<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------
FORM 10-Q
-------------
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
FOR QUARTER ENDED JUNE 30, 1996
COMMISSION FILE NUMBER 1-4199
CPC INTERNATIONAL INC.
(Exact name of Registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
36-2385545
(I.R.S. Employer Identification Number)
INTERNATIONAL PLAZA, P.O. BOX 8000
ENGLEWOOD CLIFFS, N.J. 07632-9976
(Address of principal executive office) (Zip Code)
(201)-894-4000
(Registrant's telephone number, including area code)
Former name, former address and former fiscal year,
if changed since last report.
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 the number of shares outstanding of each of the
registrant's classes of common stock, as of latest
practicable date.
CLASS OUTSTANDING AT JUNE 30, 1996
Common Stock, $.25 par value 144,802,668 shares
<PAGE> 2
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CPC INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
($ MILLIONS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C>
Net sales $ 2,514 $ 2,040 $ 4,923 $ 3,995
Cost of sales 1,542 1,223 3,001 2,396
-------- -------- -------- --------
Gross profit 972 817 1,922 1,599
Operating expenses 678 544 1,379 1,108
-------- -------- -------- --------
Operating income 294 273 543 491
-------- -------- -------- --------
Financing costs 42 31 86 57
-------- -------- -------- --------
Income before income taxes 252 242 457 434
Provision for income taxes 93 93 169 167
-------- -------- -------- --------
159 149 288 267
Minority stockholders' interest 5 7 12 14
-------- -------- -------- --------
Net income $ 154 $ 142 $ 276 $ 253
======== ======== ======== ========
Average common shares
outstanding 145,209 146,163 145,416 146,324
Earnings per common
share based on net income
reduced by "ESOP" preferred
stock dividends net of taxes $1.04 $ .96 $1.86 $1.69
Cash dividends declared
per common share $ .38 $ .36 $ .76 $ .72
</TABLE>
___________
See notes to financial statements.
1
<PAGE> 3
CFC INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ MILLIONS)
<TABLE>
<CAPTION>
June 30, 1996 Dec. 31, 1995
------------- -------------
(unaudited)
<S> <C> <C>
ASSETS
- ------
Current assets
Cash and cash equivalents $ 189 $ 203
Notes and accounts receivable, net 1,367 1,293
Inventories 1,069 1,011
Prepaid expenses 111 70
------- -------
Total current assets 2,736 2,577
------- -------
Investments in and advances to
unconsolidated affiliates 143 93
------- -------
Plant and properties 5,586 5,408
Less accumulated depreciation 2,615 2,510
------- -------
2,971 2,898
------- -------
Excess cost over net assets of
businesses acquired and other
intangible assets (net of accumulated
amortization of $229 and $214) 1,686 1,780
------- -------
Other assets 194 154
------- -------
$ 7,730 $ 7,502
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities
Notes and drafts payable $ 1,557 $ 1,399
Accounts payable and accrued items 1,608 1,607
Income taxes payable 55 5
Dividends payable 55 55
------- -------
Total current liabilities 3,275 3,066
------- -------
Non-current liabilities 828 907
------- -------
Long-term debt 1,406 1,333
------- -------
Deferred taxes on income 64 45
------- -------
Minority interest 164 164
------- -------
Stockholders' equity
Preferred stock, authorized 25,000,000
shares $1 par value -- --
Designations: Series A ESOP convertible
3,000,000 shares designated - 2,110,484
shares issued at stated value (1995:
2,133,741 shares) 188 190
Series A Junior Participating 600,000
shares designated - none issued -- --
Common stock authorized 900,000,000
shares $.25 par value - issued 195,271,444
shares 49 49
Capital in excess of par value of stock 181 167
Unearned ESOP compensation (120) (128)
Cumulative translation adjustment (248) (163)
Common stock in treasury at cost -
50,468,776 shares (1995: 49,665,627 shares) (1,407) (1,317)
Retained earnings 3,350 3,189
------- -------
Total stockholders' equity 1,993 1,987
------- -------
$ 7,730 $ 7,502
======= =======
- -------
</TABLE>
See notes to financial statements.
2
<PAGE> 4
CPC INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
($ MILLIONS)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------
1996 1995
------- -------
<S> <C> <C>
Cash flows from (used for) operating activities
- -----------------------------------------------
Net income $ 276 $ 253
Non-cash charges (credits) to net income:
Depreciation and amortization 185 154
Deferred taxes 3 6
Other, net (9) 6
Changes in trade working capital:
Notes and accounts receivable (135) (131)
Inventories (99) (91)
Accounts payable and accrued items 31 59
------- -------
Net cash flows from operating activities 252 256
------- -------
Cash flows from (used for) investing activities
- -----------------------------------------------
Capital expenditures paid (252) (174)
Disposal of plants and properties 8 5
Investment in and advances to joint ventures (40) (13)
Businesses acquired (11) (81)
------- -------
Net cash flows used for investing activities (295) (263)
------- -------
Net cash flows after investments (43) (7)
------- -------
Cash flows from (used for) financing activities
- -----------------------------------------------
Purchase of treasury stock (111) (56)
Repayment of long-term debt (132) (20)
New long-term debt 325 35
Net change in short-term debt 57 126
Dividends paid on common stock (110) (105)
Dividends paid on preferred stock (8) (8)
Common stock issued 21 7
Other liabilities (assets) (11) 12
------- -------
Net cash flows (used for) financing activities 31 (9)
------- -------
Effects of exchange rate changes on cash (2) 1
------- -------
Increase (decrease) in cash and cash equivalents (14) (15)
------- -------
Cash and cash equivalents, beginning of year 203 125
------- -------
Cash and cash equivalents, end of period $ 189 $ 110
======= =======
</TABLE>
_______
See notes to the financial statements.
3
<PAGE> 5
CPC INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY
(UNAUDITED)
($ MILLIONS)
<TABLE>
<CAPTION>
Preferred
Stock Capital in Unearned Cumulative
Series A Common Excess of ESOP Translation Treasury Retained
ESOP Stock Par Value Compensation Adjustment Stock Earnings
-------- ------ --------- ------------ ----------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995 $190 $49 $167 $(128) $(163) $(1,317) $3,189
Net income for the period 276
ESOP compensation earned 8
ESOP shares redeemed (2)
Common stock dividends (110)
Series A ESOP preferred
stock dividends,
net of taxes (5)
Translation adjustment for
the period (85)
Shares issued for:
Stock options,
deferred compensation and
restricted stock awards 14 21
Treasury stock acquired (111)
-----------------------------------------------------------------------
Balance, June 30, 1996 $188 $49 $181 $(120) $(248) $(1,407) $3,350
=======================================================================
</TABLE>
_______
See notes to financial statements.
4
<PAGE> 6
CPC INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. INTERIM FINANCIAL STATEMENTS
The unaudited consolidated interim financial statements included herein
were prepared by management and reflect all adjustments (consisting solely of
normal recurring items) which are, in the opinion of management, necessary to
present a fair statement of results of operations for the interim periods ended
June 30, 1996 and 1995 and the financial position as of June 30, 1996 and
December 31, 1995.
References to "the Company" are to CPC International Inc. and its
consolidated subsidiaries. These statements should be read in conjunction
with the consolidated financial statements and the related footnotes to these
statements contained in the Company's Annual Report to Stockholders which
notes were incorporated by reference in Form 10-K for the fiscal year ended
December 31, 1995.
2. ACQUISITIONS
There were no material acquisitions made in the second quarter of 1996.
3. INVENTORIES
Inventories are summarized as follow:
<TABLE>
<CAPTION>
June 30, 1996 Dec. 31, 1995
------------- -------------
<S> <C> <C>
Finished and goods in process $ 664 $ 602
Raw materials 241 248
Supplies 164 161
------ ------
$1,069 $1,011
====== ======
</TABLE>
5
<PAGE> 7
4. LONG-TERM DEBT
A summary of long-term debt is as follows:
<TABLE>
<CAPTION>
June 30, 1996 Dec. 31, 1995
------------- -------------
<S> <C> <C>
7.71% ESOP guaranteed notes due
December 2004 $ 154 $ 161
5.625% -- 6.75% pollution control
revenue bonds due 2007-2016 15 15
6.15% notes due 2006 300 --
Medium term notes at various rates
due 1997-2005 125 150
8.5% sinking fund debentures due
April 2016 - 100
5% Swiss franc debentures 168 174
6.75% German mark debentures 135 141
Commercial paper supported by revolving
credit agreements 400 500
Other secured and unsecured notes
and loans at various rates and
due dates 201 201
----- ------
1,498 1,442
----- ------
Less current maturities 92 109
----- ------
$1,406 $1,333
===== ======
</TABLE>
In December 1995, the Company filed a shelf registration with the Securities
and Exchange Commission for borrowings up to $700 million. Under this filing,
the Company issued, in January 1996, $300 million of 6.15% notes maturing in
2006. On April 15, 1996, the Company redeemed the 8.5% sinking fund
debentures, due April 2016.
5. CONSOLIDATED STATEMENTS OF CASH FLOWS
Supplementary information for the consolidated statements of cash flows is
set forth below:
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------
1996 1995
------- -------
<S> <C> <C>
Cash paid during the period for:
Interest $ 96 $ 64
Income taxes 119 148
Details of businesses acquired
were as follows:
Fair value of assets acquired $ 11 $ 90
Less: Liabilities assumed - 9
------- -------
Net cash paid $ 11 $ 81
======= =======
</TABLE>
6
<PAGE> 8
6. FINANCIAL INSTRUMENTS
FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying values of cash
equivalents, accounts receivable, accounts payable, and short-term debt
approximate fair values. The value of long-term debt at December 31, 1995 was
$1.4 billion. The fair value of long-term debt was based on quotes obtained
from brokers.
FOREIGN EXCHANGE CONTRACTS - The Company's policy is to hedge its exposure
to foreign currency cash flows resulting from planned dividends, fees and
royalties, intercompany loans, and other similar transactions. The Company
also hedges certain net investments in foreign operations with foreign exchange
contracts or with borrowings denominated in the particular foreign currency.
As a matter of policy, the Company does not speculate on foreign currencies.
Gains and losses, both realized and unrealized, on financial instruments that
hedge operating activities and related cash flows, flow through income in the
same period as the items being hedged. Gains and losses, both realized and
unrealized, on financial instruments that hedge the Company's investments in
foreign operations are recognized as part of the cumulative translation
adjustment in stockholders' equity.
At June 30, 1996, the Company had forward exchange contracts to deliver
$357 million of foreign currencies comprising $28 million in German marks, $93
million in British pounds, $42 million in Italian lira, $60 million in Dutch
guilders, $89 million in French francs, and $45 million in various other
currencies. The Company also had, at June 30, 1996, contracts to purchase $51
million worth of foreign currencies comprising $12 million Austrian schillings
and $37 million French francs and $2 million in German marks.
At December 31, 1995, the Company had forward exchange contracts to deliver
$391 million of foreign currencies comprising $93 million in British pounds,
$130 million in French francs, $70 million in Italian lira, $55 million in
Dutch guilders, and $43 million in various other currencies. The Company also
had contracts to purchase $32 million in various currencies.
INTEREST RATE SWAPS - The Company utilizes interest rate swap agreements to
minimize its financing costs and to balance its current and non-current asset
levels with floating and fixed-rate debt positions. The Company's risk related
to swap agreements is limited to the cost of replacing such agreements at
current market rates. The Company continually monitors its positions and
credit ratings of its counterparties, and limits the number of agreements it
enters into with any one party. Management believes the risk of incurring a
material loss is remote. Any interest rate differential on interest rate swaps
is recognized as an adjustment to interest expense over the term of the
agreement.
At June 30, 1996, the Company had a $25 million notional amount interest
rate swap agreement outstanding. A portion of the Company's variable interest
rate debt position was hedged with this swap agreement which had a weighted
average receive rate of 5.47% and a weighted average pay rate of 5.50%.
7
<PAGE> 9
At December 31, 1995 the Company had $50 million notional amount of
interest rate swap agreements outstanding. A portion of the Company's variable
interest rate debt position was hedged with a weighted average receive rate of
5.35% and a weighted average pay rate of 5.98%.
COMMODITIES - The Company's products are manufactured from a number of raw
materials, including soybean and other edible oils, peanuts, corn and wheat,
all of which are, and are expected to continue to be, in adequate supply. The
Company follows a policy of hedging its exposure to commodities fluctuations
with commodities future contracts for certain of its key North American raw
material purchases. Such raw materials may or may not be hedged at any given
time based on management's decisions as to the need to fix the cost of such raw
materials. In addition, commodity futures contracts are employed to fix the
raw material cost of certain fixed price sales contracts of the corn refining
business. Gains and losses arising from such hedging transactions are included
with the cost of raw material purchases.
At June 30, 1996 and December 31, 1995, the Company had commodity futures
contracts to purchase primarily corn totaling $86 million and $161 million,
respectively. The commodity futures contracts at June 30, 1996, principally
call for delivery in the period July to March 31, 1997. Contracts for delivery
beyond September 30, 1996, aggregate about $60 million, of which $43 million is
due in December, and $17 million in March 1997. At June 30, 1996, the Company
had unrealized gains of $12 million on these contracts.
8
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Second-quarter earnings per common share advanced 8.3% to $1.04, compared to
$.96 per share in the second quarter of 1995. Net income for the second
quarter also rose 8.3% to $153.9 million, compared to $142 million in the same
period last year.
CPC's worldwide sales increased 23% to $2.51 billion from $2.04 billion in
last year's second quarter. The sales increase chiefly reflects added volumes
from the acquisition of the Kraft baking business last October. Excluding the
baking and other acquisitions, sales rose 6.5% on a 5.1% volume increase.
Worldwide operating income rose 7.6% to $294.5 million from $273.7 million.
Financing costs in the quarter were significantly higher due to acquisitions.
CONSUMER FOODS
Commenting on the second-quarter results, C.R. Shoemate, chairman and chief
executive officer of CPC, said: "Our results this quarter reflect some highly
positive factors, which are helping us overcome the current difficult situation
in our corn refining business.
"Chief among the positives is the powerful performance of CPC Europe, which
grew operating income more than 19% on top of a 17% increase in the same period
last year. Our North American consumer foods business continues to contribute
importantly to our progress. And our baking business remains on track to add
$.03 to $.05 per share to our earnings for the full year, as we look forward to
the normal seasonal boost and the increasing benefits from synergies.
"We expect the tight corn inventories and resulting costs to have their
heaviest impact on the company's earnings in the third quarter, possibly
substantially offsetting the favorable third-quarter results we expect from our
consumer foods businesses. However, assuming a reasonable 1996 corn harvest,
the situation should normalize in the fourth quarter."
SIX-MONTH EARNINGS PER SHARE UP 10.1%
For the first half of the year, CPC's earnings per share rose 10.1% to $1.86
compared to $1.69 per share for the same period in 1995. Net income advanced
9.2% to $276.3 million from $253.1 million for the first six months of last
year. Operating income rose 10.6% to $543 million compared to $491.2 million
last year.
SECOND-QUARTER WORLDWIDE CONSUMER FOODS SALES ADVANCE 9%
CPC's worldwide sales of consumer foods (which now exclude the
separately-shown baking business results) rose 9% to $1.78 billion from $1.63
billion for the same period last year. For the six-month period, sales of
consumer foods rose 9.4%. Volume gains from existing businesses chiefly fueled
the increases, and acquisitions also contributed importantly.
9
<PAGE> 11
Second-quarter operating income from consumer foods was 13% higher compared
to second quarter last year, and for the six months, operating income grew 15%.
Best Foods, CPC's North American consumer foods division, reported sales
growth of 2.6% for the quarter on 2.8% volume growth. Operating income was up
4.6%, even while the division invested heavily in the launch of HELLMANN'S and
BEST FOODS pourable dressings in the eastern and western U.S. The gains
reflected the higher volumes and benefits from restructuring.
Volumes of corn oil and syrups were substantially higher in the quarter, and
KNORR products and pasta also showed volume growth. Volumes of mayonnaise and
peanut butter were flat.
For the first half of the year, Best Foods' sales rose slightly and operating
income increased 4.6%.
CPC Europe posted a second-quarter sales gain of 10.8% on strongly growing
volumes. About half of the volume gains came from acquisitions - the POT NOODLE
hot snacks business in the U.K. and LESIEUR dressings in France - and the other
half came from existing businesses. Volumes of dressings leapt, fueled by the
LESIEUR acquisition, the launch of Hellmann's mayonnaise in Germany, and strong
growth in Eastern Europe.
Second-quarter operating income in Europe advanced strongly,
especially taking into account a similar gain in the previous year's
comparable quarter. The 20% increase reflected equally volume growth,
including acquisitions, and important benefits from CPC Europe's 1994 and 1995
restructuring and plant rationalization programs.
For the six months, European sales were up 15%, and operating income advanced
27%.
CPC's Latin American consumer foods business posted a second-quarter sales
increase of 8.7%. A 12% volume gain came primarily from Brazil, where economic
stability has increased purchasing power and the consumer base for CPC's
products. Regional volumes of soup, bouillons, corn starch, and mayonnaise all
increased robustly. Second-quarter operating income for Latin American
consumer foods was 15% higher, after an excellent second quarter last year,
when earnings more than doubled.
Six-month results showed flat Latin American sales and an operating income
advance of 7.8%, after an earnings gain of 63% in the first half of 1995.
Second-quarter sales of CPC's consumer foods business in Asia grew strongly
on an 11.9% volume gain. Operating income was 8.2% higher, as the division
continued to invest aggressively in organization and infrastructure. For the
six-month period, sales operating income advanced 29% and 5.9%, respectively.
10
<PAGE> 12
CPC BAKING DIVISION POSTS SALES OF $384.6 MILLION
CPC's recently-established baking division posted sales of $384.6 million and
operating income was $17.2 million.
Volumes of sliced bread increased well, driven by extensions of the Master's
Best bread line, strong sales in the Freihofer's business, and line extensions
and new markets for the Thomas' business. Performance in the Entenmann's
business was weak in the Midwest; however, the doughnut segment of this
business is growing vigorously. While there has been some impact from higher
wheat costs, it is being mitigated through pricing actions and cost reductions.
Six-month results for the baking division show sales of $784.5 million and
operating income of $36.8 million.
CORN REFINING BUSINESS HURT BY COMMODITY COSTS
CPC's corn refining business recorded a second-quarter sales gain of 13% on a
5.5% volume gain. Operating income, however, was 44% lower than in the second
quarter last year, due to the extremely high corn costs in the North American
marketplace. These costs include unusual premium charges by suppliers for the
timely release of the corn to buyers.
For the first half of 1996, sales from corn refining were 7.2% higher, and
operating income was down 36%.
HFCS SETTLEMENT
As announced in June, the company agreed to settle for $7 million a federal
class action suit brought against CPC on behalf of purchasers for high fructose
corn syrup and took this charge in the second quarter. The company elected to
settle these claims solely in order to foreclose the extensive legal costs and
inherent risks of defending complex multi-party litigation such as this.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources and uses of funds as well as its general
financial policy are discussed on pages 24-27 of the 1995 Annual Report to
Stockholders which were incorporated by reference in Form 10-K for the year
ended December 31, 1995.
The Company's capital expenditures are expected to be approximately $480
million in 1996.
____________
Note: The brand names shown above in distinctive type are trademarks of CPC
International Inc. and its affiliates.
11
<PAGE> 13
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There have been no material developments in the legal proceedings as
previously reported in Form 10-K for the year ended December 31,1995.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits pursuant to Item 601 of Regulation S-K.
Exhibit 10 - Severance agreements for those five most highly
compensated executive officers who have such contracts, a
complete copy of which is attached as Exhibit 10, include
Messrs. C. R.Shoemate, A. Labergere, C. B. Storms, and
K. Schlatter. All of these agreements were dated in the
first half of 1996.
Exhibit 11 - Statements re: computation of earnings per
common share (Part I data)
Exhibit 12 - Statement regarding the computation of ratios
of earnings to fixed charges.
b) Reports on Form 8-K.
There were no reports filed on Form 8-K during the second
quarter of 1996.
12
<PAGE> 14
CPC INTERNATIONAL INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CPC INTERNATIONAL, INC.
DATE: August 8, 1996
Konrad Schlatter
-------------------------
Konrad Schlatter
Senior Vice President &
Chief Financial Officer
DATE: August 8, 1996
James W. Ripley
-------------------------
James W. Ripley
Comptroller & Chief
Accounting Officer
13
<PAGE> 15
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
10 SEVERANCE AGREEMENTS
11 COMPUTATION OF EARNINGS PER COMMON SHARE
12 COMPUTATION OF RATIOS OF EARNINGS TO FIXED
CHARGES
27 FINANCIAL DATA SCHEDULE
<PAGE> 1
EXHIBIT 10
SEVERANCE AGREEMENT
Agreement, made this______ day of __________ , 19__ , by and between CPC
INTERNATIONAL INC., a Delaware corporation (the "Company"), and
_____________(the "Executive").
WHEREAS, the Executive is a key employee of the Company or a subsidiary of
the Company as defined in Section l(ii) hereof ("Subsidiary"), and
WHEREAS, the Board of Directors of the Company (the "Board") considers the
maintenance of a sound management to be essential to protecting and enhancing
the best interests of the Company and its stockholders and recognizes that the
possibility of a change in control raises uncertainty and questions among key
employees and may result in the departure or distraction of such key employees
to the detriment of the Company and its stockholders; and
WHEREAS, the Board wishes to assure that it will have the continued
dedication of the Executive and the availability of the Executive's advice and
counsel notwithstanding the possibility, threat or occurrence of a bid to take
over control of the Company, and to induce the Executive to remain in the employ
of the Company or a Subsidiary; and
<PAGE> 2
-2-
WHEREAS, the Executive is willing to continue to serve the Company and its
Subsidiaries taking into account the provisions of this Agreement;
NOW, THEREFORE, in consideration of the foregoing, and the respective
covenants and agreements of the parties herein contained, the parties agree as
follows:
1. Change in Control. Benefits shall be provided under Section 3 hereof only
in the event there shall have occurred a "Change in Control," as such term is
defined below, and the executive's employment by the Company and its
Subsidiaries shall thereafter have terminated in accordance with Section 2
below within the period beginning on the date of the "Change in Control" and
ending on the second anniversary of the date of the Change in Control (the
"Protection Period"). If any Protection Period terminates without the
Executive's employment having terminated, any subsequent "Change in Control"
shall give rise to a new Protection Period. No benefits shall be paid under
Section 3 of this Agreement if the Executive's employment terminates outside of
a Protection Period.
<PAGE> 3
-3-
(i) For purposes of this Agreement, a "Change in Control" shall mean the
occurrence of any of the following events:
(A) any person (within the meaning of Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended) ("Person") (but
excluding the Company, a Subsidiary, or a trustee or other fiduciary
holding securities employee benefit plan or employee stock plan of the
Company or a Subsidiary) becomes, directly or indirectly, the
"beneficial owner" (as defined in Rule 13d-3 under the Securities
Exchange Act of l934, as amended) of 15% or more of the combined
voting power of the then outstanding voting securities entitled to
vote generally in the election of directors ("Voting Securities") of
the Company, provided, however, that there shall be excluded, for this
purpose, any acquisition of Voting Securities either from the Company
or pursuant to a Stock Combination (as defined hereinafter); or
(B) any Person commences a tender offer or exchange offer
which, if successful, would result in such Person becoming the
"beneficial owner" of at least 15% of the outstanding Voting
Securities of the
<PAGE> 4
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Company; provided, however, that the Board shall have the right to
delay the date on which a Change in Control shall be deemed to occur
pursuant to this clause (B), but in no event beyond the earlier of (a)
the date of the public announcement that the Board has determined to
recommend, or remain neutral toward, such offer, or (b) the earliest
date on which there is a purchase of any Voting Securities of the
Company pursuant to such offer; or
(C) durinq any period of two consecutive years individuals who
at the beginning of such period constitute the Board (including for
this purpose any new director whose election by the Board or
nomination for election by the Company's stockholders was approved by
a vote of at least two-thirds of the directors then still in office
who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved (such
individuals and such new directors being "Continuing Directors") cease
for any reason to constitute a majority of the Board; or
<PAGE> 5
-5-
(D) the stockholders of the Company approve a merger,
consolidation, reorganization or sale of substantially all of the
assets of the Company ("Combination") with any other corporation or
legal person, other than a Combination which (a) is approved by a
majority of the directors of the Company who are Continuing Directors
at the time of such approval, and (b) would result in the Common Stock
of the Company outstanding immediately prior thereto remaining
outstanding or being converted into voting common stock, or its
equivalent, of either the surviving entity or the Person owning
directly or indirectly all the common stock, or its equivalent, of the
surviving entity which voting common stock, or its equivalent, is
listed on a registered United States national securities exchange or
is approved for quotation and trading on the National Association of
Securities Dealers Automated Quotation National Market System ("Stock
Combination"); or
(E) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all the Company's assets.
<PAGE> 6
-6-
(ii) For purposes of this Agreement, the term "Subsidiary"
shall mean any corporation in which the Company possesses directly or
indirectly fifty percent (50%) or more of the total combined voting
power of all classes of stock.
2. Termination Following Change in Control. The Executive shall be
entitled to the benefits provided in Section 3 hereof upon any termination of
his or her employment with the Company and its Subsidiaries within a Protection
Period, except a termination of employment (a) because of his or her death, (b)
because of a "Disability", (c) because of "Normal Retirement", (d) by the
Company for "Cause", or (e) by the Executive other than for "Good Reason".
(i) Disability. The Executive's employment shall be deemed to
have terminated because of a "Disability" on the date on which the
Executive becomes eligible to receive long-term disability benefits
under the Company's Long-Term Disability Income Plan for Salaried
Employees, or a similar long-term disability plan of a Subsidiary, or
a successor to such Long-Term Disability Income Plan or to any such
similar plan which is applicable to the Executive. If the Executive is
not covered by the Company's Long-Term Disability Income Plan for
Salaried Employees or a similar or successor long-term disability
plan, the
<PAGE> 7
-7-
Executive shall be deemed to have terminated because of a "Disability"
on the date on which he or she would have become eligible to receive
long-term disability benefits if he or she were covered by the
Company's Long-Term Disability Income Plan for Salaried Employees.
(ii) Normal Retirement. The Executive's employment shall be
deemed to have terminated because of "Normal Retirement" if the
Executive's employment terminates on or after his or her "Normal
Retirement Date" as such term is defined in the Company's Non-
Contributory Retirement Income Plan for Salaried Employees, or a
similar pension plan of a Subsidiary, or a successor plan to such
Retirement Plan or to any such similar plan which is applicable to the
Executive. If the Executive is not covered by the Company's Non-
Contributory Retirement Income Plan for Salaried Employees or a
similar or successor pension plan, the determination of the
Executive's "Normal Retirement Date" shall be made by applying the
provisions of the Company's Non-Contributory Retirement Income Plan
for Salaried Employees as if the Executive were a Member of that Plan.
<PAGE> 8
-8-
(iii) Cause. Termination of the Executive's employment by the
Company or a Subsidiary for "Cause" shall mean termination by reason
of (A) the Executive's willful engagement in conduct which involves
dishonesty or moral turpitude in connection with his or her employment
and which either (1) results in substantial personal enrichment of the
Executive at the expense of the Company or any of its Subsidiaries, or
(2) is demonstrably and materially injurious to the financial
condition or reputation of the Company or any of its Subsidiaries or
(B) the Executive's willful violation of the provisions of the
confidentiality or non-competition agreement entered into between the
Company or any of its Subsidiaries and the Executive. An act or
omission shall be deemed "willful" only if done, or omitted to be
done, in bad faith and without reasonable belief that it was in the
best interest of the Company and its Subsidiaries. Notwithstanding
the foregoing, the Executive shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered
to the Executive a written notice of termination from the Compensation
and Nominating Committee of the Board or any successor thereto (the
"Committee") after reasonable notice to the Executive and an
opportunity for the Executive, together with his or her counsel, to be
heard before the Committee, finding that, in the good faith opinion of
<PAGE> 9
-9-
such Committee, the Executive was guilty of conduct set forth above in
clause (A) or (B) of the first sentence of this subsection (iii) and
specifying the particulars in detail.
(iv) Without Cause. The Company or a Subsidiary may terminate
the employment of the Executive without Cause during a Protection
Period only by giving the Executive written notice of termination to
that effect. In that event, the Executive's employment shall terminate
on the last day of the month in which such notice is given (or such
later date as may be specified in such notice).
(v) Good Reason. Termination of employment by the Executive
for "Good Reason" shall mean termination within a Protection Period:
(A) if there has occurred a reduction by the Company
or a Subsidiary in the Executive's base salary in effect
immediately before the beginning of the Protection Period or
as increased from time to time thereafter;
(B) if the Company or a Subsidiary, without the
Executive's written consent, has required the Executive to be
relocated anywhere in excess of thirty-five (35) miles from
his or her office
<PAGE> 10
-10-
location immediately before the beginning of the Protection
Period, except for required travel on the business of the
Company or a Subsidiary to an extent substantially consistent
with the Executive's business travel obligations immediately
before the beginning of the Protection Period;
(C) if there has occurred a failure by the Company or
a Subsidiary to maintain plans providing benefits at least as
beneficial as those provided by any benefit or compensation
plan, retirement or pension plan, stock option plan; life
insurance plan, health and accident plan or disability plan in
which the Executive is participating immediately before the
beginning of the Protection Period, or if the Company or a
Subsidiary has taken any action which would adversely affect
the Executive's participation in or materially reduce the
Executive's benefits under any of such plans or deprive the
Executive of any material fringe benefit enjoyed by the
Executive immediately before the beginning of the Protection
Period, or if the Company or a Subsidiary has failed to
provide the Executive with the number of paid vacation days to
which he or she would be entitled in accordance with the
applicable vacation policy of the
<PAGE> 11
-11-
Company or Subsidiary as in effect immediately before the
beginning of the Protection Period;
(D) if the Company or a Subsidiary has reduced in any
manner which the Executive reasonably considers important the
Executive's title job authorities or responsibilities
immediately before the beginning of the Protection Period;
(E) if the Company has failed to obtain the
assumption of the obligations contained in this Agreement by
any successor as contemplated in Section 7(ii) hereof; or
(F) if there occurs any purported termination of the
Executive's employment by the Company or a Subsidiary which is
not effected pursuant to a written notice of termination as
described in subsection (iii) or (iv) above; and for purposes
of this Agreement, no such purported termination shall be
effective.
The Executive shall exercise his or her right to terminate his or her
employment for Good Reason by giving the Company a written notice of
termination specifying in reasonable detail the circumstances constituting such
Good Reason. In
<PAGE> 12
-12-
that event, the Executive's employment shall terminate on the last day of the
month in which such notice is given.
A termination of employment by the Executive within a Protection
Period shall be for Good Reason if one of the occurrences specified in this
subsection (v) shall have occurred, notwithstanding that the Executive may have
other reasons for terminating employment, including employment by another
employer which the Executive desires to accept.
(vi) Transfers; Sale of Subsidiary. A transfer of employment
from the Company to a Subsidiary, from a Subsidiary to the Company, or
between Subsidiaries shall not be considered a termination of
employment for purposes of this Agreement. If the Company's ownership
of a corporation is reduced so as to cause such corporation to cease
to be a "Subsidiary" as defined in Section l(ii) of this Agreement and
the Executive continues in employment with such corporation, the
Executive shall not be considered to have terminated employment for
purposes of this Agreement and the Executive shall have no right to
any benefits pursuant to this Section 3 unless (I) a Change in Control
occurred prior to such reduction in ownership and (ii) the Executive's
employment terminates within the Protection Period beginning on the
date of such Change in Control
<PAGE> 13
-13-
under circumstances that would have entitled the Executive to benefits
if such corporation were still a Subsidiary.
3. Benefits Upon Termination Within Protection Period. If,
within a Protection Period, the Executive's employment by the Company or a
Subsidiary shall terminate other than (a) because of his or her death, (b)
because of a Disability, (c) because of Normal Retirement, (d) by the Company
for Cause, or (e) by the Executive other than for Good Reason, the Executive
shall be entitled to the benefits provided for below:
(i) The Company or a Subsidiary shall pay to the Executive
through the date of the Executive's termination of employment salary
at the rate then in effect, together with salary in lieu of vacation
accrued to the date on which his or her employment terminates, in
accordance with the standard payroll practices of the Company or
Subsidiary.
(ii) The Company shall pay the Executive as a severance payment
an amount equal to three times the sum of (A) his or her highest
annual salary in effect during any period of 12 consecutive months
within the 36 months immediately preceding his or her date of
termination of employment, and (B) the highest annual bonus awarded to
<PAGE> 14
-14-
the Executive under the Company's Corporate Bonus Plan or Operations
Bonus Plan or a similar bonus plan of a Subsidiary (or a successor to
any such bonus plan) in respect of any of 3 calendar years immediately
preceding the calendar year in which his or her date of termination of
employment falls. Such severance payment shall be paid in a lump sum
within 10 business days after the date of such termination of
employment.
(iii) During the period of 36 months beginning on the date of
the Executive's termination of employment (the "Benefit Period"), the
Executive shall be deemed to remain an employee of the Company or the
applicable Subsidiary for purposes of the applicable medical and
insurance plans of the Company and its Subsidiaries (but excluding any
disability, business travel, or spending account plans), and shall be
entitled to receive the benefits available to employees thereunder,
provided that continued participation is possible under applicable law
and the terms of such plan or program, and provided, further, that if
the Executive would qualify for retiree benefits during the Benefit
Period under the applicable medical or insurance plan without regard
to this Agreement, the Executive shall instead be entitled to receive
the benefits available to retirees in accordance with the terms of
such plan. In
<PAGE> 15
-15-
the event that the Executive's participation in any suet benefit plan
or program is barred, the Company shall arrange to provide the
Executive with substantially similar benefits.
(iv) The Company shall supplement the benefits payable under
the CPC International Inc. Non-Contributory Retirement Income Plan for
Salaried Employees or any successor plan (the "Retirement Plan"), the
CPC International Inc. Excess Benefit Plan or any successor plan (the
"Excess plan"), and the CPC International Inc. Special Restricted
Stock Plan or any successor plan (the "Restricted Stock Plan") (all
determined without regard to this Section 3) by providing to the
Executive the additional benefits that the Executive would have been
entitled to receive if he or she had remained in the employment of the
Company during the Benefit Period earning compensation at the rate in
effect on the date his or her employment terminates.
The supplemental benefits pursuant to this subsection (iv) in
respect of the Retirement Plan and Excess Plan shall be treated as
additional benefits under the Excess Plan, shall be payable in the
same form and commencing at the same time as benefits payable under
the Excess Plan, and shall be subject to the provisions of the
<PAGE> 16
-16-
Excess Plan. The Executive's beneficiary with respect to such benefits
shall be the same person or persons as determined under the Excess
Plan.
The supplemental benefits pursuant to this subsection (iv) in
respect of the Restricted Stock Plan shall be treated as additional
benefits under the Restricted Stock Plan, shall be payable in the same
form and commencing at the same time as benefits payable under the
Restricted Stock Plan, and shall be subject to the provisions of the
Restricted Stock Plan. The Executive s beneficiary with respect to
such benefits shall be the same person or persons as determined under
the Restricted Stock Plan.
(v) The Executive shall be entitled to all payments and
benefits provided for by or pursuant to this Section 3 whether or not
he or she seeks or obtains other employment.
4. Parachute Payments.
If any payment or benefit received by or in respect of the Executive
under this Agreement or any other plan, arrangement or agreement with the
Company or any of its Subsidiaries, including without limitation any payment or
benefit under the CPC International Inc. 1993 Stock and Performance
<PAGE> 17
-17-
Plan and any predecessor or successor thereto (determined without regard to any
additional payments required under this Section 4 and Appendix A) (a "Payment")
would be subject to the tax (the "Excise Tax") imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code") (or any similar tax that
may hereafter be imposed), the Company shall pay to the Executive with respect
to such Payment at the time specified in Appendix A an additional amount (the
"Gross-up Payment") such that the net amount retained by the Executive from the
Payment and the Gross-up Payment, after reduction for any Excise Tax upon the
Payment and any Federal, state and local income tax and Excise Tax upon the
Gross-up Payment, shall be equal to the Payment. The calculation and payment of
the Gross-up Payment shall be subject to the provisions of Appendix A. The
Executive shall be entitled to Gross-up Payments pursuant to this Section 4
irrespective of whether the Executive has satisfied the conditions for
receiving benefits pursuant to Section 3 of this Agreement.
5. No Other Severance Benefits; Right to Other Plan Benefits
In the event of termination of the Executive's employment within a
Protection Period under circumstances entitling the Executive to benefits
hereunder, the Executive shall not be entitled to any other severance benefits
except those provided by or pursuant to this Agreement, and the Executive
<PAGE> 18
-18-
hereby waives any claim against the Company or any of its Subsidiaries or
affiliates for any additional severance benefits to which he or she might
otherwise be entitled. Except as provided in the preceding sentence, nothing in
this Agreement shall be construed as limiting in any way any rights or benefits
that the Executive may have pursuant to the terms of any other plan, program or
arrangement maintained by the Company or any of its Subsidiaries or affiliates.
6. Termination of Employment Aqreements.
Any and all Employment Agreements entered into between the company or
any of its Subsidiaries and the Executive prior to the date of this Agreement
are hereby terminated.
7. Amendment; Successors; Bindinq Agreement.
(i) This Agreement may be amended or terminated only by an
instrument in writing signed by the Company and the Executive. The
Company expressly acknowledges that the Executive shall have a binding
and irrevocable right to the benefits set forth hereunder in the event
of his or her termination of employment during a Protection Period to
the extent provided in Section 2. Any purported amendment or
termination of this Agreement by the Company (other than by an
instrument in writing signed by the Company and the Executive) shall
be ineffective, and the
<PAGE> 19
-19-
Executive shall not lose any right hereunder by failing to contest
such a purported amendment or termination.
(ii) The Company shall require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all
or substantially all of the business and/or assets of the Company, to
expressly assume and agree to honor this Agreement in the same manner
and to the same extent that the Company would be required to so honor
if no such succession had taken place. Failure of the Company to
obtain such agreement prior to the effectiveness of any such
succession shall be a violation of this Agreement and shall entitle
the Executive to benefits from the Company or such successor in the
same amount and on the same terms as the Executive would be entitled
hereunder if he or she terminated his or her employment for Good
Reason, except that for purposes of implementing the foregoing, the
date on which any such succession becomes effective shall be deemed
the date of termination of employment. As used in this subsection
(ii), "Company" shall mean the Company hereinbefore defined and any
successor to its business and/or assets as aforesaid which executes
and delivers the agreement provided for in this subsection (ii) or
which otherwise becomes bound by all the terms and provisions of this
Agreement by operation of
<PAGE> 20
-20-
law. The Company shall promptly notify the Executive of any succession
by purchase, merger, consolidation or otherwise to all or
substantially all the business and/or assets of the Company and shall
state whether or not the successor has executed the agreement required
by this subsection (ii) and, if so, shall make a copy of such
agreement available to the Executive.
(iii) This Agreement and all rights of the Executive hereunder
shall inure to the benefit of, and shall be enforceable by, the
Executive and the Executive's legal representatives. If the Executive
should die while any amounts remain payable to him or her hereunder,
all such amounts shall be paid to his or her designated beneficiary
or, if there be no such beneficiary, to his or her estate.
(iv) The Company expressly acknowledges and agrees that the
Executive shall have a contractual right to the benefits provided
hereunder, and the Company expressly waives any ability, if possible,
to deny liability for any breach of its contractual commitment
hereunder upon the grounds of lack of consideration, accord and
satisfaction or any other defense. If any dispute arises after a
Change in Control as to whether the Executive is entitled to benefits
under this Agreement, there shall be a presumption that the Executive
is entitled to such benefits
<PAGE> 21
-21-
and the burden of proving otherwise shall be on the Company.
(v) The Company's obligation to provide the benefits set forth
in this Agreement shall be absolute and unconditional and shall not be
affected by any circumstances, including, without limitation, any
set-off, counterclaim, recoupment, or other right which the Company or
any Subsidiary may have against the Executive or anyone else. All
amounts payable by the Company hereunder shall be paid without notice
or demand. Each and every payment made hereunder by the Company or any
Subsidiary shall be final, and neither the Company nor any Subsidiary
will seek to recover all or any portion of such payment from the
Executive or from whomsoever may be entitled thereto, for any reason
whatsoever.
8. Notice. All notices of termination and other communications
provided for in this Agreement shall be in writinq and shall be deemed to have
been duly given when delivered by hand or mailed by United States registered
mail, return receipt requested, addressed as follows:
If to the Executive _______________
_______________
_______________
<PAGE> 22
-22-
If to the Company:
CPC International Inc.
P. O. Box 8000
International Plaza
Englewood Cliffs, New Jersey 07632
Attention: Vice President - Human
Resources
or to such other address as either party may have furnished to the other in
writing in accordance herewith.
9. Miscellaneous. No provision of this Agreement may be waived or
modified unless such waiver or modification is in writing and signed by the
Executive and the Company s Chief Executive Officer or such other officer as
may be designated by the Board. No waiver by either party of any breach by the
other party of, or compliance with, any provision of this Agreement shall be
deemed a waiver of similar or dissimilar provisions at the same or any prior or
subsequent time. The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the State of New Jersey,
without regard to its principles of conflict of laws, and by applicable laws of
the United States.
10. Validity. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision, which shall remain in full force and effect.
<PAGE> 23
-23-
11. Legal Expenses; Dispute Resolution; Arbitration.
(i) The Company shall promptly pay all legal fees and related
expenses incurred by the Executive in seeking to obtain or enforce any
right or benefit under this Aqreement (including all fees and
expenses, if any, incurred in seeking advice in connection therewith).
(ii) If any dispute or controversy arises under or in
connection with this Agreement, including without limitation any claim
under any Federal, state or local law, rule, decision or order
relating to employment or the fact or manner of its termination, the
Company and the Executive shall attempt to resolve such dispute or
controversy through good faith negotiations.
(iii) If such parties fail to resolve such dispute or
controveray within ninety days, such dispute or controveray shall, if
the Executive so elects, be settled by arbitration, conducted before a
panel of three arbitrators in New York City in accordance with the
applicable rules and procedures of the American Arbitration
Association then in effect. Judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction. Such
arbitration shall be final and binding on the parties. Costs of any
arbitration, including, without
<PAGE> 24
-24-
limitation, reasonable attorneys' fees of both parties, shall be borne
by the Company.
(iv) If such parties fail to resolve such dispute or
controversy within ninety days and the Executive does not elect
arbitration, legal proceedings may be instituted, in which event the
Company shall be required to pay the Executive's legal fees and
related expenses to the extent set forth in subsection (i) above.
(v) Pending the resolution of any arbitration or court
proceeding, the Company shall continue payment of all amounts due the
Executive under this Agreement and all benefits to which the Executive
is entitled other than those specifically at issue in the arbitration
or court proceeding.
<PAGE> 25
-25-
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first above written.
CPC INTERNATIONAL INC.
By:___________________
EXECUTIVE
_______________________
<PAGE> 26
-26-
Appendix A
Gross-up Payments
The following provisions shall be applicable with respect to the
Gross-up Payments described in Section 4:
(a) For purposes of determining whether any of the Payments will be
subject to the Excise Tax and the amount of such Excise Tax, (a) all of the
Payments received or to be received shall be treated as "parachute payments"
within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute
payments" within the meaning of Section 280G(b)(l) of the Code shall be treated
aa subject to the Excise Tax unless, in the opinion of tax counsel selected by
the Executive and reasonably acceptable to the Company, the Payments (in whole
or in part) do not constitute parachute payments, including by reason of
Section 280G(b)(4)(A) of the Code, or excess parachute payments (as determined
after application of Section 280G(b)(4)(B) of the Code), and (b) the value of
any non-cash benefits or any deferred payment or benefit shall be determined by
independent auditors selected by the Executive and reasonably acceptable to the
Company in accordance with the principles of Sections 280G(d)(3) and (4) of the
Code. For purposes of determining the amount of the Gross-up Payment the
Executive shall be deemed to pay Federal income taxes at the highest marginal
rate of Federal income taxation in the calendar year in
<PAGE> 27
-2-
which the Gross-up Payment is to be made and state and local income taxes at
the highest marginal rate of taxation to which such payment could be subject
based upon the state and locality of the Executive's residence or employment,
net of the maximum reduction in Federal income taxes which could be obtained
from deduction of such state and local taxes. In the event that the Excise Tax
is subsequently determined to be less than the amount taken into account
hereunder at the time the Gross-up Payment is made, the Executive shall repay
to Company, at the time that the amount of such reduction in Excise Tax is
finally determined, the portion of the Gross-up Payment attributable to such
reduction (plus the portion of the Gross-up Payment attributable to the Excise
Tax and Federal and state and local income tax imposed on the portion of the
Gross- up Payment being repaid by the Executive if such repayment results in a
reduction in Excise Tax and/or a Federal and state and local income tax
deduction), plus interest on the amount of such repayment at the Federal
short-term rate as defined in Section 1274(d)(1)(C)(i) of the Code. In the
event that the Excise Tax is determined to exceed the amount taken into account
hereunder at the time the Gross-up Payment is made (including by reason of any
payments the existence or amount of which cannot be determined at the time of
the Gross-up Payment), the Company shall make an additional gross-up payment in
respect of such excess (plus any interest, penalties or additions payable with
<PAGE> 28
-3-
respect to such excess) at the time that the amount of such excess is finally
determined. Notwithstanding the foregoing, the Company shall withhold from any
payment due to the Executive the amount required by law to be so withheld under
Federal, state or local wage withholding requirements or otherwise, and shall
pay over to the appropriate government authorities the amount so withheld.
(b) The Gross-up Payment with respect to a Payment shall be paid not
later than the thirtieth day following the date of the Payment; provided,
however, that if the amount of such Gross-up Payment or portion thereof cannot
be finally determined on or before such day, the Company shall pay to the
Executive on such date an estimate, as determined in good faith by the Company,
of the amount of such payments and shall pay the remainder of such payments
(together with interest at the Federal short-term rate provided in Section
1274(d)(1)(C)(i) of the Code) as soon as the amount thereof can be determined.
In the event that the amount of the estimated payments exceeds the amount
subsequently determined to have been due, such excess shall constitute a loan
by the Company to the Executive, payable on the fifth day after demand by the
Company (together with interest at the Federal short-term rate provided in
Section 1274(d)(1)(C)(i) of the code). At the time that payments are made under
Section 4 and this Appendix A, the Company shall
<PAGE> 29
-4-
provide the Executive with a written statement setting forth the manner in
which such payments were calculated and the basis for such calculations,
including, without limitation, any opinions or other advice the Company has
received from outside counsel, auditors or consultants (and any such opinions
or advice which are in writing shall be attached to the statement).
(c) The Company shall promptly pay the fees and related expenses of
any tax counsel and auditors selected by the Executive to provide services in
connection with this Appendix A.
<PAGE> 1
EXHIBIT 11
CPC INTERNATIONAL INC. AND SUBSIDIARIES
Computation of Earnings Per Common Share
Six Months Ended June 30, 1996 and 1995
Earnings per common share for CPC International Inc. is based on net
income available to common stockholders and the average number of common shares
outstanding during each period. Net income available to common shareholders
has been reduced by the ESOP preferred stock dividend net of the tax benefit.
A potentially dilutive effect on earnings per common share results from the
operation of the 1993 Stock and Performance Plan, the deferred compensation and
stock options arising from a previous executive incentive compensation plan,
and the Deferred Compensation Plan for Outside Directors. The effect on
earnings per common share resulting from the assumed exercise of outstanding
options and delivery of deferred stock awards under these programs is not
material. The maximum number of shares of common stock issuable and
deliverable under such assumptions, without giving effect to the assumed
reacquisitions of common stock with the proceeds from options exercised,
amounted to the following percentages of the average number of shares of common
stock outstanding at June 30:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C>
2.5% 2.1%
</TABLE>
Since the dilution resulting from deferred stock awards and stock options is
less than 3%, these items have not been considered in the computation of shares
outstanding. Furthermore, the potentially dilutive effect derived from using
the if-converted method in calculating fully diluted earnings per share for the
ESOP would not cause the dilution to exceed 3% even when considered with the
aforementioned programs.
<PAGE> 1
EXHIBIT 12
CPC INTERNATIONAL INC. AND SUBSIDIARIES
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
($MILLIONS)
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEARS ENDED DECEMBER 31,
JUNE 30, 1996 1995 1994 1993 1992 1991
------------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
INCOME BEFORE
- -------------
INCOME TAXES $ 457 $ 877 $ 615 $ 790 $ 745 $ 694
------------ ----- ------ ------ ----- ----- -----
Add (subtract):
Portion of rents
representative
of interest 14 26 25 21 22 20
Interest on bonds
mortgages & similar
debt 37 55 52 56 64 73
Other interest 65 87 54 54 51 54
Interest expense
included in cost of
plant construction (7) (7) (6) (7) (6) (9)
Income of
unconsolidated
venture -- -- 4 -- 5 --
----- ------ ----- ----- ----- -----
Income as adjusted $ 566 $1,038 $ 744 $ 914 $ 881 $ 832
===== ====== ===== ===== ===== =====
FIXED CHARGES:
- --------------
Portion of rents
representative of
interest $ 14 $ 26 $ 25 $ 21 $ 22 $ 20
Interest on bonds,
mortgages & similar
debt 37 55 52 56 64 74
Other interest 65 87 55 54 51 54
------- ------ ------ ----- ----- ------
$ 116 $ 168 $ 132 $ 131 $ 137 $ 148
======= ====== ====== ===== ===== ======
RATIO OF EARNINGS TO
- --------------------
FIXED CHARGES 4.9 6.2 5.6 7.0 6.4 5.6
------------- ======= ====== ====== ===== ===== ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 189
<SECURITIES> 0
<RECEIVABLES> 1,367
<ALLOWANCES> 0
<INVENTORY> 1,069
<CURRENT-ASSETS> 2,736
<PP&E> 5,586
<DEPRECIATION> 2,615
<TOTAL-ASSETS> 7,730
<CURRENT-LIABILITIES> 3,275
<BONDS> 1,406
0
188
<COMMON> 49
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 7,730
<SALES> 4,923
<TOTAL-REVENUES> 4,923
<CGS> 3,001
<TOTAL-COSTS> 3,001
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 457
<INCOME-TAX> 169
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 276
<EPS-PRIMARY> 1.86
<EPS-DILUTED> 0
</TABLE>
