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Section 240.14a-101 Schedule 14A.
Information required in proxy statement.
Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
BEST FOODS
.................................................................
(Name of Registrant as Specified In Its Charter)
.................................................................
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction
applies:
............................................................
(2) Aggregate number of securities to which transaction
applies:
.......................................................
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the amount
on which the filing fee is calculated and state how it was
determined):
.......................................................
(4) Proposed maximum aggregate value of transaction:
.......................................................
(5) Total fee paid:
.......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
.......................................................
(2) Form, Schedule or Registration Statement No.:
.......................................................
(3) Filing Party:
.......................................................
(4) Date Filed:
.......................................................
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[Logo]
700 SYLVAN AVENUE, INTERNATIONAL PLAZA, ENGLEWOOD CLIFFS, NEW JERSEY 07632-9976
March 12, 1998
Dear Stockholder:
We will hold our 1998 annual meeting of stockholders at 9:30 A.M., local
time, on Thursday, April 23, 1998 at Tamcrest Country Club in Alpine, New
Jersey.
At the meeting, we will vote on the matters shown in the notice of annual
meeting and, after the meeting, there will be an informal session to present a
brief report on the Company and respond to your questions.
Your vote is important. Whether or not you plan to attend, please sign,
date and return the enclosed proxy card in the prepaid envelope provided. If you
plan to attend, please complete the reservation form on the inside back cover
and return it to us.
Sincerely,
/s/ Charles R. Shoemate
Charles R. Shoemate
Chairman, President and
Chief Executive Officer
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BESTFOODS
700 SYLVAN AVENUE
INTERNATIONAL PLAZA
ENGLEWOOD CLIFFS, NEW JERSEY 07632-9976
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The annual meeting of stockholders of Bestfoods will be held at Tamcrest
Country Club, Route 9W, Montammy Drive, Alpine, New Jersey, on Thursday, April
23, 1998 at 9:30 A.M., local time, for the following purposes:
1. To elect five directors, each for a term of three years, and one
director for a term of one year.
2. To approve proposed amendments to each of the 1984 and 1993 Stock
and Performance Plans.
3. To re-affirm the performance goals used for the performance awards
for the 1993 Stock and Performance Plan.
4. To ratify the appointment of independent auditors for the Company
for 1998.
5. To transact such other business, if any, that is properly brought
before the meeting.
February 27, 1998 is the record date for the meeting. Only stockholders who
were of record on that date can vote at the meeting.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE
SIGN, DATE AND RETURN YOUR PROXY CARD PROMPTLY IN THE PREPAID ENVELOPE PROVIDED.
BY RETURNING THE PROXY CARD, YOU CAN ENSURE THAT YOUR VOTE WILL BE COUNTED.
By order of the Board of Directors,
Hanes A. Heller
Vice President, General Counsel
and Secretary
March 12, 1998
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TABLE OF CONTENTS
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Voting and Proxy Solicitation............................................................................. 1
Stockholder Proposals for 1999 Annual Meeting............................................................. 2
Corporate Governance and the Board of Directors........................................................... 2
Certain Transactions...................................................................................... 7
Section 16(a) Beneficial Ownership Reporting Compliance................................................... 8
Stockholder Return Comparison............................................................................. 8
Compensation and Nominating Committee Report on Executive Compensation.................................... 9
Executive Compensation.................................................................................... 14
Stock Ownership Table..................................................................................... 18
Matters to be Acted Upon:
Proposal 1.
Election of Directors............................................................................... 19
Proposal 2.
Approval of Amendments to the 1984 and 1993 Stock and Performance Plans............................. 26
Proposal 3.
Re-affirmation of Performance Goals................................................................. 27
Proposal 4.
Ratification of Appointment of Auditors............................................................. 27
Other Business............................................................................................ 28
Exhibit I................................................................................................. E-1
Exhibit II................................................................................................ E-3
</TABLE>
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BESTFOODS
700 SYLVAN AVENUE
INTERNATIONAL PLAZA
ENGLEWOOD CLIFFS, NEW JERSEY 07632-9976
PROXY STATEMENT
Our Board of Directors is soliciting proxies to be used at the annual
meeting of stockholders to be held on April 23, 1998, or any adjournment of it.
This proxy statement, the accompanying proxy card, and 1997 annual report to
stockholders will be mailed to stockholders on March 12, 1998.
VOTING AND PROXY SOLICITATION
WHO CAN VOTE
Record stockholders of common stock and ESOP preferred stock of Bestfoods
at the close of business on February 27, 1998 can vote at the meeting. On
February 27, 1998, 144,423,281 shares of common stock were issued and
outstanding and 1,828,094 shares of ESOP preferred stock were held by the
trustee of the employee stock ownership plan component of our Savings/Retirement
Plan for Salaried Employees ('Savings Plan').
Each stockholder has one vote for each share of common stock and each share
of common stock into which ESOP preferred stock can be converted.
Your proxy card includes all of your Bestfoods shares, including those in
our automatic dividend reinvestment plan, the Bestfoods Stock Fund of the
Savings Plan, and the ESOP component of the Savings Plan. If you participate in
the Bestfoods Stock Fund or the ESOP component of the Savings Plan, your proxy
will instruct the trustee of the Savings Plan how to vote or, if you have not
indicated your choice on your proxy card, the trustee will vote your shares held
in trust (together with the unallocated shares held by the trustee) in
proportion to the way other participants as a group have voted their shares.
Thus, by returning your completed proxy, you will direct the voting of your own
shares as well as the vote by the trustee with respect to unallocated shares and
allocated shares for which no instructions are received.
HOW TO VOTE
Sign and date the enclosed proxy card and return it to us. Specify your
choice on the proxy card. If you do not specify your choice on the proxy card,
we will vote your shares in favor of the proposals. You can revoke your proxy
any time before it is voted by (i) notifying our Corporate Secretary at the
above address, (ii) returning a later-dated, signed proxy card, or (iii) voting
in person at the meeting.
REQUIRED VOTES
A majority of the issued and outstanding shares entitled to vote must be
represented at the meeting in person or by proxy in order to have a quorum. A
plurality of the shares so represented is required to elect directors and the
affirmative vote of a majority of the shares so represented is required to
approve other matters to be acted on. If you vote to abstain on any matter, your
shares will be counted as present at the meeting for quorum purposes, but will
not be counted as votes cast for the proposal specified. If you hold your stock
in 'street name' and have not returned a signed proxy card, your broker will
have authority to vote your shares but only on those matters that are considered
discretionary under New York Stock
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Exchange rules. If your broker does not have such discretion on any matters
(broker non-votes), we will count your shares as present at the meeting for
quorum purposes, but we will not vote them on such matters.
Proxies will be inspected and tabulated by First Chicago Trust Company of
New York, our transfer agent.
SOLICITATION
We are soliciting proxies by mail and have retained D. F. King & Co. Inc.,
77 Water Street, New York, New York 10005, to assist in the solicitation for a
fee of $12,000 plus reasonable expenses. We will pay all costs of soliciting
proxies and will reimburse brokers, banks and other nominees of our shares for
their reasonable expenses for sending proxy materials to beneficial owners and
obtaining their instructions. In addition to solicitation by mail, directors,
officers and other employees of the Company may solicit proxies by telephone,
electronic means, or in person.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
If any stockholder wants to submit a proposal for inclusion in the proxy
material for the 1999 annual meeting which will be held on Thursday, April 22,
1999, it must be received by the Corporate Secretary by November 11, 1998. Also,
under our By-Laws, a stockholder can present at an annual meeting any other
business, including the nomination of candidates for director, only if the
stockholder notifies the Corporate Secretary in writing of the business or
candidates between January 22, 1999 and February 22, 1999. There are other
procedural requirements in the By-Laws pertaining to stockholder nominations and
proposals. Any stockholder may receive a copy of the By-Laws without charge by
writing to the Corporate Secretary.
CORPORATE GOVERNANCE AND THE BOARD OF DIRECTORS
QUALIFICATIONS OF DIRECTORS
Our Board of Directors presently consists of fourteen members, of whom
eleven are outside directors. The Board is divided into three classes, with one
class standing for election each year for a three-year term. Our Board believes
that all of the outside directors act independently from management and do not
have any relationships that would interfere with their free exercise of judgment
and are eligible to serve on the Audit Committee or the Compensation and
Nominating Committee under the rules and regulations of the Securities and
Exchange Commission, the New York Stock Exchange and the Internal Revenue
Service. Every year the Audit Committee reviews the independent status of all
outside directors and reports on this to the Board.
Our policy on tenure of directors requires outside directors and former
chief executive officers of the Company to retire from the Board at the annual
meeting of stockholders in the year following their 70th birthday, and employee
directors when they leave the Company, whether or not the term for which they
have been elected has expired.
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CORPORATE GOVERNANCE
Our Board works on an ongoing basis to fulfill its wide ranging oversight
duties and to maintain excellence in corporate governance. These activities
include: review of the Company's strategy and performance, management oversight,
enhancement of Board effectiveness, and establishment of Committees that, among
other things, oversee conduct and policy compliance, integrity of accounting and
financial controls, and the financial structure of the Company.
STRATEGY AND PERFORMANCE
The Board reviews the Company's long-term strategies and the management
structures designed to implement these strategies. This review consists of steps
that foster Board involvement at important points in the strategy formation
process:
At the start of each year, the Board conducts a review of the Bestfoods
vision and the strategies supporting it.
Thereafter, the Board reviews the strategic plans of the operating
divisions based on the vision and strategies.
During the year, the Board examines the capital expenditures that support
the strategy and reviews the performance of recent acquisitions.
After the end of each year, the Board conducts an annual review of
operating results for the previous year and the goals and plans for the
upcoming year.
MANAGEMENT OVERSIGHT
In fulfilling its responsibility to oversee the performance of the chief
executive officer and other executive officers, our Board has the following
practices:
At the beginning of each year the Board, meeting in executive session,
reviews the performance of senior management, the management organization
and succession planning.
With the chief executive officer absent, the executive session of the
Board reviews his performance, emphasizing his: leadership in development
and implementation of strategies, leadership of the Company to superior
corporate performance, establishment of an effective organizational
structure that supports the strategies, development of an effective chief
executive officer succession plan, promotion and implementation of Company
principles that further the highest ethical practices and social values,
and recommendations for improvements in corporate governance practices.
Throughout the year, directors have opportunities to review management
through informal one-on-one sessions with the chief executive officer,
routine executive sessions at the end of Board meetings, and contact
between outside directors and senior managers in informal settings,
including visits by Board members to Company facilities.
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BOARD EFFECTIVENESS
The Board works to enhance its own effectiveness and to improve the
Company's corporate governance practices in a variety of ways, including:
Conduct of an annual evaluation of Board structure and performance that
includes contrasting current corporate governance practices with evolving
expectations and making recommendations for improvements in corporate
governance practices.
Increased contact between outside directors and senior managers through
facility visits, attendance at senior management meetings, outside
director orientation programs, and work with corporate officers who serve
as committee executives.
Compensation and Nominating Committee review of incumbent directors prior
to recommendation for re-election emphasizing: directors' commitment to
serving the Company, directors' regular attendance at meetings and
familiarity with materials distributed in advance of meetings, directors'
active participation in meetings, directors' willingness to give advice
and counsel, and directors' sense of commitment to stockholders, employees
and other communities served by the Company.
COMMITTEES OF THE BOARD
In order to fulfill its responsibilities, our Board delegates to its four
Committees the authority to consider certain matters and report to the Board
with appropriate recommendations. To enhance the effectiveness of the
Committees:
Each Committee is chaired by an outside director.
The chairmanship and membership of all of the Committees are rotated on a
regular 3-4 year basis to give the directors a broader knowledge of our
Company's affairs. The Chairman of a Committee is normally a director who
has already served on that Committee for several years, and he or she then
serves for a longer period than the other members.
The Board conducts an annual review of the charter of each Committee.
Each Committee establishes its own agendas for the year, and conducts a
year-end evaluation of its performance by comparing the topics considered
at meetings with its charter as established by the Board.
Oral reports of Committee activities are given at each Board meeting and
minutes of Committee meetings are sent to all of the directors.
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Descriptions of the Committees are as follows:
CORPORATE AFFAIRS COMMITTEE
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Members: E. S. Kraus (Chairman)
T. H. Black
C. Castellini
R. J. Gillespie
E. R. Gordon
G. V. Grune
W. S. Norman
(a majority of outside directors)
Number of Meetings in 1997: 3
Functions: Reviews policies and programs of the Company relating to customer and
consumer relations, employee relations, health, safety and the
environment, community relations, compliance with laws, disclosure of
information and insider trading, and business ethics.
Reviews major litigation, crisis management organization, and programs for
communication with investors, governments and the public.
AUDIT COMMITTEE
Members: L. I. Higdon, Jr. (Chairman)
T. H. Black
C. Castellini
W. C. Ferguson
R. G. Holder
H. de C. Meirelles
(all outside directors)
Number of Meetings in 1997: 3
Functions: Reviews the scope and results of the annual audit, approves the non-audit
services rendered by the independent auditors and considers the effect of
such non-audit services on the independence of the auditors.
Recommends to the Board appointment of independent auditors for the
ensuing year, subject to stockholder approval.
Reviews internal control systems and internal auditing procedures,
accounting policies, financial structure and financial reporting.
Meets privately on a regular basis with both the independent auditors and
the corporate general auditor.
Reviews annually the independence of each outside director.
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COMPENSATION AND NOMINATING COMMITTEE
Members: W. S. Norman (Chairman)
A. C. DeCrane, Jr.
E. R. Gordon
G. V. Grune
E. S. Kraus
(all outside directors)
Number of Meetings in 1997: 4
Function: Approves executive officer compensation and administers executive
incentive plans, reviews employee benefit plans and makes recommendations
to the Board on such plans.
Recommends to the Board of Directors the compensation for outside
directors and administers their compensation plans.
Reviews the performance of incumbent directors whose terms are expiring
prior to recommending to the Board the nominees for election as directors
at the annual meeting of stockholders.
Develops criteria for Board membership and considers candidates for
membership on the Board.
</TABLE>
Stockholders who wish to recommend a candidate for consideration as a nominee
for director may do so by writing to the Corporate Secretary and providing a
statement of the candidate's experience and qualifications.
FINANCE COMMITTEE
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Members: A. C. DeCrane, Jr. (Chairman)
W. C. Ferguson
L. I. Higdon, Jr.
R. G. Holder
A. Labergere
H. de C. Meirelles
(a majority of outside directors)
Number of Meetings in 1997: 3
Function: Reviews policies and practices of the company affecting its financial
structure and position, short- and long-term financing, foreign exchange
management, financial derivatives including commodities and hedging,
capital expenditures, dividends, insurance coverage and taxes.
Recommends to the Board the appointment of trustees and investment
managers under employee benefit plans and reviews their performance, and
recommends the annual contributions by the Company to fund such plans.
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DIRECTOR COMPENSATION
Employee directors do not receive compensation for serving as directors.
Outside directors are compensated as follows:(1)
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Annual Board retainer......................................................... $60,000
Annual retainer for Committee chair........................................... 3,000
Board attendance fee (per meeting)............................................ 1,250
Committee attendance fee (per meeting)........................................ 1,250
Company facility visitation fee (per day)..................................... 1,250
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DIRECTOR ATTENDANCE
Our Board held ten meetings in 1997, and each of the directors attended at
least 75 percent of these meetings. Attendance of all directors at meetings of
the Board and of Committees on which they served averaged 96 percent.
CHARITABLE CONTRIBUTIONS
To promote charitable giving, directors participate in our Charitable
Awards Program under which the Company donates a total amount of $1 million to
as many as four educational institutions with which we have recruiting, research
and other relationships, as designated by each director. We pay these donations
in ten annual installments after the director's death. Outside directors become
vested in the program upon completion of ten years of service or retirement from
the Board at age 70, and employee directors become vested upon completion of
five years of service as a director or retirement at or after age 62. The
program is financed through the purchase of life insurance policies and the
Company receives a charitable deduction for donations made from the proceeds of
the policies. Directors derive no financial benefit from the program.
Each director may contribute up to $5,000 per year to certain tax-exempt
organizations under the Company's matching gifts program which is available to
full-time U.S. employees and their spouses. For each dollar contributed within
the $5,000 limit, we contribute two dollars. The Company provides $100,000 of
group term life insurance and $175,000 of travel accident insurance to the
outside directors as well as director liability insurance for all directors.
CERTAIN TRANSACTIONS
Messrs. DeCrane, Ferguson, Holder and Norman, as well as Mr. B. H. Kastory,
Senior Vice President -- Finance and Administration, are members of the Board of
Directors of Corn Products International, Inc. ('Corn Products'). On December
31, 1997, in a spin-off
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(1) One-half of the Annual Board retainer is paid in cash and one-half is paid
in the form of common stock of the Company which is mandatorily deferred
until retirement under the Deferred Compensation Plan for Outside Directors
(the 'Plan'). All or part of the cash portion of the retainer and fees may,
at the director's option under the terms of the Plan, be deferred in the
form of common stock of the Company or in an interest-bearing account, and
paid after retirement from the Board. In 1997, each outside director was
also credited with 100 shares of mandatorily deferred common stock of the
Company under the Plan.
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transaction, the Company transferred its corn refining business to Corn Products
and distributed the stock of Corn Products to the Company's stockholders. In
connection with the spin-off, the Company and Corn Products entered into an
arms-length supply agreement under which Corn Products will provide
approximately $150 million of products and services to the Company on an annual
basis.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers to file reports of holdings and transactions in
the Company's stock with the Securities and Exchange Commission. Due to
inadvertent administrative error, Forms 4 reporting a sale of stock by each of
H.H. Grunert and A.C.A. Krauss, executive officers of the Company, due on August
10, 1997 and November 10, 1997, respectively, were filed on January 30, 1998 and
March 5, 1998, respectively.
STOCKHOLDER RETURN COMPARISON
The following graph compares the five-year cumulative total return to
stockholders of our common stock with the cumulative total return of the
Standard & Poor's Foods Index, the Standard & Poor's 500 Stock Index and a Peer
Group Index of food and food-related companies. The companies in the Peer Group
were approved by the Compensation and Nominating Committee in order to measure
the Company's performance during each of the 1995, 1996 and 1997 performance
cycles under the 1993 Stock and Performance Plan (see the Compensation and
Nominating Committee Report on page 9). The historical performance of the Peer
Group Index, weighted for market capitalization, is shown as a reference. The
Peer Group consists of: Archer-Daniels-Midland Company, Campbell Soup Company,
Con Agra, Inc., General Mills, Inc., H. J. Heinz Company, Hershey Foods
Corporation, Hormel Foods Corporation, Kellogg Company, McCormick & Company,
Incorporated, The Quaker Oats Company, Sara Lee Corporation, Smucker (J. M.),
Co., Unilever N.V., and Wm. Wrigley Jr. Company. The Peer Group will be adjusted
beginning with the 1998 performance cycle to delete Archer-Daniels-Midland
Company and include Nabisco Holdings Corp. in order to reflect that the Company
is no longer in the corn refining business. The graph assumes initial
investments of $100 on December 31, 1992 and reinvestment of dividends.
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BESTFOODS
STOCKHOLDER RETURN COMPARISON
FOR FIVE YEARS ENDED DECEMBER 31, 1997
BASE PERIOD RETURN RETURN RETURN RETURN RETURN
1992 1993 1994 1995 1996 1997
Bestfoods 100 96.82 111.29 146.86 169.45 239.53
S&P 500 Index 100 110.08 111.53 153.45 188.68 251.63
S&P Foods Index 100 91.77 102.58 130.85 155.03 222.19
Peer Group Index 100 95.15 102.46 129.01 152.17 214.14
[PERFORMANCE CHART]
COMPENSATION AND NOMINATING COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
COMPENSATION AND NOMINATING COMMITTEE RESPONSIBILITIES
The Compensation and Nominating Committee of the Board of Directors,
composed entirely of independent directors, has the responsibility to approve
the compensation of all executive officers and to administer executive incentive
compensation plans. This report describes the manner in which we addressed those
responsibilities in 1997.
DISCUSSION OF SHORT-TERM COMPENSATION (BASE SALARY AND ANNUAL INCENTIVE)
The Company's short-term compensation program, consisting of base salary
and annual incentive, is administered by using the concepts of salary and
incentive ranges for each executive position. Salary and incentive ranges are
established reflecting data from salary surveys of companies in the consumer
goods and food sectors. The companies surveyed are those with which the Company
competes in the marketplace in business results, for human resources, and in
stockholder return. These companies are similar but not identical to those in
the S&P Foods Index and the Peer Group Index in the Stockholder Return
Comparison graph shown above because survey data are not available for all of
the Index companies.
Each salary range has a midpoint which represents the average salary for
comparable surveyed positions, and a range that varies about 27% above and below
midpoint for the highest level position and about 24% for the lowest level
position. An individual executive's progress through and position in the salary
range depend primarily upon individual performance and time in the job. Annual
incentive ranges and midpoints also have been
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established for each position as a percentage of salary. These annual incentive
ranges are highly leveraged and correlated to Bestfood's financial performance
relative to competitor companies and preestablished goals. Actual incentive
payments can vary significantly depending upon the performance of the Company,
the business unit, and the individual. The principal factors used in assessing
such performance include earnings per share growth at the Company level; sales
and operating income growth at both the Company and business unit levels; asset
utilization; and achievement at the business unit and individual levels of
agreed-upon goals under the 'Balanced Scorecard' performance system described
later. In addition to surveys of competitive practice, the Committee uses
outside consultants to review these salary ranges and incentive targets for
accuracy and appropriateness, and to review the appropriateness of compensation
actually paid. It is the Company's objective to be fully competitive in salaries
and annual incentive opportunities with companies with which it competes, based
on relative performance with these companies.
BASIS FOR SPECIFIC SHORT-TERM COMPENSATION ACTIONS
Studies of competitive short-term compensation practices, and confirmed by
outside compensation consultants, indicated that the Company's base salary
midpoints and actual salaries paid were in line with competition. On the other
hand, these studies indicated that the Company's annual incentive targets were
below competitive levels and annual incentive earnings opportunities were not as
highly leveraged compared to other companies. For 1997, the Committee approved
higher annual incentive targets that could provide greater Annual Incentive
earnings opportunity for accomplishment of aggressive earnings goals.
The base salaries paid in 1997 to the five highest paid executive officers
named in the Summary Compensation Table on page 14, vary from 5.7% below to 1.4%
above the midpoint of their respective ranges for 1997. As noted earlier, the
salary range midpoint for a position represents the average salary for that
position within the surveyed group of companies. We believe this information
indicates that the Company's base salaries are competitive with surveyed
companies. In the salaries reported in the Table, variances from midpoint
correlate to individual performance and time in position. Retirements and
organizational changes resulting from the spin-off of Corn Products resulted in
two new individuals being included in the table of the five highest paid
executive officers. In addition, two of the individuals listed assumed new
responsibilities in 1997.
Incentive payments for executive officers with corporate responsibilities
reflect overall corporate performance, 'Balanced Scorecard' performance, as well
as individual performance. Incentive payments for executive officers with
operations responsibilities primarily reflect business unit performance, as well
as corporate performance, 'Balanced Scorecard' performance and individual
performance.
For 1997, the consumer foods divisions had another excellent year by
improving operating income by 8% despite the 4.2% unfavorable impact of
currencies in Europe and Asia. The consumer foods businesses volumes, including
acquisitions, were up 2.4%, and return on equity excluding special charges for
the consumer foods businesses exceeded 50%. However, the excellent performance
by the consumer foods divisions was offset by the disappointing financial
results of the corn refining business.
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After excluding special items, earnings per share in 1997 increased by 3.3%
for the entire Company, but 5.6% for continuing consumer operations. Based on
these results and the new targets established from the competitive data, the
Committee believes the incentive awards for executive officers are reasonable
and within competitive norms. Incentive awards for the five highest paid
executive officers range from about 4% to 40% above their mid-range targets.
Specifically with regard to the chief executive officer, Mr. Shoemate, the
Committee authorized a salary increase of 6.6% effective May 1, 1997. The
Committee also approved an incentive award under the Executive Annual Incentive
Plan for 1997 of $725,000, representing 81% of his salary at the time of the
award, compared to a competitive mid-range guideline of 85%. Both the salary
increase and the annual incentive award were based on evaluations of Mr.
Shoemate's performance conducted by all of the Company's independent directors,
using the process and performance criteria described on page 3. In approving the
salary increase, the Committee considered Mr. Shoemate's time in his current
job, his position in his salary range, competitive pay data, and the performance
of the Company. In approving the annual incentive award, the Committee
considered in particular his leading the Company to achieve good financial
results in the consumer foods business; his leadership in the restructuring
actions taken in 1997; the successful spin-off of Corn Products; his strategic
leadership in pursuing the Company's vision to become 'The Best International
Food Company in the World' and progress toward that vision by executing the
supporting strategies; his continued progress in worldwide implementation of the
'Balanced Scorecard' performance measurement system which focuses all levels of
management on strategic business drivers including customer satisfaction,
business practices, people development, and innovation and learning, in order to
foster superior financial results; and his implementation of sound and effective
systems of corporate governance.
DISCUSSION OF LONG-TERM COMPENSATION
The Company's long-term compensation program consists of annual awards of
performance units and stock options under the Stock and Performance Plan. The
number of options granted is equal to the number of performance units. For a
more detailed description of how these tandem awards work, refer to footnote (1)
to the Option Grants table on page 16. The size of performance awards granted to
each participant depends upon the position level, the individual's performance
and, to a lesser extent, time in position. The size of awards is generally in
the mid-range of long-term compensation practices among surveyed consumer goods
and food sector companies. Competitiveness is assessed by independent
consultants' evaluations of survey data. Because of the wide range of approaches
to long-term compensation and the availability of data, companies surveyed for
this purpose are similar but not identical to those surveyed for short-term
compensation.
Earning of awards depends entirely upon the Company's stockholder return
(stock price appreciation plus dividends paid) compared to a group of food and
other consumer products companies with which the Company believes it competes
for investors. Each year the Committee reviews and approves the companies to be
included in the comparator group for the performance cycle established in that
year. The comparator group approved for the cycles established in 1995, 1996 and
1997 is the Peer Group described under 'Stockholder Return Comparison' on page
8. To the extent that performance awards are earned, an equivalent
11
<PAGE>
<PAGE>
number of the options granted in tandem are canceled. The value of the award
earned is dependent upon the value of Company stock and its price appreciation
from the beginning to the end of the four-year performance cycle. Payments are
made at the end of the four-year cycle.
BASIS FOR SPECIFIC LONG-TERM COMPENSATION ACTIONS
Award payments made in January 1998 and reported in the Summary
Compensation Table on page 14 reflect annual and cumulative stockholder return
results over a four-year period beginning January 1, 1994 and ending December
31, 1997. During the four-year award cycle, participants had the opportunity to
earn 25% of their awards in each year of the cycle. In the first cycle year
(1994), 25.0% was earned. In the second year (1995), 6.25% was earned. In the
third year (1996), 6.25% was earned, and in the fourth and final year (1997),
12.5% was earned. Thus, over the four years, 50.0% of the potential performance
award was earned and paid at the end of the cycle. During this period, the
Company's share price increased 127%, from $47.50 to $108.00.
Since 50.0% of the performance award was earned, 50.0% of the tandem
options were canceled. The balance of 50.0% of the stock options granted remain
in effect with an exercise price equal to the fair market value of the Company's
common stock at the date of the award in 1994 ($47.3750). This provides
continuing incentive to increase share price and, therefore, return to the
stockholder. Without share price increase, these options have no value to the
executive.
In 1997, Mr. Shoemate received an award of 55,000 performance units which
may be earned over a four-year cycle ending in 2000, and a tandem award of
55,000 stock options and a stand-alone award of 55,000 stock options. The
Committee's decision to grant this award was based upon its assessment of the
long-term compensation survey data, and outside consultants' evaluations
thereof, referred to above, and the evaluation of Mr. Shoemate's performance for
1996 conducted by the independent directors, using the process and performance
criteria described on page 3. The award was designed to provide further
incentive for Mr. Shoemate to lead the Company in maximizing stockholder value.
In addition, the Committee granted Mr. Shoemate 100,000 non-qualified stock
options at an exercise price equal to the fair market value on April 25, 1997,
the date of grant, providing Mr. Shoemate remains with the Company as chief
executive officer. This award was the second of three awards to be made in
response to competitive long-term compensation activity and to help ensure
management continuity at Bestfoods.
OVERALL PROGRAM RISK AND LEVERAGE
As the compensation tables in this proxy statement indicate, a significant
portion of executive compensation has been placed at risk. Payments under the
annual incentive program are dependent upon annual business results compared to
preestablished goals and competitor performance and individual performance.
Long-term award payments are dependent upon the Company's stockholder return
relative to the comparator group of companies referred to earlier. In the case
of Mr. Shoemate, 82% of his annual and long-term compensation came from
incentive compensation plans which relate to Company performance and only 18%
from base salary. Similar degrees of risk exist for the four other highest paid
executive officers.
12
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<PAGE>
EXECUTIVE STOCK OWNERSHIP TARGETS
In 1993, the Company established stock ownership targets for all
participants in the Stock and Performance Plan. The ownership target for the
chief executive officer is seven times base salary; for the most senior
operating and corporate staff officers, it is five times base salary; for
remaining officers, it is three times base salary; and for non-officer
participants, it is equal to base salary. Stock used to assess these ownership
targets includes stock directly owned by the executive, and stock owned
indirectly through participation in the Deferred Stock Unit Plan described in
footnote (3) to the Stock Ownership Table on page 18, but excludes shares
covered by unexercised stock options. Executives are expected to attain these
ownership targets within three to five years from the time the executive's
target was established or increased. All of the executive officers named in the
Summary Compensation Table, including Mr. Shoemate, exceed their targets.
DEDUCTIBILITY CAP ON COMPENSATION EXCEEDING $1,000,000
The tax law limits to $1 million the deductibility of annual compensation
payments made to each of the five highest paid executives. However, there is an
exception to this loss of tax deduction for payments that meet certain objective
performance standards. It is the Committee's general policy to avoid the loss of
tax deductibility to the extent it believes prudent and feasible. To this
effect, the Company amended the 1993 Stock and Performance Plan so that
long-term compensation payments, including stock options, meet the objective
performance exception. In 1997, stockholders approved a new Executive Annual
Incentive Plan so that short-term incentive payments also meet this exception.
It is the Committee's conclusion that for 1997 the $1 million cap rules will not
result in any lost tax deductions. However, notwithstanding its general policy,
the Committee retains the discretion to authorize payments that may not be
deductible if it believes that to do so is in the best interest of the Company
and its stockholders.
Compensation and Nominating Committee:
W. S. Norman, Chairman
A. C. DeCrane, Jr.
E. R. Gordon
G. V. Grune
E. S. Kraus
13
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<PAGE>
EXECUTIVE COMPENSATION
The following table summarizes the compensation awarded or paid to the
chief executive officer and each of the other four most highly compensated
executive officers of the Company (the 'named executive officers') during each
of the last three fiscal years.
- --------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------- ---------------------------------------
AWARDS PAYOUTS
---------- -------------
RESTRICTED SECURITIES LONG-TERM
NAME AND SALARY BONUS STOCK UNDERLYING INCENTIVE ALL OTHER
PRINCIPAL POSITION YEAR ($) ($) AWARDS($) OPTIONS # PAYOUTS($)(1) COMPENSATION($)(2)
- ---------------------------- ---- ------- ------- ------------ ---------- ------------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
C. R. Shoemate ............. 1997 871,667 725,000 0 210,000 3,268,514 111,548
Chairman, President and 1996 821,250 650,000 0 257,500 2,252,813 111,693
Chief Executive Officer 1995 766,250 600,000 0 45,000 2,432,859 112,001
R. J. Gillespie ............ 1997 560,000 510,000 0 20,000 1,634,207 78,329
Executive Vice 1996 536,667 290,000 0 52,437 1,126,406 77,993
President -- Strategic 1995 497,917 270,000 0 20,000 1,216,430 75,022
Business Development
A. Labergere ............... 1997 540,500 545,000 0 24,000 1,634,207 32,530
Executive Vice President 1996 483,083 300,000 0 20,000 1,126,406 28,630
and President of the 1995 413,333 275,000 0 20,000 1,073,320 24,700
Bestfoods Europe Division
A. C. A. Krauss ............ 1997 430,000 400,000 0 13,500 898,809 84,601
Senior Vice President and 1996 389,583 220,000 515,625(3) 28,375 563,162 83,334
President of the 1995 347,917 220,000 0 12,000 572,438 18,103
Bestfoods North America
Division
B. H. Kastory .............. 1997 412,500 300,000 0 13,500 898,809 63,648
Senior Vice 1996 345,000 190,000 375,000(3) 28,988 625,781 60,067
President -- Finance and 1995 282,500 170,000 331,250(3) 12,000 643,992 41,838
Administration
</TABLE>
- ------------
(1) Includes cash and the market value of the Company's common stock paid in
respect of performance units awarded under the 1993 Stock and Performance
Plan at the end of four-year performance cycles.
(2) Includes the following for 1997:
a. Company matching contributions to defined contribution plans as follows:
C. R. Shoemate, $60,501; R. J. Gillespie, $41,801; A. Labergere, $32,530;
A. C. A. Krauss, $34,001; and B. H. Kastory, $32,951.
b. Value of premiums paid by the Company under the Executive Life Insurance
Plan as follows: C.R. Shoemate, $50,440; R. J. Gillespie, $36,529; A. C.
A. Krauss, $50,600; and B. H. Kastory, $30,697.
(footnotes continued on next page)
14
<PAGE>
<PAGE>
(footnotes continued from previous page)
c. For C. R. Shoemate, $607 of above-market interest at the rate credited to
all participants in the Deferred Compensation Plan, pursuant to which all
or a portion of annual bonus may be deferred and credited to an interest
bearing account, and paid over a fifteen-year period following
retirement.
(3) Represents the value of shares of restricted stock on the date of award.
Restrictions lapse on one-fourth of the shares on each of the first four
anniversary dates of the award. Dividends are paid on restricted stock at
the rate paid to all stockholders. In the case of A. C. A. Krauss, the
amount listed represents the value of 7,500 shares of restricted stock on
the date of award, with 5,625 remaining shares on December 31, 1997 at a
value of $607,500. In the case of B. H. Kastory's 1996 award, the amount
listed represents the value of 5,000 shares of restricted stock on the date
of award, with 3,750 remaining shares on December 31, 1997 at a value of
$405,000. In the case of B. H. Kastory's 1995 award, the amount listed
represents 5,000 shares of restricted stock on the date of award, with 2,500
remaining shares on December 31, 1997 at a value of $270,000. The named
executive officers hold no other shares of restricted stock.
15
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
OPTION GRANTS IN 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(2)
- ---------------------------------------------------------------------------------- ----------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS EXERCISE
UNDERLYING GRANTED TO OR BASE
OPTIONS EMPLOYEES PRICE EXPIRATION
NAME GRANTED(#)(1) IN 1997 ($/SHARE) DATE 0% ($) 5% ($) 10% ($)
- -------------------------------------------- ------------- --------- ---------- ---------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
C. R. Shoemate................. 55,000 3.6409 82.1250 1/20/07 0 2,839,655 7,195,677
55,000 3.6409 82.1250 1/20/07 0 2,839,655 7,195,677
100,000 6.6199 81.2500 4/24/07 0 5,108,000 12,943,655
R. J. Gillespie................ 20,000 1.3240 82.1250 1/20/07 0 1,032,602 2,616,610
A. Labergere................... 24,000 1.5888 82.1250 1/20/07 0 1,239,122 3,139,932
A. C. A. Krauss................ 13,500 .8937 82.1250 1/20/07 0 697,006 1,766,212
B. H. Kastory.................. 13,500 .8937 82.1250 1/20/07 0 697,006 1,766,212
</TABLE>
- ------------
(1) Except as described below, the options listed were granted at an exercise
price equal to the fair market value of CPC International Inc. stock on the
date of grant in tandem with an equivalent number of performance units under
the 1993 Stock and Performance Plan. The performance units were issued for a
cycle of four years' duration, with a goal based on improvement in
stockholder value, determined by the increase in the value of common stock
of the Company during each year of the cycle assuming reinvestment of
dividends, measured against the performance of a Peer Group of companies as
described on page 8. Up to 25% of the units may be earned in each year of
the cycle and are payable at the conclusion of the cycle. To the extent
performance units are earned and payable, a corresponding number of options
are canceled. To the extent options are exercised, a corresponding number of
performance units are canceled. These options were granted on January 21,
1997 and became exercisable on January 21, 1998. This column also includes,
with respect to Mr. Shoemate, additional option awards under the Stock and
Performance Plan and separately, both of which were granted at an exercise
price equal to the fair market value of the Company's stock on the date of
grant. Under the 1993 Plan, in the event of a change in control of the
Company, all performance cycles will terminate and participants will receive
the value in cash of the performance units theretofore earned and 100% of
the units that could have been earned during the remainder of the cycles.
The amounts paid to the named executive officers for the cycles ending in
1997, 1996 and 1995 are shown as 'Long-term Incentive Payouts' in the
Summary Compensation Table on page 14.
(2) The amounts shown under these columns are calculated at 0% and at the 5% and
10% rates set by the Securities and Exchange Commission and are not intended
to forecast future appreciation of the Company's stock price. The amounts
shown assume that no performance units will be earned so that all options
granted will be exercisable.
16
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
AGGREGATED OPTION EXERCISES IN 1997
AND OPTION VALUES AS OF DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
DECEMBER 31, 1997(#) DECEMBER 31, 1997($)(2)
-------------------- -----------------------
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) REALIZED($)(1) UNEXERCISABLE UNEXERCISABLE
- ----------------------------- --------------- -------------- -------------------- -----------------------
<S> <C> <C> <C> <C>
C. R. Shoemate............... 0 0 230,063/280,000 9,343,152/8,771,875
R. J. Gillespie.............. 4,374 133,134 38,688/ 50,000 1,719,360/1,932,500
A. Labergere................. 5,000 249,375 10,125/ 54,000 553,133/2,036,000
A. C. A. Krauss.............. 2,100 65,625 18,757/ 32,375 807,220/1,255,938
B. H. Kastory................ 2,100 67,812 19,557/ 32,375 870,638/1,225,938
</TABLE>
- ------------
(1) Amounts shown are based on the difference between the market value of
Bestfoods' common stock on the date of exercise and the exercise price.
(2) Amounts shown are based on the difference between the closing price of
Bestfoods' common stock on December 31, 1997 ($108) and the exercise price
or base price.
- --------------------------------------------------------------------------------
PENSION PLAN TABLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
5-YEAR AVERAGE YEARS OF SERVICE
ANNUAL ----------------------------------------------------
COMPENSATION 10 15 20 25 30
- ------------------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 400,000................................ $ 48,000 $ 72,000 $ 96,000 $120,000 $144,000
600,000................................ 72,000 108,000 144,000 180,000 216,000
800,000................................ 96,000 144,000 192,000 240,000 288,000
1,000,000................................ 120,000 180,000 240,000 300,000 360,000
1,200,000................................ 144,000 216,000 288,000 360,000 432,000
1,400,000................................ 168,000 252,000 336,000 420,000 504,000
1,600,000................................ 192,000 288,000 384,000 480,000 576,000
1,800,000................................ 216,000 324,000 432,000 540,000 648,000
</TABLE>
The table shows annual pension benefits payable under the Company's defined
benefit plans for salaried employees. No additional benefits accrue after 30
years of service.
Compensation covered by the plans is the combined annual compensation
reported in the Salary and Bonus columns of the Summary Compensation Table on
page 14. Each of the named executive officers has 30 years of service for
purposes of the plans, except A. C. A. Krauss and A. Labergere, who have 28, and
14, respectively. Amounts shown in the Table are computed as a straight life
annuity upon retirement at age 62 or later and are not subject to any deduction
for Social Security benefits.
17
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
STOCK OWNERSHIP TABLE
- --------------------------------------------------------------------------------
All of the unallocated shares of ESOP preferred stock (1,079,101 shares and
59 percent of the outstanding preferred stock of the Company) are owned of
record by Fidelity Management Trust Company of Boston, Massachusetts. To our
best knowledge, there was no other beneficial owner (person or group) of more
than five percent of the outstanding common stock of the Company on February 27,
1998.
The following table shows the common stock ownership as of February 27,
1998 of each director, the named executive officers, and all directors and
executive officers as a group. All directors and executive officers as a group
own beneficially less than one percent of the outstanding common stock and less
than two percent of the ESOP preferred stock.
<TABLE>
<CAPTION>
SHARES STOCK
NAME OWNED(1) OTHER(2) UNITS(3) TOTAL(4)
- ----------------------------------------------------------- --------- -------- -------- ---------
<S> <C> <C> <C> <C>
T. H. Black................................................ 5,000 -- 4,484 9,484
C. Castellini.............................................. 1,000 -- 493 1,493
A. C. DeCrane, Jr. ........................................ 500 -- 4,120 4,620
W. C. Ferguson............................................. 2,812 -- 5,363 8,175
R. J. Gillespie............................................ 56,690 90,187 5,068 151,945
E. R. Gordon............................................... 2,000 -- 9,059 11,059
G. V. Grune................................................ 2,200 -- 5,815 8,015
L. I. Higdon, Jr........................................... 200 -- 1,551 1,751
R. G. Holder............................................... 1,000 1,000 5,780 7,780
B. H. Kastory.............................................. 64,480 2,100 9,835 76,415
E. S. Kraus................................................ 200 -- 3,774 3,974
A. C. A. Krauss............................................ 60,219 -- 10,196 70,415
A. Labergere............................................... 60,212 -- -- 60,212
H. de C. Meirelles......................................... -- -- 493 493
W. S. Norman............................................... 1,010 -- 2,528 3,538
C. R. Shoemate............................................. 529,781 23,204 21,742 574,727
All directors and executive officers as a group (29
persons)................................................ 1,199,532 137,567 109,561 1,446,660
</TABLE>
- ------------
(1) Includes all shares which may be purchased before April 30, 1998 upon the
exercise of stock options as follows: R. J. Gillespie, 55,942; B. H.
Kastory, 30,305; A. C. A. Krauss, 29,474; A. Labergere, 27,201; C. R.
Shoemate, 437,612; and all directors and executive officers as a group,
790,812.
(2) Includes shares held jointly with or owned by spouses or minor children or
held in trust. C.R. Shoemate disclaims beneficial ownership of 23,204 of
such shares. No other director or executive officer disclaims beneficial
ownership.
(3) For the executive officers, the stock units represent an annual bonus that
is deferred and credited in the form of common stock under the Deferred
Stock Unit Plan. Such bonuses are payable in cash following retirement or
termination of employment. For the outside
(footnotes continued on next page)
18
<PAGE>
<PAGE>
(footnotes continued from previous page)
directors, the stock units represent retainer and fees deferred in the form
of common stock under the Deferred Compensation Plan for Outside Directors.
(4) In addition, Messrs. Gillespie, Kastory, Krauss and Shoemate have,
respectively, 2,439, 2,478, 683, and 2,414 shares, and all executive
officers as a group have a total of 27,201 shares, of ESOP preferred stock
allocated to their accounts in the Savings Plan.
SEVERANCE ARRANGEMENTS
The Company maintains severance agreements with its executive officers,
including the named executive officers, which provide for a lump sum payment
equal to three times the sum of the annual salary and bonus of the officer, and
continuation of medical and insurance plans for a three-year period, if the
officer's employment is terminated involuntarily other than for cause or
voluntarily for good reason, within two years after a change in control of the
Company. The agreements also provide that the amount of excise tax, if any,
under the Internal Revenue Code to be paid by any executive officer shall be
reimbursed by the Company. The severance agreements, which were approved by the
outside directors, replace employment agreements previously entered into with
the executive officers.
MATTERS TO BE ACTED UPON
PROPOSAL 1. ELECTION OF DIRECTORS
At the 1998 annual meeting, the terms of four directors are expiring. Those
four directors are nominated for reelection to hold office for a three-year term
expiring in 2001. In addition, two directors who were elected by the Board in
July 1997 are nominated for initial election by stockholders, one to hold office
for a three-year term expiring in 2001, and the other for a one-year term
expiring in 1999.
All of the nominees for election have consented to being named in this
proxy statement and to serve if elected. If, for any reason, any of the nominees
should not be a candidate for election at the meeting, the proxies will be cast
for substitute nominees designated by the Board of Directors unless the Board
has reduced its membership prior to the meeting. The Board does not anticipate
that any of the nominees will be unavailable. The nominees and the directors
continuing in office will normally hold office until the annual meeting of
stockholders in the year indicated on this and the following pages.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL.
Biographical information concerning each of the nominees and directors
continuing in office is presented on this and the following pages.
19
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<PAGE>
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------------------------
DIRECTORS NOMINATED THIS YEAR FOR TERMS EXPIRING IN 2001 (CLASS III)
- --------------------------------------------------------------------------------------------------------------------
[PHOTO] ALFRED C. DECRANE, JR.
Age -- 66
Director since 1994
FORMER CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF TEXACO INC.
Mr. DeCrane retired as Chairman and Chief Executive Officer of Texaco Inc. in July 1996.
He was elected President of Texaco in 1983, Chairman of the Board in 1987, and Chief
Executive Officer in 1993. He is a director of CIGNA Corporation, Corn Products
International, Inc. and Harris Corporation. He is a trustee of the Committee for Economic
Development and Co-Chairman of the United States -- Saudi Arabian Business Council. Mr.
DeCrane is also a member of the Morgan Stanley International Advisory Board and of the
Board of Trustees of the University of Notre Dame.
- --------------------------------------------------------------------------------------------------------------------
[PHOTO] ROBERT J. GILLESPIE
Age -- 55
Director since 1988
EXECUTIVE VICE PRESIDENT OF THE COMPANY
Mr. Gillespie was elected an Executive Vice President of the Company in July 1995. He
joined the Company in 1965 and in 1976 became President of Canada Starch Company, a
subsidiary of the Company. In 1980 he was elected a Vice President of the Company and
appointed President of the Corn Products Unit of CPC North America. From 1988 to July
1995, he served as President of the Best Foods Division and was elected a Senior Vice
President of the Company in 1991. Mr. Gillespie is a member of the Board of Directors of
Arkwright Mutual Insurance Company. He is a member of the Advisory Board of the Sarah W.
Stedman Center for Nutritional Studies of Duke University.
</TABLE>
20
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<PAGE>
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------------------------
[PHOTO] ELLEN R. GORDON
Age -- 66
Director since 1991
PRESIDENT AND CHIEF OPERATING OFFICER OF TOOTSIE ROLL INDUSTRIES, INC.
Ms. Gordon was elected President and Chief Operating Officer of Tootsie Roll Industries,
Inc. in 1978. Prior to her election as President, Ms. Gordon served as Senior Vice
President. Ms. Gordon is a member of the Dean's Council of the Stanford University
Graduate School of Business, the Board of Fellows of the Faculty of Medicine of the
Harvard Medical School, the Dean's Council of the J. L. Kellogg Graduate School of
Management of Northwestern University, the University of Chicago Council on the Division
of the Biological Sciences and the Pritzker School of Medicine, the President's Export
Council, the Committee of 200, and the Committee for Economic Development.
- --------------------------------------------------------------------------------------------------------------------
[PHOTO] GEORGE V. GRUNE
Age -- 68
Director since 1985
CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF THE READER'S DIGEST
ASSOCIATION, INC.
Mr. Grune returned to The Reader's Digest Association, Inc. in August 1997 to serve as
Chairman and Chief Executive Officer, positions from which he had retired in 1995 and
1994, respectively, and held for ten years. He is currently Chairman of the DeWitt
Wallace-Reader's Digest Fund, Inc. and the Lila Wallace-Reader's Digest Fund, Inc. Mr.
Grune is also a director of Avon Products, Inc., The Chase Manhattan Corporation and
Federated Department Stores, Inc. He is chairman emeritus of the Boys & Girls Clubs of
America, a trustee of the Metropolitan Museum of Art and the Wildlife Preservation Society
and is a member of Institut de France Academie des Beaux-Arts. He is a member of the Board
of Managers of Memorial Sloan-Kettering Cancer Center and a managing director of the
Metropolitan Opera Association.
</TABLE>
21
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<PAGE>
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
[PHOTO] HENRIQUE DE CAMPOS MEIRELLES
Age -- 52
Director since July 1997
PRESIDENT AND CHIEF OPERATING OFFICER OF BANKBOSTON
CORPORATION
Mr. Meirelles was elected President and Chief Operating Officer of BankBoston Corporation
in July 1996. Previously, he served as President and Regional Manager of BankBoston in
Brazil. Mr. Meirelles is a member of the Global Board of Mastercard International. He is
the founder president of the Latin American Leasing Federation, Honorary Chairman of the
Board of the International Banks Association in Brazil, Chairman of the Society for the
Revitalization of the City of Sao Paulo and Chairman of the Board of the Travessia
Foundation.
- --------------------------------------------------------------------------------------------------------------------
DIRECTOR NOMINATED THIS YEAR FOR TERM EXPIRING IN 1999 (CLASS I)
- --------------------------------------------------------------------------------------------------------------------
[PHOTO] CLATEO CASTELLINI
Age -- 62
Director since July 1997
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER OF BECTON
DICKINSON AND COMPANY
Mr. Castellini was elected Chairman, President and Chief Executive Officer of Becton
Dickinson and Company in June 1994. Previously, he served as Medical Sector President
since 1989 and was responsible for worldwide operations of medical supplies and devices.
- --------------------------------------------------------------------------------------------------------------------
DIRECTORS CONTINUING IN OFFICE UNTIL 1999 (CLASS I)
- --------------------------------------------------------------------------------------------------------------------
[PHOTO] THEODORE H. BLACK
Age -- 69
Director since 1989
FORMER CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF INGERSOLL-RAND
COMPANY
Mr. Black served as President and Chief Operating Officer of Ingersoll- Rand Company
during 1988, and as Chairman and Chief Executive Officer until November 1993. He is a
director of General Public Utilities Corporation and McDermott International, Inc.
</TABLE>
22
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<PAGE>
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------------------------
[PHOTO] RICHARD G. HOLDER
Age -- 66
Director since 1992
FORMER CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF REYNOLDS METALS
COMPANY
Mr. Holder served as President and Chief Operating Officer of Reynolds Metals Company from
1988 until May 1992, and as Chairman and Chief Executive Officer until October 1996.
Previously, he served as Executive Vice President and Chief Operating Officer from 1986.
Mr. Holder is also a director of Corn Products International, Inc. and Universal Corp., a
member of the Board of Directors of the Virginia Economic Development Partnership, and
Chairman-Elect of the Greater Richmond Chamber of Commerce. Mr. Holder served as chairman
of the Aluminum Association from September 1991 through December 1993.
- --------------------------------------------------------------------------------------------------------------------
[PHOTO] EILEEN S. KRAUS
Age -- 59
Director since 1994
CHAIRMAN OF FLEET NATIONAL BANK (CONNECTICUT)
Ms. Kraus served as Vice Chairman of Shawmut National Corporation and President of Shawmut
Bank Connecticut, N.A. from September 1992 until December 1995. She assumed her present
position following Fleet Financial Group's completion of its acquisition of Shawmut
National Corporation in December, 1995. She served as Vice Chairman of the Consumer
Banking and Marketing Groups, Shawmut National Corporation, from 1990 until September 1992
and Executive Vice President of such Groups from 1988 until July 1990. She is a director
of Kaman Corporation, The Stanley Works, and Yankee Energy System, Inc. Ms. Kraus is also
a member of the Board of Trustees of Mount Holyoke College and the Connecticut Business
and Industry Association.
</TABLE>
23
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<PAGE>
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------------------------
[PHOTO] ALAIN LABERGERE
Age -- 63
Director since 1992
EXECUTIVE VICE PRESIDENT OF THE COMPANY AND PRESIDENT OF THE
BESTFOODS EUROPE DIVISION
Mr. Labergere joined the Company in 1983 and in 1990 was appointed Vice President,
Regional Operations, for the CPC Europe Consumer Foods Division headquartered in Brussels.
In 1991 he was appointed President of the CPC Europe Division and elected a corporate Vice
President. He was elected a Senior Vice President of the Company in October 1991 and an
Executive Vice President on July 1, 1995. Mr. Labergere is President of the Confederation
of the Food and Drink Industries of the EU (CIAA) in Brussels. He is also a member of the
Board of Trustees of the Thunderbird Graduate School of International Management.
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DIRECTORS CONTINUING IN OFFICE UNTIL 2000 (CLASS II)
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[PHOTO] WILLIAM C. FERGUSON
Age -- 67
Director since 1988
FORMER CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF NYNEX
CORPORATION
Mr. Ferguson retired as Chairman of NYNEX in April 1995 and as Chief Executive Officer in
December 1994. He served as Vice Chairman from 1987 to 1989. Previously, Mr. Ferguson
served as President and Chief Executive Officer of NYNEX and New York Telephone Co. He is
also a director of Corn Products International, Inc. and General Re Corporation. Mr.
Ferguson is a director and former Chairman of the Board of The United Way of Tri-State,
and a trustee and former Chairman of the Board of Trustees of Albion College.
</TABLE>
24
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<TABLE>
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[PHOTO] LEO I. HIGDON, JR.
Age -- 51
Director since 1993
PRESIDENT OF BABSON COLLEGE, WELLESLEY, MASSACHUSETTS
Mr. Higdon assumed the presidency of Babson College in Wellesley, Massachusetts in July
1997. From October 1993 until July 1997 he served as Dean of Colgate Darden Graduate
School of Business Administration at the University of Virginia. He joined the University
of Virginia from Salomon Brothers Inc., where he was a member of the Executive Committee.
During his 20-year career at Salomon Brothers, Mr. Higdon served as a managing director
with responsibilities for corporate finance and mergers and acquisitions, as the firm's
vice chairman, and as its co-head of global investment banking. He is also a director of
Crompton & Knowles Corp., Newmont Mining Corp. and Newmont Gold Co.
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[PHOTO] WILLIAM S. NORMAN
Age -- 59
Director since 1993
PRESIDENT AND CHIEF EXECUTIVE OFFICER OF THE TRAVEL INDUSTRY
ASSOCIATION OF AMERICA
Mr. Norman joined the Travel Industry Association of America as President and Chief
Executive Officer in the Fall of 1994. Previously, he served as Executive Vice President
of the National Railroad Passenger Corp. (AMTRAK) since 1987. Mr. Norman is also a
director of Corn Products International, Inc., the Travel Industry Association of America,
Tourism Works for America Council, The An-Bryce Foundation, the U.S. Navy Memorial
Foundation, the International Consortium for Research on the Health Effects of Radiation
and the Logistics Management Institute. He is also a member of the Board of Trustees, West
Virginia Wesleyan College and the Board of Visitors of The American University's Kogod
College of Business Administration.
</TABLE>
25
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<TABLE>
<S> <C>
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[PHOTO] CHARLES R. SHOEMATE
Age -- 58
Director since 1988
CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER OF
THE COMPANY
Mr. Shoemate was elected Chairman of the Board and Chief Executive Officer in 1990. Prior
to his election as President in 1988, Mr. Shoemate served as Vice President of the Company
and President of the Corn Refining Division. Mr. Shoemate joined the Company in 1962 and
progressed through a variety of positions in manufacturing, finance and business
management. He is also a director of CIGNA Corporation and International Paper Co., and
Chairman of the Grocery Manufacturers of America, Inc. He is a member of The Business
Roundtable and a trustee of The Conference Board, Inc.
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</TABLE>
PROPOSAL 2. APPROVAL OF AMENDMENTS TO THE 1984 AND 1993 STOCK
AND PERFORMANCE PLANS
The 1984 and 1993 Stock and Performance Plans are designed to promote
long-term financial success of our Company by providing performance-related
incentives to executive personnel. The Plans provide for stock options,
restricted stock awards, and performance awards. See the Compensation and
Nominating Committee Report on page 11 for information with respect to the
current operation of the Plans.
We originally reserved 7.5 million shares of common stock for issuance
under the 1993 Plan. During the first five years of the Plan, we have increased
the number of employees who are eligible to participate in it, particularly the
restricted stock and stock option portions. This expanded participation is
intended to create greater incentives for more Company employees and further
align their interests with the Company's stockholders, thereby improving the
Company's performance. As a result, the number of shares originally reserved may
not be sufficient over the life of the 1993 Plan. The amendment to the 1993 Plan
would increase the number of shares reserved under the Plan to 14.5 million. Of
this total, no more than 5 million shares could be issued as restricted stock or
performance units. In addition, the proposed Plan amendment increases the annual
amount of options that can be awarded under the Plan to any individual from
150,000 shares to 250,000 shares in order to provide the flexibility to grant
such option awards.
The Plans allow the Board of Directors to adopt amendments, except in
certain cases which require shareholder approval. One such exception, which was
based on securities regulations regarding short-swing trading, required
shareholder approval for matters that materially increased benefits to
participants in the Plans. Because such regulations no longer apply, the
proposed Plan amendments remove this restriction in order to allow greater
flexibility in administering the Plans. Also for reasons of flexibility, the
amendments would allow the Compensation and Nominating Committee to amend the
Plans (in certain circumstances), in addition to the full Board of Directors.
26
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Finally, the amendments reflect the new name of the Company.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL.
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PROPOSAL 3. RE-AFFIRMATION OF PERFORMANCE GOALS
Under Section 162(m) of the Internal Revenue Code of 1986, the Company
cannot deduct certain compensation in excess of $1 million paid to the named
executive officers. However, certain performance-based compensation is not
subject to this limitation if the material terms of such compensation, including
the maximum amounts payable to any individual and the performance goals to be
used, are approved by stockholders.
In 1995, the Board of Directors adopted, and the stockholders approved, an
amendment to the 1993 Plan which should satisfy the above requirements for full
deductibility of compensation paid under the stock option and performance award
components of the 1993 Plan. The amendment provided that the performance goals
must meet one or more of the following criteria: total stockholder return (based
on the change in the price of a share of the Company's common stock, and
dividends paid); earnings per share; operating income; net income; return on
stockholders' equity; return on assets; economic value added; and cash flows.
The Compensation and Nominating Committee of the Board of Directors must
establish the applicable performance goals within the time period required for
the compensation to qualify as performance-based under Section 162(m).
The tax code requires that stockholders re-affirm these goals every five
years. Proposal 3 seeks stockholder re-affirmation of the existing performance
goals, which will carry these standards through the remaining life of the 1993
Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THIS
PROPOSAL.
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PROPOSAL 4. RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors, in accordance with the recommendation of its Audit
Committee, has appointed KPMG Peat Marwick LLP ('KPMG') as independent auditors
in respect of the Company's operations in 1998, subject to ratification by the
stockholders. A partner of KPMG will be present at the stockholders' meeting and
will have an opportunity to make a statement and respond to appropriate
questions. KPMG also performs non-audit services for the Company.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL.
27
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OTHER BUSINESS
We do not know of any other matters to be brought before the meeting.
However, if other proposals are properly presented, the persons named in the
accompanying proxy will vote upon them in accordance with their best judgment.
By order of the Board of Directors,
Hanes A. Heller
Vice President, General Counsel and
Secretary
28
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EXHIBIT I
CPC INTERNATIONAL INC.
1984 STOCK AND PERFORMANCE PLAN
AMENDMENT NO. 5
THIS INSTRUMENT made this 17th day of February, 1998 by Bestfoods, formerly
known as CPC International Inc. (the 'Company').
WITNESSETH:
WHEREAS, the Company maintains the CPC International Inc. 1984 Stock and
Performance Plan, effective as of April 26, 1984, and as subsequently amended
(the 'Plan'); and
WHEREAS, the Company desires to amend the Plan to reflect changes in
applicable law and for certain other matters;
NOW, THEREFORE, subject to the required approval of the stockholders of the
Company pursuant to Section 1.9(a) of the Plan, the Plan is amended as follows:
FIRST: The name of the Plan is revised to be the Bestfoods 1984 Stock
and Performance Plan.
SECOND: The reference in Section 1.1 of the Plan to 'CPC International
Inc. (the 'Company')' is revised to refer to 'Bestfoods (the 'Company')'.
THIRD: Section 1.9(a) is revised to read as follows:
'(a) The Board of Directors shall have the authority to amend,
suspend or terminate the Plan or any portion thereof at any time,
provided that no amendment shall be made without stockholder approval
which shall (i) increase (except as provided in Section 1.5(b) hereof)
the total number of shares reserved for issuance pursuant to the Plan,
(ii) materially change the classes of Employees eligible to be
Participants, (iii) decrease the minimum option prices stated in
Section 2.2 hereof (other than to change the manner of determining Fair
Market Value to conform to any then-applicable provision of the Code or
regulations thereunder), (iv) extend the expiration date of the Plan,
(v) withdraw the administration of the Plan from a committee consisting
of two or more members, each of whom is a Non-Employee Director, or
(vi) constitute an amendment for which shareholder approval is required
under applicable law. Subject to the proviso in the first sentence of
this subsection (a), the Committee shall have the authority to amend
the Plan if such amendment (i) is required by legislation or
regulations or is requested by a government agency, or (ii) is
administrative in nature. No amendment, suspension or termination shall
alter or impair any right theretofore granted to any Participant,
without the consent of such Participant.'
FOURTH: This Amendment is effective as of January 20, 1998, contingent
upon approval by the stockholders of the Company.
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IN WITNESS WHEREOF, Bestfoods has caused this Amendment to be executed by
its duly authorized officer and its corporate seal to be affixed hereto on the
date set forth above.
BESTFOODS
/S/ RICHARD P. BERGEMAN
By: .................................
Senior Vice President
ATTEST:
/S/ HANES A. HELLER
.....................................
Vice President, General Counsel and
Secretary
(Corporate Seal)
E-2
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<PAGE>
EXHIBIT II
CPC INTERNATIONAL INC.
1993 STOCK AND PERFORMANCE PLAN
AMENDMENT NO. 5
THIS INSTRUMENT made this 17th day of February, 1998 by Bestfoods, formerly
known as CPC International Inc. (the 'Company').
WITNESSETH:
WHEREAS, the Company maintains the CPC International Inc. 1993 Stock and
Performance Plan, effective as of April 22, 1993, and as subsequently amended
(the 'Plan'); and
WHEREAS, the Company desires to amend the Plan to reflect changes in
applicable law, to increase the number of shares reserved for issuance pursuant
to the Plan, and for certain other matters;
NOW, THEREFORE, subject to the required approval of the stockholders of the
Company pursuant to Section 1.9(a) of the Plan, the Plan is amended as follows:
FIRST: The name of the Plan is revised to be the Bestfoods 1993 Stock
and Performance Plan.
SECOND: The reference in Section 1.1 of the Plan to 'CPC International
Inc. (the 'Company')' is revised to refer to 'Bestfoods (the 'Company').'
THIRD: The first sentence of Section 1.5(a) is revised to read as
follows: 'There shall be reserved for issuance pursuant to the Plan a total
of fourteen million five hundred thousand (14,500,000) shares of Common
Stock, of which no more than five million (5,000,000) may be issued in the
form of Restricted Stock and Common Stock-denominated Performance Units.'
FOURTH: Section 1.9(a) is revised to read as follows:
'(a) The Board of Directors shall have the authority to amend,
suspend or terminate the Plan or any portion thereof at any time,
provided that no amendment shall be made without stockholder approval
which shall (i) increase (except as provided in Section 1.5(b) hereof)
the total number of shares reserved for issuance pursuant to the Plan,
(ii) materially change the classes of Employees eligible to be
Participants, (iii) decrease the minimum option prices stated in
Section 2.2 hereof (other than to change the manner of determining Fair
Market Value to conform to any then-applicable provision of the Code or
regulations thereunder), (iv) extend the expiration date of the Plan,
(v) withdraw the administration of the Plan from a committee consisting
of two or more members, each of whom is a Non-Employee Director, or
(vi) constitute an amendment for which shareholder approval is required
under applicable law. Subject to the proviso in the first sentence of
this subsection (a), the Committee shall have the authority to amend
the Plan if such amendment (i) is required by legislation or
regulations or is requested by a
E-3
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<PAGE>
government agency, or (ii) is administrative in nature. No amendment,
suspension or termination shall alter or impair any right theretofore
granted to any Participant, without the consent of such Participant.'
FIFTH: Section 2.1(b) is revised to read as follows: 'Notwithstanding
any other provision of the Plan, in no event shall any Participant be
awarded Options covering more than 250,000 shares in any one calendar
year.'
SIXTH: This Amendment is effective as of January 20, 1998, contingent
upon approval by the stockholders of the Company.
IN WITNESS WHEREOF, Bestfoods has caused this Amendment to be executed by
its duly authorized officer and its corporate seal to be affixed hereto on the
date set forth above.
BESTFOODS
By: /s/ RICHARD P. BERGEMAN
.................................
Senior Vice President
ATTEST:
/s/ HANES A. HELLER
.....................................
Vice President, General Counsel and
Secretary
(Corporate Seal)
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RESERVATION FORM FOR ANNUAL MEETING
If you plan to attend the Bestfoods annual meeting of stockholders to be
held at Tamcrest Country Club, Route 9W, Montammy Drive, Alpine, New Jersey, at
9:30 A.M. on Thursday, April 23, 1998, you may use this form to request an
admission ticket. Please use the envelope provided for the return of your proxy
card to return this form or you may mail it directly to Ms. Patricia
Walesiewicz, Manager -- Corporate Secretary Services, 700 Sylvan Avenue,
International Plaza, Englewood Cliffs, New Jersey 07632-9976.
I plan to attend the meeting. Please send me an admission ticket for the
number of persons indicated below.
Name ___________________________________________________________________________
Address ________________________________________________________________________
City, State ______________________________________________ Zip Code ____________
Number of persons attending ____________________________________________________
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[Logo]
Printed on Recycled Paper
<PAGE>
<PAGE>
Appendix 1
BESTFOODS
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY FOR ANNUAL MEETING ON APRIL 23, 1998
P The undersigned hereby appoints CHARLES R. SHOEMATE and HANES A. HELLER, as
Proxies, each with the power to appoint his substitute, and hereby authorizes
R each of them to represent and to vote, as designated on the reverse side
hereof, all the shares of common and ESOP preferred stock of Bestfoods which
O the undersigned is entitled to vote at the annual meeting of stockholders to
be held at Tamcrest Country Club, Route 9W, Montammy Drive, Alpine, New
X Jersey on April 23, 1998 at 9:30 A. M., local time, or any adjournment
thereof, and in their discretion, upon any other matters which may properly
Y come before the meeting.
Election of five Directors, each for a term of three years.
<TABLE>
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Nominees:
Alfred C. DeCrane, Jr. George V. Grune (Change of Address)
Robert J. Gillespie Henrique de Campos Meirelles _____________________________________
Ellen R. Gordon _____________________________________
_____________________________________
Election of one Director for a term of one year. (If you have written in the above
Nominee: space, please mark the corresponding
Clateo Castellini box on the reverse side of this card)
</TABLE>
[LOGO] Printed on Recycled Paper SEE REVERSE SIDE
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FOLD AND DETACH HERE
IMPORTANT: PLEASE VOTE AND SIGN YOUR
PROXY AND RETURN IT IN THE ENVELOPE PROVIDED
BESTFOODS
Annual Meeting of Stockholders
April 23, 1998
9:30 A.M.
Tamcrest Country Club
Route 9W, Montammy Drive
Alpine, New Jersey
<PAGE>
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[X] Please mark your
votes as in
this example.
This proxy when properly executed will be voted in the manner directed herein
by the undersigned stockholder. If no direction is made, this proxy will be
voted FOR proposals 1, 2, 3 and 4. The ESOP Trustee shall vote unallocated ESOP
preferred stock as directed on this proxy by the participant.
- -------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR Proposals 1, 2, 3 and 4
- -------------------------------------------------------------------------------
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of [ ] [ ] 2. Approval of Amendments [ ] [ ] [ ]
Directors to each of the 1984 and
(see reverse). 1993 Stock and
Performance Plans
For, except vote withheld from the following nominee(s):
- --------------------------------------
FOR AGAINST ABSTAIN
3. Re-affirmation of the [ ] [ ] [ ]
Performance Goals for
the 1993 Stock and
Performance Plan
4. Appointment of KPMG [ ] [ ] [ ]
Peat Marwick LLP as
Independent Auditors
Special Action
Discontinue Annual Report [ ] Change of [ ]
Mailing for this Account Address on
Reverse Side
Please date, sign exactly as name appears hereon and return promptly in the
enclosed envelope. When shares are held by joint tenants, both should sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such. If a corporation, please sign in full corporate name
by president or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
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- -----------------------------------------------------
SIGNATURE(S) DATE
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FOLD AND DETACH HERE
