. See also "Management's Discussion and Analysis of Results of
Operations and Financial Condition" at pages 20 to 23 of the company's 1998
Annual Report, which is incorporated herein by reference. Additional financial
information about the company's business segments is incorporated by reference
from Note 4 of the Notes to Consolidated Financial Statements on pages 26 and 27
of the 1998 Annual Report.
INGREDIENTS
The ingredients required for the manufacture of the company's food products are
purchased from various suppliers. As a result of the company's portfolio
reconfiguration program, the company sold or spun off certain of its ingredient
and container operations and entered into various supply agreements covering
those purchases. The company does not anticipate any material restrictions on
availability or shortages of ingredients which would have a significant impact
on the company's businesses.
While all such ingredients are available from numerous independent suppliers,
raw materials are subject to fluctuations in price attributable to a number of
factors, including changes in crop size, cattle cycles, government-sponsored
agricultural programs and weather conditions during the growing and harvesting
seasons. Ingredient inventories are at a peak during the late fall and decline
during the winter and
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spring. Since many ingredients of suitable quality are available in sufficient
quantities only at certain seasons, the company makes commitments for the
purchase of such ingredients during their respective seasons.
CUSTOMERS
In the United States, sales solicitation activities are conducted by the
company's own sales force and through broker and distributor arrangements. The
company's products are generally resold to consumers in retail stores,
restaurants and other food service establishments. No material part of the
business is dependent upon a single customer. Shipments are made promptly by the
company after receipt and acceptance of orders.
TRADEMARKS AND TECHNOLOGY
The company markets its food products globally under a number of significant
trademarks. The company considers such trademarks, taken as a whole, to be of
material importance to its business and, consequently, aggressively seeks to
protect its rights in them.
Although the company owns a number of valuable patents, it does not regard any
segment of its business as being dependent upon any single patent or any group
of related patents.
COMPETITION
The company experiences vigorous competition for sales of its principal products
in its major markets, both within the United States and abroad, from numerous
competitors of varying sizes. The principal areas of competition are quality,
price, advertising, promotion and service.
WORKING CAPITAL
For information relating to the company's cash and other working capital items,
see pages 20 through 23 of the company's 1998 Annual Report in the section
entitled "Management's Discussion and Analysis of Results of Operations and
Financial Condition", which are incorporated herein by reference.
RESEARCH AND DEVELOPMENT
During the last three fiscal years, the company's expenditures on research
activities relating to new products and the improvement of existing products
were approximately $71 million in 1998, $68 million in 1997 and $76 million in
1996.
EMPLOYEES
At August 2, 1998, there were approximately 24,250 persons employed by the
company, principally reflecting the effects of the spin-off.
FOREIGN OPERATIONS
For information with respect to the revenue, operating profitability and
identifiable assets attributable to the company's foreign operations, see pages
26 and 27 of the 1998 Annual Report in the section of the Notes to Consolidated
Financial Statements entitled "Business Segment and Geographic Area
Information", which is incorporated herein by reference.
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FINANCIAL INFORMATION
For information with respect to revenue, operating profitability and
identifiable assets attributable to the company's business segments, see page 27
of the 1998 Annual Report in the section of the Notes to Consolidated Financial
Statements entitled "Business Segments", which is incorporated herein by
reference.
RECENT DEVELOPMENTS
The information presented on page 23 of the 1998 Annual Report in the section
entitled "Management's Discussion and Analysis of Results of Operations and
Financial Condition" is incorporated herein by reference.
FORWARD-LOOKING STATEMENTS
From time to time, the company makes oral and written statements which reflect
the company's current expectations regarding future results of operations,
economic performance, financial condition and achievements of the company. The
company tries, wherever possible, to identify these forward looking statements
by using words such as "anticipate", "believe", "estimate", "expect" and similar
expressions. These statements reflect the company's current plans and
expectations and are based on information currently available to it. They rely
on a number of assumptions and estimates which could be inaccurate and which are
subject to risks and uncertainties.
Campbell wishes to caution the reader that the following important factors and
those important factors described in other Securities and Exchange Commission
filings, or in the company's 1998 Annual Report, could affect the company's
actual results and could cause such results to vary materially from those
expressed in any forward-looking statements made by, or on behalf of, the
company:
- the impact of strong competitive response to the company's
efforts to leverage its brand power with product innovation
and new advertising;
- the inherent risks in the marketplace associated with new
product introductions, including uncertainties about trade and
consumer acceptance;
- the company's ability to achieve sales and earnings forecasts
which are based on assumptions about sales volume;
- the continuation of the company's successful record of
integrating acquisitions into its existing operations and the
availability of new acquisition and alliance opportunities
that build shareowner wealth;
- the company's ability to achieve its cost savings and capacity
utilization objectives;
- the impact of unforeseen economic and political changes in
international markets where the company competes such as
currency exchange rates, inflation rates, recession, foreign
ownership restrictions and other external factors over which
the company has no control; or
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- the ability of the company and its key service providers,
vendors, suppliers, customers and governmental entities to
replace, modify or upgrade computer systems in ways that
adequately address the Year 2000("Y2K") issue. Specific
factors that might cause actual results to vary materially
from the results anticipated include the ability to identify
and correct all relevant computer codes and embedded chips,
unanticipated difficulties or delays in the implementation of
the company's remediation plans and the ability of third
parties to adequately address their own Y2K issues.
This discussion of uncertainties is by no means exhaustive but is designed to
highlight important factors that may impact the company's outlook.
ITEM 2. PROPERTIES
The company's principal executive offices and main research facilities are
company-owned and located in Camden, New Jersey. The following table sets forth
the company's principal manufacturing facilities:
PRINCIPAL MANUFACTURING FACILITIES
<TABLE>
<CAPTION>
INSIDE THE U.S. OUTSIDE THE U.S.
<S> <C> <C> <C>
CALIFORNIA OHIO AUSTRALIA GERMANY
- - City of Industry - Napoleon - Burwood - Duisburg
- - Dixon - Wauseon - Huntingwood - Gerwisch
- - Sacramento - Willard - Marleston - Lubeck
- - Stockton PENNSYLVANIA - Shepparton INDONESIA
CONNECTICUT - Denver - Virginia - Jawa Barat
- - Norwalk - Downington BELGIUM MALAYSIA
FLORIDA - Reading - Brussels - Selangor Darul Ehsan
- - Lakeland SOUTH CAROLINA - Puurs MEXICO
HAWAII - Aiken CANADA - Guasave
- Listowel - Villagran
- - Captain Cook TEXAS - Toronto PAPUA NEW GUINEA
ILLINOIS - Paris UNITED KINGDOM - Gordones
- - Downers Grove UTAH - King's Lynn - Melahang Lae
KANSAS - Richmond FRANCE
- - Kansas City WISCONSIN - LePontet Cedex
MICHIGAN - Milwaukee
- - Marshall
NEW JERSEY
- - South Plainfield
NORTH CAROLINA
- - Maxton
</TABLE>
The company also operates retail confectionery shops in the United
States, Canada, Europe and Japan; retail bakery thrift stores in the United
States; a mail order facility; and other plants and facilities at various
locations in the United States and abroad.
Management believes that the company's manufacturing and processing plants are
well maintained and are generally adequate to support the current operations of
the businesses.
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ITEM 3. LEGAL PROCEEDINGS
In management's opinion, there are no pending claims or litigation, the outcome
of which would have a material effect on the consolidated results of operations,
financial position or cash flows of the company.
As previously reported, in October 1995, at the request of the Environmental
Protection Agency (EPA), the United States of America (USA) instituted an action
in the United States District Court for the Eastern District of California,
alleging, inter alia, that the company violated the Clean Air Act by operating
certain can manufacturing equipment at its Sacramento, California facility
without a valid permit and by failing to apply control technology to reduce air
emissions. In August 1997, at the request of the EPA, the USA filed a second
complaint alleging that the company violated the Clean Air Act by modifying
certain can manufacturing equipment at the same facility without a permit, and
without installing control technology. The second complaint also alleged that
the company exceeded certain daily and quarterly emission limits. The company
disputes all of these alleged violations. The USA asserts in its complaints that
it is seeking the imposition of civil penalties, calculated on a per diem/per
violation basis, for each of the alleged violations. As noted above, the company
disputes liability for any and all of the violations alleged and also has
disputed the application of the maximum statutory penalty to any of the alleged
violations and the USA's method of calculating applicable penalties, if any. The
company anticipates that ongoing settlement discussions will lead to an amicable
resolution of these cases on terms that are not expected to have a material
effect on the consolidated results of operations, financial position or cash
flows of the company.
Communities for a Better Environment (CBE) sent a Clean Air Act Notice of Intent
to Sue letter dated April 6, 1998, to the company. CBE claims that the company's
Sacramento facility has used certain solvents allegedly in violation of emission
limitations set by the District's Rules and has not complied with certain
record-keeping requirements. These are the same issues that were raised in
notices of violation issued to the company by the Sacramento Metropolitan Air
Quality Management District which were settled in October 1997, without
admitting liability. CBE contends, however, that the settlement with the
District did not resolve the alleged violation arising from the use of certain
solvents on the grounds that the District's method of settling the issue is not
federally approved. The company disputes the alleged violation and denies
liability. The company anticipates that ongoing settlement discussions will lead
to an amicable resolution of the CBE claim on terms that are not expected to
have a material effect on the consolidated results of operations, financial
position or cash flows of the company.
The company has also been named as a potentially responsible party in a number
of proceedings brought under the Comprehensive Environmental Response,
Compensation and Liability Act, commonly known as Superfund. Although the impact
of these proceedings cannot be predicted at this time due to the large number of
other potentially responsible parties and the speculative nature of clean-up
cost estimates, the ultimate disposition of these proceedings is not expected to
have a material effect on the consolidated results of operations, financial
position or cash flows of the company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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EXECUTIVE OFFICERS OF CAMPBELL
The following list of executive officers as of October 2, 1998, is included as
an item in Part I of this Form 10-K:
<TABLE>
<CAPTION>
DATE FIRST
NAME PRESENT TITLE AGE ELECTED OFFICER
---- ------------- --- ---------------
<S> <C> <C> <C>
Dale F. Morrison President and Chief Executive Officer 49 1995
Basil L. Anderson Executive Vice President and Chief Financial Officer 53 1996
Ellen Oran Kaden Senior Vice President - Law and 47 1998
Government Affairs
Robert Subin Senior Vice President - Global Sourcing and 60 1988
Engineering
F. Martin Thrasher Senior Vice President 47 1992
President - Europe/Canada
David L. Albright Vice President 51 1992
President - Pepperidge Farm
Jerry S. Buckley Vice President - Public Affairs 43 1997
T. Ron Gable Vice President - Supply Chain 50 1998
Andrew K. Hughson Vice President 43 1997
President - Asia/Pacific
Mark M. Leckie Vice President 45 1997
President - U.S. Grocery
Gerald S. Lord Vice President - Controller 52 1993
R. David C. Macnair Vice President - Global Research and Development 44 1998
</TABLE>
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EXECUTIVE OFFICERS OF CAMPBELL (CONT.)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Craig W. Rydin Vice President 46 1997
President - Campbell Away From Home
Edward F. Walsh Vice President - Human Resources 57 1993
</TABLE>
Each of the above-named officers has been employed by the company in an
executive or managerial capacity for at least five years, except Basil L.
Anderson, Jerry S. Buckley, T. Ron Gable, Andrew K. Hughson, Ellen Oran Kaden,
Mark M. Leckie and Dale F. Morrison. Basil L. Anderson served as Chief Financial
Officer (1992-1996) of Scott Paper Company prior to joining Campbell in 1996.
Jerry S. Buckley served as Assistant Managing Editor, Gannett Company, Inc.
(1994-1995) and Senior Editor/Senior Writer, U.S. News & World Report
(1987-1994) prior to joining Campbell in 1995. T. Ron Gable served as Managing
Partner, Coopers & Lybrand Manufacturing and Logistics Practice (1983-1998)
prior to joining Campbell in 1998. Andrew K. Hughson served as General Manager,
Kellogg France, Belgium and the Netherlands (1994-1996) and Assistant to the
Chairman, Kellogg Company, Global Marketing (1993-1994) prior to joining
Campbell in 1996. Ellen Oran Kaden served as Executive Vice President, General
Counsel and Secretary (1994-1998) and Senior Vice President, General Counsel and
Secretary (1993-1994) of CBS Inc. prior to joining Campbell in 1998. Mark M.
Leckie served as Executive Vice President and General Manager of the Post
Division (1993-1997) of Kraft, Inc. prior to joining Campbell in 1997. Dale F.
Morrison served as President, Frito Lay North (1994-1995) and Vice President
Marketing and Sales, Frito Lay Central Division (1993-1994) prior to joining
Campbell in 1995.
There is no family relationship among any of the company's executive officers or
between any such officer and any director of Campbell. Executive officers of
Campbell are elected at the November 1998 meeting of the Board of Directors.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREOWNER MATTERS
Campbell's capital stock is listed and principally traded on the New York Stock
Exchange. Campbell's capital stock is also listed and traded on the Philadelphia
Stock Exchange, The International Stock Exchange of the United Kingdom and the
Republic of Ireland Limited and the Swiss Exchange. On September 21, 1998, there
were 38,085 holders of record of Campbell's capital stock. The market price and
dividend information with respect to Campbell's capital stock are set forth on
page 30 of the 1998 Annual Report in the section of the Notes to Consolidated
Financial Statements entitled "Quarterly Data (unaudited)" which is incorporated
herein by reference. Future dividends will be dependent upon future earnings,
financial requirements and other factors.
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ITEM 6. SELECTED FINANCIAL DATA
The information called for by this Item is set forth on page 32 of the 1998
Annual Report in the section entitled "Five-Year Review - Consolidated" which is
incorporated herein by reference. Such information should be read in conjunction
with the Consolidated Financial Statements and Notes thereto of the company
included in Item 8 of this Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The information presented on pages 20 through 23 of the 1998 Annual Report in
the section entitled "Management's Discussion and Analysis of Results of
Operations and Financial Condition" is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information presented on page 22 of the 1998 Annual Report in the section
entitled "Management's Discussion and Analysis of Results of Operations and
Financial Condition" is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS
The information presented on pages 24 through 31 of the 1998 Annual Report is
incorporated herein by reference. With the exception of the aforementioned
information and the information incorporated by reference in Items 1, 5, 6, 7,
and 7A, the 1998 Annual Report is not deemed to be filed as part of this Form
10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The sections entitled "Election of Directors" and "Directors and Executive
Officers Stock Ownership Reports" set forth on pages 1 through 4 and page 25 of
Campbell's Notice of Annual Meeting and Proxy Statement dated October 9, 1998
(the "1998 Proxy Statement") are incorporated herein by reference.
The information required by this Item relating to the executive officers of
Campbell is set forth in Part I of this Report on pages 6 and 7 under the
heading "Executive Officers of Campbell".
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ITEM 11. EXECUTIVE COMPENSATION
The information set forth on pages 15 through 24 of the 1998 Proxy Statement in
the section entitled "Compensation of Executive Officers" is incorporated herein
by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is set forth at pages 5 through 7 of the
1998 Proxy Statement in the sections entitled "Security Ownership of Directors
and Executive Officers" and "Security Ownership of Certain Beneficial Owners"
and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. FINANCIAL STATEMENTS
- Consolidated Statements of Earnings for 1998, 1997 and 1996
- Consolidated Balance Sheets as of August 2, 1998 and August 3,
1997
- Consolidated Statements of Cash Flows for 1998, 1997 and 1996
- Consolidated Statements of Shareowners' Equity for 1998, 1997
and 1996
- Summary of Significant Accounting Policies
- Notes to Consolidated Financial Statements
- Report of Independent Accountants
- The foregoing Financial Statements are incorporated into Part
II, Item 8 of this Report by reference to pages 24 through 31
of the 1998 Annual Report.
2. FINANCIAL STATEMENT SCHEDULES
None.
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3. EXHIBITS
3 (i) Campbell's Restated Certificate of Incorporation
as amended through February 24, 1997, was filed with
the Securities and Exchange Commission ("SEC") with
Campbell's Form 10-Q for the quarterly period ended
January 26, 1997, and is incorporated herein by
reference.
3 (ii) Campbell's By-Laws, effective as of July 15,
1997, were filed with the SEC with Campbell's Form
10-K for the fiscal year ended August 3, 1997, and
are incorporated herein by reference.
4 There is no instrument with respect to long-term debt
of the company that involves indebtedness or
securities authorized thereunder exceeding 10 percent
of the total assets of the company and its
subsidiaries on a consolidated basis. The company
agrees to file a copy of any instrument or agreement
defining the rights of holders of long-term debt of
the company upon request of the SEC.
9 Major Stockholders' Voting Trust Agreement dated June
2, 1990, as amended, was filed with the SEC by the
Trustees of the Major Stockholders' Voting Trust as
Exhibit A to Schedule 13D dated June 5, 1990, and is
incorporated herein by reference.
10 (a) Campbell Soup Company 1984 Long-Term Incentive Plan,
as amended on March 30, 1998.*
10 (b) Campbell Soup Company 1994 Long-Term Incentive Plan
as amended on March 30, 1998.*
10 (c) Campbell Soup Company Management Worldwide
Incentive Plan, as amended on November 17, 1994, was
filed with the SEC with Campbell's 1994 Proxy
Statement and is incorporated herein by reference.*
10 (d) Mid-Career Hire Pension Program, as amended on
February 22, 1996, was filed with the SEC with
Campbell's Form 10-K for the fiscal year ended July
28, 1996, and is incorporated herein by reference.*
10 (e) Personal Choice, A Flexible Reimbursement Program
for Campbell Soup Company Executives, effective
August 1, 1994, was filed with the SEC with
Campbell's Form 10-K for the fiscal year ended July
30, 1995, and is incorporated herein by reference.*
10 (f) Supplemental Savings Plan, as amended on May 25,
1995, was filed with the SEC with Campbell's Form
10-K for the fiscal year ended July 30, 1995, and is
incorporated herein by reference.*
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10 (g) Salary Deferral Plan, effective January 1, 1996,
was filed with the SEC with Campbell's Form S-8 on
February 6, 1996, and is incorporated herein by
reference.*
10 (h) Severance Protection Agreement dated April 1,
1998, with Ellen Oran Kaden, Senior Vice President -
Law and Government Affairs. Agreements with eight (8)
other executive officers are in all material respects
the same as that with Ms. Ellen Oran Kaden.*
10 (i) Supplemental pension arrangement for David W.
Johnson, Chairman, was filed with the SEC in
Campbell's 1997 Proxy Statement on page 17 under the
heading "Pension Plans", and is incorporated herein
by reference.*
13 Pages 20 through 32 of Campbell's 1998 Annual Report
to Shareowners for the fiscal year ended August 2,
1998.
21 Subsidiaries of Campbell.
23 Consent of Independent Accountants.
24 (a) Power of Attorney.
24 (b) Certified copy of the resolution of Campbell's
Board of Directors authorizing signatures pursuant to
a power of attorney.
27 Financial Data Schedules (not considered to be
filed).
* A management contract, compensatory plan or arrangement
required to be filed by Item 14(c) of this Report.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed by Campbell during the
fourth quarter of fiscal 1998.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Campbell has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
Date: October 9, 1998
CAMPBELL SOUP COMPANY
By: /s/Basil L. Anderson
------------------------------------
Basil L. Anderson
Executive Vice President
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Campbell and in the
capacity and on the date indicated.
Date: October 9, 1998
/s/Basil L. Anderson /s/Gerald S. Lord
--------------------------- ----------------------------
Basil L. Anderson Gerald S. Lord
Executive Vice President Vice President - Controller
and Chief Financial Officer
<TABLE>
<CAPTION>
<S> <C> <C>
David W. Johnson Chairman and Director }
Dale F. Morrison President, Chief Executive }
Officer and Director
Alva A. App Director }
Edmund M. Carpenter Director }
Bennett Dorrance Director }
Thomas W. Field, Jr. Director }
Kent B. Foster Director }
Harvey Golub Director } By: /s/Ellen Oran Kaden
David K. P. Li Director } Ellen Oran Kaden
Philip E. Lippincott Director } Senior Vice President -
Mary Alice Malone Director } Law and Government Affairs
Charles H. Mott Director }
George M. Sherman Director }
Donald M. Stewart Director }
George Strawbridge, Jr. Director }
Charlotte C. Weber Director }
</TABLE>
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INDEX OF EXHIBITS
Document
3(i) Campbell's Restated Certificate of Incorporation as amended through
February 24, 1997 was filed with the Securities and Exchange Commission
("SEC") with Campbell's Form 10-Q for the quarterly period ended
January 26, 1997, and is incorporated herein by reference.
3(ii) Campbell's By-Laws, effective as of June 15, 1997, were filed with the
SEC with Campbell's Form 10-K for the fiscal year ended August 3, 1997,
and are incorporated herein by reference.
4 There is no instrument with respect to long-term debt of the company
that involves indebtedness or securities authorized thereunder
exceeding 10 percent of the total assets of the company and its
subsidiaries on a consolidated basis. The company agrees to file a copy
of any instrument or agreement defining the rights of holders of
long-term debt of the company upon request of the SEC.
9 Major Stockholders' Voting Trust Agreement dated June 2, 1990, as
amended, was filed with the SEC by the Trustees of the Major
Stockholders' Voting Trust as Exhibit A to Schedule 13D dated June 5,
1990, and is incorporated herein by reference.
10(a) Campbell Soup Company 1984 Long-Term Incentive Plan, as amended on
March 30, 1998.
10(b) Campbell Soup Company 1994 Long-Term Incentive Plan as amended on March
30, 1998.
10(c) Campbell Soup Company Management Worldwide Incentive Plan, as amended
on November 17, 1994, was filed with the SEC with Campbell's 1994 Proxy
Statement, and is incorporated herein by reference.
10(d) Mid-Career Hire Pension Program, as amended on February 22, 1996, was
filed with the SEC with Campbell's Form 10-K for the fiscal year ended
July 28, 1996, and is incorporated herein by reference.
10(e) Personal Choice, Financial Reimbursement Program for Campbell Soup
Company Executives, effective August 1, 1994, was filed with the SEC
with Campbell's Form 10-K for the fiscal year ended July 30, 1995, and
is incorporated herein by reference.
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10(f) Supplemental Savings Plan, as amended on May 25, 1995 was filed with
the SEC with Campbell's Form 10-K for the fiscal year ended July 30,
1995 and is incorporated herein by reference.
10(g) Salary Deferral Plan, effective January 1, 1996, was filed with the SEC
with Campbell's Form S-8 on 10(g) February 6, 1996, and is incorporated
herein by reference.
10(h) Severance Protection Agreement dated April 1, 1998, with Ellen Oran
Kaden, Senior Vice President - Law and Government Affairs. Agreements
with eight (8) other executive officers are in all material respects
the same as that with Ms. Ellen Oran Kaden.
10(i) Supplemental pension arrangement for David W. Johnson, Chairman, was
filed with the SEC in Campbell's 1997 Proxy Statement on page 17 under
the heading "Pension Plan", and is incorporated herein by reference.
13 Pages 20 through 32 of the company's Annual Report to Shareowners for
the fiscal year ended August 2, 1998.
21 Subsidiaries (Direct and Indirect) of Campbell.
23 Consent of Independent Accountants.
24(a) Power of Attorney.
24(b) Certified copy of the resolution of Campbell's Board of Directors
authorizing signatures pursuant to a power of attorney.
27 Financial Data Schedules (not considered to be filed).
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EXHIBIT 10(a)
CAMPBELL SOUP COMPANY
Campbell Soup Company 1984 Long-Term
Incentive Plan
As amended on March 30, 1998
<PAGE> 2
TABLE OF CONTENTS
Article Page
I. Purpose and Effective Date . . . . . . . . . . . . . 1
II. Definitions . . . . . . . . . . . . . . . . . . . . 1
III. Administration . . . . . . . . . . . . . . . . . . . 3
IV. Awards . . . . . . . . . . . . . . . . . . . . . . . 4
V. Stock Options and Stock Appreciation
Rights . . . . . . . . . . . . . . . . . . . . . . 4
VI. Restricted Stock . . . . . . . . . . . . . . . . . . 8
VII. Award of Performance Units . . . . . . . . . . . . . 8
VIII. Deferral of Payments . . . . . . . . . . . . . . . . 10
IX. Miscellaneous Provisions . . . . . . . . . . . . . . 13
X. Change in Control of the Company . . . . . . . . . . 14
XI. Unrestricted Campbell Stock Awards for
Non-Employee Directors . . . . . . . . . . . . . . 18
XII. Unrestricted Campbell Stock Awards for
Key Employees . . . . . . . . . . . . . . . . . . 19
<PAGE> 3
CAMPBELL SOUP COMPANY 1984 LONG-TERM INCENTIVE PLAN
ARTICLE I
PURPOSE AND EFFECTIVE DATE
Section 1.1 Purpose. The purpose of the Plan is to provide financial
incentives for selected Key Employees of the Campbell Group and for the
non-employee directors of the Company, thereby promoting the long-term growth
and financial success of the Campbell Group by (i) attracting and retaining
employees and directors of outstanding ability, (ii) strengthening the Campbell
Group's capability to develop, maintain, and direct a competent management team,
(iii) providing an effective means for selected Key Employees and non-employee
directors to acquire and maintain ownership of Campbell Stock, (iv) motivating
Key Employees to achieve long-range performance goals and objectives, and (v)
providing incentive compensation opportunities competitive with those of other
major corporations.
Section 1.2 Effective Date and Expiration of Plan. The Plan is subject
to approval by a majority of the votes cast at the annual meeting of
stockholders of the Company to be held on November 16, 1984, or at any
adjournment thereof, by the holders of shares of Campbell Stock entitled to vote
thereon, and, if so approved, shall be effective as of such date. Unless earlier
terminated by the Board pursuant to Section 9.3, the Plan shall terminate on the
tenth anniversary of its Effective Date. No Award shall be made pursuant to the
Plan after its termination date, but Awards made prior to the termination date
may extend beyond that date.
ARTICLE II
DEFINITIONS
The following words and phrases, as used in the Plan, shall have these
meanings:
Section 2.1 "Award" means, individually or collectively, any Option,
SAR, Restricted Stock Award, current Campbell Stock or Performance Unit Award.
Section 2.2 "Board" means the Board of Directors of the Company.
Section 2.3 "Campbell Group" means the Company and all of its
Subsidiaries on and after the Effective Date.
Section 2.4 "Campbell Stock" means Capital Stock of the Company.
Section 2.5 "Capital and Income Retained in the Business" means capital
and income, retained in the business of the Campbell Group as reported to the
Company on a consolidated basis by its independent public accountants.
Section 2.6 "Code" means the Internal Revenue Code of 1986, as amended.
Section 2.7 "Committee" means those members, not to be less than three,
of the Compensation Committee of the Board who, at the time of service on the
Committee hereunder, are, and at all times within one year prior thereto shall
have been, not eligible for selection as persons to whom Awards may be made or
to whom Options may be granted pursuant to the Plan or any other plan of the
Campbell Group, except for non-discretionary Awards pursuant to Article XI.
Section 2.8 "Company" means Campbell Soup Company and its successors
and assigns.
Section 2.9 "Deferred Award Account" means an account established for a
Participant under Section 8.1(a).
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Section 2.10 "Effective Date" means the date on which the Plan is
approved by the stockholders of the Company, as provided in Section 1.2.
Section 2.11 "Fair Market Value" means, as of any specified date, an
amount equal to the highest of the following:
(i) the mean between the reported high and low prices of
Campbell Stock on the New York Stock Exchange composite tape on the
specified date;
(ii) the mean between the reported high and low prices of
Campbell Stock on the New York Stock Exchange composite tape on the
market day preceding the specified date;
(iii) the five-day average mean between the reported high and
low prices of Campbell Stock on the New York Stock Exchange composite
tape during the five market days immediately preceding the specified
date.
Section 2.12 "Fiscal Year" means the fiscal year of the Company, which
is the 52- or 53-week period ending on the Sunday closest to July 31.
Section 2.13 "Incentive Stock Option" means an option within the
meaning of Section 422A of the Code.
Section 2.14 "Income before Taxes on Income" means income before taxes
on income of the Campbell Group as reported to the Company on a consolidated
basis by its independent public accountants.
Section 2.15 "Key Employee" means an employee of the Campbell Group who
occupies a responsible executive, professional, or administrative position and
who has the capacity to contribute to the success of the Campbell Group.
Section 2.16 "Market Price" means the price of the closing sale (or
last bid on a day when no sale occurs) of Campbell Stock on the New York Stock
Exchange composite tape.
Section 2.17 "Nonqualified Stock Option" means an Option granted under
the Plan other than an Incentive Stock Option.
Section 2.18 "Option" means both a Nonqualified Stock Option and an
Incentive Stock option to purchase Campbell Stock.
Section 2.19 "Option Price" means the price at which Campbell Stock may
be purchased under an Option as provided in Section 5.4.
Section 2.20 "Participant" means a Key Employee or a non-employee
director to whom an Award has been made under the Plan.
Section 2.21 "Performance Period" means a period of time over which a
Participant's performance is measured under Section 7.2.
Section 2.22 "Performance Unit" means the unit of measure determined
under Article VII by which is expressed the value of a Performance Unit Award.
Section 2.23 "Performance Unit Award" means an Award granted under
Article VII.
Section 2.24 "Performance Unit Agreement" means an agreement entered
into between a Participant and the Company under Section 7.8.
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Section 2.25 "Personal Representative" means the person or persons who,
upon the death, disability, or incompetency of a Participant, shall have
acquired, by will or by the laws of descent and distribution or by other legal
proceedings, the right to exercise an Option or the right to any Restricted
Stock Award or Performance Unit Award theretofore granted or made to such
Participant.
Section 2.26 "Plan" means Campbell Soup Company 1984 Long-Term
Incentive Plan.
Section 2.27 "Restricted Stock" means Campbell Stock subject to the
terms and conditions provided in Article VI.
Section 2.28 "Restricted Stock Award" means an Award granted under
Article VI.
Section 2.29 "Restriction Period" means a period of time determined
under Section 6.2 during which Restricted Stock is subject to the terms and
conditions provided in Section 6.3.
Section 2.30 "S & P Index" means the daily stock price index for
industrial companies as published by Standard & Poor's Corporation.
Section 2.31 "S & P Units" means cash measured by the S & P Index.
Section 2.32 "SAR" means a stock appreciation right granted under
Section 5.8.
Section 2.33 "Stock Option Agreement" means an agreement entered into
between a Participant and the Company under Section 5.3.
Section 2.34 "Subsidiary" means a corporation, domestic or foreign, the
majority of the voting stock of which is owned directly or indirectly by the
Company.
ARTICLE III
ADMINISTRATION
Section 3.1 Committee to Administer. The Plan shall be administered by
the Committee. The Committee shall have full power and authority to interpret
and administer the Plan and to establish and amend rules and regulations for its
administration. The Committee's decisions shall be final and conclusive with
respect to the interpretation of the Plan and any Award made under it.
A majority of the members of the Committee shall constitute a quorum
for the conduct of business at any meeting. The Committee shall act by majority
vote of the members present at a duly convened meeting, which may include a
meeting by conference telephone call held in accordance with applicable law.
Action may be taken without a meeting if written consent thereto is given in
accordance with applicable law.
Section 3.2 Powers of Committee. (a) Subject to the provisions of the
Plan, the Committee shall have authority, in its discretion, to determine those
Key Employees who shall receive an Award, the time or times when such Award
shall be made, and the type of Award to be granted, whether an Incentive Stock
Option or a Nonqualified Stock Option shall be granted, the number of shares to
be subject to each Option and Restricted Stock Award, and the value of each
Performance Unit.
(b) An Option, an SAR, a Restricted Stock Award, an unrestricted
Campbell Stock Award, or a Performance Unit Award may be granted by the
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Committee to a Key Employee who is a Director of the Company only if approved by
the Board. A Director shall not participate in a vote approving a grant to
himself or herself of an Option, an SAR, a Restricted Stock Award, an
unrestricted Campbell Stock Award, or a Performance Unit Award.
(c) The Committee shall determine the terms, restrictions, and
provisions of the agreement relating to each Award, including such terms,
restrictions, and provisions as shall be necessary to cause certain options to
qualify as Incentive Stock Options. The Committee may correct any defect or
supply any omission or reconcile any inconsistency in the Plan or in any
agreement relating to an Award, in such manner and to the extent the Committee
shall determine in order to carry out the purposes of the Plan. The Committee
may, in its discretion, accelerate (i) the date on which any Option or SAR may
be exercised, (ii) the date of termination of the restrictions applicable to a
Restricted Stock Award, or (iii) the end of a Performance Period under a
Performance Unit Award, if the Committee determines that to do so will be in the
best interests of the Company and the Participants in the Plan.
ARTICLE IV
AWARDS
Section 4.1 Awards. Awards under the Plan shall consist of Incentive
Stock Options, Nonqualified Stock Options, SARs, Restricted Stock, unrestricted
Campbell Stock and Performance Units. All Awards shall be subject to the terms
and conditions of the Plan and to such other terms and conditions consistent
with the Plan as the Committee deems appropriate. Awards under a particular
section of the Plan need not be uniform and Awards under two or more sections
may be combined in one agreement. Any combination of Awards may be granted at
one time and on more than one occasion to the same Key Employee.
Section 4.2 Eligibility For Awards. An Award may be made to any Key
Employee selected by the Committee. In making this selection and in determining
the form and amount of the Award, the Committee may give consideration to the
functions and responsibilities of the respective Key Employee, his or her
present and potential contributions to the success of the Campbell Group, the
value of his or her services to the Campbell Group, and such other factors
deemed relevant by the Committee. Non-employee directors are eligible to receive
non-discretionary Awards of current Campbell Stock pursuant to Article XI.
Section 4.3 Shares Available Under the Plan. The Campbell Stock to be
offered under the Plan pursuant to Options, SARs, Performance Unit Awards, and
Restricted Stock and unrestricted Campbell Stock Awards must be Campbell Stock
previously issued and outstanding and reacquired by the Company. Subject to
adjustment under Section 9.2, no more than 12,000,000 shares of Campbell Stock
shall be issuable upon exercise of Options, SARs, or pursuant to Performance
Unit Awards, Restricted Stock or unrestricted Campbell Stock Awards granted
under the Plan. Any shares of Campbell Stock subject to an Option which for any
reason is cancelled (excluding shares subject to an Option cancelled upon the
exercise of a related SAR) or terminated without having been exercised, or any
shares of Restricted Stock which are forfeited, shall again be available for
Awards under the Plan. Shares subject to an Option cancelled upon the exercise
of an SAR shall not again be available for Awards under the Plan.
Section 4.4 Limitation on Performance Unit Awards. For each fiscal year
included in a Performance Period, the maximum aggregate dollar value of the
Performance Units awarded to any Key Employee with respect to such Performance
Period may not exceed 75% of his or her annual salary at the time such
Performance Units are awarded.
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ARTICLE V
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
Section 5.1 Award of Stock Options. The Committee may, from time to
time, subject to Section 3.2(b) and other provisions of the Plan and such terms
and conditions as the Committee may prescribe, award Incentive Stock Options and
Nonqualified Stock Options to any Key Employee. Awards of Incentive Stock
Options and Nonqualified Stock Options may be separate and not in tandem.
Section 5.2 Period of Option. (a) Unless otherwise provided in the
related Stock Option Agreement, an Option granted under the Plan shall be
exercisable only after twelve months have elapsed from the date of grant. After
the twelve-month waiting period, the Option may be exercised at any time during
the term of the Option, in whole or in installments, as specified in the related
Stock Option Agreement. Subject to Section 5.6, the duration of each Option
shall not be more than ten years from the date of grant.
(b) Except as provided in Section 5.6, an Option may not be exercised
by a Participant unless such Participant is then, and continually (except for
sick leave, military service, or other approved leave of absence) after the
grant of the Option has been, an employee of the Campbell Group.
Section 5.3 Stock Option Agreement. Each Option shall be evidenced by a
Stock Option Agreement, in such form and containing such provisions not
inconsistent with the provisions of the Plan as the Committee from time to time
shall approve.
Section 5.4 Option Price, Exercise and Payment. The Option Price of
Campbell Stock under each Option shall be determined by the Committee but shall
be a price not less than 100 percent of the Fair Market Value of Campbell Stock
at the date such Option is granted, as determined by the Committee.
Options may be exercised from time to time by giving written notice to
the Treasurer of the Company, specifying the number of shares to be purchased.
No Option may be exercised for less than 40 shares unless the issue of a lesser
number is enough to exhaust the Option. The notice of exercise shall be
accompanied by payment in full of the Option Price in cash or its equivalent,
provided, however, that if the Committee, in its discretion, so provides in the
related Stock Option Agreement, the Option Price may be paid in whole or in part
through the transfer to the Company of shares of Campbell Stock previously
acquired by the Participant, provided the shares so transferred have been held
by the Participant for a period of more than one year and, further provided,
that no Restricted Stock may be transferred as payment of the Option Price. In
the event such Option Price is paid in whole or in part, with shares of Campbell
Stock, the portion of the Option Price so paid shall be equal to the value, as
of the date of exercise of the Option, of such shares. The value of such shares
shall be equal to the number of such shares multiplied by the average of the
high and low sales prices of Campbell Stock quoted on the New York Stock
Exchange composite tape on the trading day coincident with the date of exercise
of such Option (or the immediately preceding trading day if the date of exercise
is not a trading day). Such shares must be delivered (along with the portion to
be paid in cash) within five days after the date of exercise. If the Participant
fails to pay the Option Price within such five-day period, the Committee shall
have the right to take whatever action it deems appropriate, including voiding
the exercise of the Option. The Company shall not issue or transfer Campbell
Stock upon exercise of an Option until the Option Price is fully paid. If the
related Stock Option Agreement so provides, the Participant may satisfy any
amounts required to be withheld by the Company under applicable federal, state
and local tax laws in effect from time to time, by electing to have the Company
withhold a portion of the shares of Campbell Stock to be delivered for
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the payment of such taxes on such terms and conditions as the Stock Option
Agreement specifies.
Section 5.5 Limitations on Incentive Stock Options. (a)(1) For
Incentive Stock Options granted prior to January 1, 1987, the aggregate Fair
Market Value (determined as of the time such Option is granted) of Campbell
Stock for which a Key Employee may be granted Incentive Stock Options in any
calendar year (under all plans of the Company, its parent, and Subsidiaries
which provide for the granting of Incentive Stock Options) shall not exceed
$100,000, plus any unused limit carryover (as provided by Section 422A(c)(4) of
the Code, prior to its amendment by Pub. L. No. 99-514) to such year. If
$100,000 exceeds the aggregate Fair Market Value (determined as of the time the
Option is granted) of the Campbell Stock for which a Key Employee is granted
Incentive Stock Options in any calendar year (under all plans of the Company,
its parent, and Subsidiaries which provide for the granting of Incentive Stock
Options) one-half of such excess shall be an unused limit carryover to each of
the three succeeding calendar years.
(a)(2) For Incentive Stock Options granted after December 31, 1986,
there is no annual dollar limit on the amount of Incentive Stock Options which
may be granted to a Key Employee, but there is a $100,000 per Key Employee limit
on the Fair Market Value of stock covered by such Options (determined at the
time the Option is granted) that are exercisable by a Key Employee in any one
calendar year.
(b)(1) Each Incentive Stock Option granted prior to January 1, 1987,
shall not be exercisable while there is outstanding any Incentive Stock Option
that was previously granted to the Participant by the Company, its parent, or a
Subsidiary (determined as of the time such Option was granted) or a predecessor
of any of such corporations. An Incentive Stock Option shall be treated as
outstanding for this purpose until it is deemed exercised in full or expires by
reason of lapse of time.
(b)(2) For Incentive Stock Options granted after December 31, 1986, the
rules set forth in Section 5.5(b)(1) above, (pertaining to the requirement that
Incentive Stock Options granted prior to January 1, 1987, be exercised in the
order granted), are not applicable.
(c) An Incentive Stock Option shall not be awarded to any Key Employee
who, at the time of award, owns stock possessing more than ten percent of the
total combined voting power of all classes of stock of the Company or of any
Subsidiary or parent of the Company.
Section 5.6 TERMINATION OF EMPLOYMENT. (a) If the employment of a
Participant with the Campbell Group is terminated for reasons other than (i)
death, (ii) discharge for cause, (iii) retirement, or (iv) resignation, the
Participant may exercise an Option, except an Incentive Stock Option, at any
time within three years after such termination, to the extent of the number of
shares covered by such Option which were exercisable at the date of such
termination; except that an option shall not be exercisable on any date beyond
the expiration of such three-year period or the expiration date of such Option,
whichever occurs first.
(b) If the employment of a Participant with the Campbell Group is
terminated for cause, any Options of such Participant shall expire and any
rights thereunder shall terminate immediately. Any Option of a Participant whose
service is terminated by resignation may be exercised at any time within three
months of such resignation to the extent that the number of shares covered by
such Option were exercisable at the date of such resignation,
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except that an Option shall not be exercisable on any date beyond the expiration
date of such Option.
(c) Should a Participant, who is not eligible to retire under the
Company's pension plan or a pension plan of any affiliated Company, die either
while in the employ of the Campbell Group or after termination of such
employment (other than discharge for cause), the Option rights, except Incentive
Stock Option Rights, of such deceased Participant may be exercised by his or her
Personal Representative at any time within three years after the Participant's
death to the extent of the number of shares covered by such Option which were
exercisable at the date of such death, except that an Option shall not be so
exercisable on any date beyond the expiration date of such Option.
(d) After February 29, 1996, should a Participant who is eligible to
retire under the Company's pension plan or a pension plan of any affiliated
company die prior to the vesting of all Options, any installment or installments
not then exercisable shall become fully exercisable as of the date of
Participant's death and the Option rights, except Incentive Stock Option Rights,
may be exercised by the Participant's Personal Representative at any time prior
the expiration date of any Option.
(e) Should a Participant, who retires after February 29, 1996, die
prior to exercising all Options, then his or her Option rights, except Incentive
Stock Option Rights, may be exercised by the Participant's Personal
Representative at any time prior to the expiration date of any Options.
(f) If a Participant who was granted a Stock Option dies within 180
days of the expiration date of such Option, and if on the date of death the
Participant was then entitled to exercise such Option, including options vested
pursuant to section 5.6 (d), and if the Option expires without being exercised,
the Personal Representative of the Participant shall receive in settlement a
cash payment from the Company of a sum equal to the amount, if any, by which the
Fair Market Value (determined on the expiration date of the Option) of Campbell
Stock subject to the Option exceeds the Option Price.
(g) Any Option, except an Incentive Stock Option, of a Participant who
retires after February 29, 1996, may be exercised at any time prior to the
expiration date of such Option. In the event the Participant's employment with
the Campbell Group terminates prior to the vesting of all Options, and if the
Participant is eligible to retire under the Company's pension plan or a pension
plan of any affiliated company at the date of such termination, any installment
or installments not then exercisable shall become fully exercisable as of the
effective date of such termination. If the Participant receives severance
payments from the Company or any affiliated company and becomes eligible to
retire during the severance payment period, all of the Participant's options
shall become fully exercisable as of the date of such Participant's retirement
eligibility date and may be exercised at any time prior to the expiration date
of such Option.
(h) Incentive Stock Options, that have not previously expired, must be
exercised within three months following Participant's termination of employment,
unless employment is terminated because of disability in which event the
exercise period is extended to one year following termination.
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(i) Notwithstanding the provisions of subsections (a) through (h)
above, if the employment of a Participant with the Campbell Group is terminated
upon the spin-off of Vlasic Foods International Inc. ("Vlasic") from the Company
and he or she is immediately thereafter employed by Vlasic or a subsidiary
thereof, it shall not be considered a 'termination from the Campbell Group' with
respect to any Nonqualified Stock Option that the Participant had a right to
exercise, by the terms of the applicable vesting schedule, immediately before
the termination of employment with the Campbell Group. The provisions of
subsections (a) through (h) above shall then be applied by considering
employment with Vlasic and its subsidiaries the same as employment with the
Campbell Group.
ARTICLE VI
RESTRICTED STOCK
Section 6.1 Award of Restricted Stock. (a) The Committee may make a
Restricted Stock Award to any Participant, subject to this Article VI and to
such other terms and conditions as the Committee may prescribe.
(b) Each certificate for Restricted Stock shall be registered in the
name of the Participant and deposited by him or her, together with a stock power
endorsed in blank, with the Company, unless the Participant has elected to defer
pursuant to Section 8.1.
Section 6.2 Restriction Period. At the time of making a Restricted
Stock Award, the Committee shall establish the Restriction Period applicable to
such Award. The Committee may establish different Restriction Periods from time
to time and each Restricted Stock Award may have a different Restriction Period,
in the discretion of the Committee. Restriction Periods, when established for
each Restricted Stock Award, shall not be changed except as permitted by Section
6.3.
Section 6.3 Other Terms and Conditions. Campbell Stock, when awarded
pursuant to a Restricted Stock Award, will be represented by a stock certificate
registered in the name of the Participant who receives the Restricted Stock
Award, unless the Participant has elected to defer pursuant to Section 8.1. Such
certificate shall be deposited with the Company as provided in Section 6.1(b).
The Participant shall be entitled to receive dividends during the Restriction
Period and shall have the right to vote such Campbell Stock and all other
shareholder's rights, with the exception that (i) the Participant will not be
entitled to delivery of the stock certificate during the Restriction Period,
(ii) the Company will retain custody of the Campbell Stock during the
Restriction Period, (iii) a breach of a restriction or a breach of the terms and
conditions established by the Committee pursuant to the Restricted Stock Award
will cause a forfeiture of the Restricted Stock Award. The Committee may, in
addition, prescribe additional restrictions, terms, or conditions upon or to the
Restricted Stock Award.
Section 6.4 Restricted Stock Award Agreement. Each Restricted Stock
Award shall be evidenced by a Restricted Stock Award Agreement in such form and
containing such terms and conditions not inconsistent with the provisions of the
Plan as the Committee from time to time shall approve. If the Restricted Stock
Award Agreement so provides, the Participant may satisfy any amounts required to
be withheld by the Company under applicable federal, state and local tax laws in
effect from time to time, by electing to have the Company withhold a portion of
the Restricted Stock Award to be delivered for the payment of such taxes on such
terms and conditions as the Restricted Stock Award Agreement specifies.
Section 6.5 Termination of Employment. The Committee may, in its sole
discretion, establish rules pertaining to the Restricted Stock Award in the
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event of termination of employment (by retirement, disability, death, or
otherwise) of a Participant prior to the expiration of the Restriction Period.
Section 6.6 Payment for Restricted Stock. Restricted Stock Awards may
be made by the Committee under which the Participant shall not be required to
make any payment for the Campbell Stock or, in the alternative, under which the
Participant, as a condition to the Restricted Stock Award, shall pay all (or any
lesser amount than all) of the Fair Market Value of the Campbell Stock,
determined as of the date the Restricted Stock Award is made. If the latter,
such purchase price shall be paid in cash as provided in the Restricted Stock
Award Agreement.
ARTICLE VII
AWARD OF PERFORMANCE UNITS
Section 7.1 Award of Performance Units. The Committee may award
Performance Units to any Participant. Each Performance Unit shall represent the
right of a Participant to receive an amount equal to the value of the
Performance Unit, determined in the manner established by the Committee at the
time of Award.
Section 7.2 Performance Period. At the time of each Performance Unit
Award, the Committee shall establish, with respect to each such Award, a
Performance Period over which the performance of the Participant shall be
measured. There may be more than one Award in existence at any one time, and
Performance Periods may differ.
Section 7.3 Performance Measures. (a) Performance Units shall be
awarded to a Participant contingent upon the future performance of the Company
and/or of the Subsidiary, division, or department for which he or she is
employed over the Performance Period, or contingent upon such other performance
measures as the Committee may deem appropriate. The Committee shall establish
the performance measures applicable to the Participant prior to the beginning of
each Performance Period, but such performance measures may be subject to such
later revisions to reflect significant unforeseen events or changes as the
Committee shall deem appropriate.
(b) At the time of each Performance Unit Award, the Committee shall
establish target performance goals to be achieved with the Performance Period.
Section 7.4 Performance Unit Value. Each Performance Unit shall have a
maximum dollar value established by the Committee at the time of the Award. The
earned value of a Performance Unit will be determined by the Committee in
respect of a Performance Period in relation to the degree of attainment of
target performance. The value of a Performance Unit may, in the discretion of
the Committee, be equal to the Fair Market Value of one share of Campbell Stock.
Section 7.5 Award Criteria. In determining the number of Performance
Units to be granted to any Participant, the Committee shall take into account
the Participant's responsibility level, performance, potential, cash
compensation level, other incentive awards, and such other considerations as it
deems appropriate.
Section 7.6 Payment. (a) Following the end of Performance Period, a
Participant holding Performance Units will be entitled to receive payment of an
amount, not exceeding the maximum value of the Performance Units, based on the
achievement of the performance measures for such Performance Period, as
determined by the Committee.
(b) Payment of Performance Units shall be made in cash, whether payment
is made at the end of the Performance Period or is deferred pursuant
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to Section 8.1, except that Performance Units which are valued using Campbell
Stock shall be paid in Campbell Stock. Payment shall be made in a lump sum or in
installments and shall be subject to such other terms and conditions as shall be
determined by the Committee.
Section 7.7 Termination of Employment. (a) A Performance Unit Award
shall terminate for all purposes if the Participant does not remain continuously
in the employ of the Campbell Group at all times during the applicable
Performance Period, except as may otherwise be determined by the Committee.
(b) In the event that a Participant holding a Performance Unit ceases
to be an employee of the Campbell Group following the end of the applicable
Performance Period but prior to full payment according to the terms of the
Performance Unit Award, payment shall be made in accordance with terms
established by the Committee for the payment of such Performance Unit.
Section 7.8 Performance Unit Agreements. Performance Unit Awards shall
be evidenced by Performance Unit Agreements in such form and containing such
provisions not inconsistent with the provisions of the Plan as the Committee
shall determine.
ARTICLE VIII
DEFERRAL OF PAYMENTS
Section 8.1 Election to Defer. (a) Except with respect to Restricted
Stock which is restricted only by a length of service condition, a Participant
may elect, no later than June 30 of the Fiscal Year preceding the last Fiscal
Year of any Performance Period, to defer until the termination of his or her
employment with the Campbell Group by retirement or otherwise, all or a portion
of any related earned Performance Units or Restricted Stock. With respect to
Restricted Stock which is restricted only by a length of service condition, a
participant may elect, no later than 180 days before the expiration of the
length of service condition (or within such other time period as may be provided
in a Restricted Stock Award Agreement), to defer for a set number of years (not
less than two) or until the termination of his or her employment with the
Campbell Group by retirement or otherwise, all or a portion of his or her
related award. The value of the Performance Units or Restricted Stock so
deferred shall be allocated to a Deferred Award Account established for the
Participant. Participants who are subject to tax in a foreign country are not
eligible to defer payment of Performance Units unless a deferral election has
been approved for the Participant by the Treasurer of the Company.
(b) A Participant's Deferred Award Account for the deferral of
Performance Units shall be credited at the end of the Performance Period with
Campbell Stock, cash, or S & P Units as the Participant shall have elected in
writing at the time of his or her election under Section 8.1(a) above. A
Participant who elects to defer Restricted Stock shall be credited at the time
of election with Campbell Stock in the Participant's Deferred Award Account. The
Participant's Deferred Award Account shall be an unfunded bookkeeping account
only.
Section 8.2 Deferral Procedures and Measurement of Deferred Account.
The Committee, or the Treasurer of the Company, if designated by the Committee,
shall establish procedures and rules regarding the timing of deferred elections,
the time period for deferral, the maximum number of annual installment payments,
the measurement units for valuing Deferred Accounts, transfer of the balances in
Deferred Accounts among measurement units, statements of Deferred Accounts, the
time and manner of payment of Deferred Accounts, and other administrative items
for Deferred Accounts.
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Section 8.3 Payment in the Event of Death. If the Participant dies
(before or after his or her retirement), any portion of his or her Deferred
Award Account then unpaid shall be paid to the beneficiaries named in the most
recent beneficiary designation filed with the Treasurer of the Company or, in
the absence of such designation, paid to, or as directed by, his or her Personal
Representative, in such one or more installments as the Participant may have
elected, in writing, coincident with the election made pursuant to Section 8.1.
Section 8.4 Financial Hardship. (a) In the event a Participant, before
termination of his or her employment, experiences financial hardship, the
Participant may request, and the Committee in its sole discretion may grant, a
distribution in one lump sum of such portion of the amount credited to the
Participant's Deferred Award Account as is required to relieve such financial
hardship and is not reasonably available from the Participant's other resources.
Such request shall be irrevocable and shall be made at least six months in
advance of the distribution.
(b) In the event a Participant, after termination of his or her
employment, experiences financial hardship, the Participant may request, and the
Committee in its sole discretion may grant, an acceleration of the Participant's
elected number of installments under Section 8.3, to the extent necessary to
relieve such financial hardship.
(c) For purposes of this Section 8.4, a distribution will be on account
of "financial hardship" if the distribution is necessary due to severe and
unanticipated financial hardship caused by an event beyond the control of the
Participant. The Committee, in its sole discretion, shall determine whether or
not a Participant has experienced "financial hardship" within the meaning of
this Section 8.4.
Section 8.5 Conditions of Payment of Deferred Award Accounts. Prior to
a Change in Control (as hereinafter defined), a Participant who is discharged
for willful, deliberate or gross misconduct as determined by the Company shall,
unless otherwise determined by the Committee in connection with the termination
of his or her employment, lose any right to receive payment of his or her
Deferred Award Account.
No installment of a Deferred Award Account of a Participant whose
service with the Campbell Group shall have terminated by retirement or otherwise
shall be paid unless, from the time of termination until the time for such
payment or until his or her death, whichever happens first, the Participant
shall have continuously refrained from engaging in any business directly or
indirectly competitive with the Campbell Group. If the Participant violates this
condition, all rights in the unpaid portion of his or her Deferred Award Account
shall be forfeited to the Company. The Committee may waive this condition, upon
the written request of a Participant, if in its sole judgment the nonfulfillment
of the condition will have no substantial adverse effect upon the Campbell
Group. The request shall fully describe the proposed competitive activity, and
the waiver shall be limited to the specific competitive activity so described.
ARTICLE IX
MISCELLANEOUS PROVISIONS
Section 9.1 Nontransferability. Unless otherwise provided by the
Committee, no option, SAR, share of Restricted Stock, or Performance Unit under
the Plan shall be transferable by the Participant otherwise than by will or, if
the Participant dies intestate, by the laws of descent and distribution. All
Awards shall be exercisable or received during the Participant's lifetime only
by such Participant or his Personal
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Representative. Any transfer contrary to this Section 9.1 will nullify the
Option, SAR, Performance Unit, or share of Restricted Stock.
Section 9.2 Adjustments Upon Changes in Stock. In case of any
reorganization, recapitalization, stock split, stock dividend, combination of
shares, merger, consolidation, rights offering, or any other changes in the
corporate structure or shares of the Company, appropriate adjustments may be
made by the Committee (or if the Company is not the surviving corporation in any
such transaction, the board of directors of the surviving corporation) in the
aggregate number and kind of shares subject to the Plan, and the number and kind
of shares and the price per share subject to outstanding Options or which may be
issued under outstanding Restricted Stock Awards or pursuant to unrestricted
Campbell Stock Awards. Appropriate adjustments may also be made by the Committee
in the terms of any Awards under the Plan, subject to Article XI, to reflect
such changes and to modify any other terms of outstanding Awards on an equitable
basis, including modifications of performance goals and changes in the length of
Performance Periods.
Section 9.3 Amendment, Suspension, and Termination of Plan. (a) The
Board may suspend or terminate the Plan or any portion thereof at any time, and
may amend, subject to Section 11.6, the Plan from time to time in such respects
as the Board may deem advisable in order that any Awards thereunder shall
conform to any change in applicable laws or regulations or in any other respect
the Board may deem to be in the best interests of the Company; provided,
however, that no such amendment shall, without stockholder approval, (i) except
as provided in Section 9.2, increase the number of shares of Campbell Stock
which may be issued under the Plan, (ii) modify the requirements as to
eligibility for participation in the Plan, (iii) materially increase the
benefits accruing to Participants under the Plan, (iv) make any other change
that would disqualify the Plan for purposes of the exemption provided by Rule
16b-3(c)(2) of the Securities and Exchange Commission, (v) reduce the Option
Price below the Fair Market Value of Campbell Stock on the day the Option is
awarded, (vi) permit the award of SARs other than in tandem with an Option,
(vii) permit the exercise of an SAR during the first six months of its term
except as otherwise provided herein, (viii) permit the exercise of an Option or
SAR without surrender of the related SAR or Option, or (ix) extend the
termination date of the Plan. No such amendment, suspension, or termination
shall alter or impair any outstanding Options, SARs, shares of Restricted Stock,
or Performance Units without the consent of the Participant affected thereby.
(b) With the consent of the Participant affected thereby, the Committee
may amend or modify any outstanding Options. Restricted Stock Awards, or
Performance Unit Awards in any manner to the extent that the Committee would
have had the authority under the Plan initially to award such Options, SARs,
Restricted Stock Awards, or Performance Unit Awards as so modified or amended,
including without limitation, to change the date or dates as of which such
Options or SARs may be exercised, to remove the restrictions on shares of
Restricted Stock, or to modify the manner in which Performance Units are
determined and paid.
Section 9.4 Nonuniform Determinations. The Committee's determinations
under the Plan, including without limitation, (i) the determination of the Key
Employees to receive Awards, (ii) the form, amount, and timing of such Awards,
(iii) the terms and provisions of such Awards and (iv) the agreements evidencing
the same, need not be uniform and may be made by it selectively among Key
Employees who receive, or who are eligible to receive, Awards under the Plan,
whether or not such Key Employees are similarly situated. This Section 9.4 shall
not apply to current Campbell Stock Awards to non-employee directors which shall
be uniform and non-discretionary in accordance with Article XI.
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Section 9.5 General Restriction. Each Award under the Plan shall be
subject to the condition that, if at any time the Committee shall determine that
(i) the listing, registration, or qualification of the shares of Campbell Stock
subject or related thereto upon any securities exchange or under any state or
federal law (ii) the consent or approval of any government or regulatory body,
or (iii) an agreement by the Participant with respect thereto, is necessary or
desirable, then such Award shall not become exercisable in whole or in part
unless such listing, registration, qualification, consent, approval, or
agreement shall have been effected or obtained free of any conditions not
acceptable to the Committee.
Section 9.6 No Right To Employment. Neither the action of the Company
in establishing the Plan, nor any action taken by it or by the Board or the
Committee under the Plan, nor any provision of the Plan, shall be construed as
giving to any person the right to be retained in the employ of the Company or
any Subsidiary.
ARTICLE X
CHANGE IN CONTROL OF THE COMPANY
Section 10.1 Contrary Provisions. Notwithstanding anything contained in
the Plan to the contrary, the provisions of this Article X shall govern and
supersede any inconsistent terms or provisions of the Plan.
Section 10.2 Definitions.
Change in Control. For purposes of the Plan "Change in Control" shall
mean any of the following events: (a) The acquisition in one or more
transactions by any "Person" (as the term person is used for purposes of Section
13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the "1934
Act")) of "Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated
under the 1934 Act) of twenty-five percent (25%) or more of the combined voting
power of the Company's then outstanding voting securities (the "Voting
Securities"), provided, however, that for purposes of this Section 10.2(a), the
Voting Securities acquired directly from the Company by any Person shall be
excluded from the determination of such Person's Beneficial Ownership of Voting
Securities (but such Voting Securities shall be included in the calculation of
the total number of Voting Securities then outstanding); or
(b) The individuals who, as of January 25, 1990, are members of the
Board (the "Incumbent Board"), cease for any reason to constitute at least
two-thirds of the Board; provided, however, that if the election, or nomination
for election by the Company's stockholders, of any new director was approved by
a vote of at least two-thirds of the Incumbent Board, such new director shall,
for purposes of the Plan, be considered as a member of the Incumbent Board; or
(c) Approval by stockholders of the Company of (1) a merger or
consolidation involving the Company if the stockholders of the Company,
immediately before such merger or consolidation, do not own, directly or
indirectly immediately following such merger or consolidation, more than eighty
percent (80%) of the combined voting power of the outstanding voting securities
of the corporation resulting from such merger or consolidation in substantially
the same proportion as their ownership of the Voting Securities immediately
before such merger or consolidation or (2) a complete liquidation or dissolution
of the Company or an agreement for the sale or other disposition of all or
substantially all of the assets of the Company; or
(d) Acceptance of stockholders of the Company of shares in a share
exchange if the stockholders of the Company, immediately before such share
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<PAGE> 16
exchange, do not own, directly or indirectly immediately following such share
exchange, more than eighty percent (80%) of the combined voting power of the
outstanding voting securities of the corporation resulting from such share
exchange in substantially the same proportion as their ownership of the Voting
Securities outstanding immediately before such share exchange.
Notwithstanding the foregoing, a Change in Control shall not be deemed
to occur solely because twenty-five percent (25%) or more of the then
outstanding Voting Securities is acquired by (i) a trustee or other fiduciary
holding securities under one or more employee benefit plans maintained by the
Company or any of its subsidiaries, (ii) any corporation which, immediately
prior to such acquisition, is owned directly or indirectly by the stockholders
of the Company in the same proportion as their ownership of stock in the Company
immediately prior to such acquisition, (iii) any "Grandfathered Dorrance Family
Stockholder" (as hereinafter defined) or (iv) any Person who has acquired such
Voting Securities directly from any Grandfathered Dorrance Family Stockholder
but only if such Person has executed an agreement which is approved by
two-thirds of the Board and pursuant to which such Person has agreed that he (or
they) will not increase his (or their) Beneficial Ownership (directly or
indirectly) to 30% or more of the outstanding Voting Securities (the "Standstill
Agreement") and only for the period during which the Standstill Agreement is
effective and fully honored by such Person. For purposes of this Section,
"Grandfathered Dorrance Family Stockholder" shall mean at any time a "Dorrance
Family Stockholder" (as hereinafter defined) who or which is at the time in
question the Beneficial Owner solely of (v) Voting Securities Beneficially Owned
by such individual on January 25, 1990, (w) Voting Securities acquired directly
from the Company, (x) Voting Securities acquired directly from another
Grandfathered Dorrance Family Stockholder, (y) Voting Securities which are also
Beneficially Owned by other Grandfathered Dorrance Family Stockholders at the
time in question, and (z) Voting Securities acquired after January 25, 1990
other than directly from the Company or from another Grandfathered Dorrance
Family Stockholder by any "Dorrance Grandchild" (as hereinafter defined)
provided that the aggregate amount of Voting Securities so acquired by each such
Dorrance Grandchild shall not exceed five percent (5%) of the Voting Securities
outstanding at the time of such acquisition. A "Dorrance Family Stockholder" who
or which is at the time in question the Beneficial Owner of Voting Securities
which are not specified in clauses (v), (w), (x), (y) and (z) of the immediately
preceding sentence shall not be a Grandfathered Dorrance Family Stockholder at
the time in question. For purposes of this Section, "Dorrance Family
Stockholders" shall mean individuals who are descendants of the late Dr. John T.
Dorrance, Sr. and/or the spouses, fiduciaries and foundations of such
descendants. A "Dorrance Grandchild" means as to each particular grandchild of
the late Dr. John T. Dorrance, Sr., all of the following taken collectively:
such grandchild, such grandchild's descendants and/or the spouses, fiduciaries
and foundations of such grandchild and such grandchild's descendants.
Moreover, notwithstanding the foregoing, (i) a Change in Control shall
not be deemed to occur solely because any Person (the "Subject Person") acquired
Beneficial Ownership of more than the permitted amount of the outstanding Voting
Securities as a result of the acquisition of Voting Securities by the Company
which, by reducing the number of Voting Securities outstanding, increases the
proportional number of shares Beneficially Owned by the Subject Person, provided
that if a Change in Control would occur (but for the operation of this sentence)
as a result of the acquisition of Voting Securities by the Company, and after
such share acquisition by the Company, the Subject Person becomes the Beneficial
Owner of any additional Voting Securities which increases the percentage of the
then outstanding Voting Securities Beneficially Owned by the Subject Person,
then a Change in Control shall occur and (ii) a Change in Control described in
Section 10.2(a) with respect to any Participant shall not be deemed to occur by
reason of the Participant's acquisition of Beneficial
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Ownership (including the acquisition of Beneficial Ownership by a group of which
the Participant is a member) with respect to any transaction on which the
Participant would rely on Rule 16b-3(e) promulgated under the Exchange Act.
Cause. For purposes of the Plan the term, "Cause" shall mean the
termination of a Participant's employment by reason of his or her (a) conviction
of a felony or (b) engaging in conduct which constitutes willful gross
misconduct which is demonstrably and materially injurious to the Company,
monetarily or otherwise. No act, nor failure to act, on the Employee's part,
shall be considered "willful" unless he or she has acted, or failed to act, with
an absence of good faith and without a reasonable belief that his or her action
or failure to act was in the best interest of the Company.
Section 10.3 "Adjusted Fair Market Value" means, in the event of a
Change in Control, the greater of (a) the highest price per share of Campbell
Stock paid to holders of the shares of Campbell Stock in any transaction (or
series of transactions) constituting or resulting in a Change in Control or (b)
the highest Fair Market Value of a share of Campbell Stock during the ninety
(90) day period ending on the date of a Change in Control.
Section 10.4 Upon a Change in Control, (a) all Options and SARs
outstanding on the date of such Change in Control (other than any Options or
SARs granted to David W. Johnson) shall become immediately and fully exercisable
and (b) any Participant who may be subject to liability under Section 16(b) of
Securities Exchange Act of 1934, as amended, (other than any Options or SARs
granted to David W. Johnson) will be permitted to surrender for cancellation for
a period of sixty (60) days commencing after the later of such Change in Control
or the expiration of six months from the date of grant, any Option or SAR (or
portion of an Option or SAR), other than an Incentive Stock Option granted prior
to January 25, 1990, to the extent not yet exercised and the Participant will be
entitled to receive a cash payment in an amount equal to the excess, if any, in
respect of each Option or SAR surrendered, (1)(i) except as described in clause
(ii) below, the greater of (x) the Fair Market Value, on the date preceding the
date of surrender of the shares subject to the Option or SAR (or portion
thereof) surrendered or (y) the Adjusted Fair Market Value of the Shares subject
to the Option or SAR (or portion thereof) surrendered or (ii) in the case of an
Incentive Stock Option or an SAR issued in connection with an Incentive Stock
Option, the Fair Market Value, on the date preceding the date of surrender, of
the Shares subject to the Option or SAR (or portion thereof) surrendered, over
(2) the aggregate purchase price for such Shares under the Option or SAR.
Section 10.5 Upon a Change in Control, all restrictions upon any shares
of Restricted Stock (other than Restricted Stock which is subject to performance
related restrictions ("Performance Restricted Stock") and Restricted Stock
granted to David W. Johnson) shall lapse immediately and all such shares shall
become fully vested in the Participant and shall promptly be delivered to the
Participant.
Section 10.6 (a) Upon a Change in Control, the Participant (other than
David W. Johnson) shall (1) become vested in, and restrictions shall lapse on,
the greater of (i) fifty percent (50%) of the Performance Restricted Stock or
Performance Units or (ii) a pro rata portion of such Performance Restricted
Campbell Stock based on the portion of the Performance Period that has elapsed
to the date of the Change in Control and the aggregate vesting percentage
determined pursuant to this clause (ii) shall be applied to vesting first such
awards granted the farthest in time preceding the Change in Control (the "Vested
Performance Awards") and (2) be entitled to receive (A) in respect of all
Performance Units which become vested as a result of a Change in Control, a cash
payment within thirty (30) days after such Change in Control equal to the
product of the then current value of a Performance Unit multiplied by the
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number of Performance Units which become vested in accordance with this Section
10.6 and (B) in respect of all shares of Performance Restricted Stock which
become vested as a result of a Change in Control, the prompt delivery of such
shares.
(b) With respect to any shares of Performance Restricted Stock or
Performance Units which do not become vested pursuant to Section 10.6(a) (the
"Continuing Awards"), such shares or units (or the proceeds thereof) shall
continue to be outstanding for the remainder of the applicable Performance
Period (as if such shares or units were the only shares or units granted in
respect of each such Performance Period) and subject to the applicable Award
Criteria as modified below.
Section 10.7 Deferred Awards Accounts. (a) Upon a Change in Control,
each share of Campbell Stock credited to a Participant's Deferred Award Account
shall be converted into cash in an amount equal to the greater of (a) the Fair
Market Value per share of the Campbell Stock or (b) Adjusted Fair Market Value
and shall thereafter be credited with interest as provided in Section 8.2(b) of
Article VIII.
(b) Upon a Participant's termination of employment by the Participant
or by his or her employer for any reason (other than for Cause) within two years
following a Change in Control, the Company shall pay in a lump sum cash payment
the value of his or her Deferred Award Account (together with any interest
accrued thereon to the date of payment).
Section 10.8 Amendment or Termination. (a) This Article X shall not be
amended or terminated at any time if any such amendment or termination would
adversely affect the rights of any Participant under the Plan.
(b) For a period of twenty-four (24) months following a Change in
Control, the Plan shall not be terminated (unless replaced by a comparable
long-term incentive plan) and during such period the Plan (or such replacement
plan) shall be administered in a manner such that Participants will be provided
with long-term incentive awards producing reward opportunities generally
comparable to those provided prior to the Change in Control. Any amendment or
termination of the Plan prior to a Change in Control which (1) was at the
request of a third party who has indicated an intention or taken steps
reasonably calculated to effect a Change in Control or (2) otherwise arose in
connection with or in anticipation of a Change in Control, shall be null and
void and shall have no effect whatsoever.
(c) Following a Change in Control, the Plan shall be amended as
necessary to make appropriate adjustments to the Award Criteria for the
Continuing Awards for (a) any negative effect that the costs and expenses
incurred by the Company and its Subsidiaries in connection with the Change in
Control may have on the achievement of performance goals under the Plan and (b)
any changes to the Company and/or its Subsidiaries (including, but not limited
to, changes in corporate structure, capitalization and increased interest
expense as a result of the incurrence or assumption by the Company of
acquisition indebtedness) following the Change in Control so as to preserve the
reward opportunities and Award Criteria for comparable performance under the
Plan as in effect on the date immediately prior to the Change in Control.
Section 10.9 Trust Arrangement. All benefits under the Plan represent
an unsecured promise to pay by the Company. The Plan shall be unfunded and the
benefits hereunder shall be paid only from the general assets of the Company
resulting in the Participants having no greater rights than the Company's
general creditors; provided, however, nothing herein shall prevent or prohibit
the Company from establishing a trust or other arrangement for the purpose of
providing for the payment of the benefits payable under the Plan.
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ARTICLE XI
UNRESTRICTED CAMPBELL STOCK AWARDS FOR NON-EMPLOYEE DIRECTORS
Section 11.1 Award of Current Campbell Stock to Non-Employee Directors.
An award of 200 shares of Campbell Stock (based on Company capitalization on
September 23, 1991, and adjusted for any change in such capital structure
pursuant to Section 11.2) shall be made on December 1, 1991, to each
non-employee director who is elected at the Annual Meeting of Shareowners on
November 21, 1991. Thereafter, awards of 200 shares of Campbell Stock shall be
made on December 1 of succeeding years to each non-employee director who is
elected at subsequent Annual Meetings of Shareowners. Non-employee directors who
are not initially elected at an Annual Meeting of Shareowners shall receive a
pro rata portion of 200 shares of Campbell Stock within 10 business days of his
or her election based on the number of months remaining from date of election
until the next Annual Meeting of Shareowners divided by twelve. Any fractional
shares resulting from such calculation shall be rounded up to the nearest whole
number.
Section 11.2 Stock Split, Stock Dividend, or Extraordinary
Distribution. In the event the number of shares of Campbell Stock is increased
at any time after September 23, 1991, by a stock split, by declaration by the
Board of a dividend payable only in shares of such stock, or by any other
extraordinary distribution of shares, the number of shares granted pursuant to
Section 11.1 shall be proportionately adjusted.
Section 11.3 Organizational Changes. In the event a merger,
consolidation, reorganization, or other change in corporate structure which
materially changes the terms or value of the Campbell Stock, the number of
shares granted pursuant to Section 11.1 shall be adjusted in such manner as the
Board in its sole discretion shall determine to be equitable and consistent with
the purposes of this Article XI. Such determination shall be conclusive for all
purposes with respect to the grant made in Section 11.1 Such adjustment shall
comply with the restriction on amendments set forth in Section 11.6
Section 11.4 Election by Non-employee Directors to Receive Campbell
Stock. Each non-employee director may elect to receive all or a portion (in 10%
increments) of the annual cash retainer for Board service and other cash
compensation in shares of Campbell Stock, which will be issued quarterly. Such
election shall be irrevocable and shall be made at least six months in advance
of the date the non-employee director receives the quarterly payment. Only whole
numbers of shares will be issued and any fractional shares shall be paid in
cash. For purposes of computing the number of shares earned and their taxable
value each quarter, the value of each share shall be equal to the mean between
the reported high and low prices of Campbell Stock on the New York Stock
Exchange composite tape on the last business day of the quarter. If a
Participant dies prior to payment of all shares earned, the balance due shall be
payable in full to the Participant's designated beneficiary under the Director's
Retirement Program, or, if none, to the Participant's estate, in cash.
Section 11.5 No right to Continuance as a director. Neither the action
of the Company in establishing the Plan, nor the awarding of current Campbell
Stock shall be deemed (i) to create any obligation on the part of the Board to
nominate any director for reelection by the Company's shareowners or (ii) to be
evidence of any agreement or understanding, express or implied, that the
director has a right to continue as a director for any period of time or at any
particular rate of compensation.
Section 11.6 Amendment. The amount, pricing and timing of unrestricted
Campbell Stock Awards set forth in Section 11.1 shall not be amended (including
amendments to reflect adjustments pursuant to Section 11.3) more
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than once every six months, other than to comport with changes in the Code, the
Employee Retirement Income Security Act of 1974, as amended, or the rules
thereunder.
ARTICLE XII
UNRESTRICTED CAMPBELL STOCK AWARDS FOR KEY EMPLOYEES
Section 12.1 The Committee may make awards of unrestricted Campbell
Stock to Key Employees in recognition of outstanding achievements or as a
supplemental award for Key Employees who receive Restricted Stock Awards when
Company performance exceeds the established financial goals.
Section 12.2 Each certificate for unrestricted Campbell Stock shall be
registered in the name of the Participant and immediately be delivered to him or
her.
18
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Exhibit 10(b)
CAMPBELL SOUP COMPANY
-----------
1994 Long-Term Incentive Plan
----------
As Amended March 30, 1998
<PAGE> 2
CAMPBELL SOUP COMPANY
1994 LONG-TERM INCENTIVE PLAN
TABLE OF CONTENTS
Article Page
I. Purpose and Effective Date....................................... 1
II. Definitions...................................................... 1
III. Administration................................................... 3
IV. Awards........................................................... 4
V. Stock Options and Stock Appreciation Rights...................... 6
VI. Restricted Stock................................................. 9
VII. Unrestricted Campbell Stock Awards for Non-
Employee Directors............................................. 10
VIII Unrestricted Campbell Stock Awards for Key
Employees...................................................... 12
IX. Award of Performance Units....................................... 12
X. Deferral of Payments............................................. 13
XI. Miscellaneous Provisions......................................... 16
XII. Change in Control of the Company..................................... 17
<PAGE> 3
ARTICLE I
PURPOSE AND EFFECTIVE DATE
Section 1.1 PURPOSE. The purpose of the Plan is to provide financial
incentives for selected Key Employees of the Campbell Group and for the
non-employee Directors of the Company, thereby promoting the long-term growth
and financial success of the Campbell Group by (i) attracting and retaining
employees and Directors of outstanding ability, (ii) strengthening the Campbell
Group's capability to develop, maintain, and direct a competent management team,
(iii) providing an effective means for selected Key Employees and non-employee
Directors to acquire and maintain ownership of Campbell Stock, (iv) motivating
Key Employees to achieve long-range Performance Goals and objectives, and (v)
providing incentive compensation opportunities competitive with those of other
major corporations.
Section 1.2 EFFECTIVE DATE AND EXPIRATION OF PLAN. The Plan is subject
to approval by a majority of the votes cast at the annual meeting of shareowners
of the Company to be held on November 17, 1994, or at any adjournment thereof,
by the holders of shares of Campbell Stock entitled to vote thereon, and, if so
approved, shall be effective as of such date. Unless earlier terminated by the
Board pursuant to Section 11.3, the Plan shall terminate on the tenth
anniversary of its Effective Date. No Award shall be made pursuant to the Plan
after its termination date, but Awards made prior to the termination date may
extend beyond that date.
ARTICLE II
DEFINITIONS
The following words and phrases, as used in the Plan, shall have these
meanings:
Section 2.1 "AWARD" means, individually or collectively, any Option,
SAR, Restricted Stock, unrestricted Campbell stock or Performance Unit Award.
Section 2.2 "BOARD" means the Board of Directors of the Company.
Section 2.3 "CAMPBELL GROUP" means the Company and all of its
Subsidiaries on and after the Effective Date.
Section 2.4 "CAMPBELL STOCK" means Capital Stock of the Company.
Section 2.5 "CAPITAL AND INCOME RETAINED IN THE BUSINESS" means capital
and income, retained in the business of the Campbell Group as reported to the
Company on a consolidated basis by its independent public accountants.
Section 2.6 "CODE" means the Internal Revenue Code of 1986, as amended.
Section 2.7 "COMMITTEE" means those members, not to be less than three,
of the Compensation Committee of the Board who, at the time
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of service on the Committee hereunder, are, and at all times within one year
prior thereto shall have been, not eligible for selection as persons to whom
Awards may be made or to whom Options may be granted pursuant to the Plan or any
other plan of the Campbell Group, except for non-discretionary Awards pursuant
to Article VII. All members of the Committee shall be "Outside Directors" as
defined or interpreted for purposes of Section 162(m) of the Code.
Section 2.8 "COMPANY" means Campbell Soup Company and its successors and
assigns.
Section 2.9 "DEFERRED ACCOUNT" means an account established for a
Participant under Section 10.1(a).
Section 2.10 "DIRECTOR" means a member of the Board of Directors of the
Company.
Section 2.11 "EFFECTIVE DATE" means the date on which the Plan is
approved by the shareowners of the Company, as provided in Section 1.2.
Section 2.12 "FAIR MARKET VALUE" means, as of any specified date, an
amount equal to the mean between the reported high and low prices of Campbell
Stock on the New York Stock Exchange composite tape on the specified date.
Section 2.13 "FISCAL YEAR" means the fiscal year of the Company, which
is the 52- or 53-week period ending on the Sunday closest to July 31.
Section 2.14 "INCENTIVE STOCK OPTION" means an option within the meaning
of Section 422 of the Code.
Section 2.15 "INCOME BEFORE TAXES ON INCOME" means income before taxes
on income of the Campbell Group as reported to the Company on a consolidated
basis by its independent public accountants.
Section 2.16 "KEY EMPLOYEE" means a salaried employee of the Campbell
Group who is in a management position.
Section 2.17 "MARKET PRICE" means the price of the closing sale (or last
bid on a day when no sale occurs) of Campbell Stock on the New York Stock
Exchange composite tape.
Section 2.18 "NONQUALIFIED STOCK OPTION" means an Option granted under
the Plan other than an Incentive Stock Option.
Section 2.19 "OPTION" means either a Nonqualified Stock Option or an
Incentive Stock option to purchase Campbell Stock.
Section 2.20 "OPTION PRICE" means the price at which Campbell Stock may
be purchased under an Option as provided in Section 5.4 or in the case of an SAR
granted under Section 5.8, the Fair Market Value of Campbell Stock on the date
the SAR is awarded.
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Section 2.21 "PARTICIPANT" means a Key Employee or a non-employee
Director to whom an Award has been made under the Plan.
Section 2.22 "PERFORMANCE GOALS" means goals established by the
Committee pursuant to Section 4.5.
Section 2.23 "PERFORMANCE PERIOD" means a period of time over which
performance is measured.
Section 2.24 "PERFORMANCE UNIT" means the unit of measure determined
under Article IX by which is expressed the value of a Performance Unit Award.
Section 2.25 "PERFORMANCE UNIT AWARD" means an Award granted under
Article IX.
Section 2.26 "PERSONAL REPRESENTATIVE" means the person or persons who,
upon the death, disability, or incompetency of a Participant, shall have
acquired, by will or by the laws of descent and distribution or by other legal
proceedings, the right to exercise an Option or the right to any Restricted
Stock Award or Performance Unit Award theretofore granted or made to such
Participant.
Section 2.27 "PLAN" means Campbell Soup Company 1994 Long-Term Incentive
Plan.
Section 2.28 "RESTRICTED PERFORMANCE STOCK" means Campbell Stock subject
to Performance Goals provided in Section 4.5.
Section 2.29 "RESTRICTED STOCK" means Campbell Stock subject to the
terms and conditions provided in Article VI and includes Restricted Performance
Stock.
Section 2.30 "RESTRICTED STOCK AWARD" means an Award granted under
Article VI.
Section 2.31 "RESTRICTION PERIOD" means a period of time determined
under Section 6.2 during which Restricted Stock is subject to the terms and
conditions provided in Section 6.3.
Section 2.32 "SAR" means a stock appreciation right granted under
Section 5.8.
Section 2.33 "STATEMENT" means a written confirmation of an Award under
the Plan furnished to the Participant.
Section 2.34 "SUBSIDIARY" means a corporation, domestic or foreign, the
majority of the voting stock of which is owned directly or indirectly by the
Company.
ARTICLE III
ADMINISTRATION
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Section 3.1 COMMITTEE TO ADMINISTER. The Plan shall be administered by
the Committee. The Committee shall have full power and authority to interpret
and administer the Plan and to establish and amend rules and regulations for its
administration. The Committee's decisions shall be final and conclusive with
respect to the interpretation of the Plan and any Award made under it.
A majority of the members of the Committee shall constitute a quorum for
the conduct of business at any meeting. The Committee shall act by majority vote
of the members present at a duly convened meeting, which may include a meeting
by conference telephone call held in accordance with applicable law. Action may
be taken without a meeting if written consent thereto is given in accordance
with applicable law.
Section 3.2 POWERS OF COMMITTEE. (a) Subject to the provisions of the
Plan, the Committee shall have authority, in its discretion, to determine those
Key Employees who shall receive an Award, the time or times when such Award
shall be made, the vesting schedule, if any, for the Award and the type of Award
to be granted, whether an Incentive Stock Option or a Nonqualified Stock Option
shall be granted, the number of shares to be subject to each Option and
Restricted Stock Award, and the value of each Performance Unit.
(b) An Option, an SAR, a Restricted Stock Award, an unrestricted
Campbell Stock Award, or a Performance Unit Award may be granted by the
Committee to a Key Employee who is a Director of the Company only if approved by
the Board. A Director shall not participate in a vote approving a grant to
himself or herself of an Option, an SAR, a Restricted Stock Award, an
unrestricted Campbell Stock Award, or a Performance Unit Award.
(c) The Committee shall determine and set forth in an Award Statement
the terms of each Award, including such terms, restrictions, and provisions as
shall be necessary to cause certain options to qualify as Incentive Stock
Options. The Committee may correct any defect or supply any omission or
reconcile any inconsistency in the Plan or in any Statement relating to an
Award, in such manner and to the extent the Committee shall determine in order
to carry out the purposes of the Plan. The Committee may, in its discretion,
accelerate (i) the date on which any Option or SAR may be exercised, (ii) the
date of termination of the restrictions applicable to a Restricted Stock Award,
or (iii) the end of a Performance Period under a Performance Unit Award, if the
Committee determines that to do so will be in the best interests of the Company
and the Participants in the Plan.
ARTICLE IV
AWARDS
Section 4.1 AWARDS. Awards under the Plan shall consist of Incentive
Stock Options, Nonqualified Stock Options, SARs, Restricted Stock, unrestricted
Campbell Stock and Performance Units. All Awards shall be subject to the terms
and conditions of the Plan and to
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such other terms and conditions consistent with the Plan as the Committee deems
appropriate. Awards under a particular section of the Plan need not be uniform
and Awards under two or more sections may be combined in one Statement. Any
combination of Awards may be granted at one time and on more than one occasion
to the same Key Employee. Awards of Performance Units and Restricted Performance
Stock shall be earned solely upon attainment of Performance Goals and the
Committee shall have no discretion to increase such Awards.
Section 4.2 ELIGIBILITY FOR AWARDS. An Award may be made to any Key
Employee selected by the Committee. In making this selection and in determining
the form and amount of the Award, the Committee may give consideration to the
functions and responsibilities of the respective Key Employee, his or her
present and potential contributions to the success of the Campbell Group, the
value of his or her services to the Campbell Group, and such other factors
deemed relevant by the Committee. Non-employee Directors are eligible to receive
non-discretionary Awards of unrestricted Campbell Stock pursuant to Article VII.
Section 4.3 SHARES AVAILABLE UNDER THE PLAN. The Campbell Stock to be
offered under the Plan pursuant to Options, SARs, Performance Unit Awards, and
Restricted Stock and unrestricted Campbell Stock Awards must be Campbell Stock
previously issued and outstanding and reacquired by the Company. Subject to
adjustment under Section 11.2, no more than 25,000,000 shares of Campbell Stock
shall be issuable upon exercise of Options, SARs, or pursuant to Performance
Unit Awards, Restricted Stock or unrestricted Campbell Stock Awards granted
under the Plan. Any shares of Campbell Stock subject to an Option which for any
reason is cancelled (excluding shares subject to an Option cancelled upon the
exercise of a related SAR) or terminated without having been exercised, or any
shares of Restricted Stock which are forfeited, shall again be available for
Awards under the Plan. Shares subject to an Option cancelled upon the exercise
of an SAR shall not again be available for Awards under the Plan.
Section 4.4 LIMITATION ON AWARDS. The maximum aggregate dollar value of
Restricted Stock and Performance Units awarded to any Key Employee with respect
to a Performance Period or Restriction Period may not exceed $5 million for each
fiscal year included in such Performance Period or Restriction Period. The
maximum number of shares for which Options may be granted to any participant in
any one fiscal year shall not exceed one million.
Section 4.5 GENERAL PERFORMANCE GOALS. Prior to the beginning of a
Performance Period the Committee will establish in writing, Performance Goals
for the Company and its various operating units. The goals will be comprised of
specified annual levels of one or more performance criteria as the Committee may
deem appropriate such as: earnings per share, net earnings, operating earnings,
unit volume, net sales, market share, balance sheet measurements, cash return on
assets, shareowner return, or return on capital. The Committee may disregard or
offset the effect of any special charges or gains or cumulative effect of a
change in accounting in
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determining the attainment of Performance Goals. Awards may also be payable when
Company performance, as measured by one or more of the above criteria, as
compared to peer companies meets or exceeds an objective target established by
the Committee.
ARTICLE V
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
Section 5.1 AWARD OF STOCK OPTIONS. The Committee may, from time to
time, subject to Section 3.2(b) and other provisions of the Plan and such terms
and conditions as the Committee may prescribe, award Incentive Stock Options and
Nonqualified Stock Options to any Key Employee. Awards of Incentive Stock
Options and Nonqualified Stock Options must be separate and not in tandem.
Section 5.2 PERIOD OF OPTION. An Option granted under the Plan shall be
exercisable only in accordance with the vesting schedule approved by the
Committee. After the waiting period, the Option may be exercised at any time
during the term of the Option, in whole or in installments, as specified in the
related Stock Option Statement. Subject to Section 5.6, the duration of each
Option shall not be more than ten years from the date of grant.
(b) Except as provided in Section 5.6, an Option may not be exercised by
a Participant unless such Participant is then, and continually (except for sick
leave, military service, or other approved leave of absence) after the grant of
the Option has been, an employee of the Campbell Group.
Section 5.3 STOCK OPTION STATEMENT. Each Option shall be evidenced by a
Stock Option Statement.
Section 5.4 OPTION PRICE, EXERCISE AND PAYMENT. The Option Price of
Campbell Stock under each Option shall be determined by the Committee but shall
be a price not less than 100 percent of the Fair Market Value of Campbell Stock
at the date such Option is granted, as determined by the Committee. Stock
Options shall not be repriced.
Options may be exercised from time to time by giving written notice to
the Treasurer of the Company, specifying the number of shares to be purchased.
The notice of exercise shall be accompanied by payment in full of the Option
Price in cash or the Option Price may be paid in whole or in part through the
transfer to the Company of shares of Campbell Stock.
In the event such Option Price is paid in whole or in part, with shares
of Campbell Stock, the portion of the Option Price so paid shall be equal to the
value, as of the date of exercise of the Option, of such shares. The value of
such shares shall be equal to the number of such shares multiplied by the
average of the high and low sales prices of Campbell Stock quoted on the New
York Stock Exchange composite tape on the trading day coincident with the date
of exercise of such Option (or the immediately preceding trading
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day if the date of exercise is not a trading day). The Company shall not issue
or transfer Campbell Stock upon exercise of an Option until the Option Price is
fully paid. The Participant may satisfy any amounts required to be withheld by
the Company under applicable federal, state and local tax laws in effect from
time to time, by electing to have the Company withhold a portion of the shares
of Campbell Stock to be delivered for the payment of such taxes.
Section 5.5 LIMITATIONS ON INCENTIVE STOCK OPTIONS. Each provision of
the Plan and each Option Statement relating to an Incentive Stock Option shall
be construed so that each Incentive Stock Option shall be an incentive stock
option as defined in Section 422 of the Code, and any provisions of the Option
Statement thereof that cannot be so construed shall be disregarded.
Section 5.6 TERMINATION OF EMPLOYMENT. (a) If the employment of a
Participant with the Campbell Group is terminated for reasons other than (i)
death, (ii) discharge for cause, (iii) retirement, or (iv) resignation, the
Participant may exercise an Option, except an Incentive Stock Option, at any
time within three years after such termination, to the extent of the number of
shares covered by such Option which were exercisable at the date of such
termination; except that an option shall not be exercisable on any date beyond
the expiration of such three-year period or the expiration date of such Option,
whichever occurs first.
(b) If the employment of a Participant with the Campbell Group is
terminated for cause, any Options of such Participant shall expire and any
rights thereunder shall terminate immediately. Any Option of a Participant whose
service is terminated by resignation may be exercised at any time within three
months of such resignation to the extent that the number of shares covered by
such Option were exercisable at the date of such resignation, except that an
Option shall not be exercisable on any date beyond the expiration date of such
Option.
(c) Should a Participant, who is not eligible to retire under the
Company's pension plan or a pension plan of any affiliated Company, die either
while in the employ of the Campbell Group or after termination of such
employment (other than discharge for cause), the Option rights, except Incentive
Stock Option Rights, of such deceased Participant may be exercised by his or her
Personal Representative at any time within three years after the Participant's
death to the extent of the number of shares covered by such Option which were
exercisable at the date of such death, except that an Option shall not be so
exercisable on any date beyond the expiration date of such Option.
(d) After February 29, 1996, should a Participant who is eligible to
retire under the Company's pension plan or a pension plan of any affiliated
company die prior to the vesting of all Options, any installment or installments
not then exercisable shall become fully exercisable as of the date of
Participant's death and the Option rights, except Incentive Stock Option Rights,
may be
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exercised by the Participant's Personal Representative at any time prior to the
expiration date of any Option.
(e) Should a Participant, who retires after February 29, 1996, die prior
to exercising all Options, then his or her Option rights, except Incentive Stock
Option Rights, may be exercised by the Participant's Personal Representative at
any time prior to the expiration date of any Options.
(f) If a Participant who was granted a Stock Option dies within 180 days
of the expiration date of such Option, and if on the date of death the
Participant was then entitled to exercise such Option, including options vested
pursuant to section 5.6 (d), and if the Option expires without being exercised,
the Personal Representative of the Participant shall receive in settlement a
cash payment from the Company of a sum equal to the amount, if any, by which the
Fair Market Value (determined on the expiration date of the Option) of Campbell
Stock subject to the Option exceeds the Option Price.
(g) Any Option, except an Incentive Stock Option, of a Participant who
retires after February 29, 1996, may be exercised at any time prior to the
expiration date of such Option. In the event the Participant's employment with
the Campbell Group terminates prior to the vesting of all Options, and if the
Participant is eligible to retire under the Company's pension plan or a pension
plan of any affiliated company at the date of such termination, any installment
or installments not then exercisable shall become fully exercisable as of the
effective date of such termination. If the Participant receives severance
payments from the Company or any affiliated company and becomes eligible to
retire during the severance payment period, all of the Participant's options
shall become fully exercisable as of the date of such Participant's retirement
eligibility date and may be exercised at any time prior to the expiration date
of such Option.
(h) Incentive Stock Options, that have not previously expired, must be
exercised within three months following Participant's termination of employment,
unless employment is terminated because of disability in which event the
exercise period is extended to one year following termination.
(i) Notwithstanding the provisions of subsections (a) through (h) above,
if the employment of a Participant with the Campbell Group is terminated upon
the spin-off of Vlasic Foods International Inc. ("Vlasic") from the Company and
he or she is immediately thereafter employed by Vlasic or a subsidiary thereof,
it shall not be considered a `termination from the Campbell Group' with respect
to any Nonqualified Stock Option that the Participant had a right to exercise,
by the terms of the applicable vesting schedule, immediately before the
termination of employment with the Campbell Group. The provisions of subsections
(a) through (h) above shall then be applied by considering employment with
Vlasic and its subsidiaries the same as employment with the Campbell Group.
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Section 5.7 SHAREOWNER RIGHTS AND PRIVILEGES. A Participant shall have
no rights as a shareowner with respect to any shares of Campbell Stock covered
by an Option until the issuance of a stock certificate to the Participant
representing such shares.
Section 5.8 AWARD OF SARS. (a) At any time prior to six months before an
Option's expiration date, the Committee may award to the Participant an SAR
related to the Option. The Committee may also award SARs that are unrelated to
any option.
(b) The SAR shall represent the right to receive payment of an amount
not greater than the spread, if any, by which the Fair Market Value of the
Campbell Stock on the trading day immediately preceding the date of exercise of
the SAR exceeds the Option Price.
(c) SARs awarded under the Plan shall be evidenced by a Statement
between the Company and the Participant.
(d) The Committee may prescribe conditions and limitations on the
exercise or transferability of any SAR. SARs may be exercised only when the
value of a share of Campbell Stock exceeds the Option Price. Such value shall be
determined in the manner specified in Section 5.8(b).
(e) An SAR shall be exercisable only by written notice to the Treasurer
of the Company. However, an SAR shall in no event be exercisable during the
first six months of its term, except in the event of death or disability of the
Participant prior to the expiration of such six-month period.
(f) All SARs shall automatically be exercised on the last trading day
prior to their expiration, so long as the value of a share of Campbell Stock
exceeds the Option Price, unless prior to such day the holder instructs the
Treasurer otherwise in writing. Such value shall be determined in the manner
specified in Section 5.8(b).
(g) Payment of the amount to which a Participant is entitled upon the
exercise of an SAR shall be made in cash, Campbell Stock, or partly in cash and
partly in Campbell Stock at the discretion of the Committee. The shares shall be
valued in the manner specified in Section 5.8(b).
(h) At any time when a Participant is, in the judgment of the Treasurer
of the Company, subject with respect to Campbell Stock to Section 16 of the
Securities Exchange Act of 1934:
(i) any election by such Participant to receive cash in whole or in part
upon the exercise of such SAR, shall be made only during the period beginning on
the third business day following the date of release by the Company for
publication of any quarterly or annual summary statement of its sales and
earnings and ending on the twelfth business day following such date of release,
and
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(ii) in the event the Committee has not determined the form in which
such SAR will be paid (i.e., cash, shares of Campbell Stock, or any combination
thereof), any election to exercise such right in whole or in part for cash shall
be subject to the subsequent consent thereto, or disapproval thereof, by the
Committee in its sole discretion.
(i) Each SAR shall expire on a date determined by the Committee at the
time of Award.
ARTICLE VI
RESTRICTED STOCK
Section 6.1 AWARD OF RESTRICTED STOCK. (a) The Committee may make a
Restricted Stock Award to any Participant, subject to this Article VI and to
such other terms and conditions as the Committee may prescribe.
(b) Each certificate for Restricted Stock shall be registered in the
name of the Participant and deposited by him or her, together with a stock power
endorsed in blank, with the Company, unless the Participant has elected to defer
pursuant to Section 10.1.
Section 6.2 RESTRICTION PERIOD. At the time of making a Restricted Stock
Award, the Committee shall establish the Restriction Period applicable to such
Award. The Committee may establish different Restriction Periods from time to
time and each Restricted Stock Award may have a different Restriction Period, in
the discretion of the Committee. Restriction Periods, when established for each
Restricted Stock Award, shall not be changed except as permitted by Section 6.3.
Section 6.3 OTHER TERMS AND CONDITIONS. Campbell Stock, when awarded
pursuant to a Restricted Stock Award, will be represented by a stock certificate
registered in the name of the Participant who receives the Restricted Stock
Award, unless the Participant has elected to defer pursuant to Section 10.1.
Such certificate shall be deposited with the Company as provided in Section
6.1(b). The Participant shall be entitled to receive dividends during the
Restriction Period and shall have the right to vote such Campbell Stock and all
other shareowner's rights, with the exception that (i) the Participant will not
be entitled to delivery of the stock certificate during the Restriction Period,
(ii) the Company will retain custody of the Campbell Stock during the
Restriction Period, (iii) a breach of a restriction or a breach of the terms and
conditions established by the Committee pursuant to the Restricted Stock Award
will cause a forfeiture of the Restricted Stock Award. The Participant may
satisfy any amounts required to be withheld by the Company under applicable
federal, state and local tax laws in effect from time to time, by electing to
have the Company withhold a portion of the Restricted Stock Award to be
delivered for the payment of such taxes. The Committee may, in addition,
prescribe
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additional restrictions, terms, or conditions upon or to the Restricted Stock
Award including performance restrictions in accordance with Section 4.5.
Section 6.4 RESTRICTED STOCK AWARD STATEMENT. Each Restricted Stock
Award shall be evidenced by a Restricted Stock Award Statement.
Section 6.5 TERMINATION OF EMPLOYMENT. The Committee may, in its sole
discretion, establish rules pertaining to the Restricted Stock Award in the
event of termination of employment (by retirement, disability, death, or
otherwise) of a Participant prior to the expiration of the Restriction Period.
Section 6.6 PAYMENT FOR RESTRICTED STOCK. Restricted Stock Awards may be
made by the Committee under which the Participant shall not be required to make
any payment for the Campbell Stock or, in the alternative, under which the
Participant, as a condition to the Restricted Stock Award, shall pay all (or any
lesser amount than all) of the Fair Market Value of the Campbell Stock,
determined as of the date the Restricted Stock Award is made. If the latter,
such purchase price shall be paid in cash as provided in the Restricted Stock
Award Statement.
ARTICLE VII
UNRESTRICTED CAMPBELL STOCK AWARDS FOR NON-EMPLOYEE DIRECTORS
Section 7.1 AWARD OF CURRENT CAMPBELL STOCK AND STOCK OPTIONS TO
NON-EMPLOYEE DIRECTORS. An award of 1,200 shares of Campbell Stock and 1,000
Options (based on Company capitalization on November 16, 1995, and adjusted for
any change in such capital structure pursuant to Section 7.2) shall be made on
January 1, 1996, to each non-employee Director who is elected at the Annual
Meeting of Shareowners on November 16, 1995. Thereafter, awards of 1,200 shares
of Campbell Stock and 1,000 Options shall be made on January 1 of succeeding
years to each non-employee Director who is elected at subsequent Annual Meetings
of Shareowners. A Non-employee Director who is not initially elected at an
Annual Meeting of Shareowners shall receive a pro rata portion of 1,200 shares
of Campbell Stock and 1,000 Options within 10 business days of his or her
election based on the number of months remaining from date of election until the
end of the calendar year divided by twelve. Any fractional shares or Options
resulting from such calculation shall be rounded up to the nearest whole number.
Options will vest cumulatively over three years at the rate of 30%, 60% and
100%, respectively on the first three anniversaries of the grant date. The
Option Price for the Options granted each January 1, shall be the Fair Market
Value of Campbell Stock on the first business day after January 1 of each year.
The Option Price for the Options granted to a non-employee Director who is not
initially elected at an Annual Meeting of Shareowners shall be the Fair Market
Value of Campbell Stock on the effective date of his or her initial election. If
such date is not a business day, then the Fair Market Value on the first
business day following the effective date shall be used.
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Section 7.2 STOCK SPLIT, STOCK DIVIDEND, OR EXTRAORDINARY DISTRIBUTION.
In the event the number of shares of Campbell Stock is increased at any time
after November 17, 1994, by a stock split, by declaration by the Board of a
dividend payable only in shares of such stock, or by any other extraordinary
distribution of shares, the number of shares and Options granted pursuant to
Section 7.1 shall be proportionately adjusted.
Section 7.3 ORGANIZATIONAL CHANGES. In the event of a merger,
consolidation, reorganization, or other change in corporate structure which
materially changes the terms or value of the Campbell Stock, the number of
shares granted pursuant to Section 7.1 shall be adjusted in such manner as the
Board in its sole discretion shall determine to be equitable and consistent with
the purposes of this Article VII. Such determination shall be conclusive for all
purposes with respect to the grant made in Section 7.1. Such adjustment shall
comply with the restriction on amendments set forth in Section 7.6
Section 7.4 ELECTION BY NON-EMPLOYEE DIRECTORS TO RECEIVE CAMPBELL
STOCK. Each non-employee Director may elect to receive all or a portion (in 10%
increments) of the annual cash retainer for Board service and other cash
compensation in shares of Campbell Stock, which will be issued quarterly. Such
election shall be irrevocable and shall be made at least six months in advance
of the date the non-employee Director receives the quarterly payment. Only whole
numbers of shares will be issued and any fractional shares shall be paid in
cash. For purposes of computing the number of shares earned and their taxable
value each quarter, the value of each share shall be equal to the mean between
the reported high and low prices of Campbell Stock on the New York Stock
Exchange composite tape on the last business day of the quarter. If a
Participant dies prior to payment of all shares earned, the balance due shall be
payable in full to the Participant's designated beneficiary under the Director's
Retirement Program, or, if none, to the Participant's estate, in cash.
Section 7.5 NO RIGHT TO CONTINUANCE AS A DIRECTOR. Neither the action of
the Company in establishing the Plan, nor the awarding of current Campbell Stock
shall be deemed (i) to create any obligation on the part of the Board to
nominate any Director for reelection by the Company's shareowners or (ii) to be
evidence of any agreement or understanding, express or implied, that the
Director has a right to continue as a Director for any period of time or at any
particular rate of compensation.
Section 7.6 AMENDMENT. The amount, pricing and timing of unrestricted
Campbell Stock Awards set forth in Section 7.1 shall not be amended (including
amendments to reflect adjustments pursuant to Section 7.3) more than once every
six months, other than to comport with changes in the Code, the Employee
Retirement Income Security Act of 1974, as amended, or the rules thereunder.
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ARTICLE VIII
UNRESTRICTED CAMPBELL STOCK AWARDS FOR KEY EMPLOYEES
Section 8.1 The Committee may make awards of unrestricted Campbell Stock
to Key Employees in recognition of outstanding achievements or as an award for
Key Employees who receive Restricted Stock Awards when Performance Goals are
exceeded.
Section 8.2 Each certificate for unrestricted Campbell Stock shall be
registered in the name of the Participant and immediately be delivered to him or
her.
ARTICLE IX
AWARD OF PERFORMANCE UNITS
Section 9.1 AWARD OF PERFORMANCE UNITS. The Committee may award
Performance Units to any Participant. Each Performance Unit shall represent the
right of a Participant to receive an amount equal to the value of the
Performance Unit, determined in the manner established by the Committee at the
time of Award.
Section 9.2 PERFORMANCE PERIOD. At the time of each Performance Unit
Award, the Committee shall establish, with respect to each such Award, a
Performance Period during which performance shall be measured. There may be more
than one Award in existence at any one time, and Performance Periods may differ.
Section 9.3 PERFORMANCE MEASURES. (a) Performance Units shall be awarded
to a Participant contingent upon the attainment of Performance Goals in
accordance with Section 4.5.
Section 9.4 PERFORMANCE UNIT VALUE. Each Performance Unit shall have a
maximum dollar value established by the Committee at the time of the Award.
Performance Units earned will be determined by the Committee in respect of a
Performance Period in relation to the degree of attainment of Performance Goals.
The measure of a Performance Unit may, in the discretion of the Committee, be
equal to the Fair Market Value of one share of Campbell Stock.
Section 9.5 AWARD CRITERIA. In determining the number of Performance
Units to be granted to any Participant, the Committee shall take into account
the Participant's responsibility level, performance, potential, cash
compensation level, other incentive awards, and such other considerations as it
deems appropriate.
Section 9.6 PAYMENT. (a) Following the end of Performance Period, a
Participant holding Performance Units will be entitled to receive payment of an
amount, not exceeding the maximum value of the Performance Units, based on the
achievement of the performance measures for such Performance Period, as
determined by the Committee.
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(b) Payment of Performance Units shall be made in cash, whether payment
is made at the end of the Performance Period or is deferred pursuant to Section
10.1, except that Performance Units which are measured using Campbell Stock
shall be paid in Campbell Stock. Payment shall be made in a lump sum or in
installments and shall be subject to such other terms and conditions as shall be
determined by the Committee.
Section 9.7 TERMINATION OF EMPLOYMENT. (a) A Performance Unit Award
shall terminate for all purposes if the Participant does not remain continuously
in the employ of the Campbell Group at all times during the applicable
Performance Period, except as may otherwise be determined by the Committee.
(b) In the event that a Participant holding a Performance Unit ceases to
be an employee of the Campbell Group following the end of the applicable
Performance Period but prior to full payment according to the terms of the
Performance Unit Award, payment shall be made in accordance with terms
established by the Committee for the payment of such Performance Unit.
Section 9.8 PERFORMANCE UNIT STATEMENTS. Performance Unit Awards shall
be evidenced by Performance Unit Statements.
ARTICLE X
DEFERRAL OF PAYMENTS
Section 10.1 ELECTION TO DEFER PERFORMANCE UNITS OR RESTRICTED STOCK.
(a) A Participant may elect to defer all or a portion of any related earned
Performance Units or Restricted Stock. The value of the Performance Units or
Restricted Stock so deferred shall be allocated to a Deferred Account
established for the Participant. Participants who are subject to tax in a
foreign country are not eligible to defer payment of Performance Units or
Restricted Stock unless a deferral election has been approved for the
Participant by the Treasurer of the Company.
(b) A Participant's Deferred Account for the deferral of Performance
Units shall be credited at the end of the Performance Period with the
measurement units as the Participant shall have elected in writing at the time
of his or her election under Section 10.1(a) above. A Participant who elects to
defer Restricted Stock shall be credited at the time of election with phantom
Campbell Stock in the Participant's Deferred Account.
Section 10.2 ELECTION TO DEFER DIRECTOR COMPENSATION. (a) Any
non-employee Director may, by delivering a written election to the Treasurer of
the Company on or before December 31 of any calendar year, elect to defer
receipt of all or a specified part (10% increments) of his or her cash or
Campbell Stock compensation during the calendar year following such election and
succeeding calendar years.
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(b) Any person who shall become an non-employee Director during any
calendar year, and who was not an non-employee Director on the preceding
December 31, may, before his or her term begins, elect to defer receipt of all
or a specified part of his or her cash compensation during the balance of such
calendar year and for succeeding calendar years.
(c) Any such election shall be in writing and shall be delivered to the
Treasurer of the Company. Campbell Stock compensation can only be deferred into
phantom Campbell Stock. Cash compensation may be deferred into any of the
measurement units established under Section 10.3.
(d) A non-employee Director's election to defer receipt of compensation
shall continue until the date on which such director ceases to be a director of
the Company or until he or she terminates such election by written notice
delivered to the Treasurer of the company. Any such notice terminating an
election to defer compensation shall be effective as of the end of the calendar
year in which such notice of termination is delivered. Any amounts credited to
the Deferred Accounts of an Eligible Director prior to the effectiveness of any
such notice of termination shall not be affected thereby.
Section 10.3 DEFERRAL PROCEDURES AND MEASUREMENT OF DEFERRED ACCOUNT.
The Committee, or the Treasurer of the Company, if designated by the Committee,
shall establish procedures and rules regarding the timing of deferred elections,
the time period for deferral, the maximum number of annual installment payments,
the measurement units for valuing Deferred Accounts, transfer of the balances in
Deferred Accounts among measurement units, statements of Deferred Accounts, the
time and manner of payment of Deferred Accounts, and other administrative items
for Deferred Accounts.
Section 10.4 PAYMENT IN EVENT OF DEATH. If the Participant dies (before
or after his or her retirement), any portion of his or her Deferred Account then
unpaid shall be paid to the beneficiaries named in the most recent beneficiary
designation filed with the Treasurer of the Company or, in the absence of such
designation, paid to, or as directed by, his or her Personal Representative, in
such one or more installments as the Participant may have elected, in writing,
coincident with the election made pursuant to Section 10.1.
Section 10.5 FINANCIAL HARDSHIP. (a) In the event a Participant, before
termination of his or her employment, experiences financial hardship, the
Participant may request, and the Committee, or the Treasurer of the Company if
designated by the Committee, may grant, a distribution in one lump sum of such
portion of the amount credited to the Participant's Deferred Account as is
required to relieve such financial hardship and is not reasonably available from
the Participant's other resources. Such request shall be irrevocable and shall
be made at least two months in advance of the distribution.
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(b) In the event a Participant, after termination of his or her
employment, experiences financial hardship, the Participant may request, and the
Committee in its sole discretion may grant, an acceleration of the Participant's
elected number of installments under Section 10.4, to the extent necessary to
relieve such financial hardship.
(c) For purposes of this Section 10.5, a distribution will be on account
of "financial hardship" if the distribution is necessary due to severe and
unanticipated financial hardship caused by an event beyond the control of the
Participant. The Committee, in its sole discretion, shall determine whether or
not a Participant has experienced "financial hardship" within the meaning of
this Section 10.5.
Section 10.6 CONDITIONS OF PAYMENT OF DEFERRED ACCOUNTS. Prior to a
Change in Control (as hereinafter defined), a Participant who is discharged for
willful, deliberate or gross misconduct as determined by the Company shall,
unless otherwise determined by the Committee in connection with the termination
of his or her employment, lose any right to receive payment of his or her
Deferred Account.
No installment of a Deferred Account of a Participant whose service with
the Campbell Group shall have terminated by retirement or otherwise shall be
paid unless, from the time of termination until the time for such payment or
until his or her death, whichever happens first, the Participant shall have
continuously refrained from engaging in any business directly or indirectly
competitive with the Campbell Group. If the Participant violates this condition,
all rights in the unpaid portion of his or her Deferred Account shall be
forfeited to the Company. The Committee may waive this condition, upon the
written request of a Participant, if in its sole judgment the nonfulfillment of
the condition will have no substantial adverse effect upon the Campbell Group.
The request shall fully describe the proposed competitive activity, and the
waiver shall be limited to the specific competitive activity so described.
Section 10.7 RIGHTS UNSECURED. The right of a Participant to receive any
unpaid portion of his or her Deferred Accounts shall be an unsecured claim
against the general assets of the Company.
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.1 NONTRANSFERABILITY. Unless otherwise provided by the
Committee, no option, SAR, share of Restricted Stock, or Performance Unit under
the Plan shall be transferable by the Participant otherwise than by will or, if
the Participant dies intestate, by the laws of descent and distribution. All
Awards shall be exercisable or received during the Participant's lifetime only
by such Participant or his Personal Representative. Any
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transfer contrary to this Section 11.1 will nullify the Option, SAR, Performance
Unit, or share of Restricted Stock.
Section 11.2 ADJUSTMENTS UPON CHANGES IN STOCK. In case of any
reorganization, recapitalization, stock split, stock dividend, combination of
shares, merger, consolidation, rights offering, or any other changes in the
corporate structure or shares of the Company, appropriate adjustments may be
made by the Committee (or if the Company is not the surviving corporation in any
such transaction, the board of directors of the surviving corporation) in
Deferred Accounts and in the aggregate number and kind of shares subject to the
Plan, and the number and kind of shares and the price per share subject to
outstanding Options or which may be issued under outstanding Restricted Stock
Awards or pursuant to unrestricted Campbell Stock Awards. Appropriate
adjustments may also be made by the Committee in the terms of any Awards under
the Plan, subject to Article VII, to reflect such changes and to modify any
other terms of outstanding Awards on an equitable basis, including modifications
of Performance Goals and changes in the length of Performance Periods.
Section 11.3 AMENDMENT, SUSPENSION, AND TERMINATION OF PLAN. (a) The
Board may suspend or terminate the Plan or any portion thereof at any time, and
may amend, subject to Section 7.6, the Plan from time to time in such respects
as the Board may deem advisable in order that any Awards thereunder shall
conform to any change in applicable laws or regulations or in any other respect
the Board may deem to be in the best interests of the Company; provided,
however, that no such amendment shall, without shareowner approval, (i) except
as provided in Sections 7.2 and 11.2, increase the number of shares of Campbell
Stock which may be issued under the Plan, (ii) materially increase the benefits
accruing to Participants under the Plan, or (iii) materially modify the
requirements as to eligibility for participating in the Plan, or (iv) extend the
termination date of the Plan. No such amendment, suspension, or termination
shall alter or impair any outstanding Options, SARs, shares of Restricted Stock,
or Performance Units without the consent of the Participant affected thereby.
(b) With the consent of the Participant affected thereby, the Committee
may amend or modify any outstanding Options. Restricted Stock Awards, or
Performance Unit Awards in any manner to the extent that the Committee would
have had the authority under the Plan initially to award such Options, SARs,
Restricted Stock Awards, or Performance Unit Awards as so modified or amended,
including without limitation, to change the date or dates as of which such
Options or SARs may be exercised, to remove the restrictions on shares of
Restricted Stock, or to modify the manner in which Performance Units are
determined and paid.
Section 11.4 NONUNIFORM DETERMINATIONS. The Committee's determinations
under the Plan, including without limitation, (i) the determination of the Key
Employees to receive Awards, (ii) the form, amount, and timing of such Awards,
(iii) the terms and provisions of such Awards and (iv) the Statements evidencing
the same, need not be
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uniform and may be made by it selectively among Key Employees who receive, or
who are eligible to receive, Awards under the Plan, whether or not such Key
Employees are similarly situated. This Section 11.4 shall not apply to current
Campbell Stock Awards to non-employee Directors which shall be uniform and
non-discretionary in accordance with Article VII.
Section 11.5 GENERAL RESTRICTION. Each Award under the Plan shall be
subject to the condition that, if at any time the Committee shall determine that
(i) the listing, registration, or qualification of the shares of Campbell Stock
subject or related thereto upon any securities exchange or under any state or
federal law (ii) the consent or approval of any government or regulatory body,
or (iii) an agreement by the Participant with respect thereto, is necessary or
desirable, then such Award shall not become exercisable in whole or in part
unless such listing, registration, qualification, consent, approval, or
agreement shall have been effected or obtained free of any conditions not
acceptable to the Committee.
Section 11.6 NO RIGHT TO EMPLOYMENT. Neither the action of the Company
in establishing the Plan, nor any action taken by it or by the Board or the
Committee under the Plan, nor any provision of the Plan, shall be construed as
giving to any person the right to be retained in the employ of the Company or
any Subsidiary.
ARTICLE XII
CHANGE IN CONTROL OF THE COMPANY
Section 12.1 CONTRARY PROVISIONS. Notwithstanding anything contained in
the Plan to the contrary, the provisions of this Article XII shall govern and
supersede any inconsistent terms or provisions of the Plan.
Section 12.2 DEFINITIONS.
CHANGE IN CONTROL. (a) For purposes of the Plan "Change in Control"
shall mean any of the following events: (a) The acquisition in one or more
transactions by any "Person" (as the term person is used for purposes of Section
13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the "1934
Act")) of "Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated
under the 1934 Act) of twenty-five percent (25%) or more of the combined voting
power of the Company's then outstanding voting securities (the "Voting
Securities"), provided, however, that for purposes of this Section 12.2(a), the
Voting Securities acquired directly from the Company by any Person shall be
excluded from the determination of such Person's Beneficial Ownership of Voting
Securities (but such Voting Securities shall be included in the calculation of
the total number of Voting Securities then outstanding); or
(b) The individuals who, as of January 25, 1990, are members of the
Board (the "Incumbent Board"), cease for any reason to
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constitute at least two-thirds of the Board; provided, however, that if the
election, or nomination for election by the Company's shareowners, of any new
Director was approved by a vote of at least two-thirds of the Incumbent Board,
such new Director shall, for purposes of the Plan, be considered as a member of
the Incumbent Board; or
(c) Approval by shareowners of the Company of (1) a merger or
consolidation involving the Company if the shareowners of the Company,
immediately before such merger or consolidation, do not own, directly or
indirectly immediately following such merger or consolidation, more than eighty
percent (80%) of the combined voting power of the outstanding voting securities
of the corporation resulting from such merger or consolidation in substantially
the same proportion as their ownership of the Voting Securities immediately
before such merger or consolidation or (2) a complete liquidation or dissolution
of the Company or an agreement for the sale or other disposition of all or
substantially all of the assets of the Company; or
(d) Acceptance of shareowners of the Company of shares in a share
exchange if the shareowners of the Company, immediately before such share
exchange, do not own, directly or indirectly immediately following such share
exchange, more than eighty percent (80%) of the combined voting power of the
outstanding voting securities of the corporation resulting from such share
exchange in substantially the same proportion as their ownership of the Voting
Securities outstanding immediately before such share exchange.
Notwithstanding the foregoing, a Change in Control shall not be deemed
to occur solely because twenty-five percent (25%) or more of the then
outstanding Voting Securities is acquired by (i) a trustee or other fiduciary
holding securities under one or more employee benefit plans maintained by the
Company or any of its subsidiaries, (ii) any corporation which, immediately
prior to such acquisition, is owned directly or indirectly by the shareowners of
the Company in the same proportion as their ownership of stock in the Company
immediately prior to such acquisition, (iii) any "Grandfathered Dorrance Family
Shareowner" (as hereinafter defined) or (iv) any Person who has acquired such
Voting Securities directly from any Grandfathered Dorrance Family Shareowner but
only if such Person has executed an agreement which is approved by two-thirds of
the Board and pursuant to which such Person has agreed that he (or they) will
not increase his (or their) Beneficial Ownership (directly or indirectly) to 30%
or more of the outstanding Voting Securities (the "Standstill Agreement") and
only for the period during which the Standstill Agreement is effective and fully
honored by such Person. For purposes of this Section, "Grandfathered Dorrance
Family Shareowner" shall mean at any time a "Dorrance Family Shareowner" (as
hereinafter defined) who or which is at the time in question the Beneficial
Owner solely of (v) Voting Securities Beneficially Owned by such individual on
January 25, 1990, (w) Voting Securities acquired directly from the Company, (x)
Voting Securities acquired directly from another Grandfathered Dorrance Family
Shareowner, (y) Voting Securities
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which are also Beneficially Owned by other Grandfathered Dorrance Family
Shareowners at the time in question, and (z) Voting Securities acquired after
January 25, 1990 other than directly from the Company or from another
Grandfathered Dorrance Family Shareowner by any "Dorrance Grandchild" (as
hereinafter defined) provided that the aggregate amount of Voting Securities so
acquired by each such Dorrance Grandchild shall not exceed five percent (5%) of
the Voting Securities outstanding at the time of such acquisition. A "Dorrance
Family Shareowner" who or which is at the time in question the Beneficial Owner
of Voting Securities which are not specified in clauses (v), (w), (x), (y) and
(z) of the immediately preceding sentence shall not be a Grandfathered Dorrance
Family Shareowner at the time in question. For purposes of this Section,
"Dorrance Family Shareowners" shall mean individuals who are descendants of the
late Dr. John T. Dorrance, Sr. and/or the spouses, fiduciaries and foundations
of such descendants. A "Dorrance Grandchild" means as to each particular
grandchild of the late Dr. John T. Dorrance, Sr., all of the following taken
collectively: such grandchild, such grandchild's descendants and/or the spouses,
fiduciaries and foundations of such grandchild and such grandchild's
descendants.
Moreover, notwithstanding the foregoing, (i) a Change in Control shall
not be deemed to occur solely because any Person (the "Subject Person") acquired
Beneficial Ownership of more than the permitted amount of the outstanding Voting
Securities as a result of the acquisition of Voting Securities by the Company
which, by reducing the number of Voting Securities outstanding, increases the
proportional number of shares Beneficially Owned by the Subject Person, provided
that if a Change in Control would occur (but for the operation of this sentence)
as a result of the acquisition of Voting Securities by the Company, and after
such share acquisition by the Company, the Subject Person becomes the Beneficial
Owner of any additional Voting Securities which increases the percentage of the
then outstanding Voting Securities Beneficially Owned by the Subject Person,
then a Change in Control shall occur and (ii) a Change in Control described in
Section 12.2(a) with respect to any Participant shall not be deemed to occur by
reason of the Participant's acquisition of Beneficial Ownership (including the
acquisition of Beneficial Ownership by a group of which the Participant is a
member) with respect to any transaction on which the Participant would rely on
Rule 16b-3(e) promulgated under the Exchange Act.
CAUSE. For purposes of the Plan the term, "Cause" shall mean the
termination of a Participant's employment by reason of his or her (a) conviction
of a felony or (b) engaging in conduct which constitutes willful gross
misconduct which is demonstrably and materially injurious to the Company,
monetarily or otherwise. No act, nor failure to act, on the Employee's part,
shall be considered "willful" unless he or she has acted, or failed to act, with
an absence of good faith and without a reasonable belief that his or her action
or failure to act was in the best interest of the Company.
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Section 12.3 "ADJUSTED FAIR MARKET VALUE" means, in the event of a
Change in Control, the greater of (a) the highest price per share of Campbell
Stock paid to holders of the shares of Campbell Stock in any transaction (or
series of transactions) constituting or resulting in a Change in Control or (b)
the highest Fair Market Value of a share of Campbell Stock during the ninety
(90) day period ending on the date of a Change in Control.
Section 12.4 Upon a Change in Control, (a) all Options and SARs
outstanding on the date of such Change in Control shall become immediately and
fully exercisable and (b) any Participant who may be subject to liability under
Section 16(b) of Securities Exchange Act of 1934, as amended, will be permitted
to surrender for cancellation for a period of sixty (60) days commencing after
the later of such Change in Control or the expiration of six months from the
date of grant, any Option or SAR (or portion of an Option or SAR), to the extent
not yet exercised and the Participant will be entitled to receive a cash payment
in an amount equal to the excess, if any, in respect of each Option or SAR
surrendered, (1)(i) except as described in clause (ii) below, the greater of (x)
the Fair Market Value, on the date preceding the date of surrender of the shares
subject to the Option or SAR (or portion thereof) surrendered or (y) the
Adjusted Fair Market Value of the Shares subject to the Option or SAR (or
portion thereof) surrendered or (ii) in the case of an Incentive Stock Option or
an SAR issued in connection with an Incentive Stock Option, the Fair Market
Value, on the date preceding the date of surrender, of the Shares subject to the
Option or SAR (or portion thereof) surrendered, over (2) the aggregate purchase
price for such Shares under the Option or SAR.
Section 12.5 Upon a Change in Control, all restrictions upon any shares
of Restricted Stock other than Restricted Stock which is subject to performance
related restrictions ("Performance Restricted Stock") shall lapse immediately
and all such shares shall become fully vested in the Participant and shall
promptly be delivered to the Participant.
Section 12.6 (a) Upon a Change in Control, the Participant shall (1)
become vested in, and restrictions shall lapse on, the greater of (i) fifty
percent (50%) of the Performance Restricted Stock or Performance Units or (ii) a
pro rata portion of such Performance Restricted Campbell Stock based on the
portion of the Performance Period that has elapsed to the date of the Change in
Control and the aggregate vesting percentage determined pursuant to this clause
(ii) shall be applied to vesting first such awards granted the farthest in time
preceding the Change in Control (the "Vested Performance Awards") and (2) be
entitled to receive (A) in respect of all Performance Units which become vested
as a result of a Change in Control, a cash payment within thirty (30) days after
such Change in Control equal to the product of the then current value of a
Performance Unit multiplied by the number of Performance Units which become
vested in accordance with this Section 12.6 and (B) in respect of all shares of
Performance Restricted Stock which become
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vested as a result of a Change in Control, the prompt delivery of such shares.
(b) With respect to any shares of Performance Restricted Stock or
Performance Units which do not become vested pursuant to Section 12.6(a) (the
"Continuing Awards"), such shares or units (or the proceeds thereof) shall
continue to be outstanding for the remainder of the applicable Performance
Period (as if such shares or units were the only shares or units granted in
respect of each such Performance Period) and subject to the applicable Award
Criteria as modified below.
Section 12.7 DEFERRED ACCOUNTS. (a) Upon a Change in Control, each share
of phantom Campbell Stock credited to a Participant's Deferred Account shall be
converted into cash in an amount equal to the greater of (a) the Fair Market
Value per share of the Campbell Stock or (b) Adjusted Fair Market Value and
shall thereafter be transferred to measurement units in accordance with the
Participant's instructions pursuant to Section 10.3.
(b) Upon a Participant's termination of employment by the Participant or
by his or her employer for any reason (other than for Cause) within two years
following a Change in Control, the Company shall pay in a lump sum cash payment
the value of his or her Deferred Account (together with any interest accrued
thereon to the date of payment).
(c) Immediately upon a Change in Control, regardless of whether a
non-employee Director's services as a member of the Board cease, he or she shall
receive any amounts credited to his or her Deferred Accounts to the date of the
Change in Control in one lump-sum payment.
Section 12.8 AMENDMENT OR TERMINATION. (a) This Article XII shall not be
amended or terminated at any time if any such amendment or termination would
adversely affect the rights of any Participant under the Plan.
(b) For a period of twenty-four (24) months following a Change in
Control, the Plan shall not be terminated (unless replaced by a comparable
long-term incentive plan) and during such period the Plan (or such replacement
plan) shall be administered in a manner such that Participants will be provided
with long-term incentive awards producing reward opportunities generally
comparable to those provided prior to the Change in Control. Any amendment or
termination of the Plan prior to a Change in Control which (1) was at the
request of a third party who has indicated an intention or taken steps
reasonably calculated to effect a Change in Control or (2) otherwise arose in
connection with or in anticipation of a Change in Control, shall be null and
void and shall have no effect whatsoever.
(c) Following a Change in Control, the Plan shall be amended as
necessary to make appropriate adjustments to the Award Criteria for the
Continuing Awards for (a) any negative effect that the costs
22
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and expenses incurred by the Company and its Subsidiaries in connection with the
Change in Control may have on the achievement of Performance Goals under the
Plan and (b) any changes to the Company and/or its Subsidiaries (including, but
not limited to, changes in corporate structure, capitalization and increased
interest expense as a result of the incurrence or assumption by the Company of
acquisition indebtedness) following the Change in Control so as to preserve the
reward opportunities and Award Criteria for comparable performance under the
Plan as in effect on the date immediately prior to the Change in Control.
Section 12.9 TRUST ARRANGEMENT. All benefits under the Plan represent an
unsecured promise to pay by the Company. The Plan shall be unfunded and the
benefits hereunder shall be paid only from the general assets of the Company
resulting in the Participants having no greater rights than the Company's
general creditors; provided, however, nothing herein shall prevent or prohibit
the Company from establishing a trust or other arrangement for the purpose of
providing for the payment of the benefits payable under the Plan.
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Exhibit 10(h)
SEVERANCE PROTECTION AGREEMENT
FOR EXECUTIVES DESIGNATED BY THE PRESIDENT
THIS AGREEMENT made as of the 1st day of April, 1998, by and between
Campbell Soup Company (the "Company") and Ellen Oran Kaden (the "Executive").
WHEREAS, the Board of Directors of the Company (the "Board") recognizes
that the possibility of a Change in Control (as hereinafter defined) exists and
that the threat of or the occurrence of a Change in Control can result in
significant distractions of its key management personnel because of the
uncertainties inherent in such a situation;
WHEREAS, the Board has, as recommended and approved by the Compensation
and Organization Committee, determined that it is essential and in the best
interest of the Company and its stockholders to retain the services of the
Executive in the event of a threat or occurrence of a Change in Control and to
ensure her continued dedication and efforts in such event without undue concern
for her personal financial and employment security; and
WHEREAS, in order to induce the Executive to remain in the employ of
the Company, particularly in the event of a threat or the occurrence of a Change
in Control, the Company desires to enter into this Agreement with the Executive
to provide the Executive with certain benefits in the event her employment is
terminated as a result of, or in connection with, a Change in Control and to
provide the Executive with certain other benefits whether or not the Executive's
employment is terminated.
NOW, THEREFORE, in consideration of the respective agreements of the
parties contained herein, it is agreed as follows:
1. Term of Agreement. This Agreement shall commence as of April 1,
1998, and shall continue in effect until the third anniversary of such date;
provided, however, that commencing on the second anniversary of such date and on
each anniversary thereafter, the term of this Agreement shall automatically be
extended for one (1) year unless either the Company or the Executive shall have
given written notice to the other at least ninety (90) days prior thereto that
the term of this Agreement shall not be so extended; and provided, further,
however, that notwithstanding any such notice by the Company not to extend, the
term of this Agreement shall not expire prior to the expiration of twenty-four
(24) months after the occurrence of a Change in Control.
2. Definitions.
2.1 Cause. For purposes of this Agreement, a termination for
"Cause" is a termination evidenced by a resolution adopted in good faith by
two-thirds of the Board that the Executive (a) intentionally and continually
failed to substantially perform her duties with the Company (other than a
failure resulting from the Executive's incapacity due to physical or mental
illness) which failure continued for a period of at least thirty (30) days after
a written notice of demand for substantial performance has been delivered to the
Executive specifying the manner in which the Executive has failed to
substantially perform, or (b) intentionally
<PAGE> 2
engaged in conduct which is demonstrably and materially injurious to the
Company, monetarily or otherwise; provided, however that no termination of the
Executive's employment shall be for Cause as set forth in clause (b) above until
(x) there shall have been delivered to the Executive a copy of a written notice
setting forth that the Executive was guilty of the conduct set forth in clause
(b) and specifying the particulars thereof in detail, and (y) the Executive
shall have been provided an opportunity to be heard by the Board (with the
assistance of the Executive's counsel if the Executive so desires). No act, nor
failure to act, on the Executive's part, shall be considered "intentional"
unless she has acted, or failed to act, with an absence of good faith and
without a reasonable belief that her action or failure to act was in the best
interest of the Company. Notwithstanding anything contained in this Agreement to
the contrary, no failure to perform by the Executive after a Notice of
Termination is given by the Executive shall constitute Cause for purposes of
this Agreement.
2.2 Change in Control. For purposes of this Agreement, a
"Change in Control" shall mean any of the following events:
(a) The acquisition in one or more transactions by
any "Person" (as the term person is used for purposes of Section 13(d) or 14(d)
of the Securities Exchange Act of 1934, as amended (the "1934 Act")) of
"Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated under the
1934 Act) of twenty-five percent (25%) or more of the combined voting power of
the Company's then outstanding voting securities (the "Voting Securities"),
provided, however, that for purposes of this Section 2.2a, the Voting Securities
acquired directly from the Company by any Person shall be excluded from the
determination of such Person's Beneficial Ownership of Voting Securities (but
such Voting Securities shall be included in the calculation of the total number
of Voting Securities then outstanding); or
(b) The individuals who, as of January 25, 1990, are
members of the Board (the "Incumbent Board"), cease for any reason to constitute
at least two-thirds of the Board; provided, however, that if the election, or
nomination for election by the Company's stockholders, of any new director was
approved by a vote of at least two-thirds of the Incumbent Board, such new
director shall, for purposes of this Agreement, be considered as a member of the
Incumbent Board; or
(c) Approval by stockholders of the Company of (1) a
merger or consolidation involving the Company if the stockholders of the
Company, immediately before such merger or consolidation, do not own, directly
or indirectly immediately following such merger or consolidation, more than
eighty percent (80%) of the combined voting power of the outstanding voting
securities of the corporation resulting from such merger or consolidation in
substantially the same proportion as their ownership of the Voting Securities
immediately before such merger or consolidation or (2) a complete liquidation or
dissolution of the Company or an agreement for the sale or other disposition of
all or substantially all of the assets of the Company; or
2
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(d) Acceptance of stockholders of the Company of
shares in a share exchange if the stockholders of the Company, immediately
before such share exchange, do not own, directly or indirectly immediately
following such share exchange, more than eighty percent (80%) of the combined
voting power of the outstanding voting securities of the corporation resulting
from such share exchange in substantially the same proportion as their ownership
of the Voting Securities outstanding immediately before such share exchange.
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur
solely because twenty-five percent (25%) or more of the then outstanding Voting
Securities is acquired by (i) a trustee or other fiduciary holding securities
under one or more employee benefit plans maintained by the Company or any of its
subsidiaries, (ii) any corporation which, immediately prior to such acquisition,
is owned directly or indirectly by the stockholders of the Company in the same
proportion as their ownership of stock in the Company immediately prior to such
acquisition, (iii) any "Grandfathered Dorrance Family Stockholder" (as
hereinafter defined) or (iv) any Person who has acquired such Voting Securities
directly from any Grandfathered Dorrance Family Stockholder but only if such
Person has executed an agreement which is approved by two-thirds of the Board
and pursuant to which such Person has agreed that she (or they) will not
increase her (or their) Beneficial Ownership (directly or indirectly) to 30% or
more of the outstanding Voting Securities (the "Standstill Agreement") and only
for the period during which the Standstill Agreement is effective and fully
honored by such Person. For purposes of this Section, "Grandfathered Dorrance
Family Stockholder" shall mean at any time a "Dorrance Family Stockholder" (as
hereinafter defined) who or which is at the time in question the Beneficial
Owner solely of (v) Voting Securities Beneficially Owned by such individual on
January 25, 1990, (w) Voting Securities acquired directly from the Company, (x)
Voting Securities acquired directly from another Grandfathered Dorrance Family
Stockholder, (y) Voting Securities which are also Beneficially Owned by other
Grandfathered Dorrance Family Stockholders at the time in question, and (z)
Voting Securities acquired after January 25, 1990 other than directly from the
Company or from another Grandfathered Dorrance Family Stockholder by any
"Dorrance Grandchild" (as hereinafter defined) provided that the aggregate
amount of Voting Securities so acquired by each such Dorrance Grandchild shall
not exceed five percent (5%) of the Voting Securities outstanding at the time of
such acquisition. A "Dorrance Family Stockholder" who or which is at the time in
question the Beneficial Owner of Voting Securities which are not specified in
clauses (v), (w), (x), (y) and (z) of the immediately preceding sentence shall
not be a Grandfathered Dorrance Family Stockholder at the time in question. For
purposes of this Section, "Dorrance Family Stockholders" shall mean individuals
who are descendants of the late Dr. John T. Dorrance, Sr. and/or the spouses,
fiduciaries and foundations of such descendants. A "Dorrance Grandchild" means
as to each particular grandchild of the late Dr. John T. Dorrance, Sr., all of
the following taken collectively: such grandchild, such grandchild's descendants
and/or the spouses, fiduciaries and foundations of such grandchild and such
grandchild's descendants.
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<PAGE> 4
Moreover, notwithstanding the foregoing, a Change in Control shall not be deemed
to occur solely because any Person (the "Subject Person") acquired Beneficial
Ownership of more than the permitted amount of the outstanding Voting Securities
as a result of the acquisition of Voting Securities by the Company which, by
reducing the number of Voting Securities outstanding, increases the proportional
number of shares Beneficially Owned by the Subject Person, provided that if a
Change in Control would occur (but for the operation of this sentence) as a
result of the acquisition of Voting Securities by the Company, and after such
share acquisition by the Company, the Subject Person becomes the Beneficial
Owner of any additional Voting Securities which increases the percentage of the
then outstanding Voting Securities Beneficially Owned by the Subject Person,
then a Change in Control shall occur.
(e) Notwithstanding anything contained in this
Agreement to the contrary, if the Executive's Termination Date (as defined in
Section 5) is within one year prior to a Change in Control and the Executive
reasonably demonstrates that such termination (1) was at the request of a Third
Party (as defined in Section 2.4(b)) who effectuates a Change in Control or (2)
otherwise occurred in connection with or in anticipation of, a Change in
Control, then for all purposes of this Agreement, the date of a Change in
Control shall mean the date immediately prior to the date of such termination of
the Executive's employment.
2.3 Disability. For purposes of this Agreement, "Disability"
shall mean a physical or mental infirmity that impairs the Executive's ability
to substantially perform her duties under this Agreement for a period of one
hundred eighty (180) consecutive days.
2.4 (a) Good Reason. For purposes of this Agreement, "Good
Reason" shall mean the occurrence after a Change in Control of any of the events
or conditions described in Subsections (1) through (8) hereof:
(1) a change in the Executive's title, position or
responsibilities (including reporting responsibilities) which represents an
adverse change from her title, position or responsibilities as in effect
immediately prior thereto; the assignment to the Executive of any duties or
responsibilities which, in the Executive's reasonable judgment, are inconsistent
with her status, title, position or responsibilities; or any removal of the
Executive from or failure to reappoint or reelect her to any of such offices or
positions, except in connection with the termination of her employment for
Disability, Cause, as a result of her death or by the Executive other than for
Good Reason;
(2) a reduction in the Executive's base salary or any
failure to pay the Executive any compensation or benefits to which she is
entitled within thirty (30) days of the date due;
(3) the Company's requiring the Executive to be based
at any place outside a 50-mile radius from Camden, New Jersey, except for
reasonably required travel on the Company's
4
<PAGE> 5
business which is not greater than such travel requirements prior to the Change
in Control;
(4) the failure by the Company to (A) continue in
effect (without reduction in benefit level, and/or reward opportunities) any
compensation or employee benefit plan in which the Executive was participating
immediately prior to the Change in Control, unless a substitute or replacement
plan has been implemented which provides substantially identical compensation or
benefits to the Executive or (B) provide the Executive with compensation and
benefits, in the aggregate, at least equal (in terms of benefit levels and/or
reward opportunities) to those provided for under each other compensation or
employee benefit plan, program and practice as in effect immediately prior to
the Change in Control (or as in effect following the Change in Control, if
greater);
(5) the insolvency or the filing (by any party,
including the Company) of a petition for bankruptcy of the Company;
(6) any material breach by the Company of any
provision of this Agreement;
(7) any purported termination of the Executive's
employment for Cause by the Company which does not comply with the terms of
Section 2.1; or
(8) the failure of the Company to obtain an
agreement, satisfactory to the Executive, from any successor or assign of the
Company to assume and agree to perform this Agreement, as contemplated in
Section 7 hereof.
(b) Any event or condition described in this Section 2.4(a)(1)
through (8) which occurs prior to a Change in Control but which the Executive
reasonably demonstrates (1) was at the request of a third party who has
indicated an intention or taken steps reasonably calculated to effect a Change
in Control (a "Third Party"), or (2) otherwise arose in connection with or in
anticipation of a Change in Control, shall constitute Good Reason for purposes
of this Agreement notwithstanding that it occurred prior to the Change in
Control.
(c) The Executive's right to terminate her employment pursuant
to this Section 2.4 shall not be affected by her incapacity due to physical or
mental illness.
3. Severance and Benefits.
3.1 If, during the term of this Agreement, the Executive's
employment with the Company shall be terminated within twenty-four (24) months
following a Change in Control, the Executive shall be entitled to the following
compensation and benefits:
(a) If the Executive's employment with the Company shall be
terminated (1) by the Company for Cause or Disability, (2) by reason of the
Executive's death, or (3) by the Executive other
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<PAGE> 6
than for Good Reason, the Company shall pay the Executive all amounts earned or
accrued through the Termination Date but not paid as of the Termination Date,
including (i) base salary, (ii) reimbursement for reasonable and necessary
expenses incurred by the Executive on behalf of the Company during the period
ending on the Termination Date, and (iii) vacation pay (collectively, "Accrued
Compensation"). In addition to the foregoing, if the Executive's employment is
terminated by the Company for Disability or by reason of the Executive's death,
the Company shall pay to the Executive or her beneficiaries an amount equal to
the "Pro Rata Bonus" (as hereinafter defined). The "Pro Rata Bonus" is an amount
equal to the Bonus Amount (as hereinafter defined) multiplied by a fraction the
numerator of which is the number of days in such fiscal year through the
Termination Date and the denominator of which is 365. The term "Bonus Amount"
shall mean the greater of the (x) Executive's target bonus under the Campbell
Soup Company Management Worldwide Incentive Plan for the fiscal year in which
the Termination Date occurs or (y) average of the annual bonuses paid or payable
during the two full fiscal years ended prior to the Termination Date.
Executive's entitlement to any other compensation or benefits shall be
determined in accordance with the Company's employee benefit plans and other
applicable programs and practices then in effect.
(b) If the Executive's employment with the Company shall be
terminated (other than by reason of death), (1) by the Company other than for
Cause or Disability or (2) by the Executive for Good Reason, the Executive shall
be entitled to the following:
(i) The Company shall pay the Executive all Accrued
Compensation and a Pro-Rata Bonus (each as defined in Section 3.1(a)).
(ii) The Company shall pay the Executive as severance
pay and in lieu of any further compensation for periods subsequent to the
Termination Date, in a single payment an amount (the "Severance Amount") in cash
equal to two and a half times the sum of (A) the greater of the Executive's
annual base salary in effect at any time during the 90-day period prior to the
Change in Control ("Base Salary") or at any time thereafter and (B) the Bonus
Amount. Notwithstanding the foregoing, if the Executive has attained at least
age 63 on the Termination Date the Severance Amount to be paid under this
Subsection (ii) shall be the amount described in the preceding sentence
multiplied by a fraction (which in no event shall be less than one-fourth) the
numerator of which shall be the number of months (for this purpose any partial
month shall be considered as a whole month) remaining until the Executive's 65th
birthday (but in no event shall be less than 6) and the denominator of which
shall be 24 and if the Executive has attained at least age 65 on the Termination
Date the Severance Amount to be paid under this Subsection (ii) shall be the
amount described in the preceding sentence multiplied by one-fourth.
(iii) For a number of months equal to the lesser of
(A) 30 or (B) the number of months remaining until the Executive's 65th birthday
(the "Continuation Period"), the Company shall at its expense continue on behalf
of the Executive and her dependents and beneficiaries the life insurance,
disability,
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<PAGE> 7
medical, dental and hospitalization benefits provided (x) to the
Executive at any time during the 90-day period prior to the Change in Control or
at any time thereafter or (y) to other similarly situated executives who
continue in the employ of the Company during the Continuation Period. The
coverage and benefits (including deductibles and costs) provided in this Section
3.1(b)(iii) during the Continuation Period shall be no less favorable to the
Executive and her dependents and beneficiaries, than the most favorable of such
coverages and benefits during any of the periods referred to in clauses (x) and
(y) above. The Company's obligation hereunder with respect to the foregoing
benefits shall be limited to the extent that the Executive obtains any such
benefits pursuant to a subsequent employer's benefit plans, in which case the
Company may reduce the coverage of any benefits it is required to provide the
Executive hereunder as long as the aggregate coverages and benefits of the
combined benefit plans is no less favorable to the Executive than the coverages
and benefits required to be provided hereunder. This Subsection (iii) shall not
be interpreted so as to limit any benefits to which the Executive, her
dependents or beneficiaries may be entitled under any of the Company's employee
benefit plans, programs or practices following the Executive's termination of
employment, including without limitation, retiree medical and life insurance
benefits.
(iv) The Company shall pay in a single payment an
amount in cash equal to the excess of (A) the Supplemental Retirement Benefit
(as defined below) had (w) the Executive remained employed by the Company for an
additional two and one-half complete years of credited service (or until her
65th birthday if earlier), (x) her annual compensation during such period been
equal to her Base Salary and the Bonus Amount, (y) the Company and/or the
Subsidiary or Division made employer contributions to each defined contribution
plan in which the Executive was a participant at the Termination Date (in an
amount equal to the amount of such contribution for the plan year immediately
preceding the Termination Date) and (z) she had been fully (100%) vested in her
benefit under each retirement plan in which the Executive was a participant,
over (B) the lump sum actuarial equivalent of the aggregate retirement benefit
the Executive is actually entitled to receive under such retirement plans. For
purposes of this Subsection (iv), the "Supplemental Retirement Benefit" shall
mean the lump sum actuarial equivalent of the aggregate retirement benefit the
Executive would have been entitled to receive under the Company's supplemental
and other retirement plans including, but not limited to, the Campbell Soup
Company Retirement and Pension Plan for Salaried Employees, the Campbell Soup
Company Supplemental Retirement Benefit Program (collectively referred to as the
"Retirement Plan"), the Campbell Soup Company Savings and 401(k) Plan for
Salaried Employees and the Campbell Soup Company Supplemental Savings Plan. For
purposes of this Subsection (iv), the "actuarial equivalent" shall be determined
in accordance with the actuarial assumptions used for the calculation of
benefits under the Retirement Plan as applied prior to the Termination Date in
accordance with such plan's past practices.
(v) The outstanding incentive awards (including
restricted stock and performance shares or units, stock options or stock
appreciation rights) granted to the Executive after a Change
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<PAGE> 8
in Control under the Campbell Soup Company 1994 Long-Term Incentive Plan or
under any subsequent incentive plan or arrangement, shall vest and any
restrictions thereon shall lapse as follows: (i) all such incentive awards
(other than performance related awards) shall vest or become exercisable
immediately and any restrictions thereon shall lapse and (ii) any performance
related awards shall vest or become exercisable and any restrictions thereon
shall lapse on a pro-rata portion of such awards based on the portion of the
relevant performance period that has expired as of the Termination Date (but in
no event shall such performance related award vest, become exercisable or
restrictions lapse with respect to less than 50% of the total outstanding
awards, any additional vesting to apply to those awards which have been
outstanding the longest), and (B) the Executive shall have the right to require
the Company to purchase, for cash, any shares of unrestricted stock or shares
purchased upon exercise of any options, at a price equal to the fair market
value of such shares on the date of purchase by the Company.
(c) The amounts provided for in Sections 3.1(a) and
3.1(b)(i), (ii), (iv) and (v) shall be paid within thirty (30) days after the
Executive's Termination Date.
(d) The Executive shall not be required to mitigate
the amount of any payment provided for in this Agreement by seeking other
employment or otherwise and no such payment shall be offset or reduced by the
amount of any compensation or benefits provided to the Executive in any
subsequent employment except as provided in Section 3.1(b)(iii).
3.3 The severance pay and benefits provided for in Sections
3.1(a) and 3.1(b)(i) and (ii) shall be in lieu of any other severance pay to
which the Executive may be entitled under any Company severance plan, program or
arrangement.
4. Notice of Termination. Following a Change in Control, any purported
termination of the Executive's employment by the Company or by the Executive
shall be communicated by written Notice of Termination to the other. For
purposes of this Agreement, a "Notice of Termination" shall mean a notice which
indicates the specific termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's employment under the
provision so indicated. For purposes of this Agreement, no such purported
termination shall be effective without such Notice of Termination.
5. Termination Date. "Termination Date" shall mean in the case of the
Executive's death, her date of death, and in all other cases, the date specified
in the Notice of Termination subject to the following:
(a) If the Executive's employment is terminated by the Company
for Cause or due to Disability, the date specified in the Notice of Termination
shall be at least thirty (30) days from the date the Notice of Termination is
given to the Executive, provided that in the case of Disability the Executive
shall not have
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<PAGE> 9
returned to the full-time performance of her duties during such period of at
least thirty (30) days; and
(b) If the Executive's employment is terminated for Good
Reason, the date specified in the Notice of Termination shall not be more than
sixty (60) days from the date the Notice of Termination is given to the Company.
(c) Notwithstanding any other provision of this Agreement to
the contrary, the termination of the Executive's employment with the Company in
connection with the sale, divestiture or other disposition of the Division (or
part thereof) at which the Executive was employed at the time of such sale,
divestiture or other disposition, shall not be deemed to be a termination of
employment of the Executive for purposes of this Agreement provided the
Executive is offered employment by the purchaser or acquiror of such Division
(or part thereof) and the Company obtains an agreement from such purchaser or
acquiror as contemplated in Section 7(c) and the Executive shall not be entitled
to benefits from the Company under this Agreement as a result of such sale,
divestiture, or other disposition, or as a result of any subsequent termination
of employment.
6. Excise Tax Limitation.
(a) Notwithstanding anything contained in this Agreement to
the contrary, to the extent that any or all of the payments and benefits
provided to, or for the benefit of, the Executive under this Agreement or any
other plan or agreement (such payments or benefits are collectively referred to
as the "Payments") in connection with, or arising out of, her employment with
the Company or a change in ownership or effective control of the Company or of a
substantial portion of its assets would be subject to the imposition of excise
tax (the "Excise Tax") under Section 4999 of the Internal Revenue Code of 1986,
as amended (the "Code"), the Payments shall be reduced (but not below zero) if
and to the extent that such reduction would result in the Executive retaining a
larger amount, on an after tax basis (taking into account federal, state and
local income taxes and the imposition of the Excise Tax), than if the Executive
received all of the Payments (such reduced amount is hereinafter referred to as
the "Limited Payment Amount"). Unless the Executive shall have given prior
written notice specifying a different order to the Company to effectuate the
limitations described in the preceding sentence, the Company shall reduce or
eliminate the Payments, by first reducing or eliminating those payments or
benefits which are not payable in cash and then by reducing or eliminating cash
payments, in each case in reverse order beginning with payments or benefits
which are to be paid the farthest in time from the Determination (as hereinafter
defined). Any notice given by the Executive pursuant to the preceding sentence
shall take precedence over the provisions of any other plan, arrangement or
agreement governing the Executive's rights and entitlements to any benefits or
compensation.
(b) All determinations required to be made under this Section
6 shall be made, at the Company's expense, by a nationally recognized accounting
firm designated by the Company (other than
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<PAGE> 10
the accounting firm that is regularly engaged by any party who has effectuated a
Change in Control) and reasonably acceptable to the Executive (the "Accounting
Firm"). The Accounting Firm shall provide their calculations, together with
detailed supporting documentation, both to the Company and the Executive within
5 days after the Executive's Termination Date (or such earlier time as is
requested by the Company) and, with respect to the Limited Payment Amount, a
reasonable opinion to the Executive that she is not required to report any
Excise Tax on her federal income tax return with respect to the Limited Payment
Amount (collectively, the "Determination"). Within 5 days of the Executive's
receipt of the Determination, the Executive shall have the right to dispute the
Determination (the "Dispute"). The existence of the Dispute shall not in any way
affect the right of the Executive to receive the Payments in accordance with the
Determination. If there is no Dispute, the Determination by the Accounting Firm
shall be final binding and conclusive upon the Company and the Executive (except
as provided in Subsection (c) below).
(c) It is possible that the Payments made to, or provided for
the benefit of, the Executive either have been made or have not been made by the
Company which are, in either case, inconsistent with the limitations provided in
Section 6(a) (hereinafter referred to as an "Excess Payment" or "Underpayment",
respectively). If it is established pursuant to a final determination of a court
or an Internal Revenue Service (the "IRS") proceeding which has been finally and
conclusively resolved, that an Excess Payment has been made, such Excess Payment
shall be deemed for all purposes to be a loan to the Executive made on the date
the Executive received the Excess Payment and the Executive shall repay the
Excess Payment to the Company on demand, together with interest on the Excess
Payment at the applicable federal rate (as defined in Section 1274(d) of the
Code) from the date of the Executive's receipt of such Excess Payment until the
date of such repayment. In the event that it is determined by (i) the Accounting
Firm, the Company (which shall include the position taken by the Company, or
together with its consolidated group, on its federal income tax return) or the
IRS, (ii) pursuant to a determination by a court, or (iii) upon the resolution
to the satisfaction of the Executive of the Dispute, that an Underpayment has
occurred, the Company shall pay an amount equal to the Underpayment to the
Executive within 10 days of such determination or resolution together with
interest on such amount at the applicable federal rate from the date such amount
would have been paid to the Executive until the date of payment.
7. Successors; Binding Agreement.
(a) This Agreement shall be binding upon and shall inure to
the benefit of the Company, its successors and assigns and the Company shall
require any successor or assign to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession or assignment had taken place. The
term "the Company" as used herein shall include such successors and assigns. The
term "successors and assigns" as used herein shall mean a corporation or other
entity acquiring all or substantially all the
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<PAGE> 11
assets and business of the Company (including this Agreement) whether by
operation of law or otherwise.
(b) Neither this Agreement nor any right or interest hereunder
shall be assignable or transferable by the Executive, her beneficiaries or legal
representatives, except by will or by the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal personal representative.
(c) In the event that one or more Divisions that the Executive
is primarily associated with (or part thereof) are sold, divested, or otherwise
disposed of by the Company subsequent to a Change in Control, the Company shall
require such purchaser or acquiror, as a condition precedent to such purchase or
acquisition, to assume, and agree to perform the Company's obligations under
this Agreement, in the same manner, and to the same extent that the Company
would be required to perform if no such acquisition or purchase had taken place.
In such circumstances, the purchaser or acquiror shall be solely responsible for
providing any payments or benefits payable under this Agreement to the
Executive.
8. Fees and Expenses. The Company shall pay all legal fees and related
expenses (including the costs of experts, evidence and counsel) incurred by the
Executive as they become due as a result of (a) the Executive's termination of
employment (including all such fees and expenses, if any, incurred in contesting
or disputing any such termination of employment), (b) the Executive seeking to
obtain or enforce any right or benefit provided by this Agreement or by any
other plan or arrangement maintained by the Company under which the Executive is
or may be entitled to receive benefits, or (c) the Executive's hearing before
the Board as contemplated in Section 2.1 of this Agreement; provided, however,
that the circumstances set forth in clauses (a) and (b) (other than as a result
of the Executive's termination of employment under circumstances described in
Section 2.2(d)) occurred on or after a Change in Control.
9. Notice. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement (including the Notice of
Termination) shall be in writing and shall be deemed to have been duly given
when personally delivered or sent by certified mail, return receipt requested,
postage prepaid, addressed to the respective addresses last given by each party
to the other, provided that all notices to the Company shall be directed to the
attention of the Board with a copy to the Secretary of the Company. All notices
and communications shall be deemed to have been received on the date of delivery
thereof or on the third business day after the mailing thereof, except that
notice of change of address shall be effective only upon receipt.
10. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any benefit,
bonus, incentive or other plan or program provided by the Company or any of its
subsidiaries and for which the Executive may qualify, nor shall anything herein
limit or reduce such rights as the Executive may have under any other agreements
with the Company or any of its subsidiaries. Provided,
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<PAGE> 12
to the extent that the Executive receives benefits under this Agreement, she is
not entitled to severance pay under any other severance plan, policy or
arrangement of the Company, including specifically the Severance Protection
Program. Amounts which are vested benefits or which the Executive is otherwise
entitled to receive under any plan or program of the Company or any of its
subsidiaries shall be payable in accordance with such plan or program, except as
explicitly modified by this Agreement.
11. Settlement of Claims. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against the Executive or others.
12. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and the Company. No waiver by either
party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreement or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not expressly set
forth in this Agreement.
13. Employment Status. This Agreement does not constitute a contract of
employment or impose on the Company any obligation to retain the Executive, or
any obligation on the Executive to remain in the employment of the Company.
14. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New Jersey without
giving effect to the conflict of laws principles thereof. Each party hereto
consents to the subject matter and in personam jurisdiction and venue in the
United States District Court of New Jersey. In the event it is determined that
the United States District Court of New Jersey should lack subject matter
jurisdiction for any reason, the parties consent to the jurisdiction and venue
in a court of competent jurisdiction in Camden County in the State of New
Jersey.
15. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
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16. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto and supersede all prior agreements, if any,
understandings and arrangements, oral or written, between the parties hereto
with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer and the Executive has executed this
Agreement as of the day and year first above written.
ATTEST: CAMPBELL SOUP COMPANY
By:
- --------------------------- -------------------------
Secretary President and
Chief Executive Officer
EXECUTIVE
By:
-------------------------
Ellen Oran Kaden
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<PAGE> 1
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
RESULTS OF OPERATIONS
OVERVIEW - On September 9, 1997, the company announced its intention to spin off
the Specialty Foods segment to its shareowners as an independent publicly-traded
company. The spin-off, which qualified as a tax-free distribution to U.S.
shareowners, was effective March 30, 1998. On this date, shareowners of record
as of March 9, 1998, received one share of the common stock of the new company,
Vlasic Foods International Inc. ("Vlasic"), for every ten shares of Campbell
Soup Company capital stock. In March 1998, the company entered into a revolving
credit facility and borrowed $500 million. In connection with the spin-off, the
revolving credit facility and outstanding obligation of $500 million were
assumed by Vlasic. In addition, the company received approximately $75 million
from subsidiaries of Vlasic for repayment of certain advances. The net operating
results of Vlasic are reported as Earnings (Loss) from Discontinued Operations
and the net assets as of August 3, 1997, are reported as Net Assets of
Discontinued Operations.
RESULTS OF CONTINUING OPERATIONS - Comparability of net earnings and earnings
per share for the year ended August 2, 1998, was impacted by the fourth quarter
1998 gain on the sale of Delacre, the company's European biscuit business, of
approximately $14 million ($9 million after tax or $.02 per share), the third
quarter 1998 restructuring charge of $262 million ($193 million after tax or
$.42 per share), the cumulative effect of adopting Emerging Issues Task Force
consensus ruling on Issue 97-13, "Accounting for Costs Incurred in Connection
with a Consulting Contract that Combines Business Process Reengineering and
Information Technology Transformation" in the second quarter of 1998 ($11
million after tax or $.02 per share), and the first quarter 1997 restructuring
charge of $204 million ($152 million after tax or $.31 per share). Excluding
these items, the company's net earnings increased 5% and basic and diluted
earnings per share increased 9%. Earnings from continuing operations, before
these items, increased 11% and basic and diluted earnings per share increased
15% and 16%, respectively.
SALES - Sales in 1998 increased 1% to $6.70 billion from $6.61 billion last
year. The growth was due to a 4% increase from volume and new products, 2% from
higher selling prices, 1% from acquisitions, offset by a 6% decline due to
currency and divestitures. In 1997, sales increased 5% as follows: 3% volume, 3%
higher selling prices, 3% acquisitions, offset by a 4% decline due to
divestitures. Overall, net sales from ongoing businesses increased 5% in 1998
and 8% in 1997.
An analysis of net sales by segment follows:
<TABLE>
<CAPTION>
% Change
1998/ 1997/
(millions) 1998 1997 1996 1997 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Soup and Sauces $ 4,434 $ 4,171 $ 3,739 6 12
Biscuits and
Confectionery 1,522 1,546 1,459 (2) 6
Foodservice 455 439 418 4 5
Other 334 520 760 (36) (32)
Intersegment (49) (62) (52)
------- ------- ------- ------- -------
$ 6,696 $ 6,614 $ 6,324 1 5
======= ======= ======= ======= =======
</TABLE>
The Soup and Sauces sales growth in 1998 was led by worldwide wet soup volume
growth of 4% including U.S. wet soup volume growth of 1%. In the U.S.,
Campbell's condensed Chicken Noodle soup, ready-to-serve Chunky soups and
Swanson broths all reported strong volume and sales gains in 1998. International
wet soup continued to post volume gains in Canada, Germany, Australia and Japan.
In addition, Liebig in France, acquired in December 1997, and Erasco, Germany's
leading branded soup company, contributed to the sales growth. V8 Splash and
Franco-American pasta continued their positive momentum.
In 1997, Soup and Sauces sales were up significantly due to strong
worldwide wet soup unit volume growth. This was evident in the U.S. with volume
growth led by Campbell's condensed Chicken Noodle, Tomato and Cream of Mushroom
soups, premium soups in glass jars, and Swanson broths. International volume and
market share gains were achieved in all countries, and in Germany, Erasco was
acquired. New products such as V8 Splash and Franco-American Superiore
all-family pastas also contributed to sales growth.
Biscuits and Confectionery sales declined slightly in 1998 due to the
divestiture of Delacre in June and the adverse impact of currency, particularly
the weakness of the Australian dollar. Excluding the impact of the Delacre
divestiture and currency, sales increased 7%. The increase was driven by
Pepperidge Farm Goldfish crackers, Chocolate Chunk Classic cookies and swirl
breads. Godiva Chocolatier delivered double-digit sales growth and continued its
expansion with new stores in North America and distribution points in Japan.
Arnotts Limited ("Arnotts"), before the impact of currency, reported improved
sales, reflecting recovering market share from last year's extortion incident
discussed below.
In 1997, Biscuits and Confectionery sales increase was led by
Pepperidge Farm Goldfish crackers, Milano cookies and swirl breads. Godiva
contributed double-digit sales growth through strong retail sales in the U.S.
and continued expansion in Japan. Arnotts' sales were flat compared to the prior
year due to an extortion incident in Australia that resulted in a product recall
in the second half of 1997 and the comparison to a 56-week year in 1996 which
resulted from aligning Arnotts' and Campbell's fiscal year reporting.
The Foodservice sales increase in 1998 was led by Pace products, Prego
entrees and V8 Splash. In addition, Foodservice successfully introduced soup
merchandisers into convenience stores and college cafeterias.
The Foodservice sales increase in 1997 was driven by strong soup sales
in the U.S. food service channels, Prego frozen entrees and Pace Mexican sauces,
as well as solid gains in Canada.
In 1998, the company continued its portfolio reconfiguration and
divested several non-strategic businesses, including Continental Sweets, a
European confectionery and distribution business, Melbourne Mushrooms, an
Australian mushroom business and Spring Valley, an Australian beverage business.
These divestitures and the impact of the 1997 divestitures led to the decline in
sales in Other.
During 1997 the company divested several non-strategic businesses,
including Marie's salad dressings and Beeck-Feinkost chilled German salads.
These divestitures and the impact of the 1996 divestitures led to the decline in
sales in Other.
GROSS MARGIN - Gross margin, defined as net sales less cost of products sold,
increased by $261 million in 1998 and $333 million in 1997. As a percent of
sales, gross margin was 51.7% in 1998, and 48.4% and 45.4% in 1997 and 1996,
respectively. The increases in 1998 and 1997 were due principally to cost
savings generated from global procurement initiatives and continued productivity
gains in manufacturing facilities.
MARKETING AND SELLING EXPENSES - Marketing and selling expenses as a percent of
sales were 22.7% in 1998, and 20.7% and 19.6% in 1997 and 1996, respectively. In
1998, the increase was primarily attributable to consumer promotion and
advertising spending for U.S. wet soup, V8 beverages, Pepperidge Farm Goldfish
and Milano cookies and Erasco products. In 1997, the increase was a result of
heavy advertising for premium soups in glass jars, Swanson broths and Pepperidge
Farm Goldfish and Milano cookies.
GENERAL AND ADMINISTRATIVE EXPENSES - Administrative expenses increased as a
percent of sales to 4.5% from 4.1% in 1997. The increase was primarily due to
information systems investments and consulting service fees. In 1997,
administrative expenses declined as a percent of sales to 4.1% from 4.6% in
1996. The decrease was attributable to streamlining of operations associated
with the restructuring program recorded in the first quarter and favorable
employee benefits experience.
Research and development expenses as a percent of sales were unchanged
for 1998 and 1997. In 1997, the expenses declined 11% primarily due to
head-count reductions associated with the restructuring program.
Other expenses declined significantly in 1998 due to lower expenses
associated with the company's long-term incentive plans and the gain on the sale
of Delacre. In 1997, the increase in other expenses was due to the effect of the
appreciation in Campbell's share price on the company's long-term incentive plan
obligations.
OPERATING EARNINGS - Segment operating earnings in 1998 increased 7% compared to
1997. Excluding the 1998 and 1997 restructuring charges, operating earnings
increased 10% in 1998.
An analysis of operating earnings by segment follows:
<TABLE>
<CAPTION>
% Change
1998/ 1997/
(millions) 1998 1997 1996 1997 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Soup and Sauces $ 1,110 $ 1,001 $ 978 11 2
Biscuits and
Confectionery 206 153 187 35 (18)
Foodservice 53 59 56 (10) 5
Other (86) (10) 17 -- --
------- ------- ------- ------- -------
1,283 1,203 1,238 7 (3)
Corporate (35) (54) (47)
------- ------- ------- ------- -------
$ 1,248 $ 1,149 $ 1,191
======= ======= ======= ======= =======
</TABLE>
Contribution to earnings by segment includes the effect of a third quarter 1998
pre-tax restructuring charge of $262 as follows: Soup and Sauces - $135,
Biscuits and Confectionery - $25, Foodservice - $4, and Other - $98.
Contribution to earnings by segment includes the effect of a first quarter 1997
pre-tax restructuring charge of $204 as follows: Soup and Sauces - $134,
Biscuits and Confectionery - $53, and Other - $17.
Soup and Sauces earnings, excluding the restructuring charges, were up
10% in 1998 due to sales growth in Campbell's condensed Chicken Noodle soup,
ready-to-serve Chunky and Simply Home soups and Swanson broths. Our core
businesses in the United Kingdom, Continental Europe and Canada reported
increased earnings. The Liebig acquisition and V8 Splash and Franco-American
pastas and gravies also contributed to the earnings growth.
2
<PAGE> 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
Soup and Sauces earnings, excluding the restructuring charge, were up
16% in 1997 led by sales volume increases in Campbell's condensed Chicken
Noodle, Tomato and Cream of Mushroom soups. New product introductions, the
Erasco acquisition and continued benefits from manufacturing efficiencies also
contributed to the earnings growth.
Biscuits and Confectionery earnings, excluding the restructuring
charges, increased 12% in 1998. Excluding the impact of currency, earnings
increased 18% led by Godiva, Pepperidge Farm and Arnotts. Godiva sales growth,
Pepperidge Farm swirl breads and Goldfish and Arnotts' market share recovery
were the primary components of the growth.
Biscuits and Confectionery earnings, excluding the restructuring
charge, increased 10% in 1997 led by double-digit growth at Pepperidge Farm and
Godiva. Pepperidge Farm's Goldfish crackers continued their outstanding
performance and Godiva posted record earnings as a result of its strong U.S. and
Japanese retail businesses.
Foodservice earnings, excluding the restructuring charges, declined
slightly in 1998 due to investments in soup merchandisers and lower sales of
non-soup products.
In 1997, the Foodservice earnings increase was attributable to strong
soup sales in traditional U.S. food service channels and Pace Mexican sauces.
Earnings in Other, excluding the restructuring charges, improved in
1998 primarily as a result of the decision to discontinue investment in
Intelligent Quisine.
In 1997, earnings in Other, excluding the restructuring charge,
declined as a result of the company's continued efforts to reconfigure its
business portfolio and the divestiture of several non-strategic businesses.
NON-OPERATING ITEMS - The 1998 interest expense increase of 14% was primarily
due to a full year of financing costs associated with the company's 1997 $2.5
billion share repurchase program that commenced in October 1996 with the "Dutch
Auction" tender offer. This increase was partially offset by Vlasic's assumption
of the revolving credit facility obligation of $500 million in March. In 1997,
interest expense increased 33% primarily due to financing costs associated with
the company's share repurchase program.
The effective tax rate was 35.8% compared to 36.0% last year. Excluding
the restructuring charges, the effective tax rate was 34.0% in 1998 and 34.4% in
1997. In 1996, the effective tax rate was 33.0%.
DISCONTINUED OPERATIONS - On March 30, 1998, the company completed the spin-off
of Vlasic. Accordingly, the company reported the net operating results and net
assets as a discontinued operation. The loss from discontinued operations
included eight months of Vlasic operations, a third quarter 1998 restructuring
charge of $22 million ($.05 per share) and spin-off costs of $38 million ($.08
per share). The restructuring program was designed to improve operational
efficiency by closing certain U.S. and European administrative offices and
production facilities. The spin-off costs primarily consist of taxes and legal
and advisory services incurred in connection with the transaction. In addition,
1997 earnings from discontinued operations included a first quarter
restructuring charge of $8 million ($.01 per share). Earnings from discontinued
operations, before restructuring charges and spin-off costs, were $42 million in
1998, $87 million in 1997 and $84 million in 1996.
Earnings in 1998 were adversely impacted by cattle supply issues in
Argentina and competitive difficulties in the German specialty foods business.
RESTRUCTURING CHARGES - During the third quarter 1998, the company recorded a
charge included in earnings from continuing operations of $262 million ($193
million after tax or $.42 per share) related to plant and administrative
rationalization and portfolio reconfiguration in the U.S., Europe and Australia.
As a result, approximately 750 employee positions will be eliminated, primarily
due to closure of plant locations and consolidation of administrative functions.
The charge includes the realignment of soup, sauces and juice
production, the rationalization of administrative offices in the U.S., Europe
and Australia, the closure of several production facilities and the divestiture
of certain non-strategic businesses with annual sales of approximately $170
million, including Fresh Start Bakeries Inc. and Melbourne Mushrooms. The
decision to discontinue production at certain facilities was precipitated by
analyses of production capacity and the search for cost savings to fund
investments for brand growth. The restructuring program is expected to be
completed in 1999.
The restructuring program is expected to require pre-tax cash outflows
of approximately $78 million, excluding proceeds from divestitures. Cash
charges, the majority of which will be paid in 1999, relate primarily to
severance, employee benefit costs and lease termination fees. Proceeds from the
divestiture program, net of tax outflows and other cash transaction costs, are
expected to result in increases in cash flow in 1999. Cash outflows are not
expected to have a material adverse effect on the company's liquidity. The
balance of the charge relates to non-cash charges for the expected loss on the
disposition of plant assets and divestitures of businesses.
From this program, the company expects to realize approximately $74
million of ongoing annual pre-tax savings, of which approximately 70% is
expected to be generated in 1999. Expected annual savings are not necessarily
indicative of future incremental earnings due to management's commitment to fund
investments to grow brands and drive volume growth. See Note 5 to the
Consolidated Financial Statements for the components of the restructuring
reserve and the related activity.
In the first quarter of 1997, the company recorded a charge included in
earnings from continuing operations of $204 million ($152 million after tax or
$.31 per share) to cover the costs of a restructuring program. The program was
designed to improve operational efficiency by closing various plants, reducing
administrative and operational staff functions and divesting non-strategic
businesses. The program was completed in the first quarter of 1998. See Note 5
to the Consolidated Financial Statements for further discussion of this program.
LIQUIDITY AND CAPITAL RESOURCES
Strong cash flows from operations, a strong balance sheet and interest coverage
demonstrate the company's continued financial strength.
CASH FLOWS FROM OPERATIONS provided $900 million in 1998, compared to $1.0
billion in 1997. This decline is principally due to changes in working capital,
including an increase in accounts receivable and spending on restructuring
programs. Over the last three years, operating cash flows totaled approximately
$3.0 billion. This strong cash generating capability provides the company
substantial financial flexibility in meeting operating and investing objectives
and in executing the company's ongoing share repurchase program.
CAPITAL EXPENDITURES were $256 million in 1998, consistent with 1997. Capital
expenditures are projected to be $325 million in 1999.
ACQUISITIONS in 1998 totaled $478 million and included the Liebig soup business
in France for approximately $180 million and the buy-out of Arnotts' minority
shareholders for approximately $290 million. These acquisitions were funded
through cash generated from operations and short and long-term borrowings.
ASSET SALES in 1998 included the sale of the assets of the company's can-making
operations at four of its North American thermal manufacturing plants for
approximately $123 million. In conjunction with the transaction, the company
entered into a long-term supply agreement with the buyer.
SALES OF BUSINESSES included Delacre, Continental Sweets, Melbourne Mushrooms
and Spring Valley.
LONG-TERM BORROWINGS remained relatively consistent with 1997 despite the
issuance of $300 million 6.15% notes due December 1, 2002. These borrowings were
offset by the maturing of $200 million 5.5% notes and early repayment of certain
borrowings at higher than prevailing interest rates. This issuance was the
second draw down on the company's $1 billion shelf registration. A balance of
$400 million remains available under the shelf registration. The proceeds of
these notes were used primarily to repay short-term borrowings.
SHORT-TERM BORROWINGS remained consistent with 1997 primarily due to Vlasic's
assumption of the revolving credit facility obligation of $500 million, which
substantially offset the incremental borrowings utilized to support the
company's 1998 acquisitions.
The company has ample financial resources, including unused lines of credit
totaling approximately $2.5 billion, and has ready access to financial markets
around the world. The pre-tax interest coverage ratio, before the restructuring
charges, was 7.9 for 1998 compared to 7.7 for 1997.
DIVIDEND PAYMENTS increased $17 million or 5% to $367 million in 1998, compared
to $350 million in 1997. Dividends declared in 1998 totaled $.823 per share, up
from $.750 per share in 1997. The 1998 fourth quarter rate was $.210.
CAPITAL STOCK REPURCHASES totaled 12.5 million shares at a cost of $669 million
during 1998, compared to repurchases of 40 million shares at a cost of $1.7
billion in 1997. In 1998, the company substantially completed its 1997 $2.5
billion share repurchase program. Also, the company's Board of Directors
approved a new three-year $2.0 billion share repurchase program. By repurchasing
shares, the company expects to utilize existing cash and debt capacity to lower
its cost of capital and increase returns to shareowners. The company's long-term
strategy is to repurchase approximately 2% of its outstanding shares annually.
TOTAL ASSETS declined 9% to $5.6 billion primarily due to the spin-off of
Vlasic.
TOTAL LIABILITIES remained consistent with 1997 at approximately $4.8 billion.
3
<PAGE> 3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
Inflation
Inflation during recent years has not had a significant effect on the company.
The company mitigates the effects of inflation by aggressively pursuing cost
productivity initiatives including global procurement strategies and managing
capital investments in its manufacturing and administrative facilities.
Market Risk Sensitivity
The principal market risks to which the company is exposed are changes in
interest rates and foreign currency exchange rates. In addition, the company is
exposed to equity price changes relating to certain employee compensation
obligations. The company manages its exposure to changes in interest rates by
optimizing the use of variable-rate and fixed-rate debt and by utilizing
interest rate swaps in order to maintain its variable-to-total debt ratio within
targeted guidelines. International operations, which account for approximately
28% of 1998 net sales, are concentrated principally in Germany, France, United
Kingdom, Canada and Australia. The company manages its foreign currency
exposures by borrowing in various foreign currencies, by utilizing
cross-currency swaps and forward contracts and by purchasing foreign currency
option contracts. Swap, forward and option contracts are entered into for
periods consistent with related underlying exposures and do not constitute
positions independent of those exposures. The company does not enter into
contracts for speculative purposes and does not use leveraged instruments.
The information below summarizes the company's market risks associated
with debt obligations and other significant financial instruments as of August
2, 1998. Fair values included herein have been determined based on quoted market
prices. The information presented below should be read in conjunction with Notes
17 and 19 to the Consolidated Financial Statements.
For debt obligations, the table below presents principal cash flows and
related interest rates by fiscal year of maturity. Variable interest rates
disclosed represent the weighted average rates of the portfolio at the period
end. For interest rate swaps, the table presents the notional amounts and
related interest rates by fiscal year of maturity. For these swaps, the variable
rates presented are the average forward rates for the term of each contract.
EXPECTED FISCAL YEAR OF MATURITY
(US$ EQUIVALENTS IN MILLIONS)
<TABLE>
<CAPTION>
THERE- FAIR
1999 2000 2001 2003 AFTER TOTAL VALUE
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
DEBT
Fixed rate $ 285 $ 150 $ 111 $ 300 $ 608* $ 1,454 $ 1,534
Average
interest rate 4.78% 5.76% 7.02% 6.15% 7.33% 6.40%
--------- --------- --------- --------- --------- --------- ---------
Variable rate $ 1,116 $ 1,116 $ 1,116
Average
interest rate 5.51% 5.51%
--------- --------- --------- --------- --------- --------- ---------
INTEREST RATE SWAPS
Variable to fixed $ 100(1) $ 100 $ (2)
Average pay rate 8.24% 8.24%
Average receive rate 5.70% 5.70%
--------- --------- --------- --------- --------- --------- ---------
Fixed to variable $ 150(2) $ 150 $ 1
Average pay rate 4.93% 4.93%
Average receive rate 5.76% 5.76%
--------- --------- --------- --------- --------- --------- ---------
</TABLE>
*$100 callable in 2001
(1) Hedges commercial paper borrowings
(2) Hedges 5.76% notes due 2000
As of August 3, 1997, fixed-rate debt of $1.2 billion was outstanding with an
average interest rate of 6.72%, and variable-rate debt of $1.4 billion with an
average interest rate of 5.57% was outstanding. The interest rate swaps
described above were also outstanding at August 3, 1997.
The company is exposed to foreign currency exchange risk relating to
its international operations, including subsidiary debt which is denominated in
currencies other than the functional currency of those businesses. The
Cross-Currency Swaps table summarizes the swaps outstanding as of August 2, 1998
which hedge these exposures. The notional amounts of each currency and the
related weighted-average forward interest rates are presented in the
Cross-Currency Swaps table.
CROSS-CURRENCY SWAPS
(US$ EQUIVALENTS IN MILLIONS)
<TABLE>
<CAPTION>
INTEREST NOTIONAL
RATE VALUE
---- -----
<S> <C> <C>
Pay variable GBP 8.54%
Receive variable US$ 6.38% $ 66
Pay variable DM 4.29%
Receive variable US$ 6.25% $107
Pay variable FrF 4.16%
Receive variable US$ 6.24% $110
Pay fixed GBP 7.42%
Receive fixed US$ 6.02% $ 85
---- ----
</TABLE>
The company has additional contracts with a notional value of $37 outstanding at
August 2, 1998. The aggregate fair value of the contracts was $1 as of August 2,
1998. All contracts expire in 1999, except the variable French Franc contract
which expires in 2003 and the fixed Sterling contract which expires in 2000.
The notional amount and fair value of cross-currency contracts outstanding at
August 3, 1997 were $210 and $2, respectively. These contracts expired in 1998.
The company is also exposed to foreign exchange risk as a result of
transactions in currencies other than the functional currency of particular
subsidiaries. The company utilizes foreign currency forward contracts in order
to hedge these exposures. The table below summarizes the foreign currency
forward contracts outstanding with the weighted-average contract exchange rates
as of August 2, 1998.
FORWARD EXCHANGE CONTRACTS
(US$ EQUIVALENTS IN MILLIONS)
<TABLE>
<CAPTION>
AVERAGE
CONTRACT CONTRACTUAL
AMOUNT EXCHANGE RATE
------ -------------
<S> <C> <C>
Receive BEF/Pay US$ $ 127 36.78
Receive US$/Pay DM $ 32 1.77
Receive GBP/Pay BEF $ 31 73.43
Receive GBP/Pay DM $ 21 2.95
Receive US$/Pay JPY $ 14 126.83
Receive FRF/Pay US$ $ 13 5.92
------ ------
</TABLE>
The company has an additional $49 in a number of smaller contracts to purchase
or sell various other currencies, principally European, as of August 2, 1998.
The aggregate fair value of the contracts, which is not material to any
individual contract, was $1 as of August 2, 1998. Total forward exchange
contracts outstanding as of August 3, 1997 were $263.
The company has swap contracts outstanding as of August 2, 1998, which
hedge a portion of exposures relating to certain employee compensation
liabilities linked to the total return of the Standard & Poor's 500 Index or to
the total return of the company's capital stock. The company pays variable
interest rates and under one contract receives the Standard & Poor's 500 Index
and under the remaining contract receives the total return on company capital
stock. The notional value of the contract which includes the total return on the
Standard & Poor's 500 Index was $21 million at August 2, 1998, and $16 million
at August 3, 1997. The average forward interest rate applicable to this
contract, which expires in 1999, is 5.83% at August 2, 1998. The notional value
of the contract which includes the total return on company capital stock was
$122 million at August 2, 1998, and $58 million at August 3, 1997. The average
forward interest rate applicable to this contract, which expires in 2003, is
6.07% at August 2, 1998. The net cost to settle the contracts was $5 million at
August 2, 1998. Gains and losses on the contracts are recognized as adjustments
to the carrying value of the underlying obligations.
The company's utilization of financial instruments in managing market
risk exposures described above is consistent with the prior year. Changes in the
portfolio of financial instruments are a function of the results of operations
and market effects and the company's acquisition and divestiture activities.
Year 2000
Historically, certain computer programs were written using two digits rather
than four to define the applicable year. Accordingly, the company's software may
recognize a date using "00" as 1900 rather than the year 2000, which could
result in computer system failures or miscalculations, commonly referred to as
the Year 2000 ("Y2K") issue. The Y2K issue can arise at any point in the
company's supply, manufacturing, processing, distribution and financial chains.
Incomplete or untimely resolution of the Y2K issue by the company, key
suppliers, customers and other parties could have a material adverse effect on
the company's results of operations, financial condition and cash flows. To
address the Y2K issue, the company has established a Worldwide Year 2000
Business Action Council, led by an Executive Steering Committee of the company's
senior management, including representatives of each of the company's business
segments and corporate functions, to oversee and regularly review the status of
the readiness plan. In
4
<PAGE> 4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
addition, the company has established a Worldwide Project Office responsible for
the day-to-day oversight and coordination of the Y2K remediation, replacement
and testing of business systems. This project office reports to the company's
Chief Information Officer.
The company's plan for addressing the Y2K issue is divided into three major
phases: Business Systems Inventory and Assessment, Remediation and Replacement,
and Testing.
BUSINESS SYSTEMS INVENTORY AND ASSESSMENT - The internal inventory portion of
this phase, which commenced in 1997, was designed to identify internal business
systems that were susceptible to system failure or processing errors as a result
of the Y2K issue. This phase is substantially complete. Approximately 700
worldwide information technology business systems (IT) have been inventoried and
approximately 200 are Y2K compliant and 500 are non-compliant. It has been
determined that approximately 400 of the non-compliant systems require
remediation and the remaining 100 systems will be retired or replaced. In
addition, the company is in the process of completing the inventory and
assessment of its non-information technology systems (Non-IT). The remediation
and replacement of these systems, which include manufacturing production lines
and equipment, elevators, heating, ventilation and air conditioning systems and
water treatment systems, are included in the remediation and replacement plan
discussed below. As part of this phase, significant service providers, vendors,
suppliers, customers and governmental entities that are believed to be critical
to business operations after January 1, 2000, are being identified and steps
undertaken to ascertain their stage of Y2K readiness through questionnaires,
interviews, on-site visits and other available means.
REMEDIATION AND REPLACEMENT - The company has developed and is in the process of
implementing its remediation and replacement plan for all affected systems
including IT and Non-IT systems. This phase, which commenced in 1998, is
approximately 45% complete. The company's plan established priorities for
remediation or replacement. The business systems considered most critical to
ongoing operations are being given the highest priority. The company has
prioritized its business systems into "Mission Critical" and "All Other."
"Mission Critical" systems are defined as business systems such as Business
Planning and Control Process manufacturing, Sales Order Billing and Warehouse
Management systems, that, if shut down or interrupted, could have a material
adverse effect on the company's results of operations, financial condition and
cash flows. "All Other" systems are defined as business systems such as Data
Warehouse and Job Bidding systems that, if shut down or interrupted, may have an
adverse impact on the company. The company is utilizing internal and external
resources to execute the plan and expects to substantially complete all
remediation and replacement of "Mission Critical" systems by second quarter 1999
and "All Other" systems by fourth quarter 1999. The company is on schedule to
meet these objectives.
TESTING - This phase is ongoing as systems are remediated and replaced. The
company's efforts in this phase include testing by users and determination by
appropriate local and Y2K project management that the remediated or replaced
systems are Y2K compliant. The company expects to substantially complete testing
of "Mission Critical" systems by third quarter 1999 and "All Other" systems
by first quarter 2000.
Because the company's Y2K compliance is dependent upon key third parties
also being Y2K compliant on a timely basis, there can be no guarantee that the
company's efforts will prevent a material adverse impact on its results of
operations, financial condition and cash flows. The possible consequences to the
company or its business partners not being fully Y2K compliant include temporary
plant closings, delays in the delivery of finished products, delays in the
receipt of key ingredients, containers and packaging supplies, invoice and
collection errors, and inventory and supply obsolescence. These consequences
could have a material adverse impact on the company's results of operations,
financial condition and cash flows if the company is unable to conduct its
business in the ordinary course. The company believes that its readiness
program, including the contingency plans discussed below, should significantly
reduce the adverse effect any such disruptions may have.
The company is developing contingency plans to mitigate the potential
disruptions that may result from the Y2K issue. These plans may include
identifying and securing alternate suppliers of ingredients, containers,
packaging materials and utilities, adjusting manufacturing facility production,
shutdown and start-up schedules, stockpiling of finished product inventories and
other measures considered appropriate by management. Once developed and
approved, contingency plans, and the related cost estimates, will be continually
refined, as additional information becomes available.
The company currently estimates that the aggregate cost of its Y2K efforts
will be approximately $50 million, of which $14 million has been incurred to
date. These costs, except for capital costs of approximately $4 million, are
being expensed as incurred and are being funded through operating cash flows.
The company expects to incur Y2K costs of approximately $30-36 million in 1999.
A summary of the cost components is as follows:
<TABLE>
<CAPTION>
ESTIMATED
CURRENT COST COSTS COSTS TO
(MILLIONS) ESTIMATES INCURRED COMPLETE
- ---------- --------- -------- --------
<S> <C> <C> <C>
COMPONENTS
External Consulting $27 (12) $15
Hardware/Software Upgrades 17 (2) 15
Other 6 -- 6
--- --- ---
$50 (14) $36
=== === ===
</TABLE>
The company believes that such costs will not have a material impact on the
company's results of operations, financial condition or cash flows.
RECENT DEVELOPMENTS
In 1998, Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities," was issued. This standard is
effective for fiscal years beginning after June 15, 1999, and establishes
accounting and reporting standards for derivative instruments and hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the balance sheet and measure those instruments at fair
value. Changes in the fair value of derivatives are recorded in earnings or
other comprehensive income, based on whether the instrument is designated as
part of a hedge transaction and, if so, the type of hedge transaction. The
company is currently assessing the method to be utilized for adoption and the
impact of the adoption on the company's financial statements. It is not
expected, however, that adoption of this statement will have a material effect
on the company's results of operations, financial condition or cash flows.
FORWARD-LOOKING STATEMENTS
This 1998 Annual Report contains certain statements which reflect the company's
current expectations regarding future results of operations, economic
performance, financial condition and achievements of the company. The company
has tried, wherever possible, to identify these forward looking statements by
using words such as "anticipate," "believe," "estimate," "expect" and similar
expressions. These statements reflect the company's current plans and
expectations and are based on information currently available to it. They rely
on a number of assumptions and estimates which could be inaccurate and which are
subject to risks and uncertainties.
The company wishes to caution the reader that the following important
factors and those important factors described elsewhere in the commentary, or in
other Securities and Exchange Commission filings, could affect the company's
actual results and could cause such results to vary materially from those
expressed in any forward-looking statements made by, or on behalf of, the
company:
- - the impact of strong competitive response to the company's efforts to leverage
its brand power with product innovation and new advertising;
- - the inherent risks in the marketplace associated with new product
introductions, including uncertainties about trade and consumer acceptance;
- - the company's ability to achieve sales and earnings forecasts which are based
on assumptions about sales volume;
- - the continuation of the company's successful record of integrating
acquisitions into its existing operations and the availability of new
acquisition and alliance opportunities that build shareowner wealth;
- - the company's ability to achieve its cost savings and capacity utilization
objectives;
- - the impact of unforeseen economic and political changes in international
markets where the company competes such as currency exchange rates, inflation
rates, recession, foreign ownership restrictions and other external factors over
which the company has no control; and
- - the ability of the company and its key service providers, vendors,
suppliers, customers and governmental entities to replace, modify or upgrade
computer systems in ways that adequately address the Y2K issue. Specific factors
that might cause actual results to vary materially from the results anticipated
include the ability to identify and correct all relevant computer codes and
embedded chips, unanticipated difficulties or delays in the implementation of
the company's remediation plans and the ability of third parties to adequately
address their own Y2K issues.
This discussion of uncertainties is by no means exhaustive but is designed to
highlight important factors that may impact the company's outlook.
5
<PAGE> 5
CONSOLIDATED STATEMENTS OF EARNINGS
(millions, except per share amounts)
<TABLE>
<CAPTION>
1998 1997 1996
52 WEEKS 53 weeks 52 weeks
------- ------- -------
<S> <C> <C> <C>
NET SALES $ 6,696 $ 6,614 $ 6,324
------- ------- -------
Costs and expenses
Cost of products sold 3,233 3,412 3,455
Marketing and selling expenses 1,518 1,370 1,242
Administrative expenses 300 271 288
Research and development expenses 71 68 76
Other expenses (Note 6) 64 140 72
Restructuring charges (Note 5) 262 204 --
------- ------- -------
Total costs and expenses 5,448 5,465 5,133
------- ------- -------
EARNINGS BEFORE INTEREST AND TAXES 1,248 1,149 1,191
Interest expense (Note 7) 189 166 125
Interest income 14 8 6
------- ------- -------
Earnings before taxes 1,073 991 1,072
Taxes on earnings (Note 10) 384 357 354
------- ------- -------
EARNINGS FROM CONTINUING OPERATIONS 689 634 718
EARNINGS (LOSS) FROM DISCONTINUED OPERATIONS (NOTE 2) (18) 79 84
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE (NOTE 3) (11) -- --
------- ------- -------
NET EARNINGS $ 660 $ 713 $ 802
======= ======= =======
PER SHARE - BASIC
Earnings from continuing operations $ 1.52 $ 1.34 $ 1.44
Earnings (loss) from discontinued operations (.04) .17 .17
Cumulative effect of change in accounting principle (.02) -- --
------- ------- -------
NET EARNINGS $ 1.46 $ 1.51 $ 1.61
======= ======= =======
Weighted average shares outstanding - basic 454 472 498
======= ======= =======
PER SHARE - ASSUMING DILUTION
Earnings from continuing operations $ 1.50 $ 1.33 $ 1.43
Earnings (loss) from discontinued operations (.04) .16 .16
Cumulative effect of change in accounting principle (.02) -- --
------- ------- -------
NET EARNINGS $ 1.44 $ 1.49 $ 1.59
======= ======= =======
Weighted average shares outstanding - assuming dilution 460 478 503
======= ======= =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED BALANCE SHEETS
(millions, except per share amounts)
<TABLE>
<CAPTION>
AUGUST 2, 1998 August 3, 1997
-------------- --------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 16 $ 17
Accounts receivable (Note 11) 656 523
Inventories (Note 12) 564 598
Other current assets (Note 13) 204 150
------- -------
Total current assets 1,440 1,288
------- -------
PLANT ASSETS, NET OF DEPRECIATION (NOTE 14) 1,723 2,044
INTANGIBLE ASSETS, NET OF AMORTIZATION (NOTE 15) 1,904 1,710
NET ASSETS OF DISCONTINUED OPERATIONS (NOTE 2) -- 632
OTHER ASSETS (NOTE 16) 566 522
------- -------
Total assets $ 5,633 $ 6,196
======= =======
CURRENT LIABILITIES
Notes payable (Note 17) $ 1,401 $ 1,506
Payable to suppliers and others 506 485
Accrued liabilities 638 553
Dividend payable 95 88
Accrued income taxes 163 137
------- -------
Total current liabilities 2,803 2,769
------- -------
LONG-TERM DEBT (NOTE 17) 1,169 1,151
NONPENSION POSTRETIREMENT BENEFITS (NOTE 9) 405 442
OTHER LIABILITIES (NOTE 18) 382 414
------- -------
Total liabilities 4,759 4,776
------- -------
SHAREOWNERS' EQUITY (NOTE 20)
Preferred stock; authorized 40 shares; none issued -- --
Capital stock, $.0375 par value; authorized 560 shares; issued 542 shares 20 20
Capital surplus 395 338
Earnings retained in the business 3,706 3,571
Capital stock in treasury, 94 shares in 1998 and 84 shares in 1997, at cost (3,083) (2,459)
Cumulative translation adjustments (164) (50)
------- -------
Total shareowners' equity 874 1,420
------- -------
Total liabilities and shareowners' equity $ 5,633 $ 6,196
======= =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
6
<PAGE> 6
CONSOLIDATED STATEMENTS OF CASH FLOWS
(millions)
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings, excluding discontinued operations $ 678 $ 634 $ 718
Non-cash charges to net earnings
Cumulative effect of accounting change 11 -- --
Restructuring charges 262 204 --
Depreciation and amortization 261 283 280
Deferred taxes (21) (33) 45
Other, net 53 95 57
Changes in working capital
Accounts receivable (159) (37) (21)
Inventories (29) (48) (26)
Other current assets and liabilities (154) (89) 9
------- ------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 902 1,009 1,062
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of plant assets (256) (252) (357)
Sales of plant assets 148 41 29
Businesses acquired (478) (228) (186)
Sales of businesses 200 207 77
Other, net (5) 4 (120)
------- ------- -------
NET CASH USED IN INVESTING ACTIVITIES (391) (228) (557)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term borrowings 305 524 230
Repayments of long-term borrowings (36) (21) (43)
Short-term borrowings 1,847 1,306 268
Repayments of short-term borrowings (2,187) (779) (566)
Dividends paid (367) (350) (338)
Treasury stock purchases (669) (1,696) (244)
Treasury stock issuances 102 106 64
------- ------- -------
NET CASH USED IN FINANCING ACTIVITIES (1,005) (910) (629)
------- ------- -------
NET CASH PROVIDED BY DISCONTINUED OPERATIONS 511 105 93
------- ------- -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (18) 13 8
------- ------- -------
NET CHANGE IN CASH AND CASH EQUIVALENTS (1) (11) (23)
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 17 28 51
------- ------- -------
CASH AND CASH EQUIVALENTS - END OF YEAR $ 16 $ 17 $ 28
======= ======= =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF SHAREOWNERS' EQUITY
(millions, except per share amounts)
<TABLE>
<CAPTION>
Capital stock
----------------------------------------- Earnings Total
Issued In treasury retained Cumulative share-
---------------- ---------------- Capital in the translation owners'
Shares Amount Shares Amount surplus business adjustments equity
------ ------ ------ ------ ------- -------- ----------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at July 30, 1995 542 $ 20 (44) $ (550) $ 165 $ 2,755 $ 78 $ 2,468
--- ------- --- ------- ------- ------- ------- -------
Net earnings 802 802
Dividends ($.673 per share) (346) (346)
Treasury stock purchased (8) (244) (244)
Treasury stock issued under
management incentive and
stock option plans 4 15 63 78
Translation adjustments (16) (16)
--- ------- --- ------- ------- ------- ------- -------
Balance at July 28, 1996 542 20 (48) (779) 228 3,211 62 2,742
--- ------- --- ------- ------- ------- ------- -------
Net earnings 713 713
Dividends ($.750 per share) (353) (353)
Treasury stock purchased (40) (1,696) (1,696)
Treasury stock issued under
management incentive and
stock option plans 4 16 110 126
Translation adjustments (112) (112)
--- ------- --- ------- ------- ------- ------- -------
Balance at August 3, 1997 542 20 (84) (2,459) 338 3,571 (50) 1,420
--- ------- --- ------- ------- ------- ------- -------
NET EARNINGS 660 660
DIVIDENDS ($.823 PER SHARE) (375) (375)
TREASURY STOCK PURCHASED (13) (669) (669)
TREASURY STOCK ISSUED UNDER
MANAGEMENT INCENTIVE AND
STOCK OPTION PLANS 3 45 57 102
TRANSLATION ADJUSTMENTS (114) (114)
SPIN-OFF OF SPECIALTY FOODS SEGMENT (150) (150)
--- ------- --- ------- ------- ------- ------- -------
BALANCE AT AUGUST 2, 1998 542 $ 20 (94) $(3,083) $ 395 $ 3,706 $ (164) $ 874
=== ======= === ======= ======= ======= ======= =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
7
<PAGE> 7
Notes to Consolidated Financial Statements
(million dollars)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION - The consolidated financial statements include the accounts of
the company and its majority-owned subsidiaries. Significant intercompany
transactions are eliminated in consolidation. Investments of 20% or more in
affiliates are accounted for by the equity method.
FOREIGN CURRENCY - Assets and liabilities of foreign entities, where the local
currency is the functional currency, have been translated at year-end exchange
rates, and revenues and expenses have been translated using weighted
average-for-the-year exchange rates. Adjustments resulting from translation have
been recorded in Shareowners' Equity.
FISCAL YEAR - The company's fiscal year ends on the Sunday nearest July 31.
There were 52 weeks in 1998 and 1996, and 53 weeks in 1997.
CASH AND CASH EQUIVALENTS - All highly liquid debt instruments purchased with a
maturity of three months or less are classified as cash equivalents.
INVENTORIES - Substantially all domestic inventories are priced at the lower of
cost or market, with cost determined by the last in, first out (LIFO) method.
Other inventories are priced at the lower of average cost or market.
PLANT ASSETS - Plant assets are stated at historical cost. Alterations and major
overhauls which extend the lives or increase the capacity of plant assets are
capitalized. The amounts for property disposals are removed from plant asset and
accumulated depreciation accounts and any resultant gain or loss is included in
earnings. Ordinary repairs and maintenance are charged to operating costs.
DEPRECIATION - Depreciation provided in Costs and expenses is calculated using
the straight-line method. Buildings and machinery and equipment are depreciated
over periods not exceeding 45 years and 15 years, respectively. Accelerated
methods of depreciation are used for income tax purposes in certain
jurisdictions.
INTANGIBLE ASSETS - Intangible assets consist principally of excess purchase
price over net assets of businesses acquired and trademarks. Intangibles are
amortized on a straight-line basis over periods not exceeding 40 years.
ASSET VALUATION - The company periodically reviews the recoverability of plant
assets and intangibles based principally on an analysis of cash flows.
DERIVATIVE FINANCIAL INSTRUMENTS - The company uses derivative financial
instruments primarily for purposes of hedging exposures to fluctuations in
interest rate, foreign currency exchange rates and equity-linked employee
benefit obligations. The differential to be paid or received on interest rate
swaps is recognized as an adjustment to interest expense. Gains and losses on
hedges of existing assets or liabilities are included in the carrying amounts of
those assets or liabilities and ultimately recognized in earnings. Gains and
losses related to qualifying hedges of firm commitments or anticipated
transactions are deferred and recognized in earnings or as adjustments of
carrying amounts when the hedged transaction occurs.
USE OF ESTIMATES - Generally accepted accounting principles require management
to make estimates and assumptions that affect assets and liabilities, contingent
assets and liabilities, and revenues and expenses. Actual results could differ
from those estimates.
RECLASSIFICATIONS - Prior year financial statements and footnotes have been
reclassified to conform to the current year presentation, including classifying
the Specialty Foods segment as a discontinued operation. See also Note 2.
NEW ACCOUNTING STANDARDS - In 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income." In 1998, SFAS No. 132, "Employers' Disclosures About
Pensions and Other Postretirement Benefits," was issued. These statements, which
are effective for fiscal years beginning after December 15, 1997, expand or
modify disclosures and will have no impact on the company's results of
operations, financial condition or cash flows.
2. DISCONTINUED OPERATIONS
On September 9, 1997, the company announced its intention to spin-off the
Specialty Foods segment to its shareowners as an independent publicly-traded
company. The Specialty Foods segment was comprised of Vlasic pickles, Swanson
frozen foods, and certain European, Argentine and U.S. businesses. The spin-off,
which qualified as a tax-free distribution to U.S. shareholders, was effective
March 30, 1998. On this date, shareowners of record as of March 9, 1998 received
one share of common stock of the new company, Vlasic Foods International Inc.
("Vlasic"), for every ten shares of Campbell Soup Company capital stock.
In March 1998, the company entered into a revolving credit facility and
borrowed $500. In connection with the spin-off, the revolving credit facility
and outstanding obligation of $500 were assumed by Vlasic. In addition, the
company received approximately $75 from subsidiaries of Vlasic for repayment of
certain advances.
Results of discontinued operations were as follows:
<TABLE>
<CAPTION>
1998(1) 1997 1996
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $809 $1,352 $1,354
===========================================================================
Earnings before taxes 41 116 125
Taxes on earnings 21 37 41
- ---------------------------------------------------------------------------
Earnings from operations 20 79 84
Spin-off costs 38 -- --
- ---------------------------------------------------------------------------
Earnings (loss) from
discontinued operations $(18) $ 79 $ 84
===========================================================================
</TABLE>
(1)Represents the eight-month period ended March 29, 1998.
Earnings (loss) from discontinued operations do not include an allocation of
interest expense. Spin-off costs primarily consist of taxes and legal and
advisory services incurred in connection with the transaction. The earnings
(loss) from discontinued operations includes the after-tax effect of a third
quarter 1998 restructuring charge of $22 and first quarter 1997 after-tax
restructuring charge of $8. The 1998 restructuring program was designed to
improve operational efficiency by closing certain U.S. and European
administrative offices and production facilities. The 1997 program was designed
to improve operational efficiency by closing various pickle facilities and
reducing operational positions from the worldwide workforce. The restructuring
charge includes cash charges primarily related to severance and employee benefit
costs and non-cash charges for losses on the disposition of plant assets.
The net assets of the Specialty Foods segment are reflected as Net Assets
of Discontinued Operations in the consolidated balance sheet as of August 3,
1997, and are comprised of the following:
<TABLE>
<CAPTION>
1997
- ---------------------------------------------------------------------------
<S> <C>
Current assets $295
Plant assets, net 516
Other non-current assets 84
Current liabilities (212)
Non-current liabilities (51)
- ---------------------------------------------------------------------------
Net assets of discontinued operations $632
===========================================================================
</TABLE>
3. CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
In the second quarter 1998, the company adopted the provisions of the Emerging
Issues Task Force consensus ruling on Issue 97-13, "Accounting for Costs
Incurred in Connection with a Consulting Contract that Combines Business Process
Reengineering and Information Technology Transformation." The unamortized
balance of previously capitalized business process reengineering costs was
written off as a cumulative effect of change in accounting principle of $11 or
$.02 per share, net of an income tax benefit of approximately $7.
4. BUSINESS SEGMENT AND GEOGRAPHIC AREA INFORMATION
The company operates in three business segments: Soup and Sauces, Biscuits and
Confectionery, and Foodservice. The segments are managed as strategic units due
to their distinct manufacturing processes, marketing strategies and distribution
channels.
The Soup and Sauces segment includes the worldwide soup businesses, Prego
spaghetti sauces, Pace Mexican sauces, Franco-American pastas and gravies,
Swanson broths, and V8 beverages. The Biscuits and Confectionery segment
includes the Godiva Chocolatier, Pepperidge Farm, Arnotts Limited and Delacre
businesses. The Delacre business was sold in June 1998. Foodservice represents
products, including Campbell's soups and Campbell's Specialty Kitchen entrees,
which are distributed to the food service and home meal replacement markets. See
Note 2 regarding the Specialty Foods segment, which has been reclassified as a
discontinued operation.
Accounting policies for measuring segment assets and earnings before
interest and taxes are substantially consistent with those described in Note 1.
The company evaluates segment performance based on earnings before interest and
taxes, excluding certain non-recurring charges. Transfers between segments are
recorded at cost plus markup or at market. Foodservice products are principally
produced by the tangible assets of the company's other segments. Accordingly,
plant assets have not been allocated to the Foodservice segment. Depreciation
and amortization is allocated to Foodservice based on budgeted production hours.
8
<PAGE> 8
Notes to Consolidated Financial Statements
(million dollars)
BUSINESS SEGMENTS
<TABLE>
<CAPTION>
Biscuits & Corporate
Soup & Confec- Food- & Elimi-
1998 Sauces tionery service Other(1) nations(2) Total
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET SALES $4,434 1,522 455 334 (49) $6,696
EARNINGS BEFORE
INTEREST AND TAXES(3) $1,110 206 53 (86) (35) $1,248
DEPRECIATION AND
AMORTIZATION $ 132 86 11 15 17 $ 261
CAPITAL EXPENDITURES $ 135 87 -- 14 20 $ 256
SEGMENT ASSETS $3,105 1,419 202 191 716 $5,633
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents financial information of certain prepared convenience food
businesses not categorized as reportable segments.
(2) Represents elimination of intersegment sales, unallocated corporate expenses
and unallocated assets, including corporate offices, deferred taxes and
pension accounts.
(3) Contributions to earnings before interest and taxes by segment include the
effects of a third quarter restructuring charge of $262 as follows: Soup and
Sauces - $135, Biscuits and Confectionery - $25, Foodservice - $4, and
Other - $98.
<TABLE>
<CAPTION>
Biscuits & Corporate
Soup & Confec- Food- & Elimi-
1997 Sauces tionery service Other(1) nations(2) Total
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $4,171 1,546 439 520 (62) $6,614
Earnings before
interest and taxes(3) $1,001 153 59 (10) (54) $1,149
Depreciation and
amortization $ 133 102 11 18 19 $ 283
Capital expenditures $ 103 90 -- 22 37 $ 252
Segment assets(4) $2,790 1,523 230 392 629 $5,564
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents financial information of certain prepared convenience food
businesses not categorized as reportable segments.
(2) Represents elimination of intersegment sales, unallocated corporate expenses
and unallocated assets, including corporate offices, deferred taxes and
pension accounts.
(3) Contributions to earnings before interest and taxes by segment include the
effects of a first quarter restructuring charge of $204 as follows: Soup and
Sauces - $134, Biscuits and Confectionery - $53, and Other - $17.
(4) Segment assets exclude net assets of discontinued operations of $632.
<TABLE>
<CAPTION>
Biscuits & Corporate
Soup & Confec- Food- & Elimi-
1996 Sauces tionery service Other(1) nations(2) Total
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $3,739 1,459 418 760 (52) $6,324
Earnings before
interest and taxes $ 978 187 56 17 (47) $1,191
Depreciation and
amortization $ 122 91 11 37 19 $ 280
Capital expenditures $ 151 155 -- 17 34 $ 357
Segment assets(3) $2,567 1,648 228 488 778 $5,709
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents financial information of certain prepared convenience food
businesses not categorized as reportable segments.
(2) Represents elimination of intersegment sales, unallocated corporate expenses
and unallocated assets, including corporate offices, deferred taxes and
pension accounts.
(3) Segment assets exclude net assets of discontinued operations of $659.
GEOGRAPHIC AREA INFORMATION
The following presents information about operations in different geographic
areas:
<TABLE>
<CAPTION>
1998 1997 1996
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales
United States $ 4,850 $ 4,623 $ 4,475
Europe 859 895 817
Australia/Asia Pacific 627 613 614
Other countries 417 612 526
Adjustments and eliminations (57) (129) (108)
- ---------------------------------------------------------------------------------------
Consolidated $ 6,696 $ 6,614 $ 6,324
=======================================================================================
1998 1997 1996
- ---------------------------------------------------------------------------------------
Earnings before interest and taxes
United States $ 1,124 $ 1,062 $ 1,035
Europe 36 39 55
Australia/Asia Pacific 50 26 76
Other countries 73 76 72
- ---------------------------------------------------------------------------------------
Segment earnings before
interest and taxes 1,283 1,203 1,238
Unallocated corporate expenses (35) (54) (47)
- ---------------------------------------------------------------------------------------
Consolidated $ 1,248 $ 1,149 $ 1,191
=======================================================================================
1998 1997 1996
- ---------------------------------------------------------------------------------------
Identifiable assets
United States $ 3,091 $ 2,830 $ 2,918
Europe 408 655 604
Australia/Asia Pacific 925 919 980
Other countries 493 531 429
Corporate 716 629 778
Net assets of discontinued
operations -- 632 659
- ---------------------------------------------------------------------------------------
Consolidated $ 5,633 $ 6,196 $ 6,368
=======================================================================================
</TABLE>
Transfers between geographic areas are recorded at cost plus markup or at
market. Identifiable assets are those assets, including goodwill, which are
identified with the operations in each geographic area. The 1998 restructuring
charge of $262 is allocated to geographic areas as follows: United States -
$200, Europe - $36, Australia/Asia Pacific - $21, and Other - $5. The 1997
restructuring charge of $204 is allocated to geographic areas as follows: United
States - $158, Europe - $11, Australia/Asia Pacific - $33 and Other - $2.
5. RESTRUCTURING PROGRAM
A restructuring charge included in earnings from continuing operations of $262
($193 after tax or $.42 per share) was recorded in the third quarter 1998 to
cover the costs of a restructuring and divestiture program approved in March
1998 by the company's Board of Directors. This charge relates to the
rationalization of certain U.S., European and Australian production and
administrative facilities and anticipated losses on the divestitures of
non-strategic businesses with annual sales of approximately $170, including
Fresh Start Bakeries and Melbourne Mushrooms. The restructuring program includes
the elimination of approximately 750 employee positions.
The restructuring charge includes approximately $78 in cash charges
primarily related to severance, employee benefit costs and lease termination
fees. The balance of the restructuring charge relates to non-cash charges for
estimated losses on the disposition of plant assets and divestitures of
businesses. The company expects to complete the restructuring and divestiture
program in 1999. A summary of the original reserve and related activity is as
follows:
<TABLE>
<CAPTION>
Original
Reserve Activity BALANCE
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Losses on asset dispositions
and divestitures $209 $(58) $151
Severance and benefits 41 (9) 32
Other 12 (2) 10
- -----------------------------------------------------------------------
Total $262 $(69) $193
=======================================================================
</TABLE>
See Note 2 for the restructuring charge recorded by the Specialty Foods segment
during the third quarter 1998, which is included in Earnings (Loss) from
Discontinued Operations.
A restructuring charge of $204 ($152 after tax or $.31 per share) was
recorded in the first quarter of 1997 to cover the costs of a restructuring
program. This program was designed to improve operational efficiency by closing
various plants, reducing administrative and operational staff functions and
divesting non-strategic businesses. The program was completed in the first
quarter 1998.
The restructuring charge included approximately $108 in cash charges
primarily related to severance and employee benefit costs. The balance of the
restructuring charge is related to non-cash charges for estimated losses on the
disposition of plant assets and business divestitures.
6. OTHER EXPENSES
<TABLE>
<CAPTION>
1998 1997 1996
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Stock price related incentive programs $27 $ 71 $28
Amortization of intangible and
other assets 53 51 49
Minority interests 6 7 17
Other, net (22) 11 (22)
- -----------------------------------------------------------------------------
$64 $140 $72
=============================================================================
</TABLE>
7. INTEREST EXPENSE
<TABLE>
<CAPTION>
1998 1997 1996
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Interest expense $194 $177 $136
Less: Interest capitalized 5 11 11
- -----------------------------------------------------------------------------
$189 $166 $125
=============================================================================
</TABLE>
8. ACQUISITIONS
During 1998, 1997 and 1996 the company made several acquisitions. Acquisitions
were accounted for using the purchase method of accounting, and accordingly,
results of operations of the acquired companies are included in the consolidated
financial statements from the dates the acquisitions were consummated. The
allocation of the purchase price to assets acquired and liabilities assumed was
based upon fair value estimates as follows:
<TABLE>
<CAPTION>
1998 1997 1996
- --------------------------------------------------------------
<S> <C> <C> <C>
Working capital $ 32 $ 4 $ 4
Fixed assets 19 53 16
Intangibles 360 159 152
Other assets -- 19 --
Other liabilities -- (7) --
Minority interests 67 -- 14
- --------------------------------------------------------------
$478 $ 228 $186
==============================================================
</TABLE>
9
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(million dollars)
During 1998, the company acquired the Liebig soup business in France for
approximately $180. Aggregate annual sales are approximately $75. Also in 1998,
Arnotts Limited ("Arnotts") purchased the remaining outstanding ordinary shares
held by its minority shareholders for an aggregate purchase price of
approximately $290. Prior to the transaction, the company owned approximately
70% of Arnotts. The allocation of the purchase price of the acquisitions is
preliminary and may be modified as additional financial information becomes
available.
During 1997, the company acquired the Erasco Group of companies, Germany's
leading soup company. In addition, Arnotts acquired the assets of Kettle Chip
Company located in Sydney, Australia.
During 1996, the company acquired the Homepride sauce business, the United
Kingdom's leading cooking sauce brand, and the Cheong Chan soup and sauce
business in Asia. The company also increased its share ownership in Arnotts to
70%.
Based on unaudited data, net sales for 1998 and 1997 would have increased
by approximately $30 and $105, respectively, had the acquisitions occurred at
the beginning of 1997. Pro forma financial information would not have had a
material effect on net earnings and earnings per share in 1998 and 1997.
9. PENSION PLANS AND RETIREMENT BENEFITS
PENSION PLANS - Substantially all of the company's U.S. and certain non-U.S.
employees are covered by noncontributory defined benefit pension plans. Plan
benefits are generally based on years of service and employees' compensation
during the last years of employment. Benefits are paid from funds previously
provided to trustees and insurance companies or are paid directly by the company
from general funds. Actuarial assumptions and provisions for funded plans are
reviewed regularly by the company and its independent actuaries to ensure that
plan assets will be adequate to provide pension benefits. Plan assets consist
primarily of investments in equities, fixed income securities, real estate and
money market funds.
Pension (income) expense included the following:
<TABLE>
<CAPTION>
1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
Benefits earned during the year $ 31 $ 27 $ 27
Interest cost 94 83 78
Net amortization and deferrals 6 270 37
Less: Return on plan assets (135) (369) (127)
----- ----- -----
(4) 11 15
Other pension expense 2 5 3
----- ----- -----
Consolidated pension (income) expense $ (2) $ 16 $ 18
===== ===== =====
</TABLE>
Weighted average rates for principal actuarial assumptions were:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Discount rate 7.00% 7.70% 8.00%
Long-term rate of compensation increase 4.50% 5.00% 5.00%
Long-term rate of return on plan assets 10.25% 9.70% 9.50%
</TABLE>
The funded status of the plans was as follows:
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested $(1,173) $(1,105)
Non-vested (51) (43)
------- -------
Accumulated benefit obligation (1,224) (1,148)
Effect of projected future salary increases (108) (130)
------- -------
Projected benefit obligation (1,332) (1,278)
Plan assets at market value 1,674 1,675
------- -------
Plan assets in excess of projected benefit obligation 342 397
Unrecognized net gain (37) (92)
Unrecognized prior service cost 63 70
Unrecognized net assets at transition (6) (38)
------- -------
Prepaid pension expense $ 362 $ 337
======= =======
</TABLE>
Pension coverage for employees of certain non-U.S. subsidiaries is provided to
the extent determined appropriate through their respective plans. Obligations
under such plans are systematically provided for by depositing funds with trusts
or under insurance contracts. The assets and obligations of these plans are not
material.
SAVINGS PLANS - The company sponsors employee savings plans which cover
substantially all U.S. employees. After one year of continuous service, the
company generally matches 50% of employee contributions up to 5% of
compensation. In 1998, 1997 and 1996, the company increased its contribution to
60% because earnings goals were achieved. Amounts charged to Costs and expenses
were $13 in 1998, $14 in 1997 and $13 in 1996.
RETIREE BENEFITS - The company provides postretirement benefits including
healthcare and life insurance to substantially all retired U.S. employees and
their dependents. Employees who have 10 years of service after the age of 45 and
retire from the company are eligible to participate in the postretirement
benefit plans.
Postretirement benefit expense included the following:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Benefits earned during the year $ 11 $ 10 $ 13
Interest cost 22 17 19
Net amortization and deferrals (15) (14) (2)
---- ---- ----
Postretirement benefit expense $ 18 $ 13 $ 30
==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Actuarial present value of benefit obligations:
Retirees $219 $194
Fully eligible active plan participants 45 47
Other active plan participants 49 60
---- ----
Accumulated benefit obligation 313 301
Unrecognized prior service cost 16 20
Unrecognized net gain 95 140
---- ----
Accrued postretirement benefit liability $424 $461
==== ====
</TABLE>
The discount rate used to determine the accumulated postretirement benefit
obligation was 7.00% in 1998 and 7.75% in 1997. The assumed healthcare cost
trend rate used to measure the accumulated postretirement benefit obligation was
6%, declining to 4.5% over a period of 4 years and continuing at 4.5%
thereafter. A one-percentage-point change in the assumed healthcare cost trend
rate would have changed the 1998 accumulated postretirement benefit obligation
by $33 and postretirement benefit expense by $5.
Obligations related to non-U.S. postretirement benefit plans are not
significant since these benefits are generally provided through
government-sponsored plans.
The current portion of nonpension postretirement benefits included in
Accrued liabilities was $19 at August 2, 1998 and August 3, 1997.
10. TAXES ON EARNINGS
The provision for income taxes on earnings from continuing operations consists
of the following:
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Income taxes:
Currently payable
Federal $ 311 $ 330 $ 234
State 44 32 30
Non-U.S 50 28 45
------ ------ ------
405 390 309
------ ------ ------
Deferred
Federal (1) (40) 32
State (7) 2 6
Non-U.S (13) 5 7
------ ------ ------
(21) (33) 45
------ ------ ------
$ 384 $ 357 $ 354
====== ====== ======
Earnings from continuing
operations before income taxes:
United States $ 980 $ 882 $ 900
Non-U.S 93 109 172
------ ------ ------
$1,073 $ 991 $1,072
====== ====== ======
</TABLE>
The following is a reconciliation of effective income tax rates on continuing
operations with the U.S. federal statutory income tax rate:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Federal statutory income tax rate 35.0% 35.0% 35.0%
State income taxes (net of federal
tax benefit) 2.0 2.2 2.3
Nondeductible divestiture and
restructuring charges 1.8 1.6 --
Non-U.S. earnings taxed at other than
federal statutory rate (.4) (.7) (.8)
Tax loss carryforwards (.8) (.1) (1.8)
Other (1.8) (2.0) (1.7)
---- ---- ----
Effective income tax rate 35.8% 36.0% 33.0%
==== ==== ====
</TABLE>
Deferred tax liabilities and assets are comprised of the following:
<TABLE>
<CAPTION>
1998 1997
----- -----
<S> <C> <C>
Depreciation $ 142 $ 154
Pensions 112 110
Other 185 154
----- -----
Deferred tax liabilities 439 418
----- -----
Benefits and compensation 209 218
Restructuring accruals 50 37
Tax loss carryforwards 15 22
Other 71 46
----- -----
Gross deferred tax assets 345 323
Deferred tax asset valuation allowance (15) (22)
----- -----
Net deferred tax assets 330 301
----- -----
Net deferred tax liability $ 109 $ 117
===== =====
</TABLE>
10
<PAGE> 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(million dollars)
For income tax purposes, subsidiaries of the company have tax loss
carryforwards of approximately $34 of which $2 relate to periods prior to
acquisition of the subsidiaries by the company. Of these carryforwards, $29
expire through 2011 and $5 may be carried forward indefinitely. The current
statutory tax rates in these countries range from 31% to 58%.
Income taxes have not been accrued on undistributed earnings of non-U.S.
subsidiaries of $426 which are invested in operating assets and are not expected
to be remitted. If remitted, tax credits are available to substantially reduce
any additional taxes.
11. ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
1998 1997
----- -----
<S> <C> <C>
Customers $ 569 $ 499
Allowances for cash discounts and bad debts (11) (18)
----- -----
558 481
Other 98 42
----- -----
$ 656 $ 523
===== =====
</TABLE>
12. INVENTORIES
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Raw materials, containers and supplies $205 $258
Finished products 359 340
---- ----
$564 $598
==== ====
</TABLE>
Approximately 69% of inventory in 1998 and 65% in 1997 is accounted for on the
last in, first out method of determining cost. If the first in, first out
inventory valuation method had been used exclusively, inventories would not
differ materially from the amounts reported at August 2, 1998 and August 3,
1997.
13. OTHER CURRENT ASSETS
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Prepaid pensions $ 18 $ 25
Deferred taxes 137 97
Other 49 28
---- ----
$204 $150
==== ====
</TABLE>
14. PLANT ASSETS
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Land $ 54 $ 65
Buildings 816 873
Machinery and equipment 2,124 2,454
Projects in progress 166 170
------- -------
3,160 3,562
Accumulated depreciation (1,437) (1,518)
------- -------
$ 1,723 $ 2,044
======= =======
</TABLE>
Depreciation expense provided in Costs and expenses was $208 in 1998, $232 in
1997 and $231 in 1996. Approximately $150 of capital expenditures are required
to complete projects in progress at August 2, 1998.
15. INTANGIBLE ASSETS
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Purchase price in excess of net
assets of businesses acquired (goodwill) $ 1,667 $ 1,424
Trademarks 412 415
Other intangibles 4 4
------- -------
2,083 1,843
Accumulated amortization (179) (133)
------- -------
$ 1,904 $ 1,710
======= =======
</TABLE>
16. OTHER ASSETS
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Prepaid pensions $344 $312
Investments 200 188
Other 22 22
---- ----
$566 $522
==== ====
</TABLE>
17. NOTES PAYABLE AND LONG-TERM DEBT
Notes payable consists of the following:
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Commercial paper $ 859 $1,382
Current portion of Long-term Debt:
9.0% Notes -- 100
5.5% Notes 200 --
5.3% Variable-rate bank borrowings 240 --
Other 102 24
------ ------
$1,401 $1,506
====== ======
</TABLE>
The weighted average interest rate for commercial paper was 5.58% and
5.57% at August 2, 1998 and August 3, 1997, respectively.
Long-term Debt consists of the following:
<TABLE>
<CAPTION>
TYPE FISCAL YEAR MATURITY RATE 1998 1997
- ---- -------------------- ---------- ------ ------
<S> <C> <C> <C> <C>
Notes 1999 5.50% $ -- $ 200
Notes 2000 5.76% 150 150
Notes 2001* 5.75%-8.75% 111 174
Notes 2003 6.15% 300 --
Notes 2004** 5.63% 100 100
Notes 2007 6.90% 300 300
Debentures 2021 8.88% 200 200
Notes 1999-2010 6.40%-9.00% 8 7
Capital lease
obligations Various Various -- 20
------- ------- ------ ------
$1,169 $1,151
======= ======= ====== ======
</TABLE>
* $50 callable in 1998
** callable in 2001
The fair value of the company's long-term debt, including the current portion of
long-term debt in Notes payable, was $1,449 at August 2, 1998 and $1,305 at
August 3, 1997.
The company had $2,500 unused lines of credit available at August 2, 1998,
which are unconditional for a period of one to five years.
In 1997, the company filed a shelf registration statement with the
Securities and Exchange Commission for the issuance of debt securities at an
aggregate initial offering price not to exceed $1,000. As of August 2, 1998,
$400 remained unissued.
Principal amounts of long-term debt mature as follows: 1999 - $200 (in
current liabilities); 2000 - $150; 2001 - $111; 2003 - $300 and beyond - $608.
18. OTHER LIABILITIES
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Deferred taxes $246 $214
Minority interests 4 83
Deferred compensation 92 58
Postemployment benefits 18 14
Other 22 45
---- ----
$382 $414
==== ====
</TABLE>
19. FINANCIAL INSTRUMENTS
The company utilizes derivative financial instruments to enhance its ability to
manage risk, including interest rate, foreign currency and certain equity-linked
employee compensation exposures which exist as part of its ongoing business
operations. The company does not enter into contracts for speculative purposes,
nor is it a party to any leveraged derivative instrument. The use of derivative
financial instruments is monitored through regular communication with senior
management and the utilization of written guidelines.
The company finances a portion of its operations through debt instruments
primarily consisting of commercial paper, notes, debentures and bank loans. The
company utilizes interest rate swap agreements to minimize worldwide financing
costs and to achieve a desired proportion of variable versus fixed-rate debt.
The swaps mature in fiscal 2000. With these instruments, $100 of variable-rate
debt is converted to fixed (8.24%) and $150 of fixed-rate debt (5.76%) is
converted to variable. The differential to be paid or received on interest rate
swaps is recognized as an adjustment to interest expense. The notional amounts
of interest rate swaps were $250 at August 2, 1998 and August 3, 1997. The swaps
had a fair value of $1 at August 2, 1998.
The company utilizes foreign currency exchange contracts, including swap
and forward contracts, to hedge existing foreign currency exposures. Foreign
exchange gains and losses on derivative financial instruments are recognized and
offset foreign exchange gains and losses on the underlying exposures.
A mix of equity, intercompany debt and local currency borrowing is used to
finance foreign operations. Gains and losses, both realized and unrealized, on
financial instruments that hedge the company's investments in foreign operations
are recognized in the Cumulative translation adjustments account in Shareowners'
Equity.
Swap contracts are utilized to hedge exposures relating to certain
employee compensation expenses linked to the total return of the Standard &
Poor's 500 Index or to the total return of the company's capital stock. The
company pays a variable interest rate and receives the equity returns under
these instruments. The equity swap contracts have maturities in 1999 and 2003.
At August 2, 1998, the notional principal amount of the contracts was $143, and
the net cost to settle the contracts was $5. Gains or losses are recognized as
adjustments to the carrying value of the underlying obligations.
The company also has swap agreements with financial institutions which
cover both foreign currency and interest rates. The notional amounts of these
swaps were $405 at August 2, 1998 and $210 at August 3, 1997. The swaps mature
as follows: $210 in 1999, $85 in
11
<PAGE> 11
Notes to Consolidated Financial Statements
(Million Dollars)
2000 and $110 in 2003. These agreements hedge currency exposures, principally
European, arising from strategies which replaced certain local currency
borrowings with lower cost U.S. dollar financing. The fair value of the swaps
was $1 at August 2, 1998.
At August 2, 1998, the company also had contracts to purchase or sell
approximately $287 in foreign currency versus $263 at August 3, 1997. The
contracts are primarily for Japanese and European currencies and have maturities
through 1999. The fair value of the contracts was $1 at August 2, 1998.
The company is exposed to credit loss in the event of nonperformance by
the counterparties in swap and forward contracts. The company minimizes its
credit risk on these transactions by only dealing with leading, credit-worthy
financial institutions having long-term credit ratings of "A" or better and,
therefore, does not anticipate non-performance. In addition, the contracts are
distributed among several financial institutions, thus minimizing credit risk
concentration.
The carrying values of cash and cash equivalents, accounts and notes
receivable, accounts payable and short-term debt approximate fair value. The
fair value of long-term debt, as indicated in Note 17, and derivative financial
instruments is based on quoted market prices.
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," was issued. This standard, effective for fiscal years
beginning after June 15, 1999, establishes accounting and reporting standards
for derivative instruments and hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. Changes in the
fair value of derivatives are recorded in earnings or other comprehensive
income, based on whether the instrument is designated as part of a hedge
transaction and, if so, the type of hedge transaction. The company is currently
assessing the method to be utilized for adoption and the impact of the adoption
on the company's financial statements. It is not expected, however, that
adoption of this statement will have a material effect on the company's results
of operations, financial condition or cash flows.
20. SHAREOWNERS' EQUITY
On February 11, 1997 the company's Board of Directors authorized a two-for-one
stock split effective for shareowners of record on February 24, 1997. The number
of authorized shares was increased to 560 million from 280 million. All
references to the number of shares reflect the stock split. Preferred stock is
issuable in one or more classes, with or without par as may be authorized by the
Board of Directors.
The company sponsors a long-term incentive compensation plan. Under the
plan, restricted stock and options may be granted to certain officers and key
employees of the company. The plan provides for awards up to an aggregate of 25
million shares of capital stock. Options are granted at a price not less than
the fair value of the shares on the date of grant and expire not later than ten
years after the date of grant. Options vest over a three-year period.
The company accounts for the stock option grants and restricted stock
awards in accordance with Accounting Principles Board Opinion No. 25 and related
Interpretations. Accordingly, no compensation expense has been recognized in the
Statements of Earnings for the options. In 1997, the company adopted the
disclosure provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation." Had the fair value based accounting provisions of SFAS No. 123
been adopted, the effect on earnings and earnings per share in 1998, 1997 and
1996 would not have been significant.
As of August 2, 1998, nine million shares were available for grant under
the long-term incentive plan. Restricted shares granted are as follows:
<TABLE>
<CAPTION>
(Thousands of Shares) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
RESTRICTED SHARES
Granted 127 804 84
==== ==== ====
</TABLE>
Information about stock options and related activity is as follows:
<TABLE>
<CAPTION>
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
(Options in Thousands) 1998 Price 1997 Price 1996 Price
------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
STOCK OPTION PLANS
Beginning of year 20,066 $26.94 22,098 $22.53 19,312 $15.20
Granted 2,303 54.38 2,644 48.02 6,594 34.63
Exercised (3,272) 17.99 (3,428) 16.10 (3,428) 14.13
Terminated (2,212) 33.04 (1,248) 24.45 (380) 20.32
Spin-off related
modification(1) 1,481 -- -- -- -- --
------ ------ ------ ------ ------ ------
End of year 18,366 $28.72 20,066 $26.94 22,098 $22.53
====== ====== ====== ====== ====== ======
Exercisable at end
of year 13,123 13,040 12,782
====== ====== ======
</TABLE>
(1) When the Specialty Foods segment was spun off, the number and exercise
price of options outstanding were adjusted to preserve the economic
value of the options that existed prior to the spin-off.
(Options in Thousands)
<TABLE>
<CAPTION>
STOCK OPTIONS OUTSTANDING EXERCISABLE OPTIONS
------------------------- -------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Contractual Exercise Exercise
Prices Shares Life Price Shares Price
- -------- ------ ----------- -------- ------ --------
<S> <C> <C> <C> <C> <C>
$ 6.98 -$14.77 2,523 1.86 $12.52 2,523 $12.52
$15.28 -$34.72 11,461 6.06 $24.62 9,847 $23.48
$34.96 -$56.50 4,382 9.28 $49.03 753 $44.18
- -------------- ------ ---- ------ ------ ------
18,366 13,123
====== ======
</TABLE>
The company adopted the provisions of SFAS No. 128, "Earnings per Share," as of
the second quarter 1998. SFAS No. 128 revised the standards for computation and
presentation of earnings per share ("EPS"), requiring the presentation of both
basic EPS and EPS assuming dilution. Basic EPS is calculated using the weighted
average shares outstanding during the applicable period. Diluted EPS reflects
the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock. Prior periods
have been restated to conform to the provisions of SFAS No. 128. For the periods
presented in the Consolidated Statements of Earnings, the calculations of basic
EPS and EPS assuming dilution vary in that the weighted average shares
outstanding assuming dilution includes the incremental effect of stock options,
except when such effect would be antidilutive.
21. STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Interest paid, net of amounts capitalized $187 $165 $126
Interest received $ 15 $ 7 $ 6
Income taxes paid $370 $364 $313
---- ---- ----
</TABLE>
22. QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
1998
FIRST SECOND THIRD FOURTH
------- ------ ------ ------
<S> <C> <C> <C> <C>
NET SALES $ 1,813 $2,012 $1,572 $1,299
COST OF PRODUCTS SOLD 893 955 775 610
EARNINGS (LOSS) FROM
CONTINUING OPERATIONS 252 291 (36) 182
EARNINGS (LOSS) FROM
DISCONTINUED OPERATIONS 16 20 (54) --
NET EARNINGS (LOSS)(1) 268 300 (90) 182
PER SHARE - BASIC
EARNINGS (LOSS) FROM
CONTINUING OPERATIONS .55 .64 (.08) .40
EARNINGS (LOSS) FROM
DISCONTINUED OPERATIONS .03 .04 (.12) --
NET EARNINGS (LOSS)(1) .58 .66 (.20) .40
DIVIDENDS .1925 .21 .21 .21
PER SHARE - ASSUMING DILUTION
EARNINGS (LOSS) FROM
CONTINUING OPERATIONS .54 .63 (.08) .40
EARNINGS (LOSS) FROM
DISCONTINUED OPERATIONS .03 .04 (.12) --
NET EARNINGS (LOSS)(1) .57 .65 (.20) .40
MARKET PRICE(2)
HIGH 55.44 59.44 62.88 57.13
LOW 46.00 51.81 48.13 51.50
------- ------ ------ ------
</TABLE>
<TABLE>
<CAPTION>
1997
First Second Third Fourth
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net sales $1,734 $1,977 $1,541 $1,362
Cost of products sold 901 997 809 705
Earnings from continuing
operations 80 257 142 155
Earnings from discontinued
operations 8 19 15 37
Net earnings 88 276 157 192
Per share - basic
Earnings from continuing
operations .16 .55 .31 .34
Earnings from discontinued
operations .02 .04 .03 .08
Net earnings .18 .59 .34 .42
Dividends .1725 .1925 .1925 .1925
Per share - assuming dilution
Earnings from continuing
operations .16 .54 .30 .33
Earnings from discontinued
operations .02 .04 .03 .08
Net earnings .18 .58 .33 .41
Market price(2)
High 42.13 42.44 49.50 52.81
Low 32.00 39.38 40.31 45.00
------ ------ ------ ------
</TABLE>
(1) Net earnings in the second quarter include the cumulative effect of a
change in accounting principle of $11 or $.02 per share (see Note 3).
(2) Stock prices on or before March 30, 1998 are not adjusted to reflect the
spin-off (see Note 2).
12
<PAGE> 12
REPORT OF MANAGEMENT
The accompanying financial statements have been prepared by the management of
the company in conformity with generally accepted accounting principles to
reflect the financial position of the company and its operating results.
Financial information appearing throughout this Annual Report is consistent with
that in the financial statements. Management is responsible for the information
and representations in such financial statements, including the estimates and
judgments required for their preparation.
In order to meet its responsibility, management maintains a system of
internal controls designed to assure that assets are safeguarded and that
financial records properly reflect all transactions. The company also maintains
a worldwide auditing function to periodically evaluate the adequacy and
effectiveness of such internal controls, as well as the company's administrative
procedures and reporting practices. The company believes that its long-standing
emphasis on the highest standards of conduct and business ethics, set forth in
extensive written policy statements, serves to reinforce its system of internal
accounting controls.
The report of PricewaterhouseCoopers LLP, the company's independent
accountants, covering their audit of the financial statements, is included in
this Annual Report. Their independent audit of the company's financial
statements includes a review of the system of internal accounting controls to
the extent they consider necessary to evaluate the system as required by
generally accepted auditing standards.
The company's internal auditors report directly to the Audit Committee of
the Board of Directors, which is composed entirely of Directors who are not
officers or employees of the company. The Audit Committee meets periodically
with the internal auditors, other management personnel, and the independent
accountants. The independent accountants and the internal auditors have had, and
continue to have, direct access to the Audit Committee without the presence of
other management personnel, and have been directed to discuss the results of
their audit work and any matters they believe should be brought to the
Committee's attention.
/s/ Dale F. Morrison
Dale F. Morrison
President and Chief Executive Officer
/s/ Basil L. Anderson
Basil L. Anderson
Executive Vice President and Chief Financial Officer
/s/ Gerald S. Lord
Gerald S. Lord
Vice President - Controller
September 3, 1998
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareowners and Directors of Campbell Soup Company
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of earnings, shareowners' equity and cash flows present
fairly, in all material respects, the financial position of Campbell Soup
Company and its subsidiaries at August 2, 1998 and August 3, 1997, and the
results of their operations and their cash flows for each of the three years in
the period ended August 2, 1998, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Thirty South Seventeenth Street
Philadelphia, Pennsylvania 19103
September 3, 1998
13
<PAGE> 13
FIVE-YEAR REVIEW - CONSOLIDATED
(MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FISCAL YEAR 1998(1) 1997(2) 1996 1995 1994
------- ------ ------ ------ ------
SUMMARY OF OPERATIONS
<S> <C> <C> <C> <C> <C>
Net sales $ 6,696 $6,614 $6,324 $5,881 $5,495
Earnings before interest and taxes 1,248 1,149 1,191 1,039 947
Earnings before taxes 1,073 991 1,072 936 884
Earnings from continuing operations 689 634 718 627 578
Earnings (loss) from discontinued operations (18) 79 84 71 52
Net earnings 660 713 802 698 630
Cash margin(3) 26.5% 24.8% 23.5% 22.3% 21.6%
FINANCIAL POSITION
Net assets of discontinued operations $ -- $ 632 $ 659 $ 697 $ 615
Plant assets - net 1,723 2,044 2,179 2,093 1,938
Total assets 5,633 6,196 6,368 6,088 4,752
Total debt 2,570 2,657 1,606 1,719 981
Shareowners' equity 874 1,420 2,742 2,468 1,989
PER SHARE DATA
Earnings from continuing operations - basic $ 1.52 $ 1.34 $ 1.44 $ 1.26 $ 1.15
Earnings from continuing operations - assuming dilution 1.50 1.33 1.43 1.25 1.14
Net earnings - basic 1.46 1.51 1.61 1.40 1.26
Net earnings - assuming dilution 1.44 1.49 1.59 1.39 1.24
Dividends declared .823 .75 .67 .61 .55
OTHER STATISTICS
Capital expenditures $ 256 $ 252 $ 357 $ 340 $ 354
Number of shareowners (in thousands) 51 49 43 43 43
Weighted average shares outstanding 454 472 498 498 501
Weighted average shares outstanding - assuming dilution 460 478 503 503 507
======= ====== ====== ====== ======
</TABLE>
(1) 1998 earnings from continuing operations include a pre-tax restructuring
charge of $262; $193 after tax or $.42 per share (basic and assuming
dilution). Net earnings include the cumulative effect of a change in
accounting for business process reengineering costs of $11 or $.02 per
share.
(2) 1997 earnings from continuing operations include a pre-tax restructuring
charge of $204; $152 after tax or $.31 per share (basic and assuming
dilution).
(3) Cash margin equals earnings before interest and taxes plus translation,
depreciation, amortization, minority interest expense and restructuring
charges divided by net sales.
The company spun off the Specialty Foods segment in 1998 and accounted for it as
a discontinued operation (see Note 2 to the Consolidated Financial Statements).
All information has been reclassified accordingly. All share and per share data
reflect a 1997 two-for-one stock split.
14
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF CAMPBELL
<TABLE>
<CAPTION>
NAME OF SUBSIDIARY AND NAME
UNDER WHICH IT DOES BUSINESS JURISDICTION OF INCORPORATION
<S> <C>
Arnotts Limited Australia
Campbell Finance Corp. Delaware
Campbell Foods Belgium N.V. Belgium
Campbell Foodservice Company Pennsylvania
Campbell France S.A.S. France
Campbell Investment Company Delaware
Campbell Sales Company New Jersey
Campbell Soup Company Ltd--Les Soupes Campbell Ltee Canada
Campbell's Australasia Pty. Limited Australia
Campbell's de Mexico, S.A. de C. V. Mexico
Campbell's U.K. Limited England
CSC Brands, Inc. Delaware
Erasco GmbH Germany
Godiva Chocolatier, Inc. New Jersey
Joseph Campbell Company New Jersey
Pepperidge Farm, Incorporated Connecticut
PF Brands, Inc. Delaware
Stockpot Inc. Washington
</TABLE>
The foregoing does not constitute a complete list of all subsidiaries of the
registrant. The subsidiaries which have been omitted do not, in the aggregate,
(i) represent more than 10% of the assets of Campbell and its consolidated
subsidiaries, (ii) contribute more than 10% of the total sales and revenues of
Campbell and its consolidated subsidiaries or (iii) contribute more than 10% of
the income before taxes and extraordinary items of Campbell and its consolidated
subsidiaries.
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-3 (No. 333-11497 ) and Form S-8 (Nos. 333-22803, 33-59797,
33-39032, 33-14009, 33-56899 and 333-00729) of Campbell Soup Company of our
report dated September 3, 1998 appearing on page 31 of Campbell's 1998 Annual
Report to Shareowners which is incorporated by reference in this Annual Report
on Form 10-K for the year ended August 2, 1998.
PricewaterhouseCoopers LLP
Thirty South Seventeenth Street
Philadelphia, Pennsylvania 19103
September 30, 1998
<PAGE> 1
EXHIBIT 24(a)
POWER OF ATTORNEY
FORM 10-K ANNUAL REPORT FOR FISCAL 1998
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Ellen O. Kaden and John J. Furey, each of them, until
December 31, 1998, their true and lawful attorneys-in-fact and agents, with full
power of substitution and revocation, for them and in their name, place and
stead, in any and all capacities, to sign Campbell Soup Company's Form 10-K
Annual Report to the Securities and Exchange Commission for the fiscal year
ended August 2, 1998, and any amendments thereto, and to file the same with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents may lawfully do or cause to be done by virtue
hereof.
CAMPBELL SOUP COMPANY
Signature Dated as of September 24, 1998
/s/ Alva A. App /s/Philip E. Lippincott
--------------------------- -----------------------------
Alva A. App Philip E. Lippincott
/s/Edmund M. Carpenter /s/Mary Alice Malone
--------------------------- -----------------------------
Edmund M. Carpenter Mary Alice Malone
/s/Bennett Dorrance /s/Dale F. Morrison
--------------------------- -----------------------------
Bennett Dorrance Dale F. Morrison
/s/Thomas W. Field, Jr. /s/Charles H. Mott
--------------------------- -----------------------------
Thomas W. Field, Jr. Charles H. Mott
/s/Kent B. Foster /s/George M. Sherman
--------------------------- -----------------------------
Kent B. Foster George M. Sherman
/s/Harvey Golub /s/Donald M. Stewart
--------------------------- -----------------------------
Harvey Golub Donald M. Stewart
/s/David W. Johnson /s/George Strawbridge, Jr.
--------------------------- -----------------------------
David W. Johnson George Strawbridge
/s/David K. P. Li /s/Charlotte C. Weber
--------------------------- -----------------------------
David K. P. Li Charlotte C. Weber
<PAGE> 1
EXHIBIT 24(b)
CAMPBELL SOUP COMPANY
CERTIFICATION
I, the undersigned Assistant Corporate Secretary of Campbell Soup
Company, a New Jersey corporation, certify that the attached document, entitled
"FORM 10-K ANNUAL REPORT"
is a true copy of a resolution adopted by the Board of Directors of Campbell
Soup Company on September 24, 1998, at a meeting throughout which a quorum was
present, and that the same is still in full force and effect.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of
Campbell Soup Company this 9th day of October, 1998.
/s/ Diane M. Wehr
-----------------------------
Assistant Corporate Secretary
<PAGE> 2
EXHIBIT 24(b) (Cont'd)
CAMPBELL SOUP COMPANY
Board of Directors Resolution
September 24, 1998
* * *
FORM 10-K ANNUAL REPORT
RESOLVED, that the Form 10-K Annual Report for fiscal 1998 of Campbell
Soup Company in the form presented to this meeting, is hereby approved.
FURTHER RESOLVED, that the President and Chief Executive Officer, the
Senior Vice President - Law and Government Affairs, the Executive Vice President
and Chief Financial Officer and the Vice President - Controller of Campbell Soup
Company are authorized to execute the Form 10-K Annual Report for fiscal 1998
approved by this resolution and to cause such Form 10-K to be filed with the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934, with such modifications as may be required by the Commission or as may be
desirable in the opinion of such officers.
FURTHER RESOLVED, that each of the directors and the President and
Chief Executive Officer of Campbell Soup Company are each hereby authorized to
execute in their respective capacities, a power of attorney in favor of Ellen O.
Kaden and John J. Furey designating each of them as the true and lawful
attorneys-in-fact and agents of the signatory with full power and authority to
execute and to cause to be filed with the Securities and Exchange Commission the
Form 10-K Annual Report for fiscal 1998 with all exhibits and other documents in
connection therewith as such attorneys-in-fact, or either one of them, may deem
necessary or desirable; and to do and perform each and every act and thing
necessary or desirable to be done in and about the premises as fully to all
intents and purposes as such officers and directors could do themselves.
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