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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
BESTFOODS
.................................................................
(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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BESTFOODS 700 Sylvan Avenue International Plaza Englewood Cliffs, NJ 07632-9976
C.R. Shoemate Chairman and Chief Executive Officer
[logo]
March 16, 2000
Dear Stockholder:
We will hold our 2000 annual meeting of stockholders at 9:00 a.m., local
time, on Thursday, April 27, 2000 at the Radisson Hotel Englewood in Englewood,
New Jersey.
The Notice of Annual Meeting accompanying this letter describes the
business to be transacted at the meeting. Since last year's annual meeting, two
new independent directors have been elected to the Board. You will be asked to
elect both of these new directors, in addition to four other incumbent
directors, at this year's annual meeting. After the meeting, we will present a
brief report on the Company and respond to your questions.
Whether or not you plan to attend, your vote is important. You can vote by
the Internet, by telephone or by completing the enclosed proxy card.
Instructions for voting by the Internet or telephone are given on the enclosed
proxy card, or if you hold your shares in 'street name,' you may vote your
shares in accordance with your voting instruction form. If you plan to attend
the meeting, please request an admission ticket when you vote.
Sincerely,
Charles R. Shoemate
Charles R. Shoemate
<PAGE>
BESTFOODS
700 SYLVAN AVENUE
INTERNATIONAL PLAZA
ENGLEWOOD CLIFFS, NEW JERSEY 07632-9976
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
DATE: Thursday, April 27, 2000
TIME: 9:00 a.m.
PLACE: Radisson Hotel Englewood
401 South Van Brunt Street
Englewood, New Jersey
ITEMS OF BUSINESS: 1. To elect five directors, each for a term of
three years, and one director for a term of two
years.
2. To ratify the appointment of independent
auditors for the Company for 2000.
3. To transact such other business, if any, that is
properly brought before the meeting.
RECORD DATE: You can vote if you are a stockholder of record on
February 29, 2000.
VOTING: Your vote is important. Whether or not you expect to
attend the meeting, please ensure that your vote
will be counted by voting by the Internet, by
telephone, or by signing, dating and returning your
proxy card in the prepaid envelope provided. If you
hold your shares in 'street name,' please vote in
accordance with your voting instruction form.
ELECTRONIC RECEIPT
OF PROXY MATERIALS: In addition to voting your shares by the Internet,
you may consent to receive next year's proxy
materials via the Internet, thus eliminating receipt
by mail yet allowing you to print hard copies. If
your shares are registered in your name, you may
consent by going to http://www.econsent.com/bfo. If
your shares are registered through a bank or broker,
you may consent by going to
http://www.proxyvote.com, once you have voted your
shares, or you may contact your bank or broker.
By order of the Board of Directors,
Marjory A. Appel
Marjory A. Appel
Secretary
March 16, 2000
<PAGE>
TABLE OF CONTENTS
PAGE
----
Voting and Proxy Solicitation............................... 1
Matters To Be Acted Upon:
Proposal 1.
Election of Directors................................... 2
Proposal 2.
Ratification of Appointment of Auditors................. 7
General Information
Corporate Governance and the Board of Directors........ 7
Section 16(a) Beneficial Ownership Reporting
Compliance............................................ 13
Stock Ownership Table.................................. 13
Compensation and Nominating Committee Report On Executive
Compensation.............................................. 15
Executive Compensation...................................... 20
Stockholder Return Comparison............................... 24
Stockholder Proposals For 2001 Annual Meeting............... 25
Other Business.............................................. 25
<PAGE>
BESTFOODS
700 SYLVAN AVENUE
INTERNATIONAL PLAZA
ENGLEWOOD CLIFFS, NEW JERSEY 07632-9976
PROXY STATEMENT
VOTING AND PROXY SOLICITATION
Your Board of Directors is soliciting proxies to be used at the annual
meeting of stockholders to be held on April 27, 2000, or any adjournment of it.
This proxy statement, the accompanying proxy card, and 1999 annual report to
stockholders are being mailed to stockholders on March 16, 2000.
WHO CAN VOTE
Record stockholders of common stock and ESOP preferred stock of Bestfoods at
the close of business on February 29, 2000 can vote at the meeting. On
February 29, 2000, 278,634,916 shares of common stock were issued and
outstanding and 1,675,708 shares of ESOP preferred stock were held by a trustee
under the Savings/Retirement Plan for Salaried Employees ('Savings Plan').
Each stockholder has one vote for each share of common stock and for each
share of common stock into which ESOP preferred stock can be converted.
Your proxy card covers not only the Bestfoods shares that you hold directly
but also your shares 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 the Plan (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
Please follow the instructions given on the enclosed proxy card for Internet
or telephone voting. If voting by mail, specify your choice on the proxy card,
sign and date the enclosed proxy card and return it in the envelope provided. If
you do not specify your choice, we will vote your shares in accordance with the
recommendation of the Board of Directors. You can revoke your proxy any time
before it is voted by (i) notifying our Secretary at the above address,
(ii) submitting a later-dated proxy by the Internet or by telephone,
(iii) returning a later-dated, signed proxy card, or (iv) 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
<PAGE>
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 on those matters that are considered
discretionary under New York Stock 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 the First Chicago Trust Division
of EquiServe, 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 $12,500 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.
MATTERS TO BE ACTED UPON
PROPOSAL 1. ELECTION OF DIRECTORS
At the 2000 annual meeting, the terms of four directors are expiring, all of
whom are nominated for reelection to hold office for a three-year term expiring
in 2003. In addition, two directors who were elected by the Board in January
2000 are nominated for initial election by stockholders, one to hold office for
a two-year term expiring in 2002, and the other for a three-year term expiring
in 2003.
All of the nominees 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 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 the following pages.
2
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DIRECTOR NOMINATED THIS YEAR FOR A TERM EXPIRING IN 2002 (CLASS I)
- --------------------------------------------------------------------------------
<TABLE>
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[PHOTO] HAROLD MCGRAW III
Age--51
Director since January 2000
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER OF THE MCGRAW-
HILL COMPANIES, INC.
Mr. McGraw has served as Chairman of McGraw-Hill since January 2000
and President and Chief Executive Officer since 1998. Previously, he
served as President and Chief Operating Officer since 1993. He assumed
responsibility for all the operating units in 1992, at which time he was
appointed Executive Vice President, and was elected a member of the
McGraw-Hill Board in 1987.
</TABLE>
- --------------------------------------------------------------------------------
DIRECTORS NOMINATED THIS YEAR FOR TERMS EXPIRING IN 2003 (CLASS II)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
[PHOTO] WILLIAM C. FERGUSON
Age--69
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 EIRCOM and serves on
the Advisory Board of Greenwich Street Capital Partners.
- ------------------------------------------------------------------------------------------------
[PHOTO] BRUCE S. GORDON
Age--54
Director since January 2000
GROUP PRESIDENT OF ENTERPRISE BUSINESS GROUP OF BELL
ATLANTIC CORPORATION
Mr. Gordon has served as Group President of Bell Atlantic's
Enterprise Business Group since October 1998. Previously, he
served as Group President of Consumer and Small Business
Services of Bell Atlantic's Network Services Inc. Mr. Gordon
is also a director of Bartech Personnel Services, The
Southern Company, and Infinity Broadcasting Corporation.
</TABLE>
3
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
[PHOTO] LEO I. HIGDON, JR.
Age--53
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 CK Witco Corp., Newmont Mining Corp., and Eaton Vance
Corp.
- -------------------------------------------------------------------------------------
[PHOTO] WILLIAM S. NORMAN
Age--61
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) from 1987.
Mr. Norman is also a director of Corn Products
International, Inc., and the Travel Industry Association of
America.
- -------------------------------------------------------------------------------------
[PHOTO] CHARLES R. SHOEMATE
Age--60
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. 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, International Paper Company, and Texaco
Inc.
</TABLE>
4
<PAGE>
- --------------------------------------------------------------------------------
DIRECTORS CONTINUING IN OFFICE UNTIL 2001 (CLASS III)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
[PHOTO] ALFRED C. DECRANE, JR.
Age--68
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., Harris
Corporation, and U.S. Global Leaders Growth Fund, Ltd.
- -------------------------------------------------------------------------------------
[PHOTO] ROBERT J. GILLESPIE
Age--57
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 also a director of Factory Mutual Insurance Company.
- -------------------------------------------------------------------------------------
[PHOTO] ELLEN R. GORDON
Age--68
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 and she is a member
of the Tootsie Roll Board. Prior to her election as
President, Ms. Gordon served as Senior Vice President. Ms.
Gordon is also a Director and Vice President of HDI
Investment Corp., a family investment company.
</TABLE>
5
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
[PHOTO] HENRIQUE DE CAMPOS MEIRELLES
Age--54
Director since 1997
PRESIDENT OF GLOBAL BANKING AND FINANCIAL SERVICES OF
FLEETBOSTON FINANCIAL CORP.
Mr. Meirelles was appointed President of Global Banking and
Financial Services of FleetBoston Financial Corp. on October
1, 1999. Previously, Mr. Meirelles served as Regional
Manager of Brazil for both BankBoston Corp. and BankBoston
N.A. from 1994, as General Manager of Brazil for the Bank
from 1984 to 1994, and President and Chief Operating Officer
of BankBoston Corp. and BankBoston N.A. from 1996. Mr.
Meirelles is also a director of FleetBoston Corp., Champion
International Corporation, and Raytheon Company.
</TABLE>
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DIRECTORS CONTINUING IN OFFICE UNTIL 2002 (CLASS I)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
[PHOTO] CLATEO CASTELLINI
Age--64
Director since 1997
CHAIRMAN OF BECTON DICKINSON AND COMPANY
Mr. Castellini retired as President and Chief Executive
Officer of Becton Dickinson and Company in December 1999,
positions to which he was elected, along with Chairman, in
June 1994. Previously, he served as Medical Sector President
from 1989 and was responsible for worldwide operations of
medical supplies and devices.
- -------------------------------------------------------------------------------------
[PHOTO] RICHARD G. HOLDER
Age--68
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. Mr.
Holder is also a director of Corn Products International,
Inc., and Universal Corp.
</TABLE>
6
<PAGE>
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<TABLE>
<S> <C>
[PHOTO] EILEEN S. KRAUS
Age--61
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 is also a director of
ConnectiCare Holding Company, Inc. and ConnectiCare, Inc.,
Kaman Corporation, The Stanley Works, and Yankee Energy
System, Inc.
- -------------------------------------------------------------------------------------
</TABLE>
PROPOSAL 2. RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors, in accordance with the recommendation of its Audit
Committee, has appointed KPMG LLP ('KPMG') as independent auditors in respect
of the Company's operations in 2000, 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.
GENERAL INFORMATION
CORPORATE GOVERNANCE AND THE BOARD OF DIRECTORS
OVERSIGHT DUTIES
The Board of Directors recognizes the breadth and importance of its duties
both under the law and in keeping with its goal of achieving high standards in
corporate governance. Within these broad overall duties, the Board believes that
certain continuing oversight responsibilities should have priority on its
agenda. These responsibilities include review of: Company strategy and results,
management structure, performance and succession planning, Board effectiveness,
ethical conduct and legal compliance, accounting and financial control, and the
financial structure and preservation of assets. The processes for reviewing
Company strategy and results, management structure, performance and succession
planning are described below.
STRATEGY AND RESULTS
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.
7
<PAGE>
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 strategies 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 STRUCTURE AND PERFORMANCE
In fulfilling its responsibility to oversee the performance of the chief
executive officer and other executive officers, the 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 Board in executive session
reviews his performance, emphasizing his: leadership in development and
implementation of strategies; leadership of the Company in achievement of
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.
CORPORATE GOVERNANCE
This year the Board and the Corporate Governance Committee carried out a
variety of activities in order to further enhance the corporate governance
practices of the Board. These activities included a review of Board practices in
the areas of: Board structure, performance, composition and effectiveness;
Director evaluation, compensation and stock ownership guidelines; criteria for
new director candidates; CEO evaluation; and limitations on directorships and
Board tenure. The Board also considered issues contained in the Shareholder
Rights Plan, the Company's By-Laws and the Certificate of Incorporation. The
Board contrasted the Company's current practices with various published
standards of corporate governance. This review process has been used to
determine areas for further exploration. The Corporate Governance Committee also
considered certain procedural aspects of Board conduct such as, adequacy of:
pre-meeting materials, presentations and time spent in executive session.
COMMITTEES OF THE BOARD
In order to fulfill its responsibilities, the Board delegates to its five
Committees the authority to consider certain matters and report to the Board
with appropriate recommendations. To enhance the effectiveness of the
Committees:
8
<PAGE>
Each Committee is chaired by an outside director.
The chairmanships and memberships of all of the Committees are rotated on a
regular 3-4 year basis to give the directors a broader knowledge of Company
affairs and to impart fresh ideas to each Committee. 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.
CORPORATE GOVERNANCE COMMITTEE
NUMBER OF MEETINGS
MEMBERS IN 1999
------- ------------------
(all outside directors)
R. G. Holder (Chair) 1
C. Castellini
A. C. DeCrane, Jr.
W. C. Ferguson
B. S. Gordon
E. R. Gordon
L. I. Higdon, Jr.
E. S. Kraus
H. McGraw III
H. de C. Meirelles
W. S. Norman
FUNCTIONS
Reviews the size, structure and organization of the Board and its Committees.
Evaluates Board performance and effectiveness.
Reviews the Compensation and Nominating Committee criteria for nomination of new
and incumbent directors.
Establishes guidelines for Board tenure.
Reviews corporate governance matters.
9
<PAGE>
CORPORATE AFFAIRS COMMITTEE
NUMBER OF MEETINGS
MEMBERS IN 1999
------- ------------------
(all outside directors, except for one)
C. Castellini (Chair) 3
A. C. DeCrane, Jr.
R. J. Gillespie
B. S. Gordon
E. R. Gordon
W. S. Norman
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
NUMBER OF MEETINGS
MEMBERS IN 1999
------- ------------------
(all outside directors)
H. de C. Meirelles (Chair) 4
C. Castellini
W. C. Ferguson
B. S. Gordon
H. McGraw III
W. S. Norman
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 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.
10
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COMPENSATION AND NOMINATING COMMITTEE
NUMBER OF MEETINGS
MEMBERS IN 1999
------- ------------------
(all outside directors)
A. C. DeCrane, Jr. (Chair) 4
E. R. Gordon
L. I. Higdon, Jr.
R. G. Holder
E. S. Kraus
FUNCTIONS
Approves executive officer compensation and 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. (Stockholders who want 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 qualifications and experience.)
FINANCE COMMITTEE
NUMBER OF MEETINGS
MEMBERS IN 1999
------- -------
(all outside directors)
W. C. Ferguson (Chair) 3
L. I. Higdon, Jr.
R. G. Holder
E. S. Kraus
H. McGraw III
H. de C. Meirelles
FUNCTIONS
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.
11
<PAGE>
QUALIFICATIONS OF DIRECTORS
The Board of Directors presently consists of thirteen members, of whom
eleven qualify as independent directors. The Board is divided into three
classes, with one class standing for election each year for a three-year term.
The Board believes that all of the independent directors act autonomously 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 and
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 such directors and reports on this to the Board. Based upon such review,
all of the outside directors are determined to be 'independent' as none of these
eleven directors:
is a current or former employee or officer of the Company or an immediate
family member of an officer of the Company;
provides regular or personal services to the Company other than as a
director or is employed by a company which receives remuneration for
personal services;
is an owner of 5% or more of a company which receives remuneration from the
Company;
is an officer, employee or owner of 5% or more of any company that acts as
a supplier or customer of the Company where such purchases or sales exceed
5% of either entity's annual revenues;
had a personal transaction with or indebtedness to the Company in excess of
$60,000;
is employed as an executive of another company where any Bestfoods
executive serves on that company's compensation committee;
received compensation from the Company in any capacity other than as a
director.
Our policy on tenure of directors requires independent 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. In keeping with this policy, two of the Company's
independent directors retired in 1999.
DIRECTOR COMPENSATION
Employee directors do not receive compensation for serving as directors.
Independent directors are compensated as follows:
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<S> <C>
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
</TABLE>
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
12
<PAGE>
paid after retirement from the Board. In 1999, each outside director was also
credited with 500 shares of mandatorily deferred common stock of the Company
under the Plan.
In addition, the Company provides $100,000 of group term life insurance and
up to $175,000 of travel accident insurance to the directors as well as director
liability insurance for all directors.
DIRECTOR ATTENDANCE
In 1999 the Board held seven regular meetings and two special meetings, and
each of the directors attended at least 82 percent of these meetings. Attendance
of all directors at meetings of the Board and of Committees on which they served
averaged 97 percent.
CHARITABLE CONTRIBUTIONS
To promote charitable giving, directors participate in our Charitable Awards
Program under which the Company donates a total amount of up to $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 each 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 as well as the directors. For each
dollar contributed within the $5,000 limit, we contribute two dollars.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company believes that during 1999 all reports for the Company's
executive officers and directors that were required to be filed under Section 16
of the Securities Exchange Act of 1934 were timely filed; however, due to
administrative error by our transfer agent, one report reflecting one
transaction was filed late on behalf of Mary R. Henderson and one report
reflecting two transactions was filed late on behalf of Anthony J. B. Simon,
both of whom are Vice Presidents of the Company.
STOCK OWNERSHIP TABLE
All of the unallocated shares of ESOP preferred stock (730,196 shares and
43.6 percent of the outstanding preferred stock of the Company) are held by
Fidelity Management Trust Company of Boston, Massachusetts, the owner of record.
To our best knowledge, there was no beneficial owner (person or group) of more
than five percent of the outstanding common stock of the Company on February 29,
2000.
The following table shows the common stock ownership as of February 29, 2000
of each director, the chief executive officer and each of the other four most
highly compensated executive officers of the Company (the 'named executive
officers'), and all directors and
13
executive officers as a group. All directors and executive officers as a group
own beneficially less than two percent of the outstanding common stock and
less than five percent of the ESOP preferred stock.
<TABLE>
<CAPTION>
SHARES STOCK
NAME OWNED(1) OTHER(2) UNITS(3) TOTAL(4)
---- -------- -------- -------- --------
<S> <C> <C> <C> <C>
C. Castellini.......................... 2,000 -- 4,999 6,999
A. C. DeCrane, Jr...................... 1,000 -- 12,763 13,763
W. C. Ferguson......................... 5,733 -- 14,457 20,190
R. J. Gillespie........................ 94,841 180,374 25,885 301,100
B. S. Gordon........................... -- -- -- --
E. R. Gordon........................... 4,000 -- 22,873 26,873
L. I. Higdon, Jr....................... 2,000 -- 5,337 7,337
R. G. Holder........................... -- 4,000 16,088 20,088
B. H. Kastory.......................... 118,972 4,200 41,266 164,438
E. S. Kraus............................ 400 -- 11,962 12,362
A. C. A. Krauss........................ 111,513 -- 32,273 143,786
H. McGraw III.......................... 1,000 -- -- 1,000
H. de C. Meirelles..................... -- -- 4,974 4,974
W. S. Norman........................... 2,051 -- 9,240 11,291
I. M. Ramsay........................... 50,948 -- -- 50,948
C. R. Shoemate......................... 1,256,357 239,625 110,037 1,606,019
All directors and executive officers as
a group (33 persons)................. 2,309,479 590,697 408,928 3,309,104
</TABLE>
- ---------
(1) Includes all shares which may be purchased before April 30, 2000 upon the
exercise of stock options as follows: R. J. Gillespie, 93,382; B. H.
Kastory, 54,620; A. C. A. Krauss, 56,410; I. M. Ramsay, 13,700; C. R.
Shoemate, 1,256,357; and all directors and executive officers as a group,
1,897,914. Also includes shares held in the Bestfoods Stock Fund of the
Savings Plan.
(2) Includes shares held jointly with or owned by spouses or minor children or
held in trust. C. R. Shoemate and all directors and executive officers as a
group disclaim beneficial ownership of 46,408 and 82,983, respectively, of
such shares.
(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 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, 6,833; 6,875; 2,688 and 6,725 shares, and all executive
officers as a group have a total of 75,079 shares of ESOP preferred stock
allocated to their accounts in the Savings Plan.
14
<PAGE>
COMPENSATION AND NOMINATING COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
OVERVIEW
The Company's compensation objective is to develop and maintain an executive
compensation program which will attract, motivate, and retain executives with
the technical and managerial capabilities required to meet the Company's short
and long-term business objectives and, as a consequence, maximize returns to
stockholders. In order to achieve this objective, the program must:
Provide fully competitive compensation opportunities;
Encourage executive behavior which supports business plans established by
the Company and its operating units;
Establish opportunities for executives to accumulate capital when the
Company performs well.
Underlying the Company's organization and compensation objectives and
driving its actions are the following beliefs:
Equity ownership and entrepreneurial perspective among executives are
critical to establishing and maintaining performance in the best interests
of the Company and its stockholders, especially on a long-term basis;
Executives must have variable and leveraged compensation opportunities
where compensation fluctuates in relationship to Company performance in
sales, earnings, Economic Value Added (EVA), stockholder return and other
measures, relative to other companies with which the Company competes in
the product, labor and capital marketplaces;
Executive compensation must support an appropriate and effective balance
between short and long-term focus throughout the organization;
Executive compensation must support an appropriate mix of organizational
and individual performance.
COMPENSATION AND NOMINATING COMMITTEE RESPONSIBILITIES
The Compensation and Nominating Committee of the Board of Directors,
composed entirely of outside directors, has the responsibility to approve and
administer all executive compensation plans and programs.
COMPENSATION COMPETITIVENESS
In order to determine the competitive level of our compensation programs,
the Company analyzes data from published surveys. An effort is made to gather
data on our Peer Group of companies (as defined on page 24), but, since data are
not available from all of the Peer Group of companies, other companies primarily
in the food and consumer product industries are included. Every two years a
study is conducted by an independent consultant and the results are presented to
us to ensure the competitiveness of our programs.
15
<PAGE>
ESTABLISHMENT OF BASE PAY LEVELS
The Company's philosophy is to target base pay at the 50th percentile of our
competitive marketplace. To accomplish this, the Company has established an
executive salary structure. The midpoint of each salary grade approximates the
market 50th percentile for each position. Executives progress through their
assigned salary grades by receiving merit increases based on individual
performance. Progress beyond the midpoint of each salary grade is based on
continued good performance and contributions which provide value to the
organization.
BASE SALARY OF THE CHIEF EXECUTIVE OFFICER
In the case of the Chief Executive Officer, a salary increase of 4.8%
effective May 1, 1999 was approved, bringing his salary to $990,000. This placed
Mr. Shoemate's salary 1% above his salary grade midpoint. The increase was based
on an evaluation of Mr. Shoemate's performance, time in his position, his
position in his salary grade, and the Company's performance.
BASE SALARY OF OTHER NAMED EXECUTIVES
The other named executives received base salary increases in 1999 within the
guidelines described above that resulted in salaries varying from 20% below to
11% above their respective salary grade midpoints. Each individual's salary and
salary actions were based on individual performance and time in current
position.
ANNUAL INCENTIVE PLAN
Together with base salary, annual incentive makes up total direct
compensation. The objectives of the Annual Incentive Plan are the achievement of
annual earnings goals, the effective utilization of assets as measured by EVA,
and competitive performance with companies in our Peer Group. Goals are
established at a level which, we expect, will put the Company in the top
quartile of our Peer Group in earnings growth and total shareholder return.
Incentive payments for executive officers are based on the achievement of
the Company's annual earnings per share (EPS) goal and its Economic Value Added
(EVA) improvement goal. Executive officers with divisional responsibility must
also achieve operating income and EVA goals that are based on corporate
requirements, growth opportunities and other strategic factors relative to that
division. After determining the incentive level based on business results,
awards are adjusted up to 20% for achievement of Balanced Scorecard goals and
for individual executive performance.
The Annual Incentive Plan is sufficiently leveraged in order to provide top
quartile total direct compensation when the Company achieves top quartile
business results and market average total direct compensation when the Company
achieves market average business results. The Plan also provides the opportunity
for rewards that are above the top quartile target for outstanding business
results and rewards that are well below market average for poor business
results.
Beginning in 1999, the Company introduced EVA improvement as a measure in
determining the financial performance of the business. To focus managers on the
importance of asset utilization in managing the Company, EVA improvement was
added as a factor in
16
<PAGE>
determining annual incentive awards. For 1999, 75% of the potential incentive
award was based on achievement of EPS and operating income goals and the
remaining 25% was based on EVA improvement.
ANNUAL INCENTIVE OF THE CHIEF EXECUTIVE OFFICER
In the case of Mr. Shoemate, a 1999 annual incentive payment of $2,200,000
or 36% above his 1999 incentive target was approved, bringing his total direct
compensation for the year to $3,175,000. This level of direct compensation was
based on achievement of 11.7% EPS growth and implementation and achievement of
the corporate EVA improvement goal. Mr. Shoemate was also recognized for
strategies designed to realize the Company's vision to become 'The Best
International Food Company in the World', including continued emphasis on the
Balanced Scorecard measurements and strong corporate governance.
ANNUAL INCENTIVE FOR OTHER NAMED EXECUTIVES
Annual incentives for the remaining named executives were determined in
accordance with the process described above, based on both corporate and
divisional earnings performance and EVA improvement. Incentive payments for the
other named executives ranged from 19% below to 21% above their specific 1999
incentive target.
LONG-TERM INCENTIVE COMPENSATION
The Company provides for long-term compensation in the form of annual grants
of performance units and stock options under the Stock and Performance Plan. The
objective of the Stock and Performance Plan is improvement in shareholder value,
defined as stock price appreciation plus dividends paid.
The performance goal for this Plan is relative percentage improvement in
shareholder value compared to the fourteen other companies in our Peer Group.
Each performance cycle is four years in length. The Plan assumes an equal
investment in the stock of Bestfoods and each of the peer companies at the
beginning of the year for each Cycle. Dividends are reinvested and the
relative change in value of each stock is measured at the end of the year for
each Cycle.
One quarter of the total shares awarded is eligible to be earned each year
of the Cycle based on Bestfoods' stock performance relative to the other
fourteen companies. 100% of each year's award is earned if Bestfoods relative
shareholder value is in the top four companies, 85% is earned if Bestfoods is in
fifth position, 75% is earned if Bestfoods is in sixth position, 65% is earned
if Bestfoods is in seventh position, 50% is earned if Bestfoods is in eighth
position, 35% is earned if Bestfoods is in ninth position, 25% is earned if
Bestfoods is in tenth position, 15% is earned if Bestfoods is in eleventh
position, and no shares are earned if Bestfoods is in the bottom four positions.
For each performance cycle, participants are granted a number of performance
units and stock options. The stock options are priced at the average of the high
and low stock price on the date of grant. To the extent that performance units
are earned, an equal number of stock options are cancelled. At the conclusion of
a four-year performance cycle, all performance units earned during the Cycle are
paid out and the remaining stock options are exercisable.
17
<PAGE>
Participants also receive a cash award at the end of the Cycle equal to the
number of units earned times the share price appreciation from the beginning
to the end of the Cycle.
The number of performance units granted to each participant at the start of
each Cycle is based on a calculation of the present value of both the
performance units and the stock options. The award is projected to provide
market 50th percentile long-term compensation if, at the conclusion of the
Cycle, Bestfoods averages the eighth position as defined above. Because the
present value of a performance unit is significantly greater than that of a
stock option, executives will earn awards that are increasingly above market
50th percentile as shareholders receive greater relative returns compared to our
Peer Group. Conversely, executive awards will be below market 50th percentile if
our competitive ranking falls below the eighth position as defined above.
PERFORMANCE PLAN PAYMENTS FOR 1996-1999 CYCLE
Awards for the most recently completed Cycle (1996-1999) were paid in
January 2000. The Company ranked seventh (65% earned) in the 1996 year, eleventh
(15% earned) in the 1997 year, fourth (100% earned) in the 1998 year, and third
(100% earned) in the 1999 year. Thus, at the conclusion of the 1996-1999 Cycle,
executives earned 70% out of a possible total of 100% of the performance units
granted. The 30% of performance units that were not earned are exercisable stock
options. During the period, the Company's stock price increased from $33.1739
(January 2, 1996, adjusted for the spin-off of the Company's corn refining
business on December 31, 1997) to $53.3707 (December 1999 average), providing
executives a cash payment equal to the stock appreciation of $20.1968 times the
70% of shares they earned. During the 1996-1999 Cycle, the Peer Group consisted
of the companies indicated on page 24. The sole exception is that for years 1996
and 1997 Archer Daniels Midland was included and Nabisco was not. The
composition of the Peer Group was changed in 1998 following the spin-off of the
Company's corn refining business on December 31, 1997.
PERFORMANCE PLAN AWARD TO THE CHIEF EXECUTIVE OFFICER
In January of 1999, Mr. Shoemate was granted 100,000 performance units (with
a tandem award of 100,000 stock options) to be earned over the 1999-2002 Cycle.
Mr. Shoemate was also granted 100,000 stand-alone stock options. This award was
based on his performance and practices in the competitive marketplace.
PERFORMANCE PLAN AWARDS TO THE OTHER NAMED EXECUTIVES
The remaining named executives were granted performance units ranging from
20,000 to 40,000 performance units (with a tandem award of an equal number of
stock options) for the same performance cycle. These awards were based on each
executive's performance and practices in the competitive marketplace.
EXECUTIVE STOCK OWNERSHIP TARGETS
For a number of years, the Company has maintained stock ownership targets
for its executives. This is based on the belief that complete alignment of
executive and shareholder interests is only possible if executives hold a
substantial equity interest in the Company. The ownership target for the Chief
Executive Officer is seven times base salary and for the other
18
<PAGE>
named executives it is five times base salary. All named executives meet or
exceed these stock ownership guidelines.
DEDUCTIBILITY CAP ON COMPENSATION EXCEEDING $1,000,000
Tax law limits the deductibility of annual compensation payments made to the
named executives to $1 million. There is an exception to this limitation on
deductibility if executive compensation meets certain objective performance
standards. To this end, the Company amended the Plan so that long-term
compensation payments, including stock options, meet this objective performance
exception. In 1997, the Company's shareholders approved a new Executive Annual
Incentive Plan so that short-term incentives also meet this exception. For 1999,
the Committee has concluded that the $1 million cap rules will not result in the
Company's loss of tax deductions. Although the Committee generally tries to
avoid the loss of tax deductibility to the extent feasible and prudent, it
retains the discretion to authorize payments that may not be deductible if the
Committee determines that such compensation is in the best interest of the
Company and its shareholders.
Compensation and Nominating Committee:
A. C. DeCrane, Jr., Chair
E. R. Gordon
L. I. Higdon, Jr.
R. G. Holder
E. S. Kraus
19
<PAGE>
EXECUTIVE COMPENSATION
The following table summarizes the compensation awarded or paid to the named
executive officers during each of the last three fiscal years.
- --------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE*
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
-------------------------- -------------------------------------------
AWARDS PAYOUTS
------------ -------------
RESTRICTED SECURITIES LONG-TERM
NAME AND SALARY BONUS STOCK UNDERLYING INCENTIVE ALL OTHER
PRINCIPAL POSITION YEAR ($) ($)(1) AWARDS($) OPTIONS # PAYOUTS($)(2) COMPENSATION($)(3)
------------------ ---- ------ ------ --------- --------- ------------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
C. R. Shoemate ...... 1999 975,000 2,200,000 0 200,000 4,973,775 129,073
Chairman, President 1998 926,667 1,600,000 0 427,430 4,702,703 128,675
and Chief Executive 1997 871,667 725,000 0 435,602 3,268,514 111,548
Officer
R. J. Gillespie ..... 1999 622,500 920,000 0 40,000 1,989,510 88,160
Executive Vice 1998 600,000 725,000 0 40,000 2,090,057 92,952
President 1997 560,000 510,000 0 41,486 1,634,207 78,329
B. H. Kastory ....... 1999 467,500 655,000 0 32,000 1,342,919 71,872
Senior Vice 1998 445,000 520,000 0 32,000 1,254,003 78,460
President 1997 412,500 300,000 0 28,002 898,809 63,648
A. C. A. Krauss ..... 1999 475,417 440,000 0 29,000 1,342,919 169,527
Senior Vice 1998 456,667 120,000 0 32,000 1,254,003 145,301
President 1997 430,000 400,000 0 28,002 898,809 107,570
I. M. Ramsay ........ 1999 331,250 400,000 0 20,000 795,752 20,075
Senior Vice 1998 227,500 250,000 192,750(4) 16,000 627,015 14,200
President 1997 190,000 135,000 0 16,594 490,232 8,650
</TABLE>
- ---------
* Changes in the identity of the five most highly compensated officers since
the Company's 1999 Proxy Statement reflect retirements and performance of
Company divisions.
(1) Upon adopting Economic Value Added (EVA) as a financial measure in 1999, a
portion of annual bonus was based on achievement of EVA improvement goals.
Based on our 1999 results, the Company withheld and reserved part of the
annual bonus to ensure continuous improvement in earnings and EVA. The
actual 1999 bonus received after reserving was as follows: C. R. Shoemate,
$1,496,733; R. J. Gillespie, $682,267; B. H. Kastory $484,733; A. C. A.
Krauss, $413,067; and I. M. Ramsay, $284,667.
(2) Includes cash and the market value of the Company's common stock paid in
respect of performance units earned under the 1993 Stock and Performance
Plan at the end of four-year performance cycles.
(3) Includes the following for 1999:
a. Company matching contributions to defined contribution plans as follows:
C. R. Shoemate, $74,246; R. J. Gillespie, $55,541; B. H. Kastory,
$43,796; A. C. A. Krauss, $44,271; and I. M. Ramsay, $20,075.
b. Value of premiums paid by the Company under the Executive Life Insurance
Plan as follows: C. R. Shoemate, $45,049; R. J. Gillespie, $32,619; B. H.
Kastory, $28,076; A. C. A. Krauss, $46,393; and I. M. Ramsay, $0.
(footnotes continued on next page)
20
<PAGE>
(footnotes continued from previous page)
c. For C. R. Shoemate, $9,778 of above-market interest at the rate credited
to all participants in the Deferred Compensation Plan, pursuant to which
all or a portion of annual bonus may be deferred and credited to an
interest bearing account, and paid over a fifteen-year period following
retirement.
(4) Represents the value of 4,000 shares of restricted stock on the date of
award to I. M. Ramsay. Restrictions lapse on one half of the shares on the
first anniversary date of the award, and the second half on the second
anniversary of the award. Dividends are paid on restricted stock at the rate
paid to all stockholders. None of the other named executive officers holds
any shares of restricted stock.
21
<PAGE>
- --------------------------------------------------------------------------------
OPTION GRANTS IN 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(2)
- ---------------------------------------------------------------------------- -----------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS EXERCISE
UNDERLYING GRANTED TO OR BASE
OPTIONS EMPLOYEES PRICE EXPIRATION
NAME GRANTED(#)(1) IN 1999 ($/SHARE) DATE 0% ($) 5% ($) 10% ($)
- ---- ------------- ------- --------- ---------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
C. R. Shoemate....... 100,000 3.8% 48.1875 1/18/09 0 3,030,486 7,679,846
100,000 3.8% 48.1875 1/18/09 0 3,030,486 7,679,846
R. J. Gillespie...... 40,000 1.5% 48.1875 1/18/09 0 1,212,194 3,071,939
B. H. Kastory........ 32,000 1.2% 48.1875 1/18/09 0 969,756 2,457,551
A. C. A. Krauss...... 29,000 1.1% 48.1875 1/18/09 0 878,841 2,227,155
I. M. Ramsay......... 20,000 0.8% 48.1875 1/18/09 0 606,097 1,535,969
</TABLE>
- ---------
(1) The options listed were granted at an exercise price equal to the fair
market value of Bestfoods stock on the date of grant and, except as
described below, 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 relative
performance in total shareholder return, 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. 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. 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.
This column also includes, with respect to Mr. Shoemate, a grant of 100,000
stand-alone options under the 1993 Plan at an exercise price equal to the
fair market value of the Company's stock on the date of grant. The amounts
paid to the named executive officers for the 1996 cycle which ended in 1999
are shown as 'Long-Term Incentive Payouts' in the Summary Compensation Table
on page 20.
(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.
22
<PAGE>
- --------------------------------------------------------------------------------
AGGREGATED OPTION EXERCISES IN 1999
AND OPTION VALUES AS OF DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
DECEMBER 31, 1999 (#) DECEMBER 31, 1999($)(2)
--------------------- -----------------------
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED($)(1) UNEXERCISABLE UNEXERCISABLE
- ---- --------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
C. R. Shoemate....... 18,150 353,992 1,156,357/365,474 14,854,091/2,288,438
R. J. Gillespie...... -- -- 93,382/101,116 2,015,268/ 706,729
B. H. Kastory........ -- -- 54,620/ 77,006 1,158,439/ 507,395
A. C. A. Krauss...... -- -- 56,410/ 74,006 1,161,132/ 494,270
I. M. Ramsay......... -- -- 13,700/ 44,448 253,492/ 300,219
</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, 1999 ($52.5625) and the exercise
price or base price.
- --------------------------------------------------------------------------------
PENSION PLAN TABLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
5-YEAR AVERAGE YEARS OF SERVICE
ANNUAL -------------------------------------------
COMPENSATION 15 20 25 30
------------ -- -- -- --
<S> <C> <C> <C> <C>
$1,200,000.......................... 216,000 288,000 360,000 432,000
1,400,000........................... 252,000 336,000 420,000 504,000
1,600,000........................... 288,000 384,000 480,000 576,000
1,800,000........................... 324,000 432,000 540,000 648,000
2,000,000........................... 360,000 480,000 600,000 720,000
2,200,000........................... 396,000 528,000 660,000 792,000
2,400,000........................... 432,000 576,000 720,000 864,000
2,600,000........................... 468,000 624,000 780,000 936,000
2,800,000........................... 504,000 672,000 840,000 1,008,000
3,000,000........................... 540,000 720,000 900,000 1,080,000
3,200,000........................... 576,000 768,000 960,000 1,152,000
</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. This table is based upon the current pension plan formula
of 1.2% of average compensation per year of service up to 30 years. Prior to
1989 the formula provided a benefit of 1.5% of average compensation per year of
service up to 30 years reduced by the Social Security benefit. Messrs. Shoemate,
Gillespie and Kastory benefit from the prior formula for their years of service
before 1989. Mr. Ramsay is covered by the international pension plan.
Compensation covered by the plans is the combined annual compensation
reported in the Salary and Bonus columns of the Summary Compensation Table on
page 20. Each of the named executive officers has 30 years of service for
purposes of the plans. Amounts shown in
23
<PAGE>
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.
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 1996, 1997, 1998 and 1999
performance cycles under the 1993 Stock and Performance Plan (see the
Compensation and Nominating Committee Report on page 18). The historical
performance of the Peer Group Index, weighted for market capitalization, is
shown as a reference. The Peer Group consists of: Campbell Soup Company,
ConAgra, Inc., General Mills, Inc., H.J. Heinz Company, Hershey Foods
Corporation, Hormel Foods Corporation, Kellogg Company, McCormick & Company,
Incorporated, Nabisco Holdings Corp., The Quaker Oats Company, Sara Lee
Corporation, Smucker (J.M.), Co., Unilever N.V., and Wm. Wrigley Jr. Company.
The graph assumes initial investments of $100 on December 31, 1994 and
reinvestment of dividends.
BESTFOODS
STOCKHOLDER RETURN COMPARISON
FOR FIVE YEARS ENDED DECEMBER 31, 1999
- -------------------------------------------------------------------------------
BASE PERIOD RETURN RETURN RETURN RETURN RETURN
1994 1995 1996 1997 1998 1999
- -------------------------------------------------------------------------------
Bestfoods 100 131.96 152.26 215.24 233.48 235.26
- -------------------------------------------------------------------------------
S&P Foods Index 100 127.56 151.13 216.61 234.41 184.41
- -------------------------------------------------------------------------------
S&P 500 Index 100 137.58 169.17 225.60 290.08 351.12
- -------------------------------------------------------------------------------
Peer Group Index 100 129.55 152.00 216.89 231.29 181.76
- -------------------------------------------------------------------------------
[PERFORMANCE GRAPH]
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
24
<PAGE>
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.
STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
If any stockholder wants to submit a proposal for inclusion in the proxy
material for the 2001 annual meeting which will be held on Thursday, April 26,
2001, it must be received by the Corporate Secretary by November 15, 2000. 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 November 16, 2000 and December 15, 2000. 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.
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,
Marjory A. Appel
Marjory A. Appel
Secretary
25
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
[Logo]
Printed on Recycled Paper
<PAGE>
Appendix 1
BESTFOODS
Proxy Solicited on Behalf of the Board of Directors of
the Company for Annual Meeting on April 27, 2000
P The undersigned hereby appoints CHARLES R. SHOEMATE, EDUARDO B. SANCHEZ and
R MARJORY A. APPEL as Proxies, each with the power to appoint his or her
O substitute, and hereby authorizes each of them to represent and to vote, as
X designated on the reverse side hereof, all the shares of common and ESOP
Y preferred stock of Bestfoods which the undersigned is entitled to vote at
the annual meeting of stockholders to be held at the Radisson Hotel
Englewood, 401 South Van Brunt Street, Englewood, New Jersey on April 27,
2000 at 9:00 a.m., local time, or any adjournment thereof, and in their
discretion, upon any other matters which may properly come before the
meeting.
Election of Director for a term of two years.| (Change of Address)
Nominee: |
Harold McGraw III | ------------------------------
|
Election of Directors, each for a term | ------------------------------
of three years. |
Nominees: | ------------------------------
William C. Ferguson William S. Norman |
Bruce S. Gordon Charles R. Shoemate | ------------------------------
Leo I. Higdon, Jr. | (If you have written in the
above space, please mark the
corresponding box on the reverse
side of this card.)
Printed on Recycled Paper SEE REVERSE SIDE
<PAGE>
Fold and Detach Here
[X] Please mark your votes as in this example. 6654
------
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 and 2. The ESOP Trustee shall vote unallocated ESOP preferred
stock as directed on this proxy by the participant.
<TABLE>
<CAPTION>
The Board of Directors recommends a vote FOR Proposals 1 and 2.
<S> <C> <C> <C> <C> <C> <C>
1. Election of FOR WITHHELD 2. Appointment of KPMG FOR AGAINST ABSTAIN
Directors LLP as Independent
(see reverse) Auditors
</TABLE>
For, except vote withheld from the following nominee(s):
<TABLE>
<CAPTION>
Special Action
<S> <C>
Discontinue Annual Report Change of
Mailing for this Account [ ] Address on [ ]
Reverse Side
</TABLE>
<TABLE>
<S> <C>
Admssion No. of
Ticket [ ] Persons____________
Request
</TABLE>
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.
-------------------------------------------
-------------------------------------------
SIGNATURE (S) DATE
<PAGE>
Fold and Detach Here
BESTFOODS
Your vote is important. Thank you for your time and attention.
Dear Stockholder:
Voting
- ------
Bestfoods offers you the ability to vote your shares by the Internet or by
telephone, thus eliminating the need to return your proxy card. To vote your
shares by these means, please use the Voter Control Number printed in the box
above, just below the perforation. The series of numbers that appears in the box
above must be used to access the system. To ensure that your vote will be
counted, please cast your Internet or telephone vote before Midnight on April
26.
1. To vote by the Internet
------------------------
Log onto the Internet, go to the web site http://www.eproxyvote.com/bfo, and
follow the instructions provided.
2. To vote by telephone
---------------------
On a touch-tone phone, call 1-877-779-8683 24 hours a day, seven days a week.
The Board of Directors recommends a vote FOR Proposals 1 and 2.
<TABLE>
<S> <C> <C>
Proposal 1: Election of Directors: For a term of two years For a term of three years
01. Harold McGraw III 02. William C. Ferguson
03. Bruce S. Gordon
04. Leo I. Higdon, Jr.
05. William S. Norman
06. Charles R. Shoemate
</TABLE>
Proposal 2: Ratification of appointment of independent auditors
Your Internet or telephone vote authorizes the named proxies in the same manner
as if you marked, signed, dated and returned the proxy card, so there is no need
for you to mail back your proxy card.
ELECTRONIC RECEIPT OF PROXY MATERIALS
- -------------------------------------
In addition to voting your shares by the Internet, you may consent to receive
next year's proxy materials via the Internet, thus eliminating receipt by mail
yet allowing you to print hard copies. You may consent by going to the web site
http://www.econsent.com/bfo and following the instructions provided. You will
continue to receive these materials online until you revoke your consent, which
you may do at any time.
